9911796707
TMI Blog2006 (9) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... which was a part of the Chennai-Kolkata Corridor of the Golden Quadrilateral connecting Delhi, Mumbai, Chennai and Kolkata. On 11.06.2001, the appellants entered into an agreement with respondent No.1 for the aforesaid contract. The contract agreement contained a mechanism for resolution of disputes between the parties as contained in Sub-Clause 67.3 Sub-Clause 67.3 reads as follows: "Any dispute in respect of which the Recommendation(s), if any, of the Board has not become final and binding pursuant to Sub-Clause 67.1 shall be finally settled by arbitration as set forth below. The arbitral tribunal shall have full power to open-up, review and revise any decision, opinion, instruction, determination, certificate or valuation of the Engineer and any Recommendation(s) of the Board related to the dispute. (i) A dispute with an Indian Contractor shall be finally settled by arbitration in accordance with the Arbitration & Conciliation Act, 1996, or any statutory amendment thereof. The arbitral tribunal shall consist of 3 arbitrators, one each to be appointed by the Employer and the Contractor. The third Arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and Conciliation Act, 1996 and filed Arbitration Application No. 2 of 2004 in the Court of District Judge, Ganjam who, vide order dated 02.04.2004, restrained the appellants from expelling respondent No.1 from the work site till dispute between the parties are adjudicated as per the contract agreement. The Court further refused to pass any orders restraining the appellants from encashing the Bank Guarantees. The said order was challenged by both the parties before the High Court of Orissa. The High Court, vide common order dated 02.11.2004, disposed off both the appeals directing appellant No.1 to constitute Dispute Review Board within a period of 6 weeks. The order of restraint passed by the District Judge was set aside and liberty was granted to appellant No.1 to go for re-tendering process with liberty to respondent No.1 to participate. The aforesaid order was again challenged by both the parties by filing separate special leave petitions, namely: a) SLP (C) No. 24813-24814 of 2004 b) SLP (C) No. 25890-25891 of 2004 This Court, vide order dated 13.01.2005, directed both the parties to maintain status quo in the meanwhile. The Dispute Review Board gave its recommendation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties without making any reference to respondent No.2 for the appointment of the Presiding Arbitrator. On 11.05.2005, the appellants requested respondent No.2 to appoint the Presiding Arbitrator in view of the disagreement between two nominated arbitrators as stipulated in the contractual terms. In the meanwhile, respondent No.2, by a letter dated 31.05.2005, requested the appellants for submission of 50% of the processing fee to enable them to make the appointment as requested. Respondent No.1, vide letter dated 02.06.2005, informed respondent No.2 regarding the filing of the petition before the High Court for appointment of the Presiding Arbitrator and asked them to wait for the outcome of the judgment since the matters were subjudiced before the Court. On 01.07.2005, Arbitration Petition No. 23 of 2005 was listed for hearing before the High Court and the High Court ordered to appoint Mr. Justice Y. Bhaskar Rao as the Presiding Arbitrator. Respondent No.1, vide letter dated 06.07.2005, further clarified that the said appointment was made since IRC had failed to appoint the Presiding Arbitrator within the stipulated time of 30 days of the request made by the parties. On 11.07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act conferring jurisdiction on the Court to make the appointment only on failure of the persons/institutions designated to perform the functions entrusted to it and the agreed procedure; b) When the arbitration agreement clearly envisages the appointment of the Presiding Arbitrator by the IRC and there is no specification that the arbitrator has to be different persons depending on the nature of this dispute. It is not open to ignore it and invoke the exercise of powers under Section 11(6) of the Act. c) The High Court was not justified in referring to the principles of hierarchy and ignoring the express contractual provisions for appointment of the Presiding Arbitrator against the well settled law as laid down by this Court. The order in effect amounts to rewriting the contract against the text, spirit, fabric and intent of the agreed terms. Mr. Altaf Ahmed, learned senior counsel appearing for the respondents, per contra, submitted that since the arbitrators nominated by the respondent, namely, Mr. Justice Ashok A. Desai and Mr. Justice K. Jayachandra Reddy had rejected the proposal regarding appointment, the respondent on 29.04.2005 wrote a letter to Indian Roads Congress and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants in ARB Application No. 23 of 2005 which came up for hearing before the Chief Justice of the High Court of Orissa. By order dated 23.06.2006 on the Miscellaneous Application filed by the appellants, it was clarified as under: "By order dated 6-1-2006, I appointed Justice P. Chenna Keshava Reddy, Former Chief Justice of Guwahati High Court as the Presiding Arbitrator on a Fee of Rs. 10,000/- per sitting which should be equally shared by both Parties. It was further stipulated in the said order that the learned Arbitrator shall be entitled to Rs.10,000/- per sitting towards clerkage etc. Justice P. Chenna Keshava Reddy's name was picked up from a list of various names under Annexure-9 supplied by the petitioner. In that order it was inter alia, recorded that learned counsel for Opposite Party nos. 1 and 2 fairly submitted that any one from the said list may be appointed as the Presiding Arbitrator. Now, learned counsel for Opposite Party nos. 1 and 2 submits that it was not submitted by him that any one from the said list may be appointed as Presiding Arbitrator. What learned counsel for Opposite Party no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-written? The present appeal involves the issue relating to appointment of the Presiding Arbitrator in accordance with the agreed contractual terms between the parties. As per Clause 67 of the contract agreement, a dispute resolution mechanism has been agreed to wherein the parties agreed that any dispute arising between them shall, in the first instance, be referred to a Dispute Review Board (DRB). Clause 67.3 further stipulates that for the purpose of constitution of the Arbitral Tribunal in respect of challenge to the recommendation of DRB, in case of failure of the two arbitrators appointed by the respective parties to arrive at a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the President, Indian Road Congress. In the present case, for the purpose of appointment of Presiding Arbitrator, the respondent unilaterally approached the High Court of Orissa at Cuttack under Section 11(6) of the Arbitration and Conciliation Act, 1996, in express violation of the contract agreement without first requesting the Indian Road Congress being the designated authority for appointment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(1) and 15(2) of the Arbitration Act. Section 15(1) and 15(2) are complete and wholesome and contra distinct to Section 11(6). Mr. Justice Y. Bhaskar Rao's resignation brought the matter back from vestiges of Section 11(6) though in the first place in law there were none and brought the matter squarely within Section 15(2). Any decision given under Section 11(6) is wholly miscarriage in law and would tantamount to putting the Act upside down. It was also submitted that the matter on Section 15(2) is no longer res integra as per the dictum in Yashwith Construction. It may be further seen that the impugned order is not an order merely to fill up the vacancy created by the resignation but is a judicial order which takes into account all the facts and circumstances before giving the judicial determination for the appointment. The said judicial order has, ipso facto, replaced the earlier administrative order of 1.7.2005. In this regard, reliance was placed on the judgment of this Court in the case of SBP & Co. vs. Patel Engineering Ltd. & Anr. (2005) 8 SCC 618. In paragraph 47 of this judgment, this Court held as under: &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been constituted by the parties without having recourse to Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act. (x) Since all were guided by the decision of this Court in Konkan Rly. Corpn. Ltd. vs. Rani Construction (P) Ltd. (2002) 2 SCC 388 and orders under Section 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or Arbitral Tribunals thus far made, are to be treated as valid, all objections being left to be decided under Section 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications under Section 11(6) of the Act. (xi) Where District Judges had been designated by the Chief Justice of the High Court under Section 11(6) of the Act, the appointment orders thus far made by them will be treated as valid; but applications if any pending before them as on this date will stand transferred, to be dealt with by the Chief Justice of the High Court concerned or a Judge of that Court designated by the Chief Justice. (xii) The decision in Konkan Rly. Corpn. Ltd. vs. Ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Court. It was submitted that the letter dated 29.4.2005 is otherwise a mischievous clarification de hors contractual provisions which were considered otherwise. The assumption of the Court being wrong, a consent read ejudem generis therein is not consent in the eyes of law. In any case, Mr. Justice Y. Bhaskar Rao's resignation 26 days after his appointment i.e., on 26.7.2006 forecloses the chapter of consent. Learned Solicitor General appearing for the appellants argued that on the resignation of an arbitrator, the statutory provision which steps in is only Section 15(2) and not Section 11(6). Hence, after the resignation of Mr. Justice Y. Bhaskar Rao, the process of appointment had restarted as per Section 15(2). However, the concerned institution i.e. IRC being restrained by the High Court from making the appointment, there was no failure on the part of the concerned institution i.e. IRC so as to justify invocation of Section 11(6). Reliance was placed on the case of Yashwith Construction P. Ltd. vs. Simplex Concrete Piles India Ltd. & Anr. (supra) wherein this Court had reiterated the well settled law and held that there was no failure on the part of the concerned party as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hically a judicial arbitrator must sit with another judge only. This reasoning, in our opinion, is de hors the sanction in the Contract. The appointment made by the High Court as per the impugned order is against the express provisions of contract as held by this Court in the case of You One Engineering & Construction Co. Ltd. vs. National Highway Authority of India, (2006) 4 SCC 372 reaffirming that once the arbitration agreement clearly envisages the appointment of the Presiding Arbitrator by IRC, there is no qualification that the arbitratorhas to be a different person depending on the nature of the dispute. If the parties have entered into such an agreement with open eyes, it is not open to ignore it and invoke exercise of powers in Section 11(6). It is beneficial to refer to the judgment of this Court in the case of Rite Approach Group Ltd. vs. Rosoboron export (2006) 1 SCC 206 wherein this Court has clearly held that "in view of the specific provision contained in the agreement specifying the jurisdiction of the Court to decide the matter, this Court cannot assume the jurisdiction, and hence, whenever there is a specific clause conferring jurisdiction on a particular Court t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initially appointed the arbitrator and was right in appointing/substituting another arbitrator as the first arbitrator had resigned. It was a case wherein the question was whether Section 11(6) would operate or not and this Court had clearly held that Section 15(2) saves the power of the Managing Director to appoint/substitute an arbitrator even though the agreement does not specifically say so. (iii)Right Approach Group Ltd vs. Rosoboron Export (2006) 1 SCC 206 is not applicable to the facts of the present case because that was a case in which the arbitration agreement specifically provided to resolve the dispute by negotiation, the dispute would be submitted to the arbitration court under the Chamber of Commerce and Trade of Russian Federation and the application of Section 11(6) or 15(2) was not in question at all. He also invited our attention to the judgment of this Court in the case of Datar Switch Gears, (supra) and Punj Lloyd Ltd. vs. Petronet MHB Ltd. (supra) wherein this Court has repeatedly held that once a notice period of 30 days in the present case and the other party has moved the Chief Justice under Section 11(6), party having right to appoint arbitrator under arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to exercise its jurisdiction, the High Court could not assume jurisdiction under Section 11(6) of the Act. Respondent No.1 has wrongly invoked the jurisdiction of this Court without first following the procedure agreed to between the parties. Thus no cause of action had arisen in the facts of the case to seek the appointment from the High Court under Section 11(6) of the Act and thus the said petition was premature. The High Court also is not correct in relying on the contention of the respondent No.1 that in case one of the arbitrators is retired Chief Justice, the Presiding Arbitrator should be at least a retired Chief Justice or a retired Judge of a High Court with considerable experience. It was submitted by learned Solicitor General appearing for the appellants that the said finding of the High Court is self contradictory inasmuch as if the Presiding Arbitrator is a retired Judge of the High Court and one of the arbitrators is a retired Chief Justice of the High Court, the member of hierarchy is upset. Even otherwise, there does not exist any such provision in law which requires that if one of the arbitrators is a retired Judge the Presiding Arbitrator also has to be a r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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