Goyal Mg. Gases Pvt. Ltd. vs Rathi Ispat Limited
2003 Latest Caselaw 61 Del

JUDGMENT

R.C. Jain, J.

1. The above named petitioner has moved this application under Section 11 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the `Act') seeking appointment of an arbitrator.

2. The germane facts giving rise to the present application are that vide a lease agreement dated 1st March, 1996 executed between the parties, the petitioner had leased a certain equipment detailed in Schedule-I to the respondent for a period of 36 months commencing from 1st March, 1996. The said lease agreement contains an arbitration clause in Article 30 for the resolution of all disputes and differences and/or the claims arising out of the agreement by arbitration through the sole arbitration of Ms.Anuradha Dutt of Dutt and Menon, Advocate and in case of the death, refusal, neglect, incapability of the said arbitrator to act as sole arbitrator, to the sole arbitration of Mr.K.S.Mehta of S.S.Kothari & Co., Chartered Accountants having their office at 9th Floor, Atma Ram House, Tolstoy Marg, New Delhi. Disputes and differences having arisen between the parties in relation to the payment of monthly rental charges/retention charges towards the lease of the equipment and failure of the respondent to return the equipment in question, the arbitration agreement was invoked between the parties and by the letter dated 15th July, 1999, in the first instance, Ms.Anuradha Dutt, the named arbitrator was appointed as the sole arbitrator. Vide a letter dated 22nd December, 2001, Ms.Anuradha Dutt intimated both the parties that for personal reasons, it was not possible for her to further continue with the proceedings. Accordingly, in terms of Article 30 of the lease agreement which provided for replacement of the sole arbitrator, Mr.K.S.Mehta of S.S.Kothari & Co., Chartered Accountants was appointed as the sole arbitrator vide a letter dated 27th December, 2001. However, vide a letter dated 31st December, 2001, even Mr.K.S.Mehta expressed his inability to act as sole arbitrator. Petitioner has, thus, filed this petition under Section 11(6) seeking appointment of another arbitrator by the Court.

3. The application has been opposed by the respondent and a reply has been filed raising preliminary objections about the maintainability of the application on the ground that the petitioner has failed to issue a 30 days notice to the respondent as required by Section 11 of the Act after the resignation of Mr.K.S.Mehta; the application is premature inasmuch as the due procedure seeking the appointment of another arbitrator has not been exhausted.

4. I have heard Mr.Anurag Kumar Agarwal, Advocate representing the petitioner and Mr.Shiv Khurana, Advocate representing the respondent and have given my thoughtful consideration to their respective submissions. Factual position in regard to the subsisting arbitration agreement, subsisting disputes and differences between the parties as also the factum of the appointment of Ms.Anuradha Dutt as the sole arbitrator and her refusal to continue with the proceedings and thereafter the appointment of alternate arbitrator Mr.K.S.Mehta is not disputed. In view of this admitted position, the only question which needs consideration is as to whether petitioner is within his rights to approach the Court for the appointment of another arbitrator. Article 30 of the lease agreement dated 1st March, 1996 reads as under :-

"(a) All disputes differences and/or claims arising out of this Agreement, shall be settled by arbitration in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory amendments thereof shall be refered to the sole arbitration of Anuradha Dutt of Dutt and Menon, Advocate, having her present address at A-434, defense Colony, New Delhi or in case of her death, refusal, neglect incapability to act as an Arbitrator to the sole arbitration of Mr.K.S.Mehta of S.S.Kothari & Co., Chartered Accountants, having his present address at 9th Floor Atma Ram House, Tolstoy Marg, New Delhi. The reference to the Arbitrator shall be within the Articles, Terms and conditions of this Agreement. The award given by the Arbitrator shall be final and binding on both the parties.

(b) It has been expressly explained by the Lesser to the Lessee that either of the aforesaid mentioned arbitrators are usually appointed by the Lesser in the Lease Agreement accepted by them and inspite of the information supplied to them the said Lessee has willingly agreed to the nomination of any one of the said Arbitrator(s) and the appointment of the Arbitrator(s) will not be challenged on the ground that the Arbitrator(s) are connected in any manner with the Lesser.

(c) Any party desirous of making a reference to the Arbitrator shall give fifteen days Registered Acknowledgment Due notice to his intention to do so to the other party at his usual place of business or residence or the place of their last notified address and the notice shall be deemed to have been served when it would ordinarily have been delivered by the post. The notice sent by the Arbitrator to the parties by the Registered post at the address mentioned in the Lease Agreement will be considered sufficient services on the parties whether such notice is received by them or not, or is refused or is returned undelivered."

5. Mr.Shiv Khurana, learned counsel for the respondent relying upon clause (c) (supra) has strongly contended that the present application for appointment of another arbitrator is premature inasmuch as the 15 days registered acknowledgement notice contemplated in the said clause has not been issued by the petitioner after the refusal of Mr.K.S.Mehta to act as the sole arbitrator. Reference has also been made to the provisions of sub-section (5) of Section 11 of the Act which envisages for the appointment of a sole arbitrator by the Court in the case of failure of the party to adhere to the arbitration agreement and on his failure to appoint a sole arbitrator within a period of 30 days from the receipt of a request by one party from the other party. The submission of Mr.Khurana is that the respondent could file this application after serving a notice as contemplated by clause (c) of Article 30 of the agreement and on the failure of the respondent to appoint arbitrator within a period of 30 days on receipt of such a request. In support of his contention, learned counsel for the respondent has placed reliance upon a decision of the Single Bench of this Court in AA No.10/99, Munish Gupta and Ors. Vs. Ram Dass & Ors., DCLR 2002 (II) Delhi 546. In this case, on the facts of the said case, K.S.Gupta, J. has held that notice to other party to concur in the appointment of sole arbitrator out of the names suggested is mandatory before filing petition before the Court for appointment of arbitrator under Section 11(5) of the Act.

6. As against the above submission of the learned counsel for the respondent, counsel for the petitioner has submitted that the present application is one under sub-section (6) of Section 11 rather than sub-section (5) of Section 11 and for which no notice is contemplated nor there is any requirement of any other proceedings. Sub-section (6) of Section 11 of the Act is as under:-

"11(6) Where, under an appointment procedure agreed upon by the parties,---

(a) a party, fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure."

a party may request the Chief Justice or any person or institution designation by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment."

7. A bare reading of the above provision of law would make it abundantly clear that on the failure of a sole arbitrator to perform his functions, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure unless the agreement on the appointment procedure provides other means for securing the appointment. As noticed earlier, in this case the arbitration clause provided for the appointment of two arbitrators namely Ms.Anuradha Dutt and Mr.K.S.Mehta. Since Ms.Anuradha Dutt, sole arbitrator to whom the reference was made, has expressed her intention not to continue with the arbitral reference and the second/alternate named arbitrator Mr.K.S.Mehta of S.S.Kothari & Co., Chartered Accountants has expressed his unwillingness to enter the reference, will clearly show that the named arbitrators are unable to perform their functions. Therefore, the petitioner is within his rights to invoke the provisions of Section 11(6) of the Act seeking appointment of another arbitrator. The contention of learned counsel for the respondent that on the failure of Ms.Anuradha Dutt, the sole arbitrator appointed in this case to continue with the proceedings and the failure of Mr.K.S.Mehta to act as sole arbitrator, would have the effect of perishing the arbitration agreement being noted only to be rejected because the provisions of sub-section (6) of Section 11 are precisely meant to be taken care of in such like situations only.

8. For the foregoing discussion, the petition is allowed and Mr.Justice H.C.Goyal, a retired Judge of this Court is appointed as sole arbitrator to settle the disputes between the parties. The arbitrator shall be entitled to fix his own fee not exceeding Rs.1,00,000/- (Rupees One Lac) in all payable by both the parties in equal shares. The record of the proceedings which was pending before Ms.Anuradha Dutt, sole arbitrator shall stand transferred by her to the sole arbitrator Mr.Justice H.C.Goyal (Retd.) within a period of two weeks.

9. The parties are directed to appear before the sole arbitrator Mr.Justice H.C.Goyal (Retd.) on 17th February, 2003.