Kap (India) Construction vs The Waterbase Ltd.

M. Jaichandren, J.—This application has been filed to appoint the Sole Arbitrator to arbitrate the dispute between the applicant and the respondents as per the Arbitration Agreement 1 and 2, dated 19.02.1991 and 18.06.1991, under the provisions of the Arbitration Act, 1940.

It is stated that the applicant is M/s. Kap (India) Constructions. The respondent had invited tenders for construction of Civil Works including buildings, bridges and other structures for its Prawn Aquaculture Project at Nellore, in Andhra Pradesh. In response to the invitation, the applicant had submitted two separate tenders one for Civil Works, relating to construction of buildings and structures and another for Civil Works, relating to the project. The respondent by its letter, dated 10.07.1990, had awarded works relating to the construction of buildings and structures for an approximate value of Rs. 2,69,68,090/-, to the applicant. The applicant had also remitted the security deposit of 2 1/2 per cent of the value which was Rs. 6,74,200/-. By another letter, dated 04.04.1991, the respondent had awarded the second work of construction of bridges for an approximate value of Rs. 64,57,951.03 and the applicant had remitted the security deposit of Rs. 1,64,450/-.

The contract entered into between the applicant and the respondent, inter alia, provided for an Arbitration Agreement under Clause 8.20 of the tender documents. Due to various reasons, there was a delay in carrying out the construction works by the applicant. The respondent had failed to pay the amounts due to the applicant. Therefore, disputes had arisen between the applicant and the respondent and they could not be resolved mutually. Therefore, there were demands and counter demands from both sides.

By a letter, dated 07.02.1996, the respondent had appointed one Mr. K. Phanindra as an Arbitrator to adjudicate the dispute between the applicant and the respondent. However, the said Arbitrator had resigned on 14.07.1997, due to personal reasons. Thereafter, the respondent had appointed Mr. P.K. Ramachandran, as the Sole Arbitrator, by a letter, dated 11.11.1997. Due to certain objections raised by the applicant, the said Arbitrator had also resigned from the Arbitration Proceedings by his letter, dated 18.03.1998. Thereafter, the respondent by a letter, dated 30.03.1998, proposed the appointment of one Mr. S. Ravi as the Sole Arbitrator. The proposal was rejected by the applicant, by a letter, dated 13.04.1998. Thereafter, the applicant had filed a petition in O.P.No. 835 of 1998 before this Court seeking for an appointment of the Sole Arbitrator. Since this Court had dismissed the said petition an appeal in O.S.A.No. 153 of 2600 had been filed. Inspite of Mr. S. Ravi being informed about the pendency of the appeal he had passed an ex parte award, on 05.06.2000. Aggrieved by the said award, dated 05.06.2000, O.P.No. 699 of 2000 had been filed before this Court to set aside the said award on various grounds. The said petition in O.P.No. 699 of 2000; was heard and by an order, dated 23.10.2003, this Court had set aside the ex parte award, dated 05.06.2000, with the following direction.

The 1st respondent is directed to appoint an arbitrator after getting the consent of the petitioner, within four weeks from the date of receipt of the copy of this order and both the petitioner and the respondent are at liberty to file their documents and let in evidence before the arbitrator, and the arbitrator shall deal with the matter impartially and in accordance with law, without being influenced by any of the observations made by the earlier arbitrator or by this Court and pass a speaking award within three months from the date of the entering into reference.

Since the order of this Court in O.P.No. 699 of 2000 had become final, the respondent by its letter, dated 23.02.2004, gave the names of two of its Officers and the applicant was required to appoint one of them to act as the Sole Arbitrator . While rejecting the proposal of the respondent, the applicant had requested the respondent vide letter, dated 10.03.2004, to furnish five names of retired judges of the Supreme Court or of the High Court and the applicant would consent for one of them to be the Sole Arbitrator in resolving the disputes. Since the respondent had failed to comply with the request of the applicant, O.P.No. 835 of 1998 had been filed before this Court seeking for the appointment of an Independent Arbitrator stating that the appointment of an Arbitrator by the respondent, in accordance with Clause 8.20 of the agreement, cannot be proper as such an Arbitrator who is usually an officer or employee of the respondent company cannot function objectively. When the said contention was raised subsequently, by an order, dated 12.07.2001, a Division Bench of this Court in O.S.A. No. 153 of 2000, had observed as follows :

Subsequent to the filing of this appeal, the arbitrator appointed by the respondent has made an award. That award, we are told, is under challenge at the instance of the appellant in O.P.No. 699 of 2000. It is open to the appellant to canvass all the points on which it contends that the award is required to be set aside before the learned single Judge.

While considering the objections raised by the applicant, the learned single Judge of this Court had passed an order, dated 23.10.2003, in O.P.No. 699 of 2000, stating as follows :

Taking into consideration that the arbitrator has committed an error apparent in passing of the award as the claim of the petitioner was not at all taken into consideration and that the apprehension with regard to the appointment of the arbitrator was not erased from the mind of the petitioner, would naturally be a bias and on these grounds, I feel that the award is liable to be set aside and accordingly it is set aside.

It was further observed as follows:

The 1st respondent is directed to appoint an arbitrator after getting the consent of the petitioner, within four weeks from the date of receipt of the copy of this order and both the petitioner and the respondent are at liberty to file their documents and let in evidence before the arbitrator, and the arbitrator shall deal with the matter impartially and in accordance with law, without being influenced by any of the observations made by the earlier arbitrator or by this Court and pass a speaking award within three months from the date of the entering into reference.

Pursuant to the said order passed by this Court, the applicant has filed the present application praying for an appointment of the Sole Arbitrator, u/s 8 of the Arbitration Act, 1940.

Notice was ordered to the respondent in the present application and the said notice having been served on the respondent, the respondent had also entered appearance. When the matter came up for hearing today, showing the name of the respondent, there was no representation for the respondent, either in person or through a counsel.

In such circumstances, this Court is of the considered view that the Sole Arbitrator could be appointed to resolve the disputes which had arisen between the applicant and the respondent, by way of arbitration proceedings. Therefore, by invoking the powers vested in this Court u/s 8 of the Arbitration Act, 1940. Thiru. Justice K. Venkatasamy, 36, 1st Avenue, Indira Nagar, Chennai-600 020 is appointed as the Sole Arbitrator, who is to initiate and conclude the Arbitration Proceedings, expeditiously. Therefore, this application stands allowed.