Batavarlal M. Patel vs Nbcc Ltd.
2004 Latest Caselaw 734 Del

JUDGMENT

Mukul Mudgal, J.

1. This is an petition under Section 11 of the Arbitration and Conciliation Act, 1996(hereinafter referred to as the `Act') for appointment of an independent arbitrator.

2. The parties to this petition entered into an Agreement dated 27th October, 1999 for construction of M.T. Pool Buildings & Allied Works at Civil Airport, Vadodara. The petitioner is the Proprietorship concern and the respondent is the National Buildings Construction Corporation Limited(in short the `NBCC'). Clause 76 of the Agreement between the parties providing for settlement of disputes by way of arbitration reads as follows:-

"Clause 76 ARBITRATION

Except where otherwise provided for in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right matter of thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or the conditions or otherwise concerning the works, or the execution or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof except those disputes/differences or questions where decision of a particular authority only has been stated to be final in this contract or specifications or conditions, shall be referred to the sole arbitration of a person appointed by the Chairman and Managing Director of NBCC.

There will be no objection of the arbitrator so appointed is an employee of NBCC not below the rank of Project Manager and that he had to deal with the matters to which the contract relates and that in the course of his duties as such he had expressed views, on all or any of the matters in dispute or difference. The arbitrator to whom the matter originally referred being transferred or vacating his office or being unable to act for any reason as aforesaid at the time of such transfer, vacation of office or inability to act, Chairman and Managing Director of NBCC shall appoint another person to act as arbitrator in accordance with the terms of the contract. It is also a term of this contract that no person other than the person appointed by NBCC Ltd., as aforesaid shall act as an Arbitrator. Subject as aforesaid the provision of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof, and the rules made there under and for the time being in force shall apply to the arbitration proceeding under the clause. It is a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of such disputes.

The arbitrator may from time to time with the consent of the parties, enlarge the time for making and publishing the award. The work under the contract shall, if reasonably possible, continue during the arbitration proceedings and no payment due or payable to the Contractor shall be withheld on account of such proceedings.

The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties fixing the day of the first hearing. The Arbitrator shall give a separate decision in respect of each dispute or difference referred to him.

The award of the arbitrator shall be final, conclusive and binding on all parties to this contract. The cost of arbitration shall be borne by the parties to the dispute as may be decided by the arbitrator(s)."

3. It is not in dispute that upon disputes arising between the parties and in accordance with the above clause, the petitioner had called upon the respondent to appoint an arbitrator by addressing a communication to the CMD, NBCC as provided in the aforesaid clause 76 on 23rd February, 2004 by a letter admittedly received by the respondents within a week. There was no response from the respondent No.2. On 27th March, 2004 the petitioner approached this Court and notice was issued on 6th April, 2004 under sub-section (6) of Section 11 of the Act. In reply to the arbitration petition, Mr. Mahajan appears on behalf of the respondents and has stated that the respondents have now appointed an arbitrator on 5th June, 2004. It is not in dispute that the said appointment was after the petitioner approached this Court on 27th March, 2004. The position of law in respect of the delayed response to a request for appointment of an arbitrator is to be found in the judgment of the Supreme Court in Datar Switchgears Ltd. Vs Tata Finance Ltd. & Another reported as JT 2000 (Suppl.2) SC 226 wherein the relevant para 19 reads as follows:-

"19. So far as cases falling under Section 11(6) are concerned-such as the one before us-no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11(4) and Section 11(5) of the Act. In our view, therefore, so far as Section 11(6) is concerned, if one party demands the opposite party to appoint an Arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the Court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an Arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an Arbitrator under Section 11(6) is forfeited."

4. A learned Single Judge of this Court in B.W.L. Ltd. Vs M.T.N.L. 2000 IV AD (DELHI) 165 crystallized the position of law in relation to the delayed response to the request for appointment of an arbitrator as under:-

"It has now become common place for persons who have retained this power of appointment of an Arbitrator, not to act at all or to act with such obduracy as to render an Arbitration clause totally meaningless. The vehemence with which the present petition was opposed, often caused me to forget that it was only the appointment of an Arbitrator to adjudicate upon the claims raised by both parties and not the disposal of objections, that was in debate. After hearing lengthy arguments it would be an abdication of judicial duty if the Respondents were still permitted to make an appointment of the Arbitrator. The State is expected to act without arbitrariness and with fairness and in furtherance of the well-being of its citizens. It is also expected to know the law, especially as laid down by the Supreme Court. It cannot be excused if its action tantamount to emasculating the laws-i.e. of expeditious disposal of disputes through arbitration."

5. This position of the law laid down by this Court and the Hon'ble Supreme Court as extracted above is categorical. Therefore once the party moves the Court under Section 11(6) of the Act, the right of the opposite party to appoint an arbitrator as per the arbitration agreement ceases. The above position of law squarely applies to the present case. The respondent's right to appoint an arbitrator was vanquished on 27th March, 2004, the date when the petitioner approached this Court under Section 11(6) of the Act and the appointment of the arbitrator sought to be made on 5th June, 2004 by the respondents is of no avail and is set aside.

6. Accordingly, the petition is allowed and Mr. Justice S.B. Wad, a retired Judge of this Court, D-88, Panchsheel Enclave, New Delhi-110017(Tel.26495861 & 23387232) is appointed as an Arbitrator to adjudicate upon the disputes between the parties sought to be raised in this petition. The Arbitrator to fix his fees in consultation with the parties. Considering the amount of work involved in the claim, the Arbitrator to give his award, not later than 6 months from the date of entering upon reference.

7. This petition stands allowed and disposed of accordingly in the above terms.