Delhi High Court
C S Electric Ltd vs Jop Power on 29 January, 2021
$~27
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on 29th J anuar y , 2021
+ ARB.P. 86/2021 and IA 851/2021 (Section 151 CPC)
C S ELECTRIC LTD ..... Petitioner
Through Mr. Rahul Malhotra, Adv.
versus
JOP POWER ..... Respondent
Through Mr. Raman Kapur, Sr.
Advocate with Mr. Varun
Kapur, Adv.
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
J U D G M E N T (ORAL)
% 29.01.2021
(Video-Conferencing)
1. This is a petition under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as "1996 Act"), to refer
the dispute, between the petitioner and the respondent, to arbitration.
2. Given the nature of the controversy, a brief recital of facts
would suffice. On 3rd December, 2011, an Agreement was executed
between the petitioner and the respondent, whereunder the petitioner
was required to supply Sandwich Bus Ducts to the respondent.
3. Article 15.3.1 of the Agreement dated 3rd December, 2011,
provided for resolution of the disputes by arbitrator, which read thus:
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"15.3.1 All disputes shall be resolved through Arbitration.
The appointment of a sole arbitrator to be selected by the
Supplier/ Manufacturer out of the names 3 such notable
persons to be given by "JOP" within a period of 30 days from
the notice of reference of unresolved disputes between the
parties. The jurisdiction of holding the proceedings of such
arbitration shall be the state of Delhi. The applicable law will
be Arbitration and Conciliation Act, 1996. In case the
Supplier/ Manufacturer fails to choose the name of an
Arbitrator from the 3 names of Arbitrators suggested by
"JOP" BOARD reserves its right to appoint an Arbitrator of
its choice and the Supplier/Manufacturer shall be bound by
such Arbitrator and his award."
4. Disputes arose between the parties. Vide letter dated 14th June,
2014, the respondent appointed one Mr. K. Sunil as the arbitrator to
arbitrate on the disputes.
5. Contending that the learned arbitrator was not exercising its
function with due diligence and he was unduly delaying the
proceedings, the petitioner filed OMP(T)(COMM) 1/2018 before the
learned Additional District Judge (hereinafter referred to as "learned
ADJ"), under Sections 14(1) and 14(2) of the 1996 Act, for
termination of the mandate of Mr. K. Sunil. Vide order, dated 29th
September, 2020, OMP(T)(COMM) 1/2018 was allowed by the
learned ADJ and mandate of Mr. K. Sunil, to arbitrate on the disputes
between the petitioner and the respondent, was terminated, in terms of
Section 14 of the 1996 Act. This order has, admittedly, attained
finality.
6. Pursuant to the termination of the mandate of Mr. Sunil, it
became necessary to appoint a substitute arbitrator to arbitrate on the
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disputes between the petitioner and the respondent.
7. The respondent, acting in accordance with the afore-extracted
Clause 15.3.1 of the Agreement, proposed, vide letter dated 26th
November, 2020 addressed to the petitioner, the names of three
persons, out of which, the petitioner was requested to suggest one to
appoint its arbitrator to arbitrate on the aforesaid disputes. The
petitioner responded only on 4th January, 2021, after the period of 30
days, stipulated in Clause 15.3.1 of the Agreement, had expired,
suggesting the name of Mr. O.P. Bhatia, one of three names, proposed
by the respondent, to act as an arbitrator to arbitrate on the disputes
between the parties.
8. On the same day, the respondent wrote to the petitioner stating
that it had already appointed Mr. G.K. Pharlia, also one of the three
names, proposed by the respondent in its communication dated 26th
November, 2020, to arbitrate on the disputes.
9. Apparently, thereafter, Mr. Pharlia accepted his nomination as
arbitrator and fixed hearing in the matter.
10. The petitioner, however, vide email dated 9th January, 2021,
opposed the appointment of Mr. Pharlia as the arbitrator, stating that it
had already appointed Mr. Bhatia as arbitrator vide its communication
dated 4th January, 2021.
11. It is in these circumstances that the petitioner has moved the
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present petition, requesting this Court to appoint an independent
arbitrator, in exercise of its powers conferred by Section 11 of the
1996 Act.
12. Mr. Rahul Malhotra, learned counsel for the petitioner, first
sought to argue that though the petitioner had not responded to the
communication dated 26th November, 2020, of the respondent, by
selecting an arbitrator out of the three names, proposed in the said
communication within the period of 30 days stipulated in Clause
15.3.1 of the Agreement, the appointment, by the petitioner, of Mr.
Bhatia as the arbitrator, as communicated to the respondent on 4th
January, 2021, ought to be treated as valid. For this purpose, Mr.
Malhotra submitted that the period of 30 days stipulated in Clause
15.3.1 of the Agreement should only be regarded as directory and not
mandatory. He, however, acknowledged candidly, on the last date of
hearing that he could not lay hands on any judicial authority, to
support this submission.
13. In my view, the submission is not, ex facie, acceptable. The
Supreme Court has, in U.O.I. v. PREMCO-DKSPL (JV) 1 specifically
held that the covenants of the arbitration agreement are sacrosanct and
have to be strictly enforced. The period of 30 days stipulated in
Clause 15.3.1, therefore, unquestionably bound the parties and on the
expiry of 30 days from the communication dated 26th November,
2020, addressed by the respondent to the petitioner, the petitioner's
right to select an arbitrator out of the panel proposed by the
(2016) 14 SCC 651
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respondent, stood extinguished.
14. The appointment of Mr. Bhatia, as suggested by the petitioner,
on 4th January, 2021, cannot, therefore, pass muster, as it was effected
beyond the period of 30 days as stipulated in Clause 15.3.1 of the
Agreement, and was, therefore, in violation of the terms of the
Agreement between the parties.
15. Accordingly, the prayer of the petitioner, for approval of the
appointment of Mr. Bhatia as the arbitrator to arbitrate on the disputes,
is rejected.
16. Equally, however, I am of the opinion that the appointment of
Mr. Pharlia as the sole arbitrator, as effected by the respondent, also
cannot pass legal muster. Mr. Raman Kapur, learned Senior Counsel
appearing for the respondent, acknowledges that the appointment of
Mr. Pharlia by the respondent, was in exercise of the residuary
authority conferred, by Clause 15.3.1, on the respondent, to select an
arbitrator out of the panel suggested by the respondent to the
petitioner, consequent on default, by the petitioner, to select the
arbitrator within 30 days of communication of the names by the
respondent.
17. There is no gainsaying the fact that Clause 15.3.1 of the
Agreement does authorize the respondent, in the event of the
petitioner failing to select an arbitrator out of the panel proposed by
the respondent within 30 days of communication of such proposal, to
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itself select one of the names from the panel as the arbitrator to
arbitrate on the disputes.
18. In my view, however, this residuary power, as conferred by
Clause 15.3.1 (supra) is in the teeth of the law laid down by the
Supreme Court in Perkins Eastman Architects DPC v. HSCC (India)
Ltd2 and TRF Limited v. Energo Engineering Projects Ltd 3 read with
Section 12(5) and Schedule VII to the 1996 Act. The Supreme Court
has, in these decisions, clearly discountenanced conferment of any
authority, on either of the parties to the Agreement, either to act as
arbitrator or to appoint the arbitrator to arbitrate on the disputes.
19. As such, the stipulation, in Clause 15.3.1 of the Agreement that
in the event of failure, on the part of the supplier/manufacturer, i.e. the
petitioner to select a name out the panel, suggested by the respondent-
JOP, within 30 days of the such suggestion, the JOP could appoint an
arbitrator of its choice out of the said panel, cannot, in my view, be
sustained or be permitted to be enforced. This part of Clause 15.3.1 is,
according to me, clearly severable from the earlier part of the said
clause and being contrary to the law laid down in Perkins Eastman2
(supra), could not have been invoked, or enforced, by the respondent.
20. Mr. Kapur has sought to place reliance on the judgment of the
Supreme Court in Central Organisation for Railway Electrification v.
ECI-SPIC-SMO-MCML (JV) 4, to submit that the aforesaid residuary
2019 SCC Online SC 1517
(2017) 8 SCC 377
2019 SCC OnLine SC 1635
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clause was not invalid. Having gone through the decision in Central
Organisation for Railway Electrification4, I am unable to find
anything, in the said decision, which would validate such a residuary
conferment of authority, as contained in Clause 15.3.1 in the
agreement between the petitioner and the respondent. The arbitration
clause in Central Organisation for Railway Electrification4 provided
for the proposal of a panel of the names by Central Organisation for
Railway Electrification (hereinafter referred to as "CORE"), to the
respondent before the Supreme Court, out of which the respondent
was authorised to select any two. Once the respondent had selected
two names out of the panel of four proposed by CORE, the Managing
Director of CORE was authorised to pick one of the said two names as
the contractor nominee to arbitrate on the disputes. There was no
conferment of any residuary authority, on CORE, in the event of
default by the respondent to suggest the names out of the panel of
four, to itself select an arbitrator of its own choice out of the said
panel to arbitrate on the disputes. The situation that arises in the
present case, therefore, was not before the Supreme Court in Central
Organisation for Railway Electrification4 and, therefore, the said
decision cannot be of any assistance to the respondent.
21. In view thereof, I am of the opinion that respondent could not,
in the face of law laid down in Perkins Eastman2 and TRF3, have
chosen an arbitrator out its choice, even out of the panel of three
proposed by the respondent to the petitioner, to arbitrate on the
disputes, on the petitioner failing to exercise such choice within 30
days of suggestion of names by the respondent. The respondent could,
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in such circumstances, have approached this Court, but did not choose
to do so.
22. Resultantly, the appointment of Mr. Pharlia as arbitrator to
arbitrate on the disputes between the parties must also be treated as
without authority of law.
23. The task of appointing arbitrator to arbitrate on the disputes
between the parties, therefore, devolves on this Court.
24. In view thereof, this Court appoints Mr. Vijay Motwani, retired
ADG (CPWD), as arbitrator to arbitrate on the disputes between the
parties.
25. The contact details of the learned arbitrator are as under:
CII/153, Satya Marg,
Chanakyapuri,
New Delhi-110 021
Phone No.9811793440
Email ID: [email protected]
26. The parties are directed to contact the learned arbitrator within
one week of communication of email by the Registry of this Court the
copy of this order.
27. The fees of the learned arbitrator shall be fixed by the learned
arbitrator in consultation with the parties.
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Signing Date:31.01.2021
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28. The learned arbitrator shall furnish the requisite disclosure
under Section 12(2) of the 1996 Act within a week of entering on
reference.
29. Subject to the aforesaid directions, this petition stands disposed
of.
IA 851/2021 (Section 151 CPC)
In view of the order passed in the petition, this application
stands disposed of.
C. HARI SHANKAR, J.
JANUARY 29, 2021/r.bararias
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Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:31.01.2021
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