pvr 1 ap53-07 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.53 OF 2007 George Puthukaran ...Petitioner vs. Microtex India Ltd. ...Respondent --- Mr.Anil Menon i/b. Anil Menon & Co., for Petitioner. Mr.Shamrao B.Gore i/b. Sachin V.Masurkar, for Respondent. --- CORAM: D.K.DESHMUKH, J. DATED: 11th November,2011. P.C.:- 1. By this petition filed under Section 34 of the Arbitration and Conciliation Act,1996, the petitioner challenges an Award made by the sole Arbitrator dated 20.10.2006. The principal ground of challenge is that the appointment of the Arbitrator who made the Award was not in accordance with the arbitration clause and the provisions of law. The relevant facts are that admittedly there is an pvr 2 ap53-07 arbitration agreement between the parties which is contained in clause 25 of the agreement between the parties. Clause 25 reads as under:- “25. ARBITRATION AND JURISDICTION (i) In the event of any dispute arising between the parties hereto in respect of this Agreement or any condition herein contained or as to the rights duties or liabilities of either parties here to or any of them or otherwise touching the subject matter of the Agreement or arising out of or in relation thereto under Indian Arbitration and Conciliation Act,1996, the same will be referred to arbitration to a common arbitrator, agreed upon between the parties of this Agreement whose decision thereon shall be final and binding on the parties hereto. However in any case such disputes shall always be subject to Mumbai jurisdiction. (ii) Any notice required to be given hereunder by either party shall be deemed to be duly given if sent by Registered Post to the other party or left at the following addresses unless pvr 3 ap53-07 the other party has notified in writing the change of address. (iii) This Agreement is deemed to be entered at Mumbai within the jurisdiction of the Courts of Mumbai.” It is clear from perusal of the above clause that the arbitration is by a sole Arbitrator agreed upon by the parties. It appears from the record that by letter dated 21.1.2005 addressed to the petitioner by the lawyer of the respondent, several amounts were claimed as due to the respondent from the petitioner and payment of those amounts was sought. It was also stated that if the amounts are not paid, legal proceedings would be initiated including referring the matter to the arbitration under Clause 25. There was a reply given by the petitioner to the demand letter. The reply is dated 10.2.2005. The petitioner denied his liability. On 26.3.2005, second letter was addressed by the respondent’s lawyer to the petitioner. It is paragraph 3 of that letter which is relevant for the present purpose, it reads as under:- pvr 4 ap53-07 “3. In the above circumstances my clients have referred the dispute for Arbitration under clause 25 of the C & F Agreement to Ld. Arbitrator Shri.Q.M.Ashfaq, having his address at 28/30, Amrut Niwas, Kolbhat Land, Banka Mohalla, Chira Bazar, Mumbai. The Ld. Arbitrator has confirmed to act as Arbitrator and the place of Arbitration will be his above said office at Mumbai. In the above circumstances my clients have instructed me to request you to advise your clients to confirm the said appointment within 15 days from the receipt of this letter by you, failing which my clients shall be left with no other alternative to initiate such appropriate legal proceedings as may be advised including referring the matter to High Court, Bombay for Appointment of Arbitrator, entirely at your client’s own risk as to cost and consequences which your client may be asked to note please.” Thus, the respondent informed the petitioner that they have decided to appoint Mr.Q.M.Ashfaq as Arbitrator, and the petitioner was called upon to agree to his pvr 5 ap53-07 appointment within a period of 15 days from the date of receipt of this letter. It was also stated that in case the petitioner fails to agree then the petitioner will approach this Court for appointment of Arbitrator. It is common ground before me that the petitioner did not respond to this letter. Therefore, the petitioner obviously did not agree to the appointment of Mr.Ashfaq as Arbitrator. Therefore, now as per letter dated 26.3.2005 quoted above, the petitioner should have approached this Court by making application under Section 11 of the Act for appointment of the Arbitrator. It appears that that course of action was not followed by the respondent. The petitioner received a letter dated 20.2.2006 from the Arbitrator informing the petitioner that he has been appointed as Arbitrator and the petitioner should appear before him. The petitioner sent a communication to the Arbitrator pointing out that his appointment is not as per law. It appears that the Arbitrator passed an order dated 2.8.2006 rejecting the objection raised by the petitioner to his appointment, and proceeded to make the Award which is impugned in this petition. The learned Counsel pvr 6 ap53-07 appearing for petitioner submits that the appointment of the Arbitrator who made the Award which is challenged in the petition, is contrary to the arbitration clause and the provisions of Section 11 of the Arbitration & Conciliation Act. The learned Counsel appearing for respondent on the other hand submits that failure of the petitioner to agree to the appointment of Mr.Ashfaq as Arbitrator amounts to the petitioner agreeing to his appointment, and therefore, according to him, Mr.Ashfaq is the agreed Arbitrator. He then submitted that the petitioner in this petition has challenged the Award made by the learned Arbitrator but has not challenged the order passed by the learned Arbitrator rejecting the objection raised by the petitioner to his appointment, and therefore, the Award cannot be set aside on that ground. 2. Perusal of the arbitration clause shows that both the parties have to agree to a particular name for making valid appointment of Arbitrator under the arbitration clause. Admittedly, there is no procedure agreed between the parties for appointment of arbitrator in the arbitration agreement itself. pvr 7 ap53-07 Therefore, it is the provisions of Sub-section 5 of Section 11 of the Act shall apply in the present case. Sub-section 5 of Section 11 of the Act reads as under:- “11. Appointment of arbitrators.- (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. Perusal of the above provisions shows that to bring upon an agreement between the parties on a particular name as arbitrator, the claimant has to give notice to the other party asking the other party to agree to the name suggested by the claimant and 30 days period is to be given to the other party to agree to the name suggested. In the present case by letter dated 26.3.2005, name of Mr.Q.M.Ashfaq was suggested by the pvr 8 ap53-07 respondent to the petitioner as Arbitrator. However, the petitioner was given only 15 days time instead of 30 days time which was requirement of the statute to agree to the appointment. Admittedly, the petitioner did not agree to it. Therefore, in terms of the provisions of sub-section 5 of Section 11 of the Act the remedy of the respondent was to make an application in this Court. It appears from the letter dated 26.3.2005, relevant portion of which has been quoted above, that the respondent was aware of this position in law that in case the petitioner fails to agree to the name of Mr.Ashfaq, he will have to make an application to this Court for appointment of Arbitrator. Admittedly, the respondents did not take that step. Admittedly, Mr.Ashfaq was not appointed as Arbitrator by this Court. Therefore, obviously appointment of Mr.Ashfaq as Arbitrator was invalid, it being contrary to the provisions of Section 11 of the Act. The submission of the learned Counsel appearing for respondent that failure of the petitioner to respond to the letter by which name of Mr.Ashfaq was suggested as Arbitrator amounts to agreeing to the appointment of Arbitrator, is to be pvr 9 ap53-07 rejected because what is contemplated is the positive agreement between the parties on a particular name. So far as the second objection raised on behalf of the respondent is concerned, perusal of sub-section (5) and (6) of Section 16 of the Act makes it clear that if an objection to the jurisdiction of the Arbitrator is raised then the Arbitrator is to decide that objection and pass order. In case the objection is rejected, the Arbitrator can proceed further with the arbitration proceeding and pass a final award. The remedy of the party who has raised the objection is that he can challenge the Award which goes against him alongwith the order rejecting the objection that the Arbitrator has no jurisdiction to make the Award. 3. In the result, therefore, the petition succeeds and is allowed. The Award impugned in the petition is set aside. The petition is disposed of. (D.K.DESHMUKH, J.) ---