The Judgment of the Court was delivered by

M.H.S Ansari, J.:— The instant application is filed under Section 11 of the Arbitration and Conciliation Act, 1996 claiming inter alia, the relief as under;

“a) A person be appointed to act as arbitrator to function along with the two arbitrators already appointed under the agreement dated 7th August, 1992 to adjudicate upon the disputes and differences between the parties arising under the said agreement.”

2. Brief facts giving rise to the instant application are that a joint venture agreement was entered into by and between the petitioner and the respondents No. 1 and 2 herein dated 7th August, 1992 with regard to the development of New Alipore Market Complex situated at Block ‘M’. The agreement dated 7.8.92 has been made as annexure-‘A’ to the instant petition. The agreement contains an arbitration clause which reads as under;

“All disputes and differences arising between the parties hereto touching and concerning this Agreement shall be referred to the Arbitrators, to be appointed by the parties hereto each and the provisions of the Indian Arbitration Act, 1940 shall apply in this regard and whose decision is binding on the parties and in case of differences between the Arbitrators the matter would be referred to the umpire. The cost of Arbitration would be borne by the parties with the equal shares.”

3. According to the petitioners, respondents allegedly committed various breaches of the joint venture agreement and the same have been enumerated in paragraph ‘3’ of the application. The petitioner made an application under Section 9 of the Act, 1996 which was marked as A.P No. 237 of 1998 and various orders have been passed therein and also an appeal arising therefrom has been filed and is said to be pending before a Division Bench of this Court.

4. Respondent No. 1 herein filed a suit being T.S No. 72 of 1998 before the Learned Alipore Court and obtained an ex parte ad interim order dated 26.10.1998 restraining the petitioner from taking any advantage of any clause of the agreement dated 7th August, 1992. The said order, it is stated, has since been vacated by a judgment and order dated 1.12.1998 and the respondent No. 1 having been aggrieved therefrom has filed an application under Article 227 of the Constitution of India. The said Civil Revision petition is also said to be pending on the file of this Court.

5. The petitioner herein, it is averred in the instant application, has filed an application under Section 8 of the Act, 1996 in the said suit T.S No. 72 of 1998 before the Learned Alipore Court for referring the disputes to arbitration.

6. It is further averred in the application that pursuant to the agreement dated 7th August, 1992 and in compliance with the arbitration clause contained therein, respondent No. 2 by its letter dated 22.9.98 appointed an arbitrator. The petitioner herein and the respondent No. 1 were requested to nominate and/or appoint their respective arbitrators.

7. The arbitrator originally appointed by respondent No. 2 has been replaced on account of the inability expressed by the first appointed arbitrator and in his place, respondent No. 2 has nominated Mr. Shyam Nanglia, F.C.A as Arbitrator.

8. Similarly, petitioner herein had also upon receiving the letter from respondent No. 2 appointed his arbitrator and communicated the same to the respondents and on the said arbitrator having expressed his inability to act as Arbitrator, petitioner appointed Mr. Ajit Kumar Bose, Barrister-at-Law, as his Arbitrator.

9. The grievance of the petitioner in the instant case is that the respondent No. 1 has failed and/or neglected to appoint/nominate an Arbitrator in terms of the request made by the respondent No. 2 by letters dated 22.9.98 and 6.11.98 More than four (4) months, it is averred, have elapsed from the first request made to the respondent No. 1 to appoint an arbitrator and having not so appointed the Arbitrator, instant application is filed under Section 11 of the Act.

10. In the affidavit-in-opposite filed on behalf of the respondent No. 1, averments have been made respecting the development agreement between the respondent No. 1 and Calcutta Municipal Corporation for the purpose of development of the New Alipore Market Complex of which the Calcutta Municipal Corporation is owner and the obligations of the parties thereunder. Reference has also been made to the agreement dated 8.12.1989 entered into between the respondent No. 1 and Banani Properties Pvt. Ltd., the respondent No. 2 herein. Reference has also been made to the tripartite agreement dated 7.8.1992 and allegations have been made that the Directors were kept in dark about the terms and conditions of the said agreement. The respondent has stated that in and around April, 1998, the respondent No. 1 could learn about the contents of the said agreement and of the frauds committed. According to the respondent No. 1, the said tripartite agreement is the outcome of a fraud and the respondent No. 1 filed Title Suit No. 72 of 1998 in the court of the 1st Civil Judge, Senior Division, Alipore for declaration that the said agreement dated 7.8.1992, is fraudulent and void. It is stated that one Smt. Krishna Bhattacharjee has filed another suit being T.S No. 83 of 1998 with regard to the legality, validity and fraud committed in bringing into being the said purported Agreement dated 7.8.1992 both suits are pending. According to the respondent No. 1 unless the said suits are disposed of, no arbitrator can be appointed nor application for appointment of arbitrator is maintainable. Various other averments have been made with regard to the said development project. Reference has been made to certain other proceedings pending between the parties such as the winding up petition filed against respondent No. 1 as also proceeding initiated by the petitioner herein under Section 9 of the Act and to various orders passed in those proceedings as also orders passed by the Appellate Court in relation thereto.

11. Learned counsel for the respondent No. 1 raised a two fold contention with regard to the maintainability of the instant application filed under Section 11. Firstly; on the ground that the matters in controversy, if at all, pertain to ‘suit for land’ and as no part of the cause of action having arisen within the Ordinary Original Civil Jurisdiction of this Court, the application is not maintainable in this Court. Secondly, the agreement in the instant case is one which was made when the Arbitration Act, 1940 was in force and the arbitration clause in the said agreement contemplated two arbitrators, whereas the New Act of 1996 provides for appointment of more than two arbitrators. It has been further pleaded that in any case, the arbitration clause does not specify the number of arbitrators and/or the procedure under which such arbitrators can be appointed. Unless, the procedure for appointment of arbitrators is agreed upon in the light of the New Act, 1996, arbitration clause cannot be enforced and no valid arbitration can take place.

12. Learned counsel for respondent No. 1 also urged that the question of the validity and/or legality of the arbitration agreement is subject matter of the suits and until the said question is decided, the instant application is not maintainable. However, it is not disputed that the interim order of injunction granted by the learned Alipore Court in Title Suit No. 72 of 1998 has since been vacated.

13. From the brief narration of facts, it is apparent that the suit filed by respondent No. 1 is pending before the Learned Alipore Court, with respect to the validity and legality of the agreement wherein the petitioner herein as also respondent No. 2 are defendants. Also an application under Section 8 of the Arbitration and Conciliation Act, 1996 has been filed by the petitioner herein in the suit being Title Suit No. 72 of 1998 instituted by respondent No. 1 and the same is yet to be disposed of by that Court. The agreement between the parties contains an arbitration clause extracted supra What is, however, contended on behalf of the respondent No. 1 is that the agreement is not valid apart from the fact that the arbitration clause is not capable of enforcement as the same was one as contemplated under the repealed Arbitration Act, 1940.

14. As to the question of the pendency of an application under Section 8 before the Learned Civil Court and in the light thereof, the maintainability of an application under Section 11 is concerned, the same is concluded by a Division Bench judgment of this High Court of which I was a Member in Modi Korea Telecommunication Ltd. v. Appcon Consultants Pvt. Ltd., reported in 1999 (1) Calcutta Law Times 285 (H.C). Ruma Pal, J. speaking for the court, in that case, construed the provisions of Section 11 of the Act as also Section 8 of the said Act and with reference to the provisions of Sec. 8 and Sub-section (3) thereof which reads as under:

“(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.”

The Division Bench held as under:

“The corresponding provisions in the 1940 Act was Section 34. Whereas under Section 34 of the 1940 Act the court had the discretion to decide whether or not to refer the parties to arbitration even if the suit was in respect of matters covered by the arbitration agreement, under Section 8(1) of the 1996 Act the court is bound to refer the parties to arbitration.

The use of the word “may” in Section 8(3) allows for arbitration proceedings to continue despite the fact that a suit may be pending on the same issue. This may be contrasted with Section 35 of the 1940 Act under which the arbitration proceeding could not continue validly unless the suit was stayed. Section 8(3) read with the mandatory “shall” in Section 11(5) and the restriction placed by Section 5 shows that even when a suit is pending on the subject matter of the agreement and an application under Section 8(1) has been made for reference of the dispute to arbitration, the court before which an application is made for appointment of an arbitrator under Section 11 must proceed to decide the same. The fact that an application has been filed under Section 8(1), has by statute and for the purpose of Section 11, been made an immaterial consideration.

The learned single Judge therefore could not have adjourned the Section 11, application for appointment of an Arbitrator because of the pendency of the application under Section 8(1) and make the exercise of power under Section 11(5) dependent upon the disposal of the application under Section 8(1) by the Munsif.

In making the appellant's right to have an arbitrator appointed in terms of Section 11(5) subject to the outcome of the application under Section 8(1), the learned Judge has acted in a manner which is not envisaged under the 1996 Act. The order is not one which is referable to Section 11(5) or any other provision of the Act.”

15. In the light of the said judgment of the Division Bench, mere pendency of an application under Section 8 before a Civil Court would not disentitle an applicant to have an arbitrator appointed in terms of Section 11, if the facts and circumstances of the case so warrant.

16. Section 11 of the Act deals with appointment of arbitrators and sub-section (5) thereof permits intervention of the Court, only if the parties failed to agree upon the arbitrator in accordance with the procedure prescribed in the agreement between the parties. Sub-section (6) of Section 11 permits intervention by the Court, if the parties failed to act in accordance with the agreed procedure or the parties failed to reach an agreement expected of them under the procedure, or if the person including the institution, fails to perform any function entrusted to him or it under that procedure. It is only when any one of the requirements of sub-section (5) or Sub-section (6) of Section 11 are fulfilled, the Court will have the jurisdiction to intervene and appoint arbitrator.

17. In Modi Korea Telecommunication's case, cited supra, Justice Pal speaking for the Division Bench construed the provisions of Section 11 as follows:

“Section 11 makes a distinction between the procedure for appointment of an arbitrator and the actual appointment of the arbitrator. Under Section 11(2) parties can agree on the procedure for appointing the arbitrator. If there is no such agreement on the procedure, Section 11(3) prescribes the procedure to be followed. When the arbitration is to be of three arbitrators, Section 11(3) provides that “each party shall appoint one arbitrator and the two appointed arbitrators shall appoint a third arbitrator who shall act as the presiding arbitrator.” If a party fails to appoint an arbitrator within 30 days from the receipt of request to do so from the other party or two appointed arbitrators fail to agree on the third arbitrator within 30 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 institute designated by him under Sub-section (4) of Section 11.”

Section 11(5) similarly provides that in the case of the arbitration with a sole arbitrator if the parties fail to agree on the arbitrator within 30 days from the receipt of the request by one party from the other to do so, the appointment shall be made, upon request of a party by the Chief Justice or any person or institute designated by him. Section 11(6) deals with a situation where the appointment procedure has been agreed upon but there is non-compliance of the agreed procedure. In this case also any party may request “the Chief Justice or any person or institute designated by him” to take the necessary measures unless the agreement on the appointment provides other means for securing the appointment.

A decision on the matter entrusted by sub-sections (4), (5) and (6) to the Chief Justice or any person or institute designated by him is final by virtue of Section 11(7), Section 11(8) provides for considerations to which regard should be had before such power of appointment is exercised. Section 11(9) deals with International Commercial Arbitrations where the Chief Justice of India or any person or institute designated by him is given the powers of appointment. Section 11(11) deals with a situation where several requests are made to the Chief Justices of different High Courts on their designates. Section 11(12)(a) extends the operation of sub-sections (4), (5), (6), (7), (8) and (1) to international commercial arbitrations giving power of appointment to the Chief Justice of India in place of Chief Justice of the High Court. Section 11(12)(b) clarifies that the reference to Chief Justice means the Chief Justice of the appropriate High Court. What does “appointment” mean is it only limited to naming or does it include the adjudicatory process as to whether appointment should be made?

It is clear from a reading of Section 11 that the word “appoint” has been used in “Section 11 to mean nomination or designation. Thus parties may appoint or name their arbitrator under Section 11(2), (3) and (4). The parties do not, in appointing an arbitrator, do more than name or designate him.

The power which has been conferred exclusively under Section 11 on the Chief Justice is the power of appointment or the power to name an arbitrator. The Chief Justice may, if he so chooses, designate some other person or institute to exercise this power.”

18. With respect to the power of the learned Single Judge to entertain application under Section 11, it was held as under:

“For the reasons stated we hold that the learned Single Judge has the power to entertain under Section 11 to determine whether the arbitrator should be appointed in terms of Section 11 and thereafter placing the matter before the Chief Justice to name the arbitrator if the question is decided in favour of the applicant.”

The instant case has been assigned to this Court and, therefore, the limited jurisdiction of this Court is to determine whether the arbitrator should be appointed in terms of Section 11 and thereafter to place the matter before the Chief Justice to name the arbitrator if the question is decided in favour of the applicant.

19. As noticed supra, application under Section 11 can be made for naming the arbitrator only to the Chief Justice of the High Court as held in Modi Korea case, cited supra, the question as to whether the cause of action has arisen within the Ordinary Original Civil Jurisdiction referred to in Clause 12 of the Letters Patent of this High Court would have no relevance. It is not in dispute that the suits have been instituted and the cause of action has arisen within the territorial limits of the jurisdiction of this High Court. Principles governing jurisdiction for an application under Section 9 of the Act and with reference to Section 2(e) of the Act, will also be of no consequence, in the circumstances, where the application for consideration is one under Section 11 of the Act.

20. On behalf of the respondent No. 1 Mr. D. Roy Chowdhury appearing along with Mr. Jayanta Dutta contended that the arbitration clause cannot be given effect to as it is one contemplated under the Arbitration Act, 1940. It was further submitted that the arbitration clause refers to an umpire in case of differences between the arbitrators. Therefore, according to the learned counsel for the respondent No. 1, a procedure has to be agreed upon between the parties before an arbitrator can be nominated or appointed by the Court.

21. The arbitration clause in the agreement between the parties has been extracted supra. The arbitration clause provides that the disputes and differences arising between the parties touching and concerning the agreement shall be referred to the arbitrators to be appointed by each of the parties and in case of differences between the arbitrators, the matters to be referred to the umpire. In the instant case, there are three parties to the agreement. Petitioners, respondent No. 1 and 2. The two parties, the petitioner and the respondent have appointed their respective arbitrators. The respondent No. 1 alone has not appointed or nominated his arbitrator. What is sough to be contended by Mr. Roy Chowdhury is that the reference to umpire in the arbitration clause can only mean that two arbitrators may be appointed and the New Act, 1996 speaks of more than two arbitrators and, therefore, the arbitration agreement cannot be given effect to.

22. The question, therefore, arises whether by virtue of the reference in the arbitration clause to the Old Arbitration Act, 1940 would make the agreement unenforceable by virtue of the New Act, 1996. The question has been considered by the Supreme Court in M.M.T.C Limited v. Sterlite Industries (India) Ltd., reported in (1996) 6 SCC 716 : 1997 (1) Indian Civil Cases (S.C) 374. After referring to Section 10 of the Act which read as under:

“10. Number of arbitrators.— (1) The parties are free to determine the number of arbitrators, provided that such number shall not be an even number.

2) Failing the determination referred to in sub-section (1), the arbitral tribunal shall consist of a sole arbitrator,

and with reference to the provisions of Section 7 of the New Act, 1996, it was held as under:

“Sub-section (3) of Section 7 requires an arbitration agreement to be in writing and sub-section (4) describe the kind of that writing. There is nothing in Section 7 to indicate the requirement of the number of arbitrators as a part of the arbitration agreement. Thus the validity of an arbitration agreement does not depend on the number of arbitrators specified therein. The number of arbitrators is dealt with separately in Section 10 which is a part of machinery provision for the working of the arbitration agreement. It is, therefore, clear that an arbitration agreement specifying an even number of arbitrators cannot be a ground to render the arbitration agreement invalid under the New Act as contended by the learned Attorney General.”

Section 10 deals with the number of arbitrators, sub-section (1) says that the parties are free to determine the number of arbitrators, provided that such number shall not be an even number. Sub-section (2) then says that failing the determination referred to in sub-section (1), the arbitral tribunal shall consist of a sole arbitrator. Section 11 provides for appointment of arbitrators. This is how arbitral tribunal is constituted.”

23. The said judgment of the Supreme Court is an authority for the proposition that Section 10 of the Act is a part of the machinery provisions of the Act for the working of the arbitration agreement and the validity of an arbitration agreement, therefore, does not depend on the number of arbitrators specified in the agreement.

24. In the instant case, the arbitration clause, though no doubt, refers to an umpire it nevertheless provides for nomination of an arbitrator by each of the parties to the disputes. There are more than two parties, to be precise there are three parties to the agreement dated 7.8.92 in theinstant case and each of them have a right to appoint an arbitrator. There are thus more than two arbitrators that are to be appointed for resolving the disputes. The arbitrators to be appointed in the instant case are thus not of an even number requiring the appointment of an umpire. There can be no dispute in the instant case that the arbitral proceeding in the present case commenced after the New Act came into force when notices dated 22.9.1998 were issued by the respondent No. 2 nominating his arbitrator and calling upon the petitioner and respondent No. 1 herein to appoint their respective arbitrators, and, therefore, the New Act, 1996 would apply. Sub-section (2) does not apply to the instant case as the requirement of sub-section (1) of Section 10 has been fulfilled in the instant case. The appointment of arbitrators must, therefore, be governed, as held, in M.M.T.C case, cited supra, by Section 11 of the New Act.

25. As already noticed, the arbitration clause in the instant case provides for the procedure for appointment of arbitrators and, therefore, the contention of Mr. Roy Chowdhury that the procedure has to be agreed upon by virtue of the New Act and until so agreed upon between the parties, arbitration agreement is unenforceable and the present application is not maintainable, in my opinion, is misconceived besides being contrary to the ratio in the M.M.T.C Case (cited supra).

26. As already noticed, the appointment, procedure has been agreed between the parties in the arbitration agreement and each party is to nominate an arbitrator. There are thus three arbitrators. The instant case is one where: one of the parties to the agreement have failed to act as required under that procedure and, therefore, the provisions of sub-section (6)(a) of Section 11 are attracted. The respondent No. 1 alone has failed to appoint an arbitrator. Having failed to do so, an arbitrator has now to be appointed by the Hon'ble. The Chief Justice of this High Court.

27. As regards the contention of Mr. Roy Chowdhury, learned Senior counsel for the respondent No. 1 as to the legality and validity of the arbitration agreement, suffice it to state that the question whether the said agreement is illegal or void for any of the reasons alleged by respondent No. 1 that itself is an arbitrable dispute and can be considered by the arbitral Tribunal by virtue of the power conferred upon them under Section 16(1) of the Act which empowers' the arbitral tribunal to decide finally with respect to the existence and validity of the arbitration agreement subject to the right of appeal to the Court under sub section 6 thereof.

28. It has to be held that there exists an arbitration agreement between the parties as envisaged under Section 7 of the Act. The execution of the arbitration agreement dated 7.8.92 between the parties hereto is not in dispute. There is failure on the part of the respondent No. 1 to nominate an arbitrator whilst the other two parties to the agreement have appointed their respective arbitrators. A case has, therefore, been made out by the applicant for appointment of an arbitrator by court in terms of Section 11(6) of the Act. This Court has not gone into the question as to the alleged illegality of the agreement dated 7.8.92 as that is a matter within the sole jurisdiction of the arbitral tribunal under Section 16 of the Act.

29. In the result, the application is allowed and it is hereby directed that the matter may now be placed before His Lordship. The Acting Chief Justice for naming an Arbitrator.

30. Application allowed.