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M/S Delkon (India) Pvt. Ltd. Petitioner v. General Manager Bharat Heavy Electricals Ltd.
Factual and Procedural Background
The petitioner issued a notice invoking the Arbitration Clause for the appointment of an arbitrator on 23rd September 1997. The respondent did not appoint an arbitrator, prompting the petitioner to file a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, in September 1998. Subsequently, the respondent appointed an arbitrator on 3rd May 1999. Following this appointment, the petitioner filed Arbitration Application No. 371/98, which the Single Judge dismissed on the ground that the petition had become infructuous due to the respondent's appointment of the arbitrator. The parties were directed to appear before the arbitrator on 21st May 1999. The petitioner challenged this dismissal by filing the present writ petition under Article 226 of the Constitution of India.
Legal Issues Presented
- Whether the appointment of an arbitrator by the respondent after the petitioner filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, was valid.
- Whether the petitioner’s appearance before the arbitrator and invocation of Section 16 of the Arbitration and Conciliation Act to challenge jurisdiction amounted to submission to the arbitrator’s jurisdiction, thereby rendering the writ petition non-maintainable.
- The legal effect of the dismissal of the petitioner’s First Appeal (FAO) against the order dated 7th May 1999.
Arguments of the Parties
Respondent's Arguments
- The respondent contended that after they appointed the arbitrator, the petitioner appeared before the arbitrator and challenged jurisdiction under Section 16, and this pending application amounted to submission to the arbitrator’s jurisdiction, making the writ petition untenable.
- The respondent argued that the petitioner’s First Appeal (FAO) against the dismissal of the petition on 7th May 1999 was itself dismissed as not maintainable, relying on precedents such as State of Orissa & Ors. v. Gokulananda Jena and Konkan Railway Corpn. Ltd. v. Mehul Construction Company.
Petitioner's Arguments
- The petitioner argued that once a petition under Section 11(6) was filed, the respondent’s right to appoint an arbitrator was extinguished, making the appointment on 3rd May 1999 invalid.
- The petitioner maintained that appearing before the arbitrator was pursuant to the court’s direction and did not constitute submission to jurisdiction, especially since the petitioner promptly challenged the arbitrator’s jurisdiction.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Datar Switchgears Ltd. v. Tata Finance Ltd. & Anr, JT 2000 (Suppl. 2) SC 226 | The right to supply a vacancy under the arbitration agreement can be exercised even after thirty days of notice, but once a petition under Section 11(6) is filed, that right is extinguished. | The court held that since the petitioner filed under Section 11(6) in September 1998, the respondent’s appointment of an arbitrator on 3rd May 1999 was invalid, rendering the Single Judge’s order patently illegal. |
| State of Orissa & Ors. v. Gokulananda Jena (2003) 6 SCC 465 | Used to support the non-maintainability of certain appeals. | Relied upon by respondent counsel to argue dismissal of petitioner’s FAO was proper. |
| Konkan Railway Corpn. Ltd. v. Mehul Construction Company (2000) 7 SCC 201 | Used to support the non-maintainability of certain appeals. | Relied upon by respondent counsel to argue dismissal of petitioner’s FAO was proper. |
Court's Reasoning and Analysis
The court analyzed the sequence of events in light of the Arbitration and Conciliation Act, 1996, and relevant case law. It emphasized that while a party may supply a vacancy under the arbitration agreement after notice, this right ceases once a petition under Section 11(6) is filed seeking appointment by the court. Since the petitioner filed such a petition in September 1998, the respondent’s appointment on 3rd May 1999 was invalid and constituted a patent illegality.
The court rejected the respondent’s contention that the petitioner’s appearance before the arbitrator and invocation of Section 16 implied submission to the arbitrator’s jurisdiction. It reasoned that the petitioner appeared only pursuant to court directions and promptly challenged jurisdiction, thus not waiving objections.
The court also followed its prior view in Union of India v. M/s R.R Industries that failure to supply a vacancy before filing a Section 11(6) petition extinguishes the right to supply the arbitrator, leaving only the arbitration clause operative but no right to appoint an arbitrator unilaterally.
Holding and Implications
The court allowed the writ petition and quashed the appointment of the arbitrator made by the respondent on 3rd May 1999. It appointed Justice J.K. Mehra, retired Judge of the Court, as arbitrator to adjudicate the disputes between the parties and directed the parties to appear before him on 12th July 2005.
This decision directly affects the parties by invalidating the respondent’s unilateral appointment of an arbitrator post-filing of a Section 11(6) petition and reinforcing the procedural sanctity of arbitration appointments under the Act. No new precedent beyond the application of established principles was set.
Vijender Jain, J. (Oral):— This writ petition under Article 226 of the Constitution of India, inter alia, impugns the order passed by the learned Single Judge on May 7, 1999. Briefly the facts are that the petitioner had issued notice invoking the Arbitration Clause for appointment of Arbitrator on 23rd September, 1997. Arbitrator was not appointed by the respondent. The petitioner was constrained to file a petition under Section 11 (6) of the Arbitration and Conciliation Act, 1996 in September, 1998. It seems that after filing of the petition in the High Court under Section 11 (6) for appointment of an Arbitrator the respondent appointed the arbitrator on 3rd May, 1999. When the Arbitrator was appointed by the respondent, the petitioner filed A.A No. 371/98. The learned Single Judge dismissed the petition in the following words :-
“This petition is for the appointment of arbitrator. Learned counsel for the respondent has placed on record a copy of fax letter dated 3.5.99 by which an arbitrator has been appointed. In this view of the matter, this petition has become infructuous and is dismissed accordingly.
Parties are directed to appear before the Arbitrator on 21st May, the date already fixed.”
2. Learned counsel for the respondent has vehemently contended that after the appointment of the Arbitrator by the respondent, counsel for the petitioner appeared before the Arbitrator and invoked section 16 of the arbitration & conciliation act, 1996, to challenge the jurisdiction of the Arbitrator and that application is still pending and has not been decided by the Arbitrator. Therefore, on the basis of submission of learned counsel for the respondent, once the petitioner had submitted to the jurisdiction of the arbitrator, the writ petition impugning the order passed on 7.5.1999 is not maintainable.
3. Another limb of the arguments is that the petitioner filed an FAO against the order dated 7.5.1999 and that FAO being not maintainable was dismissed. Learned counsel for the respondent has relied upon State of Orissa & Ors. v. Gokulananda Jena (2003) 6 SCC 465 and Konkan Railway Corpn. Ltd. v. Mehul Construction Company (2000) 7 SCC 201.
4. We have given our careful consideration to the arguments advanced by learned counsel for both the parties. In view of the law laid down in the case of Datar Switchgears Ltd. v. Tata Finance Ltd. & Anr. JT 2000 (Suppl. 2) SC 226 it is no more res integra that the vacancy can be supplied by a party pursuant to the arbitration agreement even after thirty days of the receipt of the notice. However, once a party approaches the Court and files a petition for appointment by the designated authority of the Chief Justice of that Court under section 11 (6) of the arbitration & conciliation act, the right to supply vacancy by the opposite party is extinguished. If that right stood extinguished on filing of the petition under section 11 (6) of the arbitration & conciliation act, in September, 1998 the appointment of an arbitrator on 3rd May, 1999 could not be made, therefore, in our view, the order passed by the learned Single Judge on 7th May, 1999 suffers from patent illegality. Therefore, the submission of the respondent that the petitioner had appeared before the arbitrator and the application of the petitioner raising preliminary objections is pending adjudication which inter alia challenges the jurisdiction of the arbitrator to decide the dispute is of no consequence as from the order reproduced above it was pursuant to the directions passed by the learned Single Judge that the parties were directed to appear before the Arbitrator. The petitioner had no other option but to appear before the arbitrator and after appearing before the arbitrator the petitioner has not submitted to the jurisdiction of the arbitrator, rather has at first opportunity taken the objection that the arbitrator had no jurisdiction to proceed with the matter.
5. In this regard we are following the view which we have taken in Union of India v. M/s R.R Industries [WP (C) No. 8204/2005 decided on 19.5.2005] where we have held that once a party does not supply the vacancy or fails to supply the vacancy before filing of a petition under section 11 (6) of the arbitration & conciliation act, loses the right to supply the vacancy in terms of the arbitration clause. What remains is only the arbitration clause, i.e the dispute has to be resolved under the mechanism of alternative dispute redressal scheme but no right survives to the respondent to supply the named arbitrator in the arbitration clause.
6. There is no merit in the submission of the learned counsel for the respondent. For the reasons stated above, the petition is allowed. Appointment of the arbitrator appointed by the respondent is quashed. We appoint Justice J.K Mehra, retired Judge of this Court as arbitrator to adjudicate upon the disputes between the parties. Parties are directed to appear before the arbitrator on 12th July, 2005. Arbitrator will fix his own fees.
7. Petition is allowed.
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