Northern Sanitation vs New Delhi Municipal Council And ...
2004 Latest Caselaw 494 Del

JUDGMENT

Manmohan Sarin, J.

1. This is a petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, praying for appointment of an independent person as the sole arbitrator for adjudication of the disputes and claims detailed in para 7(xv) of the petition. Notice in the petition was issued to respondent no.3. Mr. Rohit Verma, advocate entered appearance on behalf of the respondents on 18.11.2003. The matter had been adjourned from time to time as this case got linked up with another batch of petitions wherein the Court was considering the validity of an order to be passed under Section 11, wherein during the pendency of the petitions, an Arbitrator has been appointed by the respondents.

2. The said question does not arise in the present petition and this petition has been delinked from those set of petitions and is being disposed of accordingly.

3. Petitioner's grievance is that it had submitted a tender under the name and style of "Augmentation of Sewerage in various NDMC Area = Augmentation of Sewerage in Moti Bagh, Netaji Nagar and Sarojini Nagar. SH: Making house-line connections to the newly laid main/branch sewer line at Sarojini Nagar." Petitioner claimed that it had responded to the invitation of tender and the work was awarded vide letter dated 1st March, 2001, culminating in the execution of the Agreement bearing no.23/EE/SM/2001-2002 dated 1.3.2001, between the parties.

4. It is the petitioner's case that despite reminders there were breaches right from inception of the above contract on the part of the respondents in making available the site for offices and godown, rendering the petitioner unable to mobilise and gear resources for the work to be executed. It is not necessary in this petition to go into the various breaches alleged by either party. It is sufficient to notice the claim of the petitioner that the action of termination of the contract by the respondents vide their letter dated 2.5.2002, is claimed to be wrongful and is refuted by the petitioner. The petitioner in sub-para (xv) of para 7 has set out its claims running into several lakhs of rupees and prays for appointment of an arbitrator in view of the arbitration agreement contained in Clause 25.

5. The respondents have filed counter affidavit claiming that the petitioner has not followed the procedure prescribed in Clause 25 embodying the arbitration agreement. Hence it has forfeited its right to the appointment of an arbitrator. It is claimed that the right to invoke arbitration stands forfeited as the contract was to be completed within six months from March, 2001 to 10th September, 2001, and the petitioner even failed to initiate the job resulting in rescission of the contract vide letter of 2.5.2002. It is claimed that as the contract was rescinded, the contract dies and the arbitration clause does not have existence in the absence of the contract. This claim is strongly refuted on merits by petitioner.

6. As noted earlier, it is not necessary to go into the question of merits of the individual claims. While opposing the petition, reliance was placed in the case of Wellington Associates verus Kirit Mehta reported at . Learned counsel for the respondent also relied on the observation of the Supreme Court in the cited case with regard to Section 16 of the Arbitration and Conciliation Act to the effect that Section 16 did not take away the jurisdiction of the Chief Justice of India or the designate under Section 11 to see the existence or otherwise of the arbitration agreement.

7. Reference was also made by the parties to the following observation of the Supreme Court in the case of Hythro Power Corporation versus Delhi Transco reported at 2003 (5) SCALE 590 :-

" Keeping in view the law as settled by this Court, the designate of the Chief Justice acting under Section 11 of the Act and the Division Bench of the High Court in exercise of power under Article 226 of the Constitution both acted under a misconception of law and wrongly held that the disputes were not referable to the arbitration. The appellant sought reference of its disputes with the respondent/company for adjudication through the arbitration in accordance with arbitration clause on the alleged agreement arrived at between them. Whether on the facts mentioned above an arbitration agreement can be said to have existed by recourse to arbitration clause in NIT was itself a dispute which deserved to be referred to the arbitral Tribunal in accordance with the arbitration clause. Section 16 empowers the arbitral Tribunal to decide the question of existence and validity of the arbitration agreement."

8. The above observations do not advance the respondents case at all. In the instant case, the existence of arbitration agreement is not disputed. What is sought to be claimed is that the arbitration agreement has exumed or exhausted itself due to its termination. This is not the dispute which would fall for determination within the scope of exercise of jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996. The observation of the Supreme Court in the case of Hythro Power (supra) are relevant. While the Supreme Court in Willington Associates (supra) had observed that where the very existence of the arbitration agreement was denied the jurisdiction of the Chief Justice of India or the designate to decide the question was not excluded by Section 16. The Supreme Court in Hythro Power (supra) held that the designate of the Chief Justice under Section 11 could not adjudicate upon the disputes regarding the validity and existence of the arbitration agreement and hold that the dispute was not referable. The relevant passage had already been reproduced above.

9. Applying the above dictum of the Supreme Court, there has been failure on the part of the respondent to appoint an arbitrator despite invocation of the arbitration agreement. Whether the claims are maintainable or not or have become unenforceable by non-adherence to the procedure prescribed are questions which will fall exclusively within the domain of the arbitrator.

10. The respondent did not appoint an arbitrator and the petitioner filed the present petition under Section 11 of the Arbitration and Conciliation Act. No arbitrator was appointed till the filing of the petition. Accordingly, the respondents have forfeited their right to nominate an arbitrator in terms of the judgment of the Supreme Court in Datar Switchgear versus Tata Finance Co. Ltd. and the petitioner is entitled to have an independent arbitrator.

11. Accordingly, Mr.Justice J.D.Kapoor, a retired Judge of this Court, 16, Park Street, New Delhi (Tel. Nos. 23092739, 23093695-R) is appointed as the sole Arbitrator to adjudicate upon the disputes which are the subject matter of this petition. The fee of the learned Arbitrator is fixed at Rs.10,000/- per hearing to be shared equally between the parties subject to outcome of the cause and subject to a ceiling of Rs.1,30,000/-.

12. A copy of the Order be sent to the learned Arbitrator.