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2022 Supreme(Del) 1260

IN THE HIGH COURT OF DELHI AT NEW DELHI
Sanjeev Narula, J.
Geeta Poddar - Appellant
Versus
Satya Developers Private Limited - Respondent
Arb.P. 133/2019
Decided On : 31-08-2022

Advocates appeared:
Mr. Rajiv Dalal, Mr. Sanjeev Sharma, Ms. Kamal Dalai & Mr. Vikas Bhardwaj, Advocates, for the Petitioner; Ms. Kaadambari with Mr. Uttam Kumar, Advocates, for the Respondent

Headnote:

Arbitration Appointment - Unilateral Appointment - Arbitration and Conciliation Act, 1996, Section 11 - 20. ARBITRATION - 20.1 It is agreed between the parties that any dispute which may be in relation to this present Agreement would not be taken up by the parties against each other in any criminal complaint either to the police or any Court. Both parties specifically waive their rights to do so against each other. The Buyer also waives his right to file Consumer Complaint on any issue which may be connected or arise out of this Agreement Parties agree to resolve their entire disputes through the Dispute Resolution Mechanism agreed hereinbelow. 20.2 That in case of any dispute or controversy arising out of or in connection with this Agreement the same shall be referred to the Arbitration of a Sole Arbitrator to be appointed by the Managing Director of the Developer. The arbitration proceedings shall be held in accordance with the Arbitration & Conciliation Act, 1996, and the Rules made there-under as amended from time to time. The place of Arbitration shall be New Delhi only and the language of the arbitration shall be English. The cost of arbitration including the arbitrator's fee shall be shared jointly by the Developer and the Buyer. The parties agree that during the pendency of the Arbitration, the parties shall continue to discharge their respective obligations under this Agreement. 20.3 The rights and obligations of the parties under or arising out of this Agreement shall be construed and enforced in accordance with the laws of India.

Fact of the Case:

The parties entered into a Builder Agreement in relation to a dwelling unit in a residential complex. Disputes arose regarding the completion of the project and payment obligations. The Respondent unilaterally appointed a sole arbitrator, leading to objections from the Petitioner. The first sole arbitrator recused himself, and a second arbitrator was unilaterally appointed. The Petitioner filed a case seeking appointment of an independent arbitrator and stay of ongoing arbitral proceedings.

Finding of the Court:

The appointment of the second sole arbitrator was found to be non-est in law, being in conflict with Section 12(5) read with Seventh Schedule of the Act, and thus void ab initio. The passing of the award by the ineligible arbitrator did not preclude the court from deciding the petition under Section 11 of the Act. The court appointed an independent arbitrator to adjudicate the disputes between the parties.

Issues: The key issue was the validity of the appointment of the second sole arbitrator and the effect of the final award passed during the pendency of the petition.

Ratio Decidendi: The unilateral appointment of the second sole arbitrator was found to be contrary to law and void ab initio. The passing of the award by the ineligible arbitrator did not preclude the court from deciding the petition under Section 11 of the Act. The court had the authority to appoint an independent arbitrator under Section 11(6) of the Act, notwithstanding the final award.

Final Decision: The court allowed the petition, appointed an independent arbitrator, and directed the parties to appear before the arbitrator for further proceedings. The court clarified that it had not examined the claims of the parties, leaving all rights and contentions on merits open for the parties to raise before the arbitrator.

JUDGMENT

Sanjeev Narula, J. - The issue for consideration is whether this Court can appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 [hereinafter, 'the Act'], considering the fact that a final award has already been passed, during the pendency of this petition, by a unilaterally appointed sole arbitrator.

BRIEF FACTS

2. The facts, insofar as are necessary for deciding the present petition, are set out hereinbelow:

2.1. The parties entered into a Builder Agreement on 06th September, 2014 [hereinafter, 'the Agreement'] in respect of a dwelling unit in a residential complex being developed by the Respondent [hereinafter, 'the Project']., Penthouse/ flat bearing No. 07, located on 11th floor, Tower-08 having a built-up area of approx. 1916 sq. ft. and common area of 639 sq. ft., totalling to 2555 sq. ft. in Hermitage, Sector - 103, Gurgaon, Haryana The Agreement contained an arbitration clause, which reads as under:

    '20. ARBITRATION

    20.1 It is agreed between the parties that any dispute which may be in relation to this present Agreement would not be taken up by the parties against each other in any criminal complaint either to the police or any Court. Both parties specifically waive their rights to do so against each other. The Buyer also waives his right to file Consumer Complaint on any issue which may be connected or arise out of this Agreement Parties agree to resolve their entire disputes through the Dispute Resolution Mechanism agreed hereinbelow.

    20.2 That in case of any dispute or controversy arising out of or in connection with this Agreement the same shall be referred to the Arbitration of a Sole Arbitrator to be appointed by the Managing Director of the Developer. The arbitration proceedings shall be held in accordance with the Arbitration & Conciliation Act, 1996, and the Rules made there-under as amended from time to time. The place of Arbitration shall be New Delhi only and the language of the arbitration shall be English. The cost of arbitration including the arbitrator's fee shall be shared jointly by the Developer and the Buyer. The parties agree that during the pendency of the Arbitration, the parties shall continue to discharge their respective obligations under this Agreement.

    20.3 The rights and obligations of the parties under or arising out of this Agreement shall be construed and enforced in accordance with the laws of India.' [Emphasis supplied]

    2.2. Disputes arose between the parties qua development of the Project, which led to Respondent issuing a notice dated 15th April, 2017, demanding payment of outstanding dues and offering possession of the unit. Upon visiting the Project site, vide letter dated 02nd May, 2017, Petitioner informed the Respondent that the Project was incomplete in terms of the Agreement and advertising brochure. While raising her grievances against delay in completion, Petitioner also requested for expeditious completion of the Project and handing over of possession of the unit. On the other hand, Respondent claimed that Petitioner defaulted in performing her contractual payment obligations. In these circumstances, vide notice of invocation dated 21st November, 2017, Respondent unilaterally appointed the first sole arbitrator.

    2.3. The first sole arbitrator entered upon the reference on 19th December, 2017, and notified parties of his appointment through a letter dated 22nd November, 2017. Petitioner denies the receipt of such communication and avers that instead, on 28th December, 2017, she replied to the notice of invocation objecting to the unilateral right of appointment vested in the Managing Director of the Respondent. Thereafter, vide letter dated 26th February, 2018, the Petitioner objected to the arbitration proceedings stating that the disputes were criminal in nature and hence, non-arbitrable.

    2.4. Noting the objections of Petitioner/Claimant, the first sole arbitrator, vide 8th Procedural Order signed on 07th October, 2018, concerning 'Minutes and

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