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TMI Blog2012 (7) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... clause 10 of General Terms and Conditions of Purchase Order (Foreign). The aforesaid arbitration clause reads as under:- "Arbitration - All disputes regarding this order shall be referred to B E L Chairman & Managing Director or his nominee for arbitration who shall have all the powers conferred by the Indian Arbitration & Conciliation Bill 1996 or any statutory modification thereof in force." 3. In view of the above, reference need only be made to the skeletal facts necessary for adjudicating the issues raised by the parties. 4. On 6th October, 2008, the respondent issued a Purchase Order (PO) to the petitioner through which it sought to purchase the materials/goods, namely, Hydraulic Motor, Actuating Cylinder, EL Motor EDM, Converter and GYRO Unit. 5. The purchase order was issued along with a printed Annexure IV of "General Terms and Conditions of Purchase Order (Foreign)". As noticed above, the relevant arbitration clause is contained in the aforesaid general terms and conditions. The petitioner claims that fifth item, as stated above, was GYRO Unit EK.2.369.113.CE in 174 Nos. The entire agreed terms of sale by the petitioner was against 100% payment through Letter of Cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is arbitrary, extra contractual, illegal and without any basis whatsoever. 6. The petitioner claims that 10 GYRO Units were rejected on the baseless ground that certain corruption cases had come to light against certain other companies. The respondent, therefore, stopped receiving supply from various companies including the petitioner and directly contacted the Russian manufacturer company and obtained the said units from them through another Russian Exporter company to frustrate the purchase order of the petitioner. It is claimed that the objection taken by the respondent are frivolous and without any basis. 7. The petitioner also claims that the order dated 5th June, 2009 putting on hold the supplies that were to be made by the petitioner was issued by the Ministry of Defence, under which the respondent is a Public Sector Undertaking. The aforesaid order was, however, set aside by the Delhi High Court in Writ Petition (Civil) No.821 of 2010 by an order dated 11th February, 2010. Thereafter, inspite of the efforts made by the petitioner, the respondent did not accept the plea that the purchase order did not contain any specific, express or implied condition for air damping. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be made to the Chairman-cum-Managing Director of the respondent or his nominee for arbitration. Therefore, the prayer made in the petition for appointment of a sole arbitrator to adjudicate the dispute is contrary to the express clause in the contract and thus not maintainable. It is also the case of the respondent that prior to the filing of the petition before this Court, the Chairman-cum-Managing Director, as sole arbitrator, has duly acted and exercised the power in appointing Mr. R. Chandra Kumar, General Manager (Kot), Bharat Electronics Ltd., District Pauri Garhwal, Kotdwara-246149, as the arbitrator and communicated by fax on 19th July, 2011 itself. It is denied that merely because the Chairman-cum- Managing Director is in control and supervision of the respondent Public Sector Undertaking would render him ineligible to be appointed as the arbitrator. The respondent having accepted the arbitration clause with open eyes cannot be permitted to avoid the same on the ground of perceived partiality. The petitioner in the rejoinder has emphasised that both the issues raised by the respondent are without any basis. The petitioner relies on the facts enumerated in paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or his nominee would be favorably inclined towards the respondent. He points out that CMD has been in control and supervision of the works of the respondent and, therefore, cannot be expected to be impartial in any dispute between the petitioner and the respondent. Similarly, any employee of the respondent would suffer from the same disability. In support of the submission, the learned counsel has relied on Indian Oil Corporation Limited & Ors. Vs. Raja Transport Private Limited (2009) 8 SCC 520, Denel (Proprietary) Limited Vs. Bharat Electronics Limited & Anr. (2010) 6 SCC 394, and Denel (Proprietary) Limited Vs. Ministry of Defence(2012) 2 SCC 759. 15. Mr. Viswanathan then submitted that the plea taken by the respondent that one Mr. R. Chandra Kumar, the General Manager, Bharat Electronics Limited was appointed as the sole arbitrator on 19th July, 2011 and communicated by fax on that date itself is without any basis. He submits that factually the aforesaid averment has not been proved. The affidavit filed by the respondent is not supported by any document including purported appointment letter dated 19th July, 2011. The said affidavit is completely silent as to whom the said com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel appearing for the respondent has submitted that the petitioner having agreed to the provisions of arbitration contained in Clause 10 of the general conditions cannot now be permitted to turn around and contend that someone else has to be appointed as an arbitrator, thus giving a go-by to the arbitration agreement. He submits that it is well settled that once the parties have agreed upon a named arbitrator, the parties cannot resile therefrom. In support of the submission, he relied on the judgment of this Court in the cases of Union of India & Anr. Vs. M.P.Gupta (2004) 10 SCC 504, You One Engineering & Construction Co. Ltd. & Anr. Vs. National Highways Authority of India (NHAI) (2006) 4 SCC 372, National Highways Authority of India & Anr. Vs. Bumihiway DDB Ltd.(JV) & Ors [(2006) 10 SCC 763], Northern Railway Administration, Ministry of Railway, New Delhi Vs. Patel Engineering Company Limited[(2008) 10 SCC 240] and Indian Oil Corporation Limited & Ors. Vs. Raja Transport Private Limited[(2009) 8 SCC 520]. 19. He further submits that the present petition is not maintainable as even prior to the filing of the petition, the Chairman-cum-Managing Director had duly acted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision even if the order appointing the Sole Arbitrator, Mr. R. Chandra Kumar, was made on 19th July, 2011, it would be deemed to be received only on the day it is delivered. 25. Apart from the aforesaid statutory provision, it is also settled that an official order takes effect only when it is served on the person affected. In the case of Bachhittar Singh Vs. State of Punjab & Anr. (supra), this Court has clearly enunciated the Principle of Law in the following words:- "Thus it is of the essence that the order has to be communicated to the person who would be affected by that order before the State and that person can be bound by that order. For, until the order is communicated to the person affected by it, it would be open to the Council of Ministers to consider the matter over and over again and, therefore, till its communication the order cannot be regarded as anything more than provisional in character." 26. Similarly, in this case until the order was communicated to the petitioner, the Chairman-cum-Managing Director would have been at liberty to reconsider the matter and thus rendering the order only provisional in character. Similar question arose before this Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an enforceable right. " Similar view has been reiterated in Greater Mohali Area Development Authority & Ors. Vs. Manju Jain & Ors.[ (2010) 9 SCC 157], wherein it is observed as follows:- "24. Thus, in view of the above, it can be held that if an order is passed but not communicated to the party concerned, it does not create any legal right which can be enforced through the court of law, as it does not become effective till it is communicated." 29. Mr. Bhat on the contrary relied on the judgment of this Court in the case of Collector of Central Excise, Madras Vs. M/s M.M. Rubber & Co., Tamil Nadu (supra) and submitted that the order of the Managing Director came into force from the moment it was signed on 19th July, 2011. In Paragraph 12 of the aforesaid judgment, it is observed as follows:- "12. It may be seen therefore, that, if an authority is authorised to exercise a power or do an act affecting the rights of parties, he shall exercise that power within the period of limitation prescribed therefor. The order or decision of such authority comes into force or becomes operative or becomes an effective order or decision on and from the date when it is signed by him. The date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which it was pronounced or published under such circumstances that the parties affected by it have a reasonable opportunity of knowing of passing of the order and what it contains. The knowledge of the party affected by such a decision, either actual or constructive is thus an essential element which must be satisfied before the decision can be said to have been concluded and binding on him. Otherwise the party affected by it will have no means of obeying the order or acting in conformity with it or of appealing against it or otherwise having it set aside. This is based upon, as observed by Rajmannar, C.J. in Muthia Chettiar v. CIT "a salutary and just principle". The application of this rule so far as the aggrieved party is concerned is not dependent on the provisions of the particular statute, but it is so under the general law. 18. Thus if the intention or design of the statutory provision was to protect the interest of the person adversely affected, by providing a remedy against the order or decision any period of limitation prescribed with reference to invoking such remedy shall be read as commencing from the date of communication of the order. But if it is a limitation for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to be borne in mind is the knowledge leading to the making of the order. An order ordinarily would be presumed to have been made when it is signed. Once it is signed and an entry in that regard is made in the requisite register kept and maintained in terms of the provisions of a statute, the same cannot be changed or altered. It, subject to the other provisions contained in the Act, attains finality. Where, however, communication of an order is a necessary ingredient for bringing an end result to a status or to provide a person an opportunity to take recourse to law if he is aggrieved thereby, the order is required to be communicated." These observations, in my opinion, do not support the submissions made by Mr. Bhat. 33. Keeping in view the aforesaid principle of law, the fact situation with regard to the making and the communication of the order dated 19th July, 2011 can now be examined. Even though the respondent claims that the order was sent by fax on 19th July, 2011, there is clear denial of the same by the petitioner. Prima facie, it would appear that even though the order may have been made on 19th July, 2011, it was served for the first time on the counsel of the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration clause, by the High Court in a petition under Section 11(6). It was submitted on behalf of the appellant that when the arbitration agreement clearly envisages the appointment of the presiding officer by the IRC and there is no specification that the arbitrator has to be different person depending on the nature of the dispute, it is not open to ignore it and invoke the exercise of power under Section 11(6) of the Act. It was also submitted that the High Court was not justified in referring to the principle of hierarchy and ignoring the express contractual provision for appointment of the presiding arbitrator. Upon consideration of the rival submissions, this Court considered the questions of law which had arisen. The relevant question for the purposes of this case is "Whether an arbitration clause, which is a sacrosanct clause, can be rewritten by appointment of a judicial arbitrator when no qualification therefor is provided in the agreement?" 37. The answer to the aforesaid question was in the negative. It was held that the appointment made by the High Court was beyond the arbitration agreement which clearly envisages the appointment of the presiding arbitrator by IRC, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observed as follows:- "45. If the arbitration agreement provides for arbitration by a named arbitrator, the courts should normally give effect to the provisions of the arbitration agreement. But as clarified by Northern Railway Admn., where there is material to create a reasonable apprehension that the person mentioned in the arbitration agreement as the arbitrator is not likely to act independently or impartially, or if the named person is not available, then the Chief Justice or his designate may, after recording reasons for not following the agreed procedure of referring the dispute to the named arbitrator, appoint an independent arbitrator in accordance with Section 11(8) of the Act. In other words, referring the disputes to the named arbitrator shall be the rule. The Chief Justice or his designate will have to merely reiterate the arbitration agreement by referring the parties to the named arbitrator or named Arbitral Tribunal. Ignoring the named arbitrator/Arbitral Tribunal and nominating an independent arbitrator shall be the exception to the rule, to be resorted for valid reasons." (emphasis supplied) 40. In view of the aforesaid observations, it would not be possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion/instruction issued by his superior authorities. It is also the case of the respondent in the reply to the notice issued by the respondent, though it is liable to pay the amount due under the purchase orders, it is not in a position to settle the dues only because of the directions issued by the Ministry of Defence, Government of India. It only shows that the Managing Director may not be in a position to independently decide the dispute between the parties." 42. In my opinion, the facts in the present case are similar and, therefore, a similar course needs to be adopted. 43. In exercise of my powers under Sections 11(4) and 11(6) of the Arbitration and Conciliation Act, 1996 read with Para 2 of the Appointment of Arbitrators by the Chief Justice of India Scheme, 1996, I hereby appoint Hon'ble Mr. Justice Ashok C. Agarwal, Retired Chief Justice of the Madras High Court, r/o No. 20, Usha Kiran, 2nd Pasta Lane, Colaba, Mumbai 400 005, as the sole arbitrator, to adjudicate the disputes that have arisen between the parties, on such terms and conditions as the learned sole arbitrator deems fit and proper. Undoubtedly, the learned sole arbitrator shall decide all the disputes a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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