1 IN THE HIGH COURT OF BOMBAY AT GOA APPLICATION FOR APPOINTMENT OF ARBITRATOR NO. 04/2008 M/s. South West Port Ltd. Formerly known as M/s. ABG Goa Port Ltd. A company incorporated and registered under the Indian Companies Act, 1956 having its registered address South West Port Ltd., Port Users Building, 1st Floor, at Mormugao, Goa 403 802 ............ Applicant. Versus Board of Trustees of Mormugao Port Trust, through its Secretary, constituted under the Major Port Trust Act, 1963, having its Office at Headland – Sada, Mormugao, Goa. ............ Respondent. Mr. A. N. S. Nadkarni, and Mr. H. D. Naik, Advocates for the applicant. Mr. Y.V. Nadkarni, Advocate for the respondent. CORAM : S.A. BOBDE, J. DATE : 4th July, 2008 ORAL ORDER : This is an application for appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. The applicant has 2 made this application in the following circumstances : The applicant is a Licensee and the respondent is a Licensor of certain premises. The disputes have arisen between the parties on two aspects viz. (1) Whether the applicant is entitled to retain possession of the S-1 shed ? and (2) whether the applicant has been put in possession of the premises without any encumbrance ? It is the applicant's case that there are several underground IMC pipelines which has deprived the applicant from use of the licensed premises. 2. At this juncture, it may be noted that the dispute resolution clause i.e. Clause 14.11 in the Licence Agreement between the parties requires the Licensee to refer the dispute to the Chief Engineer who is required to call upon to settle it within a period of 60 days by giving a written notice of his decision to the Licensee. If the Chief Engineer fails to give notice of his decision or if the Licensee is dis-satisfied with any such decision, the Licensee has to, within 30 days from the expiry of 60 days, write to the Chairman of the respondent Mormugao Port Trust setting forth his objections to the Chief Engineer's decision. There is a specific provision that if the licensee does not refer the dispute to the Chairman within a period of 30 days of the Chief Engineer's decision, the Chief Engineer's decision shall be final and binding and the claim shall not exist any further. Accordingly, on 3 27.4.06, the applicant raised this dispute by writing to the Chief Engineer of the Mormugao Port Trust, and specifically requested the Chief Engineer to resolve and settle the dispute under clause 14.1 of the Licence Agreement and to give the notice of decision within 60 days of the receipt of letter. Under the aforesaid clause, the Licensee wrote and asked for a decision. Sixty days available to the Chief Engineer to decide the dispute expired on 27.6.2006. However, earlier, on 26.5.06, Chief Engineer wrote a letter to the Licensee stating that the Licensees are unauthorisedly occupying the S-1 shed and that they should vacate the same immediately. Further, referring to himself in the plural, he stated that they do not agree with the Licensee that the Licensee enjoys peaceful possession of the licensed premises due to the fact that IMC pipelines are buried along the southern boundary of the licensed premises. In the letter, he stated that in the circumstances, it is not open to the applicant to claim that they do not enjoy peaceful possession of the land or demand an alternate area as a matter of right. However, in case of any operational difficulty, the applicant may move a separate application to the Port and the same will be examined and appropriate decision taken after mutual discussions/negotiations and in keeping with the objective of maintaining harmonious, peaceful, co-operative relationship between the port and the applicant. He further informed the applicant that the Board has decided to take back possession of the land and that the applicant shall act 4 accordingly. 3. The important question is whether this letter constitutes a notice by the Chief Engineer because according to the arbitration clause, a licensee, such as the applicant, is required to approach the Chairman within 30 days of receiving a notice of decision. In the present case, the Licensee has approached the Chairman on 15.7.06 on the basis that the Chief Engineer of the respondent has not given a notice of decision within 60 days in terms of clause 14.1 of the Licence Agreement. 4. The Chairman, on 20.12.06 has written to the applicant that the letter of the Chief Engineer dated 26.5.06 was a decision within 60 days and the applicant has failed to take note of the decision. The Chairman has stated that, in effect, that letter to approach him is not in consonance with the licence agreement. Notwithstanding such an observation, the Chairman has proceeded to reject the dispute raised by the applicant by stating that “Hence, we do not consider this as a dispute and therefore question of appointing an arbitrator for this matter does not arise.” 5. Under the scheme of arbitration, for resolution of dispute, after the Licensee approaches the Chairman within a period of 30 days after 5 receiving a notice of dispute, the Chairman is empowered to refer the dispute to arbitration within 30 days. The applicant has, therefore, approached this Court for appointment of an arbitrator. 6. The only dispute between the parties is as to whether the dispute raised by the applicant has become non-arbitrable by reason of failure on the part of the applicant to approach the Chairman within 30 days of receiving the letter dated 26.5.06 which is purported to be a notice of decision. There is no dispute that the applicant has approached the Chairman within 30 days of the expiry of 60 days within which the Chief Engineer is supposed to give his decision. It is not disputed by the respondent that the dispute is basically arbitrable. 7. It is, therefore, necessary to examine whether the letter dated 26.5.06 can be construed to be a notice of decision. Whatever may be the precise meaning of this term. It is clear from what is contemplated by the arbitration clause is that there must be a decision on the dispute raised by the Licensee. The arbitration clause states that the dispute shall, in the first place, be referred to and settled by the Chief Engineer who shall give a written notice of his decision. It is, therefore, clear that the decision that is contemplated must be one which settles the dispute, one way or the other. 6 Going by the meaning and the purpose of the clause which requires the dispute to be referred to the Chief Engineer, it is clear that the letter cannot be construed to be a notice of decision. The letter does ask the Licensee to vacate the S-1 shed and further states that the Chief Engineer does not agree that the Licensee is not in peaceful possession of the licensed premises due to the fact that IMC pipelines are buried in the premises. However, the letter steers clear of resolving the dispute by giving reasons why the Licensee is in authorised occupation of the S-1 shed and the reasons, if any, why the premises was not handed over to the Licensee that IMC pipelines buried along the southern boundary. The letter not only fails to resolve the dispute and settle it as contemplated by the arbitration clause, but further states that in case of any operational difficulty, the applicant may move a separate application to the Port and the same will be examined and appropriate decision taken after mutual discussions/negotiations and in keeping with the objective of maintaining harmonious, peaceful, co-operative relationship between the port and the applicant. 7-A. The notice of decision contemplated by the clause is notice of a clear decision which rejects or accepts the claim and not one which proposes further negotiation and decisions. 7 8. In the circumstances, it is clear that the letter cannot be construed to be a decision which settles the dispute. This is merely a disapproving response to the applicant's claim. This can hardly be accepted to be a decision contemplated by the arbitration clause from which the Licensee is expected to know where he stands in terms of its rights. In this regard, the learned Counsel for the applicant referred to other decisions of the respondent Port Trust dated 1.1.08 and 5.3.02 admittedly by the Chief Engineers, one of them being of the Chief Engineer who wrote the letter dated 26.5.06. In these decisions, the Chief Engineers have clearly expressed rejection of the disputes raised by the Licensee in exercise of his power conferred under Clause 14.1 of the Licence Agreement and in fact in one of the decisions which is from the Chief Engineer has stated that he is rejecting “each and every claim of the Licensee”. 9. Mr. Y. V. Nadkarni, the learned Counsel for the respondent submitted that merely because the clause under which the decision is taken is not mentioned, does not mean that no decision is taken. Though the proposition may be correct, but it has absolutely no application to the present case. As observed earlier, the decision that is expected to be taken is the one which settles the dispute and in any case allows or rejects the claim of the Licensee. The purpose is to entitle the Licensee to know in case of rejection 8 that the disputes raised by him have been clearly rejected so that he may approach the Chairman, “putting forth his view why he is not in agreement with the decision given by the Chief Engineer”. What is not contemplated by the clause is equivocation on the part of the Chief Engineer and proposals for finding out the solutions in future. 10. In the circumstances, I am of the view that the Chairman did not give a notice of decision within 60 days as contemplated by clause 14.1 of the Licence Agreement and, therefore, the Licensee was right in approaching the Chairman after a period of 60 days of having written to the Chief Engineer. In the circumstances the Chairman was bound to refer the dispute to arbitration. In the circumstances, the dispute cannot be said to have become non- arbitrable. In this view of the matter, since one Shri M.M. Kamath, Chief Engineer (Retire) has already been appointed as an arbitrator in respect of the other disputes between the parties, I hereby appoint the same person to be an arbitrator for the present disputes. Order accordingly. S.A. BOBDE, J. 1 14.1 Settlement by Chief Engineer/Chairman If any disputes or differences of any kind whatsoever arises between the Licensor and the Licensee in connection with or arising out of the contract for carrying out the works (whether during the progress of the works, after termination, abandonment of or breach of the contract) it shall in the first be referred to and settled by the Chief Engineer who within a period of 60 days, 9 after being requested by the Licensee, shall give written notice of his decision to the Licensee. If the Chief Engineer fails to give notice of his decision as aforesaid within a period of 60 days after being requested by the Licensee as aforesaid or if the Licensee be dissatisfied with any such decision, then in any such case, the Licensee shall, within a further period of 30 days from the expiry of the 60 days or from the date of receipt of the Chief Engineer's decision write to the Chairman putting forth his views why he is not in agreement with the decision given by the Chief Engineer. If the Licensee after receiving notice of the decision of the Chief Engineer does not refer the dispute to the Chairman, seeking his decision within a period of 30 days of the Chief Engineer's decision, then the Chief Engineer's decision will be final and binding upon the Licensee, and no further claim will existing thereto. The Chairman, shall within a period of 60 days from the receipt of the request from the Licensee, give written notice of his final decision in the matter under dispute to the Licensee. If the Chairman fails to give written notice of his final decision, within a period of 60 days, after being requested by the Licensee, as aforesaid, or if the Licensee be dissatisfied with any such final decision given, then the Licensee may within a period of 30 days after the expiry of the period of 60 days from the date of his application to the Chairman or within a period of 30 days after receiving notice of such final decision, as the case may be, require that the matter or matters in dispute, be referred to arbitration as hereinafter provided. If the Chairman has given written notice of his final decision to the Licensee and no claim to arbitration has been communicated to the Chairman by the Licensee, within a period of 30 days, from the receipt of the Chairman's decision, then the decision of the Chairman shall remain final and binding upon the Licensee. If the Chairman fails to give written notice of his final decision to the Licensee within a period of 60 days, and no claim to the arbitration has been communicated to the Chairman or the Chief Engineer by the Licensee within a period of 30 days thereafter, then the decision given by the Chief Engineer shall remain final and binding upon the Licensee. Save as hereinafter provided, such decision in respect of every matter as referred shall be final and binding upon the Licensee until the completion of the work and shall forthwith be given effect to by the licensee, who shall proceed with the work with all the diligence whether he requires arbitration as hereinafter provided or not. 1