IMPORTANT POINTS
Terms of the arbitration agreement deserve respect of the parties and attention of the Court.
Premature application u/s 11 is liable to be dismissed.

JUDGMENT :

SHIVA KIRTI SINGH, J.

1. The appellants have assailed the legality and correctness of final order dated 25.02.2014 passed in Arbitration Petition No.14 of 2013 by an Hon’ble Judge of Gauhati High Court designated by the Chief Justice of that Court to decide respondents’ applications under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’). By the impugned order the designated Judge allowed the application under Section 11 of the Act and appointed a former Judge of that Court as the Arbitrator after holding that the appellants had forfeited their right to appoint railway officers as arbitrators in terms of clause 64(3)(a)(ii) of the agreement.

2. According to Ms. Kiran Suri, learned senior counsel for the appellants the impugned order suffers from apparent error of fact on account of misreading or non-reading of the relevant clause of the Agreement, i.e., clause 64(3)(a)(ii) which requires the contractor/respondent to make a written demand for arbitration and permits 60 days’ time to the Railways from the date of receipt of the demand, to send a panel of more than three names of eligible gazetted railway officers so that the contractor may suggest to General Manager at least two names out of that panel for appointment of the contractor’s nominee. Such suggestion from the contractor should come within 30 days from the dispatch of the request by Railways. According to learned senior counsel, the relevant clause though indicated in paragraph 4 of the impugned order has been misread leading to an erroneous inference in the following words :

“…. This Clause permits the respondents to nominate a railway officer, provided of course, the nomination is made within 30 days of receipt of the demand letter from the petitioner. But since there was no reaction from the railways side within the permissible 30 days and since in the meantime the contractor has approached the High Court under Section 11(6) of the Arbitration Act, having regard to the decision in Datar Switchgears Ltd. (supra) it is apparent that the respondents have forfeited their right to appoint a railway officer as the arbitrator.”

3. It has been further contended on behalf of the appellants that the law laid down in the case of Datar Switchgears Ltd. v. Tata Finance Ltd. & Anr., (2000) 8 SCC 151 has not been correctly appreciated by the learned Judge because in that case failure to meet the demand to appoint an arbitrator was apparent on account of expiry of the notice period of 30 days indicated in the demand. Even then the Court held that since the application was under Section 11(6)(a) of the Act and since that Section does not prescribe any time limit rather gives an unfettered discretion to appoint an arbitrator without any time limit, such power will stand forfeited only after the party making the demand has moved the Court under Section 11 and not on mere expiry of the notice period of 30 days. It is appellants’ stand that in view of stipulations in the relevant clause providing for arbitration, the respondent-contractor admittedly sent a notice demanding arbitration on 12.06.2013 which was served on the appellants on 14.06.2013 and hence it had to wait for 60 days for receipt of a panel of more than three names. Thereafter the contractor had to suggest two names for appointment of his nominee arbitrator within 30 days. The cause of action for sending a notice of 30 days or any reasonable period, in view of clear terms in the Arbitration Agreement which has not been repudiated, can arise only after 60 days. Hence according to learned senior counsel for the appellants, the learned Judge erred in holding that the appellants had forfeited their right to appoint arbitrators. Instead, the finding should have been that the application under Section 11(6) of the Act was premature.

4. On behalf of appellants reliance has been placed upon judgment of this Court by a three Judges Bench in the case of Northern Railway Admin