Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB. P. 481/2017
th
Date of decision: 19 December, 2017
NIIT TECHNOLOGIES LIMITED .....Petitioner
Through: Mr.Vikas Dutta & Mr.Siddharth
Chander Joshi, Advs.
versus
DIRECTORATE GENERAL,
BORDER SECURITY FORCE ..... Respondent
Through: Mr.Praveen Kumar Jain, Adv.
alongwith MrB.S. Rautela, AC
of respondent
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
1. This petition under Section 11 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) has been
filed by the petitioner seeking appointment of a Sole Arbitrator to
adjudicate the disputes that have arisen between the parties in relation
to the Acceptance of Tender No.P-4/857(AT-
IPP)/PC/BSF/45/2010/1486-1516 dated February 25, 2010
("Agreement") for the Supply, Installation and Commissioning of BSF
Intranet Prahari Project on the Turnkey basis.
2. The Agreement between the parties contains Arbitration
Agreement in form of Clauses 20 (XIX) to (XXI) and the same are
reproduced herein below:-
ARB.P. 481/2017 Page 1
“Clause 20(XIX) -
In the case of dispute or difference arising between
the purchaser and the supplier relating to any
matter arising out of or connected with the
contract, such dispute or difference shall be settled
in accordance with the Indian Arbitration and
Conciliation Act, 1996.
Clause 20(XX) - Arbitration Proceedings shall be
held at New Delhi, India and the language of the
arbitration proceedings and that of all documents
and communications between the parties shall be
English.
Clause 20(XXI) -
Sole Arbitration will be Secretary, Ministry of
Home Affairs, and Govt. of India or by some other
person appointed by him. As provided in clause 24
of General Condition of Contract Form DGS&D-
68 Ministry of Commerce Department for supply”.
3. The General Conditions of Contract (GCC) form DGS&D-68
Ministry of Commerce, Department for Commerce (Supply Division)
also contains Arbitration Agreement in Clause 24 which is reproduced
herein below:-
“24. ARBITRATION
(i) In the event of any question, dispute or
difference arising under these conditions or any
special conditions of contract, or in connection
with this contract (except as to any matters the
decision of which is specially provided for by these
or the special conditions) the same shall be
referred to the sole arbitration of an officer in the
Ministry of Law, appointed to be the arbitrator by
ARB.P. 481/2017 Page 2
the Director General of Supplies & Disposals. It
will be no objection that the arbitrator is a
Government Servant that he had to deal with the
matters to which the contract relates or that in the
course of his duties as a Government servant he
has expressed views on all or any of the matters in
dispute or difference. The award of the arbitrator
shall be final and binding on the parties to this
contract.
(ii) In the event of the Arbitrator dying, neglecting
or refusing to act or resigning or being unable to
act for any reason, or his award being set aside by
the court for any reason, shall be lawful for the
Director General of Supplies & Disposals to
appoint another arbitrator in place of the outgoing
arbitrator in the manner aforesaid.
(iii) It is further a term of this contract that no
person other than the person appointed by the
Director General of Supplies & Disposals as
aforesaid should act as arbitrator and that, if for
any reason that is not possible, the matter is not to
be referred to Arbitration at all.
(iv) The arbitrator may from time to time with the
consent of all the parties to the contract enlarge
the time for making the award.
(v) Upon every and any such reference, the
assessment of the costs incidental to the reference
and award respectively shall be in the discretion of
the arbitrator”.
4. The petitioner invoked the Arbitration Agreement vide its letter
dated 31.03.2017. The respondent, vide its letter dated 01.05.2017
informed the petitioner is under examination and outcome will be
ARB.P. 481/2017 Page 3
intimated to the petitioner. Having failed to get positive response to its
request, the petitioner filed the present petition in this Court.
5. Upon issuance of notice, the respondent has filed its reply to the
petition submitting that vide order dated 07.12.2017, the respondent
has appointed the Sole Arbitrator.
6. The learned counsel for the respondent further relies upon
Clause 24(iii) of the General Conditions of Contract (GCC), quoted
hereinabove to contend that only a person appointed by the Director
General of Supplies & Disposals as aforesaid can act as an Arbitrator
and that, if for any reason, that is not possible, the matter is not to be
referred to Arbitration at all.
7. As far as the first contention is concerned the petitioner had
filed the present petition on 01.09.2017. Till that date, admittedly, the
respondent had not appointed any Arbitrator.
8. In Datar Switchgears Ltd. v. TATA Finance Ltd. (2000) 8 SCC
151 Supreme Court held as under :-
“19. So far as cases falling under Section 11(6)
are concerned – such as the one before us – no
time limit has been prescribed under the Act,
whereas a period of 30 days has been prescribed
under Section 11(4) and Section 11(5) of the Act.
In our view, therefore, so far as Section 11(6) if
concerned, if one party demands the opposite party
to appoint an arbitrator and the opposite party
does not make an appointment within 30 days of
the demand, the right to appointment does not get
automatically forfeited after expiry of 30 days. If
ARB.P. 481/2017 Page 4
the opposite party makes an appointment even
after 30 days of the demand, but before the first
party has moved the court under Section 11, that
would be sufficient. In other words, in cases
arising under Section 11(6), if the opposite party
has not made an appointment within 30 days of
demand, the right to make appointment is not
forfeited but continues, but an appointment has to
be made before the former files application under
Section 11 seeking appointment of an arbitrator.
Only then the right of the opposite party ceases.
We do not, therefore, agree with the observation in
the above judgments that if the appointment is not
made within 30 days of demand, the right to
appoint an arbitrator under Section 11(6) is
forfeited”.
9. In view of the above, the first contention of the respondent to
the effect that the respondent having already appointed an Arbitrator,
this Court will cease to have jurisdiction under Section 11 of the Act
to appoint an arbitrator, is hereby rejected.
10. As far as the second contention of the respondent, relying upon
the Clause 24(iii) of the General Conditions of Contract (GCC), is
concerned, it is to be noted that the Arbitration Agreement between
the parties is contained in Clause 20(XIX) to (XXI). These Clauses do
not contain any restriction as contained in Clause 24(ii) of the General
Conditions of Contract (GCC). In any event, the respondent having
lost its right to appoint an Arbitrator, cannot rely upon Clause 24(iii)
of the General Conditions of Contract (GCC) to contend that because
of its own default, the arbitration agreement between the parties would
ARB.P. 481/2017 Page 5
stand negated. No party can be allowed to take benefit of its own
wrong.
11. In B.E. Billimoria & Co. Ltd. Vs. Rites Limited and Ors.
MANU/DE/0266/2017 this Court had rejected a similar contention
holding as under:-
“11. The reference to third sub-paragraph of paragraph
3 of Clause 25 of GCC, which expressly provides that no
person other than a person appointed by such Appointing
Authority as aforesaid should act as arbitrator and if for
any reason that is not possible, the matter shall not be
referred to arbitration at all, is misplaced. It is clear from
the plain language that it is only applicable cases where
there is impossibility for an arbitrator appointed by the
appointing authority, to act as an arbitrator. In the
present case, it is nobody's case that it would be
impossible for an arbitrator appointed by the appointing
authority to act as such. In the present case, the
appointing authority has failed to appoint the arbitrator
as required under the provisions of the Act. Undisputedly,
an independent arbitrator - who is not ineligible to act as
such in terms of section 12(5) of the act - appointed by
the appointing authority would have no impediment in
acting as an arbitrator.
12. The decision in Newton Engineering and Chemicals
Limited (supra) also does not advance the case of RITES
any further. In that case, the arbitration clause expressly
provided that the disputes would be referred to the sole
arbitration of ED (NR) of the respondent corporation
(IOCL) and due to restructuring of the IOCL, the office of
ED(NR) had ceased to exist. Nonetheless the petitioner
therein insisted that only the ED be appointed as the
arbitrator. It is in that context, the Court had held that
appointment of Director (Marketing) as an arbitrator was
not possible. In the present case, the facts are materially
ARB.P. 481/2017 Page 6
different. As stated earlier, the procedure which requires
RITES to furnish names of serving officers is severable
from the agreement to resolve the disputes by arbitration.
It is difficult to accept that the arbitration clause would
stand frustrated if a serving officer of RITES is not
appointed as an arbitrator.
13. This is also how RITES had understood the said
clause as it had proceeded to appoint an arbitrator albeit
after the petitioner had moved this Court. The contention
that the entire clause stands frustrated appears to be an
afterthought and has been raised only after RITES had
appointed an arbitrator. Clearly, if the clause was
frustrated as contended, there was no occasion for RITES
to proceed to appoint an arbitrator in the first place.
14. This controversy is also required to be viewed from
another perspective: the stated policy to encourage
resolution of disputes by arbitration. It is now a stated
legislative intent that alternative dispute resolution
mechanism must be encouraged and, therefore, the
Courts are required to exercise their jurisdiction to hold
the parties to their bargain to resort to arbitration for
adjudication of the disputes.
15. In Chloro Controls (I) P. Ltd v Severn Trent Water
Purification Inc. and Ors: (2013) 1 SCC 641, the
Supreme Court had observed as under:
"96. Examined from the point of view of the
legislative object and the intent of the framers of
the statute, i.e., the necessity to encourage
arbitration, the Court is required to exercise its
jurisdiction in a pending action, to hold the parties
to the arbitration clause and not to permit them to
avoid their bargain of arbitration by bringing civil
action involving multifarious cause of action,
parties and prayers."
ARB.P. 481/2017 Page 7
16. Thus, arbitration clause must be interpreted in favour
of sustaining the arbitration agreement as opposed to
permitting the parties to resile from the same on technical
grounds. As indicated above, the second sub-paragraph
of paragraph 2 of Clause 25 of the GCC in so far as it
requires a serving officer to be appointed as an
arbitrator, must be read as severable from the first sub-
paragraph of paragraph 2 of Clause 25 of GCC.
17. In addition to the above, I am also persuaded to
accept the contention that question of the right of the
appointing authority to appoint an arbitrator and the
procedure relating thereto would be relevant only if the
appointing authority had proceeded to appoint the
arbitrator within the time prescribed or in any event,
prior to the petitioner moving this Court. In Deep
Trading Company (supra), the Supreme Court had
considered its earlier decision in the case of Newton
Engineering and Chemicals Limited (supra) and had
distinguished the same by holding that in that case, the
Supreme Court was not concerned with the question of
forfeiture of the right of the corporation for appointment
of an arbitrator. The Supreme Court further held that
since the corporation (IOCL) had failed to act as
required under the procedure, it had forfeited its right to
do so. In the present case also although RITES had
forwarded names of three persons to be appointed as an
arbitrator, it had failed to appoint the arbitrator as
required under the arbitration clause. This is so because
the petitioner had failed to respond to the letter of RITES
dated 28.07.2016 within a period of 15 days and thus, in
terms of the arbitration clause, the appointing authority
was to proceed to appoint an arbitrator which admittedly
the appointing authority had failed to do so.
18. It is apparent from the above that RITES had forfeited
its right to appoint an arbitrator in terms of the
arbitration clause and, therefore, an arbitrator is
required to be appointed by this Court”.
ARB.P. 481/2017 Page 8
12. In view of the above, the second contention of the respondent is
also unfounded and is hereby rejected.
13. I, therefore, see no impediment in appointing a Sole Arbitrator
for adjudicating the disputes that have arisen between the parties in
relation to the above mentioned Letter of Acceptance.
14. I appoint Justice S.N. Dhingra (Retd.) (r/o C-2/44, Safdarjung
Development Area, New Delhi-110016, Ph:-23792788, 9871300027,
e-mail:-shivnarayan.dhingra@gmail.com) as a Sole Arbitrator for
adjudicating the disputes that have arisen between the parties. The
Sole Arbitrator would file his declaration in terms of Section 12 of the
Act before proceeding with the reference. He shall be entitled to
charge fee in accordance with the Fourth Schedule of the Act, apart
from other administrative expenses.
15. The petition is allowed in the above terms with no order as to
costs.
Dasti.
NAVIN CHAWLA, J
DECEMBER 19, 2017/rv
ARB.P. 481/2017 Page 9