Indian Oil Corporation Ltd. vs Ponty Malik Construction Co.

L.N. Mittal, J

Indian Oil Corporation Ltd. has invoked jurisdiction of this Court under Article 227 of the Constitution of India by filing this revision petition to assail order dated 24.2.2010 passed by learned Additional District Judge, Panipat thereby rejecting application Annexure P12 moved by the petitioner u/s 14(2) and section 15(2) of the Arbitration and Conciliation Act, 1996 (in short, the Act), for want of jurisdiction and directing presentation thereof before the proper Forum. Dispute between petitioner-Corporation and respondent-Contractor was referred to sole Arbitrator vide order dated 12.2.2004, Annexure P/1 passed by learned Additional District Judge, Panipat on application filed by the contractor u/s 11(6)(a) of the Act, in terms of arbitration clause 9 contained in the agreement executed between the parties.

The petitioner Corporation filed application Annexure P/12 u/s 14(2) and section 15(2) of the Act for termination of mandate of the Arbitrator appointed vide order Annexure P1 and for substitution of the Arbitrator. I need not go into the averments or grounds pleaded in the said application because merits thereof are not in issue in this revision petition because the District Court has rejected the said application for want of jurisdiction.

I have heard counsel for the parties and perused the case file.

Learned senior counsel for the petitioner referring to section 14 of the Act contended that application u/s 14(2) of the Act lies in ''court'' to decide the termination of the mandate and ''court'' has been defined in section 2(1)(e) of the Act to mean Principal Civil court of original jurisdiction which is District Court in the instant case and therefore, the learned Additional District Judge was the only appropriate forum for deciding application u/s 14(2) of the Act. Counsel for the petitioner relied on judgment of Hon''ble Supreme Court in Nimet Resources Inc. and another versus Essar Steels Limited, (2009) 17 Supreme Court Cases 313 wherein it was held that for the purpose of section 14(2) of the Act, court of Principal original jurisdiction is the concerned court even if the Arbitrator was appointed by Chief Justice of High Court or Supreme Court.

As regards relief u/s 15(2) of the Act for substitution of the Arbitrator, it was contended by learned senior counsel for the petitioner that substitute Arbitrator has to be appointed according to the rules that were applicable to the appointment of Arbitrator being replaced. It was submitted that since Arbitrator was appointed by the Additional District Judge vide order Annexure P/1, the substitute Arbitrator has also to be appointed by the same District Court and therefore, the said court has jurisdiction for granting appropriate relief u/s 15(2) of the Act as well. It was also submitted that application Annexure P/12 is dated 28.2.2008 whereas it was thereafter vide notification dated 9.6.2009 that the power to appoint Arbitrator was restricted to be with the Chief Justice himself or any Judge of the High Court designated by him for the purpose and consequently prior to notification dated 9.6.2009, the District court had the jurisdiction to appoint Arbitrator. Consequently, in the instant case, when application Annexure P/2 was moved, District Court also had jurisdiction to appoint the substitute Arbitrator.

Counsel for the respondent did not dispute that ''court'' referred to in section 14(2) of the Act would be the Principal Civil Court of original jurisdiction as defined in section 2(1)(e) of the Act i.e. District Court in the instant case. However, counsel for the respondent contended that the petition u/s 14(2) of the Act would not be maintainable in view of section 13 of the Act. Learned counsel for the respondent has relied upon judgment of Delhi High Court in Progressive Career Academy Pvt. Ltd. versus FIIT FEE Ltd. 2011 VIAD (Delhi) 283. As regards section 15(2) of the Act, counsel for the respondent contended that power to appoint substitute Arbitrator, if mandate of the original Arbitrator is terminated, would lie with the Chief Justice or his nominee u/s 11(6) of the Act and not with the District Court.

I have carefully considered the rival contentions. As regards power to be exercised u/s 14(2) of the Act, there is practically no dispute. The provision refers to ''court'' which has been defined in section 2(1)(e) of the Act to mean Principal Civil Court of original jurisdiction. Consequently, the learned Additional District Judge being Principal Civil Court of original jurisdiction (in view of the case assigned to him by the District Judge) would come within the purview of ''court'' as mentioned in section 14(2) of the Act and consequently, the said court had jurisdiction to deal with petitioner''s application Annexure P/12 qua relief u/s 14(2) of the Act. In this regard, judgment of Hon''ble Supreme Court in the case of Nimet Resources Inc. and another (supra) is also very clear and even counsel for the respondent did not dispute this proposition.

However, contention of counsel for the respondent that in view of section 13 of the Act, application u/s 14(2) of the Act is not maintainable, cannot be accepted at this stage. It would be for the trial court to adjudicate the same. Suffice to observe that section 13 and section 14 of the Act operate in different fields. If the petitioner is able to make out a case u/s 14 of the Act, the court would adjudicate upon the same. I am not expressing any opinion in this regard. Consequently, judgment in the case of Progressive Career Academy Pvt. Ltd. (supra) is not attracted at this stage. This contention can be raised before the trial court.

Now coming to jurisdiction regarding relief u/s 15(2) of the Act, the contention raised by learned senior counsel for the petitioner cannot be accepted. Firstly, the appointment of Arbitrator (including substitute Arbitrator) has to be by the Chief Justice or his nominee in view of section 11(6) of the Act. When order Annexure P/1 was passed by learned Additional District Judge appointing Arbitrator, even then he was acting as nominee of the Chief Justice u/s 11(6) of the Act. Now the District Judge (including Additional District Judge) is no longer the nominee of the Chief Justice for the purpose of section 11(6) of the Act and consequently, Additional District Judge cannot appoint substitute Arbitrator. Even before application Annexure P/12 dated 28.2.2008 was moved by the petitioner, Hon''ble Supreme Court in the case of SBP & CO. versus Patel Engineering Ltd. and another, (2005) 8 Supreme Court Cases 618 held that u/s 11(6) of the Act, Chief Justice may nominate only a Judge of the High Court as nominee and not any District Judge or Subordinate Judge. Since the date of said judgment i.e. 26.10.2005, the District Judge ceased to have jurisdiction u/s 11(6) of the Act. Notification dated 9.6.2009 was issued to only implement the judgment of Hon''ble Supreme Court in the case of SBP & CO. (supra), but the ratio of law laid down in the said judgment became applicable from the date of the said judgment itself. Irrespective of the same, the substitute Arbitrator has to be appointed by the Chief Justice or his nominee and as noticed hereinbefore, District Judge is no longer nominee of the Chief Justice for exercising power u/s 11(6) of the Act. Consequently, relief u/s 15(2) of the Act for appointing substitute Arbitrator cannot be granted by District Judge and therefore, trial court which passed impugned order has no jurisdiction to pass order u/s 15(2) of the Act.

The matter may also be examined from another angle.

Arbitration clause contained in the agreement is reproduced herein under:-

Clause-9.0.1.0

Subject to the provisions of Clause 6.7.1.0 and 6.7.2.0 hereof, any dispute or difference between the parties, hereto arising out of any notified claim of the Contractor included in his Final Bill in accordance with the provisions of Clause 6.6.3.0 hereof and/or arising out of any amount claimed by the Owner (whether or not the amount claimed by the Owner or any part thereof shall have been deducted from the Final Bill of the contractor in respect of the work) shall be referred to arbitration by a Sole Arbitrator selected by the Contractor from a panel of three persons nominated by the General Manager.

According to aforesaid arbitration clause, the contractor has to select the sole Arbitrator from the panel of three persons nominated by the General Manager of the petitioner Corporation. According to section 15(2) of the Act, the rules as applicable to the appointment of Arbitrator being replaced, shall be applicable to the appointment of substitute Arbitrator. Therefore, according to rules applicable to appointment of original Arbitrator, the Contractor has to select the sole Arbitrator from the panel of three persons nominated by the General Manager of the petitioner-Corporation. Consequently, if mandate of the sole Arbitrator appointed vide order Annexure P/1 is terminated pursuant to application Annexure P/12, same procedure has to be followed for appointment of substitute Arbitrator and if the petitioner-Corporation fails to furnish panel of three persons on demand of the Contractor, aggrieved party may approach the Chief Justice or his nominee u/s 11(6) of the Act for appointment of substitute Arbitrator. For the reasons aforesaid, I find that impugned order of the trial court is partly untenable but has to be affirmed partly. Learned Additional District Judge has jurisdiction to deal with application Annexure P/12 in so far as relief claimed u/s 14(2) of the Act is concerned but learned Additional District Judge has no jurisdiction to deal with relief claimed u/s 15(2) of the Act. The revision petition is accordingly allowed partly and impugned order of the trial court is set aside to the aforesaid extent. The matter is remitted to the trial court for decision of application Annexure P12 in accordance with law relating to relief claimed u/s 14(2) of the Act. Parties to appear before the trial court on 1.8.2013. The trial court shall decide the application as expeditiously as possible and preferably within one year of receipt of certified copy of this order.