G.P Mathur, J.— The applicant Vigil Marine Services has moved this application under Section 11(5) of the Arbitration and Conciliation Act, 1996, praying that the validity of the appointment of Shri P.B Menon as a sole arbitrator for determining the dispute between the applicant and the respondent Cochin Shipyard Ltd. be confirmed or in the alternative a sole arbitrator may be appointed to adjudicate the dispute between the parties.
2. The application is founded on the plea that an agency agreement was entered into between the applicant, which is carrying on business as commission agent and broker in the maritime industry, and the respondent Cochin Shipyard Ltd., which is a shipbuilder/ship repairer, on 1-8-1993 and clause 5 of the said agreement contains an arbitration clause which reads as under:
“5. Arbitration.—In case of any dispute or difference arising out of the present agreement, which cannot be settled by mutual negotiations, the same shall be referred to arbitration and the award made in pursuance thereof shall be binding on the parties. The proceedings of arbitration shall be conducted under the Indian Arbitration Act, 1940. The venue of arbitration shall be Cochin.”
3. It is pleaded by the applicant that the agency agreement was automatically renewed from time to time and was in force at all material times. The parties explored the possibility of renegotiating some of the terms of the agency agreement and an agreement was executed on 15-7-2000, but the same was not acted upon and was waived and finally it was agreed that the terms and conditions contained in the agency agreement of 1-8-1993 would continue to govern the parties. Under the agreement, the applicant agreed to “take care of the interest of and to render all services required in marketing the products of the respondent” in the Middle East through enquiries, tenders, etc., of Government and oil companies and of other prospective customers. The agreement also provided for the commission which was payable to the applicant by the respondent on a case-by-case basis. The applicant furnished necessary inputs to the respondent for obtaining a contract for design and construction of nine multi-purpose tugs for the Jeddah Port Authority with M/s A.A Turki Corporation. The respondent vide its letter dated 30-10-2002 had specifically requested the applicant to act as its agent in securing the aforesaid contract. Necessary steps in this direction were taken by the applicant and the technical specifications and related documents were forwarded to the applicant, who in turn filed these with M/s A.A Turki Corporation and they did all acts necessary in order to ensure that the contract was ultimately awarded to the respondent. However, on 30-11-2002, the respondent intimated its intention to terminate the agreement with the applicant with immediate effect and in their letter of 20-1-2003 the respondent referred to its aforesaid letter as constituting its notice of termination. However, the applicant continued to pursue the matter, whereunder the contract was awarded to the respondent. The applicant then wrote to the respondent for payment of 5% commission on the value of the contract and finally a legal notice in this regard was given on 14-8-2003 invoking the arbitration clause and suggesting the names of three persons to act as sole arbitrator for concurrence. In view of the failure on the part of the respondent in responding to the aforesaid legal notice within the stipulated time-frame, the applicant gave information on 5-9-2003 that Shri P.B Menon has been nominated as sole arbitrator and the respondent should concur in his appointment. However, the respondent vide its letter dated 22-9-2003 not only repudiated the claim of the applicant but also took a plea that the appointment of Shri P.B Menon was illegal and against the provisions of Section 11(5) of the Arbitration and Conciliation Act, 1996. In these circumstances, the applicant has filed the present application praying for appointment of an arbitrator.
4. In the response filed on behalf of the respondent, it is submitted that though the applicant was initially engaged to act as the agent of the respondent to represent before M/s A.A Turki Corporation in the matter of tender for nine multi-purpose tugs, but later on it was revealed that the applicant had unauthorisedly opened the sealed price offer submitted by the respondent causing it prejudice and disadvantage. It was also revealed that for the very same tender the applicant was also representing a Chinese company which had also submitted in the same tender, as a result of which M/s A.A Turki Corporation conveyed its unwillingness to deal with the applicant. In these circumstances the respondent was left with no option and had to terminate the agency agreement and this was conveyed to the applicant vide communication dated 30-11-2002. Thereafter, the respondent submitted its tender directly to M/s A.A Turki Corporation and through its own efforts succeeded in getting the contract in its favour. It is further pleaded that no effort had been made by the applicant in the matter of award of contract to the respondent. The agency agreement of the applicant had been terminated earlier on account of its own misconduct and, therefore, the applicant is not entitled to claim any commission or other benefits. The plea of the applicant that the agreement dated 15-7-2000 was not acted upon or that the terms and conditions contained in the agency agreement of 1-8-1993 continue to govern the parties is specifically denied. It is submitted that anything that was done subsequent to 15-7-2000 was agreed and intended to be governed by the terms of the second agreement of the same date. It is also pleaded that the arbitration proceedings initiated by the applicant and the appointment of Shri P.B Menon as the sole arbitrator made by the applicant is not only illegal but is wholly unacceptable to it. The respondent had sent a letter dated 12-11-2003 intimating that if the applicant was willing, the respondent was agreeable for suggesting a panel of experts and reputed persons for appointment as sole arbitrator as provided in the agreement, but to this there was no response.
5. I have heard learned counsel for the parties and have perused the record. The agency agreement entered into between the parties on 1-8-1993 contains an arbitration clause. Clause 6 of this agreement provided that the same shall remain effective for an initial period of two years from the date of signing and thereafter shall be automatically renewed for equal period unless otherwise communicated by other party 60 days prior to its date of expiry in writing. This was followed by another agreement which was executed on 15-7-2000 and clause 5 thereof also contains an arbitration clause which reads as under:
“5. Arbitration.—This agreement shall be governed by and construed in accordance with the Indian Arbitration and Conciliation Act, 1996. In the event of any dispute between the parties hereto, such dispute shall be resolved amicably by mutual consultation. If such resolution is not possible, then the unresolved dispute shall be referred to arbitration by a sole arbitrator to be nominated jointly by Cochin Shipyard Ltd. and Vigil Marine Services. In the matter of appointment of sole arbitrator, if any such eventuality arises, the High Court of Kerala alone shall have jurisdiction.”
6. Clause 7 provides that the agreement shall remain effective for an initial period of one year from the date of signing and thereafter it may be extended for additional period of one year at a time, by mutual consent and on mutually agreed terms, if the performance for the preceding year in respect of contractual obligations is found satisfactory, by the parties to this agreement. The applicant asserts that the agreement dated 15-7-2000 was not acted upon and/or was waived and it was agreed that the terms and conditions contained in the agency agreement of 1-8-1993 would continue to govern the parties. However, this assertion is denied by the respondent and its specific case is that anything which was done subsequent to 15-7-2000 was agreed to and intended to be governed by the terms of the second agency agreement. However, the fact remains that under both the agreements there is a clause which provides for settlement of disputes between the parties through arbitration proceedings. The main plea of the respondent is that as the applicant had unauthorisedly opened sealed price offer submitted by the respondent for M/s A.A Turki Corporation thereby losing confidentiality and its offer was withheld by the applicant and was not received by the said M/s A.A Turki Corporation and also on account of the fact that the applicant was representing another Chinese Shipyard, a competitor of Cochin Shipyard on the same project, the agency agreement was terminated. There is also dispute between the parties as to whether the contract was awarded to the respondent Cochin Shipyard subsequent to the alleged termination of the agreement and on account of its own efforts or the applicant had rendered any services in terms of the agreement in the matter of award of the contract to the respondent. In view of the existence of the dispute, I am of the opinion that the same has to be resolved through arbitration.
7. Learned counsel for the respondent has also submitted that there was no valid arbitration agreement between the parties and as such the question of making any reference to arbitration would not arise. Section 16 of the Arbitration and Conciliation Act, 1996 provides that the Arbitral Tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement. In Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. (2002) 2 SCC 388 it has been held by a Constitution Bench that the Arbitral Tribunal's authority under Section 16 is not confined to the width of its jurisdiction, but goes to the very root of its jurisdiction. Therefore, this plea can also be raised by the respondent before the Arbitral Tribunal.
8. I accordingly nominate Mr Justice V.N Khare, former Chief Justice of India as sole arbitrator to decide the dispute between the parties. The Arbitral Tribunal may decide the venue of arbitration and other related matters after hearing the parties.