N.V. Ramana, J.

The short question that arises in the appeal is whether a party to an agreement can file a suit questioning the unilateral appointment of Arbitrator by the other party in the light of the provisions of the Arbitration and Conciliation Act, 1996.

2. The relevant facts are briefly stated as under:

The appellant-plaintiff entered into agreement with respondent No.1-defendant No.1 on 26.08.2009 for operation of LED Screens at 50 locations for the purpose of displaying advertisements. Some disputes arose between the parties. Respondent No.1 issued notice dated 15.03.2011 to the appellant for recovery of Interest Free Deposits, payments and damages to the tune of Rs.90,23,93,191/-, with interest thereon at the rate of 24% per annum. Two days thereafter, respondent No.1, while referring to their notice dated 15.03.2011, issued another notice dated 17.03.2011 invoking clause 22 of the agreement and appointing one Mr. H.C. Sharma, Superintendent Engineer (Retired) of Delhi Development Authority, as sole Arbitrator, for resolution of the disputes that arose between them, including their claims against the appellant. The Arbitrator was called upon to enter reference immediately without any further loss of time. On the very same day, respondent No.1 informed the appellant about the invocation of arbitration clause by e-mail. The appellant, by reply e-mail dated 21.03.2011 informed respondent No.1 that appointment of Arbitrator cannot be unilateral and must be with mutual consent and the Arbitrator appointed is not acceptable to them.

3. However, even before the appellant gave his reply, the Arbitrator appointed by respondent No.1, entered upon the reference on 19.03.2011. The Arbitrator while informing the appellant and respondent No.1 about the commencement of the arbitration proceedings, noted that after a long wait for the appellant, he is fixing the next date of hearing on 22.04.2011 at 4.30 p.m., and if any party fails to submit statement of facts/counter statements of facts and/or fails to attend the hearing (s), he will be at liberty to conduct ex parte proceedings to decide the case. Even before the expiry of the appointed day, the Arbitrator on 06.04.2011 conducted the arbitration proceedings, wherein he recorded that the appellant neither informed verbally nor in writing nor any person attended the hearing on behalf of the appellant.

4. On 22.04.2011 the appellant addressed a letter to the Arbitrator informing him that his very appointment by respondent No.1 as Arbitrator and claim made by respondent No.1, is illegal. The appellant stated that they objected to the appointment as Arbitrator, the proper course for respondent No.1 was to seek appointment of Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Arbitration Act’). The appellant further informed the Arbitrator that he has no right whatsoever to conduct any arbitration proceedings and that he cannot call upon them to attend the hearing and that they will not participate in any unauthorized hearings. On 22.04.2011, it appears that the appellant filed letter objecting to the appointment of Arbitrator. The Arbitrator, while refusing to accept the said letter, adjourned the matter to 09.05.2011.

5. While the proceedings before the Arbitrator were pending, the appellant on 05.05.2011 filed suit in O.S. No. 296 of 2011 on the file of the II Additional District Judge, Ranga Reddy District, L.B. Nagar, praying for the following relief:

1. Declare the appointment of the 2nd defendant i.e. Mr. H.C. Sharma as Arbitrator as contrary to the procedure prescribed in Section 11 of the Arbitration and Conciliation Act, 1996 and consequently declare the proceeding being conducted by 2nd defendant as null and void.

2. To grant permanent injunction restraining the 2nd defendant herein, from proceeding with the arbitration on 09.05.2011 or any other future date; and

3. To award cost of the suit and pass suc