Dismissed

M/s. Raja Rajeswari Constructions (India) Pvt. Ltd., v. M/s. Ncc Limited

Telangana HC5 Feb 2021ARBAPPL/133/2014

Case brief

AI extract

What is this about?

Three arbitration applications under Section 11(6) seeking appointment of a sole arbitrator over disputes under sub-contract agreements. The court held the applications premature: the applicant never issued notice demanding appointment of an arbitrator under the agreed clause, and the respondent had already appointed a sole arbitrator before the applications were filed. Applications dismissed.

What the court decided

AI extract

M/s. Raja Rajeswari Constructions (India) Pvt. Ltd., Vs M/s… — Arbitration | Telangana HC (2021)

¶1

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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FRIDAY ,THE FIFTH DAY OF FEBRUARY TWO THOUSAND AND TWENTY ONE

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PRESENT

¶4

THE HONOURABLE SRI JUSTICE A.RAJASHEKER REDDY

¶5

ARBITRATION APPLICATION Nos :^'132 133 and 134 OF 2014

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Arbitration Application No.^'132 ol 2014:.

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Betwee n:

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tr//s. Raja Rajeswari Constructions (lndia) Pvt. Ltd., (Formerly M/s. Raja Rajeswari Constructions) Regd. Office at Flat No.201, Bhavya's Lakshmi Krishna Residency, Venkata Ramana Colony, Khairtabad (West) Hyderabad - 500 004. Rep. by its N4anaging Director, Sri R. Muthaiah, S/o. Basavaiah. ...APPLICANT

¶9

AND

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lV/s. NCC Limited, (formerly Nagarjuna Construction Company Limited) Rep. by its Authorized Signatory, And Vice President -lrrigation, Sri B.A.N. Raju, Regd. Office at NN House, I/adhapur, Hyderabad - 500 081. ...RESPONDENT

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Arbitration Application Under Section 11 (6) of the Arbitration and Conciliation Act,^'1996 R/w. Scheme for Appointment of Arbitrators, 2006 praying that for the reasons stated in the affidavit filed therewith, the Fligh Court may be pleased to appoint arbitrator to resolve the disputes between the parties which arose under the Sub Contract Agreement dated 30.07.2012; as per Section 11(6) of Arbitration and Conciliation Act, 1996 and Rules framed there under.

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ARBITRATION APPLICATION NO: 133 OF 2014

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Between:

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M/s. Raja Rajeswari Constructions (lndia) Pvt. Ltd., (Formerly M/s. Raja Rajeswari Constructions) Regd. Office at Flat No.201 , Bhavya's Lakshmi Krishna Residency, Venkata Ramana Colony, Khairtabad (West) Hyderabad - 500 004. Rep. by its [/anaging Director, Sri R. Ir/uthaiah, S/o. Basavaiah. ...APPLICANT

¶15

AND

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lvl/s. NCC Limited, (formerly Nagarjuna Construction Company Limited) Rep. by its Authorized Signatory, And Vice President -lrrigation, Sri B.A.N. Raju, Regd. Office at NN House, I/adhapur, Hyderabad - 500 081. ...RESPONDENT

¶17

Arbitration Application Under Section 11 (6) of the Arbitration and Conciliation Act, 1996 R/w. Scheme for Appointment of Arbitrators, 1 996 praying that for the reasons stated in the affidavit filed therewith, the High Court may be pleased to appoint arbitrator to resolve the disputes between the parties which arose under the Sub Contract Agreement dated 30.07.20.12; as per Section 11(6) of Arbitration and Conciliation Act, 1996 and Rules framed there under.

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ARBITRATION APPLICATION NO: 134 OF 2014

¶19

Between:

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M/s. Raja Rajeswari Constructions (lndia) Pvt. Ltd.,^{(FormerlyM/s.} Raja^Raieswari Constru-tions) Regd. Office at Flat No.201, Bhavya's^{Lakshmi Krishna Residency,} Venkata Ramana Colony, Khairtabad^(West) Hyderabad^{- 500 004. Rep.} by^its ...APPLICANT Managing Director, Sri R. Muthaiah, S/o. Basavaiah.

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AND

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M/s. NCC Limited, (formerly Nagarjuna Construction Company^{Limited)Rep_. by its} Authorized Signatory, And Vice President^{-lrrigation,Sri B.A.N. Raju, Regd. Office at} ...RESPONDENT NN House, Madhapur, Hyderabad^- 500 081.

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Arbitration Application Under Section 11⁽⁶⁾ of the Arbitration^and Conciliation Act, 1996 R/w. Scheme for^{Appointmentof Arbitrators,1996 praying} that for the reasons stated in the affidavit filed^{therewith,the High Court maybe} pleased to appoint arbitrator to resolve the disputes between the^parties which arose under the Sub Contract Agreement dated 30.07.2012; as^{per Section 11(6) of} Arbitration and Conciliation Act, 1996 and Rules framed^{there under.}

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Counsel for the Applicant in all applications:^{SRI P. SREE RAGHU RAM SENIOR} COUNSEL FOR SRI. KRISHNA MOHAN SIKHARAM

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Counsel for the Respondent in all applications^{: Ms. ALTAFFATHIMAFOR} SRI GANDHAM DURGA BOSE

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The Court made the following: COMMON ORDER

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HON'BLE SRI JUSTICE A.RAJASHDKER REDDY

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ARBITRATION APPLICATION Nos. i32. 1 33 and 134 OF 2Ol4

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COMMON ORDER:

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Since the issue involved in ali these Arbitration Applications is one and the same, they are being heard together and disposed of by way of this Common Order.

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These Arbitration Applications are filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short the ActJ for appointment of an Arbitrator to resolve the disputes that arose betv/een the parties in respect of different works under separate Sub Contract Agreements dated 30.07.2012 in all these Arbitration Applications. 3. For the sake of convenience, the facts in Arbitration Application No. 132 of 2O).4 are considered for disposal of these Applications. Brief facLs which arc ncccssary for disposal of the Arbitration Application are as follows:

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The respondent was awarded a work pertaining to Sardar Sarovar Narmada Nigarrr Limited for the Design, Construction, Testing, Commissioning and operation and Maintenance for five years of Kutchh Branch Canal Package-l on Engineering, Procurement, Construction and Commissioning (EPC) basis between Ch.82.300 kms to Ch.1 12.50 krns including carthu,ork, structures, lining, service road, CR/l{l{/Escapc, Cates, Stop Locks, Control Cabins etc., by Executive Engineer, Sardar Sarovar Narmada Nigam Limited, vide agreement No.KBC/EPC/Package/ i/EPC-I of 2Olt-2O12, dated OT.O2.2Ot1. The rcspondent sub-contracted a portion of the work i.e.,9g.0O km to i00.1O0 km, which forms part of the above mentioned package awarded by Executive Engineer, Sardar Sarovar Narmada Nigam I.imited on item rate work basis including materials vide Sub-Contract

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Agreement dated^30.07.2012 lfor^{short'SCA'), which is valuedat} Rs.36,51,64,687.58^{ps and as per the said agreement, the work shall} be completed on or^{before 3O.O7.2O13' Pursuantto the award of the} contract, the^{applicant had mobilizedits men and machinery in right} earnest so as to executl^{the work} .^{under SCA and completethe} execution before^{the designateddate. However, for the reasonswhich} are beyond the^{controlof the applicant and for the reasons attributable} to the respondent,^{the entire planning scheduleof the applicant got} disturbed and thus^{the execution of the work got undulydelayed. The} issues that are encountered^{by the applicantwhile executing the work} have been brought to^{the notice of the respondentfor resolving the} same so as to complete^{the work withinthe timeschedule,but in vain'} The subject work could^{not be progressed due to frequent obstructions} by the Forest Department^{and though the same was brought to the} notice of the respondent^{for it's intervention, they turned a deafear,as} such, the work^got unduly^{delayed.That apart, the respondent failed to} pay amounts under RA Bills,^{whichwere raisedfrom time to time'} Thereafter, the Applicant^{was constrained toaddress letter} No.SRRCIPL/KBC.PKG.1/2014-^{15/ No.73,} dated rt 'Oa'2or4 demanding an arnount^{of Rs'16,79,13} ,9o4 l^{. along with interestat 18o/o} per annum. As disputes^{arosebetween the applicant and the} respondent, the^{appiicant got issued notice dated 28'07'2O 14 lnvoking} arbitrationclauseNo.34containedundertheSCAdated30.oT'2012for settlement of^{claims amicably in the first place and to take further} suitable action^{i.e', appointing an Arbitrator,if they failedto agree for} any amicabie^{settlement.In responsethereto, the respondentreplied} through letter^{vide Ref .No.NCC} /^{HO-lrri/ KBC Pkg-l/ SRRC/ 2 O | 4 - I 5 I 07'} dated 08.08.2014^{statingthat the claims raised by the applicantare} beyond the ambit^{of the contract and that same are 61s"nted matters}

\ -

...-.

and there are no disputes existing for the^purpose of^{any settlement.} Thereafter, the respondent called upon the applicant for amicabie settlement on 14.08.2014 to resolve the issues, if any, within the ambit ol the contract. On receipt of the said letter, the applicant addressed letter dated 10.08.2014 requesting the respondent to^give details of the meeting, to which the respondent replied through letter dated 12.08.2014 giving the particulars and also named the authorized representative i.e., S.Srinivasa Rao, AGM, Irrigation. As the^person proposed is far less in hierarchy than Mr.B.A.N.Raju, Vice President, the applicant addressed letter dated 14.O8.2014 expressing resr:rvations as regard the said nominated person. On 14.08.2014, the applicant represented by its Managing Director attended the meeting. While reiterating their stand in the letter dated 08.08.20i4, the respondent called upon the applicant to come up with fresh^{proposal in} terms of the contract. In the said meeting, the disputes/^claimsraised by the applicant through letter dated I i.08.2014 was also considered. As the respondent was not willing to consider the claims of^the applicant, the applicant requested the^{respondent to appointan} arbitrator lor resolving the disputes raised by the applicant^{in their} letter dated 1 1.08.2014. Thus, the so called amicable^{settlement fe1l} through, as such, the respondent ought to have^{appointedarbitrator} and that instead of appointing an Arbitrator, the respondent addressed letter dated 16.08.2014 fixing a fresh date of meeting as 23.08.2O14 falsely alleging that the applicant agreed to submit a reasonable proposal within the terms of the agreement. The applicant represented by its Managing Director attended the meeting on 23.08.2014 to question the same and also to discuss if there would be any consideration of the issues raised by them in respect of two other contracts. However, on the said date, almost a new team has come to

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the meeting and they reiterated their stand^{taken in their letter dated} 08.08.2014 for all the works / contracts,^{whichare underexecutionby} the applicant, thereby refusing to entertain the^{said issues} Subsequently, there is exchange of^{correspondence between the} parties. As the respondent did not come forward to appoint an Arbitrator as requested by the applicant^{vide letter dated11.O8.2014,} this Application is file d. 4. Counter affidavit is liled by the respondent denlring^thc averments in the affidavit filed in support of the Arbitration Application stating that application filed by the applicant is liable to be dismissed in limine on the ground that; a) the Application is premature as it is filed within 30 days and b) the Application is not maintainable either in law or orr facts and same has become infructous. That the claim ol the applicant for Rs.16,79,13,9O4 I - along with interest at l8o/o per annum is exorbitant and beyond the ambit of the SCA dated 30.07.2012. It is asserted that the applicant by letter dated 10.08.2014 acknowledged the receipt of letter dated 08.08.2014 and had given consent for the amicable settlement as provided under Clause 34 of the SCA. Accordingly, on 14.O8.2014, a meeting rvas held between the representatives of the applicant and the respondent at thc olfice^of respondent and that alter discussions, it^{u,as agrced that the applicant} would submit a reasonable^proposal for^{settlement of issues on or} before the next meeting i.e., on^{16.08.2014. llou'ever, the scheduled} meeting lr,as rescheduleci to^{23.08.2014. On the said date, a sccond} meeting was held between the^{representativesof the applicant and the} respondent at the office of the respondent.^{The applicantsubmitteda} settlement proposal for which, the respondent^{requestedfor sometime} to review ad revert with their vier,t's. On^{03.09.2014, the respondent} addressed a letter to the applicant and inlormed^{that settlement}

¶40

proposal submitted by the appligant was not agreeable to the respondent as the excess amount of Rs.2,23,98,02I / - proposed by the applicant was already paid. The respondent vide letter dated 03.09.2014 expressed its intent to appoint a Sole Arbitrator under clause 34 of the scA ror adjudication of all the claims and counter claims of the parties. Thereafter, tlre respondent addressed a letter dated 05.09.2014 to Mr.tnder Mohan Singh, who retired as Chief Engineer seeking his consent to act as an Arbitrator to arbitrate on the dispute between the parties. On 15.09.2014, Mr.lnder Mohan Singh addressed a letter . to the respondent wherein he confirmed his willingness to act as a Arbitrator to arbitrate the dispute between the parties. On 22.09.2014, the respondent prepared a draft letter to be issued to the Applicant informing the appointment of Arbitrator and the said letter was internary circurated to the officers of the respondent for their approval by e mail. pursuant to the letter dated 03.09.2014, the respondent vide letter dated,22.og.2014 intimated to the applicant that the respondent had appointed Mr.rnder Mohan Singh as sole Arbitrator under the Clause 34 of the SCA and said letter was emailed to the applicant with a copy marked to the Arbitra tor on 23.09.2014 and hard copy of the said letter was dispatched on the same day through courier and was received by the applic ant on 24.09.2014. The respondent is not aware of the fact of the applicant approaching this Court under Section 1 1(6) of the Act praying for an appointment of an Arbitrator. On the next day i.e., 23.Og.2O14 at S.2Z pm, the respondent received a letter from the counsel for the applicant informing the respondent abor-rt filing of present Application praying for an appointment of Arbitrator. The present Application has been filed before the completion of the 30 days period as required under Section rr(s) of the Act from the date of intimation by respondenr about failure oI the amicable

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settlement and that the respondent would appoint^{an Arbitrator as per} Clause 34 of the Sub-Contract Agreement.^{FromSeptember2"d,2014} i.e., from the date of filing of the^{present application till 23.O9.2014on} receipt of notice dated 21.O9.2014^{from the counsel appearingfor thc} applicant, the applicant^{deliberately suppressed the fact thatthc} applicant had filed an application^{before this Court ln responscto the} letter dated 22.O9.2O14 intimating^{the applicant about appointmcnt ol} Mr.lnder Mohan Singh as Sole^{Arbitrator, the applicant sent a reply} letter dated 25.O9.2014^{to the respondent and informedabout filing ol} present Application and disputed^{the appointment of the Arbitrator by} the respondent. The'^{sole Arbitrator appointed by the respondent} meanwhile hxed a Schedule^{for Arbitrationand issuedthe sameto both} the parties for further^{action. There is no specific request to the} respondent for^{appointment of Arbitratorconsequent to failureof} amicable settlement^{and that there is no such time limit prescribed} under clause 34^{of the SCA. The relief sought for bv the applicant} cannot be^{granted as the entil:c Application is misconceived and has} become infructous.^{The applicanteven u'ithoul making a requestfor} appointment^{of Arbitratoras contemplated under Clause 34 of the SCA'} wrth a matafide^{intention approachecl this Court' cven bcforeexpiryof} 30 days as^{provided for under Section11 of the Act Sincc the} respondent had^{already appointed Arbitratorunder Clause 34' lhis} Application is^{infructousand requires to be dismissed-In Datar} Switchgears^{Limlted u. ilorto Finance Limited [2OO1 Vol'1O3(1)} Bom.L.R 865^{(SCI, Ace PipelineContractsPriuate Limited u'} BharatPetroleumcorpo':atlonLlmitedtpoon5sccso4and Deep Trading^{Comporn1 o' Indian Oil Corporation [(2013) (3) AWC} 2984^{(S;C)], the Hon'ble Supreme Courtheld that for cases falling under} Section^{1 1(6) are concerned, no time limit has been prescribed under}

¶43

the Act, whereas a period of 30 days has been prescribed under Section 1I(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 afrer 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 liles Application under Section 11 seeking appointment of an Arbitrator. only then the right of the opposite parfy ceases. This Application cannot be entertained as the Sole Arbitrator had aiready been appointed and the schedule for submission of Statement of Claim, Statement of Defence & Counter claims and rejoinder to Statement of Defence & reply to the Counter Claims was also fixed by the Arbitrator. It is asserted that the Arbitrator appointed by the respondent retired as a Engineer_in-Chief, PWD. Government of Delhi and has vast expertise in the Construction Industry and had dea.lt with many cases as an Arbitrator and he is based out of New Deihi. The Arbitrator also issued letter dated 25.09.2014 to the Applicant and the respondent under Section 12 of the Act' 1gg6 ?he respondent folrowed due process provided under the Act and the clauses of the scA in appointing the sole Arbitrator. The applicant cannot invoke section 11(6) of the Act as the respondent had complied with sub-secrions (2), (3) and (4) of Section 1l of the Act. ?he respondent appointed sole Arbitrator within 30 days as contemprated under sub-section (4)(a) of Section 11 of the Act. The applicant is precluded from approaching this Court under Section 11(6) of the Act

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and as per the applicability^{of sub-section 6(a) o[ Section11 of the Act'} the respondent^{had acted asrequired under theprocedure} contemplated under^{the Clause 34 of the Sub-ContractAgreement'} whereas sub-sections^{6(b) and (c) of Section 11 of the Act does not} apply for the^{presentcase and sought for dismissalof the Application'} 6. tleard Sri^{P.SreeRaghu Ram,learned Senior Counsel appearing} for Sri Krishna^{Mohan Shikaram,learned counselfor the applicantand} Ms.Altaf^{Fathima,learned counsel appearingfor Sri GandhamDurga} Bose, learned^{counselfor the respondent'} 7. Sri P.Sree^{Raghu Ram' learned Senior Counsel'whiie reiterating} the averments^{in the affidavit filed in support of the Application} submitted^{that the applicantissuedletterdated 28'07 '2014 invoking} Clause^{34 of the SCA for settlementof claims amicably in the first place} and to^{take further suitable acdon for appointing an Arbitrator'if} amicable^{settlement fails'He submits that thoughthe respondent} issucd^{letter dated 08'08'2014'they did not intend to settle the issues} amicably^{and replied that the claims made by the applicant are beyond} the ambit^{of the contract and same are excepted matters and that no} disputes^{existing for the purpose of settlement' but however'addressed} a ietter^{dated14'08'2O14 calling uponthe applicantfor resolvingthe} issues,^{if any, within the ambit of the contract He submits that} though^{the meeting washeld on 14'08'2014'no amicabiesettlement} was arrived^{at between the parties'as such' present application is filed} for appointment^{of an Soie Arbitrator'He also submits that when once} the Application^{is {iledby the applicant' the respondentcannot appoint} arbitrator^{as they lost their rightof appointment an Arbitrator'FIe also} submits^{that even otherwise' there is no time limit for appointmc,tof} Arbitrator^{under Section1 1(5) of the Act' He submits that even though} 30 days^{period is not required to be maintained lbr initiating arbitration}

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proceedings under Section 11(6) of the Act, the present application is I'iled after expiry of 30 days after invocation of arbitration Clause 34 contained in SCA. He submits that this Application is filed on O2.O9.2O14 and by that rime, the respondent lost their right to appointment an Arbitrator. In support of his contention, he relied on the judgment reported in Datar Suitchgo;s Ltd., u. Tata Flnoince Ltd..,[2OOO (q ALf 26 lSC), Judgment of Catcutta High Court in credt Edstern Shipping Co. Ltd., o, Board o.f Trustees tpOO4) (A) CHN 37) and Deep Trdding Compang u, Indian Oil Corporation (AIR 20 13 SC 1479). He also submits thar in this application, the applicant invoked the arbitration clause 34 on 2g.02.2014 and also on ) 1.O8.2014 and the present application is fiied on 02.Og.2014, as such, 30 days period was also complied with.

¶48

On the other hand, learned counsel for the respondent while reiterating the averments in the counter affidavit rebutted the contentions of the learned Senior Counsel for the applicant. 9- There is no dispute with regard to award of SCA in favour of the applicant by the respondent on 30.OZ .2012 for the execution of certain works relating to Sardar Sarovar Narmada Nigam Limited. During the course of execution ol SCA, disputes arose between the parties in respect of alleged incomplete works and non_payment of certain dues by the respondent. There was an exchange of correspondence between parties and one such correspondence is the letter addressed by the applicant on 2g.O2.2O74 calling upon the respondent for amicable settlement of the disputes that arose between them. According to the applicant, even after addressing letter dated 11.Og.2O14, as there is no amicable settlement with the respondent, filed the present application for appointment of an Arbitrator. It is the specific contention of the respondent that the present application under Section 11(6) of the Act

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has already been filed on 02.09.2014, without intimation to^the respondent and without waiting for the amicable settlement. 10. Before considering the rival contentions of the^{parties, itis} necessary to extract the Clause-34 contained^{in SCA, which reads as}

¶51

follows:

¶52

"All disputes or differences whatsoever arising bet$een^{NCC and SRRC} out of or relation to the construction,^{meaningand operation or effect oI} this Sub Conhact Agreement, or any breach^{thereof, shall be settled} amicably by the^{parties,failing which, itshall be settledby a Sole} Arbitrator, to be appointed by^NCC, as^{per the provisions of the Indian} Arbitration & Conciliation Act,^{1996. The award passed by the Sole} Arbitrator shall be final and^{be bindingon the Sub-Contractor andNCC'} The Venue of arbitration^{shallbe Hyderabad, AndhraPradesh'}

¶53

A perusal of the aforesaid^{clause goes to show that if at all any} differences or disputes^{arises between the parties in relation to the} execution of the^{work or during the course of execution of the work'} initially, both^{the parties shall try for amicable settlement by issuinga} notice under^{Clause 34 for amicablesettlement'lfthe amicable} settlement fails,^{then they have to takesteps for appointmentof a Sole} Arbitrator, to^{be appointedby NCC for resolving the disputes between} the parties^{by issuing notice for appointmentof Sole Arbitrator and the} Award^{passed by the Sole Arbitratorsha1lbe Iinal and binding on both} the parties.^{Now, we haveto examinewhether the applicant and the} respondent^{have taken any steps for resolution of the disputes} amicably or^not?

¶54

il. It is the^{specificcontention of the learned counsel for the} respondent^{that the applicant never intimatedto the respondentthat} there is a faiiure^{of amiable settlement betweenthem and that the} applicant^{also neither requestedthe respondent for appointmentof} arbitrator in^{accordancewith Clause34 of the SCA nor as per the} provisions of the^{Act. As per Section 21 of the Act' date of serviceof} notice by the^{partyfor appointmentof an Arbitrator would be the} relevant date for^{the purposeof commencementof the arbitration}

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proceedings. For the sake of convenience, section 2l of the Act is reproduced hereunder:

¶57

"21. Commencement of arbitration proceedings: Unle-ss otherwise agreed by rhe parties, rhe arbitrar p.o.e.airig;^-i,;-;:;;; ,, a particular disDure commence on rhe date on which u ,Equ."t f"r',i", ai"prr!;;;f.;::";; arbitration is received by the respondeni

¶58

Section 2l of the Act mandates that unless notice of intention for appojnrmen t of arbitratot - is issued by one party to the other party, the question of compliance or non_compliance of the nodce requirements by the other parlz does not arise. Let us examine as to whether the applicant has served any notice, as required under Section 2l of the Act, on the respondent for appointment of Sole Arbitrator or not? ) 2. Admittedly, the applicant has addressed letters dated 28.07.2014 & tl.o8 '2014 purportedly under Clause 34 of the SCA for settlement of disputes in the first place and not for the purpose of appointment of arbitrator. Even according to the applicant, it is categoricalry stated in the affidavit that after receiving correspondence vide letterb dated O8.08.2014 and t2.O8.ZOt4, though there was a meeting held on 14.08.2014 for amicable settlement, but the same was not successful. It is the contention of the learned Senior Counsel for the applicant that in the .letter dared I l.Og.2Oj thev have requested rhe respondent ror appointin::::::,_ -'6'2o14' an Arbitrator' A perusal of the aforesaid letrer dated , , .or.ro ro','nting outt'"''trly' the conc'luding paragraph, goes to show that the said ,.,o,,, :e was issued only for th ror appointment or same is reproduced ..,".,^{""' '"""'o:::::,::.:J";;.'"'}

¶59

#,[iflt"i:'H:{,:"i::}i#i.x.j,#:}it{i?hi{,*'*t

¶60

The aforesaid concluding^{paragraphgoes to show that it was} only for the^{purpose of amicable settlementand not for seeking} appointment^{of a Sole Arbitrator'That apart' on the letter addressed} by the respondent^{on 16.08'2014,a meeting washeld on 23 08'2014} but there^{was no fruitful} wherein the^{applicant attended the same'} ln the affidavit,^{it is also} result forthcoming^{for amicablesettlement} categorically^{assertedby the applicant that the respondentis u'illfully} protracting^{the matter without appointingthe Arbitrator' However'it} is^{pertinentto note here that the respondent addresseda letterdated} 03,09.2014^{to the ManagingDirector of the applicant Stating as follows:}

¶61

	Keeping^{inthe viewofyourcorrespondenceexchanged} "t'u""q"""itJ^;;;; ;;;amicable^{settlement dated} 14'o820l.ill-,fi;n!^i'""av^{ptiaanexcessamountof} nsZ,Zs'se'frl^{/--"tplltstatement-enclosedalongwithour} letterdatj22oS.2o.t4,yourproposalisnotagreeable.
2. 3. 4.	Inaddition'^{there wasa defaultonvour partbynon-} p"'ro'r,,ul'll ",} ;;;"-:1t :r^{"'kror whichwe} ntu"^{uf'"l"avri'oteaclause}'9^{ofthesubcontract} ^'"""t'"tjiJot;';;;; toexecute^{theb.lanceworkat} ilT"'"'"ttr":H:tances.'altemptforamicablesettlement heldon1;:;;2;il;;23 08i014^{has railed'} si"""vol-r'"'"'J]ri"J't""u"a"]i::i"-'rli#:S3"?:i theSole^{Arbitratorshortly}'u'nder c s''tu-cot'il'""t"ig'"trn""t!lw"^ori'oo"l;,-,,1;tt"'l;"'T' adjudication^{ofalltheclaimsar} Parties^"

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adjudication^{ofalltheclaimsar}
Parties^"

¶62

As rightiy^{contended by the learned counselfor} the resPondent, regard^tothe without^{any prior request orintimationwith} 4, the^aPPlicant appointment^{of Sole Arbitrator prior to 30'09'201} 1 i (6) of^{the Act} straight^{away filed this ApplicationunderSecdon} seeking^{aPPointmentof an Arbitrator on 02 o9 2014'which is tn} violation^{of the procedure envisaged Clause34 of the SCA' Therefore'} the applicant^{has failed to followthe mandateof issuanceof notice} under^{Section 21 of the Act' so also the procedureunder Clause 34 of} the Act^{and that he failed to take steps as required underthe} provisions^{of the Act}

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It is next contended by the learned Senior Counsel for the applicant that there is no requirement of 30 days prior notice for filing an application under Section 1 1(6) of the Act. As rightly contended by the learned counsel for the respondent that the said argument was advanced but there is no whisper about the same in the affidavit filed in support of the Application. That apart, a perusal of the afrrdavit also shows that there is no such averment in the entire affidavit l ed by the applicant. As already observed supra, the applicant neither declared about the failure of amicable settlement to the respondent nor requcsted for appoin tment of sore Arbitrator in the correspondence that exchanged between the applicant and the respondent. On the other hand, the respondent had addressed a letter dated 03.09.20i4 to the applicant of it's intention to appoint an Arbitrator and in fact had also appointed one Sole Arbitrator by name Mr.lnder Mohan Singh, for resolution of disputes between the parties. That apart, the applicant also failed to follow the mandate of issuance of notice under section 2 1 ol the Act. When once there is failure on the part of the applicant in following the procedure under clause 34 of the scA by issuing notice seeking appointment of Sole Arbitrator to the respondent, the present applicant is not maintainable and liable to be dismissed on this ground alone

¶65

In Hindustan Construction Company Ltd., v. State of Orissa [2013⁽¹⁾ ILR-cur s48], wherein the orissa High court held that arbitration application is not maintalnable for the reason that it is not preceded by a demand notice issued and served to the opposite party demanding for appointment of an Arbirrator, which is mandatorv in law, as per Section I 1 (a)(a) of the Act.

¶66

It is vehemently argued by the learned Senior Counsel for the applicant that since the Application has been filed by the applicant for

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l.l

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appointment of Sole Arbitrator belorc this Court, the appointmcnt^oi Sole Arbitrator by the respondent is of no consequence and samc cannot be held to be va1id.

¶69

In Man Mohan Kumbhaj v. Union of India [2O2O^{(2) RLW} 1331 (Raj,f, wherein the Rajasthan High Court held that^if a^{notice for} appointment of Arbitrator in consonance with dispute^{resolutionclause} has not been given, the application can be dismissed on the^satd ground itself u,ith the liberty to the applicant to proceed in the matter in consonance to the terms of the agreement to seek appointment ol arbitrator. It was further held that, r,vhen the application under Section 11 of the Act itself is not maintainabie, the issue in reference to Section 12(1) and 12(5) ol the Amended Act of 2015 remains premature.

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As already observed supra, since the applicant has filed the present Application without following the procedure envisaged under Clause 34 of the SCA and urithout issuing any prior notice for appointing Arbitrator, this Application is premature and not maintainable, in view of principle of law in the aforesaid^judgment of Rajasthan High Court.

¶71

Be that as it may, as per Section¹ 1(5) of the Act, a^Sole Arbitrator should be appointed within a^{period ol 30 days upon the} request of other^party which^{intends to initiatearbitration proceedings,} as such, 30 days^period for a^{part)' to appoirlt an Arbitrator is} prerequisite condition. Clause 34^{ol the SCA mandatcs tu'o stagcs ic,} firstly for amicable settlement^{and secondl.u- lbr appointmcnt ol} Arbitrator for resolution^{of disputesbetweenthe parties arisingoutc-: I} SCA. According to the applicant,^{they have issued t$'o notices i e,} 28.07.2014 and 11.08.2014^{requesting lbr amicable settlementand} aiso for appointment of arbitrator, upon^{failure of the amicable} settlement. As already^{observedsupra, notice clated 1 1.O8.2O14 was}

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only intended for the purpose of amicable settlement as per Clause 34 in the first place and further suitable action deemed fit under the circumstances as laid down in the agreement. After failure of amicable settlement, it is the respondent who issued notice of it's intention to appoint a Sole Arbitrator as per Ciause 34 of SCA on 03.09.2014 but not the applicant. There is no iota of evidence showing that the applicant has requested the respondent seeking appointment of Sole Arbitrator upon failure of amicable settlement on 14.0g.2014 and 23.08.2014. Thus, it can be presumed that only after faiiure of amicable settlement, the respondent issued notice on e3.o9.2014 lor appointment of Sole Arbitrator, therefore, the period of 30 days as required under section 1 l (5) would start from 03.og.2014 and not from 28.07.2014 and 11.0g.2014, as alleged by the learned Senior Counsel lor applicant. It is also pertinent to note that after 03.09.2014, the respondent sought willingness of the Arbitrator i.e., Mr. Inder Mohan Singh on O5.O9.2014, who gave his consent on 15.09.2014 and thereafter, the respondent inlormed the same to the applicant on 23.O9.2014. However, the applicant, without informing the respondent about failure of amicable settlement and without requesting the respondent for appointment of Arbitrator in accordance with crause 34 ol scA' filed this Application on 02.09,2014, that too after respondent informing it,s intention t.o appoint an Arbitrator on 03.09.2014 As such, contention of the learned Senior Counsel that 30 days period shall commence from 2g.OZ.2Ol4 and 1 1.0g.2014 for initiation of arbitration proceedings under Section I 1(6) of rhe Act and thar rhe said period of 30 days is not required for firing this apprication before this Court, cannot be accepted as on the said dates, the applicant only sought for amicable sertlement with the respondent but not seeking appolntment of Arbitrator Thereforc, the contention of the learned

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counsel for the application that there is no requirement^{to provide30} days period cannot be accepted.

¶77

In Ace Pipeline Contracts Private^{Limited v.Bharat} Petroleum Corporation Limited l2OO7 l2l^{ARBLR49(SC); Datar} Switchgears Ltd.,^{(supra), it has been held by the Hon'bleSupreme} Court that in cases^{arisingunderSection1 1(6) of the Act, ifthe} opposite party has^{not made an appointment within 30 days of} demand, the^{right to make appointmentis not forfeited but continues'} but an appointment^{has to be made before the former files application} under Section^{11 of the Act, seekihgappointment of a arbitratorand} only then the^{right of the oppositeparty ceases ln the instant' as} already observed^{supra, the 30 days periodwouldstart from the date of} failure of^{amicablesettlement i.e., from 03.09.2014, the dateon which'} the respondent^{addressed letter stating so to the applicant and not} from28.07'2014^{and 11'08'2014' as alleged by the applicant'Though} the applicant^{had relied on Great Eastern Shipping Company(supra)'} but the^{facts and circumstancestherein are quite differentfrom the} facts of^{the caseon hand' In the said case'dispute resolution clause} did not^{providefor amicable settlement of the dispute and only provides} for Arbitration^{clause' The applicant therein'even after addressing} several^{letters to the respondenttherein, whenthere is no response} from the^{respondent for appointmentof an arbitrator' filed an} application^{under Section11(6)of the Act' after a period of six months'} which^{was allowed by the Court' But in the instant facts are otherwise'} as such,^{the said judgment is not applicable to the facts of the case on} hand.

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20 Similarly,^{the judgmentrelied on by the learned Senior Counsel} for the^{applicant in Deep Trading CompanyvIndianOi1 CorPoratton} (supra) is^{also not applicableto the facts of the case on hand' ln the}

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said case, the applicant therein has requested the opposite party to appoint an arbitrator as per the agreed procedure. Since the opposite party failed to as per the request of the applicant, the application under Section I l(6) was filed and thereafter, appointed an arbitrator. The Hon'ble Supreme Court held that the appointment so made is of no consequence and the right of the opposite party to appoint is lost once application for appointment is made to Court. But in instant case, as already supra, no request was made to the respondent by the applicant for appointment of arbitrator, as per Clause 34 of the SCA. As such, this^judgment is not applicable to the facts of the instant case. 21 . In Simpark Infrastructure Pvt Ltd., v, Jaipur Municlpal Corporation (2013(31 RLW 2133 (Raj,), the arbitration clause provided that any dispute which is not resolved amicably shall be referred to a panel of three Arbitrators in terms of the Act. However, the applicant therein, without attempting to resolve the issue through amicable settlement approached the Court under Section 1 1(6) of the Act. The High Court of Rajasthan observed that (i) Where the parties have greed to arbitral procedure of dispute resolution, which has been made a condition precedent for invoking the arbitration ciause, then it is required to be followed before filing an appiication under Section I1 of the Act, and (ii) Sub-section (6) of Section 1 I of the Act cannot be invoked directly on expiry of thirty days notice under sub-section (4) of Section 11 of the Act, by the applicant for appointment of the Arbitral Tribunal ignoring the agreed arbitral procedure. After considering these observations, the High Court of Rajasthan held that the agreed arbitral procedure has not been followed by the applicant and therefore, the arbitration application is premature. In the instant case also, the applicant has not followed the procedure envisaged under Clause 34 of SCA, and straight away filed this application, without

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intimation or notice to the respondent of its intention to approach this Court for appointment of an Arbitrator, which is wholly erroneous. In fact, it is the respondent, who, after failure of amicable settlement, taken steps for appointment of Sole Arbitrator and also nominated one Mr.lnder Mohan Singh, as Sole Arbitrator, in compliance of Clause 34 of SCA, as such, this Application for appointment of an arbitrator is not maintainable.

¶83

It is pertinent to note that under Section 1 1(6) of the Act, the Court has^jurisdiction to make the appointment only when the^person including an institution, faiis to perform any function entrusted to it under that procedure. If the^jurisdiction of the Court is invoked without first foliowing the procedure agre,bd to between the parties, thus no cause of action would arise to seek the appointment from the High Court under Section 1 1(6) of the Act and thus the said petition would be premature. The parties are required to comply with the proceclure of appointment as agreed to and the defaulting party cannot be allowed to take advantage of its own wrong. (see National Highways Authority of India and another v. Bumihiway DDB Ltd.,(Wl l2OO7 l2l ALT¹⁸ (scll.

¶84

Though it is vehemently argued by the learned^{Senior Counsel for} the applicant that there exists disputes^{between the parties with regard} to non payment of amount by the^{respondent, but the same is denied} by the learned counsel^{for respondent stating that no arbitraldispute} exists between the^parties at^{the first instance,when the applicant} addressed letters dated^{28.07.2014and I 1.08.2014.As already} observed supra, on two^{occasionsi.e., on 14.O8.2O14 and 23'08'2O14} amicable settlements failed,^{then only the respondent addressedletter} to the applicant on 03.09.2014^{of it's intention for appointment of an} arbitrator. Since there exists^{disputesafter amicable settlementfailed,}

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the respondent thought it fit to,, resolve such disputes through arbitration only, addressed said letter on 03.09.2014 informing the applicant about proposal for appointment of an arbitrator, as the respondent did not agree ro the proposal made by the applicant, as such, there exists a dispute, as the same was not resorved amicably. 24. The existence of dispute is essential for appointment for an arbitrator under Section g or a reference under Section 20 of the Act. 'l'here should be a dispute and there can only be a dispute when a claim is asserted by one parry and denied by the other on whatever grounds' Mere failure or inaction to pay does not lead to the inference of the existence of dispute. Dispute entails a positive erement and assertion in denying, not merely inaction to accede to a claim or a request. Whether in particular case a dispute has arisen or not has to be found out from the facts and clrcumstances of the case. (see Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority IAIR 1988 sc 1OOZ. A rel'erence to Arbitration couid only be made pursuant to the Iast communication between the parties which indicates that there is no further possibility of setrement between the parties. [see Hari Shankar Singhanla v. Gaur Hari Siaghanta [2O06 (4)ALT f (Scl. In the instant, since the respondent communicated about failure of amicable settlement c:n 03.O9.2014, then any reference to the arbitration could be made only subsequent to 03,09.2014. 25' It is argued by the rearned Senior counse.l for the applicant that there was no communication marked to the applicant which took place between the respondent and the so called Sole Arbitrator, appointed by the respondent. Learned counsel for the respondent submits that as per Clause 34 of the SCA, the appointment of Sole Arbitrator was to be done by the respondent and not by the applicant, as such, it was not necessary nor,the contract provided otherwise that the applicant was to

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be communicated^{all the communica'tion betweenthe respondent and} the arbitrator.^{However'he submitsthat the aPPlicantwas dulY} of arbitrator^{vide letterdated} communicated^{about the appointment} 22.09.2014.

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26.^{The communicationmust be addressed to all the concerned} parties^{if appointment of Arbitrator is routcd lhrough them and/ or if} the^{agreementprovides for' It does not considcrit necessarythat thc} communication^{isaddressed to all theconcernedparties} simultaneously'^{It is sufficient if itis communicated in the first} instance^{to any of them and thereafter to the others[see VoltasLimited}

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v. Rolta^{IadlaLimited[2O1OlndlawMUM 16721'}

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27.^{Learned Senior Counsel argued that after amendment of Act} 2015,,^{aparty to the agreementcannot unilaterallyappoint an} arbitrator'^{It is pertinent to note that even according to thc} respondent,^{arbitratorwasappointed on 22 'o9 '2o14 'The Arbitration} (Amenrtmcnt)^{Act' 2015 came into effect from 23'10'2015i e' after} appointment^{of arbitrator by the respondent' AmendmentAct'i2015} does^{not have retrospectiveeffect to the arbitration proceedings} commenced^{prior to the enactment of the Amendment Act' as such' as} per the^{Clause 34 of SCAas weli as the Act priot' to Amendmen!'the} respondent^{was entitied appoint an arbitrator unilaterally'and} appointed^{as such'} ^^.^{rr..,:+1-r .ffect}^frorn 2a.^{The provisionsof the AmendmentAct' 2015 (witheffect} 23'10.2015)^{cannot haveretrospectiveoperation inthe arbitral} proceedings^{alreadycommencedgnless the parties agree otherwise'} (see Board^{of Control for Cricket in lndia v' Kochl CricketPrivate} Limlted il2018)^{6 SCC 287lln S'P'singla Constructions(P) Ltd.'} v. State^{of llimachalPradeshl2(Ilg l2l SCC 4381' the Hon'ble} Supreme^{Court' while placingreiianceon the jua9menlf Boardof}

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Control for Cricket in India^{(supra) held that Section12(5) of the Act} does not apply to the case therein,^{since the arbitral proceedings} commenced back in 20 13, much^prior to the^{commencement of} Amendment Act on 23.10.2015.

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In view of above lacts and circumstances, all^{these Arbitration} Applications are liable to be dismissed^{and accordingly dismissed.No} order as to costs. As a sequel thereto,^{miscellaneous applications, if} any, pending in these Arbitration^{Applications, shall stand dismissed.}

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Sd/-M.SANTHI VARDHANI JOINT REGIS R

//TRUE COPY/i

SECTIO OFFICER