M/S. Raja Rajeswari ... vs M/S. Ncc Limited
2021 Latest Caselaw 298 Tel

      HON'BLE SRI JUSTICE A.RAJASHEKER REDDY

      ARBITRATION APPLICATION Nos.132, 133 and 134 OF 2014

COMMON ORDER:

      Since the issue involved in all these Arbitration Applications

is one and the same, they are being heard together and disposed

of by way of this Common Order.

2.    These Arbitration Applications are filed under Section 11(6) of the

Arbitration and Conciliation Act, 1996 (for short 'the Act') for

appointment of an Arbitrator to resolve the disputes that arose between

the parties in respect of different works under separate Sub Contract

Agreements dated 30.07.2012 in all these Arbitration Applications.

3.     For the sake of convenience, the facts in Arbitration Application

No.132 of 2014 are considered for disposal of these Applications. Brief

facts which are necessary for disposal of the Arbitration Application are

as follows:

      The respondent was awarded a work pertaining to Sardar

Sarovar Narmada Nigam Limited for the Design, Construction, Testing,

Commissioning and operation and Maintenance for five years of Kutchh

Branch Canal Package-I on Engineering, Procurement, Construction

and Commissioning (EPC) basis between Ch.82.300 kms to Ch.112.50

kms including earthwork, structures, lining, service road,

CR/HR/Escape, Gates, Stop Locks, Control Cabins etc., by Executive

Engineer, Sardar Sarovar Narmada Nigam Limited, vide agreement

No.KBC/EPC/Package/1/EPC-I of 2011-2012, dated 07.02.2011. The

respondent sub-contracted a portion of the work i.e.,98.00 km to

100.100 km, which forms part of the above mentioned package

awarded by Executive Engineer, Sardar Sarovar Narmada Nigam

Limited on item rate work basis including materials vide Sub-Contract

Agreement dated 30.07.2012 (for short 'SCA'), which is valued at

Rs.36,51,64,687.58 ps and as per the said agreement, the work shall

be completed on or before 30.07.2013. Pursuant to the award of the

contract, the applicant had mobilized its men and machinery in right

earnest so as to execute the work under SCA and complete the

execution before the designated date. However, for the reasons which

are beyond the control of the applicant and for the reasons attributable

to the respondent, the entire planning schedule of the applicant got

disturbed and thus the execution of the work got unduly delayed. The

issues that are encountered by the applicant while executing the work

have been brought to the notice of the respondent for resolving the

same so as to complete the work within the time schedule, but in vain.

The subject work could not be progressed due to frequent obstructions

by the Forest Department and though the same was brought to the

notice of the respondent for it's intervention, they turned a deaf ear, as

such, the work got unduly delayed. That apart, the respondent failed to

pay amounts under RA Bills, which were raised from time to time.

Thereafter, the Applicant was constrained to address letter

No.SRRCIPL/KBC.PKG.1/2014-15/No.73, dated 11.08.2014

demanding an amount of Rs.16,79,13,904/- along with interest at 18%

per annum. As disputes arose between the applicant and the

respondent, the applicant got issued notice dated 28.07.2014 invoking

arbitration clause No.34 contained under the SCA dated 30.07.2012 for

settlement of claims amicably in the first place and to take further

suitable action i.e., appointing an Arbitrator, if they failed to agree for

any amicable settlement. In response thereto, the respondent replied

through letter vide Ref.No.NCC/HO-Irri/KBC Pkg-I/SRRC/2014-15/07,

dated 08.08.2014 stating that the claims raised by the applicant are

beyond the ambit of the contract and that same are excepted matters

and there are no disputes existing for the purpose of any settlement.

Thereafter, the respondent called upon the applicant for amicable

settlement on 14.08.2014 to resolve the issues, if any, within the ambit

of the contract. On receipt of the said letter, the applicant addressed

letter dated 10.08.2014 requesting the respondent to give details of the

meeting, to which the respondent replied through letter dated

12.08.2014 giving the particulars and also named the authorized

representative i.e., S.Srinivasa Rao, AGM, Irrigation. As the person

proposed is far less in hierarchy than Mr.B.A.N.Raju, Vice President,

the applicant addressed letter dated 14.08.2014 expressing

reservations as regard the said nominated person. On 14.08.2014, the

applicant represented by its Managing Director attended the meeting.

While reiterating their stand in the letter dated 08.08.2014, the

respondent called upon the applicant to come up with fresh proposal in

terms of the contract. In the said meeting, the disputes/claims raised

by the applicant through letter dated 11.08.2014 was also considered.

As the respondent was not willing to consider the claims of the

applicant, the applicant requested the respondent to appoint an

arbitrator for resolving the disputes raised by the applicant in their

letter dated 11.08.2014. Thus, the so called amicable settlement fell

through, as such, the respondent ought to have appointed arbitrator

and that instead of appointing an Arbitrator, the respondent addressed

letter dated 16.08.2014 fixing a fresh date of meeting as 23.08.2014

falsely alleging that the applicant agreed to submit a reasonable

proposal within the terms of the agreement. The applicant represented

by its Managing Director attended the meeting on 23.08.2014 to

question the same and also to discuss if there would be any

consideration of the issues raised by them in respect of two other

contracts. However, on the said date, almost a new team has come to

the meeting and they reiterated their stand taken in their letter dated

08.08.2014 for all the works/contracts, which are under execution by

the applicant, thereby refusing to entertain the said issues.

Subsequently, there is exchange of correspondence between the

parties. As the respondent did not come forward to appoint an

Arbitrator as requested by the applicant vide letter dated 11.08.2014,

this Application is filed.

4. Counter affidavit is filed by the respondent denying the

averments in the affidavit filed in support of the Arbitration Application

stating that application filed by the applicant is liable to be dismissed

in limine on the ground that; a) the Application is premature as it is

filed within 30 days and b) the Application is not maintainable either in

law or on facts and same has become infructous. That the claim of the

applicant for Rs.16,79,13,904/- along with interest at 18% per annum

is exorbitant and beyond the ambit of the SCA dated 30.07.2012. It is

asserted that the applicant by letter dated 10.08.2014 acknowledged

the receipt of letter dated 08.08.2014 and had given consent for the

amicable settlement as provided under Clause 34 of the SCA.

Accordingly, on 14.08.2014, a meeting was held between the

representatives of the applicant and the respondent at the office of

respondent and that after discussions, it was agreed that the applicant

would submit a reasonable proposal for settlement of issues on or

before the next meeting i.e., on 16.08.2014. However, the scheduled

meeting was rescheduled to 23.08.2014. On the said date, a second

meeting was held between the representatives of the applicant and the

respondent at the office of the respondent. The applicant submitted a

settlement proposal for which, the respondent requested for some time

to review ad revert with their views. On 03.09.2014, the respondent

addressed a letter to the applicant and informed that settlement

proposal submitted by the applicant was not agreeable to the

respondent as the excess amount of Rs.2,23,98,021/- proposed by the

applicant was already paid. The respondent vide letter dated

03.09.2014 expressed its intent to appoint a Sole Arbitrator under

Clause 34 of the SCA for adjudication of all the claims and counter

claims of the parties. Thereafter, the respondent addressed a letter

dated 05.09.2014 to Mr.Inder Mohan Singh, who retired as Chief

Engineer seeking his consent to act as an Arbitrator to arbitrate on the

dispute between the parties. On 15.09.2014, Mr.Inder Mohan Singh

addressed a letter to the respondent wherein he confirmed his

willingness to act as a Arbitrator to arbitrate the dispute between the

parties. On 22.09.2014, the respondent prepared a draft letter to be

issued to the Applicant informing the appointment of Arbitrator and the

said letter was internally circulated to the officers of the respondent for

their approval by e mail. Pursuant to the letter dated 03.09.2014, the

respondent vide letter dated 22.09.2014 intimated to the applicant that

the respondent had appointed Mr.Inder Mohan Singh as Sole Arbitrator

under the Clause 34 of the SCA and said letter was emailed to the

applicant with a copy marked to the Arbitrator on 23.09.2014 and hard

copy of the said letter was dispatched on the same day through Courier

and was received by the applicant on 24.09.2014. The respondent is

not aware of the fact of the applicant approaching this Court under

Section 11(6) of the Act praying for an appointment of an Arbitrator.

On the next day i.e., 23.09.2014 at 5.27 pm, the respondent received a

letter from the counsel for the applicant informing the respondent

about filing of present Application praying for an appointment of

Arbitrator. The present Application has been filed before the completion

of the 30 days period as required under Section 11(5) of the Act from

the date of intimation by respondent about failure of the amicable

settlement and that the respondent would appoint an Arbitrator as per

Clause 34 of the Sub-Contract Agreement. From September 2nd, 2014

i.e., from the date of filing of the present application till 23.09.2014 on

receipt of notice dated 21.09.2014 from the counsel appearing for the

applicant, the applicant deliberately suppressed the fact that the

applicant had filed an application before this Court. In response to the

letter dated 22.09.2014 intimating the applicant about appointment of

Mr.Inder Mohan Singh as Sole Arbitrator, the applicant sent a reply

letter dated 25.09.2014 to the respondent and informed about filing of

present Application and disputed the appointment of the Arbitrator by

the respondent. The sole Arbitrator appointed by the respondent

meanwhile fixed a Schedule for Arbitration and issued the same to both

the parties for further action. There is no specific request to the

respondent for appointment of Arbitrator consequent to failure of

amicable settlement and that there is no such time limit prescribed

under Clause 34 of the SCA. The relief sought for by the applicant

cannot be granted as the entire Application is misconceived and has

become infructous. The applicant even without making a request for

appointment of Arbitrator as contemplated under Clause 34 of the SCA,

with a malafide intention approached this Court, even before expiry of

30 days as provided for under Section 11 of the Act. Since the

respondent had already appointed Arbitrator under Clause 34, this

Application is infructous and requires to be dismissed. In Datar

Switchgears Limited v. Tata Finance Limited [2001 Vol.103(1)

Bom.L.R 865 (SC], Ace Pipeline Contracts Private Limited v.

Bharat Petroleum Corporation Limited [(2007) 5 SCC 304 and

Deep Trading Company v. Indian Oil Corporation [(2013) (3) AWC

2984 (SC)], the Hon'ble Supreme Court held that for cases falling under

Section 11(6) are concerned, no time limit has been prescribed under

the Act, whereas a period of 30 days has been prescribed under Section

11(6) is concerned, if one party demands the opposite party to appoint

an Arbitrator and the opposite party does not make an appointment

within 30 days of the demand, the right to appointment does not get

automatically forfeited after expiry of 30 days. If the opposite party

makes an appointment even after 30 days of the demand, but before

the first party has moved the Court under Section 11 that would be

sufficient. In other words, in cases arising under Section 11(6), if the

opposite party has not made an appointment within 30 days of

demand, the right to make appointment is not forfeited but continues,

but an appointment has to be made before the former files Application

under Section 11 seeking appointment of an Arbitrator. Only then the

right of the opposite party ceases. This Application cannot be

entertained as the Sole Arbitrator had already been appointed and the

schedule for submission of Statement of Claim, Statement of Defence &

Counter claims and rejoinder to Statement of Defence & reply to the

Counter Claims was also fixed by the Arbitrator. It is asserted that the

Arbitrator appointed by the respondent retired as a Engineer-in-Chief,

PWD, Government of Delhi and has vast expertise in the Construction

Industry and had dealt with many cases as an Arbitrator and he is

based out of New Delhi. The Arbitrator also issued letter dated

25.09.2014 to the Applicant and the respondent under Section 12 of

the Act, 1996. The respondent followed due process provided under the

Act and the clauses of the SCA in appointing the Sole Arbitrator. The

applicant cannot invoke Section 11(6) of the Act as the respondent had

complied with sub-sections (2), (3) and (4) of Section 11 of the Act. The

respondent appointed Sole Arbitrator within 30 days as contemplated

under sub-section (4)(a) of Section 11 of the Act. The applicant is

precluded from approaching this Court under Section 11(6) of the Act

and as per the applicability of sub-section 6(a) of Section 11 of the Act,

the respondent had acted as required under the procedure

contemplated under the Clause 34 of the Sub-Contract Agreement,

whereas sub-sections 6(b) and (c) of Section 11 of the Act does not

apply for the present case and sought for dismissal of the Application.

6. Heard Sri P.Sree Raghu Ram, learned Senior Counsel appearing

for Sri Krishna Mohan Shikaram, learned counsel for the applicant and

Ms.Altaf Fathima, learned counsel appearing for Sri Gandham Durga

Bose, learned counsel for the respondent.

7. Sri P.Sree Raghu Ram, learned Senior Counsel, while reiterating

the averments in the affidavit filed in support of the Application

submitted that the applicant issued letter dated 28.07.2014 invoking

Clause 34 of the SCA for settlement of claims amicably in the first place

and to take further suitable action for appointing an Arbitrator, if

amicable settlement fails. He submits that though the respondent

issued letter dated 08.08.2014, they did not intend to settle the issues

amicably and replied that the claims made by the applicant are beyond

the ambit of the contract and same are excepted matters and that no

disputes existing for the purpose of settlement, but however, addressed

a letter dated 14.08.2014 calling upon the applicant for resolving the

issues, if any, within the ambit of the contract. He submits that

though the meeting was held on 14.08.2014, no amicable settlement

was arrived at between the parties, as such, present application is filed

for appointment of an Sole Arbitrator. He also submits that when once

the Application is filed by the applicant, the respondent cannot appoint

arbitrator as they lost their right of appointment an Arbitrator. He also

submits that even otherwise, there is no time limit for appointment of

Arbitrator under Section 11(5) of the Act. He submits that even though

30 days period is not required to be maintained for initiating arbitration

proceedings under Section 11(6) of the Act, the present application is

filed after expiry of 30 days after invocation of arbitration Clause 34

contained in SCA. He submits that this Application is filed on

02.09.2014 and by that time, the respondent lost their right to

appointment an Arbitrator. In support of his contention, he relied on

the judgment reported in Datar Switchgars Ltd., v. Tata Finance

Ltd.,[2000 (6) ALT 26 (SC), Judgment of Calcutta High Court in

Great Eastern Shipping Co. Ltd., v. Board of Trustees [(2004) (3)

CHN 37) and Deep Trading Company v. Indian Oil Corporation

(AIR 2013 SC 1479). He also submits that in this application, the

applicant invoked the arbitration clause 34 on 28.07.2014 and also on

11.08.2014 and the present application is filed on 02.09.2014, as such,

30 days period was also complied with.

8. On the other hand, learned counsel for the respondent while

reiterating the averments in the counter affidavit rebutted the

contentions of the learned Senior Counsel for the applicant.

9. There is no dispute with regard to award of SCA in favour of the

applicant by the respondent on 30.07.2012 for the execution of certain

works relating to Sardar Sarovar Narmada Nigam Limited. During the

course of execution of SCA, disputes arose between the parties in

respect of alleged incomplete works and non-payment of certain dues

by the respondent. There was an exchange of correspondence between

parties and one such correspondence is the letter addressed by the

applicant on 28.07.2014 calling upon the respondent for amicable

settlement of the disputes that arose between them. According to the

applicant, even after addressing letter dated 11.08.2014, as there is no

amicable settlement with the respondent, filed the present application

for appointment of an Arbitrator. It is the specific contention of the

respondent that the present application under Section 11(6) of the Act

has already been filed on 02.09.2014, without intimation to the

respondent and without waiting for the amicable settlement.

10. Before considering the rival contentions of the parties, it is

necessary to extract the Clause-34 contained in SCA, which reads as

follows:

"All disputes or differences whatsoever arising between NCC and SRRC out of or relation to the construction, meaning and operation or effect of this Sub Contract Agreement, or any breach thereof, shall be settled amicably by the parties, failing which, it shall be settled by a Sole Arbitrator, to be appointed by NCC, as per the provisions of the Indian Arbitration & Conciliation Act, 1996. The award passed by the Sole Arbitrator shall be final and be binding on the Sub-Contractor and NCC. The Venue of arbitration shall be Hyderabad, Andhra Pradesh."

A perusal of the aforesaid clause goes to show that if at all any

differences or disputes arises between the parties in relation to the

execution of the work or during the course of execution of the work,

initially, both the parties shall try for amicable settlement by issuing a

notice under Clause 34 for amicable settlement. If the amicable

settlement fails, then they have to take steps for appointment of a Sole

Arbitrator, to be appointed by NCC for resolving the disputes between

the parties by issuing notice for appointment of Sole Arbitrator and the

Award passed by the Sole Arbitrator shall be final and binding on both

the parties. Now, we have to examine whether the applicant and the

respondent have taken any steps for resolution of the disputes

amicably or not?

11. It is the specific contention of the learned counsel for the

respondent that the applicant never intimated to the respondent that

there is a failure of amiable settlement between them and that the

applicant also neither requested the respondent for appointment of

arbitrator in accordance with Clause 34 of the SCA nor as per the

provisions of the Act. As per Section 21 of the Act, date of service of

notice by the party for appointment of an Arbitrator would be the

relevant date for the purpose of commencement of the arbitration

proceedings. For the sake of convenience, Section 21 of the Act is

reproduced hereunder:

"21. Commencement of arbitration proceedings: Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent."

Section 21 of the Act mandates that unless notice of intention for

appointment of arbitrator is issued by one party to the other party, the

question of compliance or non-compliance of the notice requirements

by the other party does not arise. Let us examine as to whether the

applicant has served any notice, as required under Section 21 of the

Act, on the respondent for appointment of Sole Arbitrator or not?

12. Admittedly, the applicant has addressed letters dated

28.07.2014 & 11.08.2014 purportedly under Clause 34 of the SCA for

settlement of disputes in the first place and not for the purpose of

appointment of arbitrator. Even according to the applicant, it is

categorically stated in the affidavit that after receiving correspondence

vide letters dated 08.08.2014 and 12.08.2014, though there was a

meeting held on 14.08.2014 for amicable settlement, but the same was

not successful. It is the contention of the learned Senior Counsel for

the applicant that in the letter dated 11.08.2014, they have requested

the respondent for appointing an Arbitrator. A perusal of the aforesaid

letter dated 11.08.2014, particularly, the concluding paragraph, goes to

show that the said notice was issued only for the purpose of amicable

settlement and not for requesting the respondent for appointment of

Arbitrator. For the sake of convenience, the same is reproduced

hereunder:

"21.00 This is the notice issued under clause 34 of the sub-contract agreement for settlement of claims amicably in the first place and further suitable action deemed fit under the circumstances as laid down in the agreement."

13. The aforesaid concluding paragraph goes to show that it was

only for the purpose of amicable settlement and not for seeking

appointment of a Sole Arbitrator. That apart, on the letter addressed

by the respondent on 16.08.2014, a meeting was held on 23.08.2014

wherein the applicant attended the same, but there was no fruitful

result forthcoming for amicable settlement. In the affidavit, it is also

categorically asserted by the applicant that the respondent is willfully

protracting the matter without appointing the Arbitrator. However, it

is pertinent to note here that the respondent addressed a letter dated

03.09.2014 to the Managing Director of the applicant stating as follows:

"1. Keeping in the view of your correspondence exchanged subsequent to meeting for amicable settlement dated 14.08.2014 and having already paid an excess amount of Rs.2,23,98,021/- as per statement enclosed along with our letter dated 22.08.2014, your proposal is not agreeable.

2. In addition, there was a default on your part by non-

performance and abandonment of work for which we have already invoked clause 9 of the subcontract agreement/work order to execute the balance work at your risk an cost.

3. In these circumstances, attempt for amicable settlement held on 14.08.2014 and 23.08.2014 has failed.

4. Since you have already invoked clause 34, we will appoint the Sole Arbitrator shortly under clause 34 in respect of Sub-Contract Agreements/Work Order; 8A, 8 & 9 for adjudication of all the claims and counter claims of parties."

As rightly contended by the learned counsel for the respondent,

without any prior request or intimation with regard to the

appointment of Sole Arbitrator prior to 30.09.2014, the applicant

straight away filed this Application under Section 11(6) of the Act

seeking appointment of an Arbitrator on 02.09.2014, which is in

violation of the procedure envisaged Clause 34 of the SCA. Therefore,

the applicant has failed to follow the mandate of issuance of notice

under Section 21 of the Act, so also the procedure under Clause 34 of

the Act and that he failed to take steps as required under the

provisions of the Act.

14. It is next contended by the learned Senior Counsel for the

applicant that there is no requirement of 30 days prior notice for filing

an application under Section 11(6) of the Act. As rightly contended by

the learned counsel for the respondent that the said argument was

advanced but there is no whisper about the same in the affidavit filed

in support of the Application. That apart, a perusal of the affidavit also

shows that there is no such averment in the entire affidavit filed by the

applicant. As already observed supra, the applicant neither declared

about the failure of amicable settlement to the respondent nor

requested for appointment of Sole Arbitrator in the correspondence that

exchanged between the applicant and the respondent. On the other

hand, the respondent had addressed a letter dated 03.09.2014 to the

applicant of it's intention to appoint an Arbitrator and in fact had also

appointed one Sole Arbitrator by name Mr.Inder Mohan Singh, for

resolution of disputes between the parties. That apart, the applicant

also failed to follow the mandate of issuance of notice under Section 21

of the Act. When once there is failure on the part of the applicant in

following the procedure under Clause 34 of the SCA by issuing notice

seeking appointment of Sole Arbitrator to the respondent, the present

applicant is not maintainable and liable to be dismissed on this ground

alone.

15. In Hindustan Construction Company Ltd., v. State of Orissa

[2013 (1) ILR-CUT 548], wherein the Orissa High Court held that

arbitration application is not maintainable for the reason that it is not

preceded by a demand notice issued and served to the opposite party

demanding for appointment of an Arbitrator, which is mandatory in

law, as per Section 11(4)(a) of the Act.

16. It is vehemently argued by the learned Senior Counsel for the

applicant that since the Application has been filed by the applicant for

appointment of Sole Arbitrator before this Court, the appointment of

Sole Arbitrator by the respondent is of no consequence and same

cannot be held to be valid.

17. In Man Mohan Kumbhaj v. Union of India [2020 (2) RLW

1331 (Raj.), wherein the Rajasthan High Court held that if a notice for

appointment of Arbitrator in consonance with dispute resolution clause

has not been given, the application can be dismissed on the said

ground itself with the liberty to the applicant to proceed in the matter

in consonance to the terms of the agreement to seek appointment of

arbitrator. It was further held that, when the application under Section

11 of the Act itself is not maintainable, the issue in reference to Section

12(1) and 12(5) of the Amended Act of 2015 remains premature.

As already observed supra, since the applicant has filed the

present Application without following the procedure envisaged under

Clause 34 of the SCA and without issuing any prior notice for

appointing Arbitrator, this Application is premature and not

maintainable, in view of principle of law in the aforesaid judgment of

Rajasthan High Court.

18. Be that as it may, as per Section 11(5) of the Act, a Sole

Arbitrator should be appointed within a period of 30 days upon the

request of other party which intends to initiate arbitration proceedings,

as such, 30 days period for a party to appoint an Arbitrator is

prerequisite condition. Clause 34 of the SCA mandates two stages i.e.,

firstly for amicable settlement and secondly for appointment of

Arbitrator for resolution of disputes between the parties arising out of

SCA. According to the applicant, they have issued two notices i.e.,

28.07.2014 and 11.08.2014 requesting for amicable settlement and

also for appointment of arbitrator, upon failure of the amicable

settlement. As already observed supra, notice dated 11.08.2014 was

only intended for the purpose of amicable settlement as per Clause 34

in the first place and further suitable action deemed fit under the

circumstances as laid down in the agreement. After failure of amicable

settlement, it is the respondent who issued notice of it's intention to

appoint a Sole Arbitrator as per Clause 34 of SCA on 03.09.2014 but

not the applicant. There is no iota of evidence showing that the

applicant has requested the respondent seeking appointment of Sole

Arbitrator upon failure of amicable settlement on 14.08.2014 and

23.08.2014. Thus, it can be presumed that only after failure of

amicable settlement, the respondent issued notice on 03.09.2014 for

appointment of Sole Arbitrator, therefore, the period of 30 days as

required under Section 11(5) would start from 03.09.2014 and not from

28.07.2014 and 11.08.2014, as alleged by the learned Senior Counsel

for applicant. It is also pertinent to note that after 03.09.2014, the

respondent sought willingness of the Arbitrator i.e., Mr. Inder Mohan

Singh on 05.09.2014, who gave his consent on 15.09.2014 and

thereafter, the respondent informed the same to the applicant on

23.09.2014. However, the applicant, without informing the respondent

about failure of amicable settlement and without requesting the

respondent for appointment of Arbitrator in accordance with Clause 34

of SCA, filed this Application on 02.09.2014, that too after respondent

informing it's intention to appoint an Arbitrator on 03.09.2014. As

such, contention of the learned Senior Counsel that 30 days period

shall commence from 28.07.2014 and 11.08.2014 for initiation of

arbitration proceedings under Section 11(6) of the Act and that the said

period of 30 days is not required for filing this application before this

Court, cannot be accepted as on the said dates, the applicant only

sought for amicable settlement with the respondent but not seeking

appointment of Arbitrator. Therefore, the contention of the learned

counsel for the application that there is no requirement to provide 30

days period cannot be accepted.

19. In Ace Pipeline Contracts Private Limited v. Bharat

Petroleum Corporation Limited (2007 (2) ARBLR49 (SC); Datar

Switchgears Ltd., (supra), it has been held by the Hon'ble Supreme

Court that in cases arising under Section 11(6) of the Act, if the

opposite party has not made an appointment within 30 days of

demand, the right to make appointment is not forfeited but continues,

but an appointment has to be made before the former files application

under Section 11 of the Act, seeking appointment of a arbitrator and

only then the right of the opposite party ceases. In the instant, as

already observed supra, the 30 days period would start from the date of

failure of amicable settlement i.e., from 03.09.2014, the date on which,

the respondent addressed letter stating so to the applicant and not

from 28.07.2014 and 11.08.2014, as alleged by the applicant. Though

the applicant had relied on Great Eastern Shipping Company (supra),

but the facts and circumstances therein are quite different from the

facts of the case on hand. In the said case, dispute resolution clause

did not provide for amicable settlement of the dispute and only provides

for Arbitration clause. The applicant therein, even after addressing

several letters to the respondent therein, when there is no response

from the respondent for appointment of an arbitrator, filed an

application under Section 11(6) of the Act, after a period of six months,

which was allowed by the Court. But in the instant facts are otherwise,

as such, the said judgment is not applicable to the facts of the case on

hand.

20. Similarly, the judgment relied on by the learned Senior Counsel

for the applicant in Deep Trading Company v. Indian Oil Corporation

(supra) is also not applicable to the facts of the case on hand. In the

said case, the applicant therein has requested the opposite party to

appoint an arbitrator as per the agreed procedure. Since the opposite

party failed to as per the request of the applicant, the application under

Section 11(6) was filed and thereafter, appointed an arbitrator. The

Hon'ble Supreme Court held that the appointment so made is of no

consequence and the right of the opposite party to appoint is lost once

application for appointment is made to Court. But in instant case, as

already supra, no request was made to the respondent by the applicant

for appointment of arbitrator, as per Clause 34 of the SCA. As such,

this judgment is not applicable to the facts of the instant case.

21. In Simpark Infrastructure Pvt Ltd., v. Jaipur Municipal

Corporation (2013(3) RLW 2133 (Raj.), the arbitration clause

provided that any dispute which is not resolved amicably shall be

referred to a panel of three Arbitrators in terms of the Act. However,

the applicant therein, without attempting to resolve the issue through

amicable settlement approached the Court under Section 11(6) of the

Act. The High Court of Rajasthan observed that (i) Where the parties

have greed to arbitral procedure of dispute resolution, which has been

made a condition precedent for invoking the arbitration clause, then it

is required to be followed before filing an application under Section 11

of the Act, and (ii) Sub-section (6) of Section 11 of the Act cannot be

invoked directly on expiry of thirty days notice under sub-section (4) of

Section 11 of the Act, by the applicant for appointment of the Arbitral

Tribunal ignoring the agreed arbitral procedure. After considering

these observations, the High Court of Rajasthan held that the agreed

arbitral procedure has not been followed by the applicant and

therefore, the arbitration application is premature. In the instant case

also, the applicant has not followed the procedure envisaged under

Clause 34 of SCA, and straight away filed this application, without

intimation or notice to the respondent of its intention to approach this

Court for appointment of an Arbitrator, which is wholly erroneous. In

fact, it is the respondent, who, after failure of amicable settlement,

taken steps for appointment of Sole Arbitrator and also nominated one

Mr.Inder Mohan Singh, as Sole Arbitrator, in compliance of Clause 34

of SCA, as such, this Application for appointment of an arbitrator is not

maintainable.

22. It is pertinent to note that under Section 11(6) of the Act, the

Court has jurisdiction to make the appointment only when the person

including an institution, fails to perform any function entrusted to it

under that procedure. If the jurisdiction of the Court is invoked without

first following the procedure agreed to between the parties, thus no

cause of action would arise to seek the appointment from the High

Court under Section 11(6) of the Act and thus the said petition would

be premature. The parties are required to comply with the procedure of

appointment as agreed to and the defaulting party cannot be allowed to

take advantage of its own wrong. (see National Highways Authority of

India and another v. Bumihiway DDB Ltd.,(JV) [2007 (2) ALT 18

(SC)].

23. Though it is vehemently argued by the learned Senior Counsel for

the applicant that there exists disputes between the parties with regard

to non payment of amount by the respondent, but the same is denied

by the learned counsel for respondent stating that no arbitral dispute

exists between the parties at the first instance, when the applicant

addressed letters dated 28.07.2014 and 11.08.2014. As already

observed supra, on two occasions i.e., on 14.08.2014 and 23.08.2014

amicable settlements failed, then only the respondent addressed letter

to the applicant on 03.09.2014 of it's intention for appointment of an

arbitrator. Since there exists disputes after amicable settlement failed,

the respondent thought it fit to resolve such disputes through

arbitration only, addressed said letter on 03.09.2014 informing the

applicant about proposal for appointment of an arbitrator, as the

respondent did not agree to the proposal made by the applicant, as

such, there exists a dispute, as the same was not resolved amicably.

24. The existence of dispute is essential for appointment for an

arbitrator under Section 8 or a reference under Section 20 of the Act.

There should be a dispute and there can only be a dispute when a

claim is asserted by one party and denied by the other on whatever

grounds. Mere failure or inaction to pay does not lead to the inference

of the existence of dispute. Dispute entails a positive element and

assertion in denying, not merely inaction to accede to a claim or a

request. Whether in particular case a dispute has arisen or not has to

be found out from the facts and circumstances of the case. (see Major

(Retd.) Inder Singh Rekhi v. Delhi Development Authority [AIR

1988 SC 1007]. A reference to Arbitration could only be made

pursuant to the last communication between the parties which

indicates that there is no further possibility of settlement between the

parties. [see Hari Shankar Singhania v. Gaur Hari Singhania [2006

(4)ALT 1 (SC). In the instant, since the respondent communicated

about failure of amicable settlement on 03.09.2014, then any reference

to the arbitration could be made only subsequent to 03.09.2014.

25. It is argued by the learned Senior Counsel for the applicant that

there was no communication marked to the applicant which took place

between the respondent and the so called Sole Arbitrator, appointed by

the respondent. Learned counsel for the respondent submits that as

per Clause 34 of the SCA, the appointment of Sole Arbitrator was to be

done by the respondent and not by the applicant, as such, it was not

necessary nor the contract provided otherwise that the applicant was to

be communicated all the communication between the respondent and

the arbitrator. However, he submits that the applicant was duly

communicated about the appointment of arbitrator vide letter dated

22.09.2014.

26. The communication must be addressed to all the concerned

parties if appointment of Arbitrator is routed through them and/or if

the agreement provides for. It does not consider it necessary that the

communication is addressed to all the concerned parties

simultaneously. It is sufficient if it is communicated in the first

instance to any of them and thereafter to the others. (see Voltas Limited

v. Rolta India Limited [2010 Indlaw MUM 1672].

27. Learned Senior Counsel argued that after amendment of Act

2015, a party to the agreement cannot unilaterally appoint an

arbitrator. It is pertinent to note that even according to the

respondent, arbitrator was appointed on 22.09.2014. The Arbitration

(Amendment) Act, 2015 came into effect from 23.10.2015 i.e, after

appointment of arbitrator by the respondent. Amendment Act, 2015

does not have retrospective effect to the arbitration proceedings

commenced prior to the enactment of the Amendment Act, as such, as

per the Clause 34 of SCA as well as the Act prior to Amendment, the

respondent was entitled appoint an arbitrator unilaterally, and

appointed as such.

28. The provisions of the Amendment Act, 2015 (with effect from

23.10.2015) cannot have retrospective operation in the arbitral

proceedings already commenced unless the parties agree otherwise.

(see Board of Control for Cricket in India v. Kochi Cricket Private

Limited [(2018) 6 SCC 287]. In S.P.Singla Constructions (P) Ltd.,

v. State of Himachal Pradesh [2019 (2) SCC 488], the Hon'ble

Supreme Court, while placing reliance on the judgment of Board of

Control for Cricket in India (supra) held that Section 12(5) of the Act

does not apply to the case therein, since the arbitral proceedings

commenced back in 2013, much prior to the commencement of

Amendment Act on 23.10.2015.

In view of above facts and circumstances, all these Arbitration

Applications are liable to be dismissed and accordingly dismissed. No

order as to costs. As a sequel thereto, miscellaneous applications, if

any, pending in these Arbitration Applications, shall stand dismissed.

____________________________ A.RAJASHEKER REDDY,J

Date:05.02.2021 kvs

HON'BLE SRI JUSTICE A.RAJASHEKER REDDY

ARBITRATION APPLICATION Nos.132, 133 & 134 OF 2014

Date: 05.02.2021

kvs