JUDGMENT
A.K. Sikri, J.
Page 0475
1. There are disputes between the petitioner No.1 and the respondent No.1. In view of arbitration agreement between the parties, the matter was referred Page 0476to the arbitrator and the arbitration is in progress. Initially, the respondent No.2 was appointed as the arbitrator. However, for certain reasons, which would be stated later at appropriate stage, the respondent No.2 discontinued with the proceedings and vide order dated 2nd April, 2003 left the parties to appoint a new arbitrator. Thereafter, Mr.Anil Bhalla, the respondent No.1 appointed respondent No.3 as the arbitrator and this was communicated to the petitioners vide letter dated 29th April, 2003. The appointment of the respondent No.3 as the new arbitrator is not acceptable to the petitioners. They feel that the respondent No.1 earlier objected to the continuation of the respondent No.2 as the arbitrator on frivolous grounds to ease him out so that the respondent No.1 could appoint another arbitrator of his choice. This petition is filed under Section 14(2) of the Arbitration and Conciliation Act, 1996 (for short `the Act’) for a decision on the termination of the mandate of the respondent No.3 with the additional prayer that the respondent No.2 should resume the arbitration proceedings which were being conducted by him.
2. Now, the facts in some detail.
3. The petitioners had purchased from the respondent No.1 a plot of land in Sohna, District Gurgaon, Haryana vide agreement dated 6th June, 1989. The petitioners were aggrieved against certain unfair trade practices allegedly indulged in by the respondent No.1. They approached the Monopolies and Restrictive Trade Practices Commission, New Delhi by filing a complaint which was registered as RTPE No.41/2001. This complaint was, however, disposed of vide order dated 5th March, 2002 whereby the petitioners and the respondent No.1 were directed to take recourse to remedy of arbitration in view of clause 14 (xi) of the agreement dated 6th June, 1998. In terms of this clause, Mr.Anil Bhalla was to appoint an arbitrator in the event of disputes and differences between the parties. The clause is in the following terms: 14 (xi) In the event of any dispute or difference arising out of of relating to this Agreement between the parties, the same shall be referred to the arbitration of a nominee of Shri Anil Bhalla of the Vendor and any award made in such arbitration shall be final, conclusive and binding on the parties. The venue of such arbitration shall be at New Delhi.
4. Mr.Anil Bhalla, vide communication dated 13th April, 2002 appointed respondent No.2 as the arbitrator. Respondent No.2 commenced the arbitration proceedings. The petitioners filed their statement of claim. Reply to this statement of claim was also filed on behalf of the respondent No.1. As the petitioners wanted to amend their statement of claim on the ground that certain new facts had come to their knowledge, they moved an application for this purpose before the respondent No.2/arbitrator. At this stage of the proceedings, in January, 2003, the respondent No.1 protested about the fee charged by the arbitrator alleging that the same was too high and wrote communication dated 20th January, 2003 in this behalf. Request was also made to reduce the fee. The respondent No.2, however, rejected that application vide orders dated 28th January, 2003 and adjourned the case to 15th February, 2003. However, before the said date, the respondent No.1 filed a statement of challenge dated 7th February, 2003 whereby the mandate of the respondent No.2 was challenged mainly on the issue of fee and allegation was also made that the arbitrator was not a neutral person as he was a Page 0477friend of Mr.Anil Aggarwal who was the counsel representing the respondent No.1 earlier. The petitioners filed reply thereto and the arguments on this statement of challenge were heard by the respondent No.2 who rejected the same vide order dated 2nd April, 2003. At the same time, the respondent No.2. chose to recuse himself from the arbitration proceedings by making following observations in the said order: This tribunal while rejecting the said application, however, feels that in view of the continued demands on the part of complainants/non claimants to have the proceedings terminated on some ground or the other, and by making allegations against the arbitrator on unfounded and baseless grounds, the arbitrator has left with no other alternative, but to discontinue with the proceedings as the arbitrator and leave the parties to appoint a new arbitrator if they so desire.
5. The petitioners, however, vide application dated 17th April, 2003 under Section 13(4) of the Act requested the respondent No.2 to continue with the proceedings. During the pendency of this application, the petitioners received a letter dated 29th April, 2003 from the respondent No.3 informing that he had been appointed as the arbitrator. The petitioners responded vide letter dated 1st May, 2003 informing the respondent No.3 that their application dated 17th April, 2003 was still pending with the respondent No.2 with request to continue as the arbitrator and, therefore, appointment of the respondent No.3 was premature. The respondent No.2, however, vide letter dated 3rd May, 2003 informed the petitioners that he was unable to pass any orders.
6. Under these circumstances, the petitioners have approached this court by means of the present petition.
7. The respondent No.1 has filed the reply challenging the maintainability of this petition. It is stated that since the respondent No.2 had withdrawn himself from the office of the arbitrator vide his order dated 2nd April, 2003 and declined to re-enter the reference or continue with the arbitral proceedings, the respondent No.1 under these circumstances appointed the new arbitrator, namely, respondent No.3. It is further alleged that this petition is moved with ulterior motives. It is also mentioned that the petitioners had challenged the jurisdiction and authority of the respondent No.3 to enter upon the reference and to proceed with the matter and the respondent No.3 has already rejected the said challenge/objection of the petitioners and decided jurisdiction in his favor. Therefore, matters falls under Section 16(5) of the Act and the respondent No.3 is entitled to proceed with the matter and make arbitral award. Aggrieved party could challenge the said award including the mandate of the respondent No.3 as arbitrator only after the award by moving an application under Section 34 of the Act as stipulated under Section 16(6) of the Act and petition at this stage was premature and not maintainable. It is further alleged that the respondent No.2 had fixed excessive fee and the circumstances under which the respondent No.1 had to challenge the same including his appointment are also stated.
8. It is the case of the petitioners that immediately after the appointment of the respondent No.2 vide letter dated 13th April, 2002 in one of the dates of hearing i.e. on 20th July, 2002 the respondent No.2 had fixed his fee at Rs.Page 04783,000/- for each preliminary hearing and fee of Rs.5,000/-for subsequent hearing when evidence was to be recorded or arguments were to be heard. This fee was fixed in the presence of and with the consent of counsel for the parties. Fee was to be shared equally by the petitioners and the respondent No.1. Belated objection to the fixation of fee as too high i.e. almost more than 8 months after the commencement of the proceedings vide letter dated 20th January, 2003 with sole attempt to ensure that the respondent No.2 moves out. It is because of this reason statement of challenge dated 7th February, 2003 was also filed which was rightly rejected by the respondent No.2 vide order dated 2nd April, 2003.
9. No doubt the respondent No.1 has sought to justify its statement of challenge filed before the respondent No.2. However, the contention of the petitioners appears to be correct and such a challenge to the fee of the arbitrator was clearly belated. The respondent No.2 rightly rejected the plea of the respondent No.1. However, it be noted that while rejecting this challenge, the respondent No.2 has himself decided to discontinue with the proceedings as the arbitrator. Once he adopted this particular course of action and thereafter even on the request of the petitioners to continue with the proceedings, rejected this request of the petitioners also, it may not be now proper to direct the respondent No.2 to resume the arbitration proceedings.
10. At the same time, due to the aforesaid conduct of the respondent No.1 and the manner in which the respondent No.1 has appointed the respondent No.3, apprehension of the petitioners that the petitioners would not get fair hearing from the respondent No.3 also cannot be ill founded. The petitioners have made the allegations that the respondent No.1 and the respondent No.3 are acting in collusion with each other and the petitioners have no faith either on the respondent no.1 or in any person appointed by the respondent No.1. No doubt arbitration clause mentions that the arbitrator is to be an nominee of Mr.Anil Bhalla and thus Mr.Bhalla has the authority to fill the vacancy caused, under Section 15 of the Act. However, even when he had appointed the first arbitrator and the petitioners herein accepted the said appointment, it is the respondent and/or Mr.Anil Bhalla who saw to it that the first arbitrator is eased out from the arbitration proceedings and in the manner in which it is done, has created doubts in the mind of the petitioners that it was deliberate attempt of the respondents when they felt that the first arbitrator was acting impartially and, therefore, managed his ouster and brought another person of his choice. Under these circumstances, it would be appropriate for the court to appoint the arbitrator and the court is not powerless, notwithstanding the arbitration clause. In Interstate Construction v. NPCC Construction , 2004 3 Recent Arbitration Judgment 672 (Del.) where this court doubted the impartiality of the Chairman NPCC, designated authority and the arbitrator, the court appointed an independent arbitrator and observed : It is this type of conduct and dealing which sometimes compels a Court to override clauses in an agreement which waive objection as to impartiality of the Arbitration on the grounds that he is an officer of one of the parties to the dispute.
Page 0479
11. Though in somewhat different circumstances, such a power was exercised by the Division Bench of this Court in the case of Sushil Kumar Raut v. Hotel Marina and Ors. reported as holding:
We are conscious of the position that arbitration admits of least judicial intervention and the manner in which an arbitrator is to be appointed. But we are faced with an impasse which is neither covered by the provisions of the Arbitration Act, nor any precedent. This, if left unattended would have the natural consequence of leaving the dispute between the parties unresolved which would be contrary to the spirit and intent of the Arbitration Act. It would, therefore, require to be broken which can be only done by the appointment of an impartial arbitrator. This may not be technically or strictly in tune with the provisions of the Act which do not provide for such like eventualities but it is surely dictated by the interests of justice. Therefore to promote and secure the interests of justice, it would be appropriate to set aside the impugned order and appoint an independent arbitrator.
12. For all these reasons, I am of the view that an independent arbitrator be appointed by the court in whom both the parties could repose confidence. I feel that it is a fit case wherein the court has to step in to promote and secure the interests of justice. The mandate of the respondent No.3 is accordingly terminated. Consequently Ms.Kanwal Inder, retired District Judge, Delhi is appointed as the arbitrator. Her fee is fixed at Rs.3,000/- per hearing with maximum fee of Rs.33,000/-, in addition to out of pocket expenses. It would be open to her to start the proceedings afresh or continue from the stage where the respondent No.2 left the proceedings.
13. The petition is disposed of. Applications also stand disposed of. January 24, 2006.