Harcharan Das Gupta vs Government Of Nct Of Delhi And Anr.
2007 Latest Caselaw 2453 Del

JUDGMENT

Anil Kumar, J.

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

2. The petitioner is a registered partnership firm and the petition has been signed, verified and instituted by Sh. D.R. Mittal, registered partner of the petitioner.

3. The petitioner contended that the work of "Construction of Sports Complex at Village Bawana in Kanjhawala Block, Phase II, Delhi, SH: Construction of RCC Main stand in Sports Complex at Village Bawana" was awarded to the petitioner by work order No. F.3.(178)SDD-IV/98-99/ACS/93-104 dated 4th June, 1999 and an agreement bearing No. F.12/5/AB/CD-VIII/1999-2000 was duly executed between the parties.

4. The petitioner contended that as per the terms of the agreement, the date of commencement of the work was 11th June, 1999 and date of completion was 10th December, 2000. According to the petitioner, under the contract there were reciprocal promises to be performed by the respondents like handing over the site, drawings etc. Since the respondents failed in fulfillling its obligation under the contract, resultantly, there was delay in the completion of work which could only be completed on 23rd April, 2003 for reasons not attributable to the petitioner.

5. Despite completion of the work on 23rd April, 2003 the final bill was prepared by the respondents only in November, 2005. The copy of the final bill was supplied to the petitioner only on 20th January, 2006. On perusal of the copy of the final bill it is revealed that the respondents had denied the petitioner numerous lawful dues including damages on account of prolongation of the contract. The petitioner has detailed its various claims in para K of the petition which are due to the petitioner from the respondent under different heads.

6. Consequently disputes have arisen between the parties. According to the petitioner Clause 25 of the agreement entered into between the petitioner and the respondents contained an Arbitration agreement. Clause 25 of the agreement containing the arbitration agreement is as under:

Settlement of Disputes and Arbitration

Clause 25.

Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, design, drawings and instructions here-in-before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, 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 or otherwise concerning the works or 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 dealt with as mentioned hereinafter:

i). If the contractor considers any work demanded of him to be outside the requirements of the contract, or disputes any drawings, record or decision given in writing by the Engineer-in-Charge or any matter in connection with or arising out of the contract or carrying out of the work, to be unacceptable, he shall promptly within 15 days request the Superintending Engineer in writing for written instruction or decision. Thereupon, the Superintending Engineer shall give his written instructions or decision within a period of one month from the receipt of the contractor's letter.

ii). Except where the decision has become final, binding and conclusive in terms of Sub Para(i) above disputes or difference shall be referred for adjudication through arbitration by a sole arbitrator appointed by the Chief Engineer, DSIDC, in charge of the work or if there be no Chief Engineer, the administrative head of the said DSIDC. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever another sole arbitrator shall be appointed in the manner aforesaid. Such persons shall be entitled to proceed with the reference from the stage at which it was left by his predecessor.

It is a term or this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respect of each such dispute Along with the notice for appointment of arbitrator and giving reference to the rejection by the Chief Engineer of the appeal.

It is also a term of this contract that no person other than a person appointed by such Chief Engineer DSIDC or the administrative head of the DSIDC, as aforesaid should act as arbitrator and if for any reason that is no possible, the matter shall not be referred to arbitration at all.

It is also a term of this contract that if the contractor does not make any demand for appointment of arbitrator in respect of any claims in writing as aforesaid within 120 days of receiving the intimation from the Engineer-in-Chief that the final bill is ready for payment, the claim of the contractor shall be deemed to have been waived and absolutely barred and the D.S.I.D.C. shall be discharged and released of all liabilities under the contract in respect of these claims.

The arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1940, or any statutory modifications or re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceedings under this clause.

The arbitrator may from time to time with the consent of the parties enlarge the time for making and publishing the award.

It is also a term of this contract that the arbitrator shall adjudicate on only such disputes as are referred to him by the appointing authority and give separate award against each dispute and claim referred to him and in all cases where the total amount of the claims by any party exceeds Rs. 1,00,000/- the arbitrator shall give reasons for the award.

It is also a term of the contract that if any fees are payable to the arbitrator these shall be paid equally by both the parties.

It is also a term of the contract that the arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties calling them to submit their statement of claims and counter statement of claims. The venue of the arbitration shall be such place as may be fixed by the arbitrator in his sole discretion. The fees, if any, of the arbitrator shall, if required to be paid before the award is made and published, be paid half and half by each of the parties. The cost of the reference and of the award (including the fees, if any, of the arbitrator) shall be in the discretion of the arbitrator who may direct to any by whom and in what manner, such costs or any part thereof shall be paid and fix or settle the amount of costs to be so paid.

7. The petitioner thereafter issued a letter dated 13th April, 2006, addressed to the Chief Engineer (Flood and Irrigation) with a copy to the Executive Engineer, thereby invoking the arbitration clause in the agreement between the parties. However, no reply was given to the letter dated 13th April, 2006 nor any arbitrator was appointed in terms of arbitration agreement between the parties within the stipulated time.

8. Consequently, the petitioner has filed the present petition. Notice was issued to the respondent and a reply has been filed by the respondent objecting to the appointment of the arbitrator on the ground that there is no valid dispute as the payments against the final bill were accepted by the petitioner in all respect and that the dispute now raised is an afterthought. The respondents also stated that the procedure as specified in Clause 25 of the agreement is mandatory and a pre-requisite for referring the dispute to arbitration and that the same has not been followed by the petitioner. The respondent has placed reliance on Wipra Finance Limited v. SRG Infotech (India) Limited and Anr. and Nirman Sindia v. Indal Electromelts Ltd., Coimbatore to contend that the arbitrator cannot be appointed by the Court as the procedure as contained in the arbitration agreement has not been exhausted by the petitioner for seeking appointment of the arbitrator by the nominated authority under the contract.

9. The petitioner has placed reliance on Sh. Jagbir Singh v. MCD and Anr. Arb. Petition 3/2005 decided on 3rd January, 2005; , M.K. Shah Engineers and Contractors v. State of Madhya Pradesh to contend that non performance of the pre-requisite obligation under the contract does not invalidate the applicability and operation of an arbitration clause.

10. There is no dispute in relation to the existence of an arbitration agreement under Clause 25 of the agreement between the parties. The respondents have failed to appoint the arbitrator within 30 days from the receipt of the notice invoking the arbitration agreement and even before filing the present petition. The learned Counsel for the respondents is unable to point out as to how the appointment of an arbitrator can be denied on the ground of non compliance of the procedure by the petitioner for appointment of an arbitrator as laid down under Clause 25 of the agreement between the parties.

11. In exercise of power under Section 11 of the Arbitration and Conciliation Act, 1996 what the court is to see is whether their existed a valid arbitration agreement between the parties and once the court comes to the conclusion that there exists a valid arbitration agreement between the parties then on the request of any of the party to such an agreement the Court may appoint an arbitrator to adjudicate the disputes between the parties. It is not for this Court to adjudicate or make observation on the merits of the case as to whether the payments against the final bill were accepted by the petitioner "in all respect". The existence of the Arbitration agreement has not been disputed by the respondent and nothing has been shown contrary to agreement. Since the respondent failed to appoint an arbitrator within 30 days of the demand and had also failed to appoint an arbitrator before the petitioner moved the Court under Section 11 of the Arbitrator and Conciliation Act, 1996, the right of the respondent to appoint an arbitrator stands forfeited. Consequently it is for this Court to appoint an arbitrator to adjudicate the disputes between the parties.

12. The Apex Court in Datar Switchgears Ltd. v. Tata Finance Ltd. and Anr. IV (2000) CLT 191 (SC) : VII (2000) SLT 543 : 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.

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 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 in para 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) : VII (2000) SLT 543 : 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.

14. 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.

15. The letter dated 13th April, 2006 invoking the arbitration agreement between the parties was sent by registered AD post receipt of which has not been denied by the respondent. Despite the receipt of the letter dated 13th April, 2006 demanding appointment of an arbitrator, the respondent did not appoint an arbitrator within 30 days of receipt of notice nor was any arbitrator appointed prior to filing of the present petition. Thus 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 learned Counsel for the respondent contended that a retired engineer may be appointed as an arbitrator. The learned Counsel for the petitioner has no objection to the appointment of an retired engineer as the Arbitrator.

16. Considering the facts and circumstances, I appoint Mr. J.P. Singhal, Retd. Chief Engineer, CPWD, resident of 79, Munirka Enclave, New Delhi-110067 (Ph: 26169531; 26108170) as an Arbitrator to adjudicate all the disputes between the parties. The fees of the arbitrator shall be as per the rules of Arbitration of Indian Council of Arbitration. The parties are directed to appear before the arbitrator on 21st January, 2008. A copy of this order be sent to the arbitrator forthwith. Parties are also directed to produce the copy of the order before the arbitrator.

dusty to the counsel for the parties.