Delhi High Court

Oyo Hotels And Homes Pvt. Ltd. vs Rajan Tewari & Anr. on 9 February, 2021

Equivalent citations: AIRONLINE 2021 DEL 116

Author:
V. Kameswar Rao

Bench:
V. Kameswar Rao

IN THE HIGH COURT OF DELHI AT NEW DELHI

Judgment delivered on: February 09, 2021

+ ARB.P. 424/2020

OYO HOTELS AND HOMES PVT. LTD.

..... Petitioner

Through: Mr. Jeevan Ballav Panda, Adv.
with Ms. Satakshi Sood & Mr.
Satish Padhi, Advs.

versus

RAJAN TEWARI & ANR. ..... Respondents

Through: Ms. Bobby Anand, Adv.

CORAM:
HON'BLE MR. JUSTICE V. KAMESWAR RAO

JUDGMENT

V. KAMESWAR RAO, J

1. This present petition has been filed under
Section 11(6)
of
the Arbitration and Conciliation Act, 1996 ('Act', for short) with
the following prayers:

"It is most respectfully prayed that this Hon'ble
Court may be pleased to:

(i) appoint a Sole Arbitrator to adjudicate the
claims of the Petitioner in accordance with the

Arbitration and Conciliation Act, 1996
as amended;

(ii) declare that Hon'ble Justice Aruna Suresh
(retired) has no jurisdiction to adjudicate the

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disputes between the parties;

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(iii) Award costs of this Petition in favour of the
Petitioner and against the Respondent;
(iv) Pass such other and further order(s) as this

Hon'ble Court may deem fit and proper in the facts
and circumstances of the present case."

2. The petitioner herein is a company incorporated under the

Companies Act, 2013
and having its registered office at Ground
Floor-001, Mauryansh Elanza, Shyamai Cross Road, Nr. Parekh
Hospital, Satellite Ahmedabad, Gujarat-380015 (formerly known
as Alcott Town Planners Pvt. Ltd.).

3. The respondents herein are the joint owners of the
premises / property situated at 3/16, Main Shankar Road, Old
Rajinder Nagar, New Delhi ('Premises', for short).

4. It is the case of the petitioner and so contended by Mr.
Jeevan Ballav Panda, learned counsel appearing for the petitioner
that the petitioner and respondents entered into a Lease Deed
dated May 27, 2019 ('Lease Deed', for short) in respect of the
Premises.

5. Pursuant to the execution of the Lease Deed, petitioner
started fulfilling the obligations contained thereunder on the
assumption that the respondents will also do the same and even
disbursed an amount of Rs.3,32,000/- to the respondents in order
to expedite the refurbishment and upgradation of the Premises to
make it at par with the petitioner's benchmark.

6. Thereafter it took over the Premises and started using
the same for the purposes of its commercial activities as laid
down in the Lease Deed. In the wake of the corona virus

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pandemic, the entire hospitality sector faced huge financial
setback and on account of the same, the petitioner sought to
invoke the force majeure clause in the Lease Deed vide email
dated March 27, 2020.

7. He stated that after detailed discussion with the
representatives of the petitioner, the respondents while agreeing
to the invocation of the force majeure clause agreed to amend the
commercial understanding between the parties in the interim.

8. Mr. Panda submitted that the respondents were in breach
in terms of Clause 11.2.1 of the Lease Deed, which obligated the
respondents to obtain as well as maintain all requisite building
approvals required for running the Premises as a commercial
establishment for the purposes as laid down in the Lease Deed. It
is submitted by him that even after repeated communications and
grant of time as sought by the respondents, the respondents failed
to furnish the complete set of documents as mandated under
Clause 11.2.1 of the Lease Deed.

9. That while attempts were being made to get the breach of
Clause 11.2.1 cured, the respondents suddenly and to the
complete shock and dismay of the petitioner, issued a letter date
June 03, 2020 demanding a sum of money by misrepresenting the
clauses of the Lease Deed.

10. Thereafter, the respondents, vide notice dated June 23,
2020, invoked arbitration clause citing the existence of disputes
between the parties arising under the Lease Deed and nominated
a learned Retd. Judge of this Court as the sole Arbitrator to
adjudicate the disputes between the parties in terms of the dispute

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resolution clause contained in the Lease Deed. It is also stated by
him that the petitioner, however, could not respond to the said
notice owing to various logistical constraints on account of the
corona virus pandemic. Therefore, it is his submission that the
recommendation of the respondents was not confirmed by the
petitioner.

11. Mr. Panda stated that despite there being no confirmation
from the petitioner or mutual agreement, the respondents instead
of approaching this Court under the mandate of the Act, illegally
confirmed the appointment of the sole Arbitrator.

12. It is also submitted that the sole Arbitrator issued notice
on August 12, 2020 to the parties for the primary hearing to be
held on August 29, 2020, when for the first time, the petitioner
became aware of the appointment of the sole Arbitrator, and
objected as well as sought cancellation of the primary hearing
vide letter dated August 26, 2020.

13. Despite the objections being raised, the Arbitrator went
ahead with the hearing as scheduled on August 29, 2020 and the
petitioner, according to Mr. Panda, during the hearing also raised
its objection to the proceedings as being in contravention of the
settled principles of law and Lease Deed. Thus, it is submitted by
him that the sole Arbitrator is de facto as well as de jure
incapable of entering reference as sole Arbitrator for the
adjudication of disputes between the parties.

14. Reliance is placed by Mr. Panda on the judgments of
coordinate benches of this Court in
Naveen Kandhar & Anr. v.
Jai Mahal Hotels Pvt. Ltd., (Arb.P.
453/2017) and Manish

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Chibber v. Anil Sharma & Anr., (Arb.P. 249/2020), wherein it
was held that an appointment of an Arbitrator in contravention of
the agreed procedure is non-est and ought to be ignored.

15. Ms. Bobby Anand, learned counsel appearing for the
respondents has raised a preliminary objection as to the
maintainability of the present petition. It is the case of the
respondents and contended by Ms. Anand that while adjudicating
a petition under
Section 11
of the Act, the scope of enquiry is
limited and the petitioner, under the garb of
Section 11
, is in fact
seeking termination of the mandate of the learned sole Arbitrator,
who has already been appointed for adjudication of all disputes
between the parties.

16. By drawing the attention of this Court to the petition, it is
stated by Ms. Anand that even though the petition has been filed
under
Section 11
of the Act, reliefs and the various paragraphs of
the petition indicate and calls for the termination of the mandate
of the sole Arbitrator, which relief does not fall within the ambit
and scope of
Section 11(6)
of the Act.

17. It is also stated by Ms. Anand that the present petition is
infructuous and therefore liable to be dismissed as the sole
Arbitrator has already given consent and has entered upon
reference to adjudicate upon all the disputes emanating between
the parties from the Lease Deed. In fact, she stated that hearings
have taken place on August 29, 2020 and August 30, 2020, which
has been duly attended by the petitioner. More so, she also stated
that the sole Arbitrator has served upon both the parties an
undertaking dated September 02, 2020 as per Schedule VI as

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mandated under
Section 12 (1)(b)
of the Act.

18. Thus, according to Ms. Anand, the mandate of the sole
Arbitrator already appointed cannot be terminated under the
provisions of
Section 11(6)
of the Act. In fact, it is her
submission that the petitioner is within its right to challenge the
jurisdiction of the Arbitrator by resorting to
Sections 12-15
of the
Act, which concedingly not done.

19. Without prejudice, it is also submitted by her that the
petitioner has not shown as to how the sole Arbitrator already
appointed has become de jure or de facto unable to perform
functions especially under
Section 14
and it is not the case of the
petitioner that the sole Arbitrator falls under any one of the
categories specified in the fifth and / or the seventh schedule of
the Act.

20. That apart, it is submitted by Ms. Anand, the issuance of
a prior notice under
Section 21
of the Act is sine qua non for
filing a petition under
Section 11
, which the petitioner has failed
to issue in respect of the disputes raised by the petitioner in the
present petition and that the present petition is nothing but a
complete afterthought.

21. On the conduct of the petitioner, it is stated that the
petitioner has been delaying the payment of pending monthly
rentals since March 2020 and it was after repeated reminders that
the respondents were forced to invoke the arbitration clause
calling upon the petitioner to consent to the appointment of the
learned Retd. Judge of this Court, as sole Arbitrator, to which the
petitioner did not even respond and after the expiry of 30 days,

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the appointment was deemed to be accepted by the petitioner.
Even after her appointment, on the first date of hearing, petitioner
sought and was granted a period of 15 days for filing an
appropriate application challenging the appointment of the sole
Arbitrator. No application was in fact moved before the sole
Arbitrator. It is submitted by Ms. Anand that therefore, petitioner
having failed to take any action within the prescribed time, has
forfeited its right to challenge the appointment. She also
submitted that the petitioner having been acquiesced into the
appointment of the sole Arbitrator and not resorting to any
challenge within a reasonable time shall surely attract doctrine of
estoppel against the petitioner.

22. Rejoinder was also duly filed by the petitioner, reiterating
its stand in the petition and refuting the stand of the respondents
in the reply.

23. Having heard the learned counsel for the parties and
perused the record, the only issue which arises for consideration
is whether the appointment of the learned arbitrator is at variance
with the stipulation in the contract and as such non-est for this
court to grant the relief to the petitioner by appointing a new
arbitrator.

24. To answer this issue, it is necessary to reproduce the
arbitration clause in the contract:

"18. DISPUTE RESOLUTION- Any dispute or
controversy arising out of or in connection with the Deed
or its performance, including the validity, interpretation
or application hereof, shall to the extent possible be

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settled amicably by negotiation and discussion among the
Parties within 30 (thirty) days as of the date requested by
either Party. Failing which, either Party shall be at
liberty to refer the matter to arbitration in accordance
with the
Indian Arbitration and Conciliation Act, 1996
.
The arbitral panel shall consist of a sole arbitrator
appointed mutually by the Parties. Any arbitral award
issued by such sole arbitrator shall be final and binding
on the Parties. The language of the arbitration shall be
English and seat of arbitration shall be Delhi."

Emphasis supplied

25. From the above it is clear that the arbitrator has to be
appointed mutually by both the parties. The respondent had
invoked the arbitration clause and issued notice dated June 23,
2020 and nominated a retired Judge of this Court as the
nominator. The notice could not be responded by the petitioner.

26. Mr. Panda is right to submit that the notice /
recommendation of the respondents with regard to the learned
arbitrator was not confirmed. Mr. Panda is also right in stating
that the respondents should have approached this Court under

Section 11
of the Act seeking an appointment of an Arbitrator
when the petitioner has not confirmed the appointment.

27. Having said so, it must be held in view of the arbitration
clause as referred above; the appointment made by the respondent
is non-est and need to be ignored. The plea of Ms. Anand that the
present petition is not maintainable as the petitioner under the

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garb of
Section 11
is seeking termination of the mandate of the
learned Sole Arbitrator is not appealing for the reason when the
appointment is non-est, being not in accordance with the agreed
procedure, the petitioner is within its right to approach the Court
for appointment of an arbitrator under
Section 11
of the Act.

This position of law is well settled in terms of the Supreme Court
judgment in
Walter Bau Ag, Legal Successor of the Original
Contractor, Dycheroff & Widmann A.G. v. Municipal
Corporation of Greater Mumbai & Anr.
, (2015) 3 SCC 800,
wherein in paras 8, 9 and 10 the Supreme Court has held as
under:

"8. While it is correct that in Antrix (supra) and
Pricol
Limited
(supra), it was opined by this Court that after
appointment of an Arbitrator is made, the remedy of the
aggrieved party is not under
Section 11(6)
but such
remedy lies elsewhere and under different provisions of
the
Arbitration Act
(
Sections 12
and
), the context in
which the aforesaid view was expressed cannot be lost
sight of. In Antrix (supra), appointment of the Arbitrator,
as per ICC Rules, was as per the alternative procedure
agreed upon, whereas in
Pricol Limited
(supra), the party
which had filed the application under
Section 11(6)
of the
Arbitration Act had already submitted to the jurisdiction of
the Arbitrator. In the present case, the situation is
otherwise.

9. Unless the appointment of the arbitrator is ex facie
valid and such appointment satisfies the Court exercising

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jurisdiction under
Section 11(6)
of the Arbitration Act,
acceptance of such appointment as a fait accompli to
debar the jurisdiction under
Section 11(6)
cannot be
countenanced in law. In the present case, the agreed upon
procedure between the parties contemplated the
appointment of the arbitrator by second party within 30
days of receipt of a notice from the first party. While the
decision in
Datar Switchgears Ltd.
(supra) may have
introduced some flexibility in the time frame agreed upon
by the parties by extending it till a point of time anterior to
the filing of the application under
Section 11(6)
of the
Arbitration Act, it cannot be lost sight of that in the
present case the appointment of Shri Justice A.D. Mane is
clearly contrary to the provisions of the Rules governing
the appointment of Arbitrators by ICADR, which the
parties had agreed to abide in the matter of such
appointment. The option given to the respondent
Corporation to go beyond the panel submitted by the
ICADR and to appoint any person of its choice was clearly
not in the contemplation of the parties. If that be so,
obviously, the appointment of Shri Justice A.D. Mane is
non-est in law. Such an appointment, therefore, will not
inhibit the exercise of jurisdiction by this Court under

Section 11(6)
of the Arbitration Act. It cannot, therefore,
be held that the present proceeding is not maintainable in
law.

The appointment of Shri Justice A.D. Mane made
beyond 30 days of the receipt of notice by the petitioner,

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though may appear to be in conformity with the law
laid
down in

Datar Switchgears Ltd.
(supra), is clearly
contrary to the agreed procedure which required the
appointment made by the respondent Corporation to be
from the panel submitted by the ICADR. The said
appointment, therefore, is clearly invalid in law.

10. Consequently, we allow the present petition and
appoint Shri Justice S.R. Sathe, a retired judge of the
Bombay High Page 21 21 Court as the Arbitrator on
behalf of the respondent Corporation. Both the Arbitrators
shall now name the third Arbitrator forthwith whereafter
the arbitration proceedings will be held and concluded as
expeditiously as possible. The terms of appointment of Shri
Justice S.R. Sathe as the Arbitrator on behalf of the
respondent Corporation will be settled in consultation
with the respondent Corporation."

28. The aforesaid position is followed by this Coordinate
Benches of this Court in the cases of
Naveen Kandhari & Anr.

(supra) and Manish Chibber (supra).

In
Naveen Kandhari &
Anr.
(supra), on the objection taken by the respondent therein that
the an arbitrator has already been appointed by them and hence the

Section 11
petition is not maintainable, the Court in paragraphs 18
and 19 held as under:

"18. A plain reading of the arbitration clause as set out
above indicates that an arbitrator was required to be
appointed by the parties. Thus, the unilateral appointment

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of Mr A.P. Dhamija as an arbitrator is contrary to the
arbitration clause and without authority. It is also relevant
to note that the respondent had invoked the arbitration
clause by its letter dated 06.06.2016 and unilaterally
declared that it had appointed Mr A.P. Dhamija, Advocate
as an arbitrator.

19. The said appointment, being contrary to the terms of
the arbitration agreement, cannot be considered as an
appointment at all. It is for all intents and purposes non
est. Mr A.P. Dhamija has no authority to act as an
arbitrator; his actions are plainly of no consequence."

29. Similarly, in the case of Manish Chibber (supra), on the
significance of adherence to the procedure agreed upon by the
parties to an arbitration agreement with regard mutual/common
consent in appointing an arbitrator, the Court has held as under:

"13.
Section 11(6)
of the 1996 Act specifically states that, if
a party fails to act as required by the procedure for
appointment of arbitrator, as agreed upon between the
parties, the appointment shall, in the case of domestic
arbitration, be made by the High Court, on an application
of the party, by this Court, where the arbitration is other
than an international commercial arbitration. The
procedure agreed upon, between the petitioner and the
respondents, to appoint the arbitrator in the present case, is
encapsulated in Clause 22 of the partnership deed dated 1st
April, 2016, which already stands reproduced hereinabove.

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A reading thereof makes it clear that "appointment by
common consent of all partners" is the sine qua non, for the
appointment of the arbitrator to be valid. In the present
case, there is nothing, whatsoever, to indicate that, prior to,
or even at, the time of his appointment as sole arbitrator,
and of his taking cognizance of the arbitral proceedings,
there was any consent, by the petitioner to the appointment
of Mr. Ankit Batra. Clearly, therefore, the appointment of
Mr. Ankit Batra had not taken place in accordance with
Clause 22 of the partnership deed, dated 1st April, 2016
supra.
Section 11(6)
of the 1996 Act, therefore, squarely
applies, and the task of appointment of the arbitrator,
devolves on this Court, as there is no consensus, ad idem,
regarding the arbitrator, who would arbitrate on the
disputes between the parties."

30. A plea has been taken by Ms. Anand that the petitioner
having participated in the proceedings held on August 29, 2020 is
estopped from challenging the mandate of the arbitrator. The
same is not appealing, when it is the case of the petitioner, that
during the hearing, the petitioner had raised the objection, that the
proceeding being in contravention of principles of law and Lease
Deed. That apart, the Supreme Court in
Walter Bau
(supra), has
in para 9 stated as under:-

"9. Unless the appointment of the arbitrator is ex facie
valid and such appointment satisfies the Court exercising
jurisdiction under
Section 11(6)
of the Arbitration Act,

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the jurisdiction under
Section 11(6)
cannot be countenanced
in law. ........" emphasis supplied

Therefore, the petitioner has rightly filed the present
petition under
Section 11
of the Act, which is under
consideration in terms of this order. The appointment of the
learned Sole Arbitrator by the respondents is non-est.

31. The present petition is liable to be allowed. I appoint
Justice S.P. Garg, a retired Judge of this Court, as the sole
Arbitrator to adjudicate the disputes and differences between the
parties arising out of the Lease Deed. The fee of the learned sole
Arbitrator shall be governed by
Fourth Schedule to the Arbitration
& Conciliation Act, 1996
.

32. The petition is disposed of.

33. Let a copy of this order be sent to Justice S.P. Garg
(Retd.).

V. KAMESWAR RAO, J

FEBRUARY 09, 2021/aky

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