2015 Supreme(Raj) 1774
RAJASTHAN HIGH COURT AT JAIPUR BENCH
Bela M.Trivedi, J.
M/S. MBL Infrastructures Limited - Appellant
Versus
North Western Railway - Respondent
S.B. Arbitration Application No.97 of 2014.
Decided On : 28-08-2015
For the Applicants:Ms. Anusya Salwan with Mr. Shashank Sharma and Mr. Archit Pandey, Advocates.
For the Respondent:Mr. P.C. Sharma, Advocate.
A party's right to appoint an arbitrator under an arbitration agreement is forfeited if the party fails to make the appointment within the time limit specified in the contract or before the other party files an application under Section 11 of the Arbitration and Conciliation Act, 1996.
Headnote:
ARBITRATION - APPOINTMENT OF ARBITRATOR - SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - PROCEDURE FOR APPOINTMENT OF ARBITRATOR AGREED UPON BY PARTIES - COURT'S POWER TO APPOINT ARBITRATOR UNDER SECTION 11(6) - CIRCUMSTANCES WARRANTING DEVIATION FROM AGREED PROCEDURE - FORFEITURE OF RIGHT TO APPOINT ARBITRATOR.
Fact of the Case:
The petitioner, a contractor, was awarded a contract for the construction of railway quarters. Disputes arose between the parties, and the petitioner invoked the arbitration clause in the contract. The respondent, the railway authority, did not appoint an arbitrator within the time limit specified in the contract. The petitioner then filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of an independent arbitrator.
Finding of the Court:
The court held that the petitioner was entitled to approach the court under Section 11(6) of the Act, as the respondent had not appointed an arbitrator within the time limit specified in the contract. The court also held that the respondent had forfeited its right to appoint an arbitrator, as it had not made the appointment before the petitioner filed the application under Section 11.
Issues: 1. Whether the petitioner was entitled to approach the court under Section 11(6) of the Act, despite the existence of an agreed procedure for appointing an arbitrator in the contract? 2. Whether the respondent had forfeited its right to appoint an arbitrator?
Ratio Decidendi: 1. The court held that the petitioner was entitled to approach the court under Section 11(6) of the Act, as the respondent had not appointed an arbitrator within the time limit specified in the contract. The court relied on the Supreme Court's decision in North Eastern Railway v. Tripple Engineering Works, which held that the High Court has the power to appoint an arbitrator under Section 11(6) of the Act, even if the parties have agreed on a procedure for appointing an arbitrator in the contract. 2. The court held that the respondent had forfeited its right to appoint an arbitrator, as it had not made the appointment before the petitioner filed the application under Section 11. The court relied on the Supreme Court's decision in Deep Trading Co. v. Indian Oil Corporation, which held that the right of a party to appoint an arbitrator under an arbitration agreement is forfeited if the party fails to make the appointment within the time limit specified in the contract or before the other party files an application under Section 11 of the Act.
Final Decision: The court allowed the petition and appointed an independent arbitrator to resolve the disputes between the parties.
JUDGMENT
1. - The present arbitration application has been filed by the applicant seeking appointment of an independent Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the said Act").
2. The short facts necessary for the purpose of deciding the present application are that the applicant was awarded the contract pursuant to the tender invited by the respondent in respect of the residual composite work for the construction of 36 units type IV and 36 units type V quarters in multi-storied towers for North Western Railway Officers Colony, in connection with setting up of the North Western Railway, at Jaipur. The said contract was awarded for the total cost of Rs. 27,25,46,971.55/- on 08.05.2012. It appears that after the submission of performance bank guarantee and completion of other formalities, the petitioner had started work at the site, however the petitioner was informed to stop the work by the respondent, vide the letter dated 13.08.2012, on account of some order passed by the Apex Court in the petition filed by the land owners challenging the acquisition of the lands in question. The said order was vacated subsequently by the Apex Court and the work was restarted. However, certain disputes arose between the petitioner and the respondent. The respondent thereafter had issued the notice dated 09.04.2013 calling upon the petitioner to show cause as to why the contract of the petitioner should not be terminated. The petitioner therefore had filed the petition under Section 9 of the said Act in the Court of Additional District Judge, Jaipur. The petitioner also invoked the arbitration clause as contained in the agreement in question vide the letter dated 14.04.2014 (Annexure-P/16). The said letter was replied by the respondent vide the letter dated 13.06.2014 (Annexure-P/17) requesting the petitioner to give item wise claim for all the items as per GCC Clause 64 (1) (ii). Since the petitioner did not respond to the said letter, the respondent again wrote the letter dated 03.07.2014 (Annexure-P/18) requesting the petitioner to submit the requisite information. The petitioner thereafter vide the letter dated 15.07.2014 (Annexure-P/19) furnished the details of claims and requested the respondent to provide list of Arbitrators as per Clause 64 of the contract agreement. In response thereto, the respondent informed the petitioner vide the letter dated 20.08.2014 (Annexure-P/20) inter alia that the total amount of claims submitted by the petitioner was more than 20% of the contract value and therefore the provision of Clauses 63, 64 and other Clauses of GCC would not be applicable for settlement of such disputes in view of Clause 38.3 and 81 of the special condition/specification of the contract (part-I) non technical. The petitioner in response to the said letter therefore submitted the revised claims confining them to the extent of 20% of the contract value, as per the letter dated 05.09.2014 (Annexure-P/21). However, the respondent did not appoint the Arbitrator and therefore the petitioner has filed the present application.
3. The application has been resisted by the respondents by filing the reply contending inter alia that the demand for appointment of Arbitrator was pre-matured, as the petitioner had not waited for the period as contained in Clause 64 (1) (i) of the GCC. It is further contended that after the submission of the revised claims, the respondent had proceeded with the appointment of Arbitral Tribunal on 04.02.2015 and informed the petitioner vide the letter dated 24.12.2014 to suggest the two names, however the petitioner had not responded, and therefore the competent authority of the respondent had constituted the Arbitral Tribunal. The respondent has also submitted that no outsider could be appointed as the Arbitrator in violation of the agreed conditions of the GCC and therefore the application deserves to be dismissed. The applicant has filed the rejoinder to
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