Delhi High Court

Intuitive Tech Solutions Private ... vs Dlf Limited on 16 January, 2012

Author: S. Muralidhar

*        IN THE HIGH COURT OF DELHI AT NEW DELHI
3
+                          ARB.P. 318/2011


INTUITIVE TECH SOLUTIONS PRIVATE LTD.            ..... Petitioner
                  Through: Mr. Harpreet Singh and Mr. Rajesh
                          Gupta, Advocates.

                  versus

DLF LIMITED                                           ..... Respondent
                           Through: Mr. H.L. Tiku, Senior Advocate with
                                    Ms. Mandeep Kaur and
                                    Ms. Yashmeet, Advocates.

    CORAM: JUSTICE S. MURALIDHAR

                            ORDER

% 16.01.2012

1. The Petitioner, M/s. Intuitive Tech Solutions Private Limited, in this

petition under Section 11 of the Arbitration & Conciliation Act, 1996

('Act') seeks the appointment of an Arbitrator to adjudicate the disputes

with the Respondent, M/s. DLF Limited, arising out of an agreement dated

21st February 2011 between the parties.

2. Under the said Agreement, the Petitioner was allotted on licence basis a

commercial space being Unit No. 002 having a specific area of 167.03

square meters and super area of 238.62 square meters on the ground floor

of a commercial complex to be constructed by the Respondent at Baba

Kharag Singh Marg, Connaught Place, New Delhi. According to the

Petitioner, the Respondent failed to fulfill its commitment to obtain the

necessary occupancy certificate and to hand over the possession of the

allotted unit to the Petitioner till 30th May 2011. Consequently, the

Petitioner terminated the agreement on 31st May 2011 and sought refund of

Rs. 22,92,450/- deposited by it with the Respondent as 'interest free

refundable security deposit'. After three subsequent notices, the Petitioner

issued notice dated 14th September 2011 invoking the arbitration clause in

the Agreement dated 21st February 2011.

3. The arbitration Clause 32 (b) in the Agreement dated 21st February 2011

reads as under:

"32 (b) In case of any dispute arising on terms of the EOI, the matter shall be referred to arbitration for adjudication as per the provisions contained in the Arbitration & Conciliation Act, 1996. In that event, the right to appoint the arbitrator shall be of the Intending Licensor, at its sole discretion and the Intending Licensee shall have no objection in this regard. The decision of the arbitrator shall be final and binding upon the parties. The Intending Licencsee hereby confirms that it shall have no objection to this appointment even if the person so appointed, as the Arbitrator, is an employee or Advocate for the Intending Licensor or is otherwise connected to the Intending Licensor and the Intending Licensee confirms that notwithstanding any such relationship/connection, the Intending Licensee shall have no doubts as to the independence or impartiality of the said Arbitrator. The arbitration proceedings shall be held at an appropriate location in New Delhi."

4. In its letter dated 14th September 2011 the Petitioner while invoking the

arbitration clause stated as under:

"7. In view of the aforementioned facts and circumstances,

since the disputes have arisen between the parties, it would be just, proper and expedient that the parties appoint an Arbitrator to adjudicate and decide all the inter se disputes. Accordingly, our client calls upon you to appoint a sole Arbitrator in consultation with our client to adjudicate upon the disputes which have arisen between the parties.

8. That if you fail to give your response to the contents of the present notice within 30 days of the receipt of the same, our client shall be advised to initiate appropriate proceedings before the competent court of law for redressal of their grievance including initiation of the appropriate proceedings for the appointment of the arbitrator to adjudicate the disputes which have arisen between the parties."

5. According to the Petitioner, the said letter dated 14th September 2011

was sent to the Respondent by speed post and registered post with

acknowledgment due ('AD'). Copies of the postal receipts evidencing

dispatch of letter dated 14th September 2011 by registered and speed post

have been placed on record. Also placed on record is the AD card signed

by the Respondent card in which the date 16th September 2011 appears.

The Petitioner states that since the Respondent failed to appoint an

Arbitrator in terms of Clause 32 (b) of the Agreement within 30 days from

the date of receipt of the Petitioner's notice dated 14th September 2011 it

has forfeited its right to do so and this Court should appoint an Arbitrator.

Consequently, the present petition was filed on 20th October 2011.

6. Mr. Harpreet Singh, learned counsel appearing for the Petitioner states

that in the afternoon of 21st October 2011 the Petitioner received a letter

dated 17th October 2011 from the Respondent informing it of the

appointment Mr. Sudhanshu Batra, a Senior Advocate, as the Sole

Arbitrator in terms of Clause 32 (b) of the Agreement. On 22nd October

2011 the learned Arbitrator entered upon reference and issued notice to the

parties to appear before him on 25th November 2011 for further

proceedings.

7. On 24th October 2011 learned counsel replied to the letter dated 17th

October 2011 of the Respondent. It was, inter alia, contended that the

appointment of an Arbitrator by the Respondent was non est as it took

place beyond 30 days after receipt of the Petitioner's letter invoking of the

arbitration Clause 32 (b) of the Agreement.

8. On 25th November 2011 learned counsel for the Petitioner wrote to the

learned Arbitrator stating that the present petition under Section 11 of the

Act had been filed in this Court and in view of the stand taken in the

present petition, the said appointment of the learned Arbitrator was

inconsequential and non est. It was pointed out that in the present petition

notice was issued on 21st October 2011.

9. Mr. Harpreet Singh submitted that in light of the law explained by the

Supreme Court in Datar Switchgears Limited v. Tata Finance Limited

2000 (8) SCC 151 and Punj Lloyd Limited v. Petronet MHB Limited

2006 (2) SCC 638, the Respondent had forfeited its right to appoint an

Arbitrator in terms of Clause 32 (b) of the Agreement on the expiry of 30

days from the date of receipt of notice dated 14th September 2011 issued

by the Petitioner invoking the arbitration clause. Inasmuch as the said

notice was received by the Respondent on 16th September 2011 and the

appointment was made purportedly by a letter dated 17th October 2011

which was dispatched on 20th October 2011, the said appointment was

made after the filing of the present petition by the Petitioner on 19th

October 2011. Consequently, the appointment would be non est in terms of

the law explained in the above decisions. Reliance is also placed on the

recent decision dated 9th January 2012 of the learned Judge designate of

the Chief Justice of India in Arbitration Petition No. 11 of 2011 [Denel

(Proprietary Limited) v. Government of India, Ministry of Defence]. It is

accordingly prayed that this Court should appoint an independent

Arbitrator.

10. The above submissions were resisted by Mr. H.L. Tiku, learned Senior

counsel for the Respondent. He pointed out that even assuming that the

Respondent had received a letter dated 14th September 2011 of the

Petitioner invoking arbitration Clause 32 (b) of the Agreement on 16th

September 2011, the appointment of the learned Arbitrator was made by

the Respondent a few days prior to 17th October 2011 and this was in any

event before filing of the present petition by the Petitioner under Section

11 of the Act. In terms of the law explained in Datar Switchgears Limited

v. Tata Finance Limited, as long as the appointment of the Arbitrator was

prior to the filing of the petition under Section 11 it was valid. It is

submitted that if the Petitioner has any grievance regarding the impartiality

of the Arbitrator appointed there were other remedies under the Act for

that purpose.

11. The question whether the Respondent has forfeited its right to appoint

an Arbitrator can be answered on an analysis of the facts of the present

case. The documents placed on record show that the Petitioner's legal

notice dated 14th September 2011 invoking the arbitration clause was

received by the Respondent on 16th September 2011. However, the said

notice was not in conformity with the arbitration clause since the Petitioner

proposed that the appointment of an Arbitrator be done by the Respondent

'in consultation' with the Petitioner. This was contrary to the express

wording of Clause 32 (b) of the Agreement. Even assuming that the notice

invoking the arbitration clause was received by the Respondent on 16th

September 2011, the date of appointment of the Arbitrator by the

Respondent is significant. Although the letter of counsel for the

Respondent informing the Petitioner of the Arbitrator is dated 17th October

2011, and dispatched on 20th October 2011, the actual decision to appoint

the Arbitrator must have been taken some time prior to the said letter dated

17th October 2011.

12. In Datar Switchgears Limited v. Tata Finance Limited in para 19 it

was observed as under:

"19. So far as cases falling under Section 11(6) are conceded 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 Section11(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." (emphasis supplied)

13. The above decision was reiterated in Punj Lloyd Limited v. Petronet

MHB Limited and in a recent decision dated 9th January 2012 of the

Supreme Court in Arbitration Petition No. 11 of 2011 [Denel (Proprietary

Limited) v. Government of India, Ministry of Defence]. Consequently, for

the purposes of Section 11, it requires to be seen is whether the

appointment of the Arbitrator by the Respondent has taken place prior to

the filing of the present petition on 19th October 2011.

14. It was contended by learned counsel for the Petitioner that since the

notice dated 17th October 2011 was dispatched only on 20th October 2011

the appointment of the Arbitrator took place after the filing of the present

petition on 19th October 2011. The above submission fails to appreciate

that the actual date of appointment of the Arbitrator by the Respondent had