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THE GENERAL MANAGER (TELECOM) versus SESA SEAT INFORMATION SYSTEMS LTD.

High Court of Madras

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The General Manager (Telecom) v. Sesa Seat Information Systems Ltd. - Writ Petition No.26438 of 2005 [2005] RD-TN 626 (25 August 2005)



IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED:25/08/2005

Coram

The Hon'ble Mr. Justice P. SATHASIVAM

and

The Hon'ble Mr. Justice AR. RAMALINGAM

Writ Petition No.26438 of 2005

and

WP.32890 of 2004

1298, 1669, 7584,

11118, 15230 of 2005

and

W.P.M.P.Nos. 32194, 39801/2004,

1460, 1862, 8280,

12111, 16576/2005.

W.P.No. 26438/2004 etc., batch

1. The General Manager (Telecom),

Madurai Secondary Switching Area,

Department of Telecommunication,

Now Bharat Sanchar Nigam Ltd., (BSNL),

Bibikulam,

Madurai-625 002.

2. The Member (Telecommuncation),

Department of Telecommunication,

Now Bharat Sanchar Nigam Ltd., (BSNL),

Sanchar Bhavan, New Delhi-110 001.

.. Petitioners. -Vs-

1. Sesa Seat Information Systems Ltd.,

209, Akshay,

Dhole Patti Road, Pune-411 001.

2. Hon'ble Mr. Justice K. Sampath (Retd.,),

No.6, Second Street,

Jagadambal Colony, Royapettah,

Chennai-600 014.

.. Respondents. Petition filed under Article 226 of the Constitution of India for issuance of a Writ of Certiorarified Mandamus, calling for records of the learned Judge in O.P.No. 802/1998 and quash the order dated 26-3-2004 appointing the second responden t as Arbitrator and consequently permit the petitioners to appoint Departmental Arbitrator and to take up the Arbitration proceeding as expeditiously as possible.

For Petitioner

Mr. V.T. Gopalan,

Additional Solicitor General of

India assisted by

Mr. S. Udayakumar, Senior

Central Government Standing counsel,

Mr. V.G. Sureshkumar,

Mr. T.S. Sivagnanam,

and Mr. S.

Manikumar, Senior Central Government Standing

counsel:-

For petitioners in W.P.Nos. 26438,

32890/2004, 1298, 1669, 7584, and 11118/2005.

Mr. M. Vaidyanathan:- For petitioner in W.P.No. 15230/2005.

For Respondents

Mr. Vijaynarayan, Senior counsel for

Mr. R. Parthiban:- For respondent 1 in

W.P.26438/2004, and 15230/2005.

Mrs. Chitra Sampath:- For R-1 in W.P.No. 32890/2004. Mr. Amalraj:- For R-2 in W.P.Nos. 1298, 1669 and 7584/2005.

Mr. M.K. Kabir, Advocate, assisted the Court.

:COMMON ORDER



(Order of Court was made by P. Sathasivam, J.,) Aggrieved by the orders passed by Hon'ble Chief Justice or his nominee Judge in Original Petitions filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act"), appointing Arbitrators, Central Government organisations, namely, Telecom Department, Southern Railway, Western Railway, Rajiv Gandhi National Institute, etc., have filed the above writ petitions.

2. When the above Writ Petitions came up for final hearing before K.P. Sivasubramanian, J., on 7-6-2005, the learned Judge, after referring to the several grounds raised by the petitioners as well as contesting respondents and the decision of the Supreme Court on the issues raised, found that the questions raised for consideration pertain to very important issues of interpretation of the provisions of the Act as well as interpreted by the Supreme Court and have impact not only on all these writ petitions, but also several Original Petitions pending before this Court for appointment of Arbitrators, and desired that these petitions be heard by a Larger Bench. Pursuant to the same on the orders of the Honourable Chief Justice, the above Writ Petitions were heard by us.

3. Since the writ petitioners-Central Government Organisations have raised similar and identical contentions in all these writ petitions, for convenience we shall refer the factual details as stated in Writ Petition No. 26438 of 2004. According to the petitioners, namely, Madurai Secondary Switching Area, Department of Telecommunication, now Bharat Sanchar Nigam Ltd., (BSNL), Madurai-2, a Tender for compiling, printing, binding and supplying copies of Madurai Secondary Switching Area Main directory, Numerical Index, Supplementary Directories and billing information for a total 5 consecutive annual issues of the said Directory commencing with 1993 issue, all of which will be printed in English. Pursuant to the notice inviting tender, the first respondent, namely, Sesa Seat Information Systems Ltd., Pune submitted the offer and after process, the Tender to the first respondent was awarded. Thereafter, the first respondent has entered into an agreement on 29-07-1998 with the first petitioner.

4. The first respondent failed to deliver the printed directories and thereafter a dispute arose between the first petitioner and the first respondent. In view of the said agreement and also in view of Clause No. 38.1, if there is any dispute or difference under the said agreement, the same shall be referred to the sole Arbitration of concerned Member of the Telecom Board. By letter dated 11-07-1998, the first respondent sought for appointment of an Arbitrator. Since the petitioners have not appointed the Arbitrator, the first respondent herein filed O.P.No.802 of 1998 before this Court under Section 11 (4) of the Arbitration and Conciliation Act, 1996. The Honourable Chief Justice was pleased to appoint Mr. Justice K. Sampath, a retired Judge of this Court (second respondent herein) as Arbitrator to resolve the dispute. As per clause No. 38.1 of the Agreement dated 29-07-1993, the Departmental Arbitrator alone should be appointed and not any other person. Contrary to the said clause, the second respondent herein has been appointed. Aggrieved by the said order of the Hon'ble Chief Justice dated 26-03-2004, the petitioners herein having no other remedy except to approach this Court under Article 226 of the Constitution of India, filed the present writ petition. Similar averments have been made in the other writ petitions.

5. Heard Mr. V.T. Gopalan, Additional Solicitor General of India for most of the petitioners and Mr. M. Vaidyanathan for petitioner in W.P.No. 15230/2005 and Mr. Vijaynarayan, learned senior counsel, Mrs. Chitra Sampath and Mr. Amalraj for contesting respondents. Mr. M.K. Kabir also assisted the Court by placing relevant materials.

6. The following provisions in the Arbitration and Conciliation Act, 1996 are relevant:-

"Section 5. Extent of judicial intervention.- Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.

Section 11. Appointment of arbitrators.- (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.

(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.

(4) If the appointment procedure in sub-section (3) applies and- (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or

(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment,

the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.

(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (6) Where, under an appointment procedure agreed upon by the parties,- (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,

a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. (7) to (12) xx xx xx

Section 12. Grounds for challenge.- (1) xx xx

(2) xx xx

(3) An arbitrator may be challenged only if-

(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or

(b) he does not possess the qualifications agreed to by the parties. (4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.

Section 16. Competence of arbitral tribunal to rule on its jurisdiction.- (1) to (5) xx xx xx

(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34. Section 34. Application for setting aside arbitral award.- (1) xx xx (2) An arbitral award may be set aside by the Court only if- (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; .. .." 7. (i) Mr. V.T. Gopalan, learned Additional Solicitor General of India by drawing our attention to specific clause/clauses in the agreement for appointment of arbitrator/arbitrators, would contend that either from officers of the concerned or independent arbitrator, the parties would be bound by such agreement and neither of the parties would be allowed to resile. He further contended that a conjoint reading of Section 11 (2) and (6) of the Act makes it clear that there is no time stipulated for appointment of an arbitrator and the question of 30 days as per Section 11 (3) and (4) cannot be applied to a case governed by Section 11 (2) and (6). In other words, according to him, the time taken for appointment of an Arbitrator should be reasonable. In any event, according to him, neither the Chief Justice nor the designated Judge have power to appoint any independent Arbitrator by passing the arbitration clause agreed to between the parties. He finally contended that inasmuch as the order passed by the Chief Justice and the designated Judge is administrative in nature, the writ would lie.

ii) Countering the above arguments, Mr. Vijaynarayan, learned senior counsel and other counsel appearing for respondents, submitted that if an application is made, one of the parties to the agreement, after expiry of the period prescribed therein and in the absence of any response from other party, the Chief Justice or designated Judge has ample power to appoint independent arbitrator. He further contended that once arbitrator is appointed, in view of the statutory provisions, namely, Sections 5, 12 and 13, the said order cannot be interfered by any Court. In other words, according to him, once discretion is exercised, the same cannot be interfered by any one including by way of a judicial order. He also submitted that if the party or parties satisfied the conditions as per the terms of the agreement, the Chief Justice or designated Judge is free to appoint any one or body as Arbitrators and interference with the said orders is not permitted. 8. Learned Additional Solicitor General in support of his arguments has relied on the following decisions:-

i) (1995) 5 Supreme Court Cases 329-(BHUPINDER SINGH BINDRA v. UNION OF INDIA).

ii) Judgment of the Supreme Court in Civil Appeal No. 13076/1996 (UNION OF INDIA v. VIJAY KUMAR GARG.) iii) AIR 1998 Madhya Pradesh 276  (M/s. SUBASH PROJECT AND MARKETING LTD.,v.SOUTH EASTERN COALFIELDS LTD) iv) (2000) 8 SCC 151 (DATAR SWITCHGEARS LTD.,v. TATA FINANCE LTD.,)

v) Order made in O.P.No.815/1999 of High Court,Madras (PREMIERE INFRASTRUCTURE LTD.,v.UNION OF INDIA) vi) 2000(2) RAJ 487 (Del) (ESSEL SHYAM COMMUNICAITON LTD., v. UNION OF INDIA)

vii) 2000-Volume 3-RAJ 252 Madhya Pradesh (ASHOK COAL DEPOT v. SOUTH-EASTERN COAL FIELDS LTD.) viii) 2001-Vol.2-Arbitration Law Reporter 215 (BEL HOUSE ASSOCIATES (P) Ltd., v. GM, SOUTHERN RAILWAY) ix) AIR 2001 Madras 440 (M/s. KAMALA SOLVENT v. MANIPAL FINANCE CORPN. LTD.,)

x) 2001-Vol.4-RAJ 243 (Delhi) (VINDHYA TELELINKS LTD., v. DEPARTMENT OF TELECOMMUNICAITONS ) xi) Order made in O.P.No.28385/2001 of High Court of Kerala (UNION OF INDIA v. M.O. SIMON)

xii) Order made in O.P.No.7412/2003 of High Court of Kerala (GENERAL MANAGER, SOUTHERN RAILWAY, CHENNAI v. MS. CHANDRAGIRI CONSTRUCTION COMPANY) xiii) 2002-Vol.4- RAJ 437 (Kar) (J.L. PRASAD v. GENERAL MANAGER, SOUTHERN RAILWAY, CHENNAI)

xiv) 2004-Vol.I-SCC 768 (UNION OF INDIA v. SOHAN LAL PUGLIA)

xv) 2004-Vol.10-SCC 504 (UNION OF INDIA v. M.P.GUPTA) 9. Now we shall analyse these decisions one by one. The first case, namely, 1995 (5) S.C.C. page 329 (cited supra) is a case decided under the Arbitration Act, 1940 (old Act). In view of the repealing of the said Act and enactment of new Arbitration and Conciliation Act, 1996, adding various new clauses, the said decision rendered under old Act is not directly on the point. The next one, namely, judgement of the Supreme Court in Civil Appeal No. 13076/96 is also of the same effect, since the same relates to old Act. 10. The third one, namely, AIR 1998 M.P. page 276 is a judgement by a learned Single Judge of Madhya Pradesh High Court, relates to an order passed in an application filed under Section 11 of the Act. Likewise, the order of this court in O.P.No. 815/99; 2000 Vol.II RAJ page 487 (Delhi); 2000 Vol.III Raj 252 (Madhya Pradesh); 20 01 Vol.II Arbitration Law Reporter 215; 2001 Vol.IV RAJ 243 (Delhi); 2002 Vol.IV RAJ page 437 (Karnataka) all relate to orders passed in applications filed under Section 11 of the 1996 Act. It is not in dispute that an order of Chief Justice or designated Judge is an administrative order, hence the same cannot be challenged in an appeal. However, as held in 2003-6 SCC 465 [STATE OF ORISSA v. GOKULANANDA JENA], an order made by the Designated judge, being an administrative order is amenable to writ jurisdiction under Article 226 of the Constitution. In the light of the fact that the said orders were passed in applications filed under Section 11 of the Act, the same need not be considered.

11. The other decisions, namely, order made in O.P. No. 28385/2001 (High Court of Kerala), order made in O.P.No.7412/2003 (High Court of Kerala) are consent orders and the same cannot be cited as a binding precedent. The other two decisions, namely, 2004 Volume I SCC 768; and 2004 Volume X SCC 504 (cited supra) also arose under old Act. Except the decision of the Supreme Court reported in 2000 8 SCC 151 (cited supra), all other decisions relied on by the learned Additional Solicitor General are either under the old Act or the orders were passed on consent of both parties or administrative orders passed in an application filed under Section 11 of the Act. 12. In (2000) 8 S.C.C. 151 (cited supra), the respondent made the appointment before the appellant filed application under section 11(6). But the said appointment was made beyond 30 days. The question is, whether in a case falling under section 11 (6), the opposite party cannot appoint an arbitrator after the expiry of 30 days from the date of demand. The following conclusion of Their Lordships is relevant: (para 19) "Para 19. So far as cases falling under Section 11 (6) are concerned  such as the one before us  no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11(4) and Section 11 (5) of the Act. In our view, therefore, so far as section 11 (6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court under Section 11, that would be sufficient. In other words, in cases arising under section 11 (6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an arbitrator under Section 11 (6) is forfeited. 20.xxx xx

21.xxx xx

22. While interpreting the power of the court to appoint an arbitrator under Section 8 of the Arbitration Act, 1940, this Court in BHUPINDER SINGH BINDRA v. UNION OF INDIA (1995) 5 SCC 329 in para 3 held as under: (SCC p.330) 3. It is settled law that court cannot interpose and interdict the appointment of an arbitrator, whom the parties have chosen under the terms of the contract unless legal misconduct of the arbitrator, fraud, disqualification etc. is pleaded and proved. It is not in the power of the party at his own will or pleasure to revoke the authority of the arbitrator appointed with his consent. There must be just and sufficient cause for revocation.

23. When parties have entered into a contract and settled on a procedure, due importance has to be given to such procedure. Even though rigor of the doctrine of freedom of contract has been whittled down by various labour and social welfare legislation, still the court has to respect the terms of the contract entered into by parties and endeavour to give importance and effect to it. When the party has not disputed the arbitration clause, normally he is bound by it and obliged to comply with the procedure laid down under the said clause.

13. It is clear from the above decision that in so far as matters relating to Section 11 (6), if one party demands opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. However, if action was taken before the first party has moved the Court under Section 11, the same would be acceptable. 14. Now we shall consider whether the writ petition questioning the order of Chief Justice or designated Judge is maintainable under Article 226 of the Constitution of India as discussed in (2 003) 6 SCC 465 (supra). In that appeal, the State of Orissa has challenged the validity of the order made by the Judge designated by the Chief Justice of the said Court for appointment of an arbitrator under Section 11(6) of the Act by way of a writ petition. The High Court after referring to a judgement of the Supreme Court delivered by a Constitutional Bench in the case of KONKAN RAILWAY CORPORATION LTD., v. RANI CONSTRUCTION PRIVATE LTD., [(2002) 2 Supreme Court Cases 388], came to the conclusion that a writ petition under Article 226 of the Constitution of India questioning the correctness of an order made by a designated Judge under Section 11 (6) of the Act is not maintainable, because the said order is an administrative order and the Supreme Court in the case of KONKAN RAILWAY (cited above) has held that such an order cannot be challenged before it under Article 136 of the Constitution of India. Drawing an analogy from the said judgment, the High Court came to the conclusion that even a writ petition under Article 226 of the Constitution of India will not be maintainable. The said conclusion of the Orissa High Court was not accepted by the Supreme Court. The following conclusion in para 6 and 8 is relevant: 6. It is to be noted that an administrative order is amenable to the writ jurisdiction under Article 226 of the Constitution of India and we find that such an order made by the Designated Judge under Section 11 (6) of the Act is not an exception to this rule. The power of the High Court under Article 226 to entertain a writ petition cannot be equated with the power of the Supreme Court to entertain an appeal under Article 136 of the Constitution of India. The power of the High Court to entertain a writ petition is an original power while power of this Court while entertaining an appeal under Article 136 of the Constitution is an appellate power.

8. However, we must notice that in view of Section 16 read with Sections 12 and 13 of the Act, as interpreted by the Constitution Bench of this Court in KONKAN RAILWAY [(2002) 2 SCC 388] almost all disputes which could be presently contemplated can be raised and agitated before the arbitrator appointed by the Designated Judge under Section 11(6) of the Act. From the perusal of the said provisions of the Act, it is clear that there is hardly any area of dispute which cannot be decided by the arbitrator appointed by the Designated Judge. If that be so, since an alternative efficacious remedy is available before the arbitrator, a writ court normally would not entertain a challenge to an order of the Designated judge made under Section 11 (6) of the Act which includes considering the question of jurisdiction of the arbitrator himself. Therefore, in our view even though a writ petition under Article 226 of the Constitution is available to an aggrieved party, ground available for challenge in such a petition is limited because of the alternative remedy available under the Act itself.

The above decision makes it clear that a writ petition under Article 226 of the Constitution of India is maintainable as against the order made by the Chief Justice or Designated Judge under Section 11(6) of the Act on limited grounds. To make it clear that even if writ petition is maintainable in view of sections 16 read with Sections 12 and 13, almost all disputes can be raised and agitated before the Arbitrator and normally the writ court would not entertain a challenge to an order of appointment made by the Chief Justice or the Designated Judge.

15. Now let us consider the decisions relied on by Mr.Vijaynarayan, learned senior counsel. Like the learned Additional Solicitor General, he also relied on the judgement of the Supreme Court in DATAR SWITCHGEARS LTD., v. TATA FINANCE LTD., [(2000) 8 Supreme Court Cases 151]. Following the DATAR SWITCHGEAR case (supra), it was held in NUCON INDIA () LTD., v. DELHI VIDYUT BOARD [AIR 2001 Delhi 227), that an appointment has to be made by the opposite party of an arbitrator before filing of the application under Section 11 (6) of the Act. It was also held that if the appointment is made after the filing of the application under Section 11, then such an appointment is a nullity and in fact no appointment in the eye of law. It is non est. The following conclusion in Konkan Railway case has been heavily relied on: (para 17, 19 and 21)

17..The decision of the Chief Justice or his designate is final. In nominating an arbitrator the Chief Justice or his designate must have regard to the qualifications required of the arbitrator in the agreement between the parties and to other considerations that will secure the nomination of an independent and impartial arbitrator.

19.The function has been left to the Chief Justice or his designate advisedly, with a view to ensure that the nomination of the arbitrator is made by a person occupying high judicial office or his designate, who would take due care to see that a competent, independent and impartial arbitrator is nominated.

21. It might also be that in a given case the Chief Justice or his designate may have nominated an arbitrator although the period of thirty days had not expired. If so, the Arbitral Tribunal would have been improperly constituted and be without jurisdiction. It would then be open to the aggrieved party to require the Arbitral Tribunal to rule on its jurisdiction. Section 16 provides for this. It states that the Arbitral Tribunal may rule on its own jurisdiction. That the Arbitral Tribunal may rule on any objections with respect to the existence or validity of the arbitration agreement shows that the Arbitral Tribunals authority under section 16 is not confined to the width of its jurisdiction, as was submitted by learned counsel for the appellants, but goes to the very root of its jurisdiction. There would, therefore, be no impediment in contending before the Arbitral Tribunal that it had been wrongly constituted by reason of the fact that the Chief Justice or his designate had nominated an arbitrator although the period of thirty days had not expired and, therefore, it had no jurisdiction. The above decision makes it clear that even Arbitral Tribunal can rule on its jurisdiction.

16. In O.P.No.705/2004 dated 07-01-2005, N.V. Balasubramanian, J., of this Court, following the decision of the Supreme Court in DATAR SWITCHGEARS LIMITED and other subsequent decisions, held that the power of the respondents to appoint an arbitrator in terms of clause 35 of the agreement would not cease on the expiry of 30 days from the date of the receipt of the notice, but their power would be lost on the date the petitioner approached this Court and presented the necessary petition for appointment of an arbitrator. 17. In HYTHRO POWER CORPORATION LTD., v. DELHI TRANSCO LTD., [(2003) 8 Supreme Court Cases 35], after reiterating the decision in KONKAN RAILWAY CORPORATIONs case (supra), the Honble Supreme Court has held that the Chief Justice or his Designate under Section 11 exercised purely administrative functions and it is not open to him to discharge any judicial function of adjudicating the dispute even regarding the existence of arbitration agreement. They further held that the power that is exercised by the nominee of the Chief Justice under Section 11 of the Act is in the nature of an administrative order. It is also clear from the above decision that even if there is any infirmity in the arbitration clause, it had to be adjudicated by the very Arbitral Tribunal after a reference is made to it being so constituted and it is not for the ICA or the learned Judge in the High Court to undertake this impermissible adjudicatory task of adjudicating highly contentious issues between the parties.

18. Now we shall consider the decisions relied on by Mr. M. Vaidyanathan, learned counsel appearing for the petitioner in W.P.No. 15230/2005 and Mrs. Chitra Sampath appearing for some of the respondents. In BANWARI LAL v. P.C. AGGARWAL, reported in AIR 1985 Supreme Court 1003, while considering Arbitration Act, 1940, the Supreme Court has held that in our view resort to Section 20 of the Arbitration Act on the part of the appellant before approaching the Arbitrators for adjudication was unnecessary and the award was and is binding on the respondent.

19. In S. RAJAN v. STATE OF KERALA [AIR 1992 Supreme Court 1918] in para 12 it has been held that only in cases where the agreement does not specify the arbitrator and the parities cannot also agree upon an arbitrator, does the court get the jurisdiction to appoint an arbitrator. 20. The decisions cited by Mr. Amalraj, learned counsel appearing for some of the respondents would show that if a duty is cast on a party to appoint an Arbitrator and despite demand he fails to respond, he can still appoint prior to the opposite party invoking the provisions of Section 11 (6) of the Act. Thereafter, the right to appoint cannot be exercised. On the failure of the appointing authority to Act as required under agreed procedure, it is the duty of the Chief Justice or His designate to appoint an Arbitrator. On the failure of the appointing authority to nominate an Arbitrator, the defence of non-arbitrability of the dispute would fall within the realm of the Arbitrator for decision and it will not take away the right to reference. 21. Mrs. Chitra Sampath, learned counsel appearing for some of the respondents, has also referred to various decisions in support of her claim which is similar to the stand taken by Mr. Vijaynarayan. In FOOD CORPORATION OF INDIA v. THAKUR SHIPPING CO., [AIR 1975 Supreme Court 469] it has been held that where a party to an arbitration agreement chooses to maintain silence in the face of repeated requests by the other party to take steps for arbitration, the case is not one of mere inaction. Failing to act when a party is called upon to do so is a positive gesture signifying unwillingness or want of readiness to go to arbitration. In G. RAMACHANDRA REDDY AND CO., v. CHIEF ENGINEER, MADRAS, reported in AIR 1994 Supreme Court 2381, it was held that the Court should endeavour that the contract should always be given effect to, though the contracting party had failed to act according to contract. It is to be seen, whether the contract provided for the appointment of a named arbitrator, and if so, the parties normally would be bound by the terms of contract and the Court would not be justified to appoint any arbitrator unless the arbitrator refused or neglected to enter upon the reference, etc. In the absence of any named arbitrator it would be open to the contracting parties to agree for an appointment of an arbitrator by agreement even after the proceedings were laid in the Court under Section 20 of the Act. In the absence of any such agreement, the Court gets jurisdiction and power to appoint an arbitrator. Thus when the notice was given to the opposite contracting party to appoint an arbitrator in terms of the contract and if no action had been taken, it must be deemed that he neglected to act upon the contract. When no agreement was reached, even in the Court between the parties, the Court gets jurisdiction and power to appoint an arbitrator. Finally, it was concluded that even if Section 8(a) per se does not apply, notice was an intimation to the opposite contracting party to act upon the terms of the contract and his/its non-availment entails the forfeiture of the power to appoint an arbitrator in terms of the contract and gives right to the other party to invoke the Courts jurisdiction under Section 20. 22. Mr. M.K. Kabir who volunteered and assisted the Court, has also cited decisions of various High Courts and the Supreme Court. On a reading of the decisions, it shows that if a duty is cast on a party to appoint an Arbitrator and despite demand he fails to respond, he can still appoint prior to the opposite party invoking the provisions of Section 11 (6) of the Act. Thereafter, the right to appoint cannot be exercised. On the failure of the appointing authority to Act as required under the agreed procedure, it is the duty of the Chief Justice or His designate to appoint an Arbitrator. On the failure of the appointing authority to nominate an Arbitrator, the defence of non arbitrability of the dispute would fall within the realm of the Arbitrator for decision and it will not take away the right to reference. When the authorised person under a contract fails to appoint the Arbitrator in accordance with the conditions of contract, then he has abdicated his power to appoint. The order of the Chief Justice or his designate appointing an Arbitrator under Section 11(6) of the Act is not amenable to the jurisdiction under Article 226 of the Constitution. A challenge to an order of appointment passed by the designated Judge can be made through writ petition but since alternate efficacious remedy is available writ court will not entertain the challenge. However, intervention by writ court under Article 226 would be possible if the designated Judge has failed to or refused to appoint an arbitrator only. In administrative decision judicial review is permissible to see whether there is any infirmity in the decision making process and not in the decision itself.

23. From the above mentioned decisions of the High Courts and the Supreme Court, the following principles emerged:-

i. If the conditions of contract or the arbitration clause appended thereto envisages that a particular person/authority should appoint an Arbitrator, to decide the dispute and differences which have arisen in the contract, within a time-frame stipulated therein, then, he is bound to comply with the stipulation.

ii. If the appointing authority fails to do so, then, the other party has the right to move the Chief Justice or Designated Judge for appointment of the Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. iii. If prior to filing the petition under Section 11 of the Act, the appointing authority appoints the arbitrator as stipulated in the Agreement, then, the said reference is valid.

iv. Once the petition for appointment is filed before the Court, then, the other party abdicates its right to appoint the Arbitrator as per the provisions stipulated under the Agreement or in terms of the Arbitration clause and the court alone has the power to appoint. v. While so appointing the Arbitrator, the Court is not bound to appoint the person/panel stated by the respondent as arbitrators and the court can appoint any independent and impartial arbitrator.

vi. The appointment so made, though it is an Administrative Order, is not open to challenge through a writ petition as judicial review is permissible only to see whether there is any infirmity in the decision making process and not in the decision itself. Even if writ is maintainable, yet, in view of section 16 read with sections 1 2 and 13 almost all disputes can be raised and agitated before the Arbitrator and as the above alternate efficacious remedy is available writ court will not entertain a challenge to the appointment made by the Chief Justice or Designated Judge.

vii. It is only where the Chief Justice or the Designated Judge fails to appoint an Arbitrator as per the Agreement or Arbitration Clause appended thereto, a challenge under Article 226 of the Constitution will be entertained by the Writ Court.

viii. While appointing the Arbitrator the Chief Justice or the Designated Judge cannot decide any contentious issues as the challenge procedure contemplated under the Act empowers the Arbitrator to decide all disputes including the Constitution of the Tribunal, its `jurisdiction, the existence of the Arbitration clause etc., and any such decision is open to challenge under section 34 of the Arbitration and Conciliation Act, 1996. ix. The intention of the legislature while enacting the Arbitration and Conciliation Act, 1996 was to minimize the supervisory role of courts from appointment to the passing of the Award.

24. In most of the cases, it is demonstrated before us that the other party has not either replied to the notice or filed any counter in the petition filed under Section 11 (4) of the Act seeking for appointment of an Arbitrator. Further, only after satisfying all pre-requisites for invocation of Arbitration and Conciliation Act, 1996, the Chief Justice or his Designated Judge appointed the Arbitrator. It is also brought to our notice that the other party has not referred the matter to arbitration till such time, another party can approach this court by filing petition. It is further stated that though it is a named Arbitrator, in view of the fact that in spite of one party making demand for appointment of Arbitrator, the other party has not responded and referred the matter to the named Arbitrator, we are of the view that the applications filed before the Chief Justice or Designated Judge for appointment of independent and impartial Arbitrator cannot be faulted with. 25. In the light of our discussion, and in view of the principles as enunciated by the High Courts and the Supreme Court in various decisions cited supra, we do not find any merit in these petitions; accordingly all the petitions are dismissed. No costs. All the connected W.P.Ms., are closed. 25-08-2005.

R.B.

Index:- Yes.

Internet:- Yes.




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Reproduced in accordance with s52(q) of the Copyright Act 1957 (India) from judis.nic.in, indiacode.nic.in and other Indian High Court Websites

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