Hyderabad Pollution Controls Ltd vs M/S Indure Pvt. Ltd
2009 Latest Caselaw 3704 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                Arb.P.No.69 of 2009

%                                 Date of decision:11.09.2009

HYDERABAD POLLUTION CONTROLS LTD. ....Petitioner

                       Through:    Ms. Nitya Rama Krishanan & Mr.
                                  Sarim Naved, Advocates.

                               Versus

M/S INDURE PVT. LTD.                               ... Respondent
                       Through: Mr. Atul Nigam, Advocate.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?                yes

2.    To be referred to the reporter or not?         yes

3.    Whether the judgment should be reported        yes
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1. The petition has been preferred under Section 11 (6) of the

Arbitration Act, 1996. The respondent has filed the reply. The

counsels have been heard.

2. The counsel for the respondent has not disputed that this court

is the appropriate court i.e. it has the territorial jurisdiction to

entertain this petition. The counsel for the respondent has also not

disputed that the petitioner is a party to the arbitration agreement

which has been invoked and the respondent is the other party

thereto. In fact there are two agreements between the parties one

for supplies and the other for erection. The clause relating to

settlement of disputes in one of the agreements is as under:-

"48.00 Settlement of Disputes

48.1 Any dispute(s) or differences arising out of or in connection with the contract shall, to the extent possible, be settled amicably between the parties.

48.2 All unsettled disputes(s) or difference(s) arising out of or in connection with the contract shall be decided by the Engineer whose decision shall be final and binding on the parties.

48.3 Prior to the initiation of any/or arbitration proceedings permitted by this contract to resolve disputes between them, in the event a dispute arises between the Purchaser and the contractor regarding the application or interpretation of this contract (a "Dispute"), the Purchaser's Project Incharge and the contractor's representative shall use their best efforts in good faith to reach a reasonable and equitable resolution of the matter. If the Purchaser's Project Incharge and the contractor's representative are unable to resolve the matter within 30 days, either party by written notice may refer the matter for resolution by good faith negotiation between their respective senior officers with decision making power and who shall not have had substantive involvement in the matters involved in the dispute, unless the parties otherwise agree."

49.00 Arbitration

Where any dispute is not resolved as provided for in the clause 48 then the following provisions shall apply :

a) The dispute shall be referred to arbitration at the request of either party upon written notice to that effect to the other party (a "Notice of Reference") in accordance with the Arbitration Rules of Indian Arbitration and Conciliation Act, 1996 in force at the date of the agreement. Where the rules do not deal with any issue arising in connection with the conduct and/or procedure of the arbitration such issue shall be resolved in accordance with the law of the place in which the arbitration is held and GCC clause 50 shall be construed accordingly.

b) The place of arbitration shall be Delhi and the language of the arbitration shall be English.

c) The parties agree that any arbitration award shall be final and binding upon the parties and (to the fullest extent permitted by applicable law) the parties waive their right to any form of appeal or other similar recourse to a court or law.

d) The arbitration will take place before a arbitrator who shall be nominated by the Chairman of Desein Private Limited, Desein House, Greater Kailash-II, New Delhi-48.

e) Performance of the contract shall continue during any arbitration proceedings pursuant to above clause unless the Purchaser shall order the suspension thereof pursuant to GCC clause 47."

3. The provision for settlement of disputes in the other contract

except for minor inconsequential differences is the same save for the

procedure for appointment of arbitrator which is as under:-

"The arbitration will take place before a Sole arbitrator who shall be nominated by the Chairman of Desein Private Limited, Desein House, Greater Kailash-II, New Delhi 110048 and acceptable to the Contractor/Seller."

4. Disputes are stated to have arisen between the parties relating

to both the contracts; the petitioner claims a sum of approximately

Rs.20,14,575/- to be due under the supply contract and a sum of Rs.

7,41,301/- to be due under the erection contract. It is not disputed

that the petitioner invoked the arbitration clause and the respondent

communicated to the petitioner of the appointment of Mr. Y.A.

Ismail, Vice President, Desein International Pvt. Ltd. to be the

arbitrator. The petitioner approached this court with the case that

the arbitrator so appointed was not acceptable to the petitioner,

being an employee of a sister concern of the respondent and the

petitioner having no faith in his impartiality. It is further contended

that as per the agreement in one of the contracts, the arbitrator had

to be acceptable to the petitioner and the arbitrator so appointed is

not acceptable to the petitioner. The petitioner thus seeks

appointment of an impartial arbitrator.

5. The counsel for the respondent has vehemently opposed the

petition. It is his contention that the petition is pre-mature for the

reason of the petitioner having not followed the two tier procedure

agreed to for amicable settlement of disputes i.e. first of the meeting

of their named officers and then of their senior officials for equitable

resolution of the matter. It is contended that the parties had agreed

that only if the disputes cannot be resolved in the manner aforesaid

could the petitioner invoke the arbitration. It was further urged that

the petitioner had not made out any case of bias of the appointed

arbitrator and the averments in the petition in this regard are

sketchy. It was urged that this court could not remove an arbitrator

so appointed by the appointing authority based on such

apprehensions.

6. This court had found both of the aforesaid contentions also

taken in the reply of the respondent to be baseless and for this

reason only, at the outset suggestion was made for appointment of

an independent arbitrator without taking up the time of the court.

7. The Supreme Court in M.K. Shah Engineers & Contractors

Vs. State of Madhya Pradesh AIR 1999 SC 950 though holding

the steps preceding coming into operation of the arbitration clause

to be essential, held that the same can be waived. It was held that if

one party has by its own conduct or the conduct of its officials

disabled such preceding steps being taken, it will be deemed that the

procedural pre-requisites were waived and the party at fault cannot

be permitted to set up the bar of non-performance of pre-requisite

obligation so as to exclude the applicability and operation of the

arbitration clause. Waiver in that case was found from acquiescence

in the appointment of arbitrators and participation in the arbitration.

8. I had during the hearing enquired from the counsel for the

respondent as to whether the respondent after knowing of the

disputes raised by the petitioner, invoked the amicable settlement

mechanism. The answer was in the negative. However, the counsel

for the respondent contended that since it was the petitioner which

was invoking the arbitration, it was for the petitioner to initiate the

amicable settlement procedure. However, without entering into the

said controversy, I find the respondent to have by its conduct of

appointment of the arbitrator, in any case waived the agreed

amicable settlement procedure preceding the arbitration. The

respondent cannot blow hot and cold. The respondent cannot on the

one hand appoint an arbitrator and oppose the petition on the

ground of the arbitrator having been appointed and the petitioner

being not entitled to challenge the appointment and on the other

hand contend that the petition is pre-mature. The conduct of the

respondent in this regard is found dilatory and malafide.

9. The counsel for the respondent faced with the above,

contended that there could be no waiver of right without the

respondent being aware that by appointing the arbitrator, it was

waiving the right of amicable settlement. I find the said argument to

be preposterous. The acrimony with which the petition has been

opposed in any case leads me to believe that there can be no

possibility of any amicable settlement between the parties and the

insistence by the respondent on the same appears to be dilatory.

10. Thus the petition cannot be said to be pre-mature.

11. As far as the other aspect of the matter is concerned, though

the counsel for the respondent is correct in contending that the

petitioner if had agreed to an appointment procedure cannot object

to the arbitrator so appointed, and though I further find that in such

situation the petition under Section 14 and not the petition under

Section 11 (6) is the remedy, I find that the appointment of the

arbitrator at least qua the agreement where it is provided that the

same should be acceptable to the petition is contrary to the

agreement and thus nonest.

12. The counsel for the respondent urged that this court ought to

decide whether the non-acceptance by the petitioner of the

arbitrator proposed, even under the agreement where such

appointment was subject to acceptance of the petitioner, is

reasonable or not. It was contended that in the facts of this case no

ground was made out for non-acceptance of the arbitrator. It was

however not disputed that M/s Desein International Pvt. Ltd. whose

Vice President has been appointed as the arbitrator is the sister

concern of the respondent company.

13. In my view, once it was found that under the agreed

procedure, the arbitrator proposed had to be acceptable to the

petitioner, this court need not enter into the domain of the reasons

given by the petitioner for not accepting the arbitrator proposed by

the respondent. One of the meaning of "accept" in Black's Law

Dictionary 6th Edition is "to agree to, accede to or to consent to" or

"to adopt". The nomination by the Chairman of Desein Pvt. Ltd., of

the arbitrator is in the nature of an offer which had to be accepted

by the petitioner to become an appointment of the arbitrator. The

petitioner having not accepted the said offer, no appointment of

arbitrator came into being. The clause (Supra) tantamounts to

appointment of arbitrator with mutual consent and in the absence of

such mutual consent/agreement the court becomes entitled to

appoint the arbitrator and is not required to enter into the question

of why the parties are not able to mutually agree. Again the

contentions of the respondent in this regard are found to be

farfetched.

14. Thus it is held that the appointment of the arbitrator is not in

accordance with the agreement and is in fact no appointment at all.

The court is thus entitled to appoint the arbitrator, at least qua the

contract aforesaid.

15. Undoubtedly, under the other contract the petitioner had no

say in the matter of appointment of the arbitrator and if the

petitioner has any grievance in that regard the remedy of the

petitioner is not in this petition.

16. However, considering that the claims of the petitioner under

the two contracts are not of very high value and further considering

that both contracts were with respect to the same project and there

may be certain overlapping, it was again suggested to the counsel

for the respondent that instead of the arbitrator already appointed

continuing qua one contract and an independent arbitrator being

appointed qua the other contract, as claimed by the counsel for the

petitioner, an independent arbitrator be appointed qua both

contracts. The counsel for the respondent is agreeable to the same.

Accordingly, the petition is allowed.

18. Ms. Maninder Acharya, Advocate is appointed as the arbitrator

to adjudicate the disputes, subject matter of the arbitration

agreement in both the contracts. On the basis of the claims

disclosed, the consolidated fee of the arbitrator is fixed at

Rs.40,000/- to be borne equally by the parties besides out of pocket

expenses and subject to award as to costs. The parties to appear

before the arbitrator with prior appointment on 6th October, 2009 I

was inclined to impose heavy costs on the respondent. However,

since the respondent has ultimately agreed to one arbitrator for

arbitration under both contracts and which is found economical,

expedient and in the interest of the parties, no order as to costs.

RAJIV SAHAI ENDLAW (JUDGE)

September 11th, 2009 pp