Sh. Vikas Aggarwal vs Punj Lloyd Limited & Anr.
2009 Latest Caselaw 870 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI
+                             Arb. P. No. 406/2007
%                       Date of Decision: 18.03.2009
Sh. Vikas Aggarwal                                              .... Petitioner
               Through Mr.Ranjit Kumar, Advocate.

                                    Versus

Punj Lloyd Limited & Anr.                          .... Respondents
                Through Mr.Ashish Aggarwal, 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.

*

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

Conciliation Act, 1996 for appointment of an Arbitrator in terms of the

arbitration agreement between the parties.

The petitioner contended that he is a reputed contractor and the

respondents are engaged in the business of infrastructure development,

construction and upgradation of roads, business in real estate and

other large scale projects.

The petitioner had submitted his offer for works, namely,

production and loading of the GSB material in the project

„Rehabilitation Upgradation of Km 312.385 to Km 373.545 new

Chaingage (Km 316.00 to Km 381.00 Old Chainage) of National

Highways 76 to 4 lane configuration in State of Rajasthan (Contract

package EX-II (RJ-8)" on 17th January, 2006.

According to the petitioner, the offer of the petitioner was

accepted and work order No. PLL/PFLN11/125799 dated March 6,

2006 was awarded. According to the petitioner, he started work

immediately after it was awarded in order to complete the same within

the stipulated time of 15 months as per the work order. He asserted

that his plant was initially situated at Chandwaji, District Jaipur which

was shifted to Salavtia Village Khadipur, Tehsil Bizolia, District

Bhilwara, Rajasthan on assurance of respondent No. 2 for the execution

of the work of Rs. 2,41,30,000/-.

The petitioner contended that though he had supplied materials

to the respondent No. 2 and raised bills for Rs.52,94,350/-, the

respondent No. 2 has only paid and amount of Rs. 8,65,000/-. The

petitioner‟s grievance is that the remaining payment of Rs. 49,29,350/-

has been withheld by respondent No. 2 without assigning any reason to

the petitioner. The petitioner had raised a bill and sent it to the

respondents and insisted for release of the payment in accordance with

Clause-14 of the agreement. However, respondent No. 2 has suspended

the supply to the petitioner. The petitioner‟s staff, man, labour and

equipment are lying at site without work and the petitioner is suffering

huge loss.

The petitioner, therefore, invoked Clause-25 (settlement of

disputes) of the agreement dated 6th March, 2006. The Clause-25 of the

agreement is as under:-

"25.0 Settlement of Disputes

25.1 For purpose of this clause, PLL and the Sub- contractor shall be individually referred to as "the Party" and collectively, "the Parties".

25.2 In case of disputes/differences, all efforts shall be made to settle them amicable by and between the Pa4ties. Any outstanding disputes/differences shall be firstly referred to a sole Conciliator appointed by the Joint Managing Director of PLL. In case conciliation fails, the disputes/differences shall be referred to Arbitration.

25.3. It is pre-condition that the Party raising the dispute/difference shall give reasonable notice to the other Party explaining the reasons of dispute/difference and the amount of claim on the other Party. It is a condition of this Work Order that conciliation shall not be resorted to unless all efforts to settle disputes/differences amicably my mutual cooperation have been exhausted. Arbitration shall be the last resort in which case the Arbitrator shall enter the reference and neither Party shall have any advantage from the conciliation previously held. The views expressed, or the suggestions made or the admissions made by either Party in the course of conciliation proceedings shall not be introduced as evidence in any arbitration proceedings.

25.4 There shall b no objection if the sole Conciliator or the Arbitrator appointed for dispute resolution is an employee of Punj Lloyd Limited provided the person appointed shall not be directly connected with the works covered in this Work Order.

25.5. The venue of arbitration shall be New Delhi.

25.6 The Works to be executed under this Work Order shall nevertheless continue uninterrupted during the dispute resolution period.

25.7 Subject to aforestated conditions, the provisions of Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the

rules made thereunder and for the time being in force shall apply to the conciliation or arbitration proceedings under this clause."

Clause-25 for settlement of disputes also contemplates

adjudication of the disputes by Arbitrator to be appointed under the

said agreement in accordance with the provisions of Arbitration and

Conciliation Act, 1996 or any statutory modification or re-enactment

thereof and the rules made there under.

The petitioner had sent a notice dated 16th May, 2007 which was

replied through letter dated 15th June, 2007. The petitioner replied to

the reply dated 15th June, 2007 by counter-reply dated 4th August,

2007 and sought appointment of an Arbitrator for adjudication of

disputes between the parties.

After the respondents failed to appoint an Arbitrator, the present

petition was filed on 12th September, 2007 which also stipulates the

disputes raised on behalf of the petitioner.

The petition is opposed by the respondents who have filed a reply

dated 16th March, 2009 contending inter alia that the petition is pre-

mature and against the terms and conditions of the work order dated

6th March, 2005. It is contended that the arbitration is the last resort

in terms of Clause-25 of the agreement between the parties. It is

contended that in case of disputes, the same had to be settled amicably

and on failure to settle the same amicably, a Conciliator had to be

appointed and only after failure of the Conciliator, the resolution of

disputes by arbitration was to be resorted to.

The respondents contended that the notice dated 18th May, 2007

was given without making effort to settle the disputes amicably nor was

Managing Director of the respondents asked to appoint a Conciliator.

The respondents also contended that by reply dated 15th June, 2007,

the respondents had called upon the petitioner to contact the

authorized persons of the respondents along with all documents in

support of his claims in order to clarify all or any doubt about his claim.

The petitioner did not approach the respondents and rather sent a false

and frivolous rejoinder. In the circumstances, it is contended that there

was no occasion for the Managing Director of the respondents to

appoint an Arbitrator.

After the petition was filed by order dated 28th January, 2008, the

parties were directed to meet for a amicable settlement in the office of

respondent No. 1. Despite the order passed by this Court, the disputes

has been settled amicably nor the dispute could be resolved by the

respondents through a Conciliator.

Even after failure of resolution of the disputes amicably, the

Arbitrator has not been appointed by the respondents. The reply to the

petition dated 16th March, 2009 has been filed, however, till that time,

the Arbitrator has not been appointed.

In the facts and circumstances the arbitration agreement between

the parties is admitted. It is also not denied that despite invoking the

arbitration agreement, the respondents have not appointed any

arbitrator till today. Since the respondents have failed to appoint the

arbitrator in terms of clause 25 of the agreement which is an arbitration

clause, the respondents have lost their right to appoint an arbitrator.

In Union of India v. M/s. R.R. Industries, 120 (2005) DLT 572

(DB) 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. In the present facts and circumstances there is no

named arbitrator.

A three-Judge Bench of this Court in Punj Lloyd Ltd. v. Petronet

MHB Ltd., III (2006) SLT 287=II (2006) CLT 251 (SC)=(2006) 2 SCC 638,

considered the applicability of Section 11(6) and held that once notice

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

Arbitrator under arbitral agreement loses the right to do so. While

taking this view, the Court had referred to the judgment rendered in

Datar Switchgears Ltd. v. Tata Finance Ltd. and Another, VII (2000) SLT

543=IV (2000) CLT 191 (SC)=(2000) 8 SCC 151, wherein at page 158

(para 19) SCC, it was held 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."

In the circumstances, it will be just and appropriate to appoint

an arbitrator to adjudicate the disputes which are raised and which

may be raised by the parties. Considering the totality of the facts and

circumstances, therefore, it will not be appropriate to infer that there

was no occasion for the respondent No.1‟s Managing Director to appoint

an Arbitrator. Consequently, it has to be inferred that the respondents

have lost their right to appoint an Arbitrator in terms of Clause-25 of

the agreement.

Therefore, in the facts and circumstances, it will be just and

appropriate for this Court to appoint an Arbitrator. Consequently, Sh.

S.M. Chopra, Advocate (retired Additional District Judge), 181,

Deshbandhu Apartments, Kalkaji, New Delhi-110019 (Mobile:

9213230349; Residence: 26484158) is appointed as an Arbitrator to

adjudicate all the disputes between the parties. The Arbitrator shall be

entitled to devise his procedure for conducting the arbitration

proceedings. The fees of the Arbitrator shall be Rs. 10,000/- per

hearing, subject to a maximum fees of Rs. 2,00,000/-. The Arbitrator

shall also be entitled to secretarial expenses. The parties are directed to

appear before the Arbitrator on 27th March, 2009 at 4.00 p.m.

A copy of this order be sent to the Arbitrator forthwith and copies

of this order be also given dasti to learned counsel for the parties.

With these directions, the petition is disposed of.

MARCH 18, 2009                                     ANIL KUMAR, J.
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