JUDGMENT
Anil Kumar, J.
Page 3197
1. This is a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of an arbitrator.
2. The contention of the petitioner is that respondent No. 1 is a society which had invited bids and had floated a notice inviting tenders. The petitioner had submitted the bid and its bid was accepted for the construction of 490 dwelling units at Plot No. 40, Sector 13, Rohini, New Delhi. An agreement dated 26th February, 1988 was also executed between the petitioner and the respondent No. 1.
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3. According to the petitioner an administrator of respondent No. 1 was also appointed and the work for construction of 420 dwelling units was completed, however, the work of 70 flats could not be completed on account of change of original designs of isolated footing to raft foundation because of soil condition. The agreement between the parties was rescinded unilaterally by respondent No. 1 and on account of rescinding the contract the disputes have arisen between the parties.
4. The petitioner has contended that Clause 38 in the agreement is the arbitration agreement which is as under:
Clause No. 38:
(i) In the event of any dispute or differences between the parties the hereto as to the construction or operation of this contract on the respective rights and liabilities of the parties on any matter in question disputes and differences on any account or of the employer fails to make decision within a reasonable time, then and in any such case, but except in any of the ‘excepted matters’ referred to in Clause 36 of these condition, the contractor subject to Sub-clause (vi) of this Clause shall demand in writing that the disputes or differences be referred to arbitration. Matters in question dispute or differences to be arbitrated upon shall referred for decision to a sole arbitrator of a person appointed by the employer, person so appointed will be a fellow of the Indian Institute of Architect or a retired Engineer of State/Central Government not below the rank of S.E. The appointment of the arbitrator shall be at the absolute discretion of the society.
(ii) If the sole arbitrator appointed under Sub-clause (i) above resigns his appointment or is unable or unwilling to act for any reason whatsoever or dies, the President, Doctor’s Cooperative Group Housing Society Ltd, may appoint a new arbitrator to act in his place in accordance with the provisions of Sub-clause (i) above. Such arbitrator shall be entitled to proceed with the reference from the stage at which was the previous arbitrator.
(iii) The Arbitrator shall have power to call for such evidence by way of affidavits or otherwise as the Arbitrator shall think proper, or it shall be the duty of the parties here to do or cause to be done all such things as may be necessary to enable the Arbitrator to make the award without any delay.
(iv) Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or reenactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceedings under this Clause.
(v) It is also a term of the contract that the party involving arbitration shall specify that dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute.
(vi) It is also a term of the contract that if the contractor(s) do/does not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the intimation from the employer that the Page 3199 final bill is ready for payment, the claim of the contractor(s) will be deemed to have been waived and absolutely barred and the employer shall be discharged sand released of all liabilities under the contract in respect of these claims.
(vii) The arbitrator may inform time to time with consent of the parties enlarge the time, for making and publishing the award.
(viii) In all cases where the amount of the claim of he dispute is Rs.1,00,000/- (Rupees One Lac only) and above, the arbitrator shall give reasons for award.
5. Since the disputes have arisen, the petitioner prayed for appointment of an arbitrator for adjudication of disputes which have arisen between the parties. The petitioner had sought appointment of arbitrator by letter dated 28th June, 2003, however, within 30 days of the demand being raised for appointment of the arbitrator and before the filing of the petition, the respondent No. 1 failed to appoint an arbitrator and thus the respondents have lost their right to appoint an arbitrator in terms of Clause 38 of the agreement.
6. The application is contested by the respondents contending inter-alia that Sh. J.B. Karamchandani, Architect was appointed as an arbitrator in terms of a letter of appointment dated 20th November, 2003 who has proceeded with the arbitration proceedings. It is also contended that in terms of the arbitration agreement only an architect who fulfillls the agreed condition of being an architect engineer could be appointed by the parties as an arbitrator.
7. The respondents have also contended that no confidence could be reposed in Sh. D.N. Kathuria as the said sole arbitrator had mis-conducted himself. The allegation of the petitioner that the respondents society failed in its obligation under the contract was denied. It was contended that the petitioner is exploiting the respondent society and its member and extracting money without doing the construction work and discharging its own obligation and there has not been any breach of agreement on the part of the respondent society. The respondents also contended that letters dated 13.6.2003 and 28.6.2003 do not appear to have been received by the respondents and, therefore, the respondent No. 2 could not appoint an arbitrator and since now an arbitrator has been appointed who is holding the arbitration proceedings in accordance with law, it will not be just and appropriate to appoint another arbitrator. It is also contended that since the award rendered by Mr. D.N. Kathuria is already under challenge, therefore, the said person cannot be appointed as an arbitrator.
8. This is not disputed that there has been an arbitration agreement between the parties. Though the respondents have denied that the letter dated 28.6.2003 demanding the respondents to appoint an arbitrator was received, however, the postal receipt shows that the registered article was sent in the ordinary course on 30.6.2003. This postal receipt has not been denied nor such facts have been disclosed which will rebut the presumption of service which arises in the facts and circumstances. The respondents have also not produced anything to show as to how they could Page 3200 appoint an arbitrator without giving notice to the petitioner and how they could appoint Sh. Sh. J.B. Karamchandani, Architect as a sole arbitrator without a notice to the petitioner. The registered postal article that is letter dated 28.6.2003 was sent by registered post in the ordinary course and in the circumstances there is a presumption that the article must have been served which has not been rebutted properly by the respondents except the bare denial. In the circumstances the probable inference is that the registered article, the letter dated 28.6.2003 was served on the respondents and they failed to appoint an arbitrator within 30 days of the notice demanding them to appoint an arbitrator in terms of arbitration agreement between the parties and before filing of the present petition. The present petition under Section 11(6) of the Arbitration and Conciliation Act was also filed by the petitioner on 30.8.2003 and admittedly according to the plea of the respondents, Sh. J.B. Karamchandani was appointed as an arbitrator by communication dated 20.11.2003 after filing of the present petition.
9. The learned Counsel for the petitioner has relied on (2006) 2 SCC 638, Punj Lloyd Ltd v. Petronet MHB Ltd.; Datar Switchgears Ltd v. Tata Finance Ltd. and , Ace Pipeline Contracts (P) Ltd v. Bharat Petroleum Corpn. Ltd. to contend that since the respondent failed to appoint an arbitrator within 30 days of the demand and had also failed to appoint an arbitrator before the petitioner moved the Court under Section 11 of the Arbitrator and Conciliation Act, 1996, the right for the appointment of an arbitrator by the respondent was forfeited. According to the petitioner’s counsel the Supreme Court in Punj Lloyd (Supra) had followed the ratio laid down by the Supreme Court in Datar Switchgear (Supra).
10. There has been disputes between the parties in respect of another agreement regarding development work pertaining to external sewerage, water supply, roads and storm water drains which was also awarded to the petitioner and the agreement executed between the petitioner and the respondents also had an arbitration clause where also the disputes had arisen and the petitioner had demanded appointment of an arbitrator. Since the respondents failed to appoint an arbitrator another petition being AA No. 177/2003 has also been filed which is also pending adjudication. Pertaining to the disputes in the said arbitration the respondents have appointed Sh. S.S. Aggarwal, 263, Rajouri Apartments, Rajouri Garden, New Delhi-110064 as an arbitrator. The learned Counsel for the petitioner has contended that Sh. S.S. Aggarwal also could not proceed with the arbitration unless appointed by the Court in the present facts and circumstances. However, considering various facts, the petitioner is agreeable for appointment of Sh. S.S. Aggarwal as an arbitrator provided he starts the arbitration proceedings afresh pursuant to the appointment made by this Court.
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11. The respondents have lost their right to appoint an arbitrator as pursuant to notice dated 28.6.2003 which is held to have been served on the respondents, they failed to appoint an arbitrator within 30 days and even before filing of the petition which was filed on 30.8.2003. Admittedly the present arbitrator Sh. J.B. Karamchandani who was appointed on 20.11.2003 could not act as an arbitrator and it will be for this Court to appoint an arbitrator.
12. This is no more rest Integra that once a party files an application under Section 11(6) of the act, the other party extinguishes its right to appoint an arbitrator in terms of the arbitration agreement thereafter. The right to appoint an arbitrator under the arbitration agreement ceases after Section 11(6) petition has been filed by the other party before the court seeking appointment of an arbitrator. This was held by the Supreme Court in 2007 (3) Arb.L.R 282 (SC), Bharat Battery Manufacturing Co. (P) Ltd v. Union of India following the ratio of the decision of three judge bench in Punj Lloyd Ltd. v. Petronet MHB Ltd. (2006) 2 SCC 638. The Supreme Court had held that once the period of 30 days had lapsed, and the party had moved the chief justice under Section 11(6), the other party, having right to appoint an arbitrator under an Arbitral agreement loses the right to do so. In Datar Switchgears Ltd. v. Tata Finance Ltd. and Anr. , para 19 the Apex Court had held:
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 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.
13. The notice dated 28th June, 2003 was given to the respondents seeking appointment of the arbitrator. The present petition was filed on 30th August, 2003 and the arbitrator, Sh. J.B. Karamchandani was appointed by the respondents on 20.11.2003. Therefore, the respondents could not appoint him as the arbitrator and consequently the said arbitrator cannot act as an arbitrator and it will be for this Court to appoint an arbitrator. Since the petitioner has agreed to appoint Page 3202 Sh. S.S. Aggarwal, 263, Rajouri Apartments, Rajouri Garden, New Delhi (Mobile No. 9811239155) as an arbitrator who is also an arbitrator between the parties in another matter, it will be just and appropriate to appoint him as an arbitrator.
14. Consequently, Sh. S.S. Aggarwal, 263, Rajouri Apartments, Rajouri Garden, New Delhi (Mobile No. 9811239155) is appointed as an arbitrator for adjudication of the disputes between the parties. The fees of the arbitrator shall be Rs.50,000/- to be paid by the petitioner in the first instance. Parties are directed to appear before the arbitrator on 3rd December, 2007 at 3 PM. A copy of the order be sent forthwith to the learned arbitrator. The parties are also directed to produce the copy of the order before the learned arbitrator. Copies of the order be given dusty to the parties.