Denel (Proprrietory Limited) vs Govt.Of India Min.Of Defence

the parties for the supply of Base Bleed Units. Initially the quantity to be supplied was 42,000 units. Later on, the quantity was increased to 52,000 units as per Clause 20 of the agreement. By 5th January, 2005, the petitioner had supplied substantial quantity of the goods. However, some of the goods supplied by the petitioner were rejected by the respondent. The petitioner, thereafter, informed the respondent that two more lots were ready for discharge on 17th March, 2005. However, Union of India never responded to the letter, hence, loss and damage has been caused to the petitioner. In April, 2005, after various discussions, the petitioner came to know that improper fuzes were used by the Union of India which led to the problem that occurred in the lots which were rejected. Thereafter, on 21st April, 2005, Union of India put on hold all contracts.

Application No. 45 of 2009 under Section 14(2) of the Act. On 21st December, 2010, the Principal District Court, Chandrapur terminated the mandate of the Sole Arbitrator with the observation that the arbitrator has been biased in favour of respondent No.1. A direction was also issued in the following terms:-

4. It is an admitted fact that pursuant to the aforesaid directions, within 30 days, DGOF did not himself commence the arbitration proceedings; nor did he appoint any Government servant as an arbitrator. The petitioner has, therefore, moved the present petition under Section 11(6) of the Act on 2nd of March, 2011 seeking appointment of an independent arbitrator. The petitioner claims

provisions of Section 12 of the Act. The petitioner further claims that the DGOF has already through his actions in the dispute between the parties demonstrated his lack of independence and impartiality. The learned District Judge in her judgment alluded to the fact that the DGOF without receiving any request for referral of the dispute between the petitioner and the respondent colluded with the previous arbitrator to appoint him as an arbitrator without any notice to the petitioner. The petitioner further claims that the DGOF has been directly involved in the dispute as would be evident from the correspondence between the petitioner and the respondent. The petitioner thereafter makes a reference to the letter dated 30th June, 2008 wherein the DGOF took the view that the petitioner is liable to replace the rejected Base Bleed units, as alleged by the respondent, making specific reference to the correspondence in which respondent stated its claim against the petitioner and cancelled the contract with the petitioner. The petitioner further claims that the DGOF has failed to appoint the arbitrator either as directed by the learned District Judge or in

5. The respondent has controverted the plea put forward by the petitioner by way of a detailed counter affidavit. It is claimed by the respondent that the petition under Section 11(6) of the Act is not maintainable, as Mr.Satyanarayana has been appointed as a substitute arbitrator on 16th March, 2011. The petitioner was duly notified about the appointment of the arbitrator in its letter dated 26th March, 2011. The petitioner was requested to forward its claim within 10 days. The petitioner was informed that if such a claim does not reach by 8th April, 2011, the arbitrator will presume that the petitioner did not have any further claim. Upon receipt of that letter, the petitioner objected to the appointment of a new arbitrator by its letter dated 15th April, 2011, as being contrary to clause 19(F). The petitioner has wrongly claimed that since the

petition under Section 14(2) of the Act. The petitioner was given an opportunity to challenge the clauses in an appropriate forum. The District Judge, however, accepted the submission of the petitioner that there are justifiable reasons to indicate that the arbitrator has not acted fairly. Hence the mandate of Mr. A.K. Jain as the Sole Arbitrator was terminated. In accordance with Section 15(2) of the Act, DGOF was appointed as an arbitrator. He was also given an option to appoint Government servant as an arbitrator as per the arbitration clause. It is a matter of record that DGOF did not act himself as an arbitrator, pursuant to the aforesaid order of the Principal District Judge, Chandrapur dated 21st December, 2010.

made a reference to various notices issued by the arbitrator, none of which were received by the petitioner within time. Therefore, the petitioner was effectively denied the opportunity to present his case before the Sole Arbitrator. Therefore, the apprehensions of the petitioner can not be said to be without any basis.

(emphasis supplied)

18. The material placed before the Court by the petitioner would indicate that it would not be unreasonable to entertain the belief that the arbitrator appointed by the respondent would not be

Consequently, the Court proceeded to appoint an independent arbitrator.

20. In my opinion, the circumstances in the present case are similar and a similar course needs to be adopted. In view of the above, the petition is allowed.

Chief Justice of the Madras High Court, R/o No. 20, Usha Kiran, 2nd Pasta Lane, Colaba, Mumbai-400 005, as the Sole Arbitrator, to adjudicate the disputes that have arisen between the parties, on such terms and conditions as the learned Sole Arbitrator deems fit and proper. Undoubtedly, the learned Sole Arbitrator shall decide all the disputes arising between the parties without being influenced by any prima facie opinion expressed in this order, with regard to the respective claims of the parties.

22. The registry is directed to communicate this order to the Sole Arbitrator forthwith to enable him to enter upon the reference and decide the matter as expeditiously as possible.

...............................J. [Surinder Singh Nijjar] New Delhi;

January 09, 2012.