IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision : 20.04.2011 Arb. Case No.3 of 2010 Kunal Bansal ...Petitioner Versus M/s Vatika Land Base Limited ...Respondent Arb. Case No.4 of 2010 Vinod Bansal ...Petitioner Versus M/s Vatika Land Base Limited ...Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? Present : Mr. Alok Jagga, Advocate, for the petitioner(s). Mr. Adarsh Jain, Advocate, for the respondent(s). HEMANT GUPTA, J. (ORAL) This order shall dispose of afore-mentioned two cases raising identical question of law and facts. However, for facility of reference, the facts are taken from Arbitration Case No.3 of 2010. Smt. Rekha Bahri and Shri Parmod Bahri entered into an Agreement dated 25.04.2006 for purchase of ‘Three Bedroom Apartment, Arb. Case No.3 of 2010 & Arb. Case No.4 of 2010 Sohna Road, Gurgaon’ having approximately super area of 198 sq. mtr. (2131.58 sq. ft.) along with car parking space in the basement/surface of the said apartment building. The respondent has agreed to complete the construction of the apartment within a period of three years from the date of execution of the Agreement subject to exceptions mentioned in the different clauses of the Agreement. The petitioner is transferee of the rights of the aforesaid allottees, which transfer stands recognized by the respondent vide endorsement Annexure P-2. As per the petitioner, the respondent failed to complete the construction within the stipulated period though the petitioner has completed his part of the contract. The petitioner paid Rs.16,34,671.75 in installments allegedly in terms of the agreement but the respondent has not even started construction of the building. It was on 23.07.2008 (Annexure P-3), the respondent raised demand of Rs.13,29,737/- against installment due on casting of 2nd floor. Another demand was raised on 11.11.2008 allegedly due on casting of 5th floor. Since, the petitioner has not deposited the aforesaid installments, the respondent terminated the allotment vide communication dated 22.12.2008. It is the case of the petitioner that the demands have been raised without raising construction and not in terms of the conditions of the allotment. The petitioner vide communication dated 21.09.2009 invoked arbitration clause and sought appointment of an Arbitrator after the termination of the allotment. The said request of the petitioner for appointment of an Arbitrator was declined vide communication dated 12.10.2009 (Annexure P-6) inter-alia for the reason that the Arbitrator has to be nominated by the Company and that the petitioner has no power 2 Arb. Case No.3 of 2010 & Arb. Case No.4 of 2010 whatsoever to refer any dispute to an Arbitrator selected by the petitioner and not the least based at Chandigarh. Thereafter, the present petition for appointment of an Arbitrator was filed before this Court on 22.12.2009. In reply dated 29.10.2010, the respondent has relied upon communication dated 25.10.2010 (Annexure R-1), whereby Mr. Vivek Malik, Advocate, has been appointed as an Arbitrator after denying the assertions of the petitioner. Learned counsel for the petitioner has vehemently argued that the respondent has appointed an Arbitrator after invocation of the jurisdiction of this Court under Section 11(6) of the Arbitration and Conciliation Act, 1996, therefore, the Arbitrator appointed by the respondent cannot be permitted to proceed with the arbitration proceedings, as the right of the respondent to appoint an Arbitrator stands precluded after the filing of the petition. Reliance is placed on the judgments of Hon’ble Supreme Court reported as Datar Switchgears Ltd. Vs. Tata Finance Ltd and another (2000) 8 SCC 151 and Northern Railway Administration, Ministry of Railway Vs. Patel Engineering Company Ltd. (2008) 10 SCC 240. On the other hand, learned counsel for the respondent has argued that the arbitration clause is specific to the effect that the arbitration proceedings shall be held at the Corporate Office of the Company and the Arbitrator shall be nominated by the Company. Since the petitioner has not raised demand for adjudication of the disputes in terms of the arbitration clause, therefore, the demand raised by the petitioner on 21.09.2009 cannot be treated as a demand for appointment of an Arbitrator. Consequently, the respondent has validly appointed an Arbitrator though after the filing of the 3 Arb. Case No.3 of 2010 & Arb. Case No.4 of 2010 present petition. In support of such argument, reliance is placed upon Indian Oil Corporation Limited and others Vs. Raja Transport Private Limited (2009) 8 SCC 520. Before the respective arguments of the parties are considered, some of the relevant extracts from the agreement and communications between the parties, are required to be extracted. The relevant clauses read as under: Arbitration clause between the parties: “Arbitration All or any disputes arising out of or touching upon or in relation to the terms of this Agreement including the interpretation and validity of the terms thereof and the respective rights and obligations of the parties shall be settled amicably by mutual discussion failing which the same shall be settled through arbitration. The arbitration proceedings shall be governed by the Arbitration & Conciliation Act, 1996 or any statutory amendments/modifications thereof for the time being in force. The arbitration proceedings shall be held at the corporate office of the Company alone at Gurgaon stated hereinabove by a Sole Arbitrator who shall be nominated by the Company. The Apartment Allottee hereby confirms that he/she shall have no objection to this appointment. The courts at Gurgaon alone and the Punjab & Haryana High Court at Chandigarh alone shall have the jurisdiction in all matters arising out of/touching and/or concerning this Agreement regardless of the place of execution of this Agreement which is deemed to be at Gurgaon.” Extract from letter dated 21.09.2009 (Annexure P-5): “That the agreement dated 25.04.2006 contains an arbitration clause and evidently there is a dispute between the parties which have arisen due to the illegal acts of the company. The undersigned is entitled for the allotted flat and whereas the company has alleged the cancellation and has also alleged forfeiture of the earnest money 4 Arb. Case No.3 of 2010 & Arb. Case No.4 of 2010 which itself is a matter of dispute. The undersigned therefore refers the name of following arbitrator for adjudication of the dispute:- Sh. Ashok Kumar Jagga, Bunglow No.231, Sector-21, Chandigarh (Punjab). It would be pertinent to mention that in case the undersigned does not receive a reply within 7 days from the receipt of the notice, it shall be presumed that you had accepted the initiation of arbitration as per the terms of the present notice failing which necessary intimation for initiation of the proceedings shall be intimated to you.” Extract from letter dated 12.10.2009 (Annexure P-6): “2. The arbitration clause in the contract, which you have relied upon, clearly stipulates that the arbitration proceedings, if any, shall be held at our corporate office at Gurgaon alone by a Sole Arbitrator who shall be nominated by us. You have thus no power whatsoever to refer any dispute to an arbitrator selected by you and not the least based at Chandigarh.” Though the Agreement between the parties contemplates that the Arbitrator shall be nominated by the Company and the same shall be held at the Corporate Office of the Company at Gurgaon. Such fact is not disputed by either of the parties. It is contended that the petitioner having raised dispute, the respondent is bound to appoint an arbitrator. The request for appointment of an Arbitrator on 21.09.2009 by the petitioner (Annexure P-5) is in two distinct and severable parts. Firstly, the petitioner has pointed out that there is an arbitration clause and there exist disputes, which have arisen due to the illegal acts of the Company and that the cancellation is illegal and that the forfeiture of the earnest money itself is a matter of dispute. The petitioner having crystallized the disputes in the aforesaid letter, the petitioner then has proceeded to nominate his 5 Arb. Case No.3 of 2010 & Arb. Case No.4 of 2010 arbitrator. The second part of nomination of an arbitrator is severable from the first part and is liable to be ignored. Thus the respondent was duty bound to appoint an Arbitrator in terms of the Arbitration Clause between the parties, referred to above. The respondent in its reply has not disputed the existence of the disputes. Once disputes were in existence the respondent was bound to appoint an Arbitrator in terms of the Agreement. Having failed to appoint an Arbitrator before the filing of the present petition, the respondent is now precluded from appointing an Arbitrator in terms of judgment of Hon’ble Supreme Court in Datar Switchgears Ltd. case (supra). The judgment referred to by the learned counsel for the respondent in Indian Oil Corporation Limited case (supra), is not helpful to the arguments raised on behalf of the respondent. In the aforesaid case, vide demand dated 04.01.2006, the respondent therein has sought appointment of an independent Arbitrator by mutual discussion, which was found to be not in terms of the procedure agreed between the parties. However, in the present case, the demand raised by the petitioner is clear and categorical in respect of existence of disputes and demand for appointment of an Arbitrator. The nomination of an Arbitrator by the petitioner is distinct and severable part of the communication and thus does not affect the right of the petitioner to raise dispute and to seek its adjudication by an arbitrator in terms of the agreement. The respondent having failed to appoint an Arbitrator before the invocation of jurisdiction of this court by the petitioner, the respondent cannot be permitted to continue with the Arbitrator appointed by them after the filing of the present petition. 6 Arb. Case No.3 of 2010 & Arb. Case No.4 of 2010 In view of the above, Shri M.K.Bansal, District Judge (Retd.), resident of 175, Hope Apartment, Jharsa Road, Gurgaon, is appointed as an arbitrator to resolve all the disputes between the parties. The Arbitrator shall be entitled to charge fee not exceeding Rs.11,000/- per hearing and for not more than 10 hearings apart from expenses of Rs.25,000/-. Such arbitration expenses shall be shared equally by parties subject to the rights of the parties as resolved by the Arbitral Tribunal. 20.04.2011 (HEMANT GUPTA) Vimal JUDGE 7