THE HON’BLE Ms. JUSTICE G.ROHINI ARBITRATION APPLICATION No.150 OF 2010 Dated: 15.02.2011 Between M/s. Sai Jitesh Constructions (P) Limited, Having its regd. office at Flat No.3, Badam Apartments, Vijayapuri, Tarnaka, Secunderabad, Rep. by its Managing Director P. Sridhar. … Applicant And 1. Y. Vijayalakshmi and another. ..Respondents * THE HON’BLE Ms. JUSTICE G.ROHINI ARBITRATION APPLICATION No.150 OF 2010 % 15.02.2011 Between # M/s. Sai Jitesh Constructions (P) Limited, Having its regd. office at Flat No.3, Badam Apartments, Vijayapuri, Tarnaka, Secunderabad, Rep. by its Managing Director P. Sridhar. … Applicant $ 1. Y. Vijayalakshmi and another. ...Respondents ! COUNSEL FOR PETITIONER: Sri G.V.Rayudu ^ COUNSEL FOR RESPONDENT No.1: Sri Sri Srinivas Chitturu ^ COUNSEL FOR RESPONDENT No.2: B. Yuvaraj < Gist: > Head Note: ? CITATIONS: 1. AIR 2002 SC 778 2. AIR 2007 SC 1376 3. AIR 2009 SC 1138 4. 2006 (9) SCALE 564 THE HON’BLE Ms. JUSTICE G.ROHINI ARBITRATION APPLICATION No.150 OF 2010 ORDER : This application is filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 seeking appointment of an Arbitrator to adjudicate the claims of the applicants against the respondents. The applicant herein claims to be a company engaged in the business of construction and development of land for the purpose of construction of multi-storeyed complexes. It is stated that the respondents herein who are the owners of the property bearing No.5- 2-210 to 212, No.8, Distillery Road, Secunderabad, entered into a Registered Development Agreement-cum-General Power of Attorney, dated 15.04.2006 with the applicant for the purpose of construction of 2nd to 4th floors on the said property and as per the agreed terms the applicant obtained the required permissions to proceed with the construction. Thereafter the parties had entered into supplementary agreement dated 8.2.2008 whereby the constructed areas were divided among the parties. According to the applicant, the respondents herein were allotted excess area of 331 sft. and 71 sft. respectively for which they had agreed to pay the differential amount. It is also claimed that the applicant has paid a sum of Rs.6,28,000/- to the 1st respondent as refundable deposit and a sum of Rs.5,00,000/- to the 2nd respondent towards refundable advance amount of lease. Thus according to the applicant a sum of Rs.29,72,000/- is payable by the respondents herein. It is alleged that the respondents had taken possession of their respective flats without the consent of the applicant and that they had also failed to refund the amounts payable to the applicant in spite of the legal notice got issued by the applicant. In the circumstances, invoking the arbitration clause in the Development Agreement, the applicant issued notice dated 21.08.2010 by registered post calling upon the respondents to come forward to appoint a sole arbitrator to resolve the disputes amicably. Though the said notice was received, the respondents failed to respond. Hence the present application. Separate counter-affidavits have been filed by the respondents 1 and 2 contending that the arbitration application is not maintainable under law since the applicant had approached this Court even before expiry of 30 days from the date of receipt of notice as contemplated under Section 11 (4) of the Arbitration and Conciliation Act, 1996. It is also contended that the notice dated 21.08.2010 issued by the applicant was contrary to the procedure contemplated under the agreement since it was silent about the arbitrator chosen by him. I have heard the learned counsel for both the parties and perused the material available on record. So far as the first objection raised by the respondents that the applicant had approached this Court even before expiry of 30 days provided under Section 11 (4) of the Arbitration and Conciliation Act is concerned, it is true that sub-section (4) of Section 11 prescribed 30 days time to the opposite party to appoint an arbitrator and therefore a request for appointment of an arbitrator has to be made only after expiry of 30 days from the receipt of notice. However sub-section (4) is applicable only to the matters where the appointment of arbitrator between the parties is not covered by an agreement. The matters which are covered by an agreement for appointment of arbitrator are governed by sub-section (6) which does not provide for a time-frame to enable the other party to respond. For proper appreciation, Section 11 of the Act may be extracted hereunder: “11. Appointment of Arbitrators:- (1)A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in sub-section (3) applies and- (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (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 from 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. (7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final. (8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to- (a) any qualifications required of the arbitrator by the agreement of the parties; and (b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator. (9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. (10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub- section (6) to him. (11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub- section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request. (12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the "Chief Justice of India". (b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and ( 10) arise in any other arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a 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 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court. A reading of sub-section (6) of Section 11 shows that in matters where the procedure for appointment of an arbitrator has been agreed upon by the parties, a party may request for appointment of arbitrator only where the other party fails to act as required under the procedure provided in the agreement or where the parties or the arbitrators fail to reach an agreement in the matter of appointment of an arbitrator in terms of the agreement or where a person fails to perform any function entrusted to him under that procedure. In the instant case, both the parties are governed by Clause-26 of the Agreement dated 15.04.2006 which provided for arbitration in case of disputes between the parties. It is also not in dispute that the said Clause-26 did not provide for any time-frame to enable the other party to respond. Therefore, in my considered opinion, there is no need to wait till the expiry of 30 days from the receipt of the notice for presenting an application before this Court. Admittedly, the notice dated 21.08.2010 was issued by the applicant calling upon the respondents to respond within 10 days. The said notice was received by the respondents on 27.08.2010. Since there was no response from them within 10 days from 27.08.2010, the present application was filed before this Court on 7.9.2010. Hence the failure to wait for 30 days from the date of receipt of notice does not vitiate the proceedings. At any rate, as held by the Supreme Court in M/s. KONKAN RLY. CORPN. LTD. v. M/s. RANI CONSTRUCTION P. LTD.[1] there is no impediment in contending before the Arbitral Tribunal that it had been wrongly constituted although the period of 30 days had not expired and therefore it had no jurisdiction. Hence on the ground of non-compliance of the provisions of Section 11 of the Act, the application cannot be rejected as not maintainable. Coming to the next objection, Clause No.26 of the Agreement dated 15.04.2006 which provides for arbitration reads as under: “26. In case of any dispute arising between the parties hereto touching these presents the matter shall be referred to the arbitrators one chosen by each party and in case of the difference of opinion between such arbitrators, they shall nominate a common umpire between such arbitrators and their award shall be final and binding on both parties and the relevant provisions of Arbitration Act shall supply.” A reading of the above clause shows that in case of any dispute, each party has to choose one arbitrator and the matter shall be referred to those arbitrators. In case of the difference of opinion between such arbitrators, they shall nominate a common umpire between such arbitrators and their award shall be final and binding on both parties. However the applicant in its notice dated 21.08.2010, while invoking the above said arbitration clause, did not name his arbitrator, but on the other hand called upon the respondents to appoint a sole arbitrator and further added that if any divergent opinion was expressed the applicant would choose to appoint his own arbitrator and the respondents may choose to appoint their own arbitrator who would enter into reference to resolve the issue. Apparently the said procedure followed by the applicant is not in accordance with the procedure prescribed under Clause-26. As could be seen from the arbitration clause extracted above, there is no provision for appointment of a sole arbitrator for resolution of the disputes. The said clause enables each party to choose one arbitrator each and the dispute shall be referred to the two arbitrators so nominated. In case of any difference of opinion between the said two arbitrators, a common umpire has to be nominated whose award should be final. Since the applicant had completely deviated from the procedure prescribed in the arbitration clause and called upon the respondents to appoint a sole arbitrator, as rightly contended by the respondents, the application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 cannot be maintained. This view of mine is fortified by the decisions of the Supreme Court in INDIA HOUSEHOLD AND HEALTHCARE LTD. v. LG HOUSEHOLD AND HEALTHCARE LTD.[2] and STANDARD CORROSION CONTROLS PVT. LTD. v. S.E. SERVICES SDN BHD[3] wherein it was held that an application for appointment of an arbitrator was not maintainable unless the procedure and mechanism agreed to by and between the parties was complied with. It was also held in NATIONAL HIGHWAYS AUTHORITY OF INDIA & ANR. v. BUMIHIWAY DDB LTD. (JV) & ORS.[4] that the parties are required to comply with the procedure of appointment of arbitrator as agreed to and the defaulting party cannot be allowed to take advantage of its own wrong. For the aforesaid reasons, the Arbitration Application is dismissed. No costs. ______________ G. ROHINI, J. Date: 15.02.2011 Note: L.R. Copy to be marked gbs [1] AIR 2002 SC 778 [2] AIR 2007 SC 1376 [3] AIR 2009 SC 1138 [4] 2006 (9) SCALE 564