M/S Friends Projects P Ltd v. The Managing Director & Ors

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¶1TN TTIE IIIGII I nRIl.P. I 66/2011 7i, lRB.r.l(t6/201 I COURT OF' DALIII A'[' NF]W DELIII Judgment Delivered on: 02.02.2012 M/S ITIU]'NDS PRO.IIJCTS I) L'I'f) ..... Pctitioncr 'fhrough Ms.Saumya Chakraborly and Ms. J ayahrcc Narasimha, Advs. VCl'SUS 'I Ui MANNGING DII{IIC'|OII" & ORS ..... Itespondent Through Mr. M.M. Kalra & Mr. I(lrnal Kalra, Adv. L'ORAM: !.[(]N' I]L],1 MR. .IIJS'fICtrl G.S.SISTANI $.tii$_1$'i'ni{ I, .[ " (ORAI.I

¶1'I'iris is a pctition undcr Scction l1 of the Arbitration and Conciliaticin Act sccking appoirrtrncnt of an indepcndent A.rbitrator io adiudicatc upon clispu[cs and diftercnces, which have ariscn botrvccn thc partics. It is Iurthcr subrnittcd by colrnscl for the pctitiorior thal rcspondcnt has failed to appoint an arlbitrator clcspitc a noticc <latccl 2"d April, 20t I having bccu issr-rcd.

¶2Lcarncd counscl for the pctitioncr rclics on Clausc 9.0.I . i to show that the ciisputcs bctwccn thc parlics wcrc to bc rcsoJvecl tirrouglr Arbitration try follorving ttrc proccdurc. as lzrici Corvn. it is.contcndccl that tirc pctil.ioncr bas {-ollowcd thc proccdurc by issuing i} nolicc datcd 13.01.20,l l, Irclwc'v'cr, hc did not rcccivcd arry rcply within 30 days of rcceipt ol thc notico, which lorccd hinr to filc thc prescnt pctition on 23''d Muy, 20L1.

¶3'['hc rlattcr was lisl"ccl on 27't' Muy, 20lL 'l'hcreaflel', ol1 7'l' July, 2011 a1, ioint lcqucsl, thc rnatlcr was adjor.rrnccl to iltl'J,-rly, 201I rvhcn courtsci .+ I'nge I of5 Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing.

¶4lbr thc rcspondent sought five wecks tirnc to filc rcply and thc tnatler was acljourncd to 20tl' Scptcmbc r, 201 1. On that datc counscl for thc petitioncr sought tirnc to hlc tejoinder ancl thc mattcr was adjourned to 30tl' Novcmbor,20Il. On 30tr'Novcmbcr,2011, at thc request of learned oounscl lilr thc rcsponclent, the mattcr was again adjourncd for today. 'foday icarncd counscl for the petitioner submits that sincc the rcspondcnt failcd to appoint an arbitrator within 30 days, the respondcnt has lost its right for appointmcnt of an arbitrator. IIe has relicd upon the judgrnent of Suprcrnc Court in UOI Vs. Ilharat Battery Manufacturing rcportcd as (reinsr'rppor1oIhisp1ca...[herelevantparagraphI2reads as undcr:-

¶12A tiuee-Judge Bench of this Court in Punj Lloyd Ltd. (appcllanl) v. Pctronct MI{II Ltd. (2006) 2 SCC 638 considered thc applicability of Scction 11(6) petition and considorcd thc tacts rvhictr arc similar to the facts o[ the prcsent casc and held that oncc notice period of 30 days had lapsed, and the party had rribvcd thc Chicl'Justicc under Section 11(6), thc othcr party having right to appoint arbitrator tndcr arbitral agreclnent loses thc right to do so. Whilc tahing this vicw, thc Court had refencd to the judgmcnt rcndered in Datar Switchgcars Ltd. (appcllant) v. 'I'ata lrinancc Ltd. and Anothcr (2000) 8 SCC 151 wherein at page 15ti (para 19) SCIC, this Court hcld as uncler: "19. So far as cascs falling undcr Scction 11(6) arc concerncd - such as the onc bcforc us-r no time limit lras . bccn prcscribcd undcr thc Act, whereas a period of 30 days has bccn prescribed under Section 11(4) and Section f 1(5) of the Act. In our vicw, therefore, so far as Section I l(6) is concerncd, if one party demands the opposite party to appoint an arbitrator and thc oppositc parly docs nclt makc an appoinbncnt within 30 days of the detnand, thc right to appointment does not gct automatically forfcitcd aftcr cxpiry of 30 days. If thc oppositc pafly . makcs an appointmenl cvcn aflcr 30 days of the detnand, but lrcforc thc first party has movcd the coutl undcr Scction 1l. that would bc sufficicnt. In othcr words, in \, "v. ARR.P.t66/201I l\ge 2 of 5 It-cascs arising undcr Section 11(6), if the opposile party has not madc an appointment within 30 days of demand, the right to rnako appointrncnt is not forfeited but continues, but an appointment has to be made beforc thc folncr files application undcr Scction 11 sccking appointmcnt of au arbitrator. Only thcn ihc right of thc oppositc party ccascs. Wc do not, thcrcforc, agrcc with thc obscrvation in thc above judgmcnts that if thc appointrncnt is not madc within 30 days of dcmand, thc right to appoint an arbitratclr nndcr Scction 11(6) is forfcitcd." (cmphasis in original) As alrcady noticcd, thc lcspondent filed Section 11(6) petition on

30.3.2006 sccking appointrnent of an arbilrator. The appellant, thcrcaftcr, said to havc appointed one f)r. Gita Rawat on

15.5.2006 as a soJe arbitrator, putportedly in tertns of Clause 24 of thc agrcctncnt. Oncc a party filcs an application undcr Scction 11(6) of thc A.ct, thc othcr pafty cxtinguishcs its right to appoint an arbitrator in tcrms of thc clausc o[ thc agrccmcnt thereafter. I'hc right to appoint arbitrator undcr the clausc o1' agrcetnent cBascs aftcr Section 11(6) petition has bccn filcd by the cthcr party beforc thc Cor-rrt sccking appoinlrncnt of an arbitralor." (lounsel lbr thc rcspondcnt has opposcd this pctition on thc ground that by cernmunication datcd 9tl' Junc, 20LL, thc pctitioncr was infonned about tlrrcc narncs of arbitrators and as pcr the procedure, which is to be followcd hc was to sclcct onc of the arbitrator out of three names which wcrc providcd by thc rcspondcnt. 'l'hc rcspondcnt rclics on Indian Oil Cornoration Ltd. and Ors. Vs. Ilaia Transport Private Lirnited. rcportcd as (2009) SeC 520, whcrein the Courl hcld that the couft tnust cndcavor to givc cflbct [o tbc appoirrtmcnL proccdurc prcscribcd in the arbitration clausc.

¶6llc furthcr subrnits unless thc arbitrator soug,bt to bc appointcd by thc respondcnt is no1 indcpendcnt, it is onll, thcn for thc rcasons to be

¶5.+ t' ,4Rt].P.166/201 I I\tge 3 o.f 5 9r t '@ rcoordcd by the Courl thal thc Courl can appoint an arbitrator of its own choicc, whcrcas in this case the rcspondent has failed to point out that the thrcc nalncs, which havc bccn suggested, afe not fit persons to be appointcd.

¶7I Jravc hcarcl lcarncd counscl for thc partics and considered the rival contcntions. 'I'hc thrcc judgc bcnch of thc Apex Court in the case of Puni Llovd l,td. vs. Petronet MflI| Ltd. rcportcd as 2006 2 SCC 638 has affirrncd thc vicw takcn by thc Apcx Courl in Datar Switchgears Ltd. Vs. I'ata F'inance Ltd. rcported as2000 8 SCC 155 para 19 whichreads as undcrf- *I9. So -fru as cascs falling undcr Scction 11(6) arc conccrncd -- such as thc onc bcforc us -- no tim.e lirnit has beeu prcscribcd undcr thc Act, whereas a pcriod of 30 days has bccn prcscribcd undcr Scction 11(4) and Section 11(5) of thc Act. In out vicw, thcrcfole, so l-ar as Section 11(6) is concerned, if one party dcrnands the opposite party to appoint an arbitrator and "thc opposite party docs not make an appoinlment within 30 rlays of thc dcmand, thc right to appointmcnt docs not ' get automatically forfcited aftcr cxpiry of 30days. If thc opposite dv rnakes intrncnt cvcn aftc da of thc d but bcfolc thc first party has rnoved the Court under Section 1l that wcluld bc sufficicnt. In othcr words. in cascs arisinq under $_cction 11(5)..if th itc parly has not madc an appointment not forfeited _[[ continues. but an appointrncnl has to be r4aclc bcforc thc former sccking appointrncnt of an arbitrator. Only thcn thc right of thc ' oppositc parly ccascs." (cmphasis in original)

¶8Acfinittcclly, thc respondcnt failcd to appoinl an arbitrator within 30 days ol'noticc datcd 13.01.2011 and also before thc petitioner oould approach this Court. 'l'hus the rcspondcnt has lost its right to appoint the Arbitrator. I'hcrc is no cluarrcl with regard to thc sutrrnissions madc by thc counscl lor 1hc rcspondcnt that thc Courl must cndcavor to give effect to the ARI|.t'.166/20t I I'age 4 of5 { appointmcnt proccdurc prcscribcd in thc Arbitration Clausc, however, sincc it is the rcspondent, who has failed to adhere to the procedure itself, the dccision rendered by a Division Bench of the Supreme Court in the casc of Indian Oil Corporation Ltd. (Supra). is not applicable to the lbcts of thc prcsent case and the decision rcndcrcd in thc casc of Puni IJovd Ltd. (Supra) [three judgeslis fully applicablc to thc facts oFthe prcsont casc. 'I'hc rcspondent failed to take appropriate steps for appoinlrncnt of an arbitrator within 30 days of receipt of thc notice and upto thc datc of filing thc prcscnt pctition. Accordingly, thc respondent has losf its tight to appoint an arbitrator. 'lhc lcarncd counsel for the respondent was asked as to whether there is any rcquircrncnt fior appointment of any technical person, however, the counscl subrnittcd that therc is no such rcquircmcnt and ncithcr thcrc is any such proccdurc which has bccn followed. In tho cit'cumstanccs, Justice P.K. I3ahri, fionner Judge of this Court (Cell No.9818542737), ts appointcd as Solc A.rbitralor to adjudicate upon all disputcs and differcnces including claims and counter claims arising betwcen thc partics. It is agreed between thc partics that fcc of thc Arbilrator shall bc bomc by thc partics cqually as per the schedule maintaincd by Delhi IIigh Court Arbitration Ccntrc. l hc Arbilrator shall giivc prior noticc to Lhc partics before comrncncing tho proceedings. Petition stands disposed of. Let a copy of this order bc sent directly to lcancd Arbitrator. 'Ihc arbitration procccdings bc held under the aegis of Delhi I-Iigh Court Arbitration Centrc. 1'he petition stands disposed of. 2- ---c@ € G.S.SIST'ANI, J

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