M/S Vazra Securities And Detectives vs South Eastern Coal Fields Limited

This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, Act of 1996) for appointment of Arbitrator.

Heard Mr. Siddharth Shukla, learned counsel for the petitioner. Also heard Mr. Sudhir Bajpai, learned counsel for the respondents.

The petitioner was awarded contract for security work by the respondents for the period from 01.05.2011 to 30.04.2013. Subsequently, the period

of work was extended up to 21.10.2013.

An agreement dated 20.05.2011 was entered into by and between the petitioner and the respondents. Clause 17 of the said agreement is with

regard to Arbitration. Clauses 17.1, 17.2 and 17.3 are relevant and the same are quoted herein below :

“17.1. If any dispute, difference, question or disarrangement shall at any time here after arise between the parties hereto or the respective or

assigns in connection with or arising out of or in respect of contract, application or provision thereof, anything there under contained or arising there

under or so to right liabilities or duties of the said parties here under or any matter what so ever incidental to this contract shall be referred to the Sole

Arbitration of the person appointed by Director (Pers) of SECL CONTRACTOR shall have no objection to any such appointment that the arbitrator

so appointed in an employee of SECL on that he had dealt with the matter to which the contract related and that in the course of his duties as SECL

employee he has expressed views on all or any of the matter of disputes or difference.

17.2. If the arbitrator to whom the matter is originally be referred dues to refuses to act resigns for any reasons from the position of arbitrator, it shall

be lawful, for Director (Personnel) of SECL to appoint another person to act as Arbitrator. Such person shall be entitled to proceed with the reference

from the stage at which his predecessor left or to precede denovo,

17.3. It is agreed that no person other than the person appointed by Director (Pers) of SECL as aforesaid shall act as Arbitrator.â€​

According to the petitioner, the petitioner had successfully completed the work, but despite the same, security deposit was not released on the

ground of purported loss caused to the respondents. A dispute having arisen, the petitioner issued a legal notice dated 10.01.2019 requesting

appointment of an arbitrator within a period of 15 days. However, no arbitrator was appointed.

In the return filed by the respondents, a plea is taken that notice for arbitration was given after about six years of completion of work and therefore,

the present petition, filed on 04.06.2019, is barred by limitation.

It is pleaded that the petitioner has violated the terms and conditions of the agreement and has also violated the Guidelines sponsored by the

Director General of Resettlement willfully and therefore, a complaint case has been registered by the CBI / ACB, Jabalpur. It is also submitted that no

documents are available with the respondents as documents have been seized by the CBI.

Mr. Bajpai has drawn the attention of the Court to the documents annexed with the covering memo dated 18.10.2021, more particularly, to the letter

dated 16.11.2020 to contend that in terms of provisions contained in paras 6.1 and 12.2 of the agreement, the security deposit amount of Rs.8,19,927/-

is forfeited against an amount of Rs.29,37,065/-, recoverable from the petitioner and therefore, in exercise of provisions contained in para 9.C. of the

agreement, the petitioner was asked to deposit the balance amount of Rs. 21,17,138/-.

The narration of events demonstrate that there are disputes in between the parties. If the documents are not available, it is not understood how the

letter dated 16.11.2020 could be issued for recovery of balance amount. The plea of limitation raised by the respondents may not also hold good in

view of the letter dated 16.11.2020 forfeiting security amount and demanding an amount of Rs. 21,17,138/- from the petitioner on account of alleged

over-payment.

Clause 17.1 of the agreement dated 20.05.2011 provides, amongst others, that Director (Personnel) of the respondent No.1 shall appoint the

arbitrator and that he can also appoint a person who had dealt with the matter to which the contract related and who, during the course of his duties as

an employee of respondent No.1, had expressed views on all or any of the matter of disputes or differences.

Section 12(5) of the Act of 1996, reads as follows :

“12(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the

dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator :

Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in

writing.â€​

Sl. No. 1 of Seventh Schedule reads as follows :

“1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.â€​

Thus, any person who is an employee, consultant, advisor or has any other past or present business relationship with a party is not entitled to be

appointed as an arbitrator.

In view of the above discussion, I am of the considered opinion that the petitioner has made out a case for appointment of an arbitrator.

In view of the agreement between the parties, subject to acceptance by His Lordship, Hon'ble Mr. Justice Dhirendra Mishra, retired Judge of the

High Court of Chhattisgarh, is appointed to act as the Sole Arbitrator.

The Registry is directed to communicate this order to Hon'ble Mr. Justice Dhirendra Mishra in proper address.

The remuneration of the Arbitrator shall be settled with the mutual consent of the parties.

The arbitration application, accordingly, stands allowed. No order as to costs.