D.S. Khurana vs Municipal Corporation Of Delhi
2004 Latest Caselaw 864 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 petitioner entered into an Agreement dated 27th November, 2001 with the respondent for construction of JSC at I Block (120 seats) and J Block (40 seats), Y Block (80 seats), Y Block JJ (40 seats) and H Block (40 seats) vide Work Order No. 304/12.10.2001. The petitioner is the Sole Proprietor of M/s National Builders, engaged in the business of contractors and engineers and the respondent is the Municipal Corporation of Delhi(in short the `MCD'). Clause 25 of the general conditions of contract between the parties providing for settlement of disputes by way of arbitration reads as follows:-

"Clause 25 : 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 shall be dealt with as mentioned hereinafter:-

i) If the contractor considers any work demanded of him to be outside the requirement of the contract, or disputes, any drawings, record or decision given in writing by the Engineer-in-Charge on any matter in connection with or arising out of the contract or carrying out of the work, to be unacceptable, he shall promptly within 15 day request the Superintending Engineer in writing for written instruction or decision. Thereupon, the Superintending Engineer shall give his written instructions or decision within a period of one month from the receipt of the contractor's letter.

If the Superintending Engineer fails to give his instructions or decision in writing within the aforesaid period or if the contractor is dissatisfied with the instructions or decision of the Superintending Engineer, the contractor may, within 15 days of the receipt of the Superintending Engineer's decision, appeal to the Chief Engineer who shall afford an opportunity to the contractor to be heard, if the latter so desires, and to offer evidence in support of his appeal. The Chief Engineer shall give his decision within 30 days of receipt of contractor's appeal. If the contractor is dissatisfied with this decision, the contractor shall within a period of 30 days from receipt of the decision, give notice to the Chief Engineer for appointment of arbitrator failing which the said decision shall be final binding and conclusive and not referable to adjudication by the arbitrator.

ii) Except where the decision has become final, binding and conclusive in terms of Sub Para (i) above disputes or difference shall be referred for adjudication through arbitration by a sole arbitrator appointed by the Chief Engineer, CPWD, in charge of the work or if there be no Chief Engineer, the administrative head of the said CPWD. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacate his office due to any reason whatsoever another sole arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor.

It is a term of this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respect of each such dispute Along with the notice for appointment of arbitrator and giving reference to the rejection by the Chief Engineer of the appeal.

It is also a term of this contract that no person other than a person appointed by such Chief Engineer CPWD or the administrative head of the CPWD as aforesaid should act as arbitrator and if for any reason that is not possible, the matter shall not be referred to arbitration at all."

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 Commissioner, MCD as provided in the aforesaid clause 25 on 1st December, 2003 by a letter admittedly received by the respondent within a week. There was no response from the respondent, entitling the petitioner to seek appointment of an independent arbitrator. On 16th July, 2004 the petitioner approached this Court and notice was issued on 20th July, 2004 under sub-section (6) of Section 11 of the Act. In reply to the arbitration petition, Ms. Kapur appears on behalf of the respondents and though a reply has not been filed but she states that she has no objection to the appointment of an arbitrator appointed by this Court except that the appointment be made out of the panel of the arbitrators of MCD. 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. v. 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. v. 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 a learned Single Judge of 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 after unsuccessfully moving the respondent for appointing an arbitrator, 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 16th July, 2004, the date when the petitioner approached this Court under Section 11(6) of the Act.

6. Accordingly, the petition is allowed and Mr. Vijay Motwani, Superintending Engineer, Delhi Central Circle II, CPWD, I.P. Bhawan, New Delhi(Mobile-9811378780) 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. Parties to appear before the arbitrator on 11th October, 2004. Considering the amount of work involved in the claim, the Arbitrator to give his award, not later than 4 months from the date of entering upon reference.

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