1. By this petition under Section 11 of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as 'Conciliation Act' for short), the petitioner prayed that a sole arbitrator preferably a retired Judge of this Court be appointed to decide the dispute, raised by the petitioner.
2. The facts relevant for the decision of this petition stated in brief are:--
(i) The petitioner is a partnership firm having its place of business at Raipur. It carries on business relating to mining operation, transport etc. The respondent No. 2 is an undertaking of the Government of Madhya Pradesh and the respondent No. 1 is its Managing Director. A notice inviting tender was issued by the respondents for mining operation, sorting and breaking of 'A' Grade Bauxite from thedemarcated area of village Barima (Mainpat) District Sarguja, and for its transportation to the plant at Korba of Bharat Alluminium Company, at Korba. Offer as above, was accepted by the respondent No. 1 resulting in an agreement (Annexure A) dated 26-5-1999 between the parties.
(ii) The petitioner raised a dispute and served a notice (Annexure C) dated 10-4-2000, on the respondents asking them to refer the matter to an arbitrator and also for appointment of sole arbitrator within thirty days. The arbitrator was not appointed within thirty days as was requested by notice (Annexure C). The petitioner therefore served a second notice (Annexure D) dated 25-5-2000, intimating the respondents that since they have failed to appoint the arbitrator within the period of thirty days, he is moving a petition before Hon'ble the Chief Justice for appointment of an arbitrator, under Section 11 of the 'Conciliation Act'. The respondents subsequently by order (Annexure F) dated 30-5-2000 appointed Shri Kewal Krishna Sethi a retired I.A.S. Officer, as sole arbitrator. The petitioner, thereafter, filed this application under Section 11 of the 'Conciliation Act', praying that sole arbtirator be appointed by Hon'ble the Chief Justice as provided therein. Along with the application as above, the petitioner also filed the application from grant of interim relief.
(iii) The prayer for appointment of sole arbitration under Section 11 of the 'Conciliation Act' has been opposed by the respondents. Though the respondents have not filed written reply to the main application under Section 11 of the 'Conciliation Act', filed by the petitioner, but the respondents have filed a detailed reply to the petitioner's application for grant of interim relief. In their reply, the respondents have submitted that after the dispute was raised by the petitioner, by his notice (Annexure C) dated 10-4-2000, the respondents took action for appointment of arbtirator within a reasonable time. It has been stated in their reply that the consent of Shri Kewal Krishna Sethi a retired I.A.S. Officer, for acting as sole arbitrator, was obtained on 6-5-2000.
After he gave his consent, a formal letter (Anncxure R-1) dated 10-5-2000 was issued to him. Shri Kewal Krishna Sethi signified his written consent by his letter (Annexure R-2) dated 22-5-2000. Thereafter, the respondents issued order (Annexure R-3) dated 31-5-2000 appointing him as the sole arbitrator. It is also stated in their reply that the said arbitrator Shri Kewal Krishna Scthi has already commenced the arbitration proceedings and has issued notice (Annexure R-4) dated 3-6-2000 to the parties, and fixed the matter for hearing on 8-6-2000. The parties received the said notice on 3-6-2000. However, since the petitioner was absent on 3-6-2000 another letter/notice (Anncxure R-5) dated 11-6-2000 was issued by the arbitrator, fixing the hearing of the matter on 22-6-2000. It was further stated that since the arbitrator has already been appointed before the filing of the present petition on 18-6-2000, this petition under Section 11 of the 'Conciliation Act' has been rendered infructuous and deserves to be dismissed.
3. In view of the rival stances as above, it has to be considered as to whether the petitioner's prayer for appointment of arbitrator under Section 11 of the 'Conciliation Act', deserves to be allowed ?
4. The main contention of the learned counsel for the petitioner is, that he had raised dispute vide his notice (Annexure C) dated 10-4-2000 and had demanded that the arbitrator in terms of Clause 25 of the agreement (Annexure A) be appointed. However, since the respondents have admittedly failed to appoint the arbitrator within thirty days receipt of request by notice (Annexure C), the respondents were not entitled to appoint the arbitrator later, after the expiry of the period of thirty days. It has been submitted in the above context that, in view of the omission as above on that part of the respondents, the petitioner is entitled to make a request under Section 11 of the 'Conciliation Act' for appointment of sole arbitrator and that the respondents' subsequent action in appointing Shri Kewal Krishna Sethi as the sole arbitrator, is illegal and without any effect.
5. As against the above, the learned counsel for the respondents have submitted that Clause 25 of the agreement (Annexure A) prescribes the agreed procedure for appointment of arbittator. It has been submitted that the appointment of Shri Kewal Krishna Sethi, as arbitrator by the respondents was made without any unreasonable delay. In view of the above, the petitioner was precluded from making a request under Section 11 of the 'Conciliation Act' for appointment of arbitrator.
6. In view of the above, it will be useful to reproduce Section 11 of the 'Conciliation Act' which reads :--
"11. Appointment of arbitrators.-- (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and-
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made upon request of a party, by the Chief Justice or any person or institution designated by him.
(6) Where, under an appointment procedure agreed upon by the parties,--
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedural; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure.
a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him, is final.
(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to-
(a) any qualifications required of the arbitrator by the agreement of the parties; and
(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6) to him.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-scciion (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12)(a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the "Chief Justice of India".
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whpse local limits the principal Civil Court referred to in clause (e) of sub-section (1) of Section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court."
7. It would be clear from section 11(2) of the 'Conciliation Act'; that the subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. It has further been provided in subsection (3) of Section 11 of the 'Conciliation Act' that failing agreement referred to sub-section (2) in an arbitration with three arbitrators, each party shall appoint one arbitrator and the two appointed arbitrators shall appoint the third arbitrator, who shall act as the presiding arbitrator. Sub-section (4) of the 'Conciliation Act' provides that when the party fails to appoint an arbitrator within thirty days or two appointed arbitrators fail to agree on the third arbitrator within thirty days, the appointment shall be made on the request of a party, by the Chief Justice or any person or institution designated by him. Similarly sub-section (5) of Section 11 of the 'Conciliation Act' provides that failing any agreement referred to in sub-section (2), in the case of an arbitration with a sole arbitrator, if the parties failed to agree on the arbitrator within thirty days from the receipt of a request by one party from the other party, the appointment of the arbitrator shall be made upon request of a party by the Chief Justice or any person or institution designated by him.
8. sub-section (6) (a) of Section 11 the 'Conciliation Act' provides that where under the appointment procedure agreed upon by the parties, if a party fails to act as required under that procedure; a request can be made to the Chief Justice or any person or institution designated by him to take necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
9. In the instant case, there admittedly was an agreement between the parties as per Annexure A. Clause 25 of the said agreement (Annexure A) contains the agreement of the parties regarding the appointment of arbitrator. It has been stipulated in the said clause that in case of any dispute regarding the said contract, the matter shall be referred to for arbitration under Arbitration Act, and that the arbitrator shall be nominated by the Managing Director of the respondent No. 2 Corporation whose decision shall be final and binding on both the parties. It further provides that venue of the arbitrator will be at Bhopal and his fee shall be shared by both the parties equally. It would therefore, be clear from the above clause that as per agreement between the parties the procedure for appointment of arbitrator was agreed to by the parties.
10. In view of the agreement as above between the parties as is evidenced by Clause 25 of agreement (Annexure A), it is clear that sub-sections (3) to (5) of Section 11 of the 'Conciliation Act' would not come into play and a request to the Chief Justice could be made under section 11(6)(a) of the 'Conciliation Act', in case the respondent No. 1 failed to act as required under the agreed procedure.
11. It is not in dispute that the petitioner served notice (Annexure C) dated 10-4-2000, requesting the respondent No. 1 to appoint an arbitrator. It was staled in the notice that the arbitrator be appointed within a period of thirty days. The respondent has appointed the arbtirator by order (Annexure F) dated 30-5-2000. The learned counsel for the petitioner has vehemently urged that admittedly appointment of the sole arbitrator having not been made by the respondent No. 1 within thirty days, as requested by notice (Annexure C), dated 10-4-2000, the subsequent appointment of the arbitrator by the respondent No. 1 by his order (Annexure F) dated 30-5-2000, would be of no consequence. The petitioner was therefore entitled to approach the Hon'ble Chief Justice under Section 11 of the 'Conciliation Act', for appointment of arbitrator.
12. It may be noticed that Section 11(6) of the Conciliation Act does not stipulate any particular time within which the arbitrator must be appointed. The period of thirty days is prescribed in sub-section (4) and sub-section (5) of the 'Conciliation Act', but the said provisions would come into play only when there is no agreement between the parties on a procedure for appointing the arbitrator or arbitrators as provided in sub-section (2) of Section 11 of the 'Conciliation Act'.
13. In the instant case, since the parties had agreed to the procedure of appointment of an arbitrator as per Clause 25 of the agreement (Annexure A), which provides for the nomination of the arbitrator by the respondent No. 1 the Managing Director, the period of thirty days mentioned in sub-sec-
tion (4) and sub-section (5) of the 'Conciliation Act', in terms is not applicable. The petitioner was only entitled to make a prayer for appointment of arbitrator under sub-section (6) (a) of Section 11 of the 'Conciliation Act', if the respondent No. 1 failed to act, as required under the procedure laid down under Clause 25 of the agreement (Annexure A).
14. It has been submitted by the learned counsel for the petitioner that the petitioner having raised a dispute by his notice (Annexure C) dated 10-4-2000and that request having not been acceded to by the respondent No. 1 within a period of thirty days, as mentioned by the petitioner in his aforesaid notice, it would be deemed that the respondent No. 1 has failed to act as required under the procedure laid down in Clause 25 of the agreement (Annexure A). It has further been submitted that the petitioner after making a request in that regard, could not be made to wail for the appointment of arbitrator for an indefinite period. It has been submitted that as per the spirit and intent of the schemeof the 'Conciliation Act' as disclosed from sub-section (4) and sub-section (5) of Section 11 of the 'Conciliation Act' a period of thirty days should be treated as reasonable fime, during which the respondent No. I should have acted, specially when a specific request as above, to appoint an arbitrator within thirty days, was made by the petitioner by his notice (Annexure C).
15. It was thus submitted by the learned counsel for the petitioner that the respondent No. 1 having failed to appoint the arbitrator within the aforesaid period of thirty days, the petitioner was entitled to approach Hon'ble the Chief Justice under Section 11 of the 'Conciliation Act'. In support of his contentions as above, reliance was placed by the learned counsel for the petitioner on a decision of Bombay High Court in Naginbhai C. Patel Vs. Union of India, 1999 Arb.W.LJ. 572, wherein it has been observed that after the petitioner made a demand for the appointment of arbitrator and having failed to get response from the appointing authority within the period of 30 days, if he approached the Chief Justice for appointment of arbitrator under sub-section (6) of Section 11 of the 'Conciliation Act', there was no infirmity in the action of the petitioner. It was further observed that the absence of time limit in sub-section (6) of Section 11 of the'Conciliation Act'does not mean that the aggrieved party cannot request the Chief Justice or the person designated by him to take the necessary measure if no appointment is made by the appointing authority within a reasonable time. It has further been observed therein that what is reasonable length of time, will depend on circumstances of each case. It was also observed that ordinarily, 30 days should be reasonable length of time.
16. It may be noted in the above context that the learned counsel for the respondents has submitted that after receiving notice (Annexure C) dated 10-4-2000 from the appellant, the respondents tooksteps to appoint arbitrator It has been submitted that the consent of the said arbitrator was obtained on 6-5-2000 and a formal letter (Annexure R-l) dated 10-5-2000 was issued to him, and after his consent as per Annexure R-2, a formal order (Annexure R-3) dated 30-5-2000, appointing him as an arbitrator, was issued. It has been submitted on behalf of respondents that they have appointed the arbitrator without delay and within a reasonable period.
17. Learned counsel for the respondents also submitted in the above context lhat merely because, the petitioner desired that the arbitrator should be appointed within thirty days of his notice (Annexure C) dated 10-4-2000, would not mean and imply lhat the respondents were obliged to appoint the arbitrator within the time limit, as above. It has been stated that since the appointment was made without delay and appropriate steps were taken in that regard by the respondents, the appointment as above of the sole arbitrator in terms of Clause 25 of the agreement (Annexure A), between the parties, cannot be challenged. In support of this submissions as above, learned counsel for the petitioner relied upon a decision of this Court in Mis. Subhash Projects and Marketing Ltd. Vs. South Eastern Coalfields Ltd., AIR 1998 MP 276, wherein, the contention of the applicant that non-compliance of the notice for appointment of arbitrator within 30 days, would amount to loss of right of non-applicant to appoint an arbitrator, as was the clause in the agreement for appointment of arbitrator; was held to be not acceptable. It was further observed therein that where the agreement lays down a procedure for appointment of an arbitrator referable to sub-section (2), the Chief Justice has merely to take necessary measures for enforcing the procedure laid down in the agreement for arbitration under sub-section (6) of 'Conciliation Act'; and that the Chief Justice or his designate has not to make any appointment but to enforce or compel a party to make the appointment in accordance with the agreed procedure.
18. In Mukesh Kumar Agrawal Vs. Raj Kumar and others, AIR 2000 MP 231, it has been observed that : as per the Scheme of Section 11 of the 'Conciliation Act' where the parties have fixed the procedure or when they have not fixed any procedure, it is for the parties to first try to appoint an arbitrator or arbitrators. Only on their failure to do so, the Chief Justice or any person or institution designated by him comes into play; and that the above Scheme has to be kept in view while interpreting sub-section (6) of Section 11 of the 'Conciliation Act'. It was further observed that-
In my opinion, the words in clause (a) of sub- section (6) of Section 11 of the Act arc confined to total failure of the action on the part of the parties and it does not include wrong action of a parly which may even be illegal. Once, the parties have appointed an arbtirator or arbitrators right or wrong, there is procedure provided in the Act to challenge his authority. The applicant cannot by-pass that procedure and directly file an application under Section 11 of the Act before the Chief Justice or the person or institution designated by him. This is clear from Section 12 of the Act read with Section 13 thereof. That apart, the jurisdiction of the Arbitration Tribunal can be challenged under Section 16(1) of the Act. Therefore, once the arbitrator has already been appointed there is no occasion for the Chief Justice or his designate to exercise his powers under Section 11 of the Act. The arbitrator is already seized of the matter and it is for him to decide whether he was validly or invalidly appointed.
19. Reference may also be made to Union of India Vs. Prafulla Kumar Sanyal, AIR 1979 SC 1457, which was under the old 'Arbitration Acl' of 1940, wherein the Apex Court observed lhat wordings of Section 20(4) of the 'Arbitration Act' 1940, indicated that even if the parlies do not agree upon an arbitrator, the Court may proceed to appoint an arbitrator, but in so doing, it is desirable that the Court should consider the feasibility of appointment of an arbitrator according to the terms of the contract.
20. In the instant case, as already noticed the respondents have already appointed an arbitrator before this petition under Section 11 of the Conciliation Act' was filed. It also appears that there was no inordinate delay in appointing the arbitrator and steps were taken by the respondents within reasonable time for his appointment. In the circumstances, it cannot be said that merely because the respondents did not actually issue the order of appointment of arbitrator within 30 days, as was requested by the petitioner, by his notice (Annexure C), the subsequent appointment of arbtirator by the respondents will be ineffective. On the contrary, as noticed above in the case of M/s. Subhash Projects and Marketing Ltd. (supra), it has been laid down that where the agreement lays down procedure for appointment of an arbitrator referable to sub-section (2) of Section 11 of the 'Conciliation Act' the Chief Justice has merely to take necessary measure for enforcing the procedure laid down in the agreement for appointment of arbitrator.
21. Therefore, even if the respondent No. 1 had not appointed the arbtirator as requested by the appellant, even till the petitioner had filed the present application, the Chief Justice or his designate under Section 11(6) of the 'Conciliation Act' was not to make any appointment, but to enforce or compel the parly to make the appointment in accordance with the agreed procedure. In other words, even if, the respondent No. 1 had failed to appoint the arbitrator till the present petition under Section 11 of the 'Conciliation Act' was filed, as per M/s. Subhash Projects and Marketing Ltd. (supra), the course open for this Court under arbitration clause of agreement (Annexure A) was only to direct the respondent No. 1 to appoint an arbitrator.
22. However, to reiterate in the instant case the situation is different and admittedly the sole arbitrator has already been appointed by the respondent No. 1 as per letter (Annexure R-3) dated 30-5-2000. In fact, it appears that the arbitrator has also already started functioning and has issued notice to the respondents for hearing. The arbitrator is thus already seized with the matter. In the circumstances, there is no question of appointment of another arbitrator as prayed of the petitioner.
23. The prayer of the petitioner for appointment of arbitrator by this Court therefore, cannot be allowed. The petition is accordingly dismissed.
24. Misc. Civil Case dismissed.
sub-section (6) (a) of Section 11sub-section (6) of Section 11sub-section (6) of Section 11