NIIT Technologies Limited vs Directorate General, Border Security Force

Navin Chawla, J

This petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) has been filed by the

petitioner seeking appointment of a Sole Arbitrator to adjudicate the disputes that have arisen between the parties in relation to the Acceptance of

Tender No.P-4/857(AT-IPP)/PC/BSF/45/2010/1486-1516 dated February 25, 2010 (""Agreement"") for the Supply, Installation and Commissioning of

BSF Intranet Prahari Project on the Turnkey basis.

The Agreement between the parties contains Arbitration Agreement in form of Clauses 20 (XIX) to (XXI) and the same are reproduced herein

below:-

“Clause 20(XIX) -

In the case of dispute or difference arising between the purchaser and the supplier relating to any matter arising out of or connected with

the contract, such dispute or difference shall be settled in accordance with the Indian Arbitration and Conciliation Act, 1996.

Clause 20(XX) - Arbitration Proceedings shall be held at New Delhi, India and the language of the arbitration proceedings and that of all

documents and communications between the parties shall be English.

Clause 20(XXI) -

Sole Arbitration will be Secretary, Ministry of Home Affairs, and Govt. of India or by some other person appointed by him. As provided in

clause 24 of General Condition of Contract Form DGS&D-68 Ministry of Commerce Department for supplyâ€​.

The General Conditions of Contract (GCC) form DGS&D-68 Ministry of Commerce, Department for Commerce (Supply Division) also contains

Arbitration Agreement in Clause 24 which is reproduced herein below:-

“24. ARBITRATION

(i) In the event of any question, dispute or difference arising under these conditions or any special conditions of contract, or in connection

with this contract (except as to any matters the decision of which is specially provided for by these or the special conditions) the same shall

be referred to the sole arbitration of an officer in the Ministry of Law, appointed to be the arbitrator by the Director General of Supplies &

Disposals. It will be no objection that the arbitrator is a Government Servant that he had to deal with the matters to which the contract

relates or that in the course of his duties as a Government servant he has expressed views on all or any of the matters in dispute or

difference. The award of the arbitrator shall be final and binding on the parties to this contract.

(ii) In the event of the Arbitrator dying, neglecting or refusing to act or resigning or being unable to act for any reason, or his award being

set aside by the court for any reason, shall be lawful for the Director General of Supplies & Disposals to appoint another arbitrator in

place of the outgoing arbitrator in the manner aforesaid.

(iii) It is further a term of this contract that no person other than the person appointed by the Director General of Supplies & Disposals as

aforesaid should act as arbitrator and that, if for any reason that is not possible, the matter is not to be referred to Arbitration at all.

(iv) The arbitrator may from time to time with the consent of all the parties to the contract enlarge the time for making the award.

(v) Upon every and any such reference, the assessment of the costs incidental to the reference and award respectively shall be in the

discretion of the arbitratorâ€​.

The petitioner invoked the Arbitration Agreement vide its letter dated 31.03.2017. The respondent, vide its letter dated 01.05.2017 informed the

petitioner is under examination and outcome will be intimated to the petitioner. Having failed to get positive response to its request, the petitioner filed

the present petition in this Court.

Upon issuance of notice, the respondent has filed its reply to the petition submitting that vide order dated 07.12.2017, the respondent has appointed

the Sole Arbitrator.

The learned counsel for the respondent further relies upon Clause 24(iii) of the General Conditions of Contract (GCC), quoted hereinabove to

contend that only a person appointed by the Director General of Supplies & Disposals as aforesaid can act as an Arbitrator and that, if for any reason,

that is not possible, the matter is not to be referred to Arbitration at all.

As far as the first contention is concerned the petitioner had filed the present petition on 01.09.2017. Till that date, admittedly, the respondent had

not appointed any Arbitrator.

In Datar Switchgears Ltd. v. TATA Finance Ltd. (2000) 8 SCC 151 Supreme Court held as under :-

“19. 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) if 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 forfeitedâ€​.

In view of the above, the first contention of the respondent to the effect that the respondent having already appointed an Arbitrator, this Court will

cease to have jurisdiction under Section 11 of the Act to appoint an arbitrator, is hereby rejected.

As far as the second contention of the respondent, relying upon the Clause 24(iii) of the General Conditions of Contract (GCC), is concerned, it is

to be noted that the Arbitration Agreement between the parties is contained in Clause 20(XIX) to (XXI). These Clauses do not contain any restriction

as contained in Clause 24(ii) of the General Conditions of Contract (GCC). In any event, the respondent having lost its right to appoint an Arbitrator,

cannot rely upon Clause 24(iii) of the General Conditions of Contract (GCC) to contend that because of its own default, the arbitration agreement

between the parties would stand negated. No party can be allowed to take benefit of its own wrong.

In B.E. Billimoria & Co. Ltd. Vs. Rites Limited and Ors. MANU/DE/0266/2017 this Court had rejected a similar contention holding as under:-

“11. The reference to third sub-paragraph of paragraph 3 of Clause 25 of GCC, which expressly provides that no person other than a

person appointed by such Appointing Authority as aforesaid should act as arbitrator and if for any reason that is not possible, the matter

shall not be referred to arbitration at all, is misplaced. It is clear from the plain language that it is only applicable cases where there is

impossibility for an arbitrator appointed by the appointing authority, to act as an arbitrator. In the present case, it is nobody's case that it

would be impossible for an arbitrator appointed by the appointing authority to act as such. In the present case, the appointing authority has

failed to appoint the arbitrator as required under the provisions of the Act. Undisputedly, an independent arbitrator - who is not ineligible

to act as such in terms of section 12(5) of the act - appointed by the appointing authority would have no impediment in acting as an

arbitrator.

The decision in Newton Engineering and Chemicals Limited (supra) also does not advance the case of RITES any further. In that case,

the arbitration clause expressly provided that the disputes would be referred to the sole arbitration of ED (NR) of the respondent

corporation (IOCL) and due to restructuring of the IOCL, the office of ED(NR) had ceased to exist. Nonetheless the petitioner therein

insisted that only the ED be appointed as the arbitrator. It is in that context, the Court had held that appointment of Director (Marketing) as

an arbitrator was not possible. In the present case, the facts are materially different. As stated earlier, the procedure which requires RITES

to furnish names of serving officers is severable from the agreement to resolve the disputes by arbitration. It is difficult to accept that the

arbitration clause would stand frustrated if a serving officer of RITES is not appointed as an arbitrator.

This is also how RITES had understood the said clause as it had proceeded to appoint an arbitrator albeit after the petitioner had

moved this Court. The contention that the entire clause stands frustrated appears to be an afterthought and has been raised only after

RITES had appointed an arbitrator. Clearly, if the clause was frustrated as contended, there was no occasion for RITES to proceed to

appoint an arbitrator in the first place.

This controversy is also required to be viewed from another perspective: the stated policy to encourage resolution of disputes by

arbitration. It is now a stated legislative intent that alternative dispute resolution mechanism must be encouraged and, therefore, the Courts

are required to exercise their jurisdiction to hold the parties to their bargain to resort to arbitration for adjudication of the disputes.

In Chloro Controls (I) P. Ltd v Severn Trent Water Purification Inc. and Ors: (2013) 1 SCC 641, the Supreme Court had observed as

under:

Examined from the point of view of the legislative object and the intent of the framers of the statute, i.e., the necessity to encourage

arbitration, the Court is required to exercise its jurisdiction in a pending action, to hold the parties to the arbitration clause and not to

permit them to avoid their bargain of arbitration by bringing civil action involving multifarious cause of action, parties and prayers.

Thus, arbitration clause must be interpreted in favour of sustaining the arbitration agreement as opposed to permitting the parties to

resile from the same on technical grounds. As indicated above, the second sub-paragraph of paragraph 2 of Clause 25 of the GCC in so far

as it requires a serving officer to be appointed as an arbitrator, must be read as severable from the first sub-paragraph of paragraph 2 of

Clause 25 of GCC.

In addition to the above, I am also persuaded to accept the contention that question of the right of the appointing authority to appoint

an arbitrator and the procedure relating thereto would be relevant only if the appointing authority had proceeded to appoint the arbitrator

within the time prescribed or in any event, prior to the petitioner moving this Court. In Deep Trading Company (supra), the Supreme Court

had considered its earlier decision in the case of Newton Engineering and Chemicals Limited (supra) and had distinguished the same by

holding that in that case, the Supreme Court was not concerned with the question of forfeiture of the right of the corporation for

appointment of an arbitrator. The Supreme Court further held that since the corporation (IOCL) had failed to act as required under the

procedure, it had forfeited its right to do so. In the present case also although RITES had forwarded names of three persons to be

appointed as an arbitrator, it had failed to appoint the arbitrator as required under the arbitration clause. This is so because the petitioner

had failed to respond to the letter of RITES dated 28.07.2016 within a period of 15 days and thus, in terms of the arbitration clause, the

appointing authority was to proceed to appoint an arbitrator which admittedly the appointing authority had failed to do so.

It is apparent from the above that RITES had forfeited its right to appoint an arbitrator in terms of the arbitration clause and, therefore,

an arbitrator is required to be appointed by this Courtâ€​.

In view of the above, the second contention of the respondent is also unfounded and is hereby rejected.

I, therefore, see no impediment in appointing a Sole Arbitrator for adjudicating the disputes that have arisen between the parties in relation to the

above mentioned Letter of Acceptance.

I appoint Justice S.N. Dhingra (Retd.) (r/o C-2/44, Safdarjung Development Area, New Delhi-110016, Ph:-23792788, 9871300027, e-mail:-

shivnarayan.dhingra@gmail.com) as a Sole Arbitrator for adjudicating the disputes that have arisen between the parties. The Sole Arbitrator would

file his declaration in terms of Section 12 of the Act before proceeding with the reference. He shall be entitled to charge fee in accordance with the

Fourth Schedule of the Act, apart from other administrative expenses.

The petition is allowed in the above terms with no order as to costs.

Dasti.