Delhi High Court
M.K.Jain & Ors. vs Angle Infrastructure Pvt. Ltd., on 21 January, 2021
$~ 21 (Original Side)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 21st January, 2021
+ O.M.P. (T) (COMM.) 86/2020 & I.A. 12304/2020
M.K.JAIN & ORS. ..... Petitioners
Through: Mr. Akhil Sibal, Sr. Adv. with
Mr. Vipul Wadhwa, Ms.
Deboshree Mukherjee and Mr.
Aditya Rajgopal, Advs.
versus
ANGLE INFRASTRUCTURE PVT. LTD. ..... Respondent
Through: Mr. Siddharth Das, Adv.
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
J U D G M E N T (ORAL)
% (Video-Conferencing)
1. By this petition under Section 14(1)(a) read with section 14(2)
of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as
"the 1996 Act"), the petitioners question the legitimacy of the
appointment of the arbitrator (who happens to be a learned retired
Judge of this Court), by the respondent, to arbitrate on the disputes
between the petitioners and the respondent. Consequently, the
petition prays for a declaration that the mandate of the learned
arbitrator stands terminated under section 14(1)(a) of the 1996 Act, as
the learned arbitrator has been rendered de jure incapable of acting
in the said capacity.
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By:SUNIL SINGH NEGI
Signing Date:23.01.2021
20:26:38
2. The issue in controversy being limited, detailed allusion of the
facts may conveniently be eschewed, and a brief recital thereof would
suffice.
3. The dispute arises out of a Memorandum of Understanding
(hereinafter referred to as "MoU") dated 16th August, 2018, executed
between the petitioners and the respondent. Under the said MoU, the
petitioners invested ₹ 8,38,91,000/- in the respondent company. As
security against the said investment, the respondent allotted nine
apartments to the petitioners in its Florence Estate project.
Additionally, two apartments were allotted to the petitioners by M/s
Venta Realtech Private Limited, as the confirming party to the
agreement.
4. The petition alleges that there was default, on the part of the
respondent, in fulfilling the obligations under the MoU, whereupon
the petitioners sought to invoke the aforesaid security. At this stage, it
is alleged that the petitioners came to learn that the security interest
created by the respondent, on the aforesaid nine apartments was
illegal and void, as the respondent was bound to allot the said
apartments only to Central Government employees.
5. Aggrieved thereby, the petitioners terminated the MoU on 1st
November, 2019 and claimed, from the respondent, refund of the
invested amount.
6. The respondent, vide reply dated 6th November, 2019, denied
the allegation levelled by the petitioners and sought reference of the
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By:SUNIL SINGH NEGI
Signing Date:23.01.2021
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dispute, that had thus arisen between the petitioners and the
respondent, to arbitration, suggesting, for the said purpose, the names
of two learned arbitrators. It may be noted, in this context, that clause
XVI of the MoU, which provides for reference of intersay disputes to
arbitration, reads thus;
"In the event of any dispute arising out of or in connection
with this MoU, the same shall in the first instance be resolved
by mutual discussions and negotiations. If such differences
cannot be resolved within ten days of the notice of such
difference, then the disputes shall be referred to arbitration.
The seat and venue of arbitration shall be New Delhi."
7. It appears that, on 19th November, 2020, the respondent having
failed to receive any response from the petitioners to the aforesaid
communication dated 6th November, 2019, went ahead and proceeded
to appoint a learned retired Judge of this Court as the sole arbitrator
to arbitrate on the disputes.
8. The learned arbitrator, vide communication dated 20th
November, 2020, consented to her appointment and, thereafter, on
23rd November, 2020, wrote to the petitioner, fixing hearing in the
matter on 3rd December, 2020.
9. On receiving the said communication, the petitioner wrote, to
the learned arbitrator on 25th November, 2020, objecting to her
appointment and relying, inter alia, for the said purpose, on the
judgment of the Hon'ble Supreme Court in Perkins Eastman
Architects DPC v. HSCC (India) Pvt. Ltd 1. It was also contended, in
2019 SCC Online SC 1517
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By:SUNIL SINGH NEGI
Signing Date:23.01.2021
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the said communication, that the respondent had no right to
unilaterally appoint an arbitrator to arbitrate on the disputes.
10. The learned arbitrator has, very fairly, not proceeded
substantially with the arbitral proceedings, keeping in mind the
pendency of the present petition before this court.
11. Pleadings in this petition have been completed and the matter
has been finally heard with consent of learned counsel. Mr Siddharth
Das, learned counsel for the respondent, places reliance on the
judgment of the Hon'ble Supreme Court in Central Organisation for
Railways Electrification v. M/s ECI-SPIC-SMO-MCML (JV) 2 to
support the appointment of the learned arbitrator, unilaterally by the
respondent on the petitioners having failed to respond to the notice
dated 6th November, 2019 (supra).
12. Mr. Akhil Sibbal, learned senior counsel for the petitioners on
other hand submits that, apart from the fact that the respondent could
not, even as per the arbitration agreement between the parties or the
judgment of the Hon'ble Supreme Court in Central Organisation for
Railways Electrification2, have proceeded to appoint the learned sole
arbitrator unilaterally, the said appointment was also in the teeth of
Section 12(5) of the 1996 Act read with the Seventh Schedule thereto
and the judgment of Supreme Court in Perkins Eastman Architects
DPC v. HSCC (India) Pvt. Ltd.1
2019 SCC OnLine SC 1635
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By:SUNIL SINGH NEGI
Signing Date:23.01.2021
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13. Having heard learned counsel for both parties, I am of the
considered opinion that the appointment of the learned arbitrator by
the respondent, vide communication dated 19th November, 2020,
cannot sustain in law.
14. I hasten to add that, in so opining, I am proceeding on the basis
of the statutory provisions and the law laid down by the Hon'ble
Supreme Court in that regard, and do not intend, in any manner to
reflect on the impartiality or integrity of the learned arbitrator, who is
a respected retired Judge of this court.
15. The law must, however, have its say.
16. The reliance by Mr. Das, on the judgment of the Hon'ble
Supreme Court in Central Organisation for Railways
Electrification2, in my view, is somewhat misplaced. The appellant
Central Organisation for Railway Electrification (hereinafter referred
to as "CORE"), in the said case, maintained a panel of arbitrators, to
arbitrate on disputes between CORE and contractors engaged by it. A
dispute arose between CORE and the respondent contractor before
the Supreme Court (hereinafter referred to as "the contractor").
CORE required the contractor to select an arbitrator out of the panel
maintained by it, and, for the said purpose, suggested the names of
five arbitrators, all of whom happened to be retired judicial officers,
out of which the contractor was asked to select one. The contractor
challenged the said proposals as being in violation of the law laid
down in Perkins Eastman Architects1. The Supreme Court held that
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By:SUNIL SINGH NEGI
Signing Date:23.01.2021
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its earlier decisions in Perkins Eastman Architects DPC1 and Bharat
Broadband Network Limited v. United Telecoms Limited 3 merely
disentitled a person, falling within the Seventh Schedule to the 1996
Act, from either acting as arbitrator or appointing an arbitrator and
that this disability would not extend to a situation in which such
person maintained a panel of disinterested arbitrators out of which the
opposite party was directed to select one. In the facts before it, the
Supreme Court found that the arbitrator, whose names were
suggested by CORE were all retired judicial officers and that,
therefore, the contractor could not legitimately oppose the request of
CORE, for choosing one of said one persons from the panel of
arbitrators to arbitrate on the disputes.
17. The judgement in Central Organisation for Railways
Electrification2, quite obviously, does not examine the issue in
controversy in the present case at all. The submission, of Mr. Das,
that, by virtue of the judgment in Central Organisation for Railways
Electrification2, his client was, consequent on the default of the
petitioner in responding to the notice dated 6th November, 2019
(supra) of the respondent, entitled to unilaterally appoint the
arbitrator, is obviously misplaced.
18. In fact, the exercise of unilateral appointment of the arbitrator
by the respondent is in the teeth of section 11(6) of the 1996 Act. A
bare reading of the said provision makes it apparent that, in the event
of either party failing to act in accordance with the procedure for
(2019) 5 SCC 755
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By:SUNIL SINGH NEGI
Signing Date:23.01.2021
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appointment of arbitrator, as envisioned in the agreement between the
parties, the opposite party would have to approach the court, under
the said provision, to appoint the arbitrator. There is no justification
in law, therefore, for the respondent having proceeded to suo moto
appoint the learned arbitrator, merely because, according to the
respondent, the petitioners defaulted in responding to the notice
dated 6th November, 2019. At that stage, the respondent may have
legitimately approached this court under Section 11(6) and have the
arbitrator appointed; it could not, however, have proceeded to appoint
the arbitrator unilaterally.
19. Even on this sole ground, therefore, the appointment of the
learned sole arbitrator by the respondent, as effected on 19th
November, 2020, is unsustainable in law.
20. Mr. Sibal has also submitted that this view harmonises with
Section 12(5) of the 1996 Act, as well as the law laid down in
Perkins Eastman Architects DPC1,which specifically disentitles any
party, falling within the "related" categories enumerated in the
Seventh Schedule to the 1996 Act, either from acting as arbitrator or
from appointing an arbitrator. Even on this ground, submits Mr.
Sibbal, the respondent could not have proceeded to appoint the
arbitrator, to arbitrate on the disputes, unilaterally, without engaging
the petitioners in that exercise.
21. In my view, this submission, too, merits acceptance.
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By:SUNIL SINGH NEGI
Signing Date:23.01.2021
20:26:38
22. I am, therefore, constrained to hold, without meaning any
disrespect to the learned arbitrator, that her appointment, by the
respondent on 19th November, 2020, having been unilaterally effected
without engaging the petitioners in the said appointment, is
unsustainable.
23. The appointment of the learned sole arbitrator is, accordingly,
set aside.
24. The fall out is that the arbitrator would have to be appointed by
this court.
25. Accordingly, this court proceeds to appoint Hon'ble Mr Justice
Ajit Bharihoke, a respected retired Judge of this Court, as the learned
arbitrator to arbitrate on the disputes between the parties. The learned
arbitrator would enter on the disputes from the stage at which it
stands as on date and would, within one week of entering on the
dispute, furnish the requisite disclosure under section 12(2) of the
1996 Act.
26. The learned arbitrator would be entitled to fees in accordance
with the Fourth Schedule to the 1996 Act .
27. The contact details of the learned arbitrator are as under:
219, Church/ Mall Road,
Vasant Kunj,
New Delhi
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By:SUNIL SINGH NEGI
Signing Date:23.01.2021
20:26:38
Mobile No.9650110057
Email ID: [email protected]
28. Parties are directed to contact the learned arbitrator, within one
week of receipt, from the registry of this court, of a copy of this
judgment by email.
29. With the aforesaid observations, this petition stands allowed.
C. HARI SHANKAR, J.
JANUARY 21, 2021
ss
Signature Not Verified
By:SUNIL SINGH NEGI
Signing Date:23.01.2021
20:26:38
