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TMI Blog2006 (9) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... antage of its own wrong. The pleadings before the Arbitral Tribunal are not complete and written statement is yet to be filed by the appellant as the appellants have raised their objections with respect to the appointment before the arbitration proceedings which has been duly recorded by the Arbitral Tribunal in the orders passed by them. In view of the order now passed setting aside the appointment of the Presiding Arbitrator by the High Court, the appointment of the Presiding Arbitrator as per the procedure contemplated under the contract agreement has to be followed and IRC (Ministry of Shipping, Road Transport and Highways, R.K. Puram, New Delhi should be approached. The parties are at liberty to approach the Arbitrators for any further interim directions. Appeal allowed by setting aside the order passed by the High Court - Appeal (civil) 4251 of 2006 - - - Dated:- 25-9-2006 - Dr. AR. Lakshmanan Tarun Chatterjee, JJ. JUDGMENT Dr. AR. Lakshmanan, J. Leave granted. The appellant National Highways Authority of India has filed the present appeal against the judgment and order of the High Court of Orissa at Cuttack dated 06.01.2006 in Arbitration Petition No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) ............. (iii) ............. (iv) (v) If one of the parties fail to appoint its arbitrator in pursuance of sub-clause (i) and (ii) above, within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the President of Indian Road Congress both in cases of foreign contractors as well as Indian Contractors, shall appoint the arbitrator. A certified copy of the order of the President of Indian Road Congress making such an appointment shall be furnished to each of the parties. (vi) Arbitration proceedings shall be held at Delhi in India, and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English. (vii) The decision of the majority of arbitrators shall be final and binding upon both parties. The cost and expenses of Arbitration proceedings will be paid as determined by the arbitral tribunal. However, the expenses incurred by each party in connection with the preparation, presentation, etc. of its proceedings as also the fees and expenses paid to the arbitrator appointed by such party or on its behalf shall be borne by each party itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng order in the aforesaid special leave petitions: "Leave granted. Heard Parties. The Portion of the impugned order whereby Applicant in Civil Appeals arising out of S.L.P. (Civil) Nos. 24813-24814 is permitted to participate in the re-tender process is stayed. We clarify that the observations made by the High Court will not be taken into account in other proceedings including the Arbitration which may be invoked by the parties." Mr. D.P. Gupta, vide letter dated 15.04.2005, disagreed with the names proposed by respondent No.3. Thereafter, in view of the disagreement between the two nominated arbitrators, respondent No.1 sought clarification from respondent No.2 herein vide its letter dated 29.04.2005. Respondent No.1 requested respondent No.2 if any judicial arbitrator is available with them for the purpose of nomination as Presiding Arbitrator. It was pointed out that respondent No.1 never sought any intervention of respondent No.2 for appointment of the Presiding Arbitrator rather it only sought clarification in this regard. Vide letter dated 03.05.2005, respondent No.2 - Indian Road Congress (IRC) informed respondent No.1 that there does not exist any judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppointment of the Presiding Arbitrator. In reply to the aforesaid letter, respondent No.2 vide letter dated 06.09.2005, informed that the meeting of the Executive Committee will be held on 09.09.2005 for the appointment of the Presiding Arbitrator. Respondent No.3, vide letter dated 31.08.2005 to both the parties, stated that in view of the failure of both the arbitrators to appoint the Presiding Arbitrator, appropriate steps should be taken in this regard. Respondent No.1 filed its rejoinder affidavit before the High Court. The High Court, vide interim order dated 09.09.2005 directed to list the matter on 23.09.2005 and directed respondent No.2 not to appoint any arbitrator in the meantime till the next date of hearing. The High Court, vide final judgment dated 06.01.2006, appointed Mr. P. Chenna Keshava Reddy, former Chief Justice of Andhra Pradesh and Gauhati High Court as the Presiding Arbitrator, which according to the appellants, is in clear and express violation of the contract agreement entered into between the parties. Being aggrieved by the impugned order, the above civil appeal was filed. We heard Mr. G.E. Vahanvati, learned Solicitor General of India, appearing on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Altaf Ahmed further submitted that the appellants have never challenged the order dated 01.07.2005 appointing the Presiding Arbitrator till date. However, Mr. Justice Bhaskar Rao, Presiding Arbitrator expressed his inability to act as the Presiding Arbitrator and accordingly intimated directly to the High Court of Orissa regarding his inability to act as the Presiding Arbitrator. Thereafter, when the matter was listed on 05.08.2005, the High Court directed the counsel for the appellants to obtain instruction from the appellants. In the meantime, Mr. Ashok Desai, arbitrator appointed by the respondents and Mr. Surjeet Singh, arbitrator appointed by the appellants carried out discussions regarding the appointment of the Presiding Arbitrator. On 06.01.2006, learned counsel for the appellants, under annexure-9, had suggested the names of five retired Judges of the various High Courts including the name of the retired Chief Justice/retired Judge of the Supreme Court of India for appointing one of them as the Presiding Arbitrator. Learned counsel for the appellants herein also submitted that anyone from the said list may be appointed as the Presiding Arbitrator. Learned counsel furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarification issued by the High Court of Orissa. Learned senior counsel further submitted that the appellants having accepted the order of the High Court dated 01.07.2005 is thus precluded/estopped from challenging the order dated 06.01.2006 as the subsequent order is nothing but continuation of the proceedings dated 01.07.2005 wherein Mr. Justice Y. Bhaskar Rao was appointed and he had expressed his inability to accept the office. Learned senior counsel submitted that the appeal is devoid of any merit as the impugned order is in accordance with law and is just and proper in the facts and circumstances of the case. We shall now consider the rival submissions made by both the parties in extenso in paragraphs infra. In the facts of the present appeal, the following questions of law have arisen for consideration and determination by this Court from the arguments of both the sides:- a) What is the scope of jurisdiction of the Court on the resignation of an arbitrator considering a specific mandate and mechanism under Section 15(2) of the Arbitration and Conciliation Act, 1996 and Clause 67.3 of the Contract? b) Whether on resignation of one of the arbitrators, the statutory pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with Section 15(2) of the Arbitration Conciliation Act, 1996. The two arbitrators failed to arrive at a consensus and, therefore, after 30 days, the appellants referred the issue of appointment of Presiding Arbitrator to IRC on 30th August, 2005. It is seen from the aforesaid facts that the situation which existed prior to the resignation of Mr. Justice Y. Bhaskara Rao and those which came about subsequent thereto only affirm that the vacancy created by the resignation of Mr. Justice Y. Bhaskara Rao was accepted by the parties to be filled up in accordance with the original rules of appointment, which is wholly in consonance with Section 15(2) of the Arbitration Conciliation Act, 1996. Reliance was placed on the case of Yashwith Construction P. Ltd. Vs Simplex Concrete Piles India Ltd Anr., 2006 (7) Scale 48 (at para 4) wherein this Court had held that "The withdrawal of an arbitrator from the office for any reason is within the purview of Section 15(1) (a) of the Act and therefore, Section 15(2) would be attracted and a substitute arbitrator has to be appointed according to the rules that are applicable for the appointment of the arbitrator to be replaced." Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These will be his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live laim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the designated Judge would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the designated Judge. (v) Designation of a District Judge as the authority under Section 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act. (vi) Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High Court would not interfere with the orders passed by the arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act. (vii) Since an order passed by the Chief Justice of the High Court or by the designated Judge of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rator. The judicial order which replaces the administrative order is under challenge before this Court and, therefore, there is no need to challenge the order dated 1.7.2005. It may further be pointed out that the petition was disposed of on 1.7.2005 after the appointment and hence, on resignation of the Presiding Arbitrator, Mr. Justice Y. Bhaskar Rao, the respondent again approached the High Court for appointing the Presiding Arbitrator leading to the impugned order. It is pertinent to state that under Section 11(6) of the Act, the Court has jurisdiction to make the appointment only when the person including an institution, fails to perform any function entrusted to it under that procedure. In the present case, the relief claimed by the respondents by invoking Section 11(6) is wholly erroneous as prior to the order dated 1.7.2005, the respondents only sought a clarification from IRC and without making a reference to them, immediately filed the petition under Section 11(6) on the purported ground that the Indian Road Congress had failed to make the appointment within the stipulated time. Therefore, the reliance placed by the respondent on the judgment of this Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question arises for consideration here is who had defaulted and on what basis of default has the Court entered jurisdiction under Section 11(6). This question though raised by the appellant in the counter affidavit before the High Court has not been answered at all. Hence, the assumption of jurisdiction and adjudication by the High Court, in our opinion, is vitiated. It is reiterated by the learned Solicitor General appearing for the appellants that there did not exist any concession on behalf of counsel for the appellants as alleged. Vide the impugned order dated 6.1.2006, the High Court after detailed discussions came to the conclusion that the Court was justified in making the appointment of Presiding Arbitrator. Only after the said judicial determination, a query was put to the appellants about the selection of the name, which was categorically refused by their counsel. On an application filed by the appellants before the High Court, the Court clarified that "what learned counsel for opposite party Nos. 1 2 submitted is that he left the question of appointing the Presiding Arbitrator to the discretion of this Court. May be what learned counsel for Opposite Party Nos. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be challenged for the reasons that a) it is only a modification of the order dated 1.7.2005 which itself was an order based on consent given by the appellants. b) The order dated 1.7.2005 was never challenged by the appellants either by way of a petition under Article 226/227 of the Constitution of India before the High Court or under Article 136 of the Constitution of India before this Court. c) The counsel for the appellants had submitted before this Court on 1.6.2006 that any one from the said list for which time was given on 5.8.2005 for obtaining instructions, be appointed as the Presiding Arbitrator. d) On 23.6.2006 counsel for the appellants once again submitted that he had left the question of appointing the Presiding Arbitrator to the discretion of the High Court. Mr. Altaf Ahmad further submitted that the decisions upon which reliance had been placed by the appellants are not applicable to the facts of the present case for the following reasons:- i) You One Engineering and Construction Company Limited and another vs. National Highways Authority of India Limited, (supra) is a case in which the Indian Road Congress had appointed a Presiding Arbitrator whereas i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitration and Conciliation Act, 1996 or any amendment thereof. b. The Arbitral Tribunal shall consist of Three Arbitrators. c. Out of the three Arbitrators to be appointed, one each is to be appointed by the Employer and the Contractor; d. If one of the parties fails to appoint its arbitrator within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the President of Indian Road Congress shall appoint the arbitrator. A certified copy of the order of the President of Indian Road Congress making such an appointment shall be furnished to each of the parties. e. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the Parties and shall act as Presiding Arbitrator which is to be appointed by consensus of the two arbitrators within a period of 30 days from the appointment of the arbitrator appointed subsequently. f. In case of failure of the two arbitrators, appointed by the parties to reach upon 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 Roads Congress. As rightly pointed out by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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