1 AA99/10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION APPLICATION NO.99 OF 2010 Infrastructure Leasing and Financial Services Ltd. ...Applicants v/s Madhya Pradesh Audyogik Kendra Vikas Nigam (Indore) Ltd. And anr. ...Respondents Mr Rohit Kapadia, Sr. Counsel i/b M/s Negandhi, Shah and Himayatullah for Applicants. Mr S.U. Kamdar, Sr. Counsel with Mr Cyrus Adreshir i/b Mrs Vanita Kakar Kachwaha and Partners for Respondents. CORAM : D.K. DESHMUKH J. DATE : 8TH APRIL 2011. 2 AA99/10 P.C. :- 1] This is an application filed under section 11 of the Arbitration and Conciliation Act 1996 for appointment of Arbitrator. The relevant and material facts are that an agreement dated 10th January 1996 was entered into between the applicants, respondent No.1 and the respondent No.2 for formation of a Company which was to be called MP Tools Ltd. In that agreement, there was an arbitration clause, which reads as under :- Arbitration : All disputes, differences, claims and questions whatsoever arising from this Agreement between the parties and / or their respective representatives touching these presents or any clause or thing herein contained or otherwise in any way relating to or arising from these presents shall be referred to the arbitration of 3 AA99/10 three arbitrators, one to be appointed by each party to the dispute and such arbitration shall be in accordance with and subject to the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof for the time being in force. Such arbitration proceedings will be held at Indore, unless otherwise mutually agreed to. The dispute arose between the parties. Therefore, a letter dated 16th March 2010 was addressed by the respondent Nos.1 and 2 to the applicants informing the applicants that as the disputes have arisen between the parties and in view of the arbitration clause, the respondent No.1 is appointing Mr Justice P.D. Mulye (Retired), High Court of Madhya Pradesh as its nominee on the Arbitral Tribunal and that the respondent No.2 is appointing Mr Justice V.S. Kokje (Retired), High Court of Madhya Pradesh. The applicants were requested to appoint their nominee on the Arbitral 4 AA99/10 Tribunal. By communication dated 15th April 2010, the applicants informed the respondent Nos.1 and 2 that they are appointing Mr Justice S.P. Bharucha (Former Chief Justice of India). On 16th April 2010 the applicants addressed a communication to the respondent Nos.1 and 2 informing them that in view of the aforesaid confirmatory letter to the aforesaid e-mail and the letter appointing Hon ble Justice S.P. Bharucha are kept in abeyance. On behalf of the respondents, a letter dated 29th April 2010 was addressed to the applicants pointing out that it is not clear from their letter whether they have appointed Mr Justice S.P. Bharucha on the Arbitral Tribunal or not. The applicants in this situation have filed this application for appointment of Arbitrator. The learned counsel appearing for applicants submits that in the arbitration agreement, because there is no procedure for appointment of Arbitrator between the parties, provisions of sub-section (3) of section 11 of the Arbitration and Conciliation Act 1996 are attracted and therefore, in this petition, an order has to be 5 AA99/10 made constituting the Arbitral Tribunal. According to the respondents, this application is not maintainable because constitution of the Arbitral Tribunal is complete inasmuch as the respondents have appointed their nominees on the Arbitral Tribunal. The applicants have also appointed their nominee on the Arbitral Tribunal. If according to the applicants, the Arbitral Tribunal is not validly constituted, their remedy to file objection under section 16 of the Act before the Arbitral Tribunal and invite the Arbitral Tribunal to rule on its own constitution. The learned counsel appearing for respondents relied on the judgment of the Supreme Court in the case of Narayan Prasad Lohia v/s Nikunj Kumar Lohia and others, reported in AIR 2002 SC 1139. It was also contended, relying on clause 14 of the agreement quoted above that the petition is not maintainable in this Court and that the Court at Indore has exclusive jurisdiction. 2] Now first taking up the objection raised by the respondents as to the maintainability of the 6 AA99/10 petition in this Court for consideration, in my opinion, that objection has no substance. According to the provisions of section 11(12)(b) of the Act, when an application is to be made under sub-sections (4), (5), (6), (7), (8) and (10) of section 11, reference to the Chief Justice is to be construed as reference to the Chief Justice of the High Court within whose local limits the principal civil court referred to in clause (e) of sub-section (1) of section 2 of the Act is situated. Section 2(1)(e) of the Act reads as under :- 2(1)(e) Court means the principal civil Court or original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, but does not include any civil Court of a grade inferior to such principal civil Court, or any Court 7 AA99/10 of Small Causes; Thus, for deciding whether a particular Court is the Court within the meaning of Arbitration and Conciliation Act, one has to decide whether the party who has invoked the arbitration clause could have filed civil suit on the subject matter of dispute in relation to which arbitration clause is involved by the party who has invoked the arbitration clause in that Court had there been no arbitration agreement between the parties. In the present case, it is the respondents who have raised the dispute and therefore, an enquiry will have to be made to find out whether had there been no arbitration agreement between the parties, could the respondents have filed a civil suit in this Court against the applicants ?. The answer to this question has to be in the affirmative because admittedly the applicants carry on business within the original jurisdiction of this Court. Therefore, a suit filed by the respondents against the applicants in relation to the disputes which are to 8 AA99/10 be referred to arbitration would be maintainable in this Court. Therefore, in my opinion, the objection that this Court will not have jurisdiction to entertain the application has no substance. What is further to be seen is that the agreement which contains the arbitration clause is admittedly signed at Bombay. Clause 14 confers exclusive jurisdiction on the Court at Indore. However, it appears that no part of cause of action has arisen in Indore because the purpose of the agreement is to create a special purpose vehicle. The learned counsel appearing for respondents invited my attention to the clause of the agreement which defined the project which is to be undertaken by the special purpose vehicle, which has independent existence because of the agreement. In my opinion, because the activity of the special purpose vehicle which has to come into existence as a result of the agreement will take place within the jurisdiction of the Indore Court, it cannot be said that any part of cause of action has arisen within 9 AA99/10 the jurisdiction of Indore Court. The dispute between the parties relate to formation of the special purpose vehicle and not to the work of the special purpose vehicle. In my opinion, therefore, this objection has no substance. Then so far as the question whether the present application, in view of appointment of Arbitrators by the respondents is maintainable or not is concerned, it is clear that an order under section 11 of the Act can be made for appointment of Arbitrator or for constitution of Arbitral Tribunal only if appointment of Arbitrator or Arbitral Tribunal not already made. Obviously if the Arbitral Tribunal is already in place, an application under section 11 is not maintainable. It is clear from the correspondence between the parties that the respondents have made appointment of their nominees on the Arbitral Tribunal. If according to the applicants, the appointment of two nominees by the respondents on the Arbitral Tribunal was not in accordance with the agreement and law, it was for the applicants to say so and decline to nominate their nominee on the Arbitral Tribunal. 10 AA99/10 But, the applicants acted pursuant to the communication of the respondents and appointed their nominee on the Arbitral Tribunal. On next date, they sent a letter putting their letter appointing their nominee in abeyance but they have to this date not revoked that appointment. The respondents therefore enquired from them whether appointment of their nominee is in place or they have revoked the appointment. In this situation, the applicants could have either nominated their nominee or could have declined to appoint their nominee. In case the applicants decline to nominate their nominee, the respondents would be required to move an application for completing constitution of the Arbitral Tribunal. However, instead of doing that, the applicants have chosen to file this application. In my opinion, the learned counsel appearing for respondents was right in submitting that any order made in this application constituting Arbitral Tribunal as claimed by the applicants, would result in removal of two Arbitrators who have been appointed by the respondents and that cannot be done 11 AA99/10 in the application filed under section 11 of the Act. In my opinion, the proper course to be followed by the applicants would be either to nominate their nominee on the Arbitral Tribunal or decline to appoint their nominee on the Arbitral Tribunal. If the applicants appoint their nominee on the Arbitral Tribunal, it is always open to them to raise objection to the jurisdiction and validity of the Arbitral Tribunal in terms of section 16 of the Act. In case they do not want to nominate their nominee on the Arbitral Tribunal, they can inform the respondents accordingly so that the respondents can take steps to get the Arbitral Tribunal appointed. If such an application is made by the respondents, it is open to them to raise all objections available to them. In my opinion, filing an application under section 11 of the Act is not a remedy available to the applicants in the facts and circumstances of the case. The application is therefore disposed off. Parties to act on the copy of this order 12 AA99/10 duly authenticated by the Associate / Private Secretary of this Court. Certified copy expedited. ( JUSTICE D.K. DESHMUKH )