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2005 Supreme(Bom) 298
IN THE HIGH COURT OF BOMBAY
(D.K. Deshmukh, J.)
MUNICIPAL CORPORATION OF THE CITY OF PUNE - Appellant
V.
BOMBAY CABLE CAR CO. PVT. LTD. - Respondent
Advocates appeared
For appellant: Rohit Kapadia, Senior Counsel with V. G. Mujumdar
For respondent: V. R. Manohar, Senior Counsel with Ms. Usha Purohit instructed by Shah, Desai, Doijode and Phatarphekar
Headnote:Arbitration and Conciliation Act, 1996 - Section 11(5) Scheme of Section 11(5) Appointment of a sole arbitrator by agreement of the parties Condition precedent. Subsection (5) of Section 11 of the Arbitration and Conciliation Act operates on two things; (i) absence of agreement on procedure for appointment of the arbitrator and (ii) failure of the parties to reach the agreement within 30 days of one party giving notice to the other party. The scheme of Section 11(5) is that if there is no agreement between the parties in relation to the procedure that is to be followed in the matter of appointment of the arbitrator, then either parties make appointment within 30 days of one party issuing notice by agreement, otherwise the power to make the appointment passes on to the Chief Justice and once the power gets vested in the Chief Justice, parties by conduct or agreement cannot divest the Chief Justice of that power. Issuance of a notice which complies with the requirements of Section 11(5) is a condition precedent for bringing about a valid appointment of a sole arbitrator by agreement of the parties. Therefore, as both notices issued by the respondent do not comply with the provisions of Section 11(5) of the Act, the appointment of ’P’ as an arbitrator cannot be said to be valid. The award of the arbitrator, therefore, rejecting the objection to the jurisdiction of the arbitrator, therefore, is liable to be set aside. Similarly, the order passed by the 3rd Extra Joint District Judge impugned in the petition is also liable to be set aside.
2. The facts that are material and relevant for deciding this petition are that e petitioner/Pune Municipal Corporation had entered into a contract with the respondent. The dispute arose between the parties. The agreement had an arbitration clause. On 1st October, 1996 the respondent issued a notice styling it notice under section 9 of the Arbitration Act, 1940. The arbitration clause was invoked and the Honble Mr. Justice M. L. Pendse (Retd.) was appointed as the sole arbitrator. It was stated that if the petitioner desires to appoint an arbitrator of their own then they shall do so within 15 days and it was also stated that if they fail to appoint their own arbitrator, the arbitrator appointed by the respondent shall be the sole arbitrator, and he will proceed with the matter other notice was issued on 8 - 11 - 1996 by the respondent stating therein that as the Arbitration Act, 1996 had already come into force, the notice dated 1st October, 1996 should be taken to be a notice under section 10 of the new Act and therefore the petitioner had 30 days to communicate the name of its arbitrator. It as stated that since the period of 30 days came to an end on 5 - 10 - 1996, in the absence of any communication from the petitioner, now the arbitrator appointed by the respondent shall act as the sole arbitrator. It appears that the sole arbitrator sued a notice dated 10th December, 1996 to the petitioner/Corporation stating therein that the arbitration proceeding will commence from 24 - 12 - 1996. The petitioner/corporation addressed a letter dated 23rd December, 1996 to the learned arbitrator stating therein that the petitioner/Corporation is considering the question of appointing an independent arbitrator on behalf of the Corporation or accept the appointment of Mr. Justice Pendse (Retd.) as the sole arbitrator and therefore, two months time was sought from the learned arbitrator. The learned arbitrator did not grant two months time, but he granted only two weeks time. There was no further communication from the petitioner/corporation in this regard. Ultimately in the arbitration proceedings an objection was raised to the jurisdiction of the sole - arbitrator. The objection was that the appointment of t sole arbitrator is not in accordance with the provisions of 1996 Act. The objection was decided by the learned arbitrator by his order dated 3rd September 1997. The learned arbitrator rejected the objection. The learned arbitrator thereafter, proceeded with the matter and made the final award. The award was challenged under section 34 of the Act. The Application was registered as Misc. Application No. 586 of 1998. The learned 3rd Extra Joint District Judge, as observed above, decided the petition by order dated 5th August, 2000. The learned District Judge upheld the ruling of the learned arbitrator on the question of jurisdiction.
3. The learned counsel appearing for the petitioner submits that the arbitration clause between the parties does not provide for number of arbitrator and therefore, in terms of the provisions of sub - section (2) of section 10 of the Act, it is obvious that the appointment can be of the sole arbitrator. The learned counsel submits that there was no agreement between the parties agreeing on the procedure of appointment of the arbitrator and therefore, in terms of sub - section (5) of section 11, a notice could have been given by the respondent to the petitioner communicating the name of the person to be appointed as the sole arbitrator. After the petitioner/Corporation fails to agree to that name, then the power to make the appointment will pass on to the Honble Chief Justice of this Court and therefore, only the sole arbitrator appointed by the Chief Justice could get the jurisdiction to make the award. Th
