M/S Anukampa Solutions Private ... vs Uttar Pradesh State Road ...
2013 Latest Caselaw 353 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                   ARB.P. 113/2010

M/S ANUKAMPA SOLUTIONS PRIVATE LTD ..... Petitioner
               Through: Mr. Jayant Bhushan, Senior Advocate
                        with Mr. Muneesh Malhotra,
                        Advocate.
        versus

UTTAR PRADESH STATE ROAD TRANSPORT
CORPORATION & ORS                      ..... Respondents
            Through: Mr. Bijender Chahar, Senior
                      Advocate with Ms. Garima Prashad,
                      Advocate.


CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL


                          JUDGMENT

: REVA KHETRAPAL, J.

1. The Petitioner has filed the present petition under Section 11 of

the Arbitration and Conciliation Act, 1996 seeking appointment of an

Arbitrator to adjudicate the disputes between the Petitioner and the

Respondent, arising out of the Agreement dated 23.11.2006 for

constructing, operating, and maintaining (as BOT Project) a food stall

at Ajmeri Gate Interstate Bus Terminus, New Delhi for a period of ten

years by the Petitioner.

2. Shorn of details, the facts leading to the filing of the present

petition are as follows. Pursuant to the Agreement dated 23.11.2006

between the Petitioner, a Private Limited Company and the

Respondent No. 1, a Public Sector Passenger Road Transport

Corporation, the Petitioner started construction of the food plaza on

the site and announced the date of opening of food plaza as

20.06.2007. However, the Petitioner was shocked to receive a letter

dated 14.06.2007 from the Respondent No.1 calling upon the

Petitioner to stop all the work on the ground that 'No Objection

Certificate' from Municipal Corporation of Delhi (MCD) with regard

to subject construction had not been obtained. The Petitioner, even

though believed that under the said agreement no approval was to be

obtained from the Municipal Corporation of Delhi (MCD), at the

instance of the Respondents paid the necessary charges for approval

of the site plan and the MCD finally accorded its approval on

26.12.2008.

3. The Petitioner thereafter promptly informed the Respondent

regarding the said approval and requested the Respondent by letter

dated 27.12.2008 to grant permission to complete the unfinished

work. By letters dated 09.06.2009, 15.06.2009 and 02.07.2009, the

Petitioner was permitted to start the operation of the food plaza

temporarily, however, in none of these letters any issue with regard to

license fee from 23.06.2007 to 26.12.2008 was ever raised by the

Respondents. The Petitioner claims that after having granted

permission to the Petitioner, in complete contravention of its

assurances, the Respondent Nos.2 and 3, the employees of the

Respondent No.1, approached the site and arbitrarily fixed locks on

the subject premises. The aforesaid action of the Respondent No.1

was immediately challenged by the Petitioner before the Allahabad

High Court at Lucknow, where the Respondent took a U-turn and

stated that they had not put any lock on the site. The said petition was

disposed of by the Allahabad High Court directing the Respondent to

remove the locks, if any, with immediate effect.

4. Meanwhile, on 19.09.2009 the Petitioner informed the

Respondent about the completion of the construction work and

opening of the food plaza with effect from the said date. Again, to the

utter surprise of the Petitioner, the Petitioner received Office Order

dated 24.09.2009 from the Respondent No.1, whereunder the

Respondent No.1 abruptly terminated the Agreement dated

23.11.2006 on the ground of violation of Clauses 6, 8, 15 and 29 of

the Agreement. Aggrieved by the said Order dated 24.9.2009 issued

by the Respondent No.1, the Petitioner made a representation on

25.09.2009 to the Respondent No.1 to which the Petitioner received

reply dated 03.10.2009 denying the right of hearing to the Petitioner.

Accordingly, disputes arose between the parties as regards the

termination of the Agreement by the Respondent-Corporation.

5. In order to resolve the disputes between the parties, the

Petitioner invoked the Arbitration Clause contained in Clause 21 of

the Agreement dated 23.11.2006, vide its letter dated 08.03.2010

addressed to the Managing Director of the Respondent Corporation,

and upon failure of the Respondent Corporation to appoint an

arbitrator in terms of the aforesaid Arbitration Clause contained in the

Agreement, the Petitioner filed the present petition. It is specifically

averred in the petition that the notice dated 08.03.2010 had been

personally delivered to the Respondent and was sent through courier

as well, but there was no response to the aforesaid notice.

6. The Respondents, in their reply, though admit the existence of

the aforesaid disputes and the Arbitration Agreement between the

parties, in terms of which the said disputes are required to be referred

to arbitration, have denied the claims of the Petitioner in toto. The

Respondents claim that the Agreement dated 23.11.2006 was rightly

terminated by the Respondent-Corporation on 24.09.2009 on the

ground of non-compliance with the terms and conditions contained

therein by the Petitioner; and vehemently contest the prayer made in

the petition for appointment of a sole arbitrator on the following three

grounds.

7. First, the Respondents deny the receipt of the letter dated

08.03.2010 invoking the arbitration Clause and challenge the

maintainability of the present petition on the ground that the notice

for appointment of arbitrator was not received by the Respondent-

Corporation. The Respondents in their reply allege that the Petitioner

has sneakily tried to show that it had sent such letter to the

Respondent Corporation by showing service to the Head Office of the

Respondent Corporation whereas the duly authorized office for the

said purpose is at Ghaziabad and at Ajmeri Gate, and the Petitioner

knew fully well that the file with respect to the entire agreement is

maintained at Ghaziabad which is the competent office in the present

case. The Respondent states that the letter dated 08.03.2010 does not

find place in the entire file or record of the Respondent-Corporation

and claims that the receipts filed by the Petitioner are forged and

fabricated.

8. The second plank of Respondents' argument is based on the

arbitration clause contained in the agreement dated 23.11.2006, which

is as follows:

"21. Any dispute between the First Party and Second Party will be settled as follows:

(a) All disputes between the parties arising out or in relation to contract, shall be referred for Arbitration to the Managing Director or an officer, not below the rank of General Manager of the Corporation, and nominated and appointed by Managing Director on his behalf.

(b) The Arbitrator to whom the matter is originally referred, being transferred or vacating his office or being unable to act for any reason, the Managing Director shall be competent to appoint any other officer to act as Arbitrator. Such arbitrator shall be entitled to proceed with the references from state at which was left by his predecessor in office."

9. Relying upon the aforesaid clause, the Respondents' contention

is that it is only the Managing Director of the Respondent

Corporation or an officer not below the rank of the General Manager,

nominated and appointed by the Managing Director on his behalf,

who is a duly authorized and competent authority to appoint the

arbitrator with respect to the disputes arising out of the contract dated

23.11.2006. It is contended that the Managing Director of the

Respondent-Corporation has always been ready and willing to

appoint an arbitrator as per the contract between the parties and the

Petitioner has approached this Court "without following due

procedure as outlined under the contract.........". No arbitrator can

be appointed beyond the provisions of the arbitration Agreement

between the parties.

10. Lastly, the Respondents have contended that it is the Petitioner

who, instead of honouring the arbitration agreement between the

parties, has been indulging in frivolous litigation before different fora.

11. During the pendency of the present petition, the Respondents

placed on record a Supplementary Affidavit dated 09.03.2011, stating

therein that the Legal Section of its Ghaziabad office, vide letter dated

11.11.2010, enquired with the Head Office of the Respondent-

Corporation at Lucknow as to the receipt of the alleged notice dated

08.03.2010 from the Petitioner. In response to the said enquiry, reply

was received from the Head Office vide letter dated 20.11.2010,

wherein it was stated that notice dated 08.03.2010 had not been

received. It is further stated on oath by the Respondents that the

courier receipt filed by the Petitioner does not bear the signature of

the receiving authority and that the alleged 'by hand' receipt does not

bear the name or even the designation of the person who received the

alleged notice, which is mandatory under the Rules and Regulation

and is also the practice of the Respondent Corporation. It is also

stated in the Supplementary Affidavit by the Respondents that there is

no entry with respect to the said receipts in the Entry/Dispatch

Register maintained by the Respondent-Corporation at its Head

Office in its regular course of business. The Respondents have

enclosed the letter dated 20.11.2010 received from their Head Office

alongwith their Supplementary Affidavit.

12. In reply to the aforesaid Supplementary Affidavit, the

Petitioner filed Reply Affidavit/Counter Affidavit dated 29.03.2011,

reiterating on oath that the notice dated 08.03.2010 was served

personally at the Managing Director's office and also through courier

and denying that the courier receipts were forged and fabricated. It

stated that the stand of the Respondent adopted in the alleged letter

dated 20.11.2010 is only an afterthought, that the courier receipt bears

the signature of the receiving authority being an independent

document over which Petitioner has no control.

13. In Rejoinder Affidavit, the Respondent reiterated what had

been stated by it in the Supplementary Affidavit including its

assertion that the stamp on the courier receipt is a fabricated one.

14. Mr. Jayant Bhushan, learned senior counsel for the Petitioner at

the outset submitted that the law was well settled in Datar

Switchgears Ltd. vs. Tata Finance Ltd., (2000) 8 SCC 151, which

was affirmed in Punj Lloyd Ltd. vs. Petronet MHB Ltd., (2006) 2

SCC 638, that once a minimum of 30 days has expired from the date

of service of notice invoking arbitration and a petition is filed in the

Court, the appointing authority loses the right to make the

appointment. In the present case, the appointment has been made by

the Respondent after two years of the filing of the present petition,

and hence even if the present petition is treated as a notice to the

Respondent, the Respondent has long since lost its right to appoint an

arbitrator for settlement of the disputes which have admittedly arisen

between the parties. He further submitted that the Managing Director

in the instant case having been privy to the decision making process

which resulted in the termination of the agreement between the

parties, the insistence of the Respondent to appoint the Managing

Director and/or its nominee to arbitrate upon the disputes between the

parties would be violative of the principles of natural justice.

15. Reliance in support of the aforesaid submissions was placed by

learned senior counsel for the Petitioner on the judgment of the

Supreme Court rendered in the case of Bharat Sanchar Nigam

Limited and Anr. vs. Motorola India Private Limited, (2009) 2 SCC

337. The observations made therein, being apposite, are reproduced

hereunder:

"36. In Datar Switchgears Ltd. v. Tata Finance Ltd. (2000) 8 SCC 151, which was affirmed in Punj Llyod Ltd. v. Petronet MHB Ltd. (2006) 2 SCC 638, it was held that once a minimum of 30 days has expired and a petition is filed to the court, the appointing authority loses the right to make the appointment. Therefore, the

appellant BSNL has now lost its right to appoint any arbitrator for settling the disputes under the agreement.

37. Further, the CGM, Kerala Circle has already taken a decision as is evident from his letter dated 25-4- 2006, that the appellants were right in imposing the liquidated damages and therefore, the question of such a person becoming an arbitrator does not arise as it would not satisfy the test of impartiality and independence as required under Section 12 of the Arbitration and Conciliation Act, 1996. Moreover it would also defeat the notions laid down under the principles of natural justice wherein it has been recognized that a party cannot be a judge in his own cause. The judgment of this Court in State of Karnataka v. Shree Rameshwara Rice Mills (1987) 2 SCC 160 is significant in this matter. The Court had stated: (SCC p.161) "...Even assuming that the [terms of Clause 12 afford] scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, adjudication by the officer regarding the breach of the contract cannot be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract."

16. Learned senior counsel further emphasized that there was

ample evidence on record to substantiate the contention of the

Petitioner that the notice invoking Arbitration Clause had been duly

served upon the Respondent. He contended that the allegation of the

Respondent that the courier receipt had been fabricated by the

Petitioner deserved no credence for the courier agency was an

independent agency and it was impossible to imagine that the courier

agency would have indulged in fabrication at the instance of the

Petitioner. Alternatively, learned senior counsel submitted that a

factual dispute having arisen between the parties as to whether notice

was received or not which was incapable of being resolved by leading

evidence keeping in view the impracticability of the whole exercise,

the filing of the petition must be deemed to be notice given to the

Respondent. Learned senior counsel in this context referred to the

order of the Division Bench dated 17.10.2011 passed in FAO(OS)

557/2009, whereby the Petitioners had sought relief under Section 9

of the Arbitration and Conciliation Act, 1996 as a precursor to the

filing of the present petition, which, though disallowed by the learned

Single Judge was granted to the Petitioner/Appellant by the Division

Bench by passing the following order:-

"13. We allow the appeal and set aside the impugned order dated 5.11.2009. OMP No.601/2009 filed by the appellant stands disposed of restraining respondent No.1 from preventing appellant to carry on business as per the agreement dated 23.11.2006 till the learned

arbitrator who would be appointed would decide the dispute and needless to state the order in favour of the appellant is conditional upon the appellant paying the agreed license fee as per the agreement dated 23.11.2006 and we clarify that the license fee would be payable as per clause 6 of the agreement i.e. after 4 months of 23.11.2006. The appellant would comply with all its obligations under the agreement dated 23.11.2006. We are informed that the appellant submitted for approval of respondent No.1 the rates at which it would sell the food stuff from the food plaza, which permission was refused, as according to respondent No.1 it had cancelled the agreement. We thus direct the appellant to re-submit, for approval of respondent No.1, the rate list for the food items which are sold from the premises in question and the competent authority of respondent No.1 is also directed to exercise its power under the agreement between the parties by treating the agreement as subsisting.

14. A clarification is added by consent of learned counsel for the parties: Either party would be free to move an appropriate application under Section 17 of Arbitration and Conciliation Act 1996 before the learned arbitrator who is yet to be appointed should subsequent situation arise which needs modification of the instant order."

17. Mr. Bhushan also heavily relied upon a recent decision of the

Supreme Court rendered in Bipromasz Bipron Trading SA vs.

Bharat Electronics Limited (BEL), 2012 (5) SCALE 545. In the said

case, the only objection raised by the Respondent to the petition under

Section 11 of the Arbitration and Conciliation Act, 1996 filed by

Bipromasz Bipron Trading SA was that the disputes had to be

referred to the Chairman and Managing Director of the Respondent or

his nominee in terms of the Arbitration Clause contained in the

General Terms and Conditions of Purchase Order (Foreign). It was

submitted that the prayer made in the petition for appointment of a

sole arbitrator to adjudicate the dispute was contrary to the contract

and thus not maintainable. It was also the case of the Respondent that

prior to the filing of the petition before this Court, the Chairman-cum-

Managing Director, as sole arbitrator, had duly acted and exercised

the power in appointing the General Manager of the Respondent -

Bharat Electronics Limited, as the arbitrator and communicated the

same by fax on the same day. The Respondent having accepted the

Arbitration Clause with open eyes could not be permitted to avoid the

same on the ground of perceived partiality. Per contra, learned

senior counsel for the Petitioner submitted that the disputes cannot be

referred to the CMD or his nominee as the Petitioner would always be

under a reasonable apprehension that the CMD or his nominee would

be favourably inclined to the Appellant. In support of the aforesaid

submission, reliance was placed on the judgments rendered by the

Hon'ble Supreme Court in Indian Oil Corporation Limited & Ors.

vs. Raja Transport Private Limited, (2009) 8 SCC 520; Denel

(Proprietary) Limited vs. Bharat Electronics Limited & Anr., (2010)

6 SCC 394 and Denel (Proprietary) Limited vs. Ministry of Defence,

(2012) 2 SCC 759. After discussing the entire gamut of case law

cited by the parties, the Supreme Court opined:

"34. I am also not much impressed by the submission made by Mr. Bhat that this Court is bound to appoint the Chairman-cum-Managing Director or its nominee as the arbitrator in view of the arbitration clause............

38. In Northern Railway Administration, Ministry of Railway, New Delhi vs. Patel Engineering Company Limited (supra), a three Judge bench of this Court reiterated the general principle as noticed in the judgments relied upon by Mr. Bhat. At the same time, it is emphasised that in exercise of its powers under Section 11(6) of the Act, the Court has to take into consideration the provision contained in Section 11(8) of the Act. The aforesaid provision requires that the Chief Justice or the person or an institution designated by him in appointing an arbitrator shall have due regard to any qualifications required of the arbitrator by the agreement of the parties and other considerations as are likely to secure the appointment of an independent and impartial arbitrator......................

39. In Indian Oil Corporation Limited & Ors. vs. Raja Transport Private Limited (supra), this Court whilst emphasizing that normally the Court shall make the appointment in terms of the agreed procedure, has observed that the Chief Justice or his designate may deviate from the same after recording reasons for the same......................

40. In view of the aforesaid observations, it would not be possible to reject the petition merely on the ground that this Court would have no power to make an appointment of an arbitrator other than the Chairman- cum-Managing Director or his designate. This Court would have the power to appoint a person other than the named arbitrator, upon examination of the relevant facts, which would tend to indicate that the named arbitrator is not likely to be impartial.................."

18. On the basis of the foresaid decision, learned senior counsel

contended that the present case was a fit case for deviation from the

norm of appointment of arbitrator by the Managing Director or his

nominee, since the independence of the arbitrator is in question. He

concluded by saying that the contention of the Respondent that the

Managing Director of the Respondent, which was a Public

Corporation, had changed several times over since the passing of the

termination order and hence there was no basis for the apprehension

of the Petitioner with regard to the impartiality of the arbitrator, was

wholly misplaced. Merely because the Managing Director had since

changed and another person had stepped into the shoes of the

Managing Director, justice could not be expected to be rendered by

the new appointee as there was bound to be continuity with regard to

the decision making process and the Managing Director whosoever it

may be was not likely to be uninfluenced by the decision taken by his

predecessor.

19. Mr. Bijender Chahar, learned senior counsel for the

Respondent, contended at the outset that the appointment was not

made by the Respondent Corporation in view of the stay order passed

by this Court in the proceedings under Section 9 of the Act, which

order was passed on 17.11.2009 and continued to subsist till

17.10.2011. The appointment was made soon thereafter on

21.02.2012. The petition itself had been filed during the subsistence

of the interim order on 20th April, 2010.

20. Learned senior counsel for the Respondent placed reliance

upon the judgment of this Court in Engineering Development

Corporation vs. MCD & Anr., 2006 II AD (DELHI) 452, and in

particular on paragraph 7 of the said judgment, which reads as under:-

"7. The receipt of notice by the party who is called upon to appoint an arbitrator in consonance with the arbitration clause, has to be a notice properly containing complete particulars and duly received by the party. This is for the reason that a definite benefit accrues to a petitioner to claim substitution of the arbitrator by the process of the court on the ground that the other party has defaulted to comply with the terms of the arbitration clause despite the notice having been received by it. The

obvious consequence in law is that instead of a nominated arbitrator, the applicant is entitled to have an independent arbitrator through the process of the court. This advantages accrues to the applicant because of default. Thus, it is important that there is strict compliance to the provisions of Section 11(1) and 11(6) of the Act. Secondly, the onus lies upon the applicant to show that he has complied sincerely with the requirements which are condition precedent to maintain such a petition."

21. Counsel also relied on the following dicta enunciated by the

Supreme Court in Ace Pipeline Contracts Pvt. Ltd. vs. Bharat

Petroleum Corporation Ltd., AIR 2007 SC 1764, delineating the

distinction between petitions for appointment of arbitrators under

Sub-Section (6) on the one hand and Sub-Sections (4) and (5) of

Section 11 on the other hand. In the said case, the contention of the

Appellant before the High Court was that since the appointment of

arbitrator had been made by the Respondent after the filing of the

petition under Section 11(5) and (6) of the Act, the nominated person,

i.e., the Director (Marketing) ceased to have any right to appoint any

arbitrator after the expiry of 30 days from the notice invoking

arbitration received by it. The learned Single Judge after examining

the matter came to the conclusion that it cannot be said that the

Appointing Authority did not act with due dispatch and held that as

per the terms of the agreement the question with regard to the

independence and objectivity of the arbitrator can be examined in

view of the agreement and it was observed that this question can be

raised before the arbitrator and even if they fail, it can be agitated

under Section 34 of the Act. The Supreme Court while dismissing

the appeal observed as under:-

"13. It may also not be out of place to mention that we are aware of the Departmental lethargy in making appointment of arbitrators in terms of the arbitration clause. Therefore, mandamus can be issued by the Courts in exercise of powers under Section 11(6) of the Act but the demand should be in the event of failure by the authorities to appoint arbitrators within the reasonable time. Courts are not powerless to issue mandamus to the authorities to appoint arbitrators as far as possible as per the arbitration clause. But in large number of cases if it is found that it would not be conducive in the interest of parties or for any other reasons to be recorded in writing, choice can go beyond the designated persons or institutions in appropriate cases. But it should normally be adhered to the terms of arbitration clause & appoint the arbitrator/arbitrators named therein except in exceptional cases for reasons to be recorded or where both parties agree for common name.

14. In the present case, in fact the appellant's demand was to get some retired Judge of the Supreme Court to be appointed as arbitrator on the ground that if any person nominated in the arbitration clause is appointed, then it may suffer from bias or the arbitrator may not be impartial or independent in taking decision. Once a party has entered into an agreement with eyes wide open it

cannot wriggle out of the situation that if any person of the respondent-BPCL is appointed as arbitrator he will not be impartial or objective. However, if the appellant feels that the arbitrator has not acted independently or impartially, or he has suffered from any bias, it will always be open to the party to make an application under Section 34 of the Act to set aside the award on the ground that arbitrator acted with bias or malice in law or fact."

22. Learned senior counsel also relied upon the judgments of the

Supreme Court in Indian Oil Corporation Limited and Others vs.

Raja Transport Private Limited, (2009) 8 SCC 520 and Union of

India vs. Premier Files Limited, (2009) 9 SCC 384.

23. In the case of Indian Oil Corporation Limited and Others vs.

Raja Transport Private Limited (supra), the Supreme Court opined

that "If a party, with open eyes and full knowledge and

comprehension of the said provision enters into a contract with a

Government/statutory corporation/public sector undertaking

containing an arbitration agreement providing that one of its

Secretaries/Directors shall be the arbitrator, he can not subsequently

turn around and contend that he is agreeable for settlement of the

disputes by arbitration, but not by the named arbitrator who is an

employee of the other party."

24. In the case of Union of India vs. Premier Files Limited

(supra),while an application for appointment of an arbitrator was

pending before the High Court, another arbitrator was appointed by

the Appointing Authority. By the impugned order, the High Court

disposed of the said application filed by the Respondent appointing a

Senior Advocate of the Calcutta High Court as an arbitrator in terms

of Section 11(6) of the Arbitration and Conciliation Act, 1996.

Feeling aggrieved, the Union of India filed a Special Leave Petition.

The Hon'ble Supreme Court held that the appointment of a lawyer

arbitrator in the matter was in violation of the provisions of Clause 25

of the agreement, which clearly stated that the arbitrator must be

appointed by the Competent Authority.

25. Learned senior counsel for the Respondent contended that

though no notice invoking arbitration had been received by the

Respondent, an arbitrator had nevertheless been appointed by the

Respondent as soon as the stay order passed by this Court in the

proceedings under Section 9 of the Arbitration and Conciliation Act

initiated by the Petitioner was vacated on 17.10.2011. The

appointment was made on 21.02.2012 and thus it cannot be said that

the approach of the Respondent was lackadaisical. The petition,

therefore, deserved to be dismissed.

26. This Court has carefully considered the respective contentions

of the parties and the decisions cited at the bar. At the outset, it may

be recorded that there is no reason to suppose that the courier receipt

filed by the Petitioner is a fabricated document and on the other hand,

there is every reason to presume from the courier receipt that the

notice invoking the arbitration was duly served upon the Respondent,

for, the agreement between the parties had been abruptly terminated

by the Respondent vide letter of termination dated 24th September,

2009 and a petition under Section 9 of the Arbitration and

Conciliation Act, 1996 was instituted by the Petitioner soon

thereafter. In such a situation for the Petitioner to invoke arbitration

by sending notice thereof to the Respondent would be the natural

outcome of the termination letter.

27. The reliance placed by the counsel for the Respondent on the

judgment of this Court in Engineering Development Corporation vs.

MCD & Anr. (supra) is also misplaced. In the said case it was

observed that the Petitioner had "not even cared to file on record the

acknowledgment of the said notice which is stated to have been sent

through courier............Having failed to discharge this preliminary

onus, the Petitioner cannot take advantage of the reference of the

provisions of Section 11(6) of the Act so as to disable the other side

from exercising its right to appoint the arbitrator." In the present

case, the Petitioner has placed on record the acknowledgment from

the courier and has thereby discharged the preliminary onus placed

upon it for taking advantage of the provisions of Section 11(6) of the

Act. There is no rebuttal from the side of the Respondent except a

bald statement to the effect that the courier receipt is a fabricated one.

28. The contention of the Respondent's counsel that an arbitrator

could not be appointed by the Respondent in view of the stay order

passed by this Court on 17.11.2009 which continued to subsist till

17.10.2011 is also wholly untenable. Suffice it to state that a bare

glance at the order dated 17.11.2009 is enough to show that what was

stayed was only the termination of the agreement between the parties

and not the appointment of an arbitrator to adjudicate upon the

disputes between the parties. For the sake of ready reference, the

relevant portion of the said order is reproduced hereunder:-

"..............Pending further orders, subject to the service of notice along with a copy of this order and full set of paperbook on the respondents not later than two weeks from today, the operation and effect of the order of termination order/letter No.7546/ZM/GZB/Food-Plaza/ 2009 issued by the respondent No.3 and the consequent letter No.2230 FA(1)/09-240 FA/07-08/- issued by the respondent No.4 directing the appellant to stop all activities shall remain stayed. We further direct that all the arrears shall be deposited by the appellant in this Court and the current dues shall continue to be paid to the respondent.

A copy of this order be given dasti to the counsel for the appellant, as prayed."

29. In view of the aforesaid, I find merit in the submission of Mr.

Jayant Bhushan that the appointment of the arbitrator made by the

Respondent two years after the filing of the present petition, and that

too of their own Managing Director, who had been part of the

decision making process which resulted in the termination of the

agreement of the Petitioner, would be violative of the principles of

natural justice. Such an arbitrator cannot be perceived to be impartial

and the very purpose of his appointment being to ensure a fair and

impartial adjudication of the disputes between the parties would stand

frustrated thereby.

30. The reliance placed by the Respondent's counsel on the case of

Ace Pipeline Contracts Pvt. Ltd. vs. Bharat Petroleum Corporation

Ltd. (supra) is also misplaced, for in the said case the Hon'ble

Supreme Court has categorically laid down that though Courts are not

powerless to issue mandamus to the authorities to appoint arbitrators

as far as possible as per the arbitration Clause, but in a large number

of cases "in the interest of the parties or for any other reason to be

recorded in writing, choice can go beyond designated persons or

institutions in appropriate cases."

31. The ratio of the decision in Indian Oil Corporation Limited &

Ors. vs. Raja Transport Private Limited (supra) is also to the same

effect. In paragraph 48 of the said judgment, it has been observed by

the Supreme Court as under:-

"If circumstances exist, giving rise to justifiable doubts as to the independence and impartiality of the person nominated, or if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, the Chief Justice or his designate may, for reasons to be recorded ignore the designated arbitrator and appoint someone else."

32. The decision of the Supreme Court rendered in Union of India

vs. Premier Files Limited (supra) is also of no avail to the

Respondent. In the said case, the undisputed position was that when

the application for appointment of an arbitrator was pending before

the High Court, another arbitrator was appointed by the Appointing

Authority and in fact the said arbitrator had already entered reference

and proceeded with the arbitration. This being so, the Court held that

the appointment of a lawyer arbitrator in the matter would not be

justified at that stage, more so as the arbitrator appointed by the

Appointing Authority had been appointed in substitution of the earlier

arbitrator appointed by it who had resigned. The facts of the said case

are thus wholly inapplicable to the facts of the present case and bear

no similarity to the facts in the instant case.

33. In the instant case, the Respondents, for reasons best known to

them, did not choose to appoint an arbitrator for two years after the

filing of the present petition. Thus, even assuming that no formal

notice under Section 11(6) of the Act was served upon the

Respondents and treating the present petition as notice for

appointment of an arbitrator, there appears to be no justification for

the Respondents' lackadaisical approach in not appointing an

arbitrator for a period of two years after being called upon to do so. I

have, therefore, no hesitation in holding that the Respondents have

lost their right to appoint an arbitrator in the instant case and

appointment of an arbitrator at the eleventh hour by the Respondents

appears to be an attempt to pre-empt the appointment of an

independent arbitrator by the Court. Such an attempt being violative

of the principles of natural justice cannot be countenanced, more so as

it is the Managing Director of the Respondent No.1 Corporation who

has been appointed as arbitrator, being the very same

person/authority, who had caused the termination of the agreement

between the parties and the resultant disputes inter se the parties.

34. In view of the aforesaid, the prayer of the Petitioner for

appointment of an independent arbitrator appears to be wholly

justified. This Court accordingly appoints Mr.Justice Arijit Pasayat,

Retired Judge of Supreme Court to adjudicate upon the disputes

between the parties. The arbitrator shall fix his own fees which shall

be shared equally by the parties.

35. ARB.P. 113/2010 stands disposed of in the above terms.

REVA KHETRAPAL (JUDGE) January 24, 2013 km