Unilateral appointment of arbitrator and ex parte arbitration proceedings are void and can be ignored. Appointment of arbitrator must be based on consensus between the parties or by the court under Section 11(6) of the 1996 Act.

ORDER :

Heard Mr. Srinivas Velagapudi, learned counsel for the applicants. None has appeared for the respondents despite being served.

2. This application has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (briefly ‘the 1996 Act’ hereinafter) for appointment of sole arbitrator to arbitrate on the dispute between the parties.

3. On 05.08.2021, this Court directed issuance of notice to the respondents. Subsequently, in the proceedings dated 28.07.2022, it was recorded that respondent No.1 was served and was represented by Mr. V.Ranga Babu, learned counsel.

4. Respondent No.1 has also filed counter-affidavit.

5. Regarding service of notice upon respondent No.2, applicants had filed memo dated 27.12.2021 as per which respondent No.2 was served on 14.12.2021.

6. Regarding service of notice upon respondents No.3 and 4, this Court granted liberty to the applicants to serve the said respondents by way of newspaper publication and thereafter, to file memo detailing the steps taken regarding service of notice. Applicants filed memo dated 26.08.2022 stating that notice was published in Telangana Today (English) daily newspaper of Hyderabad on 15.08.2022 and also in Eenadu (Telugu) daily newspaper of Hyderabad on 18.08.2022.

7. Perused the memo dated 26.08.2022 along with the material papers.

8. From the above, it is evident that respondents No.3 and 4 have been served.

9. Applicants as the first party had entered into an agreement dated 12.03.2015 with respondent No.1 - Konu Developers Private Limited as the second party (builders) for construction of building on the subject land. It was mentioned therein that the first party are the owners of the subject land; they were desirous of getting a building constructed thereon.

10. Subject land is a plot of land admeasuring 1003.20 square meters bearing plot Nos.141, 142, 143, 164, 165 & 166 situated in Survey No.45(P) of Miyapur Village, Serilingampally Mandal, Cyber Valley Phase II, Kondapur, Hyderabad.

11. Clause 20 of the aforesaid agreement provided for dispute resolution. Clause 20 reads as follows :

All disputes or differences relating to the specifications, designs, drawings and as to quality of workmanship or material used in the work or as to any other question arising out of or relating to the contract, design, drawings, specifications, orders or otherwise in connection with the agreement or the carrying out of the works, whether during the progress of the work or after the completion or abandonment thereof shall be referred to the arbitration under the Arbitration and Conciliation Act, 1996.

12. It is stated that dispute arose between the parties as regards construction of building on the subject land. It is stated that an amount of Rs.7,26,22,172.00 was paid by the applicants to the respondents towards construction of the building. However, respondents failed to carry out the full construction and abruptly stopped construction activity in March, 2015.

13. Faced with this situation, applicants e-mailed to the respondents on 26.12.2020 stating that applicants would invoke the arbitration clause. Respondents in their reply e-mail dated 05.01.2021 stated that one Mr. K.R. Preetam, MBA was appointed as the sole arbitrator. By e-mail dated 06.01.2021, applicants proposed the name of Mr. V.S. Rao, as the sole arbitrator to resolve the dispute between the parties and sought for the consent of the respondents. It was mentioned therein that in the event of non-cooperation by the respondents, applicants would be constrained to approach the High Court for appointment of arbitrator under Section 11(6) of the 1996 Act.

14. In their e-mail dated 08.01.2021, respondents objected to appointment of Mr. V.S. Rao as the arbitrator. However, respondents mentioned that if the applicants were not agreeable to appointment of Mr. K.R. Preetam as the arbitrator, they would be at liberty to approach the High Court for appointment of arbitrator.

15. Surprisingly on 11.02.2021, a letter was issu