Continental Insulation Pvt. Ltd. vs Municipal Corporation, Jalandhar

Jasbir Singh, Acting Chief Justice

This application has been filed u/s 11(6) of the Arbitration and Conciliation Act, 1996 (in short, the Act) with a prayer to appoint an Arbitrator. The petitioner and the respondent entered into an agreement for re-development of Nehru Garden Jalandhar on 23.10.2009 (P1). Terms and conditions to execute the work were mentioned in the said agreement. In case of dispute, it was stipulated that the matter shall be decided by the named Arbitrator therein. Clause 6 of the agreement dated 23.10.2009 reads thus:-

In case of any dispute, the Commissioner Jalandhar will be the Arbitrator and his decision shall be final.

It is case of the petitioner that without any justification, the contract was terminated vide letter dated 1.8.2011 (P4), issued by the Executive Engineer (B&R) 1, Municipal Council, Jalandhar, on a ground that the petitioner has failed to complete the work within the stipulated period.

The petitioner invoked the arbitration clause vide its letter dated 6.9.2011 with a request that the dispute be referred to the named Arbitrator. When nothing was done, the petitioner came to this Court by filing the present petition, in which notice was issued on 22.11.2011. Reply was filed by the respondent disputing claim of the petitioner for appointment of an Arbitrator.

At the time of arguments, counsel appearing for the Municipal Corporation, Jalandhar stated that the named arbitrator has been asked to take up the dispute vide letter dated 26.4.2012. The plea raised by the counsel for Municipal Corporation can not be accepted at this stage because this Court feels that it was not open to the respondent to appoint an Arbitrator once the Court is seized of the matter. In Arbitration Case No. 107 of 2010, Arch Consultancy Services (P) Ltd. versus The Commissioner, Municipal Corporation, Amritsar, when dealing with a similar situation, it was observed as under:-

It is contended by counsel for the petitioner that when the respondent has failed to appoint an Arbitrator on receipt of a representation within a reasonable time, the respondent cannot appoint the Arbitrator when this Court is seized of the matter.

The contention raised appears to be correct. It has been so said by the Hon''ble Supreme Court in Union of India v. M/s Bharat Battery Manufacturing Co. (P) Ltd., 2007(3) Simla Law Journal 1443, wherein it was observed as under:-

We are unable to countenance with the submission of the learned counsel for the appellant. Section 11(8) of the Act could have come to the aid of the appellant had the appellant appointed the arbitrator within 30 days from the date of receipt of request to do so from the respondent or the extended time as the case may be. In the present case, as noticed above, Section 11(6) petition was filed on 30.3.2006 by the respondent. The appellant stated to have appointed one Dr. Gita Rawat on 15.5.2006, i.e. after Section 11(6) petition was filed by the respondent on 30.3.2006, which is not permissible in law. In other words, the appellants are stopped from making an appointment of the arbitrator in terms of Clause 24 of the agreement after Section 11(6) petition is filed by the respondent. Once Section 11(6) petition is filed before the Court, seeking appointment of an arbitrator, the power to appoint an arbitrator in terms of arbitration clause of the agreement ceases.

In view of ratio of the aforesaid judgment, appointment of an Arbitrator by the respondent after filing of these petitions is not proper and justified. The appointment was made after invocation of the jurisdiction of this Court, by the petitioner which cannot be allowed. Reliance of the respondent on a judgment of the Supreme Court in M/s. Raja Transport (P) Ltd.''s case (supra) is not justified. Facts of that case are altogether different.

In view of facts mentioned above, this petition is allowed, Mr. S.M.S. Mahil, D & S.J. (Retd.), resident of H.No. 245, Chotti Baradari, Part-2, Garha Road, Jalandhar is appointed an Arbitrator. The Arbitrator shall charge fee as per Punjab and Haryana High Court (Arbitrator''s Panel and Fee) Rules, 2011. Parties are directed to appear before the arbitrator on 22.9.2012.