Ramesh Ranganathan, J.:— This application is filed under Section 11(6)(a) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) for appointment of an arbitrator.
2. Facts in brief, as stated in the application, are that the applicant, a registered partnership firm and a special class contractor, entered into a sub-contract agreement dated 18-07-2000 with the respondent M/s. Kayson Constructions Company International Division, 2 floor, Iranzamin Building, 2288, Iranzamin Avenue, Sahrak Qods, Tehran - Iran, having its local office in India at Plot No. 443, Road No. 14, Banjara Hills, Hyderabad 500 034. The respondent was awarded the work, of widening and strengthening of the Eluru (Gundugolanana) - Devarapally and NH-5 Palakollu Road (Contract Package No. ASH-9), for Rs. 77,01,68,675/- at the rates agreed to by the Engineer-in-Chief (Roads & Buildings), Government of Andhra Pradesh, Hyderabad vide contract agreement dated 15-03-2000. The Applicant would contend that the contract between the respondent and the Government of Andhra Pradesh provided for subcontracting the works, that they enjoy the status of a nominated sub-contractor for upto 50% of the works in the contract agreement concluded between the employer and the main contractor i.e, the respondent and that they executed works for approximately Rs. 38.00 crores. Certain disputes arose between the applicant and the respondent, which the Applicant has valued at Rs. 4,47,95,200/-. It is their case that, after all avenues for an amicable settlement failed, both of them agreed to have their disputes resolved by a sole arbitrator i.e by Sri. Justice T.N.C Rangarajan (Retired), erstwhile Judge of the High Court of Andhra Pradesh. It is wholly unnecessary for this Court to examine in detail what transpired before the sole arbitrator except to note that, by proceedings dated 04-10-2006, the arbitral proceedings were terminated and the deposit of Rs. 50,000/- was returned along with the claim statement in three volumes. Thereafter, the Applicant filed O.P No. 1603 of 2006 before the Additional Chief Judge, City Civil Court, Hyderabad, under Section 9 of the Arbitration and Conciliation Act, 1996, to restrain the employer (Government of Andhra Pradesh) from making the payments due to the respondents. The Additional Chief Judge, City Civil Court, Hyderabad, passed an ad-interim injunction order, in I.A No. 3350 of 2006 in O.P No. 1603 of 2006 dated 12-09-2006, restraining the employer from releasing the payments due to the respondent till an award was passed. Thereafter the applicant, invoking Section 15(2) of the Act, requested the respondent herein, vide letter dated 05-10-2006, to appoint a sole arbitrator in the place of Sri. Justice T.N.C Rangarajan. Since no reply was received even after 30 days the Applicant has filed the present application, under Section 11(6) of the Act, seeking appointment of an arbitrator.
3. In their counter affidavit, the respondent would state that it is a company incorporated under the laws of Iran having its head office in Tehran, that, under Section 2(f) read with sub-section(9) and (12)(a) of Section 11 of the Act, it is only the Chief Justice of India or his designate who can appoint an arbitrator in an International Commercial Arbitration, and that the designate of the Chief Justice of the High Court is not entitled to do so. Respondent would refer to several clauses in the sub-contract agreement to dispute the applicant's claim. It is not necessary for this Court to delve into the merits of the dispute between the parties, since the preliminary issue, which necessitates examination is whether this Court has the jurisdiction to appoint an arbitrator in an International Commercial Arbitration. Suffice to note that the respondent claims that the applicant herein is liable to pay them Rs. 3,46, 72,813/-
4. A reply/rejoinder is filed, on behalf of the Applicant, to contend that sub-sections(9) and (12)(a) of Section 11 of the Act have no relevance to the present issue, since the respondent had proposed, and both parties had agreed to the appointment of Sri. Justice T.N.C Rangarajan as the domestic tribunal and had also participated in the arbitral proceedings held before him. Applicant would submit that the respondent's contention, of the present arbitration being an International Commercial Arbitration, was merely an after thought and was self-contradictory. Applicant would deny the respondent's contention on the merits of the dispute to which no reference need be made since it is extraneous to the preliminary issue which arises for consideration. Suffice to note the contention of the applicant in their rejoinder that this Court has jurisdiction to appoint an arbitraror under Section 11(6) of the Act, as:-
(a) the Sub-Contract Agreement does not specify the nature of arbitral proceedings - whether it should be by a domestic tribunal or under International Commercial Arbitration;
(b) clause 5.2 of the Sub-contract Agreement does not stipulate that the dispute be referred to “International Commercial Arbitration” only and, in the absence of such prescription, the parties are free to choose the forum either of a domestic arbitral tribunal or International Commercial Arbitration;
(c) Pursuant to the proposals made by the respondent themselves, and with the consent of both parties, Sri. Justice T.N.C Rangarajan was appointed as the sole arbitrator to adjudicate the disputes, that a preliminary meeting was held, subsequent meetings fixed and that further proceedings did not materialize only because the sole arbitrator had resigned;
(d) the arbitrator sought to be appointed is in substitution of the erstwhile arbitrator under Section 15(2) of the Act;
(e) the respondent never raised an objection to the appointment of an arbitrator, other than under an “International Commercial Arbitration”, either when the earlier arbitrator was appointed or in reply to the applicant's request, in its letter dated 05-10-2006, for appointment of an arbitrator in the place of the earlier arbitrator;
(f) the contention now raised is only to delay the process of appointment of an arbitrator; and
(g) this Court has the power to appoint an arbitrator under Section 11(6) of the Act.
Sri. K. Anjaneyulu, Learned counsel for the Applicant, would refer in detail to various clauses of both the subcontract agreement entered into between the Applicant and the respondent and the main agreement between the respondent and the Employer (Government of Andhra Pradesh). Learned counsel would contend that, since the request now made is for appointment of an arbitrator in place of, and in substitution of, the earlier arbitrator who resigned, the manner of and the conditions subject to which such appointment is required to be made is only under Section 15(2) of the Act, that this Court alone has jurisdiction to appoint such an arbitrator and that the applicant cannot now be asked to approach the designate of the Chief Justice of India for appointment of an arbitrator under Section 11(9) read with Section 2(f) of the Act. Learned counsel would submit that, even if the arbitration agreement is held to fall within the scope of an International Commercial Arbitration, as the respondent had appointed Sri. Justice T.N.C Rangarajan as the arbitrator, and had appeared before him prior to termination of the arbitral proceedings, they must be held to have waived their right to have the arbitrator appointed by the Chief Justice of India or his designate. Learned counsel would place reliance on the letters addressed to M/s. Kayson Construction (Private Limited), (a company incorporated within the State of Andhra Pradesh), to contend that, since M/s. Kayson Construction Private Limited is a company incorporated in India, the arbitration agreement between the parties cannot be said to fall within the scope and ambit of an International Commercial Arbitration. Learned counsel would refer to clause 6.7 of the Subcontract Agreement to contend that the sub-contract is governed by all terms of the contract conditions which, according to him, meant the conditions as stipulated in the original agreement between the Engineer-in-Chief, R&B, Government of Andhra Pradesh and the respondent herein. Learned counsel would place reliance on clause 67 of the main agreement, which relates to settlement of disputes, more particularly Clause 67.3 (i) and (ii), to contend that, since the respondent is a registered contractor in India, it would fall within the term “Indian Contractor” and consequently fall outside the scope of an International Commercial Arbitration. Learned counsel would submit that, since the cause of action in its entirety, except to the limited extent that the respondent is incorporated under the laws of Tehran, arose entirely in Hyderabad within the State of Andhra Pradesh, this Court alone has jurisdiction to appoint the arbitrator and that there was no necessity for the applicant to invoke the jurisdiction of the Chief Justice of India or his designate for appointment of an arbitrator. Learned counsel would submit that in O.P No. 1603 of 2006 filed before the Civil Court, under Section 9 of the Arbitration and Conciliation Act, 1996, the respondent had not raised any objection, to the jurisdiction of the Civil Court to entertain the petition, on the ground that it is an International Commercial Arbitration and that they were now estopped from contending to the contrary. Learned counsel would refer to various provisions of the Arbitration and Conciliation Act, 1996 to contend that, since the applicant seeks appointment of an arbitrator, in substitution of the earlier arbitral tribunal of Sri. Justice T.N.C Rangarajan, under Section 15(2) of the Act, it is this Court alone which has jurisdiction to appoint the arbitrator. Learned counsel would place reliance on Section 42 of the Act to submit that, since the applicant has invoked the jurisdiction of this Court under Section 11(6) of the Act, this Court alone would have jurisdiction to appoint an arbitrator. Learned counsel would place reliance on Yeshwitha Constructions (P) Ltd., West Chennai v. Simplex Concrete Piles India Ltd., Kolkata 2005 3 ALD 321. Sri. Bimal B. Bhaskar, learned counsel for the respondent, would submit that, though the respondent had specifically pleaded in the counter affidavit, filed in reply to the application, that the respondent herein is a company incorporated under the laws of Iran with its head office in Tehran, the applicant had not denied this plea in their rejoinder. Learned counsel would submit that, if one of the parties to the arbitration agreement is a body corporate, incorporated outside India, it then falls within the expression “International Commercial Arbitration” and, under Section 11(9) read with Section 2(f)(ii) and 11(12) of the Act, it is only the Chief Justice of India or his designate who is empowered to appoint the arbitrator and not the Chief Justice of the High Court or his designate. Learned counsel would submit that the appointment of Sri. Justice T.N.C Rangarajan was by mutual consent of parties and not pursuant to any directions of this Court in exercise of its jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996. According to the learned counsel, the mere fact that the parties had, hitherto, agreed to have their disputes resolved through the arbitral tribunal of Sri. Justice T.N.C Rangarajan, (a retired Judge of the High Court of Andhra Pradesh), would not confer jurisdiction on this Court to appoint an arbitrator, in an application under Section 11(6) of the Act, since Section 11(9) read with Section 2(f)(ii) and 11(12) of the Act confers such a power only on the Chief Justice of India or his designate. Learned counsel would place reliance on Dr. Reddy's Laboratories Ltd. v. Bombay Trading Company Pvt. Ltd. Singapore Order in Arbitration Application No. 60 of 2003 dated 06-08-2004. After conclusion of hearing yesterday i.e 30-08-2007 the matter was listed today for final orders to be passed. Today Sri. K. Anjaneyulu, learned counsel for the applicant, would place before this Court a couple of sheets, down-loaded from the Internet, in support of his contention that M/s. Kayson Construction Company India Private Limited was incorporated, in the State of Andhra Pradesh, as a private limited company with Registration No. 035483 and, therefore, the dispute between the parties herein falls outside the scope of an International Commercial Arbitration. After this Court commenced delivering judgment, Counsel requests that the memo now filed by him, on behalf of the applicant, be taken note of. In this memo, it is stated that the respondent is not a foreign national since it is registered as a contractor in the State of Andhra Pradesh, that it also registered as a joint-venture company with the Registrar of Companies of Andhra Pradesh on 17-10-2000, under the name and style of M/s. Kayson Construction Company India Private Limited and, therefore, the respondent is not entitled to claim the benefit of Section 2(f)(ii) read with Section 11(9) and 11(12)(a) of the Act. It is stated that, under Section 57 of the Indian Evidence Act, this Court has the power to take judicial notice of the said document notwithstanding the absence of pleadings and confirmation of the document in the course of evidence and that, at any rate, judicial notice can be taken of this piece of evidence for rendering substantial justice to the affected party who has come to the Court with clean hands, though this plea is not reflected in the counter affidavit filed by the respondent. It is stated that the respondent had unjustly pleaded and argued that the respondent is a foreign national and that, by virtue of Section 11(9) and 11(12)(a) of the Act, this Court had no jurisdiction to entertain the application. It is stated that arbitral proceedings commenced on 05-10-2006 when a statutory notice was issued by the applicant requesting that an arbitrator be appointed in substitution of the earlier arbitrator, who was appointed with the consent of the parties. It is stated that clause 2.1 and 6.7 require clause 67.3 of the main agreement to be read into the sub-contract and, when it is so read in conjunction with the certificate of incorporation, the result is that the respondent is not a foreign contractor. It is further stated that the objection taken by the respondent that they are foreign nationals, and that this Court has no jurisdiction, is in breach of the terms of the contract and that, while most of these submissions were urged at the time of arguments, the memo was being filed for the purpose of clarification, to seek indulgence of the Court to take judicial notice of the copy of the proceedings of the Registrar of Companies declaring that the respondent is a joint-venture registered under the Companies Act, 1956. As to whether Section 57 of the Indian Evidence Act can be invoked to take judicial notice, of documents downloaded from the internet, is not free from doubt. Whether the contents of a memo, filed by the Counsel appearing on behalf of the applicant, can be taken into consideration in the absence of a specific plea in this regard either in the application, or in the rejoinder filed in reply to the counter affidavit, is also doubtful.
This Court must place on record its concern of the manner in which this memo has been filed as also to its contents. As noted above, this memo was filed after this Court commenced pronouncing orders in open Court. The assertion in the memo, that the certificate of incorporation, of the respondent being registered with the Registrar of Companies, Hyderabad, is being filed is false. No certificate of incorporation has been placed before this Court. All that was brought to the notice of the Court is a tabular statement downloaded from the internet. The further assertion that a copy of the certificate of the Registrar of Companies, declaring that the respondent is a joint venture registered company, was placed before this Court, is also false. No certificate issued by the Registrar of Companies has been placed before this Court. Even the tabular statement, as downloaded from the internet, does not indicate that M/s. Kayson Construction Company India Private Limited is a joint venture with the Respondent. While I do not see any reason to delve further on these sordid events and take action against the applicant for the false assertions in the memo, it is of utmost importance that Counsel bear in mind that, as Officers of the Court, they should put forth their submissions with care, caution and a sense of responsibility and not identify themselves so completely with the cause or the client as to forget the duty they owe to the Court. I need not say more. Before examining the rival contentions, it is necessary to refer to certain clauses of the subcontract agreement between the applicant and the respondent, as also to clause 67.3 of the agreement entered into between the respondent and the Government of Andhra Pradesh. The sub-contract agreement dated 18-7-2000 refers to the agreement entered into between the respondent and the Government of Andhra Pradesh. Clause 2.1 thereof provides that the words and expressions used in the subcontract agreement shall have the same meaning as are respectively assigned to them in the contract agreement. Clause 3.2 provides that the sub-contract works should be executed as per the contract agreement concluded between the contractor and the employer. Clause 5 is the arbitration clause and it reads thus:
5.1: The contractor, in consultation with the Subcontractor, shall prefer any claim against the Employer to be preferred as an Arbitration issue, for the works executed by Subcontractor, and after the claims have been settled, the proportionate amount, without any rebate, shall be passed on to the Subcontractor.
5.2: In case of dispute between the parties to this subcontract, the parties shall endeavor to settle the dispute amicably, and in the event of not reaching an agreement, the case shall be referred to an arbitrator mutually selected by the parties within 7 days after notice by one party to the other.”
5. Clause 6.7 provides that the subcontract shall be governed by all terms of the contract conditions and that other terms and conditions, not specifically mentioned in the said contract, shall be on the basis of FIDIC, “Conditions of Subcontract for Works of Civil Engineering Construction”, to be mutually agreed upon by the parties. Clause 67.3 of the agreement between the respondent and the Government of Andhra Pradesh is the arbitration clause and reads thus:
Sub-Clause 67.3 is modified to read as follows:
“Any dispute in respect of which the Recommendation(s), if any, of the Board has not become final and binding pursuant to Sub-Clause 67.1 shall be finally settled by arbitration as set forth below. The arbitral tribunal shall have full power to open-up, review and revise any decision, opinion, instruction, determination, certificate or valuation of the Engineer and any Recommendation(s) of the Board related to the dispute.
(i) A dispute with an Indian Contractor shall be finally settled by arbitration in accordance with the Indian Arbitration & Conciliation Act, 1996, or any statutory amendment thereof. The arbitral tribunal shall consist of 3 arbitrators, one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the parties and shall act as presiding arbitrator. In case of failure of the two arbitrators, appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the presiding arbitrator shall be appointed by the Chairman of the Executive Committee of the Indian Roads Congress. For the purposes of this Sub-Clause, the term “Indian Contractor” means a contractor who is registered in India and is a juridic person created under Indian law as well as a joint venture between such a contractor and a Foreign Contractor.
(ii) In the case of a dispute with a Foreign Contractor, the dispute shall be finally settled in accordance with the provisions of UNCITRAL Arbitration Rules. The arbitral tribunal shall consist of three Arbitrators one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the parties, and shall act as presiding arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the Chairman of the Executive Committee of the Indian Roads Congress. For the purposes of this Clause 67, the term “Foreign Contractor” means a contractor who is not registered in India and is not a juridic person created under Indian Law.
(iii) Neither party shall be limited in the proceedings before such tribunal to the evidence or arguments before the Board for the purpose of obtaining its Recommendation(s) pursuant to Sub-Clause 67.1 No recommendation shall disqualify any Board Member from being called as a witness and giving evidence before the arbitrator(s) on any manner whatsoever relevant to the dispute.
(iv) Arbitration may be commenced prior to or after completion of the Works, provided that the obligations of the Employer, the Engineer, the Contractor and the Board shall not be altered by reason of the arbitration being conducted during the progress of the works.
(v) If one of the parties fail to appoint its arbitrator in pursuance of the sub-clause (i) and (ii) above, within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the Chairman of the Executive Committee of the Indian Roads Congress, both in cases of foreign contractors as well as Indian Contractors, shall appoint the arbitrator. A certified copy of the order of the Chairman of the Executive Committee of the Indian Roads Congress making such an appointment shall be furnished to each of the parties.
(vi) Arbitration proceedings shall be held at Hyderabad, Andhra Pradesh, India, and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English.
(vii) The decision of the majority of arbitrators shall be final and binding upon both parties. The cost and expenses of arbitration proceedings will be paid as determined by the arbitral tribunal. However, the expenses incurred by each party in connection with the preparation, presentation, etc., of its proceedings as also the fees and expenses paid to the arbitrator appointed by such party or on its behalf shall be borne by each party itself.”
6. As extracted above, Clause 5.2 is in two parts. In the first instance where a dispute arises, between the parties to the subcontract, they are required to endeavor to settle their disputes amicably. The second part arises in the event of the parties not being able to do so. It provides for the disputes to be referred to an arbitrator to be mutually selected by the parties within 7 days after notice by one party to the other. The agreement envisages appointment of an arbitrator by mutual agreement. It does not contain any appointment procedure for securing the appointment of an arbitrator where the parties are unable to mutually agree on such an appointment.
DOES THE PRESENT ARBITRATION AGREEMENT FALL WITHIN THE EXPRESSION “INTERNATIONAL COMMERCIAL ARBITRATION”:
7. Section 11(9) of the Act provides that, in case of appointment of a sole or a 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. Where matters, referred to in Section 11(5) and (6), arise in an International Commercial Arbitration, Section 11(12)(a) provides that a reference to “Chief Justice” in those sub-sections shall be construed as a reference to the “Chief Justice of India”. Under Section 11(12)(b), where the matters referred to in sub-section(5) & (6) arise in any other arbitration, the reference to “Chief Justice” shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub-section(1) of Section 2 is situate. If the arbitration agreement in this case does not fall within the scope of “International Commercial Arbitration” then, in view of Section 11(12)(b), since the principal Civil Court, which has jurisdiction to decide the questions forming the subject matter of the arbitration in the present case is the City Civil Court, Hyderabad, it would be the Chief Justice of the High Court of Andhra Pradesh who would have jurisdiction to appoint the arbitrator. If, however, the arbitration agreement falls within the scope of an ‘International Commercial Arbitration” then the request, for appointment of an arbitrator under Section 11, can only be to the Chief Justice of India or his designate and not to the Chief Justice of the High Court of Andhra Pradesh or his designate. I am fortified by the judgment in Dr. Reddy's laboratories Ltd. wherein this Court observed:
“………Admittedly, one of the parties to the agreement, namely the respondent is a company incorporated in a country other than India. In view of Section 2(f) of the Act, it is an “international commercial arbitration”. Objection raised by learned counsel for the respondent is that in an international commercial arbitration, application, if any, has to be moved before the Chief Justice of India and not before Chief Justice of a High Court. Learned counsel for the petitioner submits that Chapter-I of the Act makes no difference and treats the international awards at par with domestic awards and for that, he placed reliance upon the decision of the Supreme Court in Bhatia International v. Bulk Trading S.A (AIR 2002 SC 1432) saying that the Act nowhere debars even Chief Justice of a High Court to entertain application for appointment of an Arbitrator in an international commercial arbitration. Considering the scheme of the Act, in my view the submission made on behalf of the petitioner has no force since the question before the Supreme Court was about the applicability of Section 9 of the Act in respect of arbitration proceedings taking place in a foreign country. This decision does not deal with the question as to whether application for appointment of Arbitrator can or cannot be entertained by Chief Justice of a High Court when the matter pertains to international commercial arbitration.
Sub-section(12) of Section 11 of the Act clearly stipulates that where the matters referred to in sub-sections(4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, reference to the ‘Chief Justice’ in those sub-sections shall be construed as a reference to the ‘Chief Justice of India’. Therefore, even on admitted facts also, the petitioner has to approach the Chief Justice of India and the application filed in this Court will not be maintainable…….”
The question which, therefore, necessitates examination is whether the arbitration agreement in the present case falls within the expression ‘International Commercial Arbitration”?
8. Under Section 2(f)(ii) of the Act, where at least one of the parties to the arbitration agreement is a body corporate which is incorporated in any country other than India, then it falls within the definition of ‘International Commercial Arbitration”. Both in the preamble of the sub-contract agreement, and in the present application filed under Section 11(6)(a) of the Act, the respondent is shown as a company having its head office at Tehran in Iran. The specific averment of the respondent, in its counter-affidavit, that it is a company incorporated under the laws of Iran having its head office in Tehran, has not been denied or disputed by the applicant in their rejoinder. Once it is held that the respondent is a body corporate, incorporated in a country other than India, then the arbitration between the applicant and the respondent would necessarily fall within the expression “International Commercial Arbitration” under Section 2(f)(ii) of the Act and, in view of the stipulations in sub-clauses(9) and 12(a) of section 11, an application under Section 11(6)(a) of the Act can be made only to the Chief Justice of India or his designate.
9. It is, however, contended that the main agreement between the respondent and the Government of Andhra Pradesh would establish that the respondent is, in fact, a company incorporated in India. Under clause 67.3 (i) of the said Agreement, for the purposes of the sub-clause, the term “Indian Contractor” means a contractor who is registered in India and is a juridic person created under Indian Law as well as a joint venture between such a contractor and a Foreign Contractor. Under sub-clause (ii) the term “Foreign Contractor” is specified to mean a contractor who is not registered in India and is not a juridic person created under Indian Law. to bring a contractor within the definition of “Indian Contractor”, clause 67.3(i) requires (i) the Contractor to be registered in India and (ii) to be a juridic person created under Indian Law or a joint venture between such a contractor and a Foreign Contractor. The twin conditions referred to above are not in the alternative. In view of the words “and” used therein, it is only if both the conditions are satisfied, would a contractor fall within the definition of “Indian Contractor”. There is nothing on record to indicate that the respondent is a juridic person created under Indian Law or that it is a joint venture between an Indian contractor and a Foreign contractor. While the letters addressed to M/s. Kayson Construction Company India Private Limited, and the tabular statement downloaded from the internet, indicate that M/s. Kayson Construction Company India Private Limited is a company registered with the Registrar of Companies, Hyderabad, the subcontract agreement, which contains the arbitration clause, is between the applicant and M/s. Kayson Construction Company International Division and not between the applicant and M/s. Kayson Construction Company India Private Limited. The fact, that both M/s. Kayson Construction Company International Division and M/s. Kayson Construction Company India Private Limited have their offices in India at the same address, does not, in the absence of any material evidence on record, justify the conclusion that M/s. Kayson Construction Company India Private Limited is a joint venture between the respondent and another Indian Company. Even if the respondent is presumed to be a contractor registered in India it would not necessitate the conclusion that it is an Indian Contractor within the meaning of Section 67.3(i) of the agreement. In any event the subcontract agreement, which contains the arbitration clause, is not between the applicant and M/s. Kayson Construction Company Indian Private Limited but between the applicant and M/s. Kayson Construction Company International Division which, in view of unrebutted plea in the counter affidavit filed by the respondent, must be held to be a company incorporated under the laws of Iran with its head office at Tehran and as a body corporate incorporated in a country other than India. Clause 67.3, which relates to resolution of disputes between the respondent and the Government of A.P, specifically provides for the manner in which and the procedure by which an arbitrator is to be appointed to resolve the disputes between the parties. This clause does not relate to resolution of disputes between the applicant and the respondent and cannot be read into the sub-contract agreement.
SECTION 15(2): MANNER OF APPOINTMENT OF AN ARBITRATOR IN SUBSITUTION OF THE EARLIER ARBITRATOR:
10. Under Section 15(1)(a) of the Act, where an arbitrator withdraws from office for any reason, his mandate stands terminated. Under sub-section(2) where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that are applicable to the appointment of the arbitrator being replaced. As a consequence of termination of the arbitral proceedings before Sri. Justice T.N.C Rangarajan, the mandate of the arbitrator stood terminated under Section 15(1) of the Act and, therefore, appointment of the substitute arbitrator must be in accordance with the rules that are applicable to the appointment of the arbitrator being replaced. As noted above, the sub-contract agreement does not prescribe any procedure or rules for appointment of an arbitrator. It only enables the parties to mutually agree on an arbitrator. As such the rules which apply can only be those prescribed under the Arbitration and Conciliation Act, 1996. Since the power to appoint an arbitrator in the case of an “International Commercial Arbitration” is conferred only on the Chief Justice of India or his designate, the substitute arbitrator under Section 15(2) can only be appointed by the Chief Justice of India or his designate and not by the designate of the Chief Justice of the High Court of Andhra Pradesh.
11. In Yashwitha Constructions (P) Limited1 Clause 21 of the Agreement, which is the arbitration clause, read as under:
“In the event of any difference or dispute arising out of or in connection with this work order (including interpretation of the terms thereof), the same shall be referred to arbitration. The arbitration proceedings shall be conducted by a single arbitrator appointed by the Managing Director of Simplex Concrete Piles (India) Limited and the award/decision of such arbitration shall be final and binding upon both the parties. The venue of the arbitration shall be at Calcutta. However, you will not stop the work during the pendency of the proceedings and shall ensure that such work is proceeded un-interruptedly.”
12. The aforesaid arbitration clause prescribes the procedure for appointment of an arbitrator and provides that the arbitrator should be appointed by the Managing Director of the Respondent. It is in this context that this Court, while dealing with the question of appointment of an arbitrator, in substitution of the earlier arbitrator, held:
“…………Section 15 of the Act deals with termination of mandate and substitution of arbitrator and sub-section(1) of Section 15 says that in addition to the circumstances referred to in Section 13 or 14 the mandate of the arbitrator shall terminate where he withdraws from office for any reason or by or pursuant to the agreement of the parties and sub-section(2) of Section 15 says that where mandate of the arbitrator terminates a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of arbitrator being replaced.
Admittedly, the arbitration clause nowhere contemplates any other means for securing appointment of a substitute arbitrator. It contemplates a situation of appointing an arbitrator and it has authorized the arbitration proceedings to be conducted by a single arbitrator appointed by the Managing Director of Simplex Concrete Piles (India) Limited. The said arbitrator appointed by the Managing Director of Simplex Concrete Piles (India) Limited has resigned. Now the question is whether the Managing Director of Simplex Piles (India) Limited gets power to appoint a substitute arbitrator in the event of termination of mandate of the arbitrator. sub-section(2) of Section 15 of the Act says that a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of arbitrator being replaced. The rules, which were applicable, admittedly are nothing but Clause 21 of the Agreement, which authorizes the Managing Director to appoint an arbitrator. It is an agreement entered into between the parties and has to be followed and appointment has to be in consonance thereof. Section 15 of the Act is fully applicable to the facts of this case. The arbitrator had already been appointed by the appointing authority as on the day when application was filed. The said appointment is strictly in consonance with the terms of agreement and is as per provisions of Section 15 of the Act. In that view of the manner, nothing survives in this application, which stands dismissed…..”
13. Unlike in Yashwitha Constructions (P) Limited1 where the arbitration clause provided for the manner of appointment of an arbitrator, and conferred power on the Managing Director of the respondent to do so, the arbitration clause in the sub-contract agreement herein does not contain any such provision and as such we must necessarily fall back of the provisions of the Arbitration and Conciliation Act, 1996, which specifically provides that an arbitrator, in an International Commercial Arbitration, can only be appointed by the Chief Justice of India or his designate.
IS THE RESPONDENT ESTOPPED FROM CONTENDING THAT THE DESIGNATE OF THE CHIEF JUSTICE OF THE HIGH COURT DOES NOT HAVE JURISDICTION TO APPOINT AN ARBITRATOR IN AN “INTERNATIONAL COMMERCIAL ARBITRATION”?
14. Now the question of estoppel/waiver. It is not in dispute that Sri. Justice T.N.C Rangarajan was not appointed as an arbitrator by this Court on an application made by either of the parties and that the parties, hitherto, had mutually agreed that he be the arbitrator to resolve their disputes. Section 4 of the Act, which relates to waiver of the right to object, provides that a party who knows that any of the provisions of Part-I of the Act, from which the parties may derogate, or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration, without stating his objection to such non-compliance without undue delay, shall be deemed to have waived his right to so object. Section 4 of the Act would have applied if the proceedings had continued before the sole arbitrator of Justice Sri. T.N.C Rangarajan. Having agreed to the appointment of Justice Sri. T.N.C Rangarajan, as the sole arbitrator, and the proceedings having commenced before him, the respondent herein, being well aware that the appointment of the arbitrator in an “International Commercial Arbitration” could only have been made by the Chief Justice of India or his designate under Section 11(9) of the Act, could not have contended that the proceedings before the said arbitrator should not be proceeded with. It is not the applicant's case that arbitral proceedings before Sri. Justice T.N.C Rangarajan should continue. In fact, on the termination of arbitral proceedings before Sri. Justice T.N.C Rangarajan, it is the applicant who has invoked the jurisdiction of this Court under Section 11(6)(a) of the Act seeking appointment of an arbitrator. Waiver, under Section 4 of the Act, is only with regards continuance of proceedings before the arbitral tribunal agreed upon earlier. The said provision has no relevance to an application filed under Section 11 of the Act for appointment of an arbitrator. It must be noted that it is not the case of the Respondent, nor could the respondent contend in the light of the specific arbitration clause in the agreement, that no arbitrator can be appointed to resolve their disputes. The objection raised by them is that the arbitrator can only be appointed by the Chief Justice of India or his designate and not by this Court. The mere fact that the parties had earlier consented to, and had mutually agreed to, have their disputes resolved by Sri. Justice T.N.C Rangarajan, a retired Judge of this Court, would not confer jurisdiction on this Court to appoint an arbitrator in an “International Commercial Arbitration”. Even consent of parties would not confer jurisdiction on this Court to do so. It is well settled that the consent of the parties does not, by itself, confer jurisdiction. Nor can such consent take away jurisdiction if otherwise conferred under the provisions of the Act. It is not open to the parties to confer, by their agreement, jurisdiction on a court, which it does not possess. (U.C Bank v. Workmen AIR 1951 SC 230, Hakam Singh v. Gammon (India) Ltd.† . AIR 1971 SC 740 and Estate Officer and Manager (Recoveries), A.P Industrial Infrastructure Corporation Limited, Hyderabad v. Recovery Officer, Debts Recovery Tribunal, Bangalore 2003 5 ALD 599 DB).
15. With regards the plea of estoppel, it is well settled that no estoppel can be pleaded contrary to the provisions of a Statute (Electronics Corporation of India Ltd. v. Secretary, Revenue Department, Govt. of A.P 1999 4 SCC 458, Hardev Singh v. Gurmail Singh (Dead) By Lrs. 2007 2 SCC 404). Section 11(9) read with Section 2(f)(ii) and Section 11(12)(a) of the Arbitration and Conciliation Act, 1996, confers power to appoint an arbitrator, in an “International Commercial Arbitration,” only on the Chief Justice of India or his designate and not on the Chief Justice of the High Court or his designate. Section 5 of the Act administers a caution and, thereunder, except, as is provided in Part-I of the Act, no judicial authority shall intervene. Since sub-sections(9) and 12(a) of Section 11, which are in Part-I of the Act, specifically provide that an arbitrator, in the case of “International Commercial Arbitration”, can only be appointed by the Chief Justice of India or his designate, it is not for the designate of the Chief Justice of the High Court of Andhra Pradesh to intervene.
SECTION 42: JURISDICTION OVER ARBITRAL PROCEEDINGS:
16. ‘Court’ is defined, under Section 2(1)(e) of the Act, to mean the principal Civil Court of original jurisdiction in a District. Thus, where an application is made with respect to an arbitration agreement before the principal Civil Court in the District, all subsequent applications arising out of the agreement, and the arbitral proceedings, are required to be made in that Court and in no other Court. An application filed before the Chief Justice of the High Court or his designate, under Section 11(6)(a) of the Act, would not confer jurisdiction to appoint an arbitrator in an “International Commercial Arbitration” as such a power has been conferred only on the Chief Justice of India or his designate. This question can also be examined from a different angle. In arbitration agreements, which do not fall within the scope and ambit of an “International Commercial Arbitration”, an application for appointment of an arbitrator may, in a given case, be filed before the High Court in which a part of the cause of action arises. While the cause of action may arise in part within one State, it may also arise in part in another. As such, the jurisdiction of the Chief Justice of more than one High Court can be invoked in such cases seeking appointment of an arbitrator, in which event, the Chief Justice of the High Court, before whom an application is made in the first instance, would alone have jurisdiction to appoint the arbitrator and not the Chief Justice of the High Court before whom an application for appointment of an arbitrator is made later. This question, however, does not arise in the present case, since the arbitration agreement falls within the expression ‘International Commercial Arbitration’ under Section 2(f)(ii) of the Act. Viewed from any angle, this Court has no jurisdiction to appoint the arbitrator.
17. The Arbitration Application fails and is, accordingly, dismissed.