IMPORTANT POINT
Application u/s 11(6) of 1996 Act - effect of.

Judgment :-

R.M. Lodha, J.

Leave granted.

2. The questions that arise for consideration in this appeal, by special leave are, whether respondent No. 1 has forfeited its right to appoint the arbitrator having not done so after the demand was made and till the appellant had moved the court under Section 11(6) and, if the answer is in the affirmative, whether the appointment of the arbitrator by respondent No. 1 in the course of the proceedings under Section 11(6) is of any legal consequence and the Chief Justice of the High Court ought to have exercised the jurisdiction and appointed an arbitrator?

3. The above questions arise from these facts :

On 01.11.1998, an agreement for kerosene/LDO dealership was entered into between the first respondent – Indian Oil Corporation (for short, “the Corporation”) and the appellant – Deep Trading Company (for short, “the dealer”) for the retail sales supply of kerosene and light diesel oil in the area specified in the schedule. In the course of dealership agreement allegedly some violations were committed by the dealer. Following the show cause notice dated 04.03.2004, the Corporation on 12.03.2004 suspended the sales and supplies of all the products to the dealer with immediate effect.

4. Aggrieved by the action of the Corporation, the dealer filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, “1996 Act”) before the District Judge, Etawah seeking an order of injunction against the Corporation from stopping the supply of Kerosene/LDO. On 25.03.2004, the District Judge, Etawah passed a restraint order against the Corporation.

5. The Corporation challenged the order of the District Judge, Etawah dated 25.03.2004 before the Allahabad High Court and also prayed for an interim relief. On 12.07.2004, the Allahabad High Court refused to grant any interim relief to the Corporation.

6. On 09.08.2004, the dealer made a demand to the Corporation by a written notice to refer the disputes between the parties to the arbitrator under the terms of the agreement. In the demand notice, it was also stated by the dealer that if the Corporation fails to appoint the arbitrator, the dealer may be constrained to approach the court under Section 11 of the 1996 Act.

7. It appears that the Corporation challenged the order of the Allahabad High Court in the special leave petition before this Court but that was dismissed on 06.12.2004 being an interlocutory order.

8. On or about 06.12.2004, the dealer moved the Chief Justice of the Allahabad High Court under Section 11(6) for the appointment of an arbitrator as the Corporation had failed to act under the agreement. While the said proceedings were pending, on 28.12.2004, the Corporation appointed Shri B. Parihar, Senior Manager, (LPG Engineering) of its U.P. State Office as the sole arbitrator.

9. When the above application came up for consideration, the Chief Justice found no reason to appoint the arbitrator, as sought by the dealer, since the arbitrator had already been appointed by the Corporation. The brief order dated 06.12.2007, by which the dealer’s application under Section 11(6) was dismissed by the Chief Justice of the Allahabad High Court, reads as under:

“1. Heard Mr. Siddharth Singh, in support of this application and Mr. Prakash Padia, learned counsel appearing for the respondents.

2. The dispute in this matter is regarding suspension of the petitioner’s agency as a kerosene dealer for sometime. The applicant applied for appointment of an arbitrator by writing a letter in March, 2004, but filed the present proceeding on 06.12.2004. An Arbitrator was appointed by the respondents on 28.12.2004. Earlier arbitrator has been replaced by another arbitrator.

3. The contract of the applicant is continuing with the respondents in view of an injunction granted by the Civil Court.

4. The submission of the applicant is that the respondents ought to have moved within thirty days from the date of a request being made. In any case arbitrator has bee