Sh. Satya Pal Gupta vs Municipal Corporation Of Delhi
2007 Latest Caselaw 2425 Del

JUDGMENT

Anil Kumar, J.

1. This is a petition under Section 11(6) of Arbitration and Conciliation Act, 1996 for appointment of an arbitrator for adjudication of disputes which have arisen between the parties.

2. The petitioner contended that he is a registered contractor of the respondent and was awarded a work of construction of a community hall at Matiala Village by the respondents through its Executive Engineer ' VI vide work order No. EE-VI/plan/TC/01-02/177 dated 14th September, 2001 and an amount of Rs. 87,69,550/- was payable to the petitioner for the work awarded to him. The agreement was executed between the parties and Clause 25 incorporated the arbitration agreement between the parties.

3. The petitioner contended that as per the terms of the agreement, the work was to start on 23rd September, 2001 and was to be completed on or before 22nd March, 2002 within six months. The petitioner started work on 23rd September, 2001 and completed on 10th November, 2004

4. It is asserted that during the subsistence of the agreement, the petitioner had demanded the structural drawings of pile foundation and the building of the work. In the process of pile foundation, the rocks in the area were cut which led to sub soil water coming out from earth which had to be de- watered for which the petitioner incurred expenses which were demanded by the petitioner, however, the amounts were not paid despite the demands raised from time to time. According to the petitioner, the amounts on account of double stage shuttering, extra costs incurred on construction of round pillar and the expenses incurred for the watch and ward for the period of nine months also have not been paid.

5. Consequently disputes have arisen between the parties. According to the petitioner Clause 25 of the general agreement entered into between the petitioner and the respondents contains the Arbitration agreement. Clause 25 of the agreement containing the arbitration agreement is as under: '25. Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned and as to the quality of workmanship of materials used on the work or as to any other question claim, right matter or thing whatsoever in any way arising out or relating to the contract designs, drawings, specifications, estimates instructions orders or these conditions or otherwise concern in the work or the execution of 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 arbitrator appointed by the Commissioner, MCD. The parties to the dispute shall be found to abide by the terms of the award passed by the Arbitrator.'

6. The petitioner has raised various other claims, however no payments were made by the respondent, therefore, the petitioner issued a legal notice dated 14th August, 2006 requesting the respondent to pay the amounts due to him along with interest at 18% per annum, and in the alternative had sought for appointment of an arbitrator in terms of Clause 25 of the arbitration agreement between the parties. The respondents not only failed to make payments to the petitioner but also failed to appoint an arbitrator in terms of arbitration agreement between the parties within the stipulated time.

7. Consequently, the petitioner has filed the present petition. The arbitrator was not appointed by the respondents even before filing of the present petition. Despite opportunity given, the respondents have not filed any reply to the petition. The learned Counsel for the respondents, however, is unable to point out as to how the Commissioner of the respondents can appoint a sole arbitrator in terms of Clause 25 of the general agreement after failing to appoint an arbitrator within thirty days of notice and before filing of the present petition. Consequently it is for this Court to appoint an arbitrator to adjudicate the disputes between the parties.

8. The Apex Court in Datar Switchgears Ltd. v. Tata Finance Ltd. and Anr. IV (2000) CLT 191 (SC) : JT 2000 (Suppl. 2) SC 226 had held that if the vacancy of an arbitrator is not filled till 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. This ratio of Datar Switchgear Ltd. (supra) was approved by the Supreme Court in Punj Lloyed Ltd. v. Petronet MHB Ltd. and it was reiterated that once period of notice had lapsed and the petitioner had moved under Section 11(6) of the Arbitration and Conciliation Act, 1996, the party having right to appoint arbitrator under arbitral agreement loses the right to do so.

9. 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 if the respondent fails 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. A Division Bench of this Court in Delkon (India) Pvt. Ltd. v. G.M., Bharat Heavy Electricals Ltd. , relying on Datar Switchgears Ltd. v. Tata Finance Ltd. has held para in 4 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 thirty days of the receipt of the notice. However, once 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.

10. In Union of India v. R.R. Industries also 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, such a party forfeits the right to supply the vacancy in terms of the arbitration clause and 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.

11. The notice dated 14th August, 2006 was sent by UPC and by registered A.D. post. The petitioner has produced the copy of acknowledgment card showing the receipt of the notice. Despite the receipt of the notice demanding appointment of an arbitrator, the respondent did not appoint an arbitrator within 30 days of receipt of notice nor any arbitrator was appointed prior to filing of the present petition.

12. The petition under Section 11(6) was filed in October 2006 and no reply has been filed by the respondent despite various opportunities given to the respondent. The respondents also failed to reply to the notice dated 14th August, 2006 demanding the amounts due from the respondent to the petitioner and in the alternative had sought for appointment of an arbitrator. In the circumstances, the statement made by the petitioner are deemed to be admitted and the respondent has forfeited, its right to appoint an arbitrator in terms of Clause 25 as there is a valid arbitration agreement between the parties. The existence of the Arbitration agreement has not been disputed by the respondent and nothing has been shown contrary to agreement.

13. Considering the facts and circumstances, I appoint Mr. G.P. Thareja Advocate, (Retd. Additional District Judge) B-201, Priyadarshini Apartments, I.P Extension, Patpar Ganj, Delhi-110092 (Ph: 20906899) as an Arbitrator to adjudicate all the disputes between the parties. The fee of the arbitrator shall be Rs. 7,000/- per hearing subject to a maximum fees of Rs. 1,05,000 which shall be paid by the petitioner in the first instance. Parties shall appear before the Learned Arbitrator on 21st January, 2008 at 4.30 PM. Registry to send a copy of this order to the Arbitrator forthwith. Parties are also directed to intimate the Arbitrator about the order. Copy of this order be also given to the parties dusty.