1. Heard Sri Ajay Kumar Singh, learned counsel for the applicants and Sri Rahul Sahai, learned counsel for the opposite parties.
2. By the last order, an independent arbitrator had been proposed to be appointed. After that order was passed, a recall application has been received from the opposite parties.
3. Sri Rahul Sahai, learned counsel for the opposite parties would submit that he could not appear in the proceedings on account of certain technical issues. He, therefore, prays that the order dated 13.01.2021 may be recalled and the matter be re-heard.
4. Inasmuch as the order dated 13.01.2021 was only in the nature of an interlocutory or procedural order, I do not consider necessary to recall the same before hearing Sri Rahul Sahai, who opposes the appointment of the learned arbitrator and thus in effect opposes the confirmation of the order dated 13.01.2021. Similar view has been expressed in Arbitration and Conciliation Application U/S 11(4) No. 68 of 2019. Accordingly, the recall application stands disposed of. Sri Rahul Sahai, learned counsel for the opposite parties has been heard on his objection to the appointment of an independent arbitrator.
5. Solitary submission of Sri Rahul Sahai, learned counsel appearing for the opposite parties is that under the arbitration clause it was the lessor i.e. the opposite party no.1 who alone could appoint an arbitrator. The applicants never approached the opposite party for appointment of an arbitrator rather, the applicants thrust the arbitrator appointed by them on the opposite parties. Thus, vide notice dated 03.07.2020, the opposite parties appointed Sri Vikas Lather, Advocate, as the sole arbitrator. Then, referring to the second notice dated 28.08.2020, it has been submitted that the same is a wholly invalid notice inasmuch as the applicants required the opposite parties to appoint an arbitrator within a period of three days from the date of receipt of notice. That is against mandatory period of 30 days granted under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act'). That notice is stated to be further invalid as the applicant appointed Sri R.K. Joshi, Advocate, the sole arbitrator without any authority. In that regard, it has been submitted, Sri R.K. Joshi, Advocate, proceeded to issue a notice dated 05.09.2020 calling upon the parties to file their respective claims.
6. Thus, it has been submitted that there is no statutory notice yet issued to the opposite parties. Unless a valid notice is first issued, the opposite parties could never be required to appoint an arbitrator. Accordingly, the present application is stated to be wholly pre-mature and liable to be dismissed on that count also.
7. Having heard Sri Rahul Sahai, learned counsel for the opposite parties and having perused the record, I am unable to accept the objection being raised by the opposite parties to dismiss the present application. In the first place, it would be relevant to note herein the order dated 13.01.2021. It reads:
"1. List revised. None is present on behalf of the opposite party.
2. Heard Sri Ajay Kumar Singh, learned counsel for the applicant.
3. The present application has been filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act), seeking appointment of an independent arbitrator for adjudication of disputes under a written lease deed executed between the parties dated 29.01.2018 wherein the applicant was running a medical store in the hospital established by the opposite party. The applicant claims non-payment of money due to it for the medicines supplied to the in-house patients of that hospital as also the termination of lease deed as the subject matter of dispute between the parties. In that regard, reference has been made to Clause 14 of the lease deed providing for an arbitration by the learned Arbitrator to be appointed by the opposite party.
4. Referring to the notice dated 28.08.2020, it has been submitted though the applicant had issued a legal notice to the opposite party to appoint the sole Arbitrator, failing which the Arbitrator be appointed by the applicant.
5. While, the Arbitrator appointed by the applicant has never been accepted by the opposite party and proceedings conducted by the said Arbitrator are a nullity, an arbitral Tribunal is proposed to be constituted under this order.
6. Having heard learned counsel for the applicant, the scope of the present proceedings under Section 11 of the Act does not require any elaboration in view of that position in law having been made crystal clear by a recent three judge decision of the Supreme Court in the case of M/S Mayavati Trading Pvt. Ltd. Vs. Pradyuat Deb Burman, Civil Appeal No. 7023 of 2019, decided on 05.09.2019. It has been held as below:
"This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgment as Section 11(6A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment Duro Felguera, S.A. (supra) -- see paras 48 & 59."
7. While laying down that law, the Supreme Court had itself referred to paragraph nos. 48 & 59 of its earlier decision in the case of Duro Felguera, S.A. Vs. Gangavaram Port Ltd., (2017) 9 SCC 729. Therefore, it is necessary to extract that ratio as well :
"48. Section 11(6-A) added by the 2015 Amendment, reads as follows:
"11. (6-A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement."
(emphasis supplied) From a reading of Section 11(6-A), the intention of the legislature is crystal clear i.e. the court should and need only look into one aspect?the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple?it needs to be seen if the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement.
59. The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 and National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117. This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists?nothing more, nothing less. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected."
8. In the facts of the present case, on prima facie basis, it has to be accepted that there exists an arbitration clause, between the parties. Also, it is clear that the parties have not been able to appoint consented arbitrator and therefore, the appointing authority has to be assumed by this Court upon the present application being brought before this Court.
9. At the same time, no final conclusion is being drawn on any of the objections that have been raised by the opposite party in the present proceedings, in view of the law noted above. Those matters would remain to be considered by the appropriate forum at the appropriate stage, upon claim, objection, challenge or appeal being filed. Thus, amongst others it would remain open to the opposite party to raise objections as to the competence of the arbitral tribunal and all other pleas as the Act permits.
10. Leaving all such course completely open to the respective parties, at present, only a forum is being provided for a claim to be raised and resisted in accordance with law.
11. Accordingly, Mr. Swatantra Singh, a retired District Judge, residing at Flat No. - 1103, C-Block, Greenvista Apartment, N.H.-24, Indirapuram, Ghaziabad, (Mob No. - 9415042500), be appointed the sole arbitrator for resolution of the disputes between the parties. Subject to his consent under Section 11(8) of the Act, the parties agree to request the learned arbitrator to conduct the proceedings at Ghaziabad.
12. The Registry is directed to obtain consent of the proposed learned arbitrator, in terms of Section 11(8) of the Act.
13. List this case on 25.02.2021."
8. Undisputedly, there exists an arbitration clause between the parties being Clause 14 of the lease deed. It reads:
"14. Any dispute or difference which may arise among the parties with regard to the construction, meaning and effect of this deed or any part thereof or any other matter relating to the firm shall be referred to a sole arbitrator to be nominated by the lessor and the decision of the sole arbitrator shall be binding on the parties any of the terms and conditions may be varied, altered or deleted with the mutual consent of the parties."
9. Thus, though it is not being disputed that there exists an arbitration clause, the opposite parties rightly claim that they had the first right to appoint an arbitrator. At the same time, that right was not absolute as may prevent this Court from acting under Section 11 of the Act, if the parties failed to appoint an arbitrator in terms of Clause 14 of the agreement reached between the parties.
10. In that context, it is seen that the notice dated 03.07.2020 was wholly defective inasmuch as it did not invoke the power of the opposite parties to appoint an arbitrator. By that notice, the applicants assumed to themselves the authority to appoint an arbitrator. Clearly, that notice was invalid and it could not be acted upon. However, the matter does not rest there inasmuch as undisputedly, the applicant issued another notice dated 28.08.2020. The operative part of the notice reads as below:
"We hereby inform you that in case you fail to appoint, Sole Arbitrator within 3 days from the date of receipt hereof (with due intimation to the undersigned through written communication by Regd. A.D./Emal) then, it shall be deemed that you have waived your right to appoint Sole Arbitrator.
In the event, Shri R.K. Joshi, Advocate, Enrollment No.D/88/76, Chamber No.375, Old Lawyers Chamber Block, Delhi High Court, Sher Shah Marg, New Delhi-110003 shall instead step into the shoes of Sole Arbitrator.
Take notice.
This is, however, without prejudice to our any other rights and contentions."
11. The operative portion of that notice is in two parts. In the first place, it invokes the power of the opposite parties to appoint an arbitrator and in the second, it proposes to appoint an arbitrator if the opposite parties failed to discharge their obligation. With respect to the first part, a further stipulation has been made in the notice requiring the opposite parties to appoint an arbitrator within a period of three days from the receipt of the notice. That stipulation is contrary to the statutory stipulation contained in Section 11(4) of the Act. To that extent, Sri Rahul Sahai, learned counsel for the opposite parties is correct that the applicants had acted contrary to law in seeking appointment of an arbitrator within a period of three days from the receipt of notice and they were completely wrong in appointing an arbitrator.
12. While, that action of the applicant is found to be contrary to law, at the same time, it may never be said that the applicants lost their right to file the present application or that they filed it pre-maturely. It is so because the applicants had clearly sought appointment of an arbitrator by the opposite parties, vide notice dated 28.08.2020. Its receipt has not been denied by the opposite parties, at the same time, it is not the case of the opposite parties that it acted on the notice and appointed any arbitrator or sought any clarification from the applicants or disputed the notice.
13. In fact, it appears that the opposite parties sat over the matter. Thus, the notices issued to appoint an arbitrator (by the applicants) and to the extent it further seeks to impose a stipulation of three days to appoint an arbitrator, are found to be invalid. At the same time, the remaining part of the notice seeking appointment of an arbitrator is found to be in accordance with law. The opposite parties having failed to make compliance of the notice in terms of Section 11(4) of the Act and having itself failed to appoint an arbitrator, they lost their right to make that appointment. Thereafter, the Court's jurisdiction has been rightly invoked. Once the 30 days time period had elapsed from the notice dated 28.08.2020, the jurisdiction to appoint an arbitrator vested in this Court alone. Clearly, the present application has been filed much thereafter on 09.10.2020. The issue of appointment of an arbitrator being Sri R.K. Joshi, Advocate, being an action without jurisdiction, no right or liabilities may flow from that action and also no benefit arises to the opposite parties since they had objected to the jurisdiction of Sri R.K. Joshi, Advocate. The objections raised by Sri Rahul Sahai, learned counsel for the opposite parties, to that extent are thus rejected.
14. Accordingly, Mr. Swatantra Singh, a retired District Judge, residing at Flat No. - 1103, C-Block, Greenvista Apartment, N.H.-24, Indirapuram, Ghaziabad, (Mob No. 9415042500), is appointed as the arbitrator to enter upon the reference and adjudicate the dispute in accordance with the provisions of Arbitration and Conciliation Act, 1996.
15. The arbitrator shall be entitled to fees and expenses, in accordance with the provisions of the fourth schedule inserted by Act No.3 of 2016.
16. The order dated 13.01.2021 is confirmed. The application under Section 11 of the Act thus, stands allowed.
Re: Civil Misc. Recall Application No. 2 of 2021
17. For the reasons contained in the order of the same date passed in the aforesaid application, the present recall application stands disposed of.
Order Date :- 17.2.2021 Abhilash