M/s Teracom Ltd v. Uttar Haryana Bijli Vitran Nigam

have arisen between the parties. The agreement entered into between the parties contains the following mechanism for arbitration:- “All matters, question, disputes, differences Arbitration Case No.118 of 2009 -2- and/or claims arising out of and/or concerning and/or in connection and/or in consequences or relating to this Contract whether or not obligations of either of both parties under this Contract be subsisting at the time of such dispute and whether or not this Contract has been terminated or purported to be terminated or completed, shall be referred to the Sole Arbitrator of MD, UHBVN or an officer appointed by the MD, UHBVN as his nominee. The Award of the Arbitrator shall be final and binding on the parties of this Contract.” It is contended by the learned counsel for the petitioner that this Court issued notice on petition filed under Section 11(6) of the Act on 11.12.2009 returnable on

18.12.2009. However, the respondent on 17.12.2009 itself appointed an Arbitrator, which appointment the respondent could not have made because it had lost the right to appoint an Arbitrator after lapse of 30 days of invoking arbitration clause contained in the Agreement for appointment of an Arbitrator. In support of his argument, learned counsel for the petitioner has relied upon the judgments of Supreme Court in Indian Oil Corportion Limited and others versus Raja Transport Private Limited [(2009)8 SCC 520], Bharat Sanchar Nigam Ltd. & Anr. Versus Motorola India Pvt. Ltd., [AIR 2009 Supreme Court 357], Datar Switchgears Ltd. Versus Arbitration Case No.118 of 2009 -3- Tata Finance Ltd. and another [(2000) 8 SCC 151], ACE pipeline contracts(P) Ltd. Versus Bharat Petroleum Corpn. Ltd.[(2007) 5 SCC 304], Union of India Versus Bharat Battery Manufacturing Co.(P)Ltd.[(2007)7 SCC 684] and Punj Lloyd Ltd. Versus Petronet MHB Ltd.[(2006) 2 SCC 638]. On the other hand, it is contended by learned counsel for the respondents that Arbitrator could not be appointed by the respondents, in view of the fact that an application under Section 9 of the Act was pending before the District Judge. The District Judge, Panchkula, vide order dated 27.10.2009, had delegated the parties to the arbitration proceedings, while disposing of the application under Section 9 of the Act and pursuant to that order, Arbitrator was appointed on 17.12.2009. I have heard learned counsel for the parties and gone through the record. Pendency of application under Section 9 of the Act does not debar the respondents from making any appointment of the Arbitrator because those proceedings are only for interim relief and are independent in nature. The petitioner ought to have appointed Arbitrator pursuant to the notice issued to it, firstly on 23.12.2001 and then on 21.01.2009 but they failed to do so and thus, lost the right to appoint an Arbitrator. Hon'ble the Supreme Court in Bharat Sanchar Nigam Limited and Anr. Versus. Motorola India Pvt. Ltd.(supra) has laid down that in case a party fails to appoint an Arbitrator within 30 days of the receipt of notice, it loses right to do so. The view Arbitration Case No.118 of 2009 -4- taken by the Hon'ble Apex Court in this regard in para no. 15 of the judgment in Bharat Sanchar Nigam Limited and Anr. (supra) reads as follows:- “The learned counsel of the appellants had submitted before this court that it was the appellant, which had the right to appoint the arbitrator. This submission cannot be accepted. The respondent had invoked the arbitration clause on the ground that there was no delay on its part by sending a leter to this effect to the appellants on 24th of March, 2006. On 25th April, 2006, the appellants/BSNL replied stating that they had rightly recovered the Liquidated Damages and that the recovery of the damages was not arbitrable. The appointing authority in this matter, i.e., CGM Kerala, di not respond to the notice requiring the appointment of arbitrator and failed to act whthin the time prescribed under the Arbitration and Conciliation Act 1996. Cince the appointing authority appointed arbitrator, respondent/Motorolla, on 25th May, 2006, filed a petition under Section 11 of the said Act before the High Court at Kerala. In the case of Datat Switchgear vs. Tata Finance Ltd.[(2008) 8 SCC 151], which was affirmed in Punj Lloyd Ltd. Vs. Arbitration Case No.118 of 2009 -5- Petronet MHB Ltd. [(2006) 2 SCC 638], it was held that once a minimum of 30 days is expired and a petition is filed to the court, the appointing authority loses the right to make the appointment. Therefore, the appellant/BSNL has now lost its right to appoint any arbitrator for settling the disputes under the agreement.” Even otherwise, also the pendency of application under Section 9 of the Act, has nothing to do with the appointment of an Arbitrator. Even the Additional District Judge while dealing with the application under Section 9 had observed in para 11 of its judgment dated 27.10.2009, that the application under Section 9 has nothing to do with inter se dispute between the parties and observed as under:- “It is admitted by both the parties that the agreement between them contained an arbitration clause. It is also not disputed that the parties have not yet gone in arbitration. The position being so that any dispute between the parties in respect of the agreement between them is to be resolved by the arbitrator, certainly this court has nothing to do with the inter se dispute between the parties in pursuance of the agreement between them which contains an arbitration clause. The applicant-company has however, approached this Court under Section 9 Arbitration Case No.118 of 2009 -6- of the Act in order to seek an interim relief. This interim measure can be sought by a person may be before the same has been enforced. Thus the question before the Court is not that the applicant firm can not seek the relief under Section 9 of the Act, unless arbitral proceedings were pending.” Keeping in view the totality of the facts narrated above, I am of the view that since the respondents failed to appoint an Arbitrator within 30 days of the issue of letter invoking arbitration clause and also keeping in view the fact that even after culmination of proceedings under Section 9 of the Act in the court of Additional Sessions Judge on 27.10.2009, the respondents failed to appoint an Arbitrator and thus, have lost their right to do so. Therefore, the appointment made on

17.12.2009 is of no effect in law. Accordingly, this petition is allowed. Justice Kiran Anand Lall, a former Judge of this Court, is appointed as a sole Arbitrator to adjudicate upon the disputes between the parties. In the meanwhile, the parties will exchange the statements of claims and response thereof. The statement of claims be supplied to counsel for the respondents within four weeks and response to the statement of claim shall be supplied to the counsel for the petitioner within four weeks thereafter. The parties shall appear before the Arbitrator on 3.06.2010, or an agreed date convenient to the parties but not later than 15 days Arbitration Case No.118 of 2009 -7- from the aforesaid date, after exchange of pleadings as directed aforesaid. The Arbitrator shall render the award not later than six months from the date of first appearance of the parties. The Arbitrator shall fix his own fee. With these directions, the petition stands disposed of. 22nd Febraury, 2010 Shivani Kaushik [MUKUL MUDGAL] CHIEF JUSTICE