M/S Larsen & Toubro Limited vs M/S National Highways Authority Of Inida & Anr.

C. Hari Shankar, J

By this petition, under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the 1996 Actâ€), the petitioner

prays for appointment of an arbitrator, on behalf of Respondent No. 1 (hereinafter referred to as “NHAIâ€), to arbitrate on the disputes between

the petitioner and NHAI.

Facts

On 25th February 2014, an Engineering Procurement and Construction (EPC) Contract (hereinafter referred to as “the Contractâ€) was

executed between the petitioner and NHAI, for development, maintenance and management of National Highway (NH) 8, over a stretch of

approximately 6.745 km. The petitioner alleges that, owing to reasons not attributable to the petitioner, the contracted work could not be completed

within the stipulated time, and was finally completed after a delay of 15 months. The petitioner further alleges that, as a consequence, it suffered

various losses, which were duly brought to the notice of NHAI. Though the representative of NHAI had, purportedly, computed the admissible claims

of the petitioner, the petitioner is not in agreement therewith. As a result, the petitioner asserts that disputes have arisen, between the petitioner and

NHAI, which are arbitrable in nature.

Clauses 26.1 to 26.3 of the Contract provided for resolution of disputes, and read (to the extent relevant) thus:

“26.1 Dispute Resolution

26.1.1 Any dispute, difference or the controversy of whatever nature howsoever arising under or out of or in relation to this Agreement (including its

interpretation) between the Parties, and so are notified in writing by either Party to the other Party (the “Disputeâ€) shall, in the first instance, be

attempted to be resolved amicably in accordance with the conciliation procedure set forth in Clause 26.2.

26.1.2 The Parties agree to use their best efforts for resolving Disputes arising under or in respect of this Agreement promptly, equitably and in good

faith, and further agree to provide each other with reasonable access during normal business hours to all non-privileged records, information and data

pertaining to any Dispute.

26.2 Conciliation

In the event of any Dispute between the Parties, either party may call upon the Authority’s Engineer, or such other person as the Parties may

mutually agreed upon (the “Conciliatorâ€) to mediate and assist the Parties in arriving at an amicable settlement thereof. Failing mediation by the

Conciliator or without the intervention of the Conciliator, either Party may require such Dispute to be referred to the Chairman of the Authority and

the Chairman of the Board of Directors of the Contract are for amicable settlement, and upon such reference, the said persons shall meet no later

than 7 (seven) business days from the date of reference to discuss an attempt to amicably resolve the Dispute. If such meeting does not take place

within the 7 (seven) business day period over the Dispute is not amicably settled within 15 (fifteen) days of the meeting all the Dispute is not resolved

as evidenced by the signing of written in terms of settlement within 30 (thirty) days of the notice in writing referred to in Clause 26.1.1 or such longer

period as may be mutually agreed by the Parties, either Party may refer the Dispute to arbitration in accordance with the provisions of Clause 26.3.

26.3 Arbitration

26.3.1 Any dispute, which is not resolved amicably as provided in clause 26.1 and 26.2 shall be finally settled by arbitration as set forth below:

i) The Dispute shall be finally settled by arbitration in accordance with the Arbitration and Conciliation Act, 1996, or any statutory amendments

thereof. The Arbitral Tribunal shall consist of 3 Arbitrators, one each to be appointed by NHAI and the concessionaire. The third arbitrator shall be

chosen by the two Arbitrators so appointed by the Parties and shall act as Residing Arbitrator. In case of failure of the twoArbitrators, appointed by

the parties to reach upon a consensus within period of 30 days from the appointment of the Arbitrator appointed subsequently, the Residing arbitrator

shall be appointed by the Chairman of the Executive Committee of the Indian Roads Congress.

ii) Neither party shall be limited in the proceedings in the Tribunal to the evidence or arguments before the other party/Independent consultant.

iii) Arbitration may be commenced during or after the Contract Period, provided that the obligations of NHAI and the Contractor shall not be altered

by the reason of the arbitration being conducted during the Contract Period.

iv) If one of the parties failed to appoint its Arbitrator in pursuance of Sub-Clause (i) above, within 30 days after receipt of the notice of the

appointment of its Arbitrator by the other party, then the Chairman of the Executive Committee of the Indian Roads Congress, shall appoint the

Arbitrator. A certified copy of the order of the Chairman of the Executive Committee of the Indian Roads Congress making such an appointment shall

be furnished to each of the parties.

v) Arbitration proceeding shall be held at Delhi, India, and the language of the Arbitration Proceedings and that of all documents and communications

between the parties shall be English.

vi) The decision of the majority of Arbitrators shall be final and binding upon both parties. The expenses incurred by each party in connection with the

preparation, presentation, etc., of its proceedings shall be borne by each party itself.â€​

On 17th December, 2019, the petitioner wrote to NHAI, setting out its claims and seeking amicable resolution thereof, under Clause 26.2 of the

Contract, by reference of the disputes to the Chairman of NHAI and the Chairman of the Board of Directors of the petitioner. According to the

petitioner, it had duly nominated Mr. R. Ranganathan as its representative in the said settlement effort.

No efforts having been made by NHAI for amicable settlement of the disputes within 21 days, and the disputes remaining unsettled after 30 days,

the petitioner wrote, on 20th January, 2020, to NHAI, pointing out that, under Clause 26.3 of the Contract, it was open to either party to refer the

dispute to arbitration. In accordance with Clause 26.3.1, the petitioner stated that it had appointed Dr. T. R. Seshadri as its arbitrator. The NHAI was,

therefore, requested to nominate an arbitrator so that, thereafter, the two arbitrators could appoint the Presiding Arbitrator.

The petitioner avers that, as NHAI defaulted in appointing its arbitrator, the petitioner, in accordance with Clause 26.3.1(iv) of the Contract, wrote

on 24th February, 2020, to the Secretary General of the Indian Roads Congress (IRC) (as there was no post of “Chairman, Executive

Committeeâ€​ in the IRC), for appointment of the arbitrator on behalf of NHAI.

No response was received from the IRC, and no arbitrator was appointed by it, on behalf of the NHAI. The petitioner wrote, on 2t7h April, 2020, to

the IRC, with a copy marked to NHAI, stating that, as there was default, in the matter of appointment of an arbitrator on behalf of NHAI, both by

NHAI as well as by the IRC, the petitioner was moving this Court under Section 11 of the 1996 Act.

On 30th April, 2020, the petitioner received an e-mail from NHAI, stating that Mr. Prabhat Krishna had been appointed, by NHAI, as its arbitrator,

on 23rd March, 2020, and that the appointment had been accepted by Mr. Prabhat Krishna vide communication dated 14th April, 2020. The email also

enclosed the request letter dated 23rd March, 2020, from NHAI to Mr. Prabhat Krishna, and the response, dated 14th April, 2020, of Mr. Prabhat

Krishna thereto.

On 8th May, 2020, the IRC wrote to the petitioner, informing the petitioner that NHAI had, vide letter dated 30th April, 2020, addressed to the

Ministry of Road Transport and Highways (hereinafter referred to as “the Ministryâ€), informed that it had appointed Mr. Prabhat Krishna as its

nominee arbitrator.

The petitioner contends that the appointment, by NHAI, of Mr. Prabhat Krishna as its arbitrator, on 23rd March, 2020, was illegal, as, once the

petitioner had approached the IRC, NHAI had forfeited his right to appoint an arbitrator. The IRC having also failed to appoint an arbitrator, till the

filing of the present petition by the petitioner before this Court, it is contended that the NHAI, and the IRC, were not entitled to appoint any arbitrator,

and that the arbitrator, on behalf of the NHAI, would have to be appointed by this Court. There has, contends the petitioner, been “failureâ€, on the

part of the NHAI, as well as the IRC, to act in accordance with the arbitration agreement between the petitioner and NHAI. Reliance has been

placed, for the said purpose, by the petitioner, on the judgement of the Supreme Court in Datar Switchgear v. Tata Finance Ltd (2000) 8 SCC 151, as

well as of this Court in Punj Lloyd v. Petronet MHB Ltd 2006 (3) RCR (Civil) 836.

Rival Submissions

Having elaborated the above facts, Mr. R. V. Yogesh, learned counsel for the petitioner submits that, but for Clause 26.3.1(iv), which obligated

the petitioner to approach the IRC on NHAI failing to appoint an arbitrator within 30 days of the petitioner doing so, the petitioner would have

approached this Court at that stage itself. As such, submits Mr. Yogesh, once 30 days from the date of receipt of the notice from the petitioner,

informing NHAI of the appointment of arbitrator by it, had expired, the right of NHAI to appoint its arbitrator stood forfeited. Mr. Yogesh submits that

NHAI could not legitimately take advantage of Clause 26.3.1(iv) to appoint its arbitrator after 30 days, from the date of receipt of notice from the

petitioner, had expired. Mr. Yogesh also places reliance on Walter Bau AG v. Municipal Corporation of Greater Bombay (2015) 3 SCC 800.

Mr. Yogesh has also drawn my attention to Clause 2.4 of the “Guidelines for Empanelment and Nomination of Arbitrators, Presiding

Arbitrators, Dispute Review Experts, Member/Chairman of Dispute Review Board and Conciliators etc.â€, as contained in the procedure followed by

the IRC, which reads as under:

“On receipt of the request for appointment of an arbitrator for a particular work, the Secretary General, IRC will prepare a short list of five

arbitrators from among the list maintained in the IRC Secretariat and put up along with their information to the High Powered Committee for

nomination. The nomination of Arbitrator may be considered within 30 days from the date of receiving the complete details and prescribed processing

fee. If urgent meeting of HighPoweredCommittee cannot be held, the matter may be decided by circulation or telephonic consent to be ratified at the

next meeting. A standing order of the Executive Committee of the IRC is needed to authorize the High Powered Committee to nominate a person

from the empanelled list.â€​

Arguing for NHAI, Mr. Manish Bishnoi, learned Counsel submits, per contra, that NHAI did not lose its right to appoint an arbitrator, till the filing

of the present petition before this Court by the petitioner, as per the law laid down in Datar Switchgear (2000) 8 SCC 151. He submits that the

principle enunciated in the said decision is not dependent on the wording of the arbitration clause. Drawing attention to para 10 of the report in Walter

Bau AG (2015) 3 SCC 800, Mr. Bishnoi submits that this decision, too, does not help the petitioner. He draws attention to the fact that the arbitration

clause, in the contract between the petitioner and NHAI, does not stipulate that the right, of NHAI, to appoint its arbitrator, stood forfeited on expiry

of 30 days from receipt of notice by the petitioner. In any event, submits Mr. Bishnoi, no prejudice has resulted to the petitioner, as would merit

interference by this Court. Mr. Bishnoi has placed reliance on para 10 of the report in Walter Bau AG (2015) 3 SCC 800.

Arguing in rejoinder, Mr. Yogesh relies on the judgement of the Supreme Court in U.O.I. v. Premco-DKSPL (JV) (2016) 14 SCC 651, to re-

emphasise his submission that NHAI had forfeited its right to appoint an arbitrator. The reliance, by Mr. Bishnoi, on para 10 of the report in Walter

Bau AG (2015) 3 SCC 800, submits Mr. Yogesh, is misconceived, as the observation of the Supreme Court, in the said para, is merely incidental,

which does not decide the issue in controversy. Apropos the letter dated 8th May, 2020, of IRC to the petitioner, Mr. Yogesh submits that the

communication was of no relevance, as any appointment, by NHAI, of its nominee arbitrator, after the petitioner had approached the IRC, was

contrary to the terms of the contract between the petitioner and NHAI, as well as to the Rules and procedure of IRC itself. Mr. Yogesh has also

placed reliance on the decision in Antrix Corporation Ltd v. Devas Multimedia Private Ltd (2014) 11 SCC 560, and has also drawn attention to the

reasoning, in Walter Bau AG (2015) 3 SCC 800, for distinguishing Antrix Corporation Ltd (2014) 11 SCC 560.

Written Submissions

Written submissions were also filed by learned Counsel for both parties.

Besides reiterating the submissions advanced orally at the bar, the written submissions of the petitioner emphasised the use of the word

“shallâ€, in Clause 26.3.1(iv) of the Contract, denoting its mandatory nature. As such, it is submitted, any appointment of its arbitrator, by NHAI,

after the expiry of 30 days from the receipt of notice from the petitioner, would be non est in law. The submission of Mr. Bishnoi, based on para- 9 of

Datar Switchgear (2000) 8 SCC 151, that, till the petitioner moved the present petition, NHAI could appoint its nominee arbitrator at any time, he

submits, is incorrect, for various reasons. Firstly, unlike the present case, the arbitration agreement in Datar Switchgear (2000) 8 SCC 151 did not

require appointment of the arbitrator, by one party, within 30 days of receipt of notice from the other. This requirement was derived, by the Supreme

Court, by a conjoint reading of sub-sections (3), (4) and (5) of Section 11. Secondly, the notice, in Datar Switchgear (2000) 8 SCC 151, did not call on

the other party to appoint an arbitrator but merely sought invocation of the arbitration clause. Au contraire, in the present case, the petitioner had

specifically called on NHAI to appoint its arbitrator, vide its communication dated 20th January, 2020. Thirdly, there was no secondary institutional

mechanism for appointment of the arbitrator in the event of failure of the other party to do so, in Datar Switchgear (2000) 8 SCC 151. Extrapolating

the principle enunciated in Datar Switchgear (2000) 8 SCC 151 to a situation in which the contract provided for recourse to a secondary institutional

mechanism for appointment of the arbitrator, on failure of the opposite party to appoint the arbitrator within the stipulated time after receipt of notice,

Mr. Yogesh submits that, once the petitioner had taken recourse to the alternate mechanism provided in the arbitration clause, NHAI’s right to

appoint the arbitrator stood extinguished.

The written submissions of NHAI reiterate the submission that Datar Switchgear (2000) 8 SCC 151 extinguishes the right of the respondent, to

appoint the arbitrator, only on the petitioner moving the Court under Section 11 (6). So long as the respondent appointed the arbitrator prior to the

petitioner moving the Court, NHAI contends that such appointment cannot be interfered with. It is also contended that the principle enunciated in

Datar Switchgear (2000) 8 SCC 151 is not dependent on the wording of the arbitration clause. Para 19 of the judgement, it is emphasised, is based on

Section 11 (6), and not on the particular wording of the arbitration clause between the parties. This position, it is submitted, also emerges on a reading

of para 11 of the judgement. Limiting the application of the principle in Datar Switchgear (2000) 8 SCC 151 on the basis of the wording of the

arbitration clause in any particular case, it is submitted, would lead to anomalous results. For the same reason, the fact that the contract between the

petitioner and NHAI provided for recourse to the IRC, before approaching this Court, would also make no difference to the applicability of the law

enunciated in Datar Switchgear (2000) 8 SCC 151. It is further contended, in this context, that the forfeiture of the right of the respondent, to appoint

the arbitrator, as postulated in Datar Switchgear (2000) 8 SCC 151, flows from the act of the petitioner in approaching the Court under Section 11 (6),

and not from the default of the respondent in appointing the arbitrator in terms of the agreement with between the parties.

NHAI has sought, further, to contend that, once it had appointed an arbitrator, any grievance regarding the constitution of the Arbitral Tribunal

would have to be agitated, by the petitioner, by way of proceedings under Section 13 of the 1996 Act, and not by means of the petitioner under Section

11 (6) which was, for the said reason, not maintainable. Essentially, therefore, the petitioner seeks setting aside of the appointment, by NHAI, of its

arbitrator, which cannot be claimed in a petition under Section 11 (6). Reliance has been placed, for this purpose, on the judgement of the Supreme

Court in Antrix Corporation Ltd (2014) 11 SCC 560and of this Court in Lanco Infratech v. Hindustan Construction Corporation 217 (2015) DLT

373.Reliance has also been placed on NHAI v. Bumihiway DDB Ltd (2006) 10 SCC 763, to contend that the petitioner was not entitled to prefer the

present petition without, in the first instance, moving the IRC for appointment of a Presiding Arbitrator.

Analysis

The procedure for constituting the Arbitral Tribunal, as contemplated by Clause 26.3.1 of the Contract, may be outlined thus:

(i) The Arbitral Tribunal would consist of three arbitrators.

(ii) One arbitrator, each, is to be appointed by the petitioner and by NHAI.

(iii) The first party, appointing its arbitrator, would issue a notice, to the other party, intimating it of such appointment. The second party is required to

appoint its arbitrator within 30 days of receipt of such notice.

(iv) In the event of failure, by the second party, to appoint its arbitrator within the said period of 30 days, the arbitrator for the second party would be

appointed by the Chairman of the Executive Committee of the IRC.

(v) These two arbitrators would choose the third arbitrator, who would be the Presiding Arbitrator .

(vi) In case the two arbitrators, appointed by the parties, do not appoint the Presiding Arbitrator within 30 days of the appointment of the second

arbitrator, the Presiding Arbitrator would be appointed by the Chairman of the Executive Committee of the IRC.

The petitioner nominated its arbitrator and intimated NHAI, accordingly, vide letter dated 20th January 2020. The petitioner was intimated,

regarding the appointment of Mr. Prabhat Krishna, by the respondent, as its arbitrator, only vide communication dated 30th April, 2020. Even assuming

Mr. Prabhat Krishna was appointed as arbitrator, by the respondent, on 23rd March, 2020, that appointment would, nevertheless, be beyond the period

of 30 days stipulated in Clause 26.3.1 (i) of the Contract. Clearly, therefore, there was failure, on the part of the respondent, in appointing its arbitrator,

within the meaning of Clause 26.3.1 (i).

The residuary course of action, contemplated by Clause 26.3.1 (iv), in the event of the second party failing to appoint its arbitrator within 30 days

of receipt of notice, from the first party, is by way of recourse to the Chairman of the Executive Committee of the IRC, who was required, then, to

appoint the arbitrator for the second party.

The petitioner wrote, on 24th February, 2020, to the Secretary General of the IRC, to appoint an arbitrator on behalf of NHAI. The IRC,

admittedly, never appointed an arbitrator on behalf of NHAI, and contented itself by informing the petitioner, vide letter dated 8th May, 2020, that

NHAI had appointed its arbitrator. Mr. Yogesh contends that the IRC was entirely unjustified in having abdicated its responsibility, to appoint the

arbitrator on behalf of NHAI in this fashion.

I agree.

The IRC has a specific procedural dispensation, framed by itself, to be followed when approached for appointment of an arbitrator. Clause 2.4 of

the “Guidelines for Empanelment and Nomination of Arbitrators, Presiding Arbitrators, Dispute Review Experts, Member/Chairman of Dispute

Review Board and Conciliators etc.â€, supra, as framed by the IRC for its own guidance, requires the IRC to prepare a short list of five arbitrators,

from the list maintained by the IRC Secretariat, and put up the five shortlisted names before the High Powered Committee of the IRC, which is

required to nominate the arbitrator from the said list within 30 days, after having been so authorised by a standing order of the Executive Committee of

the IRC. As to why the IRC did not choose to adopt the procedure, in the case of the petitioner, is anybody’s guess. Suffice it to state that there

was complete failure, on the part of the IRC, to nominate the arbitrator on behalf of NHAI, as requested by the petitioner. Such a failure has been

held, by the Supreme Court in Walter Bau AG (2015) 3 SCC 800, to be fatal.

Section 11(6) of the 1996 Act postulates that, where there is failure, on the part of a party, to act as required by the procedure stipulated in the

agreement for appointment of the arbitrator, the appointment shall be made, in the case of domestic arbitration, by the High Court, “unless the

agreement on the appointment procedure provides other means for securing the appointmentâ€. In the present case, there was failure, on the part of

NHAI, in appointing its arbitrator, as required by the procedure stipulated in Clause 26.3.1 (iv) of the Contract, within 30 days of receipt of the notice,

dated 20th January, 2020, from the petitioner. “Other means for securing the appointmentâ€, within the meaning of Section 11 (6) of the 1996 Act,

were provided in Clause 26.3.1(iv), by way of recourse to the Chairman of the Executive Committee of the IRC. The petitioner approached the

Secretary General of the IRC, in the absence of any Chairman of the Executive Committee thereof. No dispute, regarding whether the Secretary

General of the IRC could substitute himself in place of the Chairman of the Executive Committee, has been raised before me in the present case, and

I proceed, therefore, on the premise that the recourse, to the Secretary General of the IRC, by the petitioner, was in accordance with Clause

26.3.1(iv) of the Contract. As already noted hereinabove, the IRC failed to appoint any arbitrator. The resort, by the petitioner, to the “other means

of securing the appointmentâ€​, as provided by Clause 26.3.1 (iv), was, therefore, rendered abortive.

Clause (c) in Section 11 (6) provides that where, under the appointment procedure agreed upon by the parties, an institution fails to perform any

function, entrusted to it under the procedure, the appointment would, in the case of domestic arbitrations, have to be made by the High Court. The IRC

having failed to perform the function entrusted to it by Clause 26.3.1(iv), the petitioner approached this Court.

Prior to the petitioner filing the present petition before this Court, but after the petitioner had approached the IRC, the NHAI, on 23rd March, 2020,

appointed Mr. Prabhat Krishna as its arbitrator, and informed the petitioner, accordingly, vide e-mail dated 30th April, 2020. The petitioner contends

that, once the period of 30 days, stipulated in Clause 26.3.1 (i) of the Contract had expired, and the petitioner had approached the IRC, the right of

NHAI to appoint its arbitrator stood extinguished. NHAI, per contra, contends that its right, to appoint an arbitrator, subsisted till the petitioner filed the

present petition before this Court and that, as it had appointed Mr. Prabhat Krishna as its arbitrator prior to the filing of the present petition, the

appointment was in order. NHAI relies, for this purpose, on the judgement of the Supreme Court in Datar Switchgear (2000) 8 SCC 151.

It becomes necessary, therefore, to carefully read Datar Switchgear (2000) 8 SCC 151.

In Datar Switchgear (2000) 8 SCC 151, the appellant (hereinafter referred to as “Datarâ€) entered into a lease agreement with the respondent

Tata Finance Ltd. (hereinafter referred to as “Tataâ€), in connection with which certain disputes arose. Tata sent a notice, dated 5th August, 1999,

to Datar, claiming an amount of Rs. 28,458,701/â€" and stipulating, in the alternative, that the notice be treated as one issued under Clause 20.9 of the

lease agreement, which provided for arbitration to resolve disputes between the parties. Datar did not pay the demanded amount. Having waited for

30 days, Tata filed a petition, under Section 9 of the 1996 Act, before the High Court, on 26th October, 1999, seeking interim protection. On 25th

November, 1999, Tata appointed a Sole arbitrator. Datar, thereupon, filed an Arbitration Application before the Chief Justice of the High Court of

Bombay, praying for appointment of another arbitrator. Tata opposed the application. The learned Chief Justice dismissed the application of Datar as

not maintainable, as a Sole arbitrator had already been appointed by Tata. Datar challenged the said decision, of the learned Chief Justice, before the

Supreme Court.

Before the Supreme Court, Datar contended that Tata ought to have appointed the arbitrator within a reasonable time of receipt of the notice,

dated 5th August, 1999. It was also contended that the lease agreement did not envisage unilateral appointment of the arbitrator by any party.

Observing that the application, before the learned Chief Justice of the High Court of Bombay must have been preferred by Datar under Section

11(6)(a) of the 1996 Act, the Supreme Court identified the question arising for consideration as “whether there was any real failure of the

mechanism provided under the lease agreement†for appointment of the arbitrator. Clause 20.9 of the lease agreement, which provided for

arbitration, read as under:

“It is agreed by and between the parties that in case of any dispute under thislease the same shall be referred to an arbitrator to be nominated by

the lessor and the award of the arbitrator shall be final and binding on all the parties concerned. The venue of such arbitration shall be in Bombay.

Save as aforesaid, the courts at Bombay alone and no other courts whatsoever will have jurisdiction to try suit in respect of any claim or dispute

arising out of or under this lease or in any way relating to the same.â€​

Before proceeding to the issue delineated by it, the Supreme Court noted, as “pertinent†(in para 10 of the report), the fact that no notice period

was prescribed in the arbitration clause. In view thereof, the Supreme Court proceeded to observe, in para 11 of the report, that the question that

arose was, in the circumstances, “whether for purposes of Section 11(6) the parties to whom a demand for appointment is made, forfeits his right

to do so if he does not appoint an arbitrator within 30 days.†Datar contended that, even if no specific time period for appointment of arbitrator was

stipulated in Clause 20.9, Tata was required to appoint the arbitrator within a reasonable period, and default, on the part of Tata, in doing so, amounted

to failure of the procedure contemplated under the lease deed.

The Supreme Court held thus, in para 14 of the report:

“The above decision has no application to the facts of this case as in the present case, the arbitrator was already appointed before the appellant

invoked Section 11 of the Act. The counsel for the appellant contended that the arbitrator was appointed after a long lapse of time and that too without

any previous consultation with the appellant and therefore it was argued that the Chief Justice should have appointed a fresh arbitrator. We do not find

much force in this contention, especially in view of the specific words used in the arbitration clause in the agreement, which is extracted above.This is

not a case where the appellant requested and gave a notice period for appointment of an arbitrator and the latter failed to comply with that request.

The 1st respondent asked the appellant to make payment within a stipulated period and indicated that in the event of non-payment of the amount

within fourteen days, the said notice itself was to be treated as the notice under the arbitration clause in the agreement. The amount allegedly due

from the appellant was substantial and the 1st respondent cannot be said to be at fault for having given a larger period for payment of the amount and

settling the dispute. It is pertinent to note that the appellant did not file an application even after the 1st respondent invoked Section 9 of the Act and

filed a petition seeking interim relief. Under such circumstances, it cannot be said that there was a failure of the procedure prescribed under the

contract.â€​

(Emphasis supplied)

Thereafter, the Supreme Court, after noting the reliance, placed by Datar on the judgement of this Court in B.W.L. Ltd v. M.T.N.L. (2000) 85

DLT 84 : (2000) 2 Arb LR 190 and the judgement of the High Court of Andhra Pradesh in Sharma & Sons v. Engineer-in-Chief, Army Headquarters

(2000) 2 Arb LR 31 (AP) , observed, in para 17 of the report, that, in these cases, appointment of the arbitrator had not been made by the opposite

party before filing of the application under Section 11. These cases were not, therefore, it was observed, directly in point. Thereafter, in para 18 of the

report, the Supreme Court went on to observe thus:

“In the present case, the respondent made the appointment before the appellant filed the application under Section 11 but the said appointment was

made beyond 30 days. Question is whether in a case falling under Section 11(6), the opposite party cannot appoint an arbitrator after the expiry of 30

days from the date of demand?â€​

(Emphasis supplied)

Having framed the above query, the Supreme Court went on to answer it in the negative, in para 19 of the report, holding that the failure, on the

part of Tata , in appointing the arbitrator within 30 days of receipt of the notice from Datar, would not result in forfeiture of the right, of Tata, to

appoint an arbitrator, provided the arbitrator was appointed before Datar moved the learned Chief Justice under Section 11(6). Mr. Bishnoi,

predictably, relies on this finding.

As a bare reading of para 19 of the report in Datar Switchgear (2000) 8 SCC 151 would reveal that the reliance thereon, by Mr. Bishnoi, is

misplaced. Para 19 of the report read thus:

“So far as cases falling under Section 11(6) are concerned â€" such as the one before us â€" 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 does 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, that 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. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within

30 days of demand, the right to appoint an arbitrator under Section 11(6) is forfeited.â€​

(Underlining and bold emphasis supplied; italics in original)

A conjoint reading of paras 14 and 19 of the report in Datar Switchgear (2000) 8 SCC 151 makes it more than amply clear that the Supreme Court

held the right of Tata to appoint the arbitrator could not to have been forfeited on the expiry of 30 days from the receipt of the notice, dated 5th

August, 1999, issued by Datar because, firstly, the arbitration clause, in the lease deed between Datar and Tata, did not stipulate any period within

which Tata was to appoint the arbitrator after receipt of notice from Datar; secondly, neither did Datar, in its notice dated 5th August, 1999, call upon

Tata to appoint the arbitrator within any specific time period (though, in the absence of any time period having been specified in the arbitration clause,

even if Datar had stipulated any such time period within which Tata was to appoint its arbitrator, that may not have made much difference, in my

view) and, lastly, whereas Section 11(4) and 11(5) stipulated 30 days as the time within which the arbitrator was to be appointed, no such time period

was to be found in Section 11(6). It was in these circumstances that the Supreme Court held that, till the filing of the petition under Section 11(6)

before the High Court by Datar, the right of Tata to appoint the arbitrator could not be said to have been forfeited. Essentially, therefore, what the

Supreme Court held was that, in the absence of any stipulation as to time period within which Datar was required to appoint the arbitrator, contained

either in the arbitration clause in the lease deed or in Section 11(6), the argument, of Datar, that Tata was required to have appointed the arbitrator

within a “reasonable period of 30 daysâ€​ from receipt of the notice dated 5th August, 1999 issued by Datar, was not sustainable in law.

It is clear that Datar Switchgear (2000) 8 SCC 151 can have no application, whatsoever, to a case in which the arbitration clause, in the

agreement between the parties, specifically stipulated the time period within which the recipient of the notice invoking arbitration, issued by the other

party, was required to appoint the arbitrator. This position stands underscored by the following words, contained in para 23 of Datar Switchgear (2000)

8 SCC 151:

“When parties have entered into a contract and settled on a procedure, due importance has to be given to such procedure. Even though

rigor of the doctrine of “freedom of contract†has been whittled down by various labour and social welfare legislation, still the court

has to respect the terms of the contract entered into by parties and endeavour to give importance and effect to it. When the party has not

disputed the arbitration clause, normally he is bound by it and obliged to comply with the procedure laid down under the said clause.â€​

(Emphasis supplied)

Datar Switchgear (2000) 8 SCC 151, if anything, therefore, militates against the stands canvassed by Mr. Bishnoi, as it accords pre-eminence to

the covenants of the contract between the parties, and mandates strict adherence thereto.

In this context, Mr. Bishnoi also sought to submit that the arbitration clause, in the contract between the petitioner and NHAI, did not forfeit,

expressly, the right of NHAI to appoint an arbitrator, on the expiry of 30 days from receipt of notice from the petitioner. I am unable to accept this

submission. Contractual covenants, though they command absolute and implicit compliance, cannot be construed in a manner akin to statutory edicts.

They have to be reasonably construed, in such a way as would further the manifest intention of the contracting parties. Clause 26.3.1(iv) clearly states

that, on failure of either party, to appoint its arbitrator, under Clause 26.3.1(i), within 30 days of receipt of the notice of the appointment of the

arbitrator by the other, the Chairman of the Executive Committee of the IRC shall appoint the arbitrator. The use of the word “shall†is reflective

of the mandatory nature of this clause. To hold that, even after the expiry of 30 days from receipt of notice from the first party, regarding appointing

of an arbitrator by it, the second party would continue to retain the right to appoint its arbitrator, would amount to reducing, to a redundancy, the

specification of 30 days expressly engrafted into this Clause, and would also militate against the express intent thereof. Where the contract has

expressly stipulated time period of 30 days, within which the second party could appoint its arbitrator after receipt of notice from the first party,

applying the law enunciated in para 23 of Datar Switchgear (2000) 8 SCC 151, the right to appoint the arbitrator would stand transferred to the IRC,

which would necessarily require extinguishing of such a right in the hands of NHAI. To reiterate, Clause 26.3.1 (i) cannot, in my view, be reasonably

construed as retaining, with NHAI, the right to appoint its arbitrator, despite the expiry of 30 days from the date of receipt of notice from the

petitioner, intimating the NHAI of the appointment of its arbitrator by the petitioner. Once the period of 30 days had expired, Clause 26.3.1(iv) vested

the right, to appoint the arbitrator on behalf of NHAI, with the IRC. The use of the word “shall†in Clause 26.3.1(iv) amounts to express

evisceration by contractual dispensation, of the right of NHAI to appoint its arbitrator, once 30 days, from the date of receipt of notice from the

petitioner, had expired. The contention of Mr. Bishnoi, to the contrary, is therefore rejected.

The following passage, from Premco-DKSPL (JV)4 re-emphasises this legal position:

“8. In the aforesaid facts and circumstances it did not lie in the mouth of the respondent contractor that the appellants had committed a default and

had forfeited their right to appoint arbitrators as per the terms of the agreement. The learned Judge failed to read the relevant clause of the agreement

properly and therefore wrongly placed reliance upon the judgment in Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151. In that case this

Court had extracted the relevant terms of agreement in para 9 which showed that there was no stipulation of any time-limit like that of 60 days in the

present case.The terms of the agreement bind the parties unless they have chosen to repudiate the same. Relevant terms, if provided, will be material

for deciding when the right of a party to appoint the arbitrator will suffer forfeiture and when the other party would be entitled to give notice and on

failure, move application under Section 11(6) of the Act. Such terms deserve respect of the parties and attention of the Court.â€​

(Emphasis supplied)

Mr. Bishnoi, however, relies on the judgement of an Hon’ble Single Judge of the Supreme Court (Ranjan Gogoi, J., as he then was), in Walter

Bau AG (2015) 3 SCC 800.

The arbitration clause, in Walter Bau AG (2015) 3 SCC 800, contained the following covenant:

“If one of the parties fails to appoint its arbitrator in pursuance of sub-clauses (i) and (ii) above, within 30 days after receipt of the notice of the

appointment of its arbitrator by the other party, then the International Centre for Alternative Dispute Resolution in India, both in cases of foreign

contractors as well as Indian contractors, shall appoint an arbitrator. A certified copy of the order of the International Centre for Alternative Dispute

Resolution in India making such an appointment shall be furnished to each of the parties.â€​

Paraphrasing this clause, the Supreme Court observed, in para 3 of the report, as under:

“A reading of the aforesaid clause of the agreement would go to show that after one of the parties thereto invokes the arbitration clause; appoints

its arbitrator and thereafter gives notice to the other party to appoint its arbitrator, if the same is not done within 30 days or if the two arbitrators

appointed by both sides fail to nominate a third arbitrator, the matter is to be referred to the International Centre for Alternative Dispute Resolution in

India (for short “ICADRâ€​).â€​

(Emphasis supplied)

Thus, though the arbitration clause, between the parties did not specifically, and in express terms, forfeit the right of the second party, to appoint its

arbitrator even after 30 days, from the date of receipt of notice from the first party, had expired, the Supreme Court understood the clause as

mandating reference to the ICADR for appointment of the arbitrator on behalf of the defaulting party, once the said period of 30 days had expired.

This, again, discountenances the submission, of Mr. Bishnoi, that, in the absence of any express forfeiture, by the arbitration clause, of the right of

NHAI to appoint its arbitrator on the expiry of 30 days from the date of receipt of notice from the petitioner, such a right was deemed to continue to

subsist.

In the case before the Supreme Court, the appellant Walter Bau AG (hereinafter referred to as “Walterâ€) issued a notice, dated 24th

February, 2004, to the respondent (hereinafter referred to as “the Municipal Corporationâ€), informing the Municipal Corporation that it had

appointed one Mr. R. G. Kulkarni as its arbitrator, and calling on the Municipal Corporation to do likewise. The Municipal Corporation having failed to

respond within the period of 30 days contemplated in the afore-extracted arbitration clause, Walter approached the ICADR on 19th May, 2014. The

ICADR, vide letter dated 3rd June, 2014, called upon the Municipal Corporation to appoint an arbitrator from a panel of three names furnished by it, or

to independently appoint an arbitrator. Availing the second option, the Municipal Corporation appointed Hon’ble Mr. Justice A. D. Mane, a learned

retired Judge of the High Court of Bombay, as its arbitrator, vide communication dated 3rd July, 2014. Walter approached the High Court of Bombay,

under Section 11(6) of the 1996 Act, on 21st August, 2014.

Before the High Court, as well as before the Supreme Court, it was sought to be contended, by the Municipal Corporation, that, as the municipal

Corporation had appointed its arbitrator on 3rd July, 2014, before Walter filed its Section 11(6) petition in the High Court, nothing survived for

consideration. Reliance was placed, for the purpose, on Datar Switchgear (2000) 8 SCC 151.

The findings of the Supreme Court in para 10 of the report, on which Mr. Bishnoi relies, read thus:

“Unless the appointment of the arbitrator is ex facie valid and such appointment satisfies the Court exercising jurisdiction under Section 11(6) of the

Arbitration Act, acceptance of such appointment as a fait accompli to debar the jurisdiction under Section 11(6) cannot be countenanced in law. In the

present case, the agreed upon procedure between the parties contemplated the appointment of the arbitrator by the second party within 30 days of

receipt of a notice from the first party.While the decision in Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151 may have introduced

some flexibility in the time frame agreed upon by the parties by extending it till a point of time anterior to the filing of the application under Section

11(6) of the Arbitration Act, it cannot be lost sight of that in the present case the appointment of Shri Justice A.D. Mane is clearly contrary to the

provisions of the Rules governing the appointment of arbitrators by ICADR, which the parties had agreed to abide by in the matter of such

appointment. The option given to the respondent Corporation to go beyond the panel submitted by ICADR and to appoint any person of its choice was

clearly not in the contemplation of the parties. If that be so, obviously, the appointment of Shri Justice A.D. Mane is non est in law. Such an

appointment, therefore, will not inhibit the exercise of jurisdiction by this Court under Section 11(6) of the Arbitration Act. It cannot, therefore, be held

that the present proceeding is not maintainable in law. The appointment of Shri Justice A.D. Mane made beyond 30 days of the receipt of notice by

the petitioner, though may appear to be in conformity with the law laid down in Datar Switchgears Ltd., is clearly contrary to the agreed procedure

which required the appointment made by the respondent Corporation to be from the panel submitted by ICADR. The said appointment, therefore, is

clearly invalid in law.â€​

(Italics and underscoring supplied)

It is clear, from a reading of the above passage from Walter Bau AG (2015) 3 SCC 800, that the main ground, on which the Supreme Court

rejected the submission of the Municipal Corporation, was that the procedure adopted by the ICADR was contrary to its own rules. Once the

reference had been made to the ICADR, the Supreme Court held that the ICADR could not throw the ball back into the court of the Municipal

Corporation, by giving it the option to appoint its own independent arbitrator. To that extent, the controversy before the Supreme Court in Walter Bau

AG (2015) 3 SCC 800 was somewhat different from that which arises in the present case. Even so, the italicised words, in para 40 of the report (as

extracted hereinabove), indicate that the Supreme Court reiterated, yet again, the position, emanating from the contract, that the Municipal Corporation

was required to appoint its arbitrator within 30 days of receipt of notice from Walter.

Mr. Bishnoi seeks to capitalise on the underscored sentences, from the afore-extracted passage. He submits that the sentences amount to an

acknowledgement, by the Supreme Court, that the 30 day notice period, stipulated in the arbitration clause between the parties (extracted in para 42

supra) was not sacrosanct and, extrapolating this legal position to the facts of the present case, even if NHAI had defaulted in appointing its arbitrator

within 30 days of receipt of notice from the petitioner, it nevertheless retained the right to appoint the arbitrator till the filing of the Section 11 petition,

by the petitioner, before this Court.

The argument, though attractive, is unacceptable.The observation, by the Supreme Court, that “the decision in Datar Switchgears Ltd. v. Tata

Finance Ltd., (2000) 8 SCC 151 may have introduced some flexibility in the time frame agreed upon by the parties by extending it till a point of time

anterior to the filing of the application under Section 11(6) of the Arbitration Act†or, for that matter, its later observation, in the same passage, that

“the appointment of Shri Justice A.D. Mane made beyond 30 days of the receipt of notice by the petitioner, though may appear to be in conformity

with the law laid down in Datar Switchgears Ltd.†cannot be regarded as declarations of the law, under Article 141 of the Constitution of India, in a

manner contrary to the law as declared in Datar Switchgears Ltd1. Nor, in my opinion, can these observations be read as extending the contractually

stipulated period of 30 days from the date of receipt of notice by the first party, within which the second party was to appoint its arbitrator, till the date

of filing of the Section 11(6) petition by the first party. A judgement is an authority only for what it decides, and not for what may logically appear to

flow from it. [Islamic Academy of Education v. State of Karnataka, (2003) 6 SCC 697; Laxmi Devi v. State of Bihar, (2015) 10 SCC 241] In any

event, the Supreme Court having itself regarded this factor as irrelevant to the determination of the controversy before it, and having held in favour of

Walter on an entirely different ground, the reliance, by Mr. Bishnoi, on these observations, cannot be treated as justified.

In fact, the afore-extracted passage from Walter Bau AG (2015) 3 SCC 800 would, if anything, militate against the stand adopted by Mr. Bishnoi.

The Supreme Court declared the appointment of the arbitrator, by the Municipal Corporation in that case, to be invalid, as the appointment was not in

accordance with the procedure of the ICADR, who had been approached by Walter consequent on default, by the Municipal Corporation, to appoint

the arbitrator within 30 days of receipt of notice from Walter. Extending the said ratio decidendi to the present case, once NHAI had defaulted in

appointing its arbitrator within 30 days of receipt of notice from the petitioner, and the petitioner had, thereafter, approached IRC, IRC was required to

appoint the arbitrator in accordance with the procedure formulated by it, as extracted in para 11 supra. The IRC, therefore, defaulted in its obligations,

by failing to appoint an arbitrator, on behalf of NHAI, allowing NHAI to appoint the arbitrator, and merely communicating the fact to the petitioner on

8th May, 2020. For this reason, too, the appointment of Mr. Prabhat Krishna, as its arbitrator, by the NHAI, was invalid.

The alternative submission, of Mr. Bishnoi, that, once NHAI had appointed to its arbitrator, such appointment could be challenged, by the

petitioner, only under Section 13, and not by way of a petition under Section 11 (6) of the 1996 Act, is also fully answered by Walter Bau AG (2015) 3

SCC 800. An identical plea was raised, by the Municipal Corporation, before the Supreme Court in that case, and was rejected in para 9 of the report.

Paras 7 and 9 of the report in Walter Bau AG (2015) 3 SCC 800, which speak for themselves, and need no paraphrasing, read thus:

“7. Mr Mukul Rohatgi, learned Attorney General, appearing for the respondent Corporation, on the other hand, has submitted that the present

petition would not be maintainable inasmuch as an arbitrator has already been appointed and any exercise of power under Section 11(6) of the

Arbitration Act, at this stage, would operate as an ouster of the said arbitrator. It is submitted that the remedy of the petitioner, if any, lies elsewhere

and under different provisions of the Arbitration Act and not by way of an application under Section 11(6) thereof. Reliance has been placed on the

decision of this Court in Antrix Corpn. Ltd. v. Devas Multimedia (P) Ltd., (2014) 11 SCC 560 and another recent pronouncement of this Court dated

16-12-2014 in Pricol Ltd. v. Johnson Controls Enterprise Ltd., (2015) 4 SCC 177.

While it is correct that in Antrix and Pricol Ltd, it was opined by this Court that after appointment of an arbitrator is made, the remedy of the

aggrieved party is not under Section 11(6) but such remedy lies elsewhere and under different provisions of the Arbitration Act (Sections 12 and 13),

the context in which the aforesaid view was expressed cannot be lost sight of. In Antrix , appointment of the arbitrator, as per the ICC Rules, was as

per the alternative procedure agreed upon, whereas in Pricol Ltd, the party which had filed the application under Section 11(6) of the Arbitration Act

had already submitted to the jurisdiction of the arbitrator. In the present case, the situation is otherwise.â€​

These words apply, mutatis mutandis, to the present case.

Even otherwise, it is fundamental that an illegal or invalid act cannot result in a fait accompli, disabling a court of law from granting relief.

Conclusion

In view of the fact that the arbitration clause, in the contract between the petitioner and NHAI, required NHAI to appoint its arbitrator within 30

days of receipt of notice from the petitioner, and defaulted in doing so, I am of the opinion that the appointment, by NHAI, of Mr. Prabhat Krishna, as

arbitrator, on 23rd March, 2020, was invalid. The said appointment, therefore, is quashed and set aside.

NHAI, as well as the IRC, having, therefore, defaulted in appointing the arbitrator on behalf of NHAI, this task devolves, by virtue of Section

11(6)(a) and (c), on this Court. Accordingly, this Court appoints Hon’ble Mr. Justice Pradeep Nandrajog, former Chief Justice of the High Court

of Rajasthan and an eminent retired Judge of this Court, as the arbitrator on behalf of NHAI, in place of Mr. Prabhat Krishna.

Dr. Seshadri and Hon’ble Mr. Justice Nandrajog would, therefore, proceed to appoint the Presiding Arbitrator, in accordance with the

arbitration clause in the contract between the petitioner and NHAI, whereafter the Arbitral Tribunal, thus constituted, would proceed to arbitrate on

the disputes between the parties.

Inasmuch as the appointment of Hon’ble Mr. Justice Pradeep Nandrajog, as the learned arbitrator on behalf of NHAI, is being made by this

Court, in exercise of its jurisdiction under Section 11 (6) (a) and (c) of the 1996 Act, the learned Arbitrator would not be bound by the fee schedule

stipulated in the contract, and would be entitled to charge fees in accordance with the Fourth Schedule to the 1996 Act. The fees would be equally

borne by the parties.

The petition is allowed in the aforesaid terms and to the aforesaid extent, with no orders as to costs.