1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION APPLICATION NO. 214 OF 2006 ALONG WITH ARBITRATION APPLICATION NO. 215 OF 2006 ARBITRATION APPLICATION NO. 214 OF 2006 Subhadra Shivlal Daga ).. Applicant. Versus M/s. M.R. & D.R. Thacker and others ).. Respondents ALONG WITH ARBITRATION APPLICATION NO. 215 OF 2006 Shivlal Ramnath Daga ).. Applicant. Versus M/s. M.R. & D.R. Thacker and others ).. Respondents Mr. A.Y. Bookwala, Senior Advocate, a/w Mr. Rajiv Ravi i/b Bilawala & Co. for the Applicant. Ms. Armin Wandrewalla with Mr. Pratik Shah i/b Law Charter for Respondent Nos.1 and 3. CORAM : J.N. PATEL, ACTING C.J. DATED : 9TH FEBRUARY, 2010 ORAL JUDGMENT: 1. The Applicants in these two Arbitration Applications are husband and 2 wife. Shivlal Ramnath Daga, the Applicant in Arbitration Application No. 215 of 2006, has filed in his individual capacity as also for and on behalf of and as a Karta of Shivlal Ramnath Daga-HUF, seeking appointment of Sole Arbitrator in the matter of dispute arising between the parties in consonance with the Agreements/Declarations dated 1st December 1993 and 1st January 1994 which are annexed at Exhibit C respectively to “ ” the Arbitration Applications. 2. It is the case of the Applicants that, Respondent No.1 partnership firm M/s. M.R. & D.R. Thacker of which Respondent Nos.2 and 3 are partners, took over the property owned by M/s. R.B.B.A. Properties Pvt. Ltd., of which the Applicants were originally a tenant. Under the said Agreements/Declarations, the Respondents, inter alia, agreed to provide the Applicants with a tenement, namely, tenement No.1 on the 1st and 2nd floor and tenement No.2-A on the 3rd floor in the building which was subsequently designated as Suraj together with a portion in the “ ” basement and car parking spaces and various other amenities as set out in the said Agreements/Declarations within 36 months from the date of commencement of construction work i.e. 8th April 1987 and certain amount of compensation for loss and inconvenience suffered by the Applicants and family members in terms of the Agreements/Declarations. It is the case of the Applicants that as per the arrangement and agreement entered between the parties after much negotiations during the period 8th April 1987 to 1st December 1993, when the said 3 Agreements/Declarations came to be signed, the Applicants vacated the rented premises and shifted to alternate accommodations provided from time to time by the Respondents to enable to complete the construction of the proposed buildings and to provide permanent alternate accommodation to the Applicants within 36+3 months in the proposed building designated as Suraj . It is further the case of the Applicants “ ” that the Respondents took more than fifteen years to complete the buildings and during the long intervening period, the Respondents committed various breaches of terms and conditions of the Agreements/Declarations which have been set out in the Applications. There were negotiations between the parties in the matter of the grievances/disputes and the Applicants were always and repeatedly assured by the Respondents that they would carry out their contractual obligations and would not cause loss, damage or harm to the Applicants more so in view of the close relationship with the partners of the Respondent No.1 firm. In spite of these assurances, the Respondents did not take any steps to redress the grievance of the Applicants and, therefore, the Applicants are required to move these Applications for settlement of her/his disputes and/or differences as agreed in Clause 6 of the Declarations dated 1st December 1993 and 1st January 1994. 3. It is the case of the Applicants that on 18th December 2003, the Respondents made a part-payment of Rs.2,50,000/- each out of the total outstanding dues to be paid by the Respondents to the Applicants and 4 thereafter failed to make further payment and, therefore, in order to resolve the dispute in terms of Clause 6 of the two Agreements/ Declarations, the Applicants by his Advocate s letter dated 29 ’ th August 2006 called upon the Respondents to comply with the requisition set out therein and inform that in the event of the failure to comply with the same, the arbitration clause contained in the Declaration dated 1st December 1993 and 1st January 1994 would stand invoked and then proceed in arbitration before the Sole Arbitrator, Shri Janak Dwarkadas, who was named in the said documents. 4. In reply, the Respondents through their Advocate s letter dated 15 ’ th September 2006, contended that they did not have the Declaration dated 1st December 1993 and that Mahendra Ramanlal Thacker, being Respondent No.2, ceased to be a partner and has nothing whatsoever to do with the matter. The Applicants state that this was a ploy to avoid their contractual obligations. Therefore, the Applicants by Advocate s’ letter requested Shri Janak Dwarkadas to act as a Sole Arbitrator. However, Shri Janak Dwarkadas declined to act as an Arbitrator on the ground that he had represented Respondent Nos.1 and 3 in several proceedings, some of which pertained to the building Suraj . “ ” Thereafter, on 6th November 2006, the Applicants by Advocate s letter ’ suggested to the Respondents names of four eminent retired Supreme Court Judges and sought their consent to one of them to be appointed as Sole Arbitrator, but the Respondents failed and neglected to agree 5 and, therefore, these Applications came to be filed. 5. In reply to the applications, respondent no.3 has filed his affidavit in reply on behalf of the respondents wherein it is contended that in so far as the applications filed by Subhadra Shivlal Daga in Arbitration Application No.214 of 2006 is concerned, the so called declaration executed between the parties does not bear the signature of the applicant. Therefore, it cannot be said to be a concluded contract. It is further contended that the respondent no.2 ceased to be a partner of respondent no.1 firm prior to 1.1.94 and therefore, the agreements executed between the parties particularly, the applicants and respondent no.2 subsequent to 1.1.94 cannot be an agreement which will bind the parties to the applications. 6. The respondent no.3 has taken a plea that the period of limitation for commencement of an arbitration runs from the date on which, had there been no arbitration clause, the cause of action would have accrued. Ex- facie, the alleged claims and consequently commencement of Arbitration are hopelessly time barred and, therefore, the respondents cannot be foisted with an Arbitrator and futile Arbitration Proceedings particularly, it is submitted that even if there is an agreement to refer the dispute to Arbitration, it can only be referred to the named Arbitrator and not to any one else and therefore, it will not be just, fair and proper to foist any other person as an Arbitrator. 6 7. It is also contended that all the disputes and differences raised by the applicants upto and prior to 1.1.94 were resolved, settled and concluded and the parties thereafter were governed by the declaration dt.1.1.94 which the petitioner produced only after 18.8.08 and as no disputes and differences have arisen between the parties thereto within the prescribed the period of limitation and consequently the provision of arbitration thereunder and which is not the subject matter of this petition has become infructuous and in any event hopelessly barred by limitation. 8. It has been pointed out that the notice Exhibit D on which the ‘ ’ applicants place reliance refer to the subject matter of the writings Exhibit A and B which admittedly do not contain arbitration clauses ‘ ’ ‘ ’ and, therefore, the disputes and differences under Exhibits A and B ‘ ’ ‘ ’ which do not contain any Arbitration Clause, cannot be a basis to invoke the Arbitration Clause as recorded the declaration dt.1.12.93 and 1.1.94 which contains Arbitration Clause. It is submitted that the respondents have all along compensated in cash and kind the applicant and her husband extending much beyond the legitimate claim and the petitioner and her husband are not entitled to anything further and knowing fully well the same did not make any claim in respect of latches of more than 12 years and it is unfortunate that they are now attempting to rake up the same to unjustly enrich themselves purely out of greed and, therefore, the applications deserve to be dismissed. 7 9. The applicants have filed these applications under section 11(6) of the Arbitration and Conciliation Act, 1996 on the refusal of the named Arbitrator Janak Dwarkadas, Senior Advocate to act as a sole Arbitrator on the ground that he had represented respondent nos.1 and 3 in several proceedings, some of which pertain to the building known as Suraj. It can be seen from the pleadings of the parties from the fact that the applicants by virtue of the two agreements entered with the respondents on 8.4.87 and in a supplemental agreement dt.24.6.87, agreed for the development of the subject property on certain terms and conditions and that it was agreed by the developers to provide the applicants who were the occupants, residential flats as specified in the said building in terms of a built up area including that of the basement of the said building in addition to compensation which included compensation for loss and inconvenience of multiple shifting, of improvements made from time to time in the said existing premises, cost of shifting and for renovating and equipping the said permanent alternate accommodation. It was also agreed that the developer shall also provide to the applicants / occupants car parking spaces. It appears that the applicants were not satisfied with the due performance of the agreements by the respondent developer which led to the fresh agreement being executed between the parties in the form of declaration dt.1.12.93 and 1.1.94 wherein it was agreed between the parties that they will jointly declare that in case of any dispute and / 8 or differences arising out of or in connection with or in relation to the said ownership flat and or basement area and or the three car parking space and or the one-eighth share in any further FSI as mentioned in the said declaration or any matter arising out of or relating to the declaration and the covenants made therein and the same shall be settled by Arbitration for which purpose the dispute and / or differences shall be referred to Janak Dwarkadas Advocate of A-6 Tamarind House, 36 Tamarind Lane, Fort, Mumbai 400 023 for arbitration and whose decision or award shall be final and binding on both the parties i.e. Dagas and Thackers. 10. It is not disputed that after the applicants were provided with a tenement as agreed between the parties in the building which was subsequently designated as Suraj, the applicants were still agitating their claim as they were dissatisfied and it appears that on or before 18.12.2003, a sum of Rs.2,50,000/- each has been paid by the respondents to the applicants. 11. Considering the plea of the parties and the documents placed on record, it appears that on 29.8.06, for the first time the applicants through their advocates, gave notice to the respondents specifying their claims and regarding various developments which occurred in respect of the said transaction. The respondents have not disputed the fact that pursuant to the initial agreements between the parties the applicants were put in 9 possession of the respective flats in September 2003 which shows that the respondents have performed their part of the contract entered between the parties in the year 1987-88 which was confirmed by the declaration entered between the parties in the year 1993-94 and were put in possession in the year September 2003 and in December 2003, the respondents have paid a sum of Rs.2,50,000/- each to the applicants towards their dues which according to the applicants was made in part payment of the total outstanding dues which was accepted by them in good faith. On the other hand, it is the contention of the respondents that they have performed their part of the contract and if at all any cause of action arises, it was prior to 1.1.94 except for raising this contention that the claim is barred by limitation. It has not been specified either in the declaration of 1993-1994 as to what was the time fixed for due performance of the agreement and, therefore, I have no hesitation to hold that the applicants have issued notice dt.29.8.06 calling upon the respondents to perform the agreements and declaration so executed between the parties and to provide for the benefits to which they were entitled under the said agreements and declaration, failing which they had informed the respondents that the arbitration clause containing the two declarations both dated 1st December 1993 and 1st January 1994 shall stand invoked and then they will proceed in Arbitration before the learned Arbitrator, Mr.Janak Dwarkadas named in the aforesaid documents to adjudicate the disputes for redress of their grievances and claims which was within 3 weeks from the date they 10 were put in possession of the respective tenements which is the subject matter of the two agreements and declaration. The applicants also wrote a letter to the named Arbitrator on 4.9.06 in reference to the notice dt. 29.8.06 sent to the respondents requesting them to enter upon the reference to act as a Sole Arbitrator and call for meeting of the parties at the earliest. To this request, Mr.Janak Dwarkadas by his letter dt. 1.11.06 declined to act as a sole arbitrator in the matter of dispute between the parties. 12. On receipt of such a communication, the applicants suggested to the advocates of the respondents by their letter dt.6.11.06 that Mr.Janak Dwarkadas, Senior Advocate has declined to act as a sole arbitrator and suggested names of retired Supreme Court Judges to be nominated as a sole arbitrator in place of Mr.Janak Dwarkadas but it appears that the respondents did not act. 13. The contention of the respondents that all disputes and differences raised by the petitioner have been resolved, settled and concluded and that thereafter the parties were governed by the declaration of 1st December 1993 and 1st January 1994 and therefore, the parties cannot rely upon the agreements entered between the parties in the 1987-88 for raising the dispute as those agreements (Exhibits A and B ) do not ‘ ’ ‘ ’ contain any Arbitration Clause. Plain reading of the declaration Exhibit C to the application would go to show that the same came to be ‘ ’ 11 executed between the parties to reiterate and confirm the earlier agreement executed between them and it is in this declaration that they have included Arbitration Clause to refer their disputes and differences to a named Arbitrator arising out of or in connection with or in relation to the said ownership flat and / or the basement area and / or the three car parking spaces and / or the one-eighth share in any further FSI as mentioned in the said declaration and therefore, this contention cannot be accepted. 14. The last issue which requires consideration and has been raised, pertains to the declaration executed between Smt.Subhadra Daga wherein it is specifically stated that the said declaration is not signed by her. The applicant has annexed copy of the declaration which shows that the same does not bear the signature of the applicant Smt.Subhadra Daga. In view of the fact that the applicant has filed the application seeking appointment of an Arbitrator and thereby admit the declaration being executed between the parties and considering the peculiar facts and circumstances of the case, it will be proper that the issue as to whether there has been a concluded contract between the parties is better left to the Arbitrator to decide. 15. It has been seriously contended by the learned counsel for the respondents that once the named Arbitrator has declined to adjudicate the dispute, it will not be just, fair and proper to foist any other person 12 as an Arbitrator not intended to or agreed upon by the parties and, therefore, it will be just, convenient, necessary and in the interest of Justice that the application be rejected. 16. In the decision rendered by the Supreme Court in the case of Northern Railway Administration, Ministry of Railway, New Delhi Vs. Patel Engineering Company Limited reported in (2008) 10 Supreme Court Cases 240, the Supreme Court was required to examine the scope and ambit of Sec. 11(6) of the Act relating to appointment of arbitrator and held as under: 9. Section 11 reads as follows: “ "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. 13 (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 14 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 subsection (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 15 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 16 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." 10. The crucial sub-sections are sub-sections (2), (3), (4), (5) and (6). Sub-sections (3) to (5) refer to cases where there is no agreed procedure. Sub-section (2) provides that subject to sub-section (6) the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. Sub-section (6) sets out the contingencies when party may request the Chief Justice or any person or institution designated by him to take necessary measures unless the agreement on the appointment procedure provides other means for securing the appointment. The contingencies contemplated in sub-section (6) statutorily are (i) a party fails to act as required under agreed procedure or (ii) the parties or the two appointed arbitrators fail to reach an agreement expected of them under that procedure or (iii) a person including an institution fails to perform any function entrusted to him or it under the procedure. In other words, the third contingency does not relate to the parties to the agreement or the appointed arbitrators. 17 11. The crucial expression in sub-section (6) is "a party may request the Chief Justice or any person or institution designated by him to take the necessary measures" (underlined for emphasis). This expression has to read alongwith requirement in sub- section (8) that the Chief Justice or the person or an institution designated by him in appointing an arbitrator shall have "due regard" to the two cumulative conditions relating to qualifications and other considerations as are likely to secure the appointment of an independent and impartial arbitrator. 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 true as contended by Mr. Desai, that it is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations.” It can be seen that the agreement has to be given effect and the contract has to be adhered to as closely as possible. The named arbitrator Shri Dwarkadas having declined to act as an arbitrator does not mean the 18 clause in the agreement to refer the dispute to arbitrator becomes defunct, on the other hand, in such a contingency a remedy is provided in clause (c) of sub-section (6) of section 11 of the Act of 1996. 17. Therefore, I am of the opinion that there is no legal impediment to appoint a sole arbitrator to adjudicate the disputes between the parties in both the applications and as the named Arbitrator has declined to act as an Arbitrator, this court appoints Mr.M.P.S. Rao, Senior Advocate to act as an Arbitrator. Parties to bear their own costs. 18. Both the applications stand disposed of accordingly. 19. After pronouncement of the order, the learned counsel appearing for the respondent nos.1 and 3 sought stay of the effect and implementation of the order for a period of six weeks. The order is stayed for a period of six weeks to enable the respondents to challenge the same on