YOU ONE MAHARIA -N THROUGH YOU ONE ENGINEERING AND

CONSTRUCTION COMPANY LTD. AND ANR.

NATIONAL HIGHWAYS AUTHORITY OF INDIA

AUGUST 21, 2007

[C.K. THAKKER, J.]

Arbitration and Conciliation Act, 1996-s.11(6) & 11(12)-Arbitration clause contained in agreement between the parties provided that each party C would appoint its arbitrator and two arbitrators so appointed would appoint third arbitrator who shall act as the Presiding Arbitrator-Arbitrators appointed by the parties failed to reach .upon a consensus on appointment of the Third/Presiding Arbitrator-Arbitration petition filed by one party before Supreme Court praying for appointment of a retired Judge of Supreme C, ourt or a retired Chief Justice of a High Court as the Presiding Arbitrator- D Maintainability of-Held, not maintainable since the arbitration clause explicitly empowered the 'Council of1ndian Road Congress' to appoint the Presiding Arbitrator in case arbitrators appointed by the parties failed to appoint Presiding Arbitrator-Appointment of Arbitrators by the Chief Justice of India Scheme, 1996-Para 2.

The Petitioners had entered into an agreement with Respondent for execution of a project for 4-laning of portions of the National Highway 7 in

the State of Andhra Pradesh. The agreement contained an arbitration clause providing for settlement of disputes between the parties by an arbitral tribunal consisting of three arbitrators. Each party was required to appoint one F arbitrator and the two arbitrators so appointed by the parties were to appoint the third Arbitrator who was to act as the Presiding Arbitrator.

Disputes having arisen between the parties, both parties appointed one arbitrator each. However, the arbitrators so appointed could not agree on appointment of the Presiding arbitrator.

G .

In the present petition under Section 11(6) and 11(2) of the Arbitration and Conciliation Act, 1996 read with Puagraph 2 of the Appointment of Arbitrators by the Chief Justice of India Scheme, 1996 the Petitioners contended that since they had chosen a. retired Chief Justice of High Court 177 H

A as their Arbita:ator, a Judge Senior in , rank to hi~ viz. a retired J11dg~ of

Su pre.me Court or _a rtir:ed Chief Justice of a High. Court should be appointed as the Presiding Arbitrator.

Dismissing the petition, the Court

B HELD: The prayer of the petitioners cannot be granted. A bare reading of the arbitration clause leaves no room for doubt that in case of failure of the two Arbitrators appointed by the' parties to reach upon a consensus, the Presiding Arbitrator shall be appointed by the Council of IRC (Indian Road Congress). The clause is explicitly clear and there is o ambiguity. Apart from clear language of Arbitration Clause, the point is also covered.by an C earlier <t.ecision between the ame parties wher~ almost in idenical

circumstances, this Court was called upon to consider the provisions of the.

Act and the right to appoint Presiding Arbitrator und'er the Agreement. The Court held that "i°t i~ the right of IRC tO appoint Presiding Arbitrator i.n case, the parties are not ad idein in appointment of Third/Presiding Arbitrator ..

D Therefore, the petitioners cannot compel the respondentto agree fo~ retired

Judge of this Court or retired Chief Justice of a High Court, senior to the arbitrator appointed by the Peitioners as Presiding Arbitrator.

(Paras_9, 10, 12 and IS( (181-E; 182-A, D; 1~3-F)

You one Engineering & Construction Co. Ltd. & Anr. v. NatiOnal E Highways Authority of India, (2006) 4 SCC 372, referred to. , .

CIVIL ORIGINAL JURISDICTION :Arbitration Petition No. 12 of2007.

Under Section 11(6) read with Section I I(l2) of the Arbitration and;• Conciliation Act, 1996. : ' ·

R.P. Bhatt, Ravikesh K. Sinha and Abhijat P. Medh for the Petitioners:

MukuI Rohtagi and V.B. Joshi for the Respondent.

The Judgment of the Court was delivered by

C.K. THAKKER, J. I. This petition is filed by tile' petitioner5 under Section 11(6) and Section 11(12) of the Arbitration and Cnciliation Ac!, 1996 (hereinafter referred to as 'the Act') read with paragraph 2 of the Appointment of Arbitrators by the Chief Justice of India Scheme, 1996 for appointment of Third/Presiding Arbitrator in accordance with the Agreement/Contract Package.

H No. NS-23/ AP dated May 31, 200 I entered into between the petitioners and

., the respondent.

2. The petitioners are a 'Joint Venture' who came together by virtue of Joint Venture Agreement dated May l 0, 200 l for execution of certain contracts for National Highways Authority of India ('NHAI' for short). Petitioner No. l is a Company registered under the Laws of the Republic of Korea having its B registered office at 75-95, Seosomoon Dong, Chung Ku, Seoul, Korea l 00 110.

Originally it was known as YOU ONE Engineering and Construction Co. Ltd. at the time of Joint Venture Agreement and also at the time of contract dated May 31, 2001 with NHAI. The Company has since merged with and known as Ultra Construction and Engineering Co. Ltd., Seoul, Korea; i.~. in a country other than India within the meaning of Section 2(t)(ii) of the Act. Petitioner c No.2 is a Private Limited Company incorporated and registered under the Companies Act, 1956 having its registered office at A-10, Panchvati, Azadpur, Delhi 110 033.

3. According to the petitioners, they entered into an Agreement on May 31, 200 I with the resndent for execution of Contract Package No. NS-23/ D AP being a project for 4-Laning of KM. 464.000 to KM. 474.000 of Nagpur- Hyderabad section and KM. 9.400 and KM. 22.300 of Hyderabad-Bangalore section of National Highway 7 in the State of Andhra Pradesh at a contract price of Rs. 74,88, 79,544.69. The Agreement contains an arbitration clause which I will refer to at an appropriate stage.

4. According to the petitioners, in September, 2004, i.e. after more than three years of Contract-Agreement, it was alleged by the respondent that the petitioners had furnished forged Bank Guarantees for availing mobilization and other advances under the Contract Agreement. The respondent, in view of the Arbitration Clause, filed OMP No. 342 of 2004 in the High Court of F Delhi against the petitioners under Section 9 of the Act for interim relief. The High Court passed interim directions restraining the petitioners from removing and/or transferring machinery and stock placed by them at the site for execution of work. On December 13, 2004, the respondent invoked Clause 59 of the Agreement and terminated the contract. There was exchange of letters and notices between the parties. Ultimately, by a communication dated April 7, G 2005, the petitioners intimated the respondent that in accordance with the ....

Arbitration Clause, they had appointed Hon'ble Mr. Justice A.K. Srivastava, a retired Judge of the High Court of Delhi as their nominee Arbitrator.

According to the petitioners, in the second half of June, the respondent addressed a letter to Mr. C.S. Balaramamurthi, purported to have been written H

A on April 7, 2005 appointing him as the nominee Arbitrator ofNHAI. From the record, it appears that the two Arbitrators could not agree to an appointment of Third Arbitrator. The respondent intended to appoint a 'technical' man as the Third Arbitrator as the matter was of a 'highly technical nature', but the arbitrator appointed by the petitioners insisted that the Presiding Arbitrator should be a retired Chief Justice or a Judge of a High Court, who should be B senior to him (Justice Srivastava). It is also on record that the respondent appointed Mr. K.P. Mohanty as the Presiding Arbitrator. Subsequently, however, his appointment was not continued. In February, 2006, Justice Srivastava had shown his unwillingness to continue as Arbitrator and the petitioners nominated Hon'ble Mr. Justice V.A. Mohta, retired Chief Justice of C High Court ofOrissa as their nominee Arbitrator in place of Justice Srivastava.

Since the parties could not agree as to appointment of Third/Presiding Arbitrator, the petitioners have filed the present petition praying therein that the Chief Justice of India may be pleased to appoint a retired Judge of the Supreme Court of India or a retired Chief Justice of a High Court as Presiding Arbitrator. The Hon'ble Chief Justice of India designated me to deal with the D matter and to pass an appropriate order on the application. Accordingly the petition was placed before me.

5. On January 24, 2007 notice was issued. Affidavits and further affidavits had been filed by the parties.

6. I have heard learned counsel on both the sides.

7. The learned counsel for the petitioners submitted that the respondent- NHAI ought to have agreed to appoint a retired Judge of the Supreme Court or a retired Chief Justice of a High Court as Presiding/Third Arbitrator. It was F submitted that when the petitioners have nominated a retired Chief Justice of a High Court as their Arbitrator, the respondent ought to have considered the said fact and ought to have agreed to nominate a Judge, senior in rank to the Arbitrator appointed by the petitioners. It was also submitted that the dispute relates to interpretation of terms and conditions of the contract and there is no 'technical' element which requires appointment of a 'technical' man. It was G also stated that in similar circumstances, between the same parties, a dispute had arisen earlier, arbitration petitions were filed before the Chief Justice of High Court of Delhi and the nominee of the Chief Justice had appointed Hon'ble Mr. Justice Arun Kumar, retired Judge of this Court as the Presiding Arbitrator. In the instant case also, such a course ought to have been adopted H by the respondent. Since it was not done, the petitioners are constrained to

....

ENGINEERING AND CONSTRUCTION COMPANY LTD. v. NATIONAL HIGHWAYS AUlHORITY OF INDJA IC.K. 1HIJCIC£R. I.I 181

approach this Court.

8. The learned counsel for the respondent, on the other hand, submitted that the relevant clause empowers the Council of Indian Road Congress ('IRC' for short) to appoint Presiding Arbitrator in case of failure of the two Arbitrators to appoint Third Arbitrator. Since two Arbitrators appointed by the parties (the petitioners on the one hand and the respondent on the other hand) could B not arrive at a consensus, it is the power of IRC to appoint a Third Arbitrator and the petition is liable to be dismissed. It was also submitted that a similar question came up for consideration before this Court between the same parties in YOU ONE Engineering & Construction Co. Ltd. & Anr. v. National Highways Authority of India, [2006] 4 SCC 372 and this Court has held that it is the right of IRC to appoint Third Arbitrator and the petitioners could not C insist for a particular Arbitrator. Regarding the order passed by the Nominee of the Chief Justice of High Court of Delhi, it was submitted that it was an agreed order and the respondent had consented to in appointing Hon'ble Mr.

Justice Arun Kumar, retired Judge of this Court as the Third Arbitrator. The said decision, therefore, does not help the petitioner. It was also urged that D the question is of 'highly technical' nature and hence IRC is insisting to appoint a 'technical' man as the Third/Presiding Arbitrator. It was, therefore, prayed that the petition be dismissed.

9. Having considered rival contentions of the parties and having gone through the Agreement and Arbitration Clause, I am of the view that the E prayer of the petitioners cannot be granted. It is not in dispute that the Agreement, dated May 31, 2001 contains an Arbitration Clause (Clause 3).

The relevant part of the said Clause reads thus:

"In case of dispute or difference arising between the employer and a domestic contractor relating to any matter arising out of or connected F with this Agreement, such dispute or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The Arbitral Tribunal shall consist of 3 Arbitrators, one each to be appointed by the employer and the contractor. The third arbitrator shall be chosen by the two arbitrators so appointed by the parties and shall act as Presiding Arbitrator. In case of the failure qf the two arbitrators G 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 Council of Indian Road Congress".

(emphasis supplied) H

10. A bare reading of the above clause leaves no room for doubt .that in case of failure of the two Arbitrators appointed by the parties to reach upon a consensus, the Presiding Arbitrator 'shall be appointed by the Council of/RC'.

11. It may be stated at this stage that when the matter was placed before B me on April 24, 2007, the parties invited my attention to the aforesaid clause and it was sut"mitted that no consensus could be arrived at by the parties.

Considering the.fact situation and the Agreement, I thought it proper that the parties should undertake fresh exercise in the direction. I accordingly passed anorder to make one more attempt. Unfortunately, however, the effort could C not succeect and both the counsel stated that the matter will have "to be dec.ided on merits. Accordingly, the matter was heard.

12. In my opinion, the learned counsel for the respondent is right that apart fro, m clear language of Arbitrtion Clause, the point is also covered by D YOU ONE Engineering. Almost in identical circumstances, this Court was

 called µpon to consider the provisions of the Act and the right of the respondent to appoint Presiding Arbitrator under the Agreement. The Court held that it is the right of IRC to appoint Presiding Arbitrator in case the parties are not ad idem in appointment of Third/Presiding Arbitrator.

13. This Court stated:

"The arbitration agreement clearly envisages the appointment of the presiding arbitrator by IRC. There is no qualification that the arbitrator has to be a different person depending on the nature of the dispute.

If the parties have entered into such an agreement with open eyes, F it is not open to ignore it and invoke exercise of powers in Section

I I (6)".

(emphasis supplied)

14. It is, no doubt, true that the High Court of Delhi has appointed G Hon'ble Mr. Justice Arun Kumar, retired Judge of this Court as Presiding Arbitrator in OMP No. 342 of2004 vide its order dated May 22, 2006. The said order is on record of this case. Three paragraphs of the said order are important and they read as under:

H "3. Learned counsel for the parties jointly state that whole issue can

. be sortedout by having a panel of three arbitrators, with one aritrator A . as nominated by each of the parties and the presiding arbitrator to be appointed by this Court with the joint. consent of the learned counsel . for the part_ies. It may be noticed that as on date the petitioner has

nol!linate~ Mr.LR.Gupta, Director General Works, CPWD (Retd.) while respondent has nominated Justice S.B.Wad (Retd.). Justice S.B.Wad B

as"nominated in place of Justice A.K.Srivastava (Retd.), who expressed his inapility to act as an arbitrator.

4. Learned couns'el for the parties propose that Justice Arun Kumar (Retd Judge.of ihe Supeme Court), JO, Krishna Meon Marg, New Delhi - l JO 001 (Phone: 2301-2175) be appointed as the presiding C :·,. arbitrat9r anfi qrbitral tribunal be constituted accordingly. ·

5. The bonstitution of the presiding arbitrator and arbitral tribunal" as proposed by learned counsel for the parties is accepted by this Court and the said tribunal shall proceed to enter upon reference .and .. determine the dispute between the parties. Ordered accordingly. The D constitution of the tribunal be Justice Arun Kumar (Retd.) as the presiding arbitrator, Mr.L.R. Gupta and Justice S.B. Wad (Retd.) as the two other members of the arbitral tribunal. The fee shall be fixed by the tribunal itself'.

(emphasis supplied) E

15. The learned counsel for the respondent was right when he submitted that the order was based on 'consent' of the parties. As in the present case, there is no such consent, the Court has to consider the matter by interpreting an Arbitration Clause. Clause 3, as observed earlier, is explicitly clear and there is no ambiguity. Again, the controversy is decided by this Court in YOU F ONE Engineering. In my view, therefore, the petitioners cannot compel the respondent to agree for a retired Judge of this Court or retired Chief Justice of a High Court, senior to Hon'ble Mr. Justice Mohta as Presiding Arbitrator.

16. It was finally submitted that even if this Court is of the view that ' no such direction can be issued or order can be passed, it may be appreciated G that the petitioners have chosen a retired Chief Justice of a High Court as + their Arbitrator and appropriate observations may be made so that IRC may appoint retired Judge of this Court or a retired Chief Justice of a High Court to be the Presiding Arbitrator. That would enable the petitioners to avail services of an Arbitrator appointed by them.

17. I appreciate the anxiety of the petitioners. In my view, however, when the Arbitration Clause is clear and the point is concluded by a decision of this Court, it would not be proper on my part to make any such observation.

It is, however, open to the respondent to take an appropriate decision in the matter keeping in view the facts in their entirety. I may only state that. this B decision will not inhibit the respondent in taking any decision as it thinks fit.

18. In view of the above legal position, I express no opinion on the contention of the parties as to whether the controversy raised is or is not of a 'technical' nature. Since it is not necessary for me to enter into that question, I leave the matter there.

ie

19. For the foregoing re'asons, the application deserves to be dismissed and is accordingly dismissed, however, leaving the parties to bear their own costs.

8.8.B.

Petition dismissed.