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TMI Blog2012 (1) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... oods supplied by the petitioner were rejected by the respondent. The petitioner, thereafter, informed the respondent that two more lots were ready for discharge on 17 th March, 2005. However, Union of India never responded to the letter, hence, loss and damage has been caused to the petitioner. In April, 2005, after various discussions, the petitioner came to know that improper fuzes were used by the Union of India which led to the problem that occurred in the lots which were rejected. Thereafter, on 21st April, 2005, Union of India put on hold all contracts. Further, on 14th May, 2008, Union of India sent a notice seeking refund of amount of US $ 23,20,240, failing which legal action was to issue. 2. The disputes having arisen between the parties, efforts were made to resolve the same. The details of the efforts made are narrated in the petition. Since the disputes could not be resolved through mutual discussions, the DGOF appointed one Mr. A.K. Jain, Additional General Manager, Ordnance Factory, Ambajhari, Nagpur as an arbitrator in terms of Clause 19(F) of the contract, which reads as under:- All the disputes and difference arising out of or in any way touching or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, whereby the learned Judge assumed the authority to appoint an arbitrator, which is beyond her jurisdiction. The Act does not make provision for the appointment of an arbitrator other than in accordance with the arbitration agreement and in the limited circumstances provided for in Section 11. The petitioner also claims that the DGOF would be disqualified to act as an arbitrator as the dispute is against the Government of India and particularly against the Ordnance Factory, Ministry of Defence. If the Director General, Ordnance Factory, Government of India (DGOF) or a Government servant is appointed as an arbitrator, he shall always be bound by the directions/instructions issued by his superior authorities and, therefore, such an arbitrator would not be in a position to independently decide the dispute between the parties. According to the petitioner, such an appointment would be contrary to the provisions of Section 12 of the Act. The petitioner further claims that the DGOF has already through his actions in the dispute between the parties demonstrated his lack of independence and impartiality. The learned District Judge in her judgment alluded to the fact that the DGOF without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itchgears Ltd. Vs. Tata Finance Ltd. Anr. 2000 (8) SCC 151 , Punj Lloyd Ltd. Vs. P etronet MHB Ltd. 2006 (2) SCC 638 and Yashwith Constructions (P) Ltd. Vs. Simplex Concrete Piles India Ltd. Anr. 2006 (6) SCC 204 8. On the other hand, Mr. Raval, appearing for the Union of India has submitted that the petitioner has failed to make out a case for not appearing before the arbitrator appointed pursuant to the order of the Principal District Court, Chandrapur on 21st December, 2010. He submits that the respondents have willingly accepted the appointment of the earlier arbitrator in accordance with the arbitration clause. Therefore, they can have no justification to challenge the appointment of the present arbitrator, who has only been appointed as the mandate of the earlier arbitrator had been terminated by the orders of the Court. The petitioner was duly informed about the appointment of the arbitrator on 16th March, 2011. The arbitrator had intimated both the parties about the appointment and had requested them to submit their respective claims within a period of 10 days. It was only at that stage that the petitioner wrote a letter dated 15th April, 2011 stating that the appoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts, it is evident that the mandate of the earlier arbitrator Mr. Arun Kumar Jain was terminated by the orders passed by the Principal District Court, Chandrapur in Civil Misc. Application No. 45 of 2009 by order dated 21st December, 2010. A perusal of the aforesaid order would show that the petitioner had challenged the validity of Clause 19(F). The aforesaid submission was rejected by the Court with the observation that the same cannot be the subject matter which could be resolved in a petition under Section 14(2) of the Act. The petitioner was given an opportunity to challenge the clauses in an appropriate forum. The District Judge, however, accepted the submission of the petitioner that there are justifiable reasons to indicate that the arbitrator has not acted fairly. Hence the mandate of Mr. A.K. Jain as the Sole Arbitrator was terminated. In accordance with Section 15(2) of the Act, DGOF was appointed as an arbitrator. He was also given an option to appoint Government servant as an arbitrator as per the arbitration clause. It is a matter of record that DGOF did not act himself as an arbitrator, pursuant to the aforesaid order of the Principal District Judge, Chandrapur date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly, even though they are employees of such institutions/organizations. In my opinion, the aforesaid observations are a complete answer to the submission made by Mr. Naphade. 12. Learned senior counsel then submitted that even if the arbitration clause is held to be valid, Mr. Satyanarayana still cannot be permitted to continue with arbitration as the petitioner has a strong apprehension that he is biased in favour of the respondents. In support of the submission, the learned senior counsel has relied on the various notices issued by the arbitrator which were invariably received after the expiry of the time fixed by the arbitrator. In support of his submission, he relied on a judgment of this Court in the case of Denel (Proprietary) Limited Vs. Bharat E lectronics Limited Anr. 2010 (6) SCC 394 . 13. Replying to the apprehension of bias pleaded by Mr. Naphade, it is submitted by Mr. Raval that non-receipt of the letters in time cannot possibly give rise to an apprehension that Mr. Satyanarayana is in any manner biased against the petitioner. He submits that the reliance of the petitioner on the judgment in Denel (Proprietary) Limited (supra) is also misconceived as the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Satyanarayana is an employee within the same organization. The attitude of the respondents towards the proceeding is not indicative of an impartial approach. In fact, the mandate of the earlier arbitrator was terminated on the material produced before the Court, which indicated that the arbitrator was biased in favour of the Union of India. In the present case also, Mr. Naphade has made a reference to various notices issued by the arbitrator, none of which were received by the petitioner within time. Therefore, the petitioner was effectively denied the opportunity to present his case before the Sole Arbitrator. Therefore, the apprehensions of the petitioner cannot be said to be without any basis. 17. It must also be remembered that even while exercising the jurisdiction under Section 11(6), the Court is required to have due regard to the provisions contained in Section 11(8) of the Act. The aforesaid section provides that apart from ensuring that the arbitrator possesses the necessary qualifications required of the arbitrator by the agreement of the parties, the Court shall have due regard to other considerations as are likely to ensure the appointment of an independent and imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ministry of Defence, Government of India. Therefore, the Court concluded that the Managing Director may not be in a position to independently decide the dispute between the parties. Consequently, the Court proceeded to appoint an independent arbitrator. 20. In my opinion, the circumstances in the present case are similar and a similar course needs to be adopted. In view of the above, the petition is allowed. 21. In exercise of my powers under Section 11(4) and (6) of the Arbitration and Conciliation Act, 1996 read with Paragraph 2 of the Appointment of Arbitrator by the Chief Justice of India Scheme, 1996, I hereby appoint Hon. Mr. Justice Ashok C. Agarwal, Retd. Chief Justice of the Madras High Court, R/o No. 20, Usha Kiran, 2 nd 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 arising between the parties without being influenced by any prima facie opinion expressed in this order, with regard to the respective claims of the parties. 22. The reg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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