M/S. Dmg Consulting Pvt. Limited vs Telecommunication Consultants ...
2015 Latest Caselaw 1942 Del

*        IN THE HIGH COURT OF DELHI AT NEW DELHI
                                   Judgment reserved on February 25, 2015
                                     Judgment delivered on March 05, 2015
+                             ARB. PET. 21/2015
M/S. DMG CONSULTING PVT. LIMITED                               ..... Petitioner

                     Through:            Mr.Arjun Krishnan, Advocate

                     versus

TELECOMMUNICATION CONSULTANTS INDIA LIMITED
                                    ..... Respondent

                     Through:            Mr.P.K.Bansal, Advocate

CORAM:
HON'BLE MR. JUSTICE V.KAMESWAR RAO
V.KAMESWAR RAO, J.

1. The present petition has been filed by the petitioner under Section

11(6) of the Arbitration and Conciliation Act, 1996 ('Act', in short) for

appointment of a Sole Arbitrator to decide the disputes that have arisen

between the parties.

2. It is the case set up by the petitioner that pursuant to a Notice

Inviting Tender (NIT) to appoint Survey Agency for conducting Base

Line Survey under Sample Registration System in all the States/Union

Territories across the country, the petitioner having been found

successful bidder in four groups i.e. Group No. 1, 6, 8 & 9, a composite

purchase order dated July 11, 2011 was issued.

3. As per clause 13 of the purchase order, all other terms and

conditions including arbitration clause were to be as per the tender

document dated May 5, 2014. The respondent vide its letter dated

September 26, 2014 cancelled the work order and forfeited the EMD.

This action of the respondent was objected to by the petitioner. Since

disputes have arisen between the parties, the petitioner, vide its letter

dated November 12, 2014 invoked the arbitration clause and requested

the Chairman and Managing Director (CMD, in short) of the respondent

company to act as or to appoint an Arbitrator to adjudicate the disputes

between the parties. It was also the case of the petitioner that the

statutory limit of 30 days has expired and within the said period, the

CMD has failed to appoint an Arbitrator.

4. The present petition was filed on December 18, 2014.

5. When the matter was listed on January 14, 2015, Mr. Arjun

Krishnan, learned counsel appearing for the petitioner has brought to the

notice of this Court a communication dated December 17, 2014 received

by the petitioner from the respondent, whereby the respondent company

has communicated the decision of the CMD to appoint Mr. M.K.Yadav,

GGM (HRD), TCIL as the Sole Arbitrator.

6. It was the case set up by Mr. Krishnan, since the communication

dated December 17, 2014 was received only on December 22, 2014 after

the petition was filed in this Court on December 18, 2014, the order

passed by CMD cannot be said to have taken effect unless the same was

communicated to the petitioner before filing of the petition, the

respondent deemed to have forfeited its right. He relied upon the

judgments of the Supreme Court reported as Bipromasz Bipron Trading

SA Vs. Bharat Electronics Limited (BEL), (2012) 6 SCC 384, BSNL

and Ors. Vs. Subash Chandra Kanchan and Another, (2006) 8 SCC

279 to contend that it is only when the letter appointing Arbitrator is

communicated, that it can be said that, the Arbitrator has been appointed.

He would also rely upon the judgment of the Supreme Court in Northern

Railway Administration, Ministry of Railways, New Delhi Vs. Patel

Engineering Company Limited, (2008) 10 SCC 240 to contend that the

scheme of Section 11 shows that the emphasis is on the terms of the

agreement being adhered to or given effect to as closely as possible and

it is not mandatory for the Chief Justice or any person or institution

designated by him, to appoint the named Arbitrator, except due regard

has to be given to the qualifications required by the agreement and other

considerations.

7. Mr.P.K.Bansal, Advocate appeared for the respondent on February

23, 2014 and contested the stand taken on behalf of the petitioner that

Mr. M.K.Yadav cannot act as an Arbitrator.

8. Mr.Bansal has stated that he would orally argue this objection

raised by the learned counsel for the petitioner.

9. Mr. Bansal would state that the position of law is well settled in

terms of the judgments of the Supreme Court in the case of Ace Pipeline

Contracts (P) Ltd. Vs. Bharat Petroleum Corporation Ltd., (2007) 5

SCC 304, Indian Oil Corporation Ltd. and Ors. Vs. Raja Transport

Private Ltd., (2009) 8 SCC 520 and Intuitive Tech Solutions Pvt. Ltd.

Vs. DLF Ltd, 2012 (3) R.A.J. 363 (Del.) and contended that on failure

of the other party to act within 30 days, will give a cause of action to the

party seeking arbitration to approach the Chief Justice or his designate

by way of a petition under Section 11(6) of the Act, still, the Chief

Justice or his designate i.e. this Court, while exercising power under

Section 11(6) of the Act shall endeavour to give effect to the

appointment procedure prescribed in the arbitration clause. It is only in

the eventuality, where circumstances exist giving rise to justifiable

doubts as to the independence and impartiality of the person nominated

or the circumstances warrant appointment of an independent Arbitrator

this Court, after recording the reasons, ignore the designated Arbitrator

and appoint someone else. He states that a perusal of the petition would

show that no foundation has been laid by the petitioner to doubt the

independence and impartiality of Mr. M.K.Yadav and hence, the petition

is liable to be dismissed. He would also state that the judgment of the

Supreme Court in Bipromasz Bipron Trading SA (supra) would not be

applicable in the facts of this case inasmuch as the conclusion of the

Supreme Court for appointment of an independent Arbitrator was not

based only on the ground that the order of appointment of Arbitrator in

that case, having been communicated after the petitioner in the said case

had filed the petition before the High Court but was also premised on the

fact that the apprehension of the petitioner that the Arbitrator would not

be impartial was found as reasonable.

10. Having considered the submissions made by the learned counsel

for the parties, the issue whether failure on the part of the respondent to

communicate the order of appointment of the Arbitrator before the

petitioner approached this Court would enable this Court to deviate, from

the procedure laid down in the Arbitration clause and appoint an

independent Arbitrator is no more res integra in view of the judgments

of the Supreme Court in Indian Oil Corporation Limited and Ors.

(supra) and Bipromasz Bipron Trading SA (supra) inasmuch the

Supreme Court in Indian Oil Corporation Limited & Ors. has held that

the time bound requirement as found in Sub-Section (4) and (5) is not

found in Sub-Section (6) to Section 11. The failure to act as per the

agreed procedure within time limit prescribed by the arbitration

agreement or in the absence of any prescribed time limit within a

reasonable time, will enable the party to file a petition under Section

11(6) of the Act and the Chief Justice or his designate i.e. this Court,

while exercising power under Sub-Section (6) of Section 11, shall

endeavour to give effect to the appointment procedure prescribed in the

arbitration clause. The deviation from the arbitration clause must be for

certain reasons to be recorded if doubt arises on the independence and

impartiality of the person nominated. In the present case, no such

foundation has been laid down in the petition by the petitioner. The

relevant paras of the judgment of the Supreme Court in Indian Oil

Corporation Limited & Ors. (supra) are reproduced as under:-

"48.....

(vi) The Chief Justice or his designate while exercising power under sub-section (6) of Section 11 shall endeavour to give effect to the appointment procedure prescribed in the arbitration clause.

(vii) 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 of his designate may, for reasons to be recorded ignore the designated arbitrator and appoint someone else."

11. Insofar as the submission of Mr.Arjun Krishnan, that, there was no

occasion for the petitioner to lay such a foundation in the petition as the

appointment of Mr. M.K.Yadav was communicated only after the filing

of the petition, is concerned, no doubt, during the submission, he sought

an opportunity to file an affidavit in that regard, which was declined by

this Court, as it was noted, no allegations with regard to independence

and impartiality of the CMD was made even in the letter of invocation.

Further, it was the petitioner who sought reference to arbitration in terms

of the arbitration agreement. Pursuant to such a request, Mr.M.K.Yadav

was appointed. In any case, in terms of Section 12, if the circumstances

exist during the conduct of the proceedings, the petitioner would be

within its right to challenge the independence and impartiality of the

learned Arbitrator.

12. Insofar as the reliance placed by Mr. Krishnan, learned counsel for

the petitioner on the judgment of the Supreme Court in Bipromasz

Bipron Trading SA (supra) is concerned, I agree with the submission of

the learned counsel for the respondent that the Supreme Court

considered, relied and followed its judgment in the case of Indian Oil

Corporation (supra) in Bipromasz Bipron Trading SA (supra). In

Bipromasz Bipron Trading SA (supra), the Supreme Court had

considered two issues; the first one being whether the order of

appointment of Arbitrator made before the other party approached the

Court under Section 11(6) of the Act but communicated after the filing

of the petition, would be still effective and whether, when, doubt exists

on the independence and impartiality of the Arbitrator, the Chief Justice

or his designate can deviate from the procedure of appointment.

13. On the first issue, the Supreme Court was of the view that order

passed by an authority cannot be said to take effect unless the same is

communicated to the party effected, and thereby rejected the submission

made for upholding the appointment of Mr.R. Chandra Kumar in that

case. The Supreme Court further had on fact situation, doubted the

independence and impartiality of Mr.R.Chandra Kumar to arbitrate the

disputes arisen between the parties and appointed Justice Ashok C.

Aggarwal as the learned Arbitrator, in exercise of its power under

Section 11(6) of the Act. In this regard, I reproduce the following paras

of the judgment, wherein the Supreme Court agreed with the conclusion

in Indian Oil Corporation Ltd. (supra):

"47. 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. In Paragraph 45 of the aforesaid judgment, it is observed as follows:-

"45. If the arbitration agreement provides for arbitration by a named arbitrator, the courts should normally give effect to the provisions of the arbitration agreement. But as clarified by Northern Railway Admn., where there is material to create a reasonable apprehension that the person mentioned in the arbitration agreement as the arbitrator is not likely to act independently or impartially, or if the named person is not available, then the Chief Justice or his designate may, after recording reasons for not following the agreed procedure of referring the dispute to the named arbitrator, appoint an independent arbitrator in accordance with Section 11(8) of the Act. In other words, referring the disputes to the named arbitrator shall be the rule. The Chief Justice or his designate will have to merely reiterate the arbitration agreement by referring the parties to the named arbitrator or named Arbitral Tribunal. Ignoring the named arbitrator/Arbitral Tribunal and nominating an independent arbitrator shall be the exception to the rule, to be resorted for valid reasons".

48. 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".

14. Further, reliance placed by Mr.Krishnan on the judgment of the

Supreme Court in Northern Railway Administration, Ministry of

Railway (supra) is concerned, suffice to state, the same would also not

help Mr. Krishnan as the said judgment was also considered and referred

to by the Supreme Court in Bipromasz Bipron Trading SA (supra).

15. In view of the above, I do not think that this Court need to

interfere with the appointment made by CMD of Mr. M.K.Yadav.

Suffice to state, as observed above, if the petitioner has any doubt on the

independence and impartiality of the Arbitrator, would be within its right

to raise such an issue before the learned Arbitrator in terms of Section 12

of the Act.

16. The petition is accordingly dismissed.

(V.KAMESWAR RAO) JUDGE MARCH 05, 2015 akb