Traxpo Enterprises Pvt. Ltd vs Pec Limited & Another
2013 Latest Caselaw 5830 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%
                                           Date of Decision: 17.12.2013

+      W.P.(C) 7918/2013 and CM No. 16777/2013 (stay)
       TRAXPO ENTERPRISES PVT. LTD                       ..... Petitioner
                   Through: Mr Kuljeet Rawal and Mr Jagjit
                   Singh, Advs.
                   Versus
    PEC LIMITED & ANOTHER                      ..... Respondent
                   Through: Mr Arvind Chaudhary, Adv for R-1
CORAM:
HON'BLE MR. JUSTICE V.K.JAIN

                             JUDGMENT

V.K.JAIN, J. (Oral)

The petitioner before this Court entered into an agreement with

respondent No.1-PEC Limited, which is a public sector undertaking.

The agreement between the said parties contained the following

arbitration clause:-

"Any dispute or difference in respect of may matter relating to or arising out of the Associateship Agreement between PEC and ASSOCIATE, if the same is not resolved amicably, will be settled at New Delhi by arbitration in accordance with Rules of Arbitration of Indian Council of Arbitration, New Delhi and the Award made in pursuance thereof shall be final and binding on the parties. The Arbitrator will give a reasoned Award. The venue of arbitration will be New Delhi.

2. As per the rules of Arbitration of ICA, since the claim raised by

respondent No. 1 amounted to Rs 13,22,55,637/-, it was required to be

decided by the Tribunal of three arbitrators, one each to be nominated

by the parties and the third or the presiding arbitrator to be nominated by

the Council unless the parties to the dispute mutually agreed to refer the

dispute to a sole arbitrator.

The disputes arose between the parties and respondent No. 1

raised a claim of Rs 13,22,55,637/- against the petitioner and

approached respondent No.2-Indian Council of Arbitration. Vide letter

dated 24.04.2013, the said Council, referring to the claim of respondent

No. 1, required the petitioner to forward the name of its nominee

arbitrator from the ICA panel of arbitrators which was available on its

website, on or before 25.05.2013. The petitioner was also required to

deposit a sum of Rs 14,45,490/- towards its share of the advance deposit

of the tentative arbitration cost and expenses of arbitration, in terms of

Rule 28 of the ICA Rules of Arbitration, on or before 25.05.2013.

The petitioner responded to the letter of respondent No. 2 dated

25.04.2013 by way of reply dated 23.05.2013. In its reply, the petitioner

denied the claim raised by respondent No.1, but neither did it appoint an

arbitrator from the panel of ICA nor did it deposit its share towards the

cost of tentative cost of arbitration. In fact, no request was made in the

reply dated 23.05.2013 for extension of time for nominating the

arbitrator of the petitioner and/or depositing its share towards the

tentative cost of arbitration.

3. Vide letter dated 30.05.2013, respondent No. 2 Indian Council of

Arbitration, extended time till 21.06.2013 for compliance of the

directions, contained in its letter dated 25.04.2013. The petitioner

responded to the letter of ICA dated 30.05.2013, by way of reply dated

13.06.2013. The stand taken in the reply was that it was not bound to

pay to ICA towards the deposit for arbitration. No request was made in

this letter for extension of time either for appointment of an arbitrator on

behalf of the petitioner or for depositing the share of the petitioner in the

tentative cost of arbitration.

4. Vide letter dated 18.06.2013, ICA informed the petitioner that in

view of their refusal to make payment of arbitral fee, they could, under

Rule 28, realize the share of the petitioner from the claimant/respondent

No.1. The petitioner was further informed that the claimant had

forwarded the name of Shri P.C. Markanda, Senior Advocate and had

proposed to resolve the dispute through his sole arbitration instead of

resolving it through the panel of three arbitrators. The petitioner was

asked to convey its consent in case the proposal was acceptable to it.

The petitioner responded to the said letter vide reply dated 27.06.2013,

objecting to the proposal of the claimant/respondent No. 1 for resolving

the dispute by sole arbitrator instead of a panel of three arbitrator and

also informed ICA that they would convey the name of their arbitrator

within three weeks. ICA was requested to grant three weeks time for the

purpose. However, despite having sought time for three weeks for

appointing its arbitrator, admittedly, the petitioner failed to do so.

5. Vide letter dated 03.07.2013, the ICA again asked the respondent

No. 1/claimant to make payment of Rs 14,45,490/- towards the

petitioner's share of the arbitral cost and expenses. The respondent No.

1 was also asked whether it would like to retain the name of Shri P.C.

Markanda as its nominee arbitrator.

Vide letter dated 03.07.2013, referring to the request which the

petitioner had made for extension of time for nominating its arbitrator,

ICA informed the petitioner that they had not appointed an arbitrator

despite repeated opportunities. Hence, a final opportunity was granted to

the petitioner for this purpose till 15.07.2013. It was further stated in

the said letter that if the petitioner failed to comply with the said

directions, the matter shall be referred to the arbitration committee for

appointment of its nominee arbitrator. Admittedly, the petitioner did not

nominate an arbitrator on its behalf even till 15.07.2013.

Vide letter dated 15.07.2013, the petitioner, instead of nominating

an arbitrator, informed ICA that they were still awaiting the consent of

the arbitrator whom they proposed to appoint and as soon as the same is

received, they would send the name and contact details of their

arbitrator. Further three weeks time was sought by the petitioner for

appointment of its arbitrator.

Vide letter dated 19.07.2013, the ICA responding to the letter of

the petitioner dated 15.07.2013, informed it that the ICA could not grant

more than 10 days time for the purpose and required the petitioner to

forward the name of its nominee arbitrator by 29.07.2013. Admittedly,

the petitioner did not nominate an arbitrator by 29.07.2013 and in fact

not even within three weeks, computed with effect from 15.07.2013.

6. Vide letter dated 25.07.2013, the petitioner again sought two

weeks time for appointment of arbitrator by them. Vide letter dated

06.08.2013, the petitioner again sought three more weeks time for

appointment of an arbitrator. It would be pertinent to note here that no

arbitrator was appointed by the petitioner even within two weeks,

computed from 25.07.2013 though on that date also it had sought two

weeks time for this purpose. Vide letter dated 06.08.2013, the ICA

informed the petitioner that Rule 22 (c) of ICA Rules of Arbitrator

enables the Registrar to go ahead and appoint claimant's nominee

arbitrator as the sole arbitrator in the situation prevailing in the case and,

therefore, they shall pursuing the matter in accordance with the

aforesaid rule. It was, thereafter, that vide letter dated 16.08.2013, the

petitioner appointed a former Judge of this Court, as the arbitrator on its

behalf. The aforesaid nomination was, however, not accepted by the

ICA and vide letter dated 03.10.2013, the ICA informed the petitioner as

well as respondent No. 1 that Shri P.C. Markanda, Senior Advocate had

been appointed as arbitrator under Rule 22 (c) of ICA Rules of

Arbitrator. Being aggrieved from the decision of the ICA to go ahead

with arbitration, without constituting a panel of three arbitrator,

including the nominee of the petitioner, this writ petition has been filed

claiming the following reliefs:-

"a. issue writ of mandamus and any other order or writ or direction whereby calling upon the records of arbitration proceeding relating and pertaining to its titled as PEC Limited (claimant) versus Traxpo Enterprises Pvt. Ltd. (respondent) as pending before the office of Indian Council of Arbitration (ICA) with No.AC/1888;

b. writ of certiorari or any other writ or direction or order whereby quashing and setting aside directions issued by respondent no.2 vide their letters dated

6/8/2013, 16/08/2013 & 3/10/2013 and while quashing and setting aside the above directions or all other direction of respondent no.2 & whereby be pleased to constitute Arbitral Tribunal constituting of 3 Arbitrators one each to be the nominee Arbitrator of each i.e. Petitioner & Respondent No.1 & umpire thereto all proceeding be proceed with denove by the said Arbitral Tribunal in accordance with law."

7. Rule 22(c) of ICA Rules of Arbitration reads as under:- "(c) Where three arbitrators have to be appointed as per the above sub-rule and any of the parties to the dispute fails to make the necessary deposit towards the costs and expenses of arbitration, instead of three arbitrators, the Registrar shall request the arbitrator appointed by any of the parties to act as sole arbitrator irrespective of the claim exceeding Rs. one crore. In the event the agreement provides for appointment of three arbitrators, the Registrar in consultation with the Chairman of the Arbitration Committee may appoint arbitrators on behalf of Claimant or Respondent, as the case may be, as well as presiding arbitrator."

The contention of the learned counsel for the petitioner is that the

first part of the aforesaid rule applies to a situation where the fee is not

deposited at all by one of the parties to the agreement and will not apply

to a situation where the one party commits default in deposit of its share

of the cost of arbitration and the other party deposits the share of the

party in default. I, however, find myself unable to accept the said

contention. A careful scrutiny of the aforesaid rule would show that it

applies to a situation where one of the parties to the agreement fails to

deposit the cost and expenses of arbitration and once that situation has

arisen, it would make no difference if the share of the party in default is

deposited by the other party to the arbitration agreement. The purpose of

the claimant depositing the share of the petitioner in the cost and

expenses of arbitration is to enable the Council to go ahead with the

arbitration, since, without deposit of the share of both the parties, the

Council may not go ahead with the arbitration. The second part of the

aforesaid clause, in my view, would not apply to a situation where one

of the parties commits default in depositing its share towards the cost

and expenses of arbitration. It would apply to a situation, where the fee

is deposited by all the parties, but any of the parties fails to nominate his

arbitrator. The contention of Mr Rawal is that even in the event one of

the parties commits the default in nominating an arbitrator and

depositing its share towards the cost and expenses or arbitration, ICA

has to nominate an arbitrator on its behalf, instead of referring the matter

to the sole arbitrator. I, however, cannot accept the contention since

accepting the said contention would make the first part of the aforesaid

report absolutely redundant.

8. Mr Rawal states that in view of the letter dated 06.08.2013 sent

by ICA to the respondent No. 1 with copy endorsed to the petitioner,

they ought to have waited till 13.08.2013. Firstly, the contention cannot

be accepted since the Council had already decided to proceed under

Rule 22(c) on account of default committed by the petitioner; secondly,

admittedly, the petitioner did not nominate its arbitrators even by

13.08.2013.

9. I find no illegality in the procedure adopted by the Indian Council

of Arbitration. The conduct of the petitioner to say the least was highly

undesirable. The petitioner was given repeated opportunities to

nominate its arbitrator from the panel of arbitrators of ICA. The

petitioner not only failed to avail the opportunities given from time to

time, it also failed to appoint an arbitrator even within the time it sought

from ICA, firstly vide letter dated 27.06.2013 and then vide letter date

15.07.2013. Obviously, the petitioner was trying to delay the initiation

of arbitration proceedings, thereby defeating the very purpose behind

having an arbitration clause.

For the reasons stated hereinabove, I find no merit in the writ

petition and the same is hereby dismissed.

V.K. JAIN, J

DECEMBER 17, 2013 BG