M/s Goyal Fuels Private Limited v. Reliance Industries Limited

(SB: Hon'ble Mr. N.K. Aaarwal. J.) Present : Mr. Sanjay KumarAgrawal, counsel for the applicant. Mr. Goutam Bhaduri, counsel forthe respondent. ORAL ORDER (Passed on 19.06.2012)

1. The applicant has preferred this applicatipn under Section 1 1 (6) of the Arbitration and Conciliation Act, 1996 (for short 'the Act') for appointment of Arbitrator.

2. Pursuant to advertisement floated by respondent for allotment of retail outlets for petroleum products in various places of Raigarh in the State of Chhattisgarh, the applicant's offer was accepted and the country including consequently the applicant was given retail outlet for selling petroleum products. Both the parties entered into dealership agreement (Annexure A/1) on 05.02.2005. o

3. The agreement entered into between the parties contains an arbitration clause 60, which reads as under:

60. ARBITRATION </^ ^^ @ "Any dispute or difference of any nature whatsoever arising out of or in relation to this Agreement shall be referred to a sole Arbitrator to be appointed by Reliance and the arbitration shall be the Arbitration & held in accordance with the provisions of Conciliation Act, 1996 or any statutory modification or re-enactment thereof for the time being in force and such arbitration shall be conducted at Mumbai in the English language. The dealer shall not be entitled to raise any objection to any such Arbitrator on the ground that Arbitrator is appointed by Reliance or that the Arbitrator was an Officer of the company or that he had dealt with the matters to which contract relates or that in the course of his duties he had expressed views on all or any other matters in dispute or difference." the Arbitrator is appointed by Reliance or that

4. The dispute and differencesarose between the parties. The applicant vide letter dated 02.07.2010 (Annexure A/3) served 30 days notice on the respondent demanding appointment of an Arbitrator to adjudicate the dispute between the parties in terms of arbitration clause 60, but the respondent failed to act. Therefore, the applicant moved this instant application for appointment of independent Arbitrator on 06.09.2010. o 5. The respondent put in its appearance by filing its reply stating that pursuant to notice dated 02.07.2010 (Annexure A/3), the respondent Company, in terms of clause 60 within reasonable time had already appointed Shri Anupam J. Dholakia, a retired District & Sessions Judge, Mumbai as sole Arbitrator to resolve the dispute and differences raised by the applicant.

6. Shri Sanjay Kumar Agrawal, learned counsel appearing for applicant would submit: the respondent failed to act in accordance with the arbitration clause within a period of 30 days of the demand and also before instant application has been moved by the applicant, therefore, <espondent's right to appoint Arbitrator ceases. The dispute and differences between the parties may be referred to an independent Arbitrator.

7. On the other hand, Shri Gautam Bhaduri, learned counsel appearing for the respondent, placing reliance upon the judgment of Apex Court in the case of Ace Pipiline Contracts (P) Ltd. v. Bharat Petroleum Corpn. Ltd. (2007) 5 SCC 304, would submit: although the respondent has failed to appoint the Arbitrator in terms of arbitration clause within a period of 30 days of the demand and also before instant application has been moved by the applicant, "^ "^ ' "' /^^. _,4" ^' ^. "7 i .;^^^^ ^ /.f but within a reasonable time, the respondent had appointed Shri Anupam J. Dholakia, a retired District and Sessions Judge, Mumbai, to resolve the dispute and differences raised by the applicant. Therefore, the instant application for appointment ofArbitrator deserves rejection.

8. have heard learned counsel for the parties.

9. A three judge Bench of the Supreme Court, in the case of Punj Lloyd Ltd. v. Petronet MHB Ltd., (2006) 2 SCC 638, has held: once notice period of thirty days has expired and the party has moved the Hon'ble Chief Justice of the High Court under Section 11 (6) of the Act, the other party loses his right to appoint an arbitrator on the basis of arbitral agreement. The Supreme Court, JO. had relied on the judgment of Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151. judgment, the Supreme Court has observed as under: in the above case, while taking the above view, its own rendered in the case of Datar In para 19 of the "19. So far as cases falling under Section 11 (6) are concerned- such as the one before us—notime-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 [do] not make an appointment within 30 days of the demand, to appointment does not get automatically If the opposite party makes an appointment even after 30 days of the demand, but before the first forfeited after expiry of 30 days. the right party has moved the court under Section 11, sufficient. In other words, [which] would be in cases arising under Section 11(6), the opposite party has not made an appointment within 30 days of demand, to make appointment forfeited but the right is not 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."

11. The Supreme Court, reiterating the same view taken by it in the case of Punj Lloyd Ltd. v. Petronet MHB Ltd., and Datar Switchgears Ltd. v. Tata Finance Ltd., (supra), has again held in the case of Union oflndia v. Bharat 'once a party files an (2007) 7 SCC 684 that Battery Mfg.Co.(P) Ltd. application under Section 11 (6) of the Act, the other party extinguishes its the agreement in terms of to appoint an Arbitrator the clause of thereafter. The right to appoint Arbitrator under the clause of the agreement ceases after Section 11 (6) petition has been filed by the other party before the Court seeking appointment of an Arbitrator.

12. Somewhat different view was expressed by the Supreme Court in the case of Ace Pipiline Contracts (P) Ltd. v. Bharat Petroleum Corpn. Ltd. (supra) wherein the Supreme Court has observed in para 10 of its judgment as under: "10..... But the procedure has in sub-section (6), where, already been agreed upon by the parties, as in the present case, if a party fails to act as required under that and in that event, procedure or the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure or a fails to perform any function person, entrusted to him or it under that procedure, a party may in that the Chief Justice or a person or an institution event, designated by him to make necessary measures, unless the including an institution, request agreement on the appointment procedure provides other means for appointment of arbitrator. Therefore, so far as the period of thirty is not mentioned in sub-section (6). The days is concerned, period of limitation is only provided under sub-sections (4)and (5) of Section 11. As such, as per the statute, the period of limitation of thirty days cannot be invoked under sub-section (6) of Section 11oftheAct."

13. Recently following the same view taken by it in the case of Punj Lloyd Ltd. v. Petronet MHB Ltd., Datar Switchgears Ltd. v. Tata Finance Ltd. and Union of India v. Bharat Battery Mfg.Co.(P) Ltd. (supra), the Supreme in the case of Dene/ (Proprietary) Limited v. Ministry of Defence, Court, ^y^' 1.S • 7" % ;^"'.-/L.^^?^iL J. ^?^^"""t ff ^ fHy (2012) 2 SCC 759, has held, respondents had lost right to appoint arbitrator as respondents failed to appoint arbitrator before petitioner moved Court.

14. The circumstances in the present case are similar. Arbitration clause The require any specific qualifications of the Arbitrator. also does not respondent failed to appoint Arbitrator in terms of arbitration agreement till the present application is filed by the applicant. Considering the facts and circumstances of the present case in the light of Section 11 (6) and the twin requirements of sub-section (8) of Section 11 ofthe Act, in my opinion, a case for appointment of independent Arbitrator is made out.

15. Learned counsel for the parties submit that they have no objection if the matter is referred to Hon'ble Mr. Justice V. K. Agrawal, former Judge of High Court of Madhya Pradesh as sole Arbitrator for resolving the dispute and <lifferences between them.

16. Therefore, with the consent of the parties, matter is referred for arbitration to Hon'ble Mr. Justice V.K. Agrawal, former Judge of High Court of Madhya Pradesh as sole Arbitrator for resolving the dispute and differences between them.

17. The Hon'bte Arbitrator may settle his terms and conditions and remuneration.

18. Registry to intimate Hon'ble Mr. Justice V.K.Agrawal, former Judge of High Court of M.P. about his appointment as Arbitrator and to send all the papers along with address ofthe parties.

19. Parties are also directed to approach Hon'ble Mr. Justice V.K. Agrawal, who is presently residing at B-12, Aakriti Gardens, Nehru Nagar, Bhopal -462 003 (M.P.) and to submit papers and to take part in arbitration proceedings.

20. Accordingly, the application is disposed of to the extent indicated above. —^—— Sd/- N.K. Agrawal Judge