Econ Puri Consortium vs Delhi Metro Railway Corporation ...
2006 Latest Caselaw 351 Del

JUDGMENT

Badar Durrez Ahmed, J

Page 0673

1. These petitions under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said Act) raise common issues and, therefore, were heard together and are being disposed of by this common order.

2. It is the case for the petitioner that certain disputes had arisen between the petitioner and the respondents with regard to the contract and / or performance of the contract between the parties. The details of the arrangement between the parties need not be gone into. All that is relevant for the purposes of the present applications is the interpretation of clause 85.5 of the general conditions of contract which deals with the nomination of arbitrators/sole arbitrator. The said clause 85.5 which is identical in both the cases, reads as under:-

85.5. Nomination of Arbitrators/Sole Arbitrator

Matters to be arbitrated upon shall be referred to a sole Arbitrator where the total value of claims does not exceed Rs.1.50 millions. Beyond the claim limit of Rs.1.50 million, there shall be three arbitrators. For this purpose the employer will make out a panel of Engineers with the requisite qualifications and professional experience relevant to the field to which the Contract relates. This panel will be from serving or retired Engineers of Government departments or of Public sector. In case of a single arbitrator, the Panel will be of three Engineers, out of which the Contractor will choose one. In case three arbitrators are to be appointed, the employer will make out a panel of five. The Contractor and the Employer will choose one arbitrator each and the two so chosen will choose the third arbitrator. Neither party shall be limited in the proceedings before such arbitrator/s to the evidence or arguments put before the Engineer for the purpose of obtaining his decision. No decision given by the Engineer in accordance with the foregoing provisions shall disqualify him from being called as a witness and giving evidence before the Arbitrator/s on any matter, whatsoever, relevant to dispute or difference referred to arbitrator/s. The arbitration proceedings shall be held in Delhi only. The language of proceedings, that of documents and communication shall be English and the award shall be made in writing. The arbitrators shall always give item-wise and reasoned awards in all cases where the value of total claims exceeds Rs.1.00 million. Where three arbitrators have been appointed, the award by the majority will prevail.

Reading the aforesaid clause, it is clear that two different procedures have been prescribed for claims not exceeding Rs.1.5 million and claims beyond the limit of Rs.1.5 million. In cases where the claim does not exceed Rs. 1.5 million, the procedure is for appointment of a sole arbitrator out of a panel of three suggested by the employer (the respondent). In the present case, the claim is beyond 1.5 million and, therefore, the other procedure is to be followed. This requires the arbitration to be conducted by a Tribunal consisting of three Arbitrators to be nominated out of the panel of five Page 0674Engineers with requisite qualifications and professional experience relevant to the field to which the contract relates. This panel is to be made by the respondents (Employer) from serving or retired Engineers of Government Departments or of the Public Sector. The procedure is clear that once the employer (the respondent) names the panel of five such Engineers, the Contractor (the petitioner) and the Employer (the respondent) would choose one arbitrator each out of the panel and the two so chosen would choose the third arbitrator from out of the remaining three.

3. The case for the petitioner is that by letters dated 28.11.2005 the petitioner had invoked the arbitration clause (namely, clause 85.5) and required the respondents to provide the names, addresses and telephone numbers of the arbitrators on the panel with brief particulars to enable the petitioner to suggest the names. According to the learned counsel for the petitioner, these letters dated 28.11.2005 were dispatched to the respondents by mail & fax on 28.11.2005 itself. The learned counsel for the petitioner further submitted that since no reply had been received, these petitions were filed on 9.12.2005. He submitted that it is only after the filing of these petitions that the respondents by their letters dated 22.12.2005 gave the names of the members of the panel constituted by the respondents out of which the Arbitral Tribunal was to be selected. He, however, submitted that this letter of 22.12.2005 was received by it only on 30.12.2005. This is so stated in the additional affidavit filed on behalf of the petitioner in AA 17/2006 which is being adopted in respect of AA 18/2006 also. The additional affidavit is not on record although filed by the counsel for the petitioner on 20.2.2006 vide filing No.116. A copy of the same was handed over and the same is taken on record.

4. The learned counsel for the petitioner submitted that though the letter of 22.12.2005 gives the names and designations of the five persons constituting the panel, it did not give their addresses and qualifications and, therefore, this letter would not be in strict compliance with the requirements of clause 85.5. As a consequence, the learned counsel for the petitioner submitted, the respondents had lost and forfeited their right to appoint an arbitrator in terms of the procedure prescribed under clause 85.5. It is in this context that the learned counsel for the petitioner submitted that an independent arbitrator be appointed by this court pursuant to the provisions of Section 11(6) of the said Act.

5. The learned counsel for the respondents submitted that the relief sought by the petitioner cannot be allowed on several grounds. The first ground taken by him is that the petitioner had invoked the arbitration clause by its letters dated 28.11.2005 and shortly, thereafter, before the expiry of two weeks, the petitioner rushed to this court and filed the present petition on 9.12.2005. He submitted that this is clearly a premature petition, particularly, in view of the dictum of the Supreme Court in the case of Datar Switchgears Ltd v Tata Finance Ltd & Anr. 2000 VIII AD (SC) 50 where the Supreme Court had construed 30 days as being a reasonable period. The second ground taken by the learned counsel for the respondents is that the respondent did respond to the letter dated 28.11.2005, as would be evident from its letter dated 22.12.2005, and complied with the Page 0675requirements of clause 85.5 in nominating the panel of five Engineers from which the Arbitral Tribunal was to be constituted. He submitted that the non supply of the addresses and qualifications of the Engineers would not result in the annulment of the right of the respondents to proceed with the appointment of the Arbitral Tribunal. The learned counsel for the respondents thirdly submitted that these petitions came up before court for the first time on 4.1.2006 on which date this court was pleased to issue notice, returnable on 21.2.2006. He submits that when this matter came up for the first time before this court on 4.1.2006, the letter dated 2.12.2005 had been dispatched by the respondents and, as per the admission of the petitioner, had been received by the petitioner on 30.12.2005 itself. The receipt of this letter was not disclosed to the court on 4.1.2006 when the matter came up for the first time. The learned counsel for the petitioner immediately stated that this petition was filed earlier and that is the reason for not mentioning the receipt of the letter dated 22.12.2005. He stated that this is the reason why the additional affidavit was filed and that has been taken on record. The affidavit clearly points out the receipt of the letter dated 22.12.2005 on 30.12.2005.

6. Insofar as the provisions of Section 11 of the said Act are concerned, it is clear that Section 11(2)(3)(4) and (5) would have no application to the facts of the present case inasmuch as the parties had agreed on a procedure for appointing the arbitrators as would be evident from a reading of clause 85.5 referred to above. This takes us straightaway to the provisions of Section 11(6) of the said Act which reads as under:

(6) Where, under an appointment procedure agreed upon by the parties, -

(a) a party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

7. The learned counsel for the petitioner submitted that this was a case which clearly fell under clause (a) namely, where a party fails to act as required under the procedure agreed upon by the parties. He submitted that the procedure agreed upon by the parties is set out in clause 85.5. It requires that the panel be drawn up out of the Engineers having the requisite qualifications and professional experience relevant to the field to which the contract relates. In this context, he submitted that when the letter dated 22.12.2005 was issued by the respondents, the respondents ought to have indicated the requisite qualifications of the said panel of Engineers suggested by them. He also submitted that a specific request for the addresses had been made by the petitioner in its letters dated 28.11.2005 and the same were also not supplied. He submitted that upon a strict construction of this clause, the respondents not having provided the requisite qualifications and the addresses of the persons named in the panel, the Page 0676respondents had forfeited their rights to nominate and / or appoint arbitrators out of the said panel.

8. Considering the arguments advanced by the parties, I am unable to agree with the submissions made by the learned counsel for the petitioner. There are several reasons for this. The first reason being that if one were to strictly read clause 85.5 it nowhere prescribes that the respondent (the employer) was required to notify the petitioner with regard to the requisite qualifications of the members named in the panel nor is there any requirement of providing the addresses. Therefore, the non-supply of the qualifications of the Engineers named in the panel as well as the non-supply of their addresses is not a lacuna which cannot be filled. In other words, this is not something which would be fatal to the cause of the respondent. The other aspect of the matter is that the petitioner rushed to this court on 9.12.2005, within two weeks of the issuance of its invocation letters of 28.11.2005. The respondents replied to the letters on 22.12.2005 within 30 days which has been regarded a reasonable period by the Supreme Court in the case of Datar (supra). A reference to paragraph 18 of the said decision of the Supreme Court would be appropriate. The said paragraph 18 reads as under:

18. 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 make 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.

9. In view of what has been observed by the Supreme Court and in view of the special circumstances and facts which arise in the present case, I do not feel that it could said that the respondents forfeited their rights to proceed with the nomination and constitution of the Arbitral Tribunal pursuant to their letter dated 22.12.2005. At best, the petitioner would be entitled to seek further information with regard to the qualifications of the said five Engineers nominated in the panel by the respondents, as also their addresses. The learned counsel for the respondents submitted straightaway that he would be supplying this information within two days to the learned counsel for the petitioner. This would be necessary because the petitioner could then take objections, if any, as available to the petitioner Page 0677under law if there is any doubt with regard to the qualifications of any of the empaneled Engineers.

10. As indicated above, the respondents shall supply the requisite details within two days to the counsel for the petitioner and the petitioner shall nominate its arbitrator within four weeks in accordance with clause 85.5. These petitions are dismissed.