Keti Construction (I) Ltd. vs Gas Authority Of India Ltd. And ...
2004 Latest Caselaw 1419 Del

JUDGMENT

Vijender Jain, J.

1. This appeal has been preferred against the order passed by the learned Single Judge dismissing the objection of the appellant under Section 34 of the Act. Mr. Markanda, learned counsel for the appellant" has contended that the appellant has been awarded four independent contracts for their various projects at Petro Chemical Complex Dibiyapur, District Etawah (UP) which are as follows :

"(A) Work order No. CE/AUR/Ph-II Extn. B. Works/97A/95, dated 26.05.1995 : Balance work of construction of C-6 and D-2 Houses at GAIL Vihar Township, Dibiyapur ;

(B) Work order No. CE/115/Auriaya/GAIL/GAIL Vihar Road Work 95, dated 10.02.1995 : Construction of premix bitumen carpeting and repairs of roads in GAIL Vihar Colony and Compressor Station;

(C) Work order No. CE/137/Auriaya/Ext/SER/95, dated 01.11.1995 : Construction of external sewerage line at UPPC Nagar, Dibiyapur; and

(D) Work order No. CE/136/Auriaya/Housing/95, dated 28.09.1995 : Construction of residential quarters Type A-25 units, Type B-105 units, Type C-55 units for UPPC Complex, Dibiyapur."

2. The dispute in question pertains to the work stated at serial No. D vide work order No. CE/136/Auriaya/Housing/95, dated 28.09.1995. The dispute raised in Section 34 of the Act was with regard to incorrect constitution of arbitral forum by the respondent. Both the sides relied upon Clause 107 of the agreement. The same is reproduced below :

"107.1 All disputes or differences whatsoever which shall at any time arise between the parties hereto touching or concerning the WORKS or the execution or maintenance thereof this CONTRACT or the rights touching or concerning the WORKS or the execution effect thereof or to the rights or liabilities or the construction meaning operation or effect whether during or after completion of the CONTRACT or whether before or after determination, foreclosure or breach of the CONTRACT (other than those in respect of which the decision of any person is by the CONTRACT expressed to be final and binding) shall after written notice by either party to the CONTRACT to the other of them and to the appointing authority hereinafter mentioned be referred for adjudication to a sole arbitrator to be appointed as hereinafter provided.

107.2 For the purpose of appointing the sole arbitrator referred to above, the appointing authority will send within thirty days of the receipt of the notice to the CONTRACtor, a panel of three persons who shall all be presently unconnected with the organisation for which the WORK is executed.

The CONTRACtor shall on receipt of the names, as aforesaid, select any one of the persons named to be appointed as a sole arbitrator and communicate his name to the appointing authority within thirty days of receipt of names. The appointing authority, shall thereupon without any delay appoint the said person as the sole arbitrator. If the CONTRACtor fails to communicate such selection as provided above within the period specified, the appointing authority shall make the selection and appoint the selected as the sole arbitrator.

If the appointing authority fails to send to the CONTRACtor the panel of three names as aforesaid within the period specified, the CONTRACtor shall send the appointing authority a panel of three names of persons who shall all be unconnected with either party. The appointing authority shall on receipt of the names as aforesaid select any one of the persons named and appoint him as the sole arbitrator. If the appointing authority fails to select the person and appoint him as the sole arbitrator within 30 days of the receipt of the panel and inform the CONTRACtor accordingly, the CONTRACtor shall be entitled to appoint one of the persons from the panel as the sole arbitrator and communicate his name to the appointing authority.

If the arbitrator so appointed is unable to or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever, another sole arbitrator shall be appointed as aforesaid. The WORK under the CONTRACT shall, however, 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 date of the first hearing.

The arbitrator may, from time to time, with the consent of the parties, enlarge the time for making and publishing the award.

The venue of the arbitration shall be New Delhi.

The fees, if any, of the arbitrator shall, if required to be paid before the award is made and published, be paid half AND half by each of the parties. The costs of the reference and of the award including the fees, if any, of the arbitrator shall be in the discretion of the arbitrator who may direct to and by whom and in what manner, such costs or any part thereof shall be paid and may fix or settle the amount of costs to be so paid.

The award of the arbitrator shall be final and binding on both the parties.

Subject to aforesaid the provisions 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 proceedings under this clause."

3. It is the case of the appellant that the appellant invoked the arbitration clause on 17th July, 1999. Reliance in this regard is placed on pages 42-43 of the paper book and as per the aforesaid Clause 107, the respondent was to send a panel of three names as per the agreement and then the appellant was to select any one of the person mentioned in the said panel as sole arbitrator. However, even after the invocation of the arbitration clause on 17th July, 1999, the same was not done and the appellant waited till 28th October, 1999 and sent a panel of three names to the respondent. However, the respondent did not intimate their preference of the sole arbitrator in terms of the arbitration clause.

4. In the meanwhile, the appellant appointed respondent No. 4 as arbitrator on 10th December, 1999, who entered into reference on 6th January, 2000. It seems that in the meanwhile, the respondent also appointed respondent No. 3 as arbitrator on 13th January, 2000. Respondent No. 3 entered into reference on 13.01.2000 and 11.02.2000 and rendered 'No Claim' award on 19.04.2000.

5. Mr. Markanda has contended that pursuant to the arbitration clause the panel of names was to be sent to the appellant indicating three names on the said panel for appointment of a sole arbitrator within thirty days after invocation of the arbitration clause. Having not done so, the respondent could not have appointed respondent No. 3 as an arbitrator and, therefore, the impugned order suffers from patent illegality and the same is against the terms of the agreement between the parties. It was also contended that the four contracts were independent contracts given on different dates. All the four works had independent arbitration clauses. Therefore, the approach of the learned Single Judge that four contracts were not independent contracts and it was one contract was legally unsustainable and factually incorrect.

6. On the other hand, Mr. Nayyar, counsel for the respondent has vehemently contended that pursuant to the letter dated 15.11.1999 which is at page 45 of the paper book, it was contended that the respondent had sent a panel of three names and had given the option to the appellant to select anyone of them to act as sole arbitrator and, therefore, when reply of the said letter was not received, the respondent was left with no other alternative except to appoint respondent No. 3 as the sole arbitrator. As the invocation of the arbitration clause by the appellant was on 17th July, 1999 a letter dated 31st July, 1999 sent by one Sushil Chauhan, Advocate to the appellant was relied upon by the respondent. The said letter is to the following effect:

"Pursuant to the discussions held on various occasions by you and my client, GAIL officials with regard to settlement of disputes and appointment of sole arbitrator, I am instructed by my client, Gas Authority of India Ltd. (GAIL) to call upon you to select the sole arbitrator from the names of three distinguished persons already suggested by my clients during discussions in response to your notices. Please take further necessary action."

7. It was further contended by learned counsel for the respondent that in the said letter dated 15.11.1999 it was already communicated relying on a letter of the appellant dated 05.10.1998 that the respondent has responded to the communication of the appellant vide their letter dated 16.02.1999 and a panel of three arbitrators was indicated in the said letter. It was also contended by Mr. Nayyar that appellant having not participated before the arbitrator, no relief could be granted to the appellant as the procedure has been prescribed under Section 16 that in case an arbitral tribunal is not having jurisdiction still that jurisdiction has to be challenged before the said arbitration tribunal.

8. We have given our consideration to the arguments advanced by learned counsel for both the parties. At the outset we must observe that when there are four contracts and all contracts have independent arbitration clauses, to construe that if name of an arbitrator or a panel of arbitrators have been sent in relation to one or two contracts the same would not be sufficient compliance of an arbitration clause if the said arbitration clause takes into consideration the sending of a panel of names in one or two contracts. Rather this argument goes against the respondent as the respondent knew that there were four contracts and the arbitration clause has been incorporated with the consent of the parties in all four contracts. If that was the intention of the arbitration clause that the name of arbitrator in one contract between the parties will be taken, the panel of names for the purpose of another contract between the parties, ought to have been mentioned in such terms in the agreement. No such terms can be carved from the reading of Clause 107 of the agreement. Therefore, reliance on a letter of appellant dated 05.10.1998 and its reply by the respondent dated 15.11.1999 was in relation to other contracts and not in relation to Contract (D). Now let us deal with the submission of the respondent as to whether there was a compliance of the terms of agreement when the arbitration was invoked by the appellant oil 17th July, 1999. Respondent tried to rely on a letter dated 31st July, 1999 which has not been admitted by the appellant. As a matter of fact, this letter purported to have been sent by a lawyer on behalf of respondent that too by UPC. Said letter, which has been sent by a lawyer and that too by UPC, raises doubt about the genuineness of this letter.

9. Normally, it is the parties who correspond with each other, here also it was not the case that lawyers were corresponding on behalf of the parties. Therefore, letter dated 31st July, 1993 on which reliance has been placed by the respondent, its existence is surrounded with mystery. Let us deal with the letter of the respondent dated 15.11.1999. It was contended before us that appellant has not responded to the names suggested by the respondent pursuant to the said letter. But this letter itself speaks the truth and demolishes the stand of the respondent that after invocation of the arbitration clause on 17th July, 1999, no action was taken by the respondent to send the names of a panel containing three names. From the perusal of the aforesaid letter of the respondent dated 15.11.1999 it appears that in relation to the work orders 'A' and 'B' in response to a letter of the respondent dated 05.10.1998, the respondent had submitted a panel of three arbitrators asking the appellant to select one of them. As a matter of fact, when the arbitration clause in relation to Contract (D) was invoked on 17th July, 1999, how a letter of 5th October, 1998 of the appellant could be acted upon or could be referred in the correspondence by the respondent. When there was no dispute till 17th July, 1999, the reliance placed by the respondent on a letter of the appellant dated 05.10.1998 which according to Mr. Nayyar was in relation to Contracts (A) and (B) shows that the respondent has not acted upon the invocation of the arbitration clause on 17th July, 1999 by the appellant. Therefore, there is no merit in the submission of the respondent that respondent had sent the names as per the arbitration clause of the agreement. Therefore, the finding of the learned Single Judge was based on wrong assumptions as he has taken the date of the letter as 16th February, 1999 and on that basis has come to the conclusion that dispute in relation to Contract (D) also stood resolved in terms of said letter. As stated earlier, said letter was in relation to disputes relating to Contracts (A) and (B) and not in relation to Contract (D).

10. We also find no merit in the submission of the respondent that Section 16 provides a complete code for such an eventuality when the arbitral tribunal is constituted de hors the terms of the agreement. According to the learned counsel for the respondent in such cases the appellant ought to have participated in the proceedings as they could have challenged the award. From the correspondence and the order sheets of respondent No. 3 we observe that at all stages the appellant have been questioning the jurisdiction of respondent No. 3 and respondent No. 3 in spite of the protests of the appellant regarding the jurisdiction, proceeded in the matter and gave no claim award, then the only remedy left for the appellant was to wait till the award was given as per Sub-section (6) of Section 16 of the Arbitration and Conciliation Act and thereafter said award has been challenged pursuant to Sub-section (6) of Section 16 of the Act. The same has been done by the appellant. Therefore, judging from any angle, we do not find any substance in the arguments of the respondent. The appointment of the respondent No. 3 was not in consonance with Clause 107 of the arbitration agreement. On this ground, order of the learned Single Judge is set aside. The award of the arbitrator/respondent No. 3 is consequently set aside. Parties to appear before respondent no, 4 who will proceed in accordance with law and give the award.

11. Appeal stands allowed and disposed of in terms of above directions.