Engineering Development ... vs Mcd And Anr.
2005 Latest Caselaw 1281 Del

ORDER

Swatanter Kumar, J.

1. This is a petition filed by the Engineering Development Corporation through its partner Mr. Pawandeep Singh Chadha under Section 11 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as 'the Act') for appointment of an independent arbitrator.

2. Municipal Corporation of Delhi invited tenders for construction of re-modelling of nallah from Dhouli Piao Road passing between A-2A Block and Government Senior Secondary School, Janak Puri. The petitioner had tendered for the said work and was awarded the work vide work order No. EE(Project)WZ/TC/2001-2001/4/1/59 dated 4th September, 2001. The agreement was executed. The work was to be completed within nine months. According to the petitioner, there was delay in execution of the work because the respondent committed fundamental breaches of the contract. Parties exchanged correspondence and despite odds according to the petitioner, it completed the contracted work to the entire satisfaction of the respondent on 7.9.2003. The petitioner claimed its dues from the respondent and asked it to finalize the final payment but of no consequence and as such, the disputes arose between the parties for which the petitioner wrote a letter dated 27th April, 2005 to the respondent invoking the arbitration clause and requested it to appoint an arbitrator and refer the disputes to the said arbitrator in accordance with law. It is averred by the petitioner that clause 25 of the contract is the arbitration clause and provides for reference of disputes of all kinds to the arbitrator. As the respondent failed to appoint an arbitrator despite service of the notice, the petitioner has been compelled to file the present petition.

3. Upon notice on this petition, the respondent appeared. The prayer for appointment of an independent arbitrator under the orders of the court was opposed by the respondent on the ground that the petition itself is not maintainable as the petitioner is neither a registered partnership concern nor the petitioner is the registered partner. It is further averred that no notice as contemplated under Section 11 of the Act has been served upon the respondent. As such, they have not committed any breach of the terms of the agreement or in compliance with the requirement of the arbitration clause. It is stated that the petition itself is not maintainable for want of notice and service thereof upon the respondent in accordance with law. It is stated that the respondent otherwise is willing to treat the present petition as a notice for appointing the arbitrator and for reference of the disputes raised by the petitioner.

4. From the above narrated facts, it is clear that the controversy in the present case is a very short one. The facts are really not in dispute. The objection raised with regard to partnership not being a registered partnership is an objection without any basis and hardly lies in the mouth of a public undertaking to raise such an objection once it has admittedly entered into contract with the same partnership concern through the same partner who has filed the petition. In any case, this objection was not seriously pressed by the counsel appearing for the respondent and as such, it is not necessary for this court to adjudicate upon this issue any further.

5. The petitioner claims to have sent notice for appointment of arbitrator to the respondents on 27th April, 2005. The said notice reads as under:-

Dated 27.04.2005

The Commissioner,

Municipal Corporation of Delhi

Town Hall,

New Delhi.

Name of work: Re-Modelling of Nallah from Douli Piao road passing     between A- 2A, Block and Govt. Sr. Sec. School in     Janakpuri, WZ.
 

S/H  : Construction of RCC Box Type Drain
 

The above noted work was awarded to us and the date of start as per agreement was 14.09.2001 and the work to be completed within nine months.
 

The work was completed to the entire satisfaction of the M.C.D. However the running account bill till dates not paid to us. Nor the payment of the final bill has been made to us.
 

The disputes have arisen between the parties and the agreement contains an arbitration clause, for settlement of disputes through arbitration.
 

We, therefore request you to appoint an arbitrator within 30 days of receipt of the notice.
 

Thanking you, 

Yours faithfully,  

for ENGEERING DEVELOPMENT CORPORATON 

Sd/- 

Partnership 

Enclosed: Copy of claims.
 

6. The bare reading of the above notice shows that work order has not been mentioned in the said letter. Even complete details including the date of the agreement has not been specified in the letter. In the petition, the petitioner has given complete details of the agreement as alleged the work order. Thus, there was no reason for the petitioner not to mention such details in the notice as contemplated under Section 11 of the Act. A party serving a notice in terms of Section 11 of the Act cannot serve a vague notice which is incomplete, indefinite and does not satisfy the requirements of Section 11 of the Act. The onus to prove that such proper notice has been served upon the respondent lies upon the petitioner. In the present case, the notice was not even sent by registered AD, by courier or any other known mode of postal services. The copy of the notice is stated to have been served upon the office of the respondent and it is stated to bear receipt of the office dated 27th April, 2005 on the copy of the notice which has been placed on record. Even, this acknowledgment is not clear.

7. The receipt of notice by the party who is called upon to appoint an arbitrator in consonance with the arbitration clause, has to be a notice properly containing complete particulars and duly received by the party. This is for the reason that a definite benefit accrues to a petitioner to claim substitution of the arbitrator by the process of the court on the ground that the other party has defaulted to comply with the terms of the arbitration clause despite the notice having been received by it. The obvious consequence in law is that instead of a nominated arbitrator, the applicant is entitled to have an independent arbitrator through the process of the court. This advantages accrues to the applicant because of default. Thus, it is important that there is strict compliance to the provisions of Section 11(1) and 11(6) of the Act. Secondly, the onus lies upon the applicant to show that he has complied sincerely with the requirements which are condition precedent to maintain such a petition.

8. At this stage, it will be appropriate to refer to the recent judgment of this court titled as Varun Associates v. Army Welfare Housing Organisation, Arb.P. 222/2004 decided on 28th July, 2005, having a direct bearing on the arguments raised in the present case. In that case the court held as under:-

6. Section 11(4) of the Act state that if the appointment procedure in Sub-section 3 applies and a party fails to appoint an Arbitrator within 30 days from the receipt of a request to do so from the other party, the appointment shall be made upon request by a party before the Chief Justice or any person or institution designated by him. Under Sub-section 5 of the same Section failing in Agreement referred to Sub-section 2 in the Arbitration with a sole Arbitrator, if the parties fail to agree on the Arbitrator within 30 days from receipt of a request by one party from the other to so agree the appointment shall be made upon request of a party, by the Chief Justice or any person or institution designated by him. It is the default of one party to act which gives right to the other to invoke the provisions of Section 11 of the Act for appointment of an Arbitrator. The default is a fact. This fact must be shown to have existed to the satisfaction of the Court by the party which approaches the Court. The onus to establish this fact that other party has faulted to act despite the receipt of the notice is on the party which pleads this fact and wishes to take advantage of the provisions of the Section 11 of the Act.

8. The expression 'receipt' has also been explained as a formal written acknowledgment that something has been received. This meaning also finds support from The New Lexicon Webster's Dictionary, Deluxe Encyclopedic Edition. In other words the 'receipt'of notice as referred in the language of the provisions of the Arbitration Act, though not specifically referred to any Section 11(6) of the Act still would make it obligatory upon the part of the Petitioner so as to establish a party's failure to act as required under the procedures of agreement for appointment of the Arbitrator to show that notice or demand for appointment has been received by the either side and they have failed to act despite reasonable period. The period of thirty days does not find mention in 11(6) but it is a settled principle of law now that the party must act within a reasonable time and in the event it fails to act within the reasonable time, it will lose the right to appoint Arbitrator at its own as per the procedure agreed between the parties for such appointment.

9. At this stage, the judgment of the Supreme Court in the case of 'Datar Switchgears Ltd. V. Tata Finance Ltd. and Anr., JT 2000 (Suppl.2) SC 226 can be usefully referred to, where their Lordships of Supreme Court held as under :-

"The respondent made the appointment before the appellant filed the application under Section 11 but the said appointment was made beyond 30 days. Question is whether in a case falling under Section 11(6), the opposite party cannot appoint an Arbitrator after the expiry of 30 days from the date of demand? 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.

10. Applying the above facts to the present case, the Petitioner has not been able to satisfactorily demonstrate before the Court that the notice dated 29th July, 2004 was served upon the Respondent. The said notice was not sent by registered acknowledgment due so as to draw any presumption in favor of its delivery having been correctly addressed. Furthermore, the Petitioner has not even cared to file on record the acknowledgment of the said notice which is stated to have been sent through courier. It was the duty of the petitioner to file on record the acknowledgment and certificate from the courier that the said letter have been delivered at the correct address given in the letter. Having failed to discharge this preliminary onus, the Petitioner cannot take advantage of the reference of the provisions of Section 11(6) of the Act so as to disable the other side from exercising its right to appoint the Arbitrator.

9. Usefully, the reference can also be made to the judgment of this court in the case titled as Jansatta Shakari Awas Samiti Ltd. v. Organic India, Arb.P. 250/2003 decided on 25th August, 2005.

10. The law stated in the above cases when applied to the facts of the present case, would show that the petitioner has failed to satisfy the basis ingredients essential to the very maintainability of the petition under Section 11(6) of the Act. The notice is vague, indefinite and does not even refer to the order number, date of agreement and its very receipt by the respondent is doubtful. Merely because it bears stamp of a department which does not in any way depicts that it was received by the correct branch of the department would not be a sufficient service so as to construe receipt of the notice by the respondent.

11. For the reasons afore-stated, I would dispose of this petition with a direction to the respondent to abide by its statement before the court that it would treat the present petition as a valid notice under Section 11 of the Act and would appoint an arbitrator within one month from today and refer the disputes as stated in the letter dated 27.04.2005.

12. In the facts and circumstances of the case, the parties are left to bear their own costs.