Case: Dene l(Proprietary Limited) Vs. Bharat Electronics Ltd. and Another

arbitrator, only the `named person in the Clause-10 can be appointed and, therefore, the petitioner- company cannot request for appointment of independent arbitrator for resolving disputes, if any, between the parties. The learned counsel relies on the observations made by this Court in the case of You One Engineering & Construction Co. Ltd. & Anr. Vs. National Highways Authority of India (NHAI), [(2006) 4 SCC 372] . It is stated in the said decision: "Although the learned counsel for the petitioners contended that this is a situation falling within the contemplation of clause (c) of Section 11(6) of the Act, namely, that the institution i.e. IRC failing to perform the function entrusted to it under the appointment procedure, I am not satisfied. Under the appointment procedure agreed to under clause 67.3, each of the parties to the dispute is required to nominate its arbitrator and the third arbitrator is to be chosen by the two arbitrators appointed by the parties and he shall act as the presiding arbitrator. Clause 67.3(ii) provides that in case of the 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 of the Indian Roads Congress." 18) The petitioner has prayed before this Court for the appointment of the sole arbitrator. The petitioner has submitted, that, it is clear from the invoices and the correspondence between the parties particularly dated 4th May 2005 and 8th June 2006, that the respondent has not disputed the liability of payment due to the petitioner. Therefore, as the respondent now seeks to avoid the payment of the amount due to the petitioner, there is dispute between the parties which requires to be referred for arbitration before the arbitrator. 19) Clause 10 of the `General Terms and Conditions to Purchase Order does constitute a valid arbitration clause as it shows the intention of the parties to appoint an arbitrator and refer the dispute between the parties for the arbitration proceedings under the Arbitration and Conciliation Act 1996. The wordings of Clause 10 are as follows: "ARBITRATION: All disputes regarding this order shall be referred to our Managing Director or his nominee for arbitration who shall have all powers conferred by Indian Arbitration and Conciliation Bill, 1996 for the time in force." 20) Section 11 of the Act provides for the appointment of arbitrators and sub-section (6) of Section 11 of the Act under which the present petition is before this Court reads as under: "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 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" 21) Sub-section (6) of Section 11 of the Act provides, that, when the parties fail to reach to an agreement as regards the appointment of the arbitrator, can request the Chief Justice or any person or institution designated by him to come to the rescue of the parties. Therefore, petitioner in the present case has sought the appointment of the arbitrator by this Court so that the dispute between the parties can be resolved. 22) In the case of Datar Switchgears Ltd. v. Tata Finance Ltd. & Anr., [(2000) 8 SCC 151] , this Court while considering the powers of the Court to appoint arbitrator under Section 8 of the Arbitration Act, 1940, cited the decision of this Court in the case of Bhupinder Singh Bindra v. Union of India and Anr. [AIR1995 SC 2464]. It was held in that case that "It is settled law that court cannot interpose and interdict the appointment of an arbitrator, whom the parties have chosen under the terms of the contract unless legal misconduct of the arbitrator, fraud, disqualification etc. is pleaded and proved. It is not in the power of the party at his own will or pleasure to revoke the authority of the arbitrator appointed with his consent. There must be just and sufficient cause for revocation." The said principle has to abide by in the normal course. However, considering the peculiar conditions in the present case, whereby the arbitrator sought to be appointed under the arbitration clause, is the Managing Director of the company against whom the dispute is raised (the Respondents). In addition to that, the said Managing Director of Bharat Electronics Ltd which is a `Government Company, is also bound by the direction/instruction issued by his superior authorities. It is also the case of the respondent in the reply to the notice issued by the respondent, though it is liable to pay the amount due under the Purchase Orders, it is not in a position to settle the dues only because of the directions issued by Ministry of Defence, Government of India. It only shows that the Managing Director may not be in a position to independently decide the dispute between the parties. 23) The facts narrated by me would clearly demonstrate that there is a dispute between the parties in regard to payment of certain amounts towards Purchase Orders/Invoice. Since, there is a failure on the part of the respondent in making appointment of an arbitrator for resolving the dispute in accordance with the understanding of the parties which is reflected in the Purchase Order, the prayer of the petitioner requires to be granted. 24) Before parting with the case, in my considered opinion, the decision on which reliance is placed by Shri S.N. Bhat, learned counsel for the respondent, would not assist him to drive home his point.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]n (6) of Section 11 of the Act provides, that, when the parties fail to reach to an agreement as regards the appointment of the arbitrator, can request the Chief Justice or any person or institution designated by him to come to the rescue of the parties. Therefore, petitioner in the present case has sought the appointment of the arbitrator by this Court so that the dispute between the parties can be resolved22) In the case of Datar Switchgears Ltd. v. Tata Finance Ltd. & Anr., [(2000) 8 SCC 151] , this Court while considering the powers of the Court to appoint arbitrator under Section 8 of the Arbitration Act, 1940, cited the decision of this Court in the case of Bhupinder Singh Bindra v. Union of India and Anr. [AIR1995 SC 2464]. It was held in that case that "It is settled law that court cannot interpose and interdict the appointment of an arbitrator, whom the parties have chosen under the terms of the contract unless legal misconduct of the arbitrator, fraud, disqualification etc. is pleaded and proved. It is not in the power of the party at his own will or pleasure to revoke the authority of the arbitrator appointed with his consent. There must be just and sufficient cause for revocation." The said principle has to abide by in the normal course. However, considering the peculiar conditions in the present case, whereby the arbitrator sought to be appointed under the arbitration clause, is the Managing Director of the company against whom the dispute is raised (the Respondents). In addition to that, the said Managing Director of Bharat Electronics Ltd which is a `Government Company, is also bound by the direction/instruction issued by his superior authorities. It is also the case of the respondent in the reply to the notice issued by the respondent, though it is liable to pay the amount due under the Purchase Orders, it is not in a position to settle the dues only because of the directions issued by Ministry of Defence, Government of India. It only shows that the Managing Director may not be in a position to independently decide the dispute between the parties23) The facts narrated by me would clearly demonstrate that there is a dispute between the parties in regard to payment of certain amounts towards Purchase Orders/Invoice. Since, there is a failure on the part of the respondent in making appointment of an arbitrator for resolving the dispute in accordance with the understanding of the parties which is reflected in the Purchase Order, the prayer of the petitioner requires to be granted24) Before parting with the case, in my considered opinion, the decision on which reliance is placed by Shri S.N. Bhat, learned counsel for the respondent, would not assist him to drive home his point.