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Judgment
Heard Mr. C.Raghu, learned counsel for the applicant.
2 Though cause list reflects the name of Mr.B.Pandu Ranga Reddy, as the learned counsel for the respondent, he was not present in the hearing on 09.02.2022 and thereafter again on 11.02.2022. Today also he is not present. In such circumstances, Court has decided to proceed with the Arbitration Application since this was filed way back in the year 2016.
3 This is an application under Section 11 (5) and (6) of the Arbitration and Conciliation Act, 1996 (briefly, ‘the 1996 Act’, hereinafter) for appointment of arbitrator.
4 Case of the applicant is that it had entered into a dealership agreement with the respondent on 10.01.2005. Though the term of the agreement was for a period of three years, the same could be extended by the parties mutually. In the event respondent did not wish to extend the agreement, it was required to give one month’s prior notice and in the absence of such notice, the agreement would be deemed to have been renewed.
5 The dealership agreement dated 10.01.2005 has been extended by the parties. During the subsistence of the agreement, certain disputes arose between the applicant and the respondent in the year 2014; whereafter respondent stopped supply of vehicles to the applicant in the month of November, 2014 which in turn led to several associated disputes.
6 Clause 28 of the agreement dated 10.01.2005 provides for dispute resolution by way of arbitration.
7 In terms of Clause 28, applicant issued notice dated 27.12.2014 to the respondent invoking the arbitration clause and appointing Sri N.Rama Rao as its nominee arbitrator. Respondent by letter dated 23.01.2015 while denying the allegations of the applicant, however, nominated Sri Mudit Sharma, advocate on record, Supreme Court of India, as its nominee arbitrator.
8 Nominee arbitrator of the applicant addressed a letter dated 14.02.2015 to the nominee arbitrator of the respondent for appointment of the third arbitrator. While several names were proposed and considered but no consensus could be reached. Because of the stalemate, till date, no third arbitrator could be appointed. In the meanwhile, applicant filed petition under Section 9 of the 1996 Act before the III Additional Chief Judge, City Civil Court at Hyderabad, being O.P.No.2792 of 2014. Learned Court below passed interim order on 15.12.2014 directing the respondent not to stop supply of vehicles to the applicant. It is contended that since O.P.No.2792 of 2014 has been filed before the Civil Court at Hyderabad, this Court would have the jurisdiction to appoint the third arbitrator under Section 11 (6) of the 1996 Act.
9 Respondent has filed counter affidavit denying and disputing the allegations made by the petitioner. Insofar appointment of arbitrator is concerned, stand taken is that this Court has no territorial jurisdiction. Regarding petition under Section 9 of the 1996 Act, it is stated that respondent has taken necessary steps under Order VII Rule 10 of the Code of Civil Procedure, 1908 (CPC) for return of the petition. However, it is admitted that respondent had issued statutory notice to the applicant on 27.12.2014 nominating Sri Mudit Sharma, advocate on record, Supreme Court of India, as nominee arbitrator of the respondent. However, as the nominee arbitrators failed to appoint the third arbitrator, respondent filed Arbitration Case before the High Court for the States of Punjab & Haryana at Chandigarh, being Arbitration Case No.228 of 2015, which is stated to be pending. In the above backdrop, respondent seeks dismissal of the present application.
10 Applicant in its reply affidavit justified filing of the Section 9 petition before the Civil Court at Hyderabad. Further, it is contended that Punjab & Haryana High Court does not have the jurisdiction to entertain an application under Section 11(6) of the 1996 Act.
11 Learned counsel for the applicant submits that arbitration application filed by the respondent before the High Court of Punjab & Haryana at Chandigarh, being Arbitration Case No.228 of 2015, was decided on 01.02.2019 appointing Justice Rekha Sharma, former Judge of the Delhi High Court as the sole arbitrator. Subsequently, a review application was filed by the applicant wherein notice was issued and the order dated 01.02.2019 was suspended.
12 Learned counsel for the applicant has referred to Section 42 of the 1996 Act to contend that this Court would have the jurisdiction to pass appropriate order for appointment of third arbitrator.
13 Submissions made have been considered. Also perused the materials on record.
14 Before adverting to the arbitration clause in the agreement in question, it would be apposite to deal with Section 11 (6) of the 1996 Act. In this proceeding we are concerned with Clause (b) of Sub-Section (6) of Section 11 of the 1996 Act, which provides that where, under an appointment procedure agreed upon by the parties, the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure, the appointment shall be made on an application of the party by the arbitraral institution designated by the Supreme Court in case of international commercial arbitration or by the High Court in case of arbitrations other than international commercial arbitration.
15 The dealership agreement is dated 10.01.2005. Clause 28 deals with arbitration and jurisdiction. Clause 28 reads as under:
“28. ARBITRATION & JURISDICTION
28.1 Each party shall in good faith perform this Agreement based on confidence placed by one party in the other and relied by the such party. Any dispute, controversy or claim, arising out of or relating to this Agreement, or the breach, termination or validity thereof shall be settled by arbitration under the Arbitration and Conciliation Act, 1996, subject to any statutory modification thereto.
28.2 The party invoking arbitration shall serve a notice on the other party nominating its nominee arbitrator and calling on the other party to nominate its nominee arbitrator within 15 days of the receipt of such notice. On receipt of the Notice, the other party shall, within the said period of 15 days, nominate its nominee Arbitrator. The two Arbitrators shall thereafter nominate a third arbitrator.
28.3 In case the other party does not respond to the Notice or fails to appoint its nominee Arbitrator within 15 days of receipt of the Notice, the person nominated by the party serving the Notice shall commence the arbitration proceedings as the Sole Arbitrator.
28.4 The Award of the Arbitrators shall be final and binding upon the parties and the Award shall include allocation of the cost of the arbitration proceedings.
28.5 The seat of arbitration shall be New Delhi.
28.6 For all purposes in relation to this agreement, the courts at Gurgaon alone shall have exclusive jurisdiction. No other Courts shall have jurisdiction to deal with any dispute or any matter between the parties arising out of this Agreement.”
16 From a reading of the above, it is seen that as per Clause 28 (1), any dispute, controversy or claim arising out of or relating to the agreement, or the breach, termination or validity thereof shall be settled by arbitration under the 1996 Act. Clause 28 (2) lays down the procedure to be followed by the party invoking arbitration. As per Clause 28 (2) either of the parties are required to nominate its arbitrator and the two arbitrators shall thereafter nominate a third arbitrator. However, Clause 28 (3) says that in the event of non-response by the other party, the party seeking arbitration may nominate its sole arbitrator and commence arbitration proceedings. While Clause 28 (4) speaks of finality of the award, Clause 28 (5) specifies that seat of arbitration shall be New Delhi. Finally it is stated that in case of any dispute between the parties, the Courts at Gurgaon would have exclusive jurisdiction.
17 The fact that applicant has filed petition under Section 9 of the 1996 Act before the Civil Court at Hyderabad is not disputed. That being the position and having regard to Section 42 of the 1996 Act, this Court would have the jurisdiction under Section 11 (6) (b) of the 1996 Act for appointment of the third arbitrator in the event of failure of the nominated arbitrators to appoint the third arbitrator. It is already on record that applicant had appointed Sri N.Rama Rao as its nominee arbitrator, whereas, respondent has nominated Sri Mudi Sharma, advocate on record, Supreme Court of India, as its nominee arbitrator. Unfortunately, the two arbitrators could not reach a consensus to nominate the third arbitrator as per requirement of Clause 28 (2) of the dealership agreement. On the other hand, we find that on an arbitration application moved by the respondent, High Court for the States of Punjab & Haryana at Chandigarh, vide order dated 01.02.2019, had appointed Justice (Retired) Rekha Sharma, a former Judge of the Delhi High Court as the sole arbitrator. However, on a review petition filed by the applicant contending that the High Court of Punjab & Haryana does not have the jurisdiction to entertain such application, the said order has been suspended.
18 The present application is pending before this Court since the year 2016. Almost six years have elapsed, still the third arbitrator is yet to be appointed. The situation needs to be addressed immediately.
19 Thus, having regard to the facts and circumstances of the case, Court is of the view that it would be just and proper if Justice (Retired) Rekha Sharma, a former Judge of the Delhi High Court, is appointed as the third arbitrator to head the Arbitral Tribunal.
20 Ordered accordingly.
21 Let a copy of this order be furnished to all the learned arbitrators who may decide amongst themselves the venue of arbitration keeping in mind the convenience of the parties, as well as that of the learned arbitrators. Let the Arbitral Tribunal hold its first meeting on 14.03.2022 in which the parties shall remain present.
22 Registry to communicate this order to all the learned arbitrators.
23 This disposes of the arbitration application.