Delhi High Court M/S Kadimi International Pvt. Ltd. vs M/S Emaar Mgf Land Limited on 29 August, 2019 * + Reserved on: 7thAugust 2019. Pronounced on: 29th August 2019. + ARB.P. 485/2019, I.A. 10378/2019, I.A. 10379/2019 M/S KADIMI INTERNATIONAL PVT. LTD. ..... Petitioner Through: Mr. Vikas Mishra, Mr. Subhankar Sengupta, Mr. Shashwat Tripathi and Mr. Shaleen Srivastva, Advs. versus M/S EMAAR MGF LAND LIMITED ..... Respondent Through: None JUDGMENT SANJEEV NARULA, J. ARB.P. 485/2019 1. The present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter „the Act‟) challenges appointment of Mr. R.S. Baswana, District and Sessions Judge (Retd.) as the sole arbitrator and further seeks appointment of an independent Arbitrator, in terms of Clause 35 of the Space Buyer Agreement dated 30th December 2008. BRIEF FACTS 2. Petitioner M/s Kadimi International Pvt. Ltd, is a private limited company. RespondentM/s. Emaar MGF Land Limited, is engaged in the business of real estate. Petitioner booked, a commercial unit along with one ARB.P. 485/2019 Page 1 of 18 car parking in Respondent‟s project, "The Palm Square" at sector 66, Gurugram Manesar Urban Complex, Village Badshahpur, Gurugram (hereinafter „the project‟), on 17th October 2007 for a total consideration of Rs. 1,42,54,861. In pursuance thereto, Respondent vide letter dated 24th December 2007, allotted a Commercial Unit to the Petitioner. Apropos, a Office/Retail/Restaurant Space Buyers Agreement was executed between the parties on 30th December 2008 (hereinafter „the Agreement‟). However, Respondent failed to deliver the unit in terms of the Agreement, despite Petitioner having paid entire consideration amount. Thereafter, certain disputes arose between the parties regarding payment of Haryana Value Added Tax (hereinafter „HVAT‟) and the Monthly Maintenance Charges (hereinafter „MMC‟) and Petitioner issued a notice dated 31st January 2019 invoking Arbitration clause under the Agreement. Respondent in its reply dated 11th February 2019 expressed its inability to appoint an Arbitrator in view of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 on account of Corporate Insolvency Resolution Process (CIRP) against the Respondent. The CIRP proceedings were set aside by the Supreme Court vide order dated 29th March 2019 in Civil Appeal No. 2302 of 2019 titled as Dr. Virendra Swarup Institute of Computer Studies v. Hadi Mohd. Taher Badri. Thereafter, Petitioner sent notice dated 7th May 2019, invoking Arbitration Clause of the Agreement, requesting the Respondent to agree to appointment of an Arbitrator under the aegis of DIAC. In response to the said notice, Respondent appointed Mr. R.S. Baswana, District and Sessions Judge (Retd.) (hereinafter „the Arbitrator‟) as the Sole Arbitrator, on 24th May 2019. ARB.P. 485/2019 Page 2 of 18 Case of the Petitioner 3. Petitioner has challenged the appointment of Mr. R.S. Baswana, as the Sole Arbitrator, on several grounds. Petitioner contends that, since Respondent failed to appoint the Arbitrator within 30 days of invocation of the Arbitration agreement, its right of appointment stood forfeited. Petitioner also contends that even if it is construed that invocation of the arbitration clause became valid only on 29th March 2019, i.e. after the CIRP proceedings were set aside by the Supreme Court and the period is calculated from the said date, still Respondent has failed to appoint arbitrator within the stipulated period of 30 days. Petitioner contends that if a person is found to be ineligible to be appointed as an arbitrator, then any appointment/ nomination made by such a person would also be invalid. Since Director of a company cannot act as an Arbitrator, he cannot also appoint an Arbitrator. Petitioner contends that appointment of the Arbitrator, in the present case is in contravention of Section 12(5) read with Schedule VII of the Act. He argued that as per Arbitration Clause contained in the Agreement, appointment has to be made by the Director of the Respondent Company, but consequent to the amendment of Section 12(5) of the Act, since the Director of Respondent Company cannot himself act as an Arbitrator, concomitantly any appointment made by him would also be void, nonest and in teeth of Section 12(5) of the Act. Reliance is placed on the Judgments of Supreme Court in TRF Ltd. v. Energo Engineering Pr