M/S. V.V.S Construct... v. M/S. Ivrcl Infrastru...

This application is filed un der Section 11 (6) of the Arbitration and Conciliation Act, 1996 seeking removal of the sole arbitrator and appoint a former Judge of this Court to assume the office of Arbitrator for resolution of the disputes between the applicant and the respondent arising out of the Agreement dated 23.11.2005.

2. I have heard the learned counsel for both the parties.

The applicant herein was awarded civil works of 765 KV Switch Yard for ALSTOM - AREVA, NTPC, SITAT by the respondent company vide work order dated 23.11.2005. When certain disputes arose between the parties with regard to the ex ecution of the works awarded, the applicant by letter dated 1.3.2010 called upon the re spondent to settle its disputes and pay a sum of Rs. 89,03,406/- together with interest at 18% failing which to appoint an arbitrator as agreed between the parties. The respondent company by letter dated 20.03.2009 agreed for appointment of an arbitrator and accordingly the Chief Operating Officer - PMC by name R. Venkata Raghavan was appointed as the sole arbitrator. The arbi trator so appointed after notice to both the parties held a preliminary meeting on 19.05.2010 and the schedule of arbitration proceedings was fixed. The applicant filed its claim statement within the stipulated time. However the respondent did not file its reply/counter-claims and sought extension of time. The applicant by letter dated 2.12.2010 while opposing grant of extension of time, alleged that the arbitrator was biased towards the respondent company. A doubt was also expressed about the independency and im partiality of the arbitrator on the ground that he being the subordinate of the respondent company, is directly involved with the claims under the dispute. The arbitrator by letter dated 16.12.2010 while informing the appli cant that his appointment was made strictly as per the arbitration clause and that he was discharging his duties as per law, directed the respondent to submit its counter-statement on or before 20.01.2011 with a copy to the applicant.

3. At that stage, the present application came to be filed seeking removal of the sole arbitrator and appointment of a new arbitra tor under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (for short, 'the Act') contending that the letter dated 16.12.2010 addressed by the arbitrator itself shows the biased attitude of the arbitrator.

4. In response to the notice ordered by this Court, appearance has been entered on be half of the respondent. Though no counter-affidavit is filed, the learned counsel for the respondent at the outset raised a preliminary objection as to the maintainability of the ap plication. While relying upon Ace Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corpn. Limited, (2007) 5 SCC 304: (AIR 2007 SC 1764) the learned counsel contended that the only remedy available to the applicant is to prefer an appeal under Section.34 of the Act after an award is passed.

5. I have also heard the learned counsel for the applicant, who, while relying upon a Division Bench judgment of this Court in Sai Priya Construction Company v. K. Anantha Kumari, 2006 (2) ALT 70 (D.B.) vehemently contended that the application is main tainable under Section 11 (6) of the Arbitra tion and Conciliation Act, 1996.

6. It is not disputed before this Court that as per the arbitration clause contained in the special conditions of contract, subject to which the Work Order was issued to the ap plicant, the officer of the respondent com pany as nominated by its Managing Direc tor shall be the sole arbitrator. The said clause reads as under:

"Clause 28. DISPUTES: In the event of any dispute arising out of this Sub-Contract, the parties hereto agree that the matter shall be referred to the Sole Arbitrator who is the officer of M/s. IVRCL Infrastructures & Projects Limited (other than concerned with this Sub-Contract), nominated by Managing Director of IVRCL. The award of the Arbi trator so nominated shall be final conclusive and binding on all parties to the dispute. The venue of Arbitration is at Hyderabad. All the expenses of Arbitration shall be borne by the party who has invoked the Arbitra tion."

7. Having entered into the agreement, the applicant is bound by all the terms and con ditions contained therein including the arbi tration clause. In fact, the petitioner agreed for appointment of the sole arbitrator and ac cordingly the officer of the respondent was appointed as the sole arbitrator. Thereafter the applicant filed its claim statement and participated in the proceedings before the arbitrator. At that stage, if a party to the pro ceedings feels that the arbitrator has not been acting impartially, what is the procedure to be followed has been provided under Sec tion 13 of the Act which reads as under:

"13. Challenge procedure: -

(1) Subject to sub-section (4), the parties are free to agree on a procedure for challeng ing an arbitrator.

(2) Failing any agreement referred to in sub-section (1), a party who intends to chal lenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the Arbitral Tribunal or after becoming aware of any circumstances referred to in sub-sec tion (3) of section 12, send a written state ment of the reasons for the challenge to the Arbitral Tribunal.

(3) Unless the arbitrator challenged un der sub-section (2), withdraws from his of fice or the other party agrees to the challenge, the Arbitral Tribunal shall decide on the chal lenge.

(4) If a challenge under any procedure agreed upon by the parties or under the pro cedure under sub-section (2) is not success ful, the Arbitral Tribunal shall continue the arbitral proceedings and make an arbitral award.

(5) Where an arbitral award is made un der sub-section (4), the party challenging the arbitrator may make an application for set ting aside such an arbitral award in accor dance with section 34.

(6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbi trator who is challenged is entitled to any fees."

8. A plain reading of the above provision shows that in case the parties have not agreed upon a specific procedure for challenging an arbitrator, a party who intends to challenge an arbitrator has to submit in writing to the arbitral tribunal the reasons for the challenge. On receipt of such objections/challenge, un less the arbitrator withdraws from his office or the other party agrees to the objections, the arbitral tribunal shall decide on the ob jections. If the arbitrator does not accept the objections so raised by one of the parties, the arbitrator shall continue the arbitral pro ceedings and make an arbitral award. There after it is open to the party who raised the objections to make an application for setting aside the arbitral award so made in accordance with Section 34.

9. Thus it is clear that the challenge, if any, as to the competency of the arbitrator has to b& decided by the arbitrator himself and if such challenge is not successful, the arbitral proceedings shall be continued be fore the same arbitrator and an award shall be passed and only thereafter the party challenging the arbitrator has to make an appli cation for setting aside such an arbitral award in accordance with Section 34.

10. In the light of the procedure prescribed under Section 13 of the Act, the present ap plication under Section 11(6) of the Act for removal of the arbitrator already appointed and to replace him with a new arbitrator is not maintainable.

11. In Sai Priya Construction Company case (supra) relied upon by the learned coun sel for the applicant, the Division Bench was dealing with a case where the arbitrators ap pointed failed to perform their duties with out undue delay. The said case is clearly dis tinguishable on facts and therefore the ratio laid down by the Division Bench has no ap plication to the present case. Another deci sion of the High Court of Delhi in Vishnu Promotors Private Limited v. Holtec Co-op erative Group and others, 2002 (1) Raj 392 (Del) cited by the learned counsel for the ap plicant is also of no assistance since the said case was not decided on merits.

For the aforesaid reasons, the Application is dismissed. However, this shall not pre clude the applicant to make an application under Section 34 of the Act to set aside the Award on the ground that the arbitrator acted with bias or malice. No costs.

Application dismissed.