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SUPREME COURT OF INDIA
G.P. Mathur & Lokeshwar Singh Panta
M/s. Gas Authority of India Ltd. and anr-PETITIONER
VERSUS
M/s. Keti Construction (I) Ltd. and ors-RESPONDENT
Appeal (civil) 2440 of 2007
CIVIL APPEAL NO. 2440 OF 2007
(@ Special Leave Petition (Civil) No.11391 of 2005)
DECIDED ON: 11/05/2007
Arbitration - Construction Contracts - Arbitration and Conciliation Act, 1996, Section 37 - Contracts for construction work awarded by Gas Authority of India to M/s Keti Construction (I) Ltd. - Disputes arose regarding completion of construction work - Arbitration clause invoked - Appointment of arbitrator contested - Appellant no.1 failed to respond to notice and panel nominations by respondent no.1 - Appointment of arbitrator by appellant no.1 challenged - Appellant no.1's stand on resolving disputes through single arbitrator reiterated - Respondent no.1 unilaterally nominated arbitrator - Failure to appear before arbitrator appointed by appellant no.1 - Plea of jurisdiction not raised before arbitrator - Appeal allowed, setting aside Division Bench's judgment and affirming Single Judge's order dismissing petition under Section 34 of the Act
Fact of the Case:
Gas Authority of India awarded four contracts to M/s Keti Construction (I) Ltd. for construction work at Petro-Chemical Complex, Dibiyapur, District Etawah (U.P.). Disputes arose regarding completion of construction work, leading to invocation of the arbitration clause. Appellant no.1 failed to respond to notice and panel nominations by respondent no.1. Appointment of arbitrator by appellant no.1 was contested by respondent no.1. Appellant no.1's stand on resolving disputes through a single arbitrator was reiterated. Respondent no.1 unilaterally nominated an arbitrator and failed to appear before the arbitrator appointed by appellant no.1. Plea of jurisdiction was not raised before the arbitrator.
Finding of the Court:
The court found that appellant no.1's stand on resolving disputes through a single arbitrator was reasonable and reiterated throughout the correspondence. Respondent no.1 unilaterally nominated an arbitrator despite appellant no.1's clear stand. Failure to appear before the arbitrator appointed by appellant no.1 and failure to raise a plea of jurisdiction weighed heavily against respondent no.1.
Issues: The issues involved the contested appointment of the arbitrator, failure to respond to notice and panel nominations, unilateral nomination of an arbitrator by respondent no.1, and failure to appear before the arbitrator appointed by appellant no.1.
Ratio Decidendi: The court held that where a party has received notice and does not raise a plea of lack of jurisdiction before the arbitral tribunal, strong reasons must be shown if the party chooses to move a petition for setting aside the award on the ground of improper constitution of the arbitral tribunal. Failure to appear before the arbitrator appointed by appellant no.1 and failure to raise a plea of jurisdiction weighed heavily against respondent no.1.
Final Decision: The appeal was allowed, setting aside the Division Bench's judgment and affirming the Single Judge's order dismissing the petition under Section 34 of the Act filed by respondent no.1.
JUDGMENT:
G.P. Mathur, J.
Leave granted.
2.This appeal, by special leave, has been preferred against the judgment and order dated 7.12.2004 of a Division Bench of Delhi High Court by which the appeal filed by M/s Keti Construction (I) Ltd. - Contractor (Respondent No.1 herein) under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) was allowed and the judgment and order dated 20.10.2003 of a learned Single Judge by which the petition filed by respondent no.1 under Section 34 of the Act was dismissed, was set aside and the award given by the arbitrator (respondent no.2 in the present appeal) on 19.4.2000, was also set aside. It was further directed that Brig. Nardip Singh (Retd.) who was appointed by respondent no.1 shall proceed with the arbitration in accordance with law and give the award.
3.Gas Authority of India (GAIL, appellant no.1 herein) awarded four contracts for its project at Petro-Chemical Complex, Dibiyapur, District Etawah (U.P.) to M/s Keti Construction (I) Ltd., Indore (Contractor), which is arrayed as respondent no.1 in the present appeal. All the four contracts were awarded in the year 1995 and they related to construction of certain types of houses for GAIL Vihar Township, pre-mix bitumen carpeting and repair of roads in GAIL Vihar Colony, construction of external sewerage line and construction of certain residential quarters in UPPC Complex, Dibiyapur. Certain disputes arose between the parties regarding completion of the construction work in accordance with the design and cost of construction, etc. The contracts entered into between the parties contained arbitration clause. Appellant no.1 referred the dispute with regard to contract dated 28.9.1995 for arbitration to Justice N.N. Goswami (Retd.) who was formerly a Judge of Delhi High Court. The arbitrator gave a no claim award on 19.4.2000. Respondent no.1 filed a petition under Section 34 of the Act in the Delhi High Court for setting aside the award. A learned Single Judge who heard the petition, after detailed discussion of the material on record, found that the petition was devoid of merits and accordingly dismissed the same by the judgment and order dated 20.10.2003. Respondent no.1 then preferred an appeal before the Division Bench of the High Court under Section 37 of the Act which allowed the same by the judgment and order dated 7.12.2004 and set aside the award of the arbitrator. It was further directed in the order that parties shall appear before Brig. Nardip Singh (Retd.) who had been nominated as arbitrator by respondent no.1 (contractor) and he shall proceed in accordance with law and give the award.
4.The principal ground on which the petition under Section 34 of the Act had been filed by respondent no.1 was that it had invoked the arbitration clause by sending a notice to appellant no.1 on 17.7.1999 and accordingly the appellant no.1 was required to send a panel of three names for arbitration within 30 days of receipt of notice. Since appellant no.1 did not respond to the notice and did not send a panel within 30 days, it forfeited its right to nominate a panel and thereafter respondent no.1 sent its own panel on 28.10.1999. Appellant no.1 again did not make any response and did not choose anyone from the panel nominated by respondent no.1 and accordingly it informed appellant no.1 on 10.12.1999 that it had selected Brig. Nardip Singh (Retd.) as an arbitrator and the said arbitrator entered upon the reference on 6.1.2000. Appellant no.1 appointed Justice N.N.
Goswami (Retd.) as an arbitrator subsequently on 13.1.2000 which appointment was not valid being contrary to the terms of the agreement entered into between the parties. Respondent no.1 thus submitted that the appointment of Justice N.N. Goswami (Retd.) was invalid and the award given by him was liable to be set aside in view of Section 34(2)(v) of the Act.
5.The petition was contested by the appellants on the grounds, inter
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