Galada Power And … vs Transmission Corporation Of A.P. … on 28 April, 2003

Andhra High Court
Galada Power And … vs Transmission Corporation Of A.P. … on 28 April, 2003
Equivalent citations: 2003 (4) ALD 768, 2003 (4) ALT 561, 2003 (3) ARBLR 6 AP
Author: T C Rao
Bench: T C Rao


T. Ch. Surya Rao, J.

1. The applicant seeks appointment of an arbitrator by filing this application under Section 11(6)(a) of the Arbitration and Conciliation Act, 1996.

2. The facts lie in a narrow compass. The applicant Company is one of the manufacturers and suppliers of All Aluminium Alloy Conductors predominantly used by the State Electricity Boards. The respondents floated a global tender involving International Competitive Bidding under the World Bank Loan Assistance for the purchase of All Aluminium Alloy Conductors and ACSR Conductors for the A.P Power Sector Restructuring Project. The applicant participated in the said tender and after the conclusion of the tenders, the respondents placed purchase order dated 12.3.1999 with the petitioner for supply of 940 Kms of Panther ACSR Conductors and 330 Kms of Panther All Aluminium Alloy Conductors. The total value was worked out to US $ 1.77 million. Pursuant to the said purchase order, the 2nd respondent entered into a contract agreement bearing No. l4/1999-2000 dated 10.5.1999 with the petitioner. The petitioner accordingly completed supplies of All Aluminium Alloy Conductors and ACSR Conductors and the 2nd respondent failed to adhere and abide by the payment terms of the said contract agreement stipulated inter alia under Clause 11(b) of the Special Conditions of Contract read with Clause 3 of the Purchase Order. It is specifically stipulated therein that 80% of the ex-works price with 100% sales tax should be paid within 30 days after the date of issuance of acceptance certificate. The 2nd respondent committed various violations of the agreed terms and conditions. After making several representations to the respondents for reimbursement of the liquidated damages through its letters dated 10.4.2000, 5.10.2000 and 24.4.2001, the applicant ultimately got issued a legal notice dated 8.10.2002 issued to the respondents. Inter alia in the said notice it is claimed to convene a joint meeting to sort out the differences failing which appropriate proceedings under the relevant provisions of the contract agreement would be taken. When there has been no response on the part of the respondents, the petitioner again got another notice dated 22.11.2002 issued inter alia by nominating an arbitrator requesting the respondents to nominate their arbitrator. However, later on 29.11.2002, the petitioner received a letter in response to his first notice dated 8.10.2002 requesting him to attend to the informal negotiations for amicable resolution of the dispute. Accordingly, the petitioner attended the meeting on that day and when it was postponed on the next date suggested by the authorities of the 2nd respondent, when there was deadlock to the negotiations, the petitioner again got another notice dated 9.12.2002 issued to the respondents fixing the date to appoint an arbitrator on their side for resolution of the dispute. Eventually, he filed the present application on 28.2.2003 before the Court seeking appointment of an arbitrator.

3. There has been no gainsaying about the agreement entered into in between the parties inter se and conditions stipulated therein. Equally, there is no dispute about the existence of the arbitration clause for resolution of the disputes between the parties. The issuance of notices by the applicant on various dates namely 8.10.2002 and 22.11.2002 are also not in dispute.

4. The only point the respondents seek to urge before the Court mentioning inter alia in the counter is that as per Clause 15(c) of the Arbitration agreement, the Presiding Officer shall be nominated by the President of the Institute of Engineers and that has not been complied with in this case. Finally, it is represented by the learned Standing Counsel appearing for the respondents that soon after the request made by the applicant, the file was processed and eventually an arbitrator was appointed by the respondents on 1.4.2003 and the same was communicated to the applicant and therefore, the present application seeking appointment of an arbitrator cannot be considered.

5. This appointment of an arbitrator by the respondents is obviously subsequent to the filing of the present application by the applicant before this Court. It may be reiterated here that the application was filed on 28.2.2003, arbitrator was appointed on 1.4.2003 and the communication thereof was received by the applicant on 6.4.2003. Such an appointment after the filing of the application cannot be countenanced. The parties are expected to act within 30 days as set out in the notice issued by the opposite party. Of course that may not forfeit his right to appoint an arbitrator even beyond 30 days provided such appointment is made before filing of the application into the Court by one of the parties seeking appointment of an arbitrator by the Chief Justice or his designate under the Scheme. Once that application is filed into the Court the opposite party forfeits his right to appoint an arbitrator and the procedure envisaged under the arbitration clause for appointment of arbitrator ceases to be in existence. The legal position is no more res Integra and is squarely covered by the judgment of the Apex Court in Dattar Switchgears v. Tata Finance Ltd, . The Apex Court held thus:

“If party having responsibility of appointing arbitrator does not do so within . 30 days of the demand being made by the other party, held, the right to make appointment is not automatically forfeited. The appointment can still be made, but before the other party moves the Court under Section 11 of the Act. Once the other party moves the Court the right to make the appointment ceases to exist.”

6. In view of the said judgment, the only objection raised by the respondents inter alia in the counter cannot be countenanced. It is therefore a clear case where the request of the petitioner shall have to be considered.

7. In the result, the application is allowed and Sri Justice K. Rama Chandra Rao, (Chief Justice, retired) is appointed as a sole arbitrator for the resolution of the dispute. It is open to the arbitrator to fix his fees. In the circumstances, there shall be no separate order as to costs.

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