Sh.Ashwani Kumar vs Municipal Corporation Of Delhi & ...
2009 Latest Caselaw 706 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                            AA No.179/2008

%                      Date of Decision: 02.03.2009

Sh.Ashwani Kumar                                      .... Petitioner
                      Through Mr.Ranjeet Kumar, Advocate.

                                Versus

Municipal Corporation of Delhi & Another           .... Respondents
                     Through Mr.Amit K.Paul, Advocate.

CORAM:
HON'BLE MR. JUSTICE ANIL KUMAR

1.   Whether reporters of Local papers may be                YES
     allowed to see the judgment?
2.   To be referred to the reporter or not?                  NO
3.   Whether the judgment should be reported in              NO
     the Digest?


ANIL KUMAR, J.

1. This is a petition under Section 11(6) of the Arbitration &

Conciliation Act, 1996 by the petitioner for appointment of an

independent arbitrator to settle/arbitrate the disputes between the

parties.

2. The petitioner contended that he is the proprietor of M/s.Ashwini

Kumar which proprietorship concern is enrolled with the Municipal

Corporation of Delhi as a contractor for supply of building material and

to do other construction related business.

3. The respondent No.2 is stated to have invited tenders for

construction of houses for safai karamcharis of MCD on hire purchase

basis and the petitioner had given a tender which was accepted by

order No.D/EEXXVI/TC/2002-2003/WO/H-15/19 dated 14th August,

2002 for the tender amount of Rs.4,55,597/- and the contractual value

of Rs.5,33,185/-.

4. The petitioner has contended that he worked according to the

terms and conditions of the tender documents and that the

measurement was done by the Engineer-in-charge and entered at page

numbers 79 to 89 in M.B No.1574 dated 23rd April, 2003. The plea of

the petitioner is that though a running bill was prepared, which was

according to the rules of Municipal Corporation of Delhi, the

respondents however refused to pass the final bill.

5. Petitioner further contended that since the respondents refused to

pass the final bill and did not agree to pay the amounts of the extra

items, disputes arose between the parties. Therefore, a legal notice

dated 17th March, 2006 was sent to the respondent, invoking the

arbitration agreement in terms of clause 25 of the General Agreement

which is the Arbitration Agreement between the parties, seeking

appointment of an arbitrator. The clause 25 of the agreement

incorporating the arbitration agreement is as under:-

      "25)     Arbitration

        (a)      Any controversy or dispute arising out of this contract

allotted to the licensee shall be referred to the sole arbitration of the Commissioner or an officer nominated by him in this behalf. There shall be no bar on reference of dispute to the arbitrator or such an officer as so nominated by the Commissioner even though the said officer is an employee of the MCD or might have dealt with the matter earlier or expressed his opinion thereon. In case the arbitrator to whom the matter is originally referred is transferred or vacates his office or is unable to act for any reason, whatsoever, the Commissioner, MCD shall be competent to appoint another person as arbitrator who shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. No person other than the one nominated by the Commissioner, MCD shall act as arbitrator. The decision of the arbitrator appointed shall be final and binding on the parties. The limitation for filing claim for an arbitration is 90 days from the expiry of the contract period and in case no claim is filed within this period, it shall be presumed that there is no claim.

(b) Subject to above, the provisions of the Arbitration and Conciliation Act, 1996 or statutory modification or enactment thereon and the rules made thereunder and for the time being in force shall apply to the arbitrator proceedings under this clause.

(c) The party invoking the arbitration clause shall specify the disputes to be referred to arbitration under the clause together with the amount or amounts claimed in respect of each such disputes/claims.

The arbitrator may from time to time without the consent of the parties enlarge the time for making and publishing the award."

6. The respondent No.1 issued a notification bearing reference

No.MWB & ACCTTS/2006/13 dated 21st April, 2006 appointing

Sh.Tirath Raj, Chief Engineer, MCD (Retd) Engineer, r/o. 989, Sector

14, Faridabad, Haryana as an arbitrator in terms of clause 25 of the

General Condition of the Agreement.

7. The petitioner's grievance is that he tried his best to approach

Sh.Tirath Raj, Retired Chief Engineer but nobody by the name of

Sh.Tirath Raj, Retired Chief Engineer was available at the address given

by the respondents. The petitioner was, thereafter, given another

address by the respondents of Sh.Tirath Raj, Retired Chief Engineer as

r/o.989, Sector 15, Faridabad, Haryana. However, the petitioner did not

find anyone at the said address also with the said name. Moreover, the

said arbitrator also did not accept the appointment as Arbitrator nor did

he sent any communication to the petitioner or even to the respondents

agreeing to act as an arbitrator nor did anything as an Arbitrator.

8. Therefore, by a legal notice dated 31st January, 2009, the

petitioner requested for appointment of an arbitrator. The notice

seeking appointment of an arbitrator was received by the respondents

on 11th February, 2008 and 12th February, 2008, however, the

respondents did not appoint any arbitrator till the filing of the present

petition on 7th March, 2008.

9. The notice of the petition was issued on 12th May, 2008 by the

Court and the respondents counsel appeared on 13th August, 2008 and

sought time to file the reply. The matter was taken up on 14th

November, 2008 and last opportunity was given to the respondents to

file the reply within four weeks. Despite the order dated 14th November,

2008 giving the last opportunity to file the reply within four weeks, reply

to the petition was not filed and yet another adjournment and time to

file the reply was sought on 23rd January, 2009. On 23rd January, 2009

again four weeks time was granted to the respondents to file the reply

subject to a cost of Rs.5000/- which has been paid today in the Court.

10. The reply has been filed on behalf of Mr.J.P.Verma,

Superintending Engineer of Municipal Corporation of Delhi contending

inter-alia that by a notification No.MWB & ACCTTS/2008/384 dated 4th

February, 2009 Sh.K.S.Mazumdar, IAS (Retd) has been appointed as a

sole arbitrator to decide and make his award regarding the

disputes/claims referred to him by M/s.Ashwani Kumar and also

regarding the counter claims of the MCD, if any, against the contractor

referred to him through EE-(Project)-II, Shahdara, North.

11. The learned counsel for the respondents has very emphatically

contended that the petition under Section 11(6) of the Arbitration &

Conciliation Act, 1996 is not maintainable as the appointment of

Sh.Tirath Raj, Chief Engineer, MCD (Retd), who was appointed by

notification dated 21st April, 2006, has not been terminated. It is also

contended that since a new arbitrator has been appointed pursuant to

request dated 31st January, 2008, the termination of the appointment

of Sh.Tirath Raj could only be from 4th February, 2009, on which date a

new arbitrator was appointed and, therefore, in the circumstances the

petitioner is not entitled to have any other person appointed as an

independent arbitrator.

12. I have heard the learned counsel for the parties in detail. It is not

disputed that though pursuant to the notice dated 17th March, 2006,

the respondent No. 1 had nominated Mr. Sh.Tirath Raj, Chief Engineer,

MCD as the arbitrator by a notification dated 21st April, 2006 the said

person could not be located at the address mentioned in the notification

of appointment. The alternate address that was subsequently provided

by the respondents also turned out to be a wrong address. Despite the

best efforts of the petitioner, Sh.Tirath Raj, the alleged arbitrator, could

not be contacted nor did the said person accept his appointment as an

arbitrator or issue any notice either to the petitioner or to the

respondents from March, 2006 till January, 2008 when the petitioner

again sent a notice for appointment of a new arbitrator. During this

entire period nothing has been done by the respondents even to

ascertain whether the person appointed by them as an arbitrator exist

or not and whether he was agreeable to act as an arbitrator.

13. There is nothing in the reply filed by the respondents that shows

that the alleged Sh.Tirath Raj resided at the addresses given by the

respondents. If a person appointed as an arbitrator does not exist at the

address mentioned in the notification of appointment and the

respondents also do not take any steps to ascertain whether the

addresses they had given were correct and whether the person

appointed by them is willing to act as arbitrator, then the respondents

cannot be permitted to contend that they had already appointed an

arbitrator and since an arbitrator has been appointed by them, unless

the appointment of such an arbitrator is terminated, the petitioner does

not have a right to get another arbitrator appointed.

14. The pleas taken by the respondents are contradictory and

baseless. The plea that the appointment of Sh.Tirath Raj was to be

terminated first before a new arbitrator can be appointed will be valid

only if Sh.Tirath Raj had accepted his appointment as an arbitrator and

had issued notices or had done something pursuant to the notification

whereby he was appointment as an arbitrator.

15. The plea of the petitioner is that no such person existed at the

addresses given by the respondents and despite his efforts, for close to

2 years, he could not even contact the person appointed as arbitrator by

the respondents. The respondents did not take any steps to even

ascertain about a person who is alleged to have been appointed by them

as an arbitrator pursuant to invocation of the arbitration agreement by

the petitioner. In the circumstances, it is difficult to infer that the

respondents appointed an arbitrator in accordance with Arbitration

Agreement between the parties pursuant to invocation of the arbitration

clause by the petitioner by his communication dated 17th March, 2006.

If an arbitrator had not been appointed, there will not be any

requirement for terminating the appointment of such a person.

16. Since an Arbitrator had not been appointed by the respondents,

as the alleged person neither accepted his appointed nor proceeded with

the arbitration nor took any steps for commencement of arbitration, the

petitioner demanded from the respondents to appoint an Arbitrator and

sent a legal notice dated 31st January, 2008. Within thirty days after

the demand being made for appointment of an Arbitrator and even

before filing of the petition on 7th May, 2008 the respondents did not

appoint an arbitrator and, therefore, they have lost their right to

appoint an arbitrator in terms of Clause 25 of the General Agreement.

17. This is no more res integra that once a party files an application

under section 11 (6) of the Arbitration & Conciliation Act, 1996 the

other party extinguishes its right to appoint an arbitrator in terms of

the arbitration agreement. The right to appoint an arbitrator under the

arbitration agreement ceases after section 11 (6) petition is filed by the

other party before the court seeking appointment of an arbitrator. This

was held by the Supreme Court in Bharat Battery Manufacturing Co.

(P) Ltd v. Union of India, 2007 (3) Arb.L.R 282 (SC) following the ratio of

the decision of three judge bench in Punj Lloyd Ltd. v. Petronet MHB

Ltd., (2006) 2 SCC 638. The Supreme Court had held that once the

period of 30 days had lapsed, and the party had moved the chief justice

under section 11 (6), the other party, having right to appoint an

arbitrator under the Arbitral agreement loses the right to do so. In

Datar Switchgears Ltd. v. Tata Finance Ltd. and Anr, (2000) 8 SCC 151

at page 168, para 19 the Apex Court had held:

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.

Again in Union of India v. V.S. Engg. (P) Ltd.,(2006) 13 SCC 240,

at page 244 it was held by the Apex Court that in case appointment is

not made in time on the request made by the contracting party, then in

that case the power of the High Court to appoint arbitrator under

Section 11 of the Act will not be denuded. It was further held that the

Court cannot allow administrative authorities to sleep over the matter

and leave the parties without any remedy. The Supreme Court had

held:

6. However, before parting with this case we may also observe that Railways and public institutions are very slow in reacting to the request made by a contractor for appointment of the arbitrator. Therefore, in case appointment is not made in time on the request made by the contracting party, then in that case the power of the High Court to appoint arbitrator under Section 11 of the Act will not be denuded. We cannot allow administrative authorities to sleep over the matter and leave the citizens without any remedy. Authorities shall be vigilant and their failure shall certainly give rise to cause to the affected party. In case the General Manager, Railways does not appoint the Arbitral Tribunal after expiry of the notice of 30 days or before the party approaches the High Court, in that case, the High Court will be fully justified in appointing arbitrator under Section 11 of the Act. It is the discretion of the High Court that they can appoint any railway officer or they can appoint any High Court Judge according to the given situation.

18. Therefore, the respondents could not appoint Sh.K.S.Mazumdar,

IAS (Retd) as an arbitrator by the notification dated 4th February, 2009

almost one year after filing of the petition by the petitioner.

19. Consequently, this Court will have jurisdiction to appoint an

independent person as an arbitrator. Therefore, in the totality of facts

and circumstances, Mr. S.M. Chopra, Advocate (Retired Additional

District Judge), 181, Deshbandhu Apartments, Kalkaji, New Delhi-

110019 (Mobile: 9213230349, Residence No.26484158) is appointed as

an arbitrator. The learned arbitrator shall adjudicate all the disputes

between the parties. The fees of the arbitrator shall be Rs.5,000/- per

hearing subject to a maximum of Rs.30,000/-. The fees shall be shared

equally by the parties. The Arbitrator shall also be entitled for actual

secretarial expenses which will also be shared by the parties. The

parties are directed to appear before the learned arbitrator on 27th

March, 2009 at 4.30 PM. A copy of this order be sent forthwith to the

learned arbitrator. Copies of the order be also given dasti to the parties.

MARCH 02, 2009                                      ANIL KUMAR, J.
"K"