M.L. Dalmiya & Company Ltd. vs The Chairman & Managing Director, ...
2012 Latest Caselaw 6470 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI
#15                                     (Reportable)
+                   O.M.P. 569 of 2012

        M.L. DALMIYA & COMPANY LTD.                ..... Petitioner
                      Through: Mr. Ram K. Watel, Advocate.

                         versus

        THE CHAIRMAN & MANAGING DIRECTOR,
        NATIONAL BUILDING CONSTRUCTION
        CORPORATION LIMITED & ORS.               ..... Respondents
                     Through: Mr. Sagar Bhatia, Advocate.

        CORAM: JUSTICE S. MURALIDHAR

                                  ORDER

% 05.11.2012

1. This is a petition under Section 14 of the Arbitration and Conciliation

Act, 1996 ('Act') for a direction to terminate the mandate of the

Respondent No. 4, who has been appointed by the Respondent, National

Building Construction Corporation Limited ('NBCC') (represented by

Respondents 1 to 3) to act as sole Arbitrator to adjudicate the disputes

between the Petitioner, M.L. Dalmiya & Company Ltd. and NBCC

arising out of the work of expansion and modification of the terminal

building and allied works at Patna Airport which was awarded to the

Petitioner by a letter dated 31st December 1993 and 3rd January 1994.

2. According to the Petitioner, it completed the work in all respects by

31st October 1998 but there were disputes concerning the payment of the

final bill, the security deposit and performance bank guarantee ('PBG').

The Petitioner invoked the arbitration clause by a letter dated 25th April

2002.

3. In terms of the arbitration clause, the Arbitrator was to be appointed

by the Chairman-cum-Managing Director ('CMD'), NBCC. By a letter

dated 18th June 2002, the CMD first appointed one Mr. S.K. Chatterjee,

Additional General Manager ('AGM'), NBCC as sole Arbitrator. The

Petitioner filed its statement of claim before Mr. Chatterjee. However,

NBCC failed to file its written statement despite several opportunities. In

anticipation of his retirement on 31st January 2004, Mr. Chatterjee had

resigned on 12th January 2004. He noted that the hearing in the arbitral

proceedings could not commence since NBCC had failed to submit its

counter claims.

4. Mr. Chatterjee was replaced by one Mr. A.K. Gupta, Deputy General

Manager ('DGM') on 1st May 2004. It is stated that without any

significant progress being made in the arbitral proceedings, Mr. Gupta

also resigned on 28th September 2007 stating that he was pre-occupied

with other commitments. The CMD, NBCC thereafter appointed one

Mr. S.K. Basandra, DGM, NBCC (Respondent No. 4 herein) as sole

Arbitrator by a letter dated 26th October 2007.

5. It is averred in the petition that after his appointment Mr. Basandra

held one hearing on 3rd June 2008 and for more than two years thereafter

he failed to fix any date for hearing. The copies of the letters dated 9th

December 2009 and 23rd February 2010 written by the Petitioner to

Respondent No. 4 have been placed on record. The Petitioner by a letter

dated 28th May 2010 informed Respondent No. 4 that since he had failed

to act without undue delay, his mandate stood terminated. A copy of the

said letter was also marked to NBCC. In response thereto by a letter

dated 9th/10th August 2010, Respondent No. 4 informed the parties that a

hearing had been fixed on 17th September 2010. At the request of the

Petitioner, Respondent No. 4 re-fixed the hearing date as 21st October

2010. On that date, the Arbitrator suggested that both parties should try

and reconcile their differences. At the instance of the Respondent No. 4,

the Petitioner by a letter dated 4th November 2010 sent the learned

Arbitrator a copy of the letter dated 14th January 1998 written by the

Chief Project Manager, NBCC to the Petitioner extending the time. It is

stated that thereafter no hearing was held by Respondent No. 4. By a

letter dated 12th May 2011, the Petitioner asked Respondent No. 4 to fix

a date for hearing. However, Respondent No. 4 failed to do so.

6. It is in the above circumstances that a letter was addressed by the

Petitioner to Respondent No. 4 on 27th April 2012 asking him to fix a

date for hearing within fifteen days failing which the Petitioner would

approach the Court. It is submitted by Mr. Ram K. Watel, learned

counsel appearing for the Petitioner that Respondent No. 4 having failed

to act without undue delay, he had lost his mandate in terms of Section

14(1)(a) of the Act. He further submits that the CMD, NBCC should

also be held to have forfeited his right to appoint an Arbitrator. Reliance

is placed on the decisions in Ariba India Private Ltd. v. Ispat Industries

Ltd. 2011(3) Arb. LR 163 (Delhi); Union of India v. Singh Builders

Syndicate 2009(2) Arb. LR 1 (SC); Northern Railway Administration,

Ministry of Railways, v. Patel Engineering Company Ltd. 2008(3) Arb.

LR 349 (SC); Bipromasz Bipron Trading SA v. Bharat Electronics

Limited (BEL) (2012) 6 SCC 384 and N.B.C.C. Ltd. v. J.G.

Engineering Pvt. Ltd. 2010(1) Arb. LR 165 (SC).

7. Mr. Sagar Bhatia, learned counsel appearing on behalf of the

Respondents 1 to 3 at the outset stated that the Respondents do not wish

to file any reply to the petition. He relied on the decision dated 4th

August 2009 of the Supreme Court in Civil Appeal No. 5075 of 2009

(Union of India v. Premier Files Ltd.) and a decision dated 23rd

December 2009 of this Court in OMP No. 451 of 2006 (Executive

Engineer v. M/s Nav Nirman Construction Co.). He submitted that

since the arbitration clause required the CMD to appoint an Arbitrator

then the choice of the Arbitrator had to be that of the CMD, NBCC. He

submitted that alternatively a time-frame may be fixed by the Court for

conclusion of the arbitral proceedings by Respondent No. 4.

8. The above submissions have been considered. This Court is satisfied

that the Respondent No. 4 has failed to act without undue delay resulting

in the termination of his mandate in terms of Section 14(1)(a) of the Act.

Despite letters written by the Petitioner to Respondent No. 4 requesting

him to expedite the arbitral proceedings as noted hereinbefore, the

Arbitrator has failed to do so. With the Respondents choosing not to file

any counter affidavit, the averments by the Petitioner on the failure of the

Arbitrator to act expeditiously remain uncontroverted. He has brought

about a situation where the "controversy remains" concerning his failure

to act without undue delay. Therefore, under Section 14(2) of the Act,

the Petitioner is entitled to approach this Court seeking termination of the

mandate of Respondent No. 4.

9. In Union of India v. Singh Builders Syndicate, the Supreme Court

observed that if the arbitral Tribunal is made non-functional on account

of the delay of one of the serving officers either by the frequent transfer

or by failure to take steps expeditiously then the Court should step in,

and appoint an Arbitrator. Again in Northern Railway Administration v.

Patel Engineering Company Ltd., the Supreme Court observed that it

was not powerless to make appropriate alternative arrangements where

the arbitral Tribunal is not functional. As regards appointing the named

Arbitrator, the Supreme Court in Bipromasz Bipron Trading SA v.

Bharat Electronics Limited, observed that if the facts so warrant, the

Court can appoint another person where it is of the view that the named

Arbitrator is not likely to be impartial. In N.B.C.C. Ltd. v. J.G.

Engineering Pvt. Ltd., the Supreme Court terminated the mandate of the

Arbitrator as there was undue delay in completing the arbitral

proceedings.

10. In the present case, the uncontroverted facts are that the arbitral

proceedings which commenced with the Petitioner invoking the

arbitration clause way back on 25th April 2002 are yet to conclude. There

have been three Arbitrators appointed by the CMD, NBCC in this long

period of over ten years with no significant progress being made in the

arbitral proceedings. The Court is, therefore satisfied that permitting the

CMD, NBCC to further appoint another Arbitrator to replace Respondent

No. 4 would be a futile exercise as the Arbitrators so far appointed have

not been able to carry on with the arbitral proceedings without undue

delay. This Court, therefore holds that in the facts and circumstances of

the case, the CMD, NBCC should be held to have forfeited his right to

appoint an Arbitrator in terms of the arbitration clause.

11. In the above circumstances, this Court terminates the mandate of

Respondent No. 4 as an Arbitrator.

12. Consequently, in exercise of its powers under Section 11 read with

Section 14(1)(a) and Section 14(2) of the Act, this Court appoints Mr.

Justice P.K. Bahri, a former Judge of this Court, residing at 171, Jor

Bagh, New Delhi-3 (Mob. 9818542737) as sole Arbitrator to adjudicate

the disputes between the parties. The learned Arbitrator will proceed

from the stage at which the arbitral proceedings were before Respondent

No. 4.

13. It will be the responsibility of the NBCC to ensure that the entire

arbitral record is collected from Respondent No. 4 within the next ten

days and placed before the learned Arbitrator appointed by this Court

forthwith. The fees of the learned Arbitrator would be in terms of the

Delhi High Court Arbitration Centre (Arbitrators' Fees) Rules.

14. The petition is disposed of in the above terms. A copy of this order

be delivered to the learned Arbitrator forthwith.

S. MURALIDHAR, J.

NOVEMBER 05, 2012 akg