M/s Sagar Enterprises v. M/s Malti Enterprises having its office at Bata Gali, Phusro

aforesaid work with interest @ 18% and appointed Shri Ashutosh Anand, Advocate, High Court of Jharkhand, as sole Arbitrator to adjudicate the dispute between the parties arising out of said agreement dated 01.04.2018 and 29.08.2018 respectively. The respondent, response to the letter dated 30.10.2021 has stated that there is no scope left for any adjudication of the alleged dispute by any method. Further, the stand of the respondent is that perception of profit is illusion and not real and substantive and there is no clause of sharing 4 profit. Apart from the aforesaid, one more bill is also pending. The petitioner/applicant had no other alternative but to invoke the Clause-19 of the aforesaid milling agreement which is an arbitration clause and in terms thereof, the petitioner appointed Shri Ashutosh Anand, Advocate as Arbitrator. The respondent has neither settled the claims nor has referred the claims/disputes under agreement to arbitration, as such, the petitioner has got no other efficacious remedy than to approach before this Court under the provisions of Arbitration and Conciliation Act, 1996 for appointment of an independent Arbitrator for settlement of the disputes.

4. It is the case of the applicant/petitioner that the request has been made through legal notice appointment of Arbitrator since the dispute has not amicably been settled but the Arbitrator having not been appointed, therefore, the instant applications have been filed.

5. The respondent has appeared and an filed affidavit inter-alia objecting and stating that the instant application is not maintainable, reason being that the applicant/petitioner has not invoked Clause-8 in the manner as agreed upon by the parties because Clause 8 5 of the agreement specifically says that all disputes and difference arising out of all in connection with this agreement which is not resolved amicably within 15 days of the dispute and difference coming to the notice of both the parties shall be resolved by arbitration. No such 15 days’ notice has ever been issued or given by the applicant, therefore, since, the pre-mechanism exercise has not been taken before filing the instant applications, hence, applications are not maintainable. Further, the criminal case also been instituted against the proprietor of the respondent/opposite party. It has also been stated that a letter has also been communicated i.e., letter dated 30.10.2021 seeking consent of the opposite party to accept Mr. Ashutosh Anand, Advocate as sole Arbitrator to adjudicate the dispute in terms of Clause 8 of the agreement dated

01.04.2018, which has been replied as under paragraph-11 thereof, and sum and substance, such claim has been rejected, said to be not maintainable as the same will cause the prejudice in the pending criminal case. Further, the dispute of claim has also been objected.

6. In order to buttress his argument, learned counsel for the respondent has relied upon the 6 judgment rendered by the Hon’ble Apex Court in the case of Union of India Vrs. Parmar Construction Company, (2019) 15 SCC 682.

7. In response to the same, learned counsel for the petitioner/applicant has submitted that the ground which has been taken for giving no notice for amicable settlement within 15 days as provided in the agreement, even if, it will be accepted to be correct then also, at this stage, on that ground, this application is held to be maintainable, since, the legal notice making request for appointment of Arbitrator has been responded by rejecting the claim on merit as also the objecting the application for appointment of Arbitrator, as would appear from paragraph-11, so far as it relates to Arbitration Application No.07 of 2022 and paragraph-14 so far as it relates to Arbitration Application No.08 of

2022. Therefore, once the claim has been rejected as raised vide legal notice by making request appointment of Arbitrator and as such, at this stage, taking the ground of not giving notice for amicable settlement within 15 days is not worth to be considered. Since, when the claim itself has been rejected, where is the question of amicable settlement as on the date. 7 It has further been stated by referring to the various paragraphs of the objection affidavits filed on

30.08.2022 in both the applications, wherein, the claim on merit has also been disputed, which suggest that the dispute is there and hence, the same is required to be adjudicated by appointment of Arbitrator and in that view of the matter also, the instant applications are well maintainable.

8. This Court has heard the learned counsel for the parties and perused the pleading of both the parties as also the Agreement, basis upon which, the jurisdiction of this Court as conferred under Section 11(6) of the Arbitration and Conciliation Act, 1996 has been invoked.

9. Admittedly, the agreement dated 01.04.2018 (A.A. No.07.2022) and 29.08.2018 (A.A. No.08.2022) are having the same Arbitration Clause as under Clause-8 which reads hereunder as:- “8. Any dispute or differences arising out of or in connection with agreement which is not resolved amicably within 15 days of the dispute or difference coming to the notice of both the parties shall be resolved by arbitration of a single arbitrator. Both the 8 parties shall appoint the arbitrator mutually in case of disagreement on the choice of the arbitrator, the arbitration shall be conducted in accordance with and the government by the rules of Indian Council of arbitration language of arbitrators shall be English and the venue of arbitration shall be Bokaro or Dhanbad.” The aforesaid Arbitration Clause provides the following mechanism:- In case of all disputes and differences arising out of or in connection with this agreement which is not resolved amicably within 15 days of the dispute and differences coming to the notice of both the parties shall be resolved by arbitration by a single Arbitrator. The aforesaid condition of contract stipulates that the resolution through the Arbitrator is to be made only if the dispute has not been resolved amicably within 15 days. The further admitted position herein is that no notices have been given by the claimant for its 9 amicable resolution of the dispute within 15 days. A legal notice has been given for making request in view of the provision of Section 21 of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator. The Arbitrator having not been appointed, therefore, the instant applications.

10. The objection has been raised on behalf of the respondent that before making request for appointment of Arbitrator for resolution of dispute, a notice for amicable settlement of the dispute within 15 days has not been resorted to and as such, on this ground the instant applications are fit to be dismissed.

11. This Court for the purpose of consideration of the said objection has considered the objection filed on behalf of the concerned respondent and found from paragraph-11, so far as it relates to Arbitration Application No.07 of 2022 and paragraph-14, so far as it relates to Arbitration Application No.08 of 2022 that the legal notice which has been given by the applicant in pursuance to the provision of Section 21 of the Arbitration and Conciliation Act, 1996 has been discussed and the claim has been rejected on the ground that the applicant has not given any notice for resolution of dispute amicably within 15 days. It further appears that the claim has also been disputed. 10

12. This Court, on the basis of the pleading made in the objection affidavits (in both the applications) filed on behalf of the respondent on 30.08.2022, is of the view that the fact about dispute of the claim is not being disputed by the respondent. The only dispute is that no notice for amicable settlement within 15 days for resolution of dispute has been taken by petitioner/applicant and the applications under Section 11(6) have been filed by inserting the said condition contained in the contract.

13. This Court is to consider as to whether at this stage, will it be proper to reject the application for appointment for Arbitrator in view of the fact that the request made as per the provision of Section 21 of the Arbitration and Conciliation Act, 1996, has been dealt with by rejecting the claim of appointment of Arbitrator on various grounds including the ground of institution of criminal case by the applicant/petitioner upon the respondent and the claim on merit has also been disputed.

14. The question of consideration of the objection about not taking steps for resolution of amicable settlement of the dispute, can be said to be a good ground to reject these applications, if the respondent would not have taken any adverse decision on the 11 request made by applicant/petitioner appointment of Arbitrator.

15. This Court is further of the view that if at this stage, the applicant/petitioner will be relegated to take recourse of the amicable settlement of the dispute within 15 days, then what would be its result, is required to be considered. The contract suggests that first, steps to be taken for amicable settlement of the dispute. The respondent when rejected the claim on the basis of the request made for appointment of Arbitrator, as would appear from paragraph-11 of the affidavit dated

30.08.2022, so far as it relates to Arbitration Application No.07 of 2022 and paragraph-14 of the affidavit dated

30.08.2022, so far as it relates to Arbitration Application No.08.2022, now where is the question of amicable settlement. Therefore, petitioner/applicant will be relegated before concerned respondent, there will be no result and it will be rejected and as such, in that circumstances, relegating the petitioner/applicant before the respondent for raising the dispute for amicable settlement will be nothing but a futile exercise. 12

16. This Court thought it proper to consider the judgment, upon which, the learned counsel for the respondent has relied upon, i.e., the judgment rendered by the Hon’ble Apex in the case of Union of India Vrs. Parmar Construction Company (supra). The observation laid down as under paragraph- 39 thereof, has been relied upon, in which, it has been held that it is advisable for the Court to ensure that the remedy provided as agreed between the parties in terms of the contract is first exhausted. There is no dispute about the settled position of law but it is equally settled that the judgment is to be considered on the basis of the facts and circumstances governing the case. The fact of the case of Union of India Vrs. Parmar Construction Company (supra), as would appear from the judgment, wherein, the agreement contains a Clause as under Clause 64 of the Condition of Contract which provides that in the event of any dispute or difference between the parties hitherto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account or as to the withholding by the Railways of any certificate to which the contractor may claim to be 13 entitled to, or if the Railways fail to make a decision within 120 days, then and in any such case, but except in any of the “excepted matters” referred to in Clause 63 of these Conditions, the contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters shall demand in writing that the dispute or difference be referred to arbitration. The fact of the case is that the respondent when raised the final bills in the predetermined format on the newly agreed prices, dispute has arisen in the context of payment of escalated prices or withholding of security deposits, taking note of the existence of arbitration clause in the agreement the respondents sent a notice to appoint an Arbitrator as per Clause 64(3) of the GCC to resolve the dispute of payment of outstanding dues which was declined by the appellants by sending the reply that “no due certificate” was signed and that entails no dispute to be sent to arbitration. Since the appellants failed to appoint the arbitrator in accordance with arbitration clause in the agreement, each of the respondent filed application under Section 11(6) of the Act before the High Court for appointment of an independent Arbitrator and the primary objection of the appellants before the High Court was that on furnishing the no claim certificate by the contractor, no dispute 14 subsists which is to be sent to the arbitrator and further the claims which have been submitted were beyond time as prescribed in the agreement and thus fall under the “excepted matter” in the agreement. The application filed under Section 11(6) of the Act, 1996 came to be decided by the High Court and appointed a retired Judge of the High Court as an independent sole arbitrator. The said order has been questioned by the respondent therein on the ground that there is final settlement of bill, no arbitral dispute subsists and the contract stands discharged and as such, they cannot be permitted to urge that they gave no certificate under any kind of financial duress/undue influence and even in support thereof, no prima facie evidence has been placed on record. In such circumstances, the appointment of an independent arbitrator by the High Court under Section 11(6) of the Act, 1996 is not sustainable. The Hon’ble Apex Court has consideration pre-appointment arbitrator mechanism as provided under Clause 64.1, wherein, it has been stipulated that if there is any dispute or difference between the parties hitherto as to the construction or operation of the contract, or the respective rights and liabilities of the parties on any 15 matter in question, or any other ancillary dispute arising from the terms of the contract or if the Railway establishment fails to take a decision within the stipulated period and the dispute could not be amicably settled, such dispute or difference is to be referred to the arbitration. The Hon’ble Apex Court in the pretext of the objection raised by the respondent that the claim of the parties was turned down because of furnishing no claim certificate and taking into consideration the specific clause made as under Clause 64(3) that in cases, where the total value of all claims in question added together does not exceed Rs.25 lakhs, the Arbitral Tribunal shall consist of a sole arbitrator who shall be a gazetted officer of the Railways not below JA Grade, nominated by the General Manager.

17. But, herein, in the facts of the given case, no such clause is available under the contract designating the name of the Arbitrator to be nominated by the concerned respondent, rather, only stipulation made that the notice is to be given to both the parties for amicable settlement within 15 days. Once the decision has been taken by the respondent negating the claim, then in that circumstances, it has to be resolved and since there is no condition in contract for appointment 16 of named Arbitrator, therefore, only remedy available to the applicant/petitioner is to make an application under Section 11(6) of the Act, 1996 and as such, the instant applications have been filed and in view thereof, the judgment relied upon by the learned counsel for the respondent is not applicable in the facts of the given cases.

18. The issue herein since pertains commercial dispute and the intent of the Commercial Courts Act read with the Arbitration and Conciliation Act, 1996 is to dispose of dispute of such nature expeditiously.

19. This Court, after taking into consideration the aforesaid statute and taking into consideration the fact that the claim of appointment of Arbitrator vis-à-vis the claim on merit has also been disputed by the respondent, therefore, at this stage, it will not be just and proper to relegate the petitioner/applicant to take recourse of amicable settlement.

20. This Court, on the basis of the discussion made hereinabove, is of the view that the objection which has been raised by the respondent is not worth to be considered, accordingly, rejected.

21. The respondent, since, has admitted that the dispute is there, but, the applicant/petitioner is not 17 entitled for the same which suggests that the dispute requires to be resolved.

22. Therefore, in such circumstances, this Court is of the view that the instant applications deserve to be allowed.

23. Accordingly, instant applications stand allowed.

24. The order after having been passed, Mr. Atanu Banerjee, learned counsel appearing for the respondent, at this juncture, has suggested the name of Hon’ble Mr. Justice (Retd.) Tapen Sen, Former Judge of this Court, to act as an Arbitrator. The aforesaid suggestion has been accepted by the learned counsel appearing for the petitioner/applicant.

25. Considering the aforesaid suggestion, this Court, therefore, appoints Hon’ble Mr. Justice (Retd.) Tapen Sen, Former Judge of this Court, presently residing at H/o-Raju Hirani, Dam Side Road, Kanke, Ranchi, e- mail-justicetapensen@gmail.com, to act as an Arbitrator for resolution of dispute between the parties.

26. The proposed Arbitrator is required to submit a declaration in terms of Section 12 of Arbitration and Conciliation Act, 1996.

27. Learned Arbitrator would be free to lay down fees and other expenses towards conduct of the arbitration 18 proceedings, however, keeping into account the ceiling prescribed under Schedule IV of the Act, 1996 as amended.

28. Let the photocopy of the entire pleadings along with copy of the entire order sheets be sent to the learned Arbitrator by the Registry.

29. Pending Interlocutory Application(s), if any, stands disposed of. (Sujit Narayan Prasad, J.) N.A.F.R. Rohit/-