Mohan Agrawal Construction Company vs Union of India

Prakash Shrivastava, J.—Heard finally with consent.

This application under Section 11(6) of Arbitration and Conciliation Act, 1996 (for short Act) has been filed for appointment of the arbitrator.

In brief, the case of applicant is that an agreement dated 14/9/2009 was executed between the applicant and respondent and the applicant was awarded the contract for construction work. Some delay had taken place in performance of the contract which according to the applicant was attributable to the respondent. On account of delay and slow progress of the work, the contract was terminated and the earnest money, security deposit and performance guarantee was forfeited vide order dated 10/2/2012. Applicant had preferred an appeal and had given notice for appointment of arbitrator to the Superintending Engineer and Chief Engineer, CPWD in terms of clause 25 of General Condition of Contract. The applicant was required to submit his claim and applicant had submitted his claim in the proscribed form, but no action was taken, therefore, he had earlier filed Arbitration Case No. 12/2012, but the same was withdrawn with liberty to file response to the communication of the Executive Engineer dated 23/2/2012 and with a direction to Superintending Engineer to take expeditious action in accordance with the procedure prescribed in clause 25. Thereafter the applicant had submitted the response to the Superintending Engineer but within the prescribed period of one month, the Superintending Engineer had not taken any decision, therefore, the applicant had preferred an appeal to the Chief Engineer but in the meanwhile the Superintending Engineer had given the written decision on 6/3/14 rejecting the claim therefore, the applicant on 22/2/14 had made a request for appointment of arbitrator but no decision on said request was taken therefore, he had filed the present application under Section 11(6) of the Act.

The respondent has filed reply denying the claim of applicant on merit. A plea has been taken by the respondent that the arbitrator has already been appointed by the respondent subsequently, therefore, no case for allowing prayer made in the application is made out.

Learned counsel for applicant submits that since the respondent inspite of the request in terms of Clause 25 has not appointed the arbitrator within time, therefore, his right to appoint the arbitrator has been forfeited and now this Court may appoint an independent arbitrator to resolve the dispute between the parties.

Learned counsel for respondent has submitted that since the arbitrator has now been appointed therefore, the application filed by the applicant deserves to be rejected and that the agreement does not provide for appointment of arbitrator by the High court, therefore, the application is not maintainable.

I have heard the learned counsel for parties and perused the record.

The agreement dated 14/9/09 is not in dispute. Clause 25 of General Condition of Contract containing the arbitration clause is also undisputed. The respondent has also not disputed the fact that the procedure which has been prescribed in clause 25 has already been exhausted by the applicant by approaching the Superintending Engineer and the Chief Engineer.

The objection of the respondent is that since subsequently the respondent has appointed the arbitrator, therefore, the application is not maintainable. The applicant has filed the present application under Section 11(6) of Act on 30th April, 2014. The reply of respondent reveals that the arbitrator has been appointed by the respondent after filing the present application before this court, therefore, in terms of the judgment of the Supreme court in the matters of Bharat Sanchar Nigam Ltd. and Another Vs. Dhanurdhar Champatiray, , Punj Lloyd Ltd. Vs. Petronet MHB Ltd., reported in (2006) 2 SCC 638, as also the judgment in the matter of Datar Switchgears Ltd. Vs. Tata Finance Ltd. and Another, , the right of the respondent to appoint the arbitrator in terms of arbitration clause had come to an end after the applicant had approached this court. The Supreme court in the matter of Bharat Sanchar Nigam Ltd. (supra), considering the earlier judgment has held as under:-

"8. A plain reading of Section 11(5) of the Act would show that if one party demands appointment of an arbitrator and the other party does not appoint any Arbitrator within thirty days of such demand, the right to appointment at the instance of one of the parties does not get automatically forfeited. If the appellant makes an appointment even after thirty days of demand but the first party has not moved the Court under Section 11, that action on the part of the appellant would be sufficient. In other words, in cases arising under Section 11(6), if the respondent has not made an appointment within thirty days of demand, right to make an appointment of an arbitrator is not forfeited but continues, but such appointment shall be made before the other party files the application under Section 11 seeking appointment of an arbitrator before the High Court. It is only then the right of the respondent ceases. In this connection, a three-Judge Bench decision of this Court in Punj Lloyd Ltd. V. Petronet MHB Ltd. (2006) 2 SCC 638, may be referred to. In this case, this Court considered the applicability of Section 11(6) of the Act and after considering the scope and object of the Act held that once notice period of thirty days has expired and the party has moved the Hon. Chief Justice of the High Court under Section 11(6) of the Act, the other party loses his right to appoint an arbitrator on the basis of arbitral agreement. While taking this view, this Court in the Punj Lloyd''s case (supra) had relied on the judgment referred in Datar Switchgears Ltd. Vs. Tata Finance Ltd. and Another, , wherein in paragraph 19 at page 158 this Court observed as follows:-

"So far as cases falling under Section 11(6) are concerned such as the one before us no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11(4) and Section 11(5) of the Act. In our view, therefore, so far as Section 11(6) is concerned, if one party demands the opposite party to appoint an Arbitrator and the opposite party do 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, which 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." 10. This court also in the matter of M/s Mohan Agrawal Construction Company Vs. Union of India by order dated 26/9/2012 in Arbitration Case No. 33/2011 has rejected similar objection when the arbitrator was appointed by the respondent department after the applicant had approached this court under Section 11 of the Act.

Counsel for respondent has placed reliance upon the decision of this court dated 24/7/14 in the matter of M/s Mohan Agrawal Construction Company Vs. Union of India in Arbitration Case No. 25/2010 but that was a matter relating to the appointment of substitute arbitrator which stands on different footing. Thus, I am of the opinion that the respondent''s right to appoint the arbitrator in terms of the arbitration clause had ceased after the applicant had approached this court by filing the present application.

So far as the argument of counsel for respondent that the agreement does not provide for appointment of the arbitrator by the High court is concerned, such an argument is required to be rejected at the threshold since Clause 25 of General Condition of Contract itself in clear terms provides that arbitration will be conducted in accordance with the provisions of Arbitration and Conciliation Act, 1996.

Considering the aforesaid, I am of the opinion that an independent arbitrator needs to be appointed for resolving the dispute between the parties under Section 11(6) of Act. Hence AC is allowed and Hon''ble Shri Justice S.P. Khare (Retired Judge of High court of MP) R/o Formet A-1, 202, Sahanai Residency, A.B. Road, Indore (MP) is appointed as an independent arbitrator to resolve the dispute between the parties.

Parties are directed to appear before the learned arbitrator on 27/4/2015.

Arbitration application is accordingly disposed off.

C.C. As per rules.