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2020 Supreme(Del) 1163
IN THE HIGH COURT OF DELHI AT NEW DELHI
C. Hari Shankar, J.
Larsen & Toubro Limited - Appellant
Versus
National Highways Authority Of Inida & Anr. - Respondent
Arbitration Petition No. 208 of 2020
Decided On : 06-11-2020
R.V. Yogesh, Advocate, Snigdha Singh, Advocate, Manish Bishnoi, Advocate, Umang Raja, Advocate, Anurag Sarda, Advocate
Failure of a party to appoint an arbitrator within the time stipulated in the arbitration clause results in forfeiture of the right to appoint an arbitrator.
Headnote:
ARBITRATION - Appointment of Arbitrator - Failure of the respondent to appoint its arbitrator within the time stipulated in the arbitration clause - Whether the respondent forfeited its right to appoint an arbitrator - Whether the petitioner is entitled to prefer a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (1996 Act) - Held, yes.
Fact of the Case:
The petitioner and NHAI entered into an EPC Contract for development, maintenance and management of National Highway (NH) 8. Disputes arose between the parties, which were arbitrable in nature. The arbitration clause provided for resolution of disputes through conciliation and arbitration. The petitioner appointed its arbitrator and intimated NHAI, accordingly. NHAI appointed its arbitrator beyond the period of 30 days stipulated in the arbitration clause. The petitioner approached the IRC to appoint an arbitrator on behalf of NHAI. The IRC failed to appoint any arbitrator. The petitioner filed a petition under Section 11(6) of the 1996 Act, seeking appointment of an arbitrator on behalf of NHAI.
Finding of the Court:
The Court held that the respondent forfeited its right to appoint an arbitrator, as it failed to do so within the time stipulated in the arbitration clause. The Court further held that the petitioner was entitled to prefer a petition under Section 11(6) of the 1996 Act, as the IRC failed to perform the function entrusted to it under the arbitration clause.
Issues: 1. Whether the respondent forfeited its right to appoint an arbitrator, as it failed to do so within the time stipulated in the arbitration clause? 2. Whether the petitioner was entitled to prefer a petition under Section 11(6) of the 1996 Act, as the IRC failed to perform the function entrusted to it under the arbitration clause?
Ratio Decidendi: 1. The Court held that the respondent forfeited its right to appoint an arbitrator, as it failed to do so within the time stipulated in the arbitration clause. The Court relied on the judgement of the Supreme Court in Datar Switchgear v. Tata Finance Ltd, (2000) 8 SCC 151, wherein it was held that the failure on the part of a party to appoint an arbitrator within the time stipulated in the arbitration clause would result in forfeiture of the right to appoint an arbitrator. 2. The Court held that the petitioner was entitled to prefer a petition under Section 11(6) of the 1996 Act, as the IRC failed to perform the function entrusted to it under the arbitration clause. The Court relied on the judgement of the Supreme Court in Walter Bau AG v. Municipal Corporation of Greater Bombay, (2015) 3 SCC 800, wherein it was held that where an institution fails to perform any function entrusted to it under the arbitration procedure, the appointment of the arbitrator shall be made by the High Court.
Final Decision: The Court allowed the petition and appointed an arbitrator on behalf of NHAI. The Court also directed that the fees of the arbitrator would be equally borne by the parties.
JUDGMENT
C. Hari Shankar, J. - By this petition, under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act"), the petitioner prays for appointment of an arbitrator, on behalf of Respondent No. 1 (hereinafter referred to as "NHAI"), to arbitrate on the disputes between the petitioner and NHAI.
Facts
2. On 25th February 2014, an Engineering Procurement and Construction (EPC) Contract (hereinafter referred to as "the Contract") was executed between the petitioner and NHAI, for development, maintenance and management of National Highway (NH) 8, over a stretch of approximately 6.745 km. The petitioner alleges that, owing to reasons not attributable to the petitioner, the contracted work could not be completed within the stipulated time, and was finally completed after a delay of 15 months. The petitioner further alleges that, as a consequence, it suffered various losses, which were duly brought to the notice of NHAI. Though the representative of NHAI had, purportedly, computed the admissible claims of the petitioner, the petitioner is not in agreement therewith. As a result, the petitioner asserts that disputes have arisen, between the petitioner and NHAI, which are arbitrable in nature.
3. Clauses 26.1 to 26.3 of the Contract provided for resolution of disputes, and read (to the extent relevant) thus:
"26.1 Dispute Resolution
26.1.1 Any dispute, difference or the controversy of whatever nature howsoever arising under or out of or in relation to this Agreement (including its interpretation) between the Parties, and so are notified in writing by either Party to the other Party (the "Dispute") shall, in the first instance, be attempted to be resolved amicably in accordance with the conciliation procedure set forth in Clause 26.2.
26.1.2 The Parties agree to use their best efforts for resolving Disputes arising under or in respect of this Agreement promptly, equitably and in good faith, and further agree to provide each other with reasonable access during normal business hours to all non-privileged records, information and data pertaining to any Dispute.
26.2 Conciliation
In the event of any Dispute between the Parties, either party may call upon the Authority''s Engineer, or such other person as the Parties may mutually agreed upon (the "Conciliator") to mediate and assist the Parties in arriving at an amicable settlement thereof. Failing mediation by the Conciliator or without the intervention of the Conciliator, either Party may require such Dispute to be referred to the Chairman of the Authority and the Chairman of the Board of Directors of the Contract are for amicable settlement, and upon such reference, the said persons shall meet no later than 7 (seven) business days from the date of reference to discuss an attempt to amicably resolve the Dispute. If such meeting does not take place within the 7 (seven) business day period over the Dispute is not amicably settled within 15 (fifteen) days of the meeting all the Dispute is not resolved as evidenced by the signing of written in terms of settlement within 30 (thirty) days of the notice in writing referred to in Clause 26.1.1 or such longer period as may be mutually agreed by the Parties, either Party may refer the Dispute to arbitration in accordance with the provisions of Clause 26.3.
26.3 Arbitration
26.3.1 Any dispute, which is not resolved amicably as provided in clause 26.1 and 26.2 shall be finally settled by arbitration as set forth below:
i) The Dispute shall be finally settled by arbitration in accordance with the Arbitration and Conciliation Act, 1996, or any statutory amendments thereof. The Arbitral Tribunal shall consist of 3 Arbitrators, one each to be appointed by NHAI and the concessionaire. The third arbitrator shall be chosen by the two Arbitrators so appointed by the Parties and shall act as Residing Arbitrator. In case of failure of the twoArbitrators, appointed by the parties to reach upon a consensus within pe
