As per sec 11(6) of the Arbitration Act right to arbitrator is ceased after the expiry of periods only if person filed petition in the Court

 * IN THE HIGH COURT OF DELHI AT NEW DELHI

#5

+                                  ARB.P. 106/2011 & I.A. No. 5815/2011

M/S SIKKA PROMOTERS PVT LTD .                                                      .... Petitioner

Through: Mr. Sudeep Kumar Shrotriya, Advocate. Versus

MUNICIPAL CORPORATION OF DELHI                                                  ..... Respondent

                                           Through: Ms. Mini Pushkarna, Standing counsel                                

                                            for the MCD with Mr.Rajesh Singh, Advocate. CORAM: JUSTICE S. MURALIDHAR

1.      Whether Reporters of local papers may be allowed

 to see the judgment? No

     2.    To be referred to the Reporter or not? Yes

     3.   Whether the judgment should be reported in Digest? Yes

O R D E R

% 17.11.2011

1. On the previous date, this Court had noted the fact that the Respondent  municipal Corporation of Delhi („MCD‟) had by a letter dated 19th September 2011 informed the Petitioner that it was appointing an Engineer Member of the Delhi Development Authority („DDA‟) as a sole Arbitrator. It was accordingly sought to be contended by Ms. Mini Pushkarna, learned counsel for the MCD that the present petition had been rendered infructuous.

2. Mr. Sudeep Kumar Shrotriya, learned counsel for the Petitioner, on the other hand, pointed out that the MCD had appointed its Arbitrator only after the present petition was filed by the Petitioner and notice was issued thereon by this Court. Relying on the decisions in Datar Switchgears v. Tata Finance Ltd. (2000) 8 SCC 151, Punj Lloyd v. Petronet MHB Ltd. (2006) 2 SCC 638 and Union of India v. Bharat Battery Manufacturing Co. (P) Ltd. (2007) 7 SCC 684, he submitted that the MCD had forfeited its right to appoint an Arbitrator and, therefore, it is for this Court to appoint an Arbitrator.

3. Opposing the above submissions, Ms. Pushkarna, learned counsel appearing for the MCD, places reliance on the decision of the Supreme Court in ACE Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corporation Ltd. (2007) 5 SCC 304 to contend that this Court should while exercising its powers under Section 11(6) of the Arbitration and Conciliation Act, 1996 („Act‟) as far as possible appoint an Arbitrator as per the arbitration clause. Since the MCD had already appointed an Arbitrator in terms of the arbitration clause, this Court should not accept the plea of the Petitioner that it should appoint an Arbitrator.

4. In the present case, the Petitioner had first issued a legal notice to the MCD through its lawyer on 27th April 2010 in which, inter alia, the MCD was asked to appoint an Arbitrator in terms of the Agreement dated 12th October 2009 within seven days. Admittedly, no action was taken thereon by the MCD. A reminder was sent by the Petitioner on 12th May 2010 wherein again the MCD was called upon to appoint a Sole Arbitrator “in terms of my earlier notice dated 27.4.2010 within period prescribed therein and intimate to my client if any intimation of any nature or intimation otherwise of any kind has been sent by the department to my client, within seven days from the receipt of this Notice…” Nothing was done by the MCD pursuant to that notice.

5. The present petition was filed on 2nd April 2011. Notice was issued on 21st April 2011. It was only after receipt of the notice by the MCD that by a letter dated 19th September 2011 it informed the Petitioner that it was appointing Engineer Member of the DDA (Retired) as a Sole Arbitrator. Clearly, therefore, the MCD did not appoint the Arbitrator in terms of the arbitration clause prior to the Petitioner approaching this Court with the present petition.

6. In Datar Switchgears v. Tata Finance Ltd. (supra), the Supreme Court explained 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 Section11(5) of the Act. In our view, therefore, so far as Section 11(6) is 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 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.

20. In the present case the respondent made the appointment before the appellant filed the application Under Section 11(6) though it was beyond 30 days from the date of demand. In our view, the appointment of the arbitrator by the respondent is valid and it cannot be said that the right was forfeited after expiry of 30 days from the date of demand.

21. We need not decide whether for purposes of Sub-clauses (4) and (5) of Section 11, which expressly prescribe 30 days, the period of 30 days is mandatory or not.”

7. It will be noticed that Section 11(6) does not by itself prescribe any time limit as such. The time limit of 30 days is envisaged under Section 11(4)(a) of the Act. Consequently, it was observed in Datar Switchgears that “if 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.”

8. The decision in Datar Switchgears was further affirmed in Punj Lloyd v. Petronet MHB Ltd. In the latter case, even till the date of moving of the application under Section 11(6) of the Act “the Respondent had not made appointment consistently with the arbitration clause.”

9. In Union of India v. Bharat Battery Manufacturing Co. (P) Ltd. the dictum of Datar Switchgears and Punj Lloyd v. Petronet MHB Ltd. was further affirmed. In that case it was held that Section 11(8) of the Act would come to the aid of the appellant therein only if “the appellant appointed the arbitrator within 30 days from the date of receipt of request to do so from the respondent or the extended time, as the case may be.” Since that was not done “the appellants are estopped from making an appointment of the arbitrator in terms of Clause 24 of the agreement after Section 11(6) petition is filed by the respondent. Once Section 11(6) petition is filed before the Court, seeking appointment of an arbitrator, the power to appoint an arbitration in terms of arbitration clause of the agreement ceases.”

10. The facts in ACE Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corporation Ltd. decided by the two-Judge of the Supreme Court were that the appellant by a letter dated 21st July 2005 wrote to the Director (Marketing) of the Respondent invoking the arbitration clause and requested for reference of the  matter to the Arbitrator. Upon failure of the Respondent to make an appointment the appellant, on 22nd August 2005 filed an application under Section 11(6) of the Act in the High Court. Factually, it was found that the appointment of an Arbitrator was made by the Director (Marketing) of the Respondent on 22nd August 2005, the very date of which the application was filed under Section 11(6) of the Act. On those facts, it was held by the Supreme Court that the Respondent had not forfeited its right to appoint an Arbitrator. It would appear, therefore, that the only point which was considered by the Supreme Court was whether by not making an  appointment within thirty days of the demand the Respondent had forfeited the right to appoint an Arbitrator. Relying on the above noted observations of the Supreme Court in Datar Switchgears in which it was held that even if the appointment is made after thirty days such right would not be forfeited, the Supreme Court in ACE Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corporation Ltd. negatived the plea of the claimant and upheld the appointment made by the Respondent of an Arbitrator in terms of the clause. The facts of ACE Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corporation Ltd. indicates that the appointment of the Arbitrator by the Respondent in that case was made on the very date that the petition filed under Section 11(6) of the Act. However, in the present case, the appointment has been made long after filing of the petition under Section 11(6) of the Act.