Revanjali Furnishers (P) Ltd. vs Association Of Corpn. And Apex ...
2006 Latest Caselaw 1379 Del

JUDGMENT

Vikramajit Sen, J.

1. This Petition has been filed under Section 11 read with Section 14 of the Arbitration and Conciliation Act, 1996 (for brevity the Act). The Applicant had entered into a contract with the Respondents for the interior decoration of Handloom Pavilion, Pragati Maidan, New Delhi, over five years back. Disputes had arisen which were being adjudicated under the Sole Arbitration of Shri R.C.M. Reddy appointed by the Respondent. It transpires that the proceedings scheduled for 7.1.2003 were adjourned by the said Sole Arbitrator on the grounds that the parties were trying to settle the matter amicably. Thereafter, no further proceedings were held by the Sole Arbitrator. This necessitated the filing of Arbitration Petition No. 231/2005 which was allowed by Sanjay Kishan Kaul, J. in terms of Orders dated 23.1.2006. The Respondents appointed Shri Sanjit K. Samal, Joint DGFT as the Sole Arbitrator. However, he declined to act in the matter, as intimated by him in his letter dated 17.5.2006.

2. A legal Notice was thereafter issued to the Chairman, Association of Corporation and Apex Societies of Handloom (ACASH) seeking a direction to Shri Samal to commence arbitral proceedings, failing which the Applicant would have no recourse other than to approach the Court yet again. Timely action has not been taken. This Petition came to be filed on 14.7.2006.

3. Llearned Counsel for the Respondents submits that the Applicant was intimated by letter dated 28.7.2006 that the Chairman, ACASH had appointed Shri Pankaj Malik, Joint Director as the Sole Arbitrator in place of Shri Samal. On 31.7.2006 Shri Pankaj Malik addressed a letter to the Applicant, which was dispatched by fax, calling upon the Applicant to appear in his office at 4:00 P.M. on that very date. Persons who take on quasi judicial functions should not act in such an arbitrary manner; it renders their duties illusory. No party can be considered to be at the beck and call of an Arbitrator; he ought not to insist on appearance before him within two and a half hours of the issuance of a notice. Shri Malik has manifested an unbiased or judicial approach. Llearned Counsel for the Respondent has submitted that the notice of the petition under Section 11 was served on Defendant No. 1 on 1.8.2006. What he has failed altogether to inform the Court is that on 28.7.2006 this notice had been served on the previous Sole Arbitrator, Shri Samal, who is the Joint DGFT, Government of India. Llearned Counsel for the Respondent seeks to clarify that Shri Samal is from a different Ministry. Be that as it may, it is too much of a coincidence that the appointment of Shri Pankaj Malik took place on the very day on which notices had been served on the previous Sole Arbitrator, who had declined to proceed with the Arbitration after over two months of his appointment. Justice should be seen to be done and a party cannot be compelled to have disputes arbitrated upon by a person who he does not have faith in to be independent.

4. Llearned Counsel for the Respondent relies on the Orders of a Single Judge of this Court in Harcharan Das Gupta v. Shivlok C.G.H.S. Limited which decision is per incuriam in view of the Supreme Court's pronouncement in Datar Switchgears Ltd. v. Tata Finance Ltd. which was not cited. The following paragraph from Datar Switchgears is relevant:

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.

5. It is not in dispute that the invitation to tender contained an Arbitration Clause which specified that in case of any dispute the Arbitration would be conducted by the Indian Council of Arbitration (ICA). The Applicant had, in fact, approached the ICA in the year 2002 but the ICA declined to proceed in the matter in view of the subsequent Arbitration Clause contained in the Agreement that had been executed by the parties, which reposes the power to nominate a Sole arbitrator with the Respondent.

6. Since the Applicant has been compelled, for the second time, to approach this Court under Section 11 of the Act, the pronouncement in Datar Switchgears Ltd. becomes critical. It is, therefore, the duty of this Court to appoint an independent Arbitrator, even though the Respondents have appointed Shri Pankaj Malik belatedly that is after the filing of the present Petition. It is also possible that this appointment was made immediately upon service of the Petition on the previous nominee Arbitrator. If the Appointing Authority acts with dispatch, Courts would not be clogged with Petitions such as the present one, and valuable Court time could be better utilised. As seen above, Shri Malik has not acted in a manner behoving a quasi judicial authority. There is no justification for him to have neglected to fix a future date of hearing, especially keeping in perspective the unusual delay in the arbitration that has already occurred.

7. Since the Respondents have themselves mentioned in their Tender documents that Arbitration would be taken recourse of under the aegis of the ICA, the course that commends itself is to refer the parties to ICA for arbitration of their disputes. Ordered accordingly. Parties to appear before the Registrar, ICA, Federation House, Tansen Marg, New Delhi on 4.9.2006 at 11:00 A.M. who shall thereafter proceed in the matter as per ICA Rules and Regulations.

8. Petition is disposed of in these terms. I ought to award costs against the Respondents, but decline to do so.

9. A copy of this Order be dispatched to the Registrar, ICA, Federation House, Tansen Marg, New Delhi.