Cdr. S.P. Puri (Retd.) Sole Prop. ... vs Agriculture Produce Market ...
2006 Latest Caselaw 1711 Del

JUDGMENT

Reva Khetrapal, J.

1. This is a petition under Section 11 of the Arbitration & Conciliation Act, 1996 whereby the petitioner seeks appointment of an arbitrator to enter upon the reference to adjudicate the claims preferred by the petitioner.

2. The petitioner is the sole proprietor of M/s. Spiral Services and has filed the petition as such. An agreement was entered into between the petitioner acting as sole proprietor of M/s. Spiral Services and the respondent, Agriculture Produce Market Committee on 29th December, 2000. This agreement was for a period of 30 years and the object of the Agreement was "Conversion of 125 Metric Tonne fruit and vegetable waste generated in fruit and vegetable markets of APMC, Azad Pur, Delhi into organic manure.

3. According to the petitioner, the respondent miserably failed in adhering to the various clauses of the agreement between the parties. Thus, between July, 2001 to January, 2006 the total supply of garbage received by the petitioner from the respondent was 610.88 metric tonnes, whereas in terms of the agreement the quantity which ought to have been supplied during these 41/2 years should have been above 2 lakh metric tonnes (Clause 2.1 of the agreement). Then again, the quality of waste which was supplied to the Compost Plant being run by him, which was to comprise of only biodegradable material, in fact contained non-biodegradable material such as heavy stones, tyres, polythene bags, malba, etc. Resultantly, the petitioner was forced to segregate the waste being provided by the respondent, and the Compost Plant was getting converted into a dump yard with excessive non-biodegradable material, which was being sent to the site by the respondent. Faced with these circumstances, the petitioner was left with no option but to send a bill for segregation costs incurred by the petitioner and compensation for deliberate short supply of raw-material vis-a-vis meeting the fixed costs for running the system and anticipated loss of profits and other issues. Disputes with regard to the fulfilllment of the obligation on the part of the respondent in terms of the agreement between the parties thus cropped up between the parties. The petitioner took up the issues at various levels as delineated at length in the petition and ultimately vide letter dated 31st March, 2004 addressed to the Secretary of the respondent served notice for appointment of an arbitrator. The said notice was delivered in the office of the respondent on 31st March, 2004 itself. A copy of the same was sent to the Chairman of the respondent, which was also delivered on 31.3.2004.

4. Despite the aforesaid request made by the petitioner, no action was taken by the respondent for appointment of an arbitrator in terms of Clause 5.2 of the Agreement dated 29th December, 2000 between the parties (Annexure-B). The said clause reads as under:

5.2 ARBITRATION CLAUSE

Except where other wise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned as to the quality of workmanship or material used on the work or as to any other question claim, right matter or thing what so ever in any way arising out of or relating to the contract designs, drawings, specifications estimates, instructions orders or these conditions or otherwise concerning the works or the failure to execute the same whether arising during the progress of the work or after the completion or abandonment shall be referred to the sole arbitration of the person who shall be appointed with mutual consent of both the parties by the administrative head of APMC at the time of such appointment. There will be no objection to any such appointment even if the arbitrator so appointed is a Govt. servant, and had dealt with the matters to which the contract relates and that in the course of his duties as Govt. servant he had expressed views on all or any of the matters in dispute or difference. The arbitration to whom the matter is originally referred being transferred or vacating his offices or being unable to act for any reason, Administrative head as aforesaid at the time of such transfer, vacation of office or inability to act, shall appoint another person to act as Arbitrator in accordance with the terms of the contract. Such persons shall be entitled to proceed with the references from the stage at which it was left by his predecessor. In all cases where the amount of the claim in dispute is Rs. 25,000.00 (Twenty Five Thousand) and above the arbitrator shall give reasons for the award.

Subject as aforesaid the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification of re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceedings under the clause.

5. The respondent not having acceded to the request of the petitioner for reference of the matter to an arbitrator in terms of Clause 5.2 of the agreement between the parties and having abrogated its duty in this regard, the petitioner then knocked at the door of the administrative head of the respondent. A letter dated 30th August, 2004 was sent to the administrative head of the respondent, reminding him about the letter dated 31st March, 2004 through which request for appointment of an arbitrator was made by the petitioner, but without any result.

6. In the aforesaid circumstances, the petitioner approached this Court for reference of the disputes and prayed for the appointment of an arbitrator to adjudicate the claims preferred by the petitioner as set out in paragraphs N-1 to N-23 of the petition. Thus, the present petition was filed on 13th February, 2006 after the petitioner had exhausted all remedies, including service of notice upon the respondent for appointment of an arbitrator vide letters dated 31st March, 2004 and 30th August, 2004.

7. Notice of the petition was served on the respondent on 31st March, 2006. The respondent filed a reply to the petition alleging that the same was totally misconceived and liable to be dismissed on the short ground that though a notice was issued by the petitioner to the respondent on 31st March, 2004 invoking the arbitration clause, the same was abandoned for the time being by the petitioner for the following reasons. The petitioner had approached the Minister for redressal of his grievance and consequent thereto a meeting was arranged. Thereupon a committee was constituted which accepted certain suggestions from the side of the petitioner, including the petitioner's suggestion to install a new segregating plant at the given site. The petitioner, however, asked for a loan of Rs. 50 lakhs for installation of the segregating plant which, however, was declined by the committee. This decision was duly communicated to the petitioner. Petitioner thereupon asked the respondent to treat the segregation of non-biodegradable material as an additional service and desired the respondent to pay reasonable segregation charges. This plea of the petitioner was also not accepted by the respondent.

8. According to the respondent, from the above facts it is clearly evident that the petitioner had abandoned the request for appointment of an arbitrator, and after the talks failed he rushed to the court for appointment of an arbitrator without first making a fresh request to the respondent for the said appointment, and this was an abuse of the process of the court. The respondent further contends that in fact, as per the terms of the agreement, the names of 3 arbitrators were offered to the petitioner vide letter of 1.5.2006, but he refused to give his sanction and, therefore, the respondents nominated Sh. K.S. Gangadharan, retired Additional D.G. (W), 15-B, Charakh Sadan, Vikas Puri, New Delhi.

9. In the course of hearing, learned Counsel for the petitioner strenuously urged that notice dated 31st March, 2004 was never given up, waived or abandoned by the petitioner. Had it been so, the respondent would not have nominated an arbitrator after the filing of the present petition. The very fact that the respondent nominated Sh. K.S. Gangadharan as the arbitrator itself belies the contention of the respondent that notice dated 31st March, 2004 invoking the arbitration clause was treated as abandoned by the petitioner. I am inclined to agree with this contention for more than one reason, other than the reason given by the petitioner. Firstly, the petitioner has stated that letter dated 31st March, 2004 addressed to the Secretary of the respondent was followed by another letter dated 30th August, 2004 sent to the administrative head of the respondent reminding him about the letter dated 31st March, 2004. This clearly shows that the petitioner did not intend to abandon the notice dated 31st March, 2004. Secondly, the committee constituted by the respondent having declined the proposal for a loan of Rs. 50 lakhs for installation of a Segregation Plant, the petitioner vide its letter dated 27th March, 2006 wanted re-consideration of the decision. Thus, quite apparently the petitioner who had filed the present petition on 13.2.2006 was simultaneously making efforts to settle the matter with the respondent. This, to my mind, cannot be construed as an abandonment of his notice for appointment of an arbitrator. Had the respondent construed it as such, it would not have extended to the petitioner the names of three arbitrators and thereafter nominated Sh.K.S. Gangadharan as the arbitrator to adjudicate upon the dispute between the parties.

10. In view of the foregoing, it clearly emerges that there was a valid and subsisting arbitration agreement between the parties. Disputes and differences had cropped up between the parties. The petitioner in terms of Clause 5.2 of the agreement by letter/notice dated 31st March, 2004, followed by letter dated 30th August, 2004 quantifying the various claims, invoked the arbitration agreement. It also clearly emerges from a bare perusal of Clause 5.2 of the agreement that the arbitrator was to be appointed with mutual consent of both the parties and not unilaterally. Names of three arbitrators were offered vide letter dated 1st May, 2006 after the present petition had been filed in this Court on 13th February, 2006, when the respondent had already lost its right to appoint an arbitrator.

11. Thus, the only aspect of the matter which remains to be considered is whether the appointment of Sh.K.S. Gangadharan by the respondent after the filing of the present petition is contrary to the law laid down by the Hon'ble Supreme Court. According to the respondent, the petition has become infructuous after the said appointment of Sh. A.S. Gangadharan, while according to the petitioner the alleged appointment of the arbitrator itself is not in accordance with the law as enunciated by the Apex Court in the case of Datar Switchgear Ltd. v. Tata Finance Ltd. and Anr. 2000 (VIII) SCC 151. The relevant part of the judgment which appears at page No. 158 of the Report reads as under:

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.

12. The ratio of Datar Switchgear (supra) was affirmed by the Apex Court in Punj Lloyd Ltd. v. Petronet MHB Ltd. (2006) 2 SCC 638 and Shin Satellite Public Co. Ltd. v. Jain Studios Ltd. . A three Judge Bench in Punj Lloyd (supra) held that once the party conferred with the power to appoint the arbitrator, fails to respond to the request of the aggrieved party to appoint the arbitrator, it ceases to have an authority to appoint the arbitrator after the aggrieved party approaches the court for the appointment of the arbitrator. To the same effect is the ratio of the judgment in Shin Satellite (supra), wherein it was held that the respondent had lost its right to make appointment of an arbitrator once the petitioner had approached the Chief Justice under Section 11(6) of the Act for appointment. This then is the consistent view of the Apex Court.

13. Looked at it from another angle, continued obduracy and nonchalance of governmental authorities and semi-governmental bodies must not, in my view, be countenanced by the courts as the same defeats the very purpose of the enactment viz., the expeditious settlement of disputes between the parties. Not infrequently, invocation of the arbitration clause by the aggrieved party falls on deaf ears or at any rate is met with dogged refusal to appoint an arbitrator, compelling the aggrieved party as a last resort to knock at the doors of the Court. Abrogation of duty to nominate an arbitrator must, therefore, be viewed strictly. Last ditch efforts to wrest the power to nominate by the concerned authority after an impasse in the settlement of disputes has been created by the authority itself must be snubbed by the Courts. To do otherwise, would tantamount to allowing the wrong-doer to take advantage of his own default. The nomination of an arbitrator by the respondent after the Chief Justice has been approached for such appointment makes mockery of the system, and renders at nought the whole purpose of setting up an Alternate Dispute Resolution System.

14. In the above view of the matter, it is held that the nomination of Shri K.S. Gangadharan after the filing of the present petition and after the respondent had forfeited all right to nominate an arbitrator deserves to be set aside. The same is accordingly set aside, and Justice Jaspal Singh, Retired Judge of this Court is appointed as sole arbitrator to adjudicate upon the disputes/claims raised by the petitioner as detailed in the petition. The arbitrator shall fix his own fees as he deems fit. The parties shall appear before the learned arbitrator on 16th October, 2006 or on any date and time convenient to the learned arbitrator. The learned arbitrator will dispose of the disputes set out in the petition, preferably within a period of 4 months from the date of entering upon the reference.

15. The petition is disposed of accordingly, leaving the parties to bear their own costs.

16. A copy of this judgment be sent to the learned Arbitrator to enable him to enter upon the reference on an early date.