ARB No.27 of 2006 1 In the High Court of Punjab and Haryana, Chandigarh. ARB No.27 of 2006 Date of Decision: 06.03.2009 M/s. Welways Engineers ....Petitioner Versus Punjab Health System Corporation, Chandigarh and others. ....Respondents. Coram:- Hon'ble Mr.Justice J.S. Khehar Present: Mr. B.S. Walia, Advocate for the petitioner. Mr. Brijeshwar Singh, Advocate for the respondents. ... J.S. Khehar, J. (Oral). An application was filed by the petitioner under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Arbitration Act) in the Court of Civil Judge (Senior Division), Union Territory, Chandigarh, in 2002, seeking the appointment of an arbitrator on the basis of a dispute which had arisen between the petitioner and the respondents, on the basis of an agreement which is available on the record of this case as Ex. PW1/2. Clauses 24 and 25 of the aforesaid agreement are relevant for determining the controversy between the parties. The same are, accordingly, being reproduced hereunder: -- “24. Disputes. ARB No.27 of 2006 2 24.1. If the Contractor believes that a decision taken by the Engineer was either outside the authority given to the Engineer by the Contract or that the decision was wrongly taken, the decision shall be referred to the Adjudicator within 14 days of the notification of the Engineer’s decision. 25. Procedure for Disputes. 25.1. The Adjudicator shall give a decision in writing within 28 days of receipt of a notification of a dispute. 25.2. The Adjudicator shall be paid daily at the rate specified in the Contract Data together with reimbursable expenses of the types specified in the Contract Data and the cost shall be divided equally between the Employer and the Contractor, whatever decision is reached by the Adjudicator. Either party may refer a decision of the Adjudicator to an Arbitrator within 28 days of the Adjudicator’s written decision. If neither party refers a dispute to arbitration within the above 28 days, the Adjudicator’s decision will be final and binding. 25.3. The arbitration shall be conducted in accordance with the arbitration procedure stated in the Special Conditions of Contract.” According to the learned counsel for the petitioner, a dispute had arisen in respect of the execution of the contract under reference on the basis of the determination of the Engineer, referred to in Clause 24.1, extracted hereinabove, on 28.10.2001. For the resolution of the aforesaid dispute, the petitioner sought the appointment of an adjudicator in terms of Clause 25 extracted hereinabove. It is not a matter of dispute, that Mr. S.C. Jain, a ARB No.27 of 2006 3 retired Chief Engineer was assigned the responsibility to adjudicate upon the matter under Clause 25. Since the aforesaid adjudicator did not decide the dispute raised by the petitioner, within 28 days of the receipt of the notification of the dispute, the petitioner moved a representation dated 28.2.2002 for the appointment of an arbitrator. After the submission of the representation dated 28.2.2002 (for appointment of an arbitrator), the adjudicator passed an order dated 25.3.2002. Clause 25.3 of the contract extracted hereinabove, refers to the appointment of an arbitrator, in terms of the special conditions prescribed under the contract. Learned counsel for the parties are agreed, that the special conditions of the contract have been delineated in Ex. PW1/4. The relevant arbitration clause expressed therein, is being extracted hereunder: -- “ARBITRATION (GCC Clause 25.3) The procedure for arbitration will be as follows: -- 25.3. (a) In case of dispute or difference arising between the Employer and a domestic contractor relating to any matter arising out of or connected with this agreement, such disputes or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The arbitral Tribunal shall consist of three arbitrators one each to be appointed by the Employer and the Contractor. The third arbitrator shall be chosen by the two arbitrators so appointed by the parties and shall act as Presiding arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding arbitrator shall be ARB No.27 of 2006 4 appointed by the President IRC, New Delhi. (b) In the case of dispute with a foreign contractor, the dispute shall be settled in accordance with the provisions of UNCITRAI. Arbitration Rules. The Arbitral Tribunal shall consist of three arbitrators one each to be appointed by the employer and the contractor. The third arbitrator shall be chosen by the two arbitrators so appointed by the parties and shall act as Presiding arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding arbitrator shall be appointed by the President, IRC, New Delhi. (c) if one of the parties fails to appoint its arbitrator in pursuance of sub-clause (a) and (b) above within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the Presiding arbitrator shall be nominated by President, IRC, New Delhi, both in cases of the foreign contractors as well as Indian contractors shall appoint the arbitrator. A certified copy of the order of the President of the IRC, New Delhi, making such an appointment shall be furnished to each of the parties. (d) Arbitration proceedings shall be held at Chandigarh, India and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English. (e) The decision of the majority of arbitrators shall be final and ARB No.27 of 2006 5 binding upon both parties. The cost and expenses of arbitration proceedings will be paid as determined by the arbitral Tribunal. However, the expenses incurred by each party in connection with the preparation, presentation, etc. of its proceedings as also the fees and expenses paid to the arbitrator appointed by such party or on its behalf shall be borne by each party itself. (f) Where the value of the contract is Rs.50 millions and below, the disputes or differences arising shall be referred to the Sole Arbitrator. The Sole Arbitrator should be appointed by agreement between the parties: failing such agreement, by the appointing authority, namely, by the President, IRC, New Delhi.” The question to be adjudicated upon while disposing of the present arbitration case is, whether in the facts and circumstances of this case, the respondents have failed to discharge their obligation of appointing an arbitrator. The scheme of the dispute clauses, as well as, arbitration clause, extracted hereinabove, reveal that on the arising of a dispute, the first recourse open to an aggrieved party is to seek the appointment of an adjudicator, and in case the adjudicator does not decide the dispute within the stipulated time, or tenders decision which is not palatable to one or the other party, then the remedy available to the aggrieved party is to seek arbitration. The facts and circumstances narrated hereinabove reveal existence of a dispute at the hands of the petitioner. It also reveals the ARB No.27 of 2006 6 initiation of the first process, namely, the presentation of the dispute before an adjudicator. Learned counsel for the respondents acknowledges, that the adjudicator appointed under Clause 25.1, extracted hereinabove, did not render a decision thereon within 28 days of the notification of the dispute. Thus viewed, it was open to the petitioner herein, even without waiting for the final order of the adjudicator, to seek the appointment of an arbitrator. This claim was made by the petitioner herein on 28.2.2002. Despite thereof, no arbitrator was appointed by the respondents. It is, therefore, that the petitioner approached the Court of the Civil Judge (Senior Division), Union Territory, Chandigarh, by filing a petition under Section 11 of the Arbitration Act. The aforesaid petition has been transferred to this Court for adjudication. The prayer made by the petitioner herein for appointment of an arbitrator is opposed by the learned counsel for the respondents. Learned counsel for the respondents has invited the Court's attention to the decision rendered by the Supreme Court in Northern Railway Administration, Ministry of Railways, New Delhi Vs. Patel Engineering Company Ltd., (2008) 10 Supreme Court Cases 240, and has pointedly referred to the following observations recorded therein: -- “12. A bare reading of the scheme of Section 11 shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. The court must first ensure that the remedies provided for are exhausted. It is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or ARB No.27 of 2006 7 arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations. I have examined the solitary objection raised by the learned counsel for the respondents. I am, however, satisfied that the observations brought to the notice of this Court, recorded in the judgement relied upon by the learned counsel for the respondents do not preclude this Court from appointing an arbitrator, subject to adherence of the requirements under Section 11(8) of the Arbitration Act. In the peculiar facts and circumstances of this case, I consider it just and appropriate to appoint Mr. Justice (retd.) J.S. Sekhon, as arbitrator. The arbitrator shall determine his own fee and other terms. Parties are directed to appear before the arbitrator on 6.4.2009, either in person or through counsel. Disposed of accordingly. ( J.S. Khehar ) Judge 06.03.2009 sk.