1/33 R IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 08th DAY OF DECEMBER 2017 BEFORE THE HON'BLE Dr.JUSTICE VINEET KOTHARI C.M.P. No.228/2016 BETWEEN:
SOBHA PROJECTS AND TRADE PRIVATE LIMITED HAVING ITS PRESENTLY REGISTERED OFFICE AT No.3256, 8TH CROSS, 11TH MAIN H.A.L. 2ND STAGE, INDIRANAGAR BANGALORE-56008 REPRESENTED BY THE AUTHORISED SIGNATORY THE SENIOR GENERAL MANAGER – OPERATIONS PRADEEP SUKUMARAN.
(BY SRI. SHREYAS JAYASIMHA, ADV.,) AND:
GAMMON INDIA LIMITED HAVING ITS REGISTERED OFFICE AT GAMMON HOUSE, VEER SSAVARKAR MARG PRABHADEVEI, MUMBAI-400025.
…PETITIONER …RESPONDENT (BY SRI. K.R. MURALIKRISHNA, ADV.) THIS C.M.P IS FILED UNDER SECTION 11(6) OF THE ARBITRATION & CONCILIATION ACT, 1996, PRAYING TO ALLOW THE PRESENT PETITION AND APPOINT HON’BLE SHRI. JUSITCE R. GURURAJAN (RETD.) OR SUCH OTHER PERSON AS THIS HON’BLE Court MAY DEEM FIT, AS THE SOLE ARBITRATOR AS PER THE PROVISIONS OF ARBITRATION AND CONCILIATION ACT, 1996, TO ADJUDICATE AND DECIDE UPON THE DISPUTES WHICH HAVE ARISEN BETWEEN THE PETITIONER AND THE RESPONDENT ARISING FROM THE SUB CONTRACTS, PRODUCED HEREWITHAS & ETC., THIS C.M.P. COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER Mr. Shreyas Jayasimha, Adv. for Petitioner Mr. K.R. Muralikrishna, Adv. for Respondent The present petition has been filed by the Petitioner- M/s.Shobha Projects and Trade Private Limited, Bengaluru, against the Respondent-M/s.Gammon India Limited, Mumbai, (for short ‘Company’) under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short ‘the Act of 1996’) for appointment of an Arbitrator on account of certain disputes arising between the parties in the contract for construction of building at Bengaluru.
2. The contract in question which contains the Arbitration Clause between the parties was executed vide Annexure-A dated 27.09.2013. The relevant Clause-
45 of the said contract between the parties is quoted below for ready reference:
“45. DISPUTE RESOLUTION Amicable Settlement In case of any dispute, both Parties shall attempt to settle the dispute amicably before the commencement of Arbitration.
Arbitration Except where otherwise provided for in the Subcontract, all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the Contracts, designs drawings, specifications, estimates, instructions, orders or these conditions of otherwise concerning the works, or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof, after written notice by either party to the Contract, shall be referred to the sole arbitration of a person bearing the designation of General Manager (or higher designation) of Gammon India Limited to be appointed by the Chairman and Managing Director, Gammon India Limited.
If the person so appointed is unable or unwilling to act, as the sole arbitrator, some other person willing to act as such arbitrator shall be appointed by the Chairman and Managing Director, Gammon India Limited.
There will be no objection if the arbitrator so appointed is an employee of Gammon India Limited and that he had to deal with the matters to which the Subcontract relates and that in the course of his duties with the matters as such he had expressed views on all or any of the matters in dispute or difference.
The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason as aforesaid at the time of such transfer, vacation of office or inability to act, Chairman and Managing Director, Gammon India Limited shall appoint another person to act as arbitrator in accordance with the terms of the contract. It is also a term of this contract that no person other than a person appointed by Chairman and Managing Director, Gammon India Limited as aforesaid should act as arbitrator and if for any reason, that is not possible, the matter is not be referred to arbitration at all.
Subject as aforesaid the provisions of the Arbitration and Conciliation Act, 1996, or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this Clause.
It is a term of the Subcontract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this Clause together with the amount or amounts claimed in respect of each such dispute.
The arbitrator may from time to time with consent of the parties enlarge the time, for making and publishing the award.
The work under the Subcontract shall, if reasonably possible, continue during the arbitration proceedings.
The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties fixing the date of the first hearing. The Arbitrator shall give a separate award in respect of each dispute or difference referred to it.
The venue of arbitration shall be Mumbai.
The award of the arbitrator shall be final, conclusive and binding on all parties to this Subcontract.
The cost of arbitration shall be borne by the parties to the dispute, as may be decided by the arbitrator.”
3. The Notice in this regard was served by the petitioner upon the Respondent vide Annexure-E dated 14.05.2016 seeking an appointment of an Arbitrator under the said contract. However, the parties since then have failed to appoint any Arbitrator so far, hence the present petition was filed in this Court on 17.09.2016 by the petitioner.
4. Learned counsel for the petitioner Mr. Shreyas Jayasimha, has submitted before the Court that in view of the Amendment of Act by Act No.3 of 2016 with effect from 23.10.2015, particularly by insertion of Section 12(5) of the Act read with Schedule VII of the Act, the said Arbitration Clause 45 quoted above to the extent it authorizes the Chairman and Managing Director of the Respondent-Company to nominate and appoint the Arbitrator not below the rank of General Manager of the Respondent-Company, will stand superseded by the said Amendment in law and since the parties in Clause 45 have also agreed inter alia to abide by the provisions of Act of 1996 or any statutory modification and Rules made therein, therefore, the Respondent-Company cannot now insist upon the nomination and appointment of the in-house Arbitrator to resolve the dispute between the parties to be nominated and appointed by the Chairman and the Managing Director of the Respondent-Company.
5. Relying upon the recent judgment of Hon’ble Supreme Court in the case of TRF Ltd. vs. Energo Engineering Projects Ltd. (2017 SCC Online SC 692), the learned counsel further submitted that the Chairman and the Managing Director of the Respondent-Company has been rendered ineligible to act as Arbitrator in view of Schedule VII read with 12(5) of the Act as amended now, therefore he cannot nominate any other person of the Respondent-Company in the rank of General Manager or higher, to act as Arbitrator in the said dispute and therefore an independent and different sole Arbitrator is to be appointed as agreed between the parties in the said Clause 45 quoted above.
6. Para 59 of the said judgment of the Hon’ble Supreme Court rendered on 03.07.2017 post amendment of the law with effect from 23.10.2015 is quoted below for ready reference:
“59. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so.”
7. On the other hand, Mr.K.R.Muralikrishna, learned counsel for the Respondent-Company has submitted the following:-
(i) That first part of Clause 45 of the Contract between the parties quoted above envisages and stipulates that both parties shall attempt to settle the dispute amicably before the commencement of Arbitration and without exploring such possibility of amicable settlement, the matter cannot be referred to arbitration under the Act as envisaged and agreed between the parties in the remaining part of the Clause 45 of the contract quoted above.
(ii) The learned counsel for the Respondent- Company has emphasized that in the said Clause 45 of the contract, it was also inter alia agreed between the parties that no person other than a person appointed by Chairman and Managing Director, Gamman India Limited as aforesaid should act as Arbitrator and if for any reason, that is not possible, the matter is not be referred to arbitration at all. He, therefore, contended that if by the statutory amendment, the person nominated by the Chairman and Managing Director of the Respondent- Company cannot be now nominated to act as an Arbitrator, the Clause 45 is rendered otiose and this Court cannot appoint any Arbitrator in the matter.
(iii) Learned counsel for the Respondent-Company further contended that Clause 5 of the said Contract provides for ‘Governing Laws’ provided that the Laws of India and the Courts in Mumbai shall have exclusive jurisdiction over all the matters arising out of or relating to the Subcontract. Clause 5 of the said Contract is also quoted below for ready reference:
“5.GOVERNING LAWS The Subcontract shall be governed by the Laws of India and courts in Mumbai shall have exclusive jurisdiction over all matters arising out of or relating to this Subcontract.”
(iv) Another Clause to the similar effect in the Agreement between the parties relating to Performance Bank Guarantee given by the present petitioner to the Respondent and which has given rise to certain disputes between the parties also similarly provided that the jurisdiction in relation to such Bank Guarantee shall be with the courts of Mumbai and Laws of India shall be applicable. Learned counsel for the respondent-Company Mr. K.R. Muralikrishna, therefore contended that this Court at Bengaluru shall not have jurisdiction to appoint an Arbitrator under Section 11(6) of the Act.
He also relied upon the pre-amended judgment of Hon’ble Supreme Court in the case of The Iron and Steel Co. Ltd –vs- M/s.Tiwari Road Lines in (2007) 5 SCC 703.
8. Having heard learned counsels for the parties, this Court is of the considered opinion that the present petition deserves to be allowed and an independent Sole Arbitrator deserves to be appointed by this Court under Section 11(6) of the Act of 1996 to enter into the Reference and resolve the dispute between the parties under the provisions of the Act. The objections raised by the Respondent-Company are not sustainable in law for the following reason.
That as far as the nomination and appointment of an in-house Official of the Respondent-Company is concerned that part of Clause 45 clearly stands over-ridden by the statutory amendment of the Act w.e.f. 23.10.2015. The amended Act No.3 of 2016 was given retrospective effect to be operative from 23.10.2015 and this Amendment Act came to be dealt with by this Court, after dealing the cited Supreme Court decisions rendered prior to the said amendment in a recent case decided by this Court on 26.10.2017 in CMP No.98/2008 in which the Court has held as under:
“4. Admittedly, an arbitrable dispute exists between the parties who are Real Estate Developers and the agreement between the parties to the dispute contains the Arbitration Clause also. The Clause 12.4.1 of the Memorandum of Understanding dated 16.08.1999 between the two parties namely N.K.Developers and Concord India Ltd. is reproduced below for ready reference:
“That in the event of any question or dispute arising under, in connection with, incidental to and/or interpretation or scope of this MOU which is not agreed upon in consultation with each other, shall be referred to the Indian Council of Arbitration in accordance with the Arbitration and Conciliation Act, 1996.”
5. Mr.Suraj Govinda Raj, the learned counsel appearing for the Respondent-Concord India Ltd., relied upon certain judgments to contend that the aforesaid Arbitration Clause between the parties required the parties to go before the Indian Council for Arbitration (ICA) and therefore, the petitioner without first approaching the ICA and that Institution having failed to appoint an Arbitrator, the petitioner could not approach this Court for appointment of the Arbitrator under Section 11(6) of the Act. He mainly relied upon the decisions of the Supreme Court in the following cases:-
i) Iron & Steel Co. Ltd. –vs- Tiwari Road Lines (2007) 5 SCC 703, ii) National Highways Authority of India and Another –vs- Bumihiway DDB Ltd. (JV) and Others (2006) 10 SCC 763 and iii) Walter Bau AG, Legal Successor, of the original contractor, Dyckerhoff and Widmann A.G. -vs- Municipal Corporation of Greater Mumbai and Another (2015) 3 SCC 800.
6. A brief of these cases is as under:
“In the present case there being an agreed procedure for resolution of disputes by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration, Sections 11(3), (4) and (5) can have no application. Furthermore, the respondent did not make any effort to have the dispute settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration. On the contraty, it straightaway moved an application under Section 11. Since the parties here had agreed on a procedure for appointing an arbitrator for settling the dispute by arbitration as contemplated by Section 11(2) and there is no allegation that any one of the contingencies enumerated in Section 11(6) clause (a) or (b) or (c) had occurred, the application moved by the respondent was clearly not maintainable and the Court had no jurisdiction to entertain such an application and pass any order.”
ii) In National Highways Authority of India’s case (supra), the Hon’ble Supreme Court has held that unless the mechanism/procedure for appointment of the substitute arbitrator fails or the mechanism/procedure is not exhausted, the court cannot assume jurisdiction under Section 11(6) of the Act. The relevant para-44 is quoted below for ready reference:
“44…………..Unless respondent No.2 failed 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 retired Judge. The parties have entered into a contract after fully understanding the import of the terms so agreed to from which there cannot be any deviation. The Courts have held that the parties are required to comply with the procedure of appointment as agreed to and the defaulting party cannot be allowed to take advantage of its own wrong.”
iii) In Walter Bau AG’s case, the learned Single Judge of Hon’ble Supreme Court while dealing with the petition under Section 11(6) of the Act held that a strict compliance with the agreement procedure by parties and institutions nominated in agreement is necessary and the appointment of the Arbitrator as fait accompli, does not bar/oust jurisdiction of Court unless it is in compliance with agreement procedure. The relevant para-10 of the order of the said judgment is quoted below for ready reference:
“10. Unless the appointment of the arbitrator is ex facie valid and such appointment satisfies the Court exercising jurisdiction under Section 11(6) of the Arbitration Act, acceptance of such appointment as a fait accompli to debar the jurisdiction under Section 11(6) cannot be countenanced in law. In the present case, the agreed upon procedure between the parties contemplated the appointment of the arbitrator by second party within 30 days of receipt of a notice from the first party. While the decision in Datar Switchgears Ltd. (supra) may have introduced some flexibility in the time frame agreed upon by the parties by extending it till a point of time anterior to the filing of the application under Section 11(6) of the Arbitration Act, it cannot be lost sight of that in the present case the appointment of Shri Justice A.D. Mane is clearly contrary to the provisions of the Rules governing the appointment of Arbitrators by ICADR, which the parties had agreed to abide in the matter of such appointment. The option given to the respondent Corporation to go beyond the panel submitted by the ICADR and to appoint any person of its choice was clearly not in the contemplation of the parties. If that be so, obviously, the appointment of Shri Justice A.D. Mane is non-est in law. Such an appointment, therefore, will not inhibit the exercise of jurisdiction by this Court under Section 11(6) of the Arbitration Act. It cannot, therefore, be held that the present proceeding is not maintainable in law. The appointment of Shri Justice A.D. Mane made beyond 30 days of the receipt of notice by the petitioner, though may appear to be in conformity with the law laid down in Datar Switchgears Ltd. (supra), is clearly contrary to the agreed procedure which required the appointment made by the respondent Corporation to be from the panel submitted by the ICADR. The said appointment, therefore, is clearly invalid in law.”
7. It may be noticed here that all these judgments relied upon by the learned counsel for the Respondent were prior to the amendment of Section 11 of the Act effected by Act No.3 of 2016 w.e.f. 23.10.2015.
8. On the other hand, Mr.Udaya Holla, Senior counsel appearing with Mr.Vivek Holla, for the petitioner-N.K.Developers Pvt. Ltd. submitted that firstly, no such objection has ever been raised by the Respondent in the present petition filed way back in the year 2008, though a Statement of Objections has been filed by them and except baldly saying therein that the procedure has not been followed by the petitioner, the Respondent has never contended that this Court has no jurisdiction to appoint an Arbitrator under Section 11 of the Act, and secondly, the learned Senior counsel urged that Section 11 of the Act of 1996 stands amended recently by Act No.3 of 2016 w.e.f. 23.10.2015 and those newly inserted provisions of sub-sections (6-A) and (6-B) in Section 11 now provide that notwithstanding any judgment, decree or order of any Court, the High Court or Supreme Court, while considering any application under sub-sections (4), (5) or (6) of Section 11 of the Act shall confine to the examination of the existence of an arbitration agreement. The said sub-sections (6-A) and (6-B) inserted by Act No.3 of 2016 w.e.f. 23.10.2015 are quoted below for ready reference: “(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.
(6-B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.”
9. The aforesaid Sub-sections (6-A) and (6-B) inserted in Section 11 of the Act, 1996 were clearly brought on the statute book to undo the effect of the aforecited Supreme Court decisions and the said Arbitration and Conciliation (Amendment) Bill, 2015 was enacted on the basis of the recommendations, 246th Report of the Law Commission of India.
The brief look into the object behind effecting said amendments is opportune here. The said 246th Report of the Law Commission of India submitted in August, 2014 by its Chairman Sri Ajit Prakash Shah, Former Chief Justice of Delhi High Court and it undertook painstakingly a review of the deficiencies pointed out and recommendations contained in 176th Report on the ‘Arbitration and Conciliation (Amendment) Bill, 2001’ and the recommendations of Justice Saraf Committee. The Ministry of Law and Justice issued a Consultation Paper on 8th April, 2010 inviting suggestions from eminent lawyers, judges, industry members, institutions and various stakeholders and after several National Conferences across the country and after taking such suggestions into account, the Law Commission was asked to undertake a study of the amendments proposed in the said Act and consequently the following important recommendations for amendment of Section 11 of the Act in 246th Report of the Law Commission of India deserve a mention here. Proposed amendments of Section 11 are quoted below from the said Report of Law Commission of India for ready reference:
“7. In section 11, (i) In sub section (4), sub clause (b), after the words “by the” delete “Chief Justice” and add words “High Court” and after the words “designated by” delete the word “him” and add the word “it”.
(ii) In sub section (5), after the words “by the” delete “Chief Justice” and add words “High Court” and after the words “designated by” delete the word “him” and add the word “it”.
(iii) In sub section (6), sub clause (c), after the words “may request the” delete “Chief Justice” and add words “High Court” and after the words “designated by” delete the word “him” and add the word “it”.
(iv) after sub section (6), insert sub section “(6A) An appointment by the High Court or the person or institution designated by it under sub-section (4) or sub section (5) or sub section (6) shall not be made only if the High Court finds that the arbitration agreement does not exist or is null and void, Explanation 1 : If the High Court is prima facie satisfied regarding the existence of an arbitration agreement, it shall refer the parties to arbitration and leave the final determination of the existence of the arbitration agreement to the arbitral tribunal in accordance with section 16, which shall decide the same as a preliminary issue.
Explanation 2 : For the removal of any doubt, it is clarified that reference by the High Court to any person or institution designated by it shall not be regarded as a delegation of judicial power.
Explanation 3: The High Court may take steps to encourage the parties to refer the disputes to institutionalised arbitration by a professional Indian or International Arbitral Institute.
[NOTE: The proposed section 11 (6A) envisages the same process of determination as is reflected in the proposed amendment to section 8. Explanation 2 envisages that reference by the High Court to any person or institution designated by it shall not be regarded as a delegation of judicial power. Explanation 3 has been inserted with the hope and expectation that High Courts would encourage the parties to refer the disputes to institutionalize arbitration by a professional Indian or international arbitral institute.] (v) In sub section (7), after the words “or sub section (6)” add the words “or sub section (6A)” and after the words “to the” delete the words “Chief Justice or the” and add the words “High Court is final where an arbitral tribunal has been appointed or a” and after the words “person or institution” add the words “has been” and after the words “designated by” delete the words “him is final” and insert the words “the High Court, and no appeal, including letters patent appeal, shall lie against such order.”
[NOTE : This amendment ensures that a) an affirmative judicial finding regarding the existence of the arbitration agreement; and (b) the administrative act of appointing the arbitrator are final and non-appealabe].”
10. Besides the aforesaid Law Commission recommendations, one independent Institute for Public Research studies known as PRS Legislative Research also gave its comments on the aforesaid Amendment Bill, 2015 and in so far as the appointment of Arbitrators by the Court in exercise of its power under Section 11 of the Act is concerned, their comments are also worth noticing and they are as under:-
“Powers of Court to refer a party to arbitration if agreement exists: Under the Act, if any matter that is brought before a Court is the subject of an arbitration agreement, parties will be referred to arbitration.
The Bill states that this power of referral is to be exercised by a Court even if there is a previous court judgment to the contrary. The Court must refer the parties to arbitration unless it thinks that a valid arbitration agreement does not exist.
Appointment of Arbitrators: The Act permits parties to appoint arbitrators. If they are unable to appoint arbitrators within 30 days, the matter is referred to the Court to make such appointments.
The Bill states that, at this stage, the Court must confine itself to the examination of the existence of a valid arbitration agreement.”
11. The aforesaid legislative exercise was undertaken by the Parliament with a view to further expedite the process of alternate dispute resolution through the mechanism of arbitration under the Act of 1996 and all the requisite amendments effected in the Act, 1996 are geared with the object to achieve not only expedition, but, also to meet the international expectations on the international arbitration also governed by our Act of 1996 enacted on the UNCITRAL Model Arbitration Law.
12. LORD MUSTILL in the Foreword to the Book by O.P.MALHOTRA, Law and Practice of Arbitration (1st Edn, 2002, LexisNexis) said like this for Court’s role in arbitration proceedings:
“First, there is the Central importance of a harmonious relation between the courts and the arbitral process. This has always involved a delicate balance, since the urge of any judge is to see justice done, and to put right injustice wherever he or she finds it; and if it is found in an arbitration, why then the judge feels the need to intervene. On the other side, those active in the world of arbitration stress its voluntary nature, and urge that it is wrong in principle for the courts to concern themselves with disputes which the parties have formally chosen to withdraw from them, quite apart from the waste of time and expense caused by gratutitous judicial interference. To a degree both views were right, and remain so; the problem has been to give proper weight to each of them. It was an unhappy feature of discourse on arbitration in the century just past that the legitimate arguments which could be advanced in favour of one or another came to be expressed, in some instances at least, with quite unnecessary vigour.
Fortunately, in recent years wiser counsels have prevailed, and it has, I believe, generally come to be recognized on both sides of the procedural divide that the courts must be partners, not superiors or antagonists, in a process which is vital to commerce at home or abroad…..”
13. In view of the aforesaid legal position, this Court is of the view that the objections raised by the learned counsel for the Respondent are not maintainable and sustainable. Not only because no such objections have been pleaded and raised before this Court either in the Statement of Objections or otherwise in the reply to the notice served by the petitioner on the respondent seeking an appointment of the Arbitrator, but also in view of the recent amendment in law by insertion of sub-sections (6-A) and (6-B) in Section 11 of the Act, which not only confers positive and over- riding powers upon this Court but also at the same time an obligation to confine their examination of the existence of a valid Arbitration Agreement between the parties and to see that the arbitration proceedings are not unnecessarily delayed on the basis of such technical objections.
14. The failure on the part of the Respondent-Company itself to take the petitioner through the arbitration proceedings to the ICA, now does not entitle it to raise this objection at the fag end after eight years of pendency of the present application before this Court under Section 11 of the Act and it can be inferred therefore that the said procedure agreed between the parties to approach ICA had failed and which itself has largely defeated the very purpose of expeditious disposal of the disputes through the mechanism of Alternative Dispute Resolution (ADR) provided under the Act and agreed to by the parties.
15. Sub-sections (6-A) and (6-B) now not only mandate the Court while dealing with application filed under Section 11 of the Act to confine its examination to the existence of a valid Arbitration Agreement which undisputedly exists in the present case and thus, the jurisdiction of this Court to appoint the Arbitrator in view of agreed Arbitration Agreement is not ousted at all. The failure of parties to appoint ICA or any other Arbitrator through the Institution of Indian Arbitration Centre can certainly be construed to be the failure of the parties, enabling any one of them to apply to this Court under Section 11(6) of the Act. Therefore, the said objection of the Respondent-Company deserves to be over-ruled and this Court is of the opinion that this Court has the jurisdiction to appoint the Arbitrator under Section 11 of the Act in the present case, at this stage.
16. The judgments relied upon by the learned counsel for Respondent on the provisions as they existed prior to the amendment of Act No.3 of 2016 w.e.f. 23.10.2015 are therefore of no help to the Respondent-Company. Those judgments only delineate that the procedure agreed upon between the parties for appointment of Arbitrator should be followed. That legal position, even if held applicable in the present case, has exhausted itself and the agreed mode of approaching the Indian Council of Arbitration at this belated stage is not an option for which this Court should either relegate the parties or refuse to appoint Arbitrator under Section 11(6) of the Act. Moreover, the amendment in law removes the rigour of those precedents.”
9. Therefore, the said amendment effected in Law rules out any possibility of institutional bias or bias of a person in the form of Section 12(5) of the Act read with Schedule VII of the Act which inter alia excludes an employee of the party to act as an Arbitrator and the same has to be given effect to and the stipulations contrary to the said amendment or repugnant thereto have to be ignored and excluded from the concerned arbitration clause or agreement between the parties.
10. The parties in the present case clearly agreed to refer their dispute to arbitration to be resolved in accordance with the provisions of the Act 1996, including the amendments and modification in the law. Therefore, the arbitration clause exists in the Agreement to be enforced in consonance with the amended provisions of the Act. A contrary argument therefore cannot be entertained much less sustained. Therefore, this argument of the learned counsel for the Respondent-Company is liable to be rejected and the same is accordingly rejected.
11. The next contention of the learned counsel for the Respondent-Company with the ‘Governing Laws’ of India and Courts at Mumbai shall have a jurisdiction, is also a contention without any merit. The jurisdiction of Mumbai Courts as envisaged under Clause 5 as quoted above could have been relevant only if the dispute was required to be adjudicated upon by the Civil Courts at Mumbai, on such a suit or plaint filed by either of the parties. The said Clause 5 neither envisages to govern the present petition under Section 11 of the Act nor it can curtail or divest the jurisdiction of this Court to appoint an Arbitrator under Section 11(6) of the Act. The applicable Laws of India inter alia includes the provisions of the Act 1996 also which under Clause 45 the parties themselves have agreed to abide by the provisions of Arbitration or any statutory modifications and Rules made therein. Therefore, this contention is also liable to be rejected and is hereby rejected.
12. As far as the contention regarding the venue is concerned, prima facie it appears that since the construction of the building in question was to take place at Bengaluru, a part of cause of action would definitely arise within the State of Karnataka at Bengaluru and therefore, even the Courts at Bengaluru could have the jurisdiction, even if the parties were to invoke the proceedings before the Civil Courts. The alternative dispute resolutions through the mechanism of arbitration as agreed between the parties in Clause 45 quoted above is not covered by this part of Clause 45. Even otherwise as far as the venue is concerned, it should be best left to the parties to decide or to be decided by the Arbitrator appointed by this Court under Section 11 of the Act, in as much as the procedures and place of meeting etc., can always be determined by the Arbitral Tribunal concerned.
13. Coming to the last limb of the argument of the learned counsel for the Respondent-Company that amicable settlement ought to have been tried between the parties, this Court is not impressed with that argument either. The amicable settlement necessarily envisages effort on the part of both the parties and one party cannot force upon the other party to enter into an amicable settlement. Even then during the course of arguments, this Court sought a response from both the learned counsels for referring the matter to the Mediation Centre for such amicable settlement even now, but while the learned counsel for the petitioner Mr. Shreyas Jayasimha, readily accepted that suggestion and offered for matter being referred to the Mediation Centre, however, the learned counsel for the Respondent-Company Mr. K.R.Muralikrishna, could not clearly accept the said proposition and it appears that the said contention was raised more than for the sake of raising an argument rather than any substantial or earnest desire behind it. Even otherwise with the lapse of time by now and even failure on the part of the parties to appoint an Arbitrator even by now, prima facie, indicates that much water has flown in the contrary direction and therefore any offer of amicable settlement between the parties at this stage cannot be put in preference in the arbitrary proceedings. Clause 45 of the contract agreement between the parties quoted above also does not envisages these two mechanisms in water tight compartments. Therefore, the first part of Clause 45 regarding amicable settlement does not exclude or ousts the reference being made to the arbitration under the remaining part of Clause 45 excluding therefrom the offending part as hit by amendment of the law itself.
14. Thus, this Court does not find any substance in the objections raised by the learned Counsel for the Respondent-Company and it is considered appropriate and expedient to allow this petition and appoint the Sole Arbitrator to undertake the arbitral proceedings in accordance with the provisions of the Act of 1996 under the Rules framed for governing the Bengaluru Arbitral Centre.
15. Learned counsel for the petitioner also pointed out that the petitioner has approached the City Civil Court by filing Arbitration Application No.58/2016 under Section 9 of the Act against the Respondent-Company against encashing the Bank Guarantee and an injunction has been granted by the Trial Court.
16. Both the learned counsels fairly agreed to the name of Mr.Justice Jayant Patel, the former judge of this Court to act as the Arbitrator.
17. Accordingly, Mr.Justice Jayant Patel, the former Judge of this Court, is appointed to act as the Arbitrator in the present case with a request to him to proceed with the arbitration in the matter in accordance with the provisions of the Act of 1996.
18. A copy of this order be sent to the Khanija Bhavan, Bengaluru, for proceeding further in the matter on administrative side and also to Mr.Justice Jayant Patel, on the address available with the said Arbitration Centre, Bengaluru.
The petition filed under Section 11(6) of the Act is accordingly allowed.
Sd/- JUDGE TL