ORDER
T. Ch. Surya Rao, J.
1. The applicant seeks appointment of a sole arbitrator for resolution of the dispute between the parties inter se.
2. It is averred inter alia in the application that the applicant entered into an
agreement No. 28/Sr/DEN/N/MG dated 10.10.1983 with the respondents agreeing inter alia to carry out the work of tree plantation at Akot Station, the value whereof is Rs. 1,20,300/-. The period within which the work should be carried out is one month and the maintenance period is for nine months. The applicant had carried out the work and he was paid two part bills. However, the final bill amount of Rs. 62,127/-has not been paid till date. The measurements have already been recorded in the measurement book. The applicant signed in the measurement book as well as the final bill. However, there has been no response from the authorities. The applicant was forced to maintain the garden for a period of four months even after the completion of the original period of nine months maintenance as per the agreement. Thus, he incurred overhead establishment regarding the five months period. In this connection, the applicant made several representations requesting the authorities for demand. He got a notice dated 17.5.2002 issued demanding appointment of an Arbitrator for proper resolution of the dispute invoking Clause 64 of the General Conditions of Contract (‘G.C.C.’ for brevity). The respondents however failed to do so.
3. The third respondent filed a Counter resisting the claim. It is averred inter alia in the counter that the applicant executed the work at a lower pace and sought extension of time. Accordingly, time was extended from 29.10.1983 to 10.8.1984 for the completion of the work and the maintenance period upto 9.5.1985. Since the agreement is about 19 years old, some of the measurement books and bill copies are not traceable from records. However, as per the records available, it could be seen that the applicant himself did not turn up for witnessing the final measurements and signing the final bill. The final measurements were recorded in the measurement book on 1.8.1985 but the payment could not be
made as the applicant was not available and he did not comply with the procedure. Thus, the Department is not responsible for the delay on the part of the applicant. Although the applicant made a representation dated 17.2.1997 requesting for finalisation since the matter was pending finalisation for more than one decade, it has been proposed to close the agreement by submitting the final bill on the basis of the measurements recorded. Furthermore, on account of the time gap, it is also not possible to verify the genuineness of the work done. Therefore, the claim of the applicant is disputed. In view of the conduct of the applicant, there is no arbitral dispute between the applicant and the respondents inasmuch as the claim is time barred. Even according to Clause 64 of G.C.C. the period of 90 days has been elapsed and, therefore, the Department deemed that the applicant waived his claim. Since the claim pertains to the year 1983, the present Arbitration and Conciliation Act, 1996 (‘the Act’ for brevity) has no application and, therefore, this Arbitration Application is liable to be dismissed.
4. Having regard to the stands taken on either side, it is obvious that there has been a dispute to be resolved. Even the plea that the claim of the applicant is barred by limitation is got to be decided. Furthermore, whether the applicant is entitled to prove his claim or not on account of his own conduct is again the subject-matter of the resolution by an appropriate authority. Therefore, 1 am of the considered view that here is a case where there has been a dispute between the parties inter se to be resolved.
5. The petitioner got a notice dated 17.05.2002 issued to the first and second respondents. The said notice has been confessedly received by the first and second respondents inasmuch as there has been a reference about the said notice inter alia in the counter. The applicant in the last para of
the said notice requested for appointment of an Arbitrator in accordance with the procedure envisaged under Section 11(5) of the Act. There has been no reply to the said notice. The provisions of Sub-sections (5) and (6) of Section 11 of the Act are germane to be noticed in this regard. The said provisions read as under:
“11. Appointment of arbitrators:–
(1)…………
(2)…………
(3)…………
(4)…………
(5) Failing any agreement referred to in Sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days froth receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(6) Where, under an appointment procedure agreed upon by the parties,–
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.”
6. It is obvious from a perusal of the said provisions that there is nothing for the Court to adjudicate except to appoint an
arbitrator at the request of the applicant in the event of any failure on the part of the parties to the agreement to agree on the arbitrator or act in accordance with the procedure agreed upon.
7. Under Clause 64 of the GCC, the contractor, after 90 days of the presentation of the final claim and within 180 days, shall demand in writing that the dispute be referred to Arbitration and the demand shall specify the matters, which are in dispute between the parties inter se. Under Clause 64(3)(a)(i) of the GCC, a Sole Arbitrator shall be the General Manager or a Gazetted Railway Officer nominated by the General Manager in that behalf where the claim is below Rs. 5 lakhs. Having regard to the said provision, the parties inter alia in the agreement agreed to resolve the dispute by a Sole Arbitrator who shall be the General Manager or his nominee. The contention of the learned Standing Counsel appearing for the respondents-Railways that here is a case where the conditions enjoined under Clause 64 of the GCC has not been complied with and, therefore, the claim is deemed to have been waived merits no consideration at this stage inasmuch as it is not germane in this application to advert to it and adjudicate the same on merits. Such resolution is within the exclusive realm of the Arbitrator to be appointed for that purpose and quite outside the jurisdiction of this Court in an application filed under Sub-section (5) of Section 11 of the Act.
8. Turning to the law on the point it is appropriate here to quote the relevant observations of the Apex Court in its Judgment in State of West Bengal v. National Builders, , thus:
“Where the agreement provides for an appointment of a specific person either by name or by designation and that person refuses to act and then the question of appointing him again cannot arise. Refusal
by such a person results in the agreement clause ceasing to operate.”
9. In Konkan Railway Corporation Limited and Anr. v. Mehul Construction Co., , (first case) a three Judge Bench of the Apex Court in para 4 of its Judgment considered the objects and reasons for enacting the Act thus:
“4. To attract the confidence of the international mercantile community and the growing volume of India’s trade and commercial relationship with the rest of the world after the new liberalisation policy of the Government, Indian Parliament was persuaded to enact the Arbitration and Conciliation Act of 1996 on the UNCITRAL Model and, therefore, in interpreting any provisions of the 1996 Act, Courts must not ignore the objects and purpose of its enactment. A bare comparison of different provisions of the Arbitration Act of 1940 with the provisions of the Arbitration and Conciliation Act, 1996 would unequivocally indicate that the 1996 Act limits intervention of Court with an arbitral process to the minimum and it is certainly not the legislative intent that each and every order passed by a authority under the Act would be a subject-matter of judicial scrutiny of a Court of law……………..The provisions of the
Act aim at achieving the sole objective of resolving the dispute as expeditiously as possible so that trade and commerce are not affected on account of litigation. The Statement of Objects and Reasons of the Act clearly enunciates that the main objective of the legislation was to minimise the supervisory role of Courts in the arbitral process.”
Keeping the sole objective of resolving the dispute between the parties inter se as expeditiously as possible, the Apex Court held ultimately thus:
“When the matter is placed before the Chief Justice or his nominee under Section 11 of the Act it is imperative for the said Chief Justice or his nominee to bear in mind the legislative intent. At that stage it would not
be appropriate for the Chief Justice or his nominee to entertain any contentious issue between the parties and decide the same. A bare reading of Sections 13 and 16 of the Act makes it crystal clear that questions with regard to the qualifications, independence and impartiality of the arbitrator, and in respect of the jurisdiction of the arbitrator could be raised before the arbitrator who would decide the same. Section 16 empowers the Arbitral Tribunal to rule on its own as well as on objections with respect to the existence or validity of the arbitration agreement. Therefore it would be proper for the Chief Justice or his nominee just to appoint an arbitrator without wasting any time. If this approach is adhered to, then there would be no grievance of any party and in the arbitral proceeding, it would be open to raise any objections, as provided under the Act.”
10. It is also apt here to consider a Judgment of the Apex Court in Datar Switchgears Limited v. Tata Finance Limited and Anr., . That was a case where there had been a dispute between the parties and the first respondent sent a notice to the appellant demanding payment further mentioning specifically that in case of failure to pay the amount, the notice be treated as one issued under Clause 20.9 (arbitration clause) of the lease agreement. The appellant did not pay the amount as demanded. Even the first respondent failed to appoint an Arbitrator even after the lapse of thirty days. Instead he filed an application under Section 9 of the Act for interim protection. However, on 25.11.1999 the first respondent appointed the second respondent as the Sole Arbitrator. The Arbitrator issued notice to the appellant for his appearance. Thereafter, the appellant filed an application before the Chief Justice of Bombay High Court seeking appointment of another Arbitrator. That application having been resisted by the first respondent, it was rejected as not maintainable. In the appeal before the Supreme Court, it was contended that the first respondent did not
appoint Arbitrator within 30 days and, therefore, he forfeited his right to do so. While repelling the said contention, the Apex Court dismissed the appeal holding that since that was a case falling under Section 11(6) of the Act which does not prescribe any period unlike in the case of Section 11(4) and (5) of the Act, the right of appointment does not get automatically forfeited after expiry of thirty days. In paras 5 and 6 of its Judgment, the Apex Court considered the procedure envisaged under Section 11(4), (5) and (6). It was held thus:
“6. Sub-section (5) of Section 11 can be invoked by a party who has requested the other party to appoint an arbitrator and the latter fails to make any appointment within thirty days from the receipt of the notice………………….. An application under Sub-section (6) of Section 11 can be filed when there is a failure for appointment of an arbitrator. This failure of procedure can arise under different circumstances. It can be a case where a party who is bound to appoint an arbitrator refuses to appoint the arbitrator or where two appointed arbitrators fail to appoint the third arbitrator. If the appointment of an arbitrator or any function connected with such appointment is entrusted to any person or institution and such person or institution fails to discharge such function, the aggrieved party can approach the Chief Justice for appointment of an arbitrator.”
11. What is noteworthy is that a notice demanding the appointment of an Arbitrator shall have to be issued. In the abovementioned case, the appellant did not issue any such notice which fact merited consideration by the Apex Court.
12. In Nimet Resources Inc. and Anr. v. Essar Steels Limited, , the Apex Court held that even where there has been some transaction, but the correspondence, documents or exchange between the parties are not clear as to the existence or non-existence of an arbitration
agreement, it would be an appropriate course for the arbitrator to decide that question under Section 16 of the Act rather than the Chief Justice or his nominee under Section 11 of the Act.
13. It is also relevant here in this connection to notice a Judgment of a Division Bench of this Court in Union of India v. Vengamamba Engineering Co., Juputi, Krishna District and Anr., (DB). Placing reliance upon a Judgment of the Apex Court in State of West Bengal v. National Builders’ case (supra), the Division Bench of this Court held that the contention that if there is any delay or refusal of any appointment of Arbitrator by the authority specified in the arbitration agreement, the Court can direct the said authority to appoint an arbitrator, the Court cannot appoint an independent Arbitrator is not tenable and the jurisdiction to appoint an Arbitrator exclusively vests with the Court and when once the appointing authority abdicates his power, no further chance can be given to him.
14. Ultimately, every controversy has been resolved by a Constitution Bench Judgment of the Apex Court in Konkan Railway Corporation Limited and Anr. v. Rani Construction Private Limited, . In para 18 of its Judgment, the Apex Court held thus:
“18. There is nothing in Section 11 that requires the party other than the party making the request to be noticed. It does not contemplate a response from that other party. It does not contemplate a decision by the Chief Justice or his designate on any controversy that the other party may raise, even in regard to its failure to appoint an arbitrator within the period of thirty days …………………… In its request to the Chief
Justice to make the appointment the party would aver that this period has passed and, ordinarily, correspondence between the parties would be annexed to bear this out.
This is all that the Chief Justice or his designate has to see.”
15. Having regard to this authoritative pronouncement of the Apex Court, nothing more is relevant to be considered than the requirement under the provisions of the Act to issue a notice in writing demanding the appointment of an Arbitrator invoking the arbitral Clause and to wait till the requisite period of thirty days for compliance of the demand and in the event of any non-compliance then file an application seeking appointment of an Arbitrator duly annexing therewith the correspondence between the parties, demanding by a notice about the appointment of an Arbitrator and a copy of the arbitral clause which enabled the parties to invoke the same for resolution of the dispute by an Arbitrator.
16. The learned standing Counsel appearing for the respondents in this connection seeks to place reliance upon a Judgment of the Apex Court in A. Mohammad Yunus (Dead) By LRs. v. Food Corporation of India and Anr., 2000 (7) Supreme 772. That was a case under the old Arbitration Act, 1940. Clause 19 of the arbitration agreement in that case envisages the resolution of the dispute arising out a contract by Sole Arbitrator appointed by the Food Corporation of India. The term further ordains that no person other than a person appointed by the Food Corporation of India shall act as Arbitrator and if for any reason that is not possible, the matter is not to be referred to the arbitrator at all. In that connection, the Apex Court held that recourse to arbitration could not have been taken contrary to the agreed stipulation contained in Clause 19 of the agreement. This position is not the same under the new Act of 1996.
17. In view of the clear legal position as discussed hereinabove, inasmuch as there is no adjudicatory process involved in an
application of this sort, all contentious issues arising between the parties shall have to be resolved only by the Arbitrator and it is within his exclusive realm and the order to be passed by this Court under the scheme of the Act is only in the nature of an administrative order, there is nothing left to the Court to resolve at this stage except making appointment of an Arbitrator keeping in view the parameters enjoined under Sub-section (8) of Section 11 of the Act. Therefore, the contention of the learned standing Counsel appearing for the respondents merits no consideration.
18. For the above reasons, the Arbitration Application is allowed and Sri K. Govinda Rao, District and Sessions Judge (Retired) is appointed as Sole Arbitrator to resolve the dispute between the parties inter se. The Sole Arbitrator is entitled to fix his fee.