M/S. Dakshin Shelters
P. Ltd. Vs. Geeta S. Johari
[Special Leave
Petition No. 33448 of 2011]
J U D G M E N T
R.M. LODHA, J.
1.
We
have heard Mr. Pallav Shishodia, learned senior counsel for the petitioner and Mr.
Shyam Divan, learned senior counsel for the respondent.
2.
A
Development Agreement-cum-General Power of Attorney (for short
"Development Agreement") was executed between the parties on February
7, 2006. Certain disputes arose out of that agreement. On December 10, 2010,
the respondent issued a notice to the petitioner invoking arbitration clause in
the above agreement and nominated a former Judge of the High Court of Andhra Pradesh
- Justice P.L.N. Sharma -on her behalf and called upon the present petitioner
to nominate its arbitrator.
3.
By
reply dated January 10, 2011, the petitioner communicated to the respondent that
since the Development Agreement has been cancelled by her, there was no
question for resolution of disputes between the parties by the Arbitrator. The reply
sent by the petitioner necessitated the invocation of Section 11 of the Arbitration
and Conciliation Act, 1996 (for short "the Act") by the respondent
and an application was made before the High Court of Andhra Pradesh requesting the
Chief Justice or the Designate Judge to appoint the arbitrator/arbitrators to decide
the disputes arising out of the above agreement.
4.
On
hearing the parties, the Designate Judge by his order dated September 9, 2011
appointed Mr. D.V. Seetharama Murthy, Sr. Advocate as an arbitrator on behalf of
the petitioner (respondent therein). It was further observed in the order that the
arbitrator nominated by the applicant (present respondent) and the arbitrator appointed
by the Designate Judge on behalf of the petitioner (respondent therein) are
required to appoint the third arbitrator before entering into reference.
5.
The
order dated September 9, 2011 is under challenge in this Special Leave
Petition.
6.
On
December 16, 2011, a limited notice was issued by this Court to the respondent.
The order issuing notice reads as follows: "Mr. Pallav Shishodia, learned senior
counsel for the petitioner submits that instead of senior advocate, who has
been appointed as arbitrator by the designate Judge, a retired High Court Judge,
stationed in Hyderabad, may be appointed. He further submits that the petitioner
is willing to bear the expenses, if limited notice is issued to the respondent.
Issue notice limited to the above, returnable in five weeks subject to deposit of
Rs. one lakh by the petitioner in the Registry towards costs. In the meanwhile,
further proceedings before the arbitrators shall remain stayed.
7.
In
compliance of the above order, the petitioner has deposited Rs. 1 lakh in the
Registry of this Court towards the costs of the respondent.
8.
After
service, respondent has entered appearance through Mr. Y. Rajagopala Rao, advocate-on-record.
Mr. Shyam Divan, learned senior counsel appearing for the respondent, at the
outset, submitted that the respondent was not agreeable to the substitution of
arbitrator appointed by the Designate Judge on behalf of the petitioner.
9.
Mr.
Pallav Shishodia, learned senior counsel for the petitioner vehemently contended
that the Designate Judge ought to have given an opportunity to the petitioner to
nominate its arbitrator. He referred to the suit filed by the petitioner against
the respondent challenging the cancellation of the Development Agreement. He
also submitted that the respondent made an application under Section 8 of the Act
but that came to be dismissed. In backdrop of these facts, Mr. Pallav Shishodia
submitted that when the petitioner received the notice dated December 10, 2012,
it was communicated by the petitioner to the respondent in its reply dated
January 10, 2011 that there was no question for appointment of arbitrator and the
disputes between the parties could not be decided by the arbitrator. Learned senior
counsel, thus, submitted that the petitioner had not failed to appoint the arbitrator
as contemplated under Section 11(4) of the Act.
10.
Mr.
Shyam Divan, learned senior counsel for the respondent, on the other hand, submitted
that once an opportunity was given to the petitioner to nominate its arbitrator
by notice dated December 10, 2010 and it failed to avail of the opportunity, it
ceased to have any right to appoint the arbitrator in terms of the arbitration
clause in the Development Agreement. In support of his submission, Mr. Shyam Divan
relied upon the decision of this Court in Union of India vs. Bharat Battery
Manufacturing Co. (P) Ltd.1 .
11.
Mr.
Pallav Shishodia, learned senior counsel for the petitioner, in rejoinder,
referred to the decision of this Court in National Highways Authority of India
and another vs. Bumihiway DDB Ltd. (JV) and others2. He particularly referred
to paragraphs 37 and 38 of the above decision.
12.
We
must immediately observe that the judgment of this Court in National Highways Authority2
relied upon by Mr. Pallav Shishodia has no application to the controversy involved
in the present matter. The main question in National Highways Authority2 related
to the process of appointment of arbitrator to be followed on resignation or termination
of mandate of an arbitrator and one of the questions framed by this Court for
determination was whether on resignation of one of the arbitrators, the statutory
provision that comes into play was Section 15(2) or Section (6) of the Act. The
other three questions noted in para 1 (2007) 7 SCC 6842 (2006) 10 SCC 76320 of
the Report have also no bearing on the question with which we are concerned in
the present matter.
13.
The
arbitration clause in the Development Agreement between the parties reads as
follows: "25: Arbitration: 25.1 Tribunal: Disputes relating to this
Agreement or its interpretation shall be referred to the arbitration of an arbitral
tribunal, consisting of three arbitrators (Tribunal), one each to be appointed
by the parties hereto and the third to be appointed by the two arbitrators so appointed.
The award of the Tribunal shall be final and binding on the parties. The arbitration
proceedings will be held only in Secunderabad and the courts situated in the
Ranga Reddy District alone shall have the territorial jurisdiction to entertain
the dispute.
The provisions of Arbitration
and Conciliation Act shall comply to the arbitration procedures. 25.2 Powers of
Tribunal: The Tribunal shall be at liberty to (1) proceed summarily (2) avoid
all rules, procedures and/or evidences that can be lawfully avoided by the
mutual consent and/or directions by the parties and (3) award damages along with
the final award against the party not complying with any interim award or order
passed by the Tribunal. The Tribunal shall:
a. Make the award in English
and within four months from the date of appointment with the right to give
extension of not more than one month at a time on emergent grounds but the total
extensions shall not be more than four months.
b. Conduct the
proceedings from day-to-day and for about 5 hours per day save for initial
sittings.
c. Not grant to either of
the parties any extension of time and/or adjournment except on grounds beyond their
control and only for such periods as be of the abosute3 minimum.
d. The Tribunal shall be
entitled to pass interim award granting interim relief to the parties. 25.3 Mechanism
and Procedure: The procedure to be followed shall be decided by the Tribunal. The
directions/award of the Tribunal shall be final and binding on the
parties."
14.
On
the disputes having arisen between the parties, the notice was sent by the
respondent to the petitioner on December 10, 2010. Paragraph 4 of the said
notice reads as under: "I do hereby invoke the Arbitration Clause in the agreement
bearing Doc. No. 2778 of 2006 and appoint Hon'ble Mr. Justice P.L.N. Sharma, a retired
Judge of A.P. High Court, r/o Gandhi Nagar, Hyderabad as arbitrator within a
week from the date of receipt of this notice to adjudicate all claims, disputes,
differences, restitutions, restorations whatsoever in law and in equity, in terms
of the registered Development Agreement cum GPA document registered as Doc. No.
2778 of 2006, failing which I shall be constrained to initiate appropriate legal
action under Section 11 of the Arbitration Act for appointment of arbitrator on
your behalf as well as you shall be solely responsible fro all costs and consequences."
15.
The
petitioner did respond to the above notice within 30 days of its receipt by
sending its reply on January 10, 2011. Various pleas were raised in that reply and
ultimately, the petitioner responded by stating "it is stated that the question
of appointment of Arbitrator does not raise either from your side or from our
side. There is no arbitral dispute to be decided by the arbitrator."
16.
From
the above response, it is clear that the petitioner declined to appoint its
arbitrator as according to it there was no question of appointment of
arbitrator by either of the parties and there being no arbitral dispute, there
was no occasion for resolution of dispute as provided in the Development Agreement.
The stance of the petitioner amounted to failure on its part to appoint its
arbitrator on receipt of the request to do so from the respondent.
17.
In
view of the above, it cannot be said that the Designate Judge committed any
error in nominating Mr. D.V. Seetharama Murthy, Sr. Advocate as an arbitrator
on behalf of the petitioner. The order of the learned Single Judge is in conformity
with the decision of this Court in Bharat Battery Manufacturing Co. (P) Ltd.1 wherein
this Court stated as follows: "Once a party files an application under section
11(6) of the Act, the other party extinguishes its right to appoint an arbitrator
in terms of the clause of the agreement thereafter. The right to appoint arbitrator
under the clause of agreement ceases after Section 11(6) petition has been
filed by the other party before the Court seeking appointment of an
arbitrator."
18.
18
The petitioner's right to appoint its arbitrator in terms of clause 25 of the Development
Agreement got extinguished once it failed to appoint the arbitrator on receipt
of the notice dated December 10, 2010. There is no merit in the submission of
the learned senior counsel for the petitioner that the Designate Judge ought to
have given an opportunity to the petitioner to nominate its arbitrator.
19.
The
order impugned in the present Special Leave Petition does not suffer from any
infirmity. Special Leave Petition is, accordingly, dismissed with costs. The
amount of Rs. one lakh deposited by the petitioner in the Registry of this
Court shall be paid to the respondent.
.....................J.
(R.M. LODHA)
.....................J.
(H.L. GOKHALE)
NEW
DELHI
FEBRUARY
21, 2012.
for Special Leave to
Appeal (Civil) No(s).33448/2011(From the judgment and order dated 09/09/2011 in
AA No.41/2011 of The HIGH COURT OF A.P AT HYDERABAD)
M/S Dakshin Shelters
P. Ltd. Vs. Geeta S. Johari (Office Report For Direction)
Date: 21/02/2012
This Petition was
called on for hearing today.
CORAM :
HON'BLE MR. JUSTICE
R.M. LODHA
HON'BLE MR. JUSTICE
H.L. GOKHALE
For Petitioner(s) Mr.
Pallav Shishodia,
Sr. Adv. Mr. Annam
D.N. Rao,Adv.
Ms. Neelam Jain,Adv.
For Respondent(s)
Mr. Shyam Divan, Sr.
Adv.
Mr. Y. Raja Gopala
Rao,Adv.
UPON hearing counsel
the Court made the following
O R D E R
1.
We
have heard Mr. Pallav Shishodia, learned senior counsel for the petitioner and Mr.
Shyam Divan, learned senior counsel for the respondent.
2.
A
Development Agreement-cum-General Power of Attorney was executed between the parties
on February 7, 2006. Certain disputes arose out of the above agreement between
the parties. On December 10, 2010, the present respondent issued a notice to
the petitioner invoking the arbitration clause in the above agreement and
nominated a former Judge of the High Court of Andhra Pradesh - Justice P.L.N. Sharma
-on her behalf calling upon the present petitioner to nominate its arbitrator.
3.
By
reply dated January 10, 2011, the petitioner communicated to the present respondent
that since the Development Agreement itself has been cancelled by the present respondent,
there is no occasion for resolution of disputes between the parties by the Arbitrator.
The reply sent by the petitioner necessitated the invocation of Section 11 of
the Arbitration and Conciliation Act, 1996 (for short "the Act") by
the present respondent and an application was made before the High Court of
Andhra Pradesh requesting the Chief Justice or the designate Judge to appoint the
arbitrator-arbitrators to decide the disputes arising out of the above
agreement.
4.
On
hearing the parties, the designate Judge by his order dated September 9, 2011
appointed Mr. D.V. Seetharama Murthy, Sr. Advocate as an arbitrator on behalf of
the petitioner (respondent therein) for adjudication of the disputes between
the parties. It was further observed in the order that the arbitrator nominated
by the present respondent-cum-applicant therein and the arbitrator appointed by
the designate Judge on behalf of the present petitioner are required to appoint
the third arbitrator before entering into a reference.
5.
It
is the order dated September 9, 2011 which is under challenge in this Special
Leave Petition.
6.
On
December 16, 2011, a limited notice was issued by this Court to the respondent.
The order issuing notice reads as follows: "Mr. Pallav Shishodia, learned senior
counsel for the petitioner submits that instead of senior advocate, who has
been appointed as arbitrator by the designate Judge, a retired High Court Judge,
stationed in Hyderabad, may be appointed. He further submits that the petitioner
is willing to bear the expenses, if limited notice is issued to the respondent.
Issue notice limited to the above, returnable in five weeks subject to deposit of
Rs. one lakh by the petitioner in the Registry towards costs. In the meanwhile,
further proceedings before the arbitrators shall remain stayed.
7.
In
compliance of the above order, the petitioner has deposited Rs. 1 lakh in the
Registry of this Court towards the costs of the respondent.
8.
After
service, respondent has entered appearance through Mr. Y. Rajagopala Rao,
advocate-on-record and he is represented by Mr. Shyam Divan, learned senior counsel.
9.
Mr.
Pallav Shishodia, learned senior counsel for the petitioner refers to the suit
filed by the present petitioner against the respondent cancelling the Development
Agreement between the parties. He also submits that the present respondent made
an application under Section 8 of the Act but that came to be dismissed.
10.
In
the backdrop of the above facts, when the petitioner received the notice dated
December 10, 2012, by its reply dated January 10, 2011, it was communicated by the
petitioner to the respondent that there was no occasion for appointment of
arbitrator and the disputes between the parties could not be decided by the arbitrator.
Learned senior counsel further submits that the petitioner had not failed to appoint
the arbitrator as contemplated under Section 11(4) of the Act and, therefore, the
Designate Judge ought to have given an opportunity to the petitioner to
nominate its arbitrator.
11.
Mr.
Shyam Divan, learned senior counsel for the respondent, on the other hand, submitted
that once an opportunity was given to the petitioner to nominate its arbitrator
which it failed to do, it ceases to have any right to appoint the arbitrator in
terms of the arbitration clause in the Development Agreement.
12.
In
support of his submissions, Mr. Shyam Divan relied upon a decision of this
Court in Union of India vs. Bharat Battery Manufacturing Co. (P) Ltd.
13.
Mr.
Pallav Shishodia, learned senior counsel for the petitioner, in rejoinder,
referred to a decision of this Court in National Highways Authority of India
and another vs. Bumihiway DDB Ltd. (JV) and others2. He particularly referred to
the paragraphs 37 and 38 of the above decision.
14.
We
must immediately observe that the judgment of this Court in National Highways Authority
of India2 relied upon by Mr. Pallav Shishodia has no application to the
controversy involved in the present matter. The controversy in National
Highways2 related to the process of appointment of arbitrator to be followed on
resignation or termination of mandate of an arbitrator. That matter related to the
appointment of substitute arbitrator which is not the present case.
15.
Insofar
as the present case is concerned, the arbitration clause reads as follows: "25:
Arbitration: 25.1 Tribunal: Disputes relating to this Agreement or its
interpretation shall be referred to the arbitration of an arbitral tribunal, consisting
of three arbitrators (Tribunal), one each to be appointed by the parties hereto
and the third to be appointed by the two arbitrators so appointed. The award of
the Tribunal shall be final and binding on the parties. The arbitration 1 (2007)
7 SCC 6842 (2006) 10 SCC 763 proceedings will be held only in Secunderabad and the
courts situated in the Ranga Reddy District alone shall have the territorial jurisdiction
to entertain the dispute. The provisions of Arbitration and Conciliation Act shall
comply to the arbitration procedures. 25.2 Powers of Tribunal: The Tribunal
shall be at liberty to (1) proceed summarily (2) avoid all rules, procedures and/or
evidences that can be lawfully avoided by the mutual consent and/or directions by
the parties and (3) award damages along with the final award against the party not
complying with any interim award or order passed by the Tribunal. The Tribunal
shall:
a. Make the award in
English and within four months from the date of appointment with the right to give
extension of not more than one month at a time on emergent grounds but the total
extensions shall not be more than four months.
b. Conduct the
proceedings from day-to-day and for about 5 hours per day save for initial sittings.
c. Not grant to either of
the parties any extension of time and/or adjournment except on grounds beyond their
control and only for such periods as be of the abosute3 minimum.
d. The Tribunal shall be
entitled to pass interim award granting interim relief to the parties. 25.3 Mechanism
and Procedure: The procedure to be followed shall be decided by the Tribunal. The
directions/award of the Tribunal shall be final and binding on the
parties."
16.
On
the dispute as having been arisen between the parties, notice was sent by the
respondent to the petitioner on December 10, 2010. Paragraph 4 of the said
notice reads as under: "I do hereby invoke the Arbitration Clause in the
agreement bearing Doc. No. 2778 of 2006 and appoint Hon'ble Mr. Justice P.L.N. Sharma,
a retired Judge of A.P. High Court, r/o Gandhi Nagar, Hyderabad as arbitrator within
a week from the date of receipt of this notice to adjudicate all claims, disputes,
differences, restitutions, restorations whatsoever in law and in equity, in terms
of the registered Development Agreement cum GPA document registered as Doc. No.
2778 of 2006, failing which I shall be constrained to initiate appropriate
legal action under Section 11 of the Arbitration Act for appointment of
arbitrator on your behalf as well as you shall be solely responsible fro all
costs and consequences."
17.
The
petitioner did respond to the above notice by sending its reply on January 10,
2011.
18.
Various
pleas were raised in that reply and ultimately, the petitioner responded by stating
that "it is stated that the question of appointment of Arbitrator does not
raise either from your side or from our side. There is no arbitral dispute to
be decided by the arbitrator."
19.
From
the above response, no doubt is left that the petitioner failed to appoint its arbitrator
on receipt of the request to do so from the respondent.
20.
In
view of the above, the designate Judge did not commit any error in nominating
Mr. D.V. Seetharama Murthy, Sr. Advocate as an arbitrator on behalf of the petitioner.
The order of the learned Single Judge is in conformity with the decision of
this Court in Bharat Battery Manufacturing Co. (P) Ltd.1 wherein this Court stated
as follows: "Once a party files an application under section 11(6) of the Act,
the other party extinguishes its right to appoint an arbitrator in terms of the
clause of the agreement thereafter. The right to appoint arbitrator under the clause
of agreement ceases after Section 11(6) petition has been filed by the other party
before the Court seeking appointment of an arbitrator."
21.
The
order impugned in the present Special Leave Petition does not suffer from any infirmity
and is dismissed. The amount of Rs. one lakh deposited by the petitioner in the
Registry of this Court shall be paid to the respondent.
(Pardeep
Kumar) Court Master
(Renu
Diwan) Court Master
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