S.R. Construction Co. vs Delhi Development Authority
2006 Latest Caselaw 671 Del

JUDGMENT

Anil Kumar, J.

1. This petition has been filed by the Petitioner under Section 11(6)(a) and (c) of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator.

2. Petitioner is a partnership firm duly registered under the Partnership Act and Shri Sudhir Kumar is a registered partner of the firm.

3. The respondent No. 3 had invited tenders for construction of 160 houses for Category II and III (80 Nos. ) two bed rooms category?II. (80 Nos. ) three bed rooms category?III and 120 Nos. S/G. under SFS in Vasant Kunj, Sector?D, Pocket?II, Gr.-III, e/c. Internal development of land.

4. The petitioner contended that he had submitted a tender which was accepted and an agreement No. 3/EE/HD-XXI/DDA/1985-86 was executed between the petitioner and the respondents.

5. It was asserted by the petitioner that he mobilized all materials and labor to complete the work within time. Despite all efforts made by him, there were substantial delays by the respondents and the work could actually be completed on 24th August, 1989. The petitioner attributes all the delays on the part of the respondents and attributable to him.

6. It has been contended that though the work was completed on 24th August, 1989, respondent instructed the petitioner to hand over the possession of flats to the alottees and till the allotment of all the flats, respondents did not make payment of the final bill in spite of several requests. The respondent is alleged to have unlawfully deducted various amounts from the bills of the petitioner and unlawfully recovered rebates which they were not entitled to. The respondents also unlawfully recovered various other amounts by making reduction/deduction items and withheld amounts of the petitioner. The petitioner was not paid on account of escalation under Clause 10-CC and the losses and damages suffered by the petitioner have not been paid by the respondents.

7. The petitioner stated that there is an arbitration agreement in terms of Clause 25 between the parties which is as under:-

Clause 25 Except where other wise provided 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 of materials used on the work or as to any other questions claim, right, matter or thing whatsoever in any way arising out of or relating to the contract designs, drawings specifications, estimates instructions orders or these conditions of otherwise concerning the work of the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination completion or abandonment thereof shall be referred to the sole arbitrator of the person appointed by the Engineer Member Delhi Development Authority at the time of dispute. It will no objection to any such appointment that the arbitrator so appointed is a Delhi Development Authority employee that he had to deal with the material to which the contract relates and that in the course of his duties as Delhi Development Authority employees had expressed view on all or any of the matters in dispute of difference. The arbitrator to whom the matter is originally referred being transferred of vacating his office or being unable to act for any reason, such Engineer Member Delhi Development Authority as aforesaid at the time of such transfer, vacation of office or liability to act shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by the predecessor it is also a term of this contract that no person other than a person appointed by such Engineer Member, Delhi Development Authority as aforesaid should act as arbitrator and, if for any reason that is not possible, the matter is not to be referred to arbitration at all. In all cases where the amount of the claim in dispute is Rs. 50,000/- (Rupees Fifty Thousand) and above, the arbitrator will give reason for the award.

Subject as aforesaid the provision of the Arbitration Act, 1940 or any statutory modification or reenactment thereof and the rules made there under and for the time being in force shall apply to the arbitation proceeding under this 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 each such dispute. It is also a term of this contract that if the contractor(s) does/do not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the intimation from the Engineer-in-charge that the bill is ready for payment. The claim(s) of the contractor(s) will be deemed to have been waived and absolutely barred and the Delhi Development Authority shall be discharged and released of all liabilities under the contract in respect of those claims.

8. The petitioner invoked arbitration agreement between the parties by notice dated 21st September, 2005 which was sent by registered post and served on 23rd September, 2005 seeking appointment of Arbitrator for resolution of disputes between the parties.

9. Despite the service of notice dated 21st September, 2005, the arbitrator had not been appointed by the respondents entailing filing of present petition for appointment of Arbitrator.

10. Mr. Mehandru appeared on behalf of the respondent and stated that he does not wish to file any reply nor opposed appointment of any independent person as an arbitrator since the respondents neither appointed any arbitrator after notice given by the petitioner nor has appointed any arbitrator even after service of notice of present petition.

11. The petitioner has made specific averments that there was agreement between the parties containing Clause 25 having arbitration agreement and on account of disputes raised by him and invoking the arbitration agreement, the respondents ought to have appointed an Arbitrator in accordance with agreement.

12. The respondents have not appointed any arbitrator nor any reason has been disclosed for not appointing an arbitrator. The respondents failed to appoint an arbitrator despite invoking the agreement and therefore they have forfeited the right to appoint an arbitrator in terms of Clause 25 containing arbitration agreement which contemplates that the disputes shall be referred to the adjudication through an arbitrator appointed by the Engineer member of Delhi Development Authority and no person other than a person appointed by and Engineer Member will act as an arbitrator.

13. A learned Single Judge in Haryana Telecom Ltd. v. Union of India and Anr. 112 (2004) DLT 339 : 2004 (3) Raj 147, had held that since the respondent failed to appoint an Arbitrator within the stipulated time of 30 days of the notice, and even after filing of the petition under Section 11 of the Act, it is for the Court to appoint an Arbitrator. Learned Counsel for the petitioner states that this is a similar position, since in the present case notice was issued to the person designate on 21.09.2005 and was served on the respondent on 23.09.2005 and despite that no Arbitrator had been appointed.

14. Learned Counsel has also referred to the judgment of the Division Bench of this Court in Delkon (India) Pvt. Ltd. v. G.M., Bharat Heavy Electricals Ltd. , where it was observed in paras 4 and 5 as under:

4. We have given our careful consideration to the arguments advanced by learned Counsel for both the parties. In view of the law laid down in the case of Datar Switchgears Ltd. v. Tata Finance Ltd. and Anr. IV (2000) CLT 191 (SC) : JT 2000 (Suppl. 2) SC 226 it is no more res integra that the vacancy can be supplied by a party pursuant to the arbitration agreement even after third days of the receipt of the notice. However, onces a party approaches the Court and files a petition for appointment by the designated authority of the Chief Justice of that Court under Section 11(6) of the Arbitration and Conciliation Act, the right to supply vacancy by the opposite party is extinguished. If that right stood extinguished on filing of the petition under Section 11(6) of the Arbitration and Conciliation Act, in September 1998 the appointment of an Arbitrator on 3rd May, 1999 could not be made, therefore in our view, the order passed by the learned Single Judge on 7th May, 1999 suffers from patent illegality. Therefore, the submission of the respondent that the petitioner had appeared before the Arbitrator and the application of the petitioner raising preliminary objections is pending adjudication which inter alia challenges the jurisdiction of the Arbitrator to decide the dispute is of no consequence as from the order reproduced above it was pursuant to the directions passed by the learned Single Judge that the parties were directed to appear before the Arbitrator. The petitioner had no other option but to appear before the Arbitrator and after appearing before the Arbitrator the petitioner has not submitted to the jurisdiction of the Arbitrator, rather has at first opportunity taken the objection that the Arbitrator had no jurisdiction to proceed with the matter.

In this regard the learned Counsel for the respondent is unable to show anything as to why the view taken in Union of India v. R.R. Industries 120 (2005) DLT 572 be not followed where it was held that once a party does not supply the vacancy or fails to supply the vacancy before filing of a petition under Section 11(6) of the Arbitration and Conciliation Act, forfeits the right to supply the vacancy in terms of the arbitration clause. What remains is only the arbitration clause, i.e. the dispute has to be resolved under the mechanism of alternative dispute redressal scheme but no right survives to the respondent to supply the named Arbitrator in the arbitration clause.

15. Another single judge of this Court has also followed the ratio of the judgment of Union of India v. R.R. Industries in another matter Sudhir Gensets Ltd. v. Union of India and Anr. 125 (2005) DLT 602. There is no reason in the facts and circumstances to differ with the ratio laid down in these cases nor any thing to the contrary has been canvassed before me.

16. Faced with these propositions, the learned Counsel for the respondents also agreed for appointment of an independent person as an arbitrator for adjudication of the disputes between the parties and contended that the Court may appoint any suitable person as an arbitrator.

17. Consequently, I appoint Mr. G.P. Theraja, retired Additional District and Sessions Judge, B-201, Priyadarshani Appartments, Patpar Ganj, Delhi-110092 (Tel. 20906899) as a sole arbitrator to adjudicate the disputes between the parties. The fee of the arbitrator shall be Rs. 10,000/- per hearing subject to a maximum of Rs. 1,20,000.00. The parties are directed to appear before Shri J.P. Theraja retired Additional District Judge on May 2, 2006 at 04.00 pm. Copy of this order be communicated to the Arbitrator forthwith. The parties are also directed to communicate the order to the Arbitrator. Copies of this order be given also to the parties, dusty.

18. With these directions the petition is disposed of.