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2007 DAILYLAW 2768 (DEL)

A. L. SUDERSHAN CONSTRUCTION COMPANY LIMITED v. GE CAPITAL TRANSPORTATION FINANCIAL SERVICES LIMITED

2007-10-30

Anil Kumar

body2007
ANIL KUMAR, J. ( 1 ) THE notice of the petition was sent to the respondent. The notice was served at the Delhi address of the respondent, however, no one is present on behalf of respondent. The matter was passed over, however, no one has appeared even after the pass over and consequently the respondent is proceeded ex parte. No reply has been filed by the petitioner refuting the allegations made by the petitioner and in the circumstances the averments and pleas raised by the petitioner remain unrebutted. ( 2 ) THIS is a petition under Section 11 (6) of Arbitration and Conciliation act, 1996 for appointment of an Arbitrator in terms of arbitration agreement between the parties. ( 3 ) THE petitioner contended that it is a construction company engaged in the business of road construction. Mr. A. L. Sudershan is stated to be the Director of the company authorized to institute the proceedings on behalf of petitioner company. ( 4 ) ACCORDING to the petitioner, a Road contract was awarded by National highway Authority of India to the joint venture of the petitioner and a company named Dolomite Berhad. The petitioner entered into a Master Security and Loan agreement dated 6th February, 2003 with the respondents for a sum of rs. 88,00,000/- payable in 22 equal installments with interest @6. 49% against vogele Paver Finisher (a machinery imported for an amount of 198790 Euros), in respect of which post dated cheques from 10. 3. 2003 to 10. 1. 2005 were given to the respondent by the petitioner. However, due to capital crunch by reason of certain disputes which arose between the petitioner and the NHAI and hike in steel prices, the petitioner, who had earlier paid the first sixteen installments in time, defaulted in payment of later installments and a request for rescheduling the installments was made to the respondent. The respondent by an e-mail dated 3rd November 2004 asked for payment of additional finance charges @ 18% and re-scheduling charges of Rs. 15,000/ -. ( 5 ) THE petitioner gave another proposal to the respondent who without responding to the same repossessed the machinery on 10th December, 2004 from chitradurga work site of the applicant and shifted it to Hyderabad. 15,000/ -. ( 5 ) THE petitioner gave another proposal to the respondent who without responding to the same repossessed the machinery on 10th December, 2004 from chitradurga work site of the applicant and shifted it to Hyderabad. Thereafter letter dated 30th December, 2004 enclosing the termination sheet was issued by the respondent informing the petitioner that the machinery has been repossessed by the respondent and that the same will be sold, if the petitioner did not pay the amount mentioned in the termination sheet (Rs. 34,30,134/-) within 7 days of the receipt of the letter. ( 6 ) ACCORDING to the petitioner despite repeated request from the petitioner not to sell the machinery, which was purchased by the petitioner under duty exemption scheme of the Central Government (under which the machinery could not be disposed off within five years from the date of purchase), without giving notice to the petitioner, the respondent in breach of the agreement dated 6th February, 2003 sold the machinery without informing the petitioner. Thus disputes relating to hire-purchase agreement dated 6th February, 2003 have arisen between the parties. Clause 13 (g) of the agreement dated 6th February, 2003 provides an arbitration agreement which is as under:-13 (g) Any dispute, controversy or claim arising out of or relating to this agreement or any related agreement or other document or the validity, interpretation, breach or termination thereof ("dispute"), including claims seeking redress or asserting rights under applicable law, shall, be resolved and finally settled in accordance with the provisions of the Arbitration and conciliation Act, 1996 as may be amended from time to time or its re-enactment (the "arbitration Act" ). The parties consent to a single, consolidated arbitration for all disputes that may at the time exist. The arbitral tribunal shall be composed of one arbitrator to be appointed by the Secured Party. The arbitration proceedings shall be conducted in the English language and any document, not in English submitted by any party shall be accompanied by an english translation. The arbitration shall be conducted in New Delhi. The arbitral tribunal shall determine the Dispute in accordance with the law of india, without giving effect to any conflict of law rules or other rules that might render such law inapplicable or unavailable, and shall apply this agreement according to its terms. The arbitration shall be conducted in New Delhi. The arbitral tribunal shall determine the Dispute in accordance with the law of india, without giving effect to any conflict of law rules or other rules that might render such law inapplicable or unavailable, and shall apply this agreement according to its terms. The arbitral tribunal shall not appoint any experts under Section 26 of the Arbitration Act. The parties agree to be bound by any reward or order resulting from any arbitration conducted hereunder. The arbitral tribunal shall endeavor to make the award within 90 days from the date of reference to him. The arbitral tribunal shall award the prevailing party, as determined by such arbitral tribunal, all its, costs and fees. For the purpose of this Agreement, the expression costs and fees shall mean and include all reasonable pre-award expenses of the arbitration including the arbitrator's fees, administrative fees, travel expenses, out of pocket expenses such as copying and telephone, court costs and lawyers' fees. The parties hereto agree to be bound by any award or order passed by the arbitral tribunal in the manner laid out hereinabove and further agree that:- i) in the context of an attempt by either to enforce an arbitral award or order, any defenses relating to the parties capacity or the validity of this agreement are hereby waived; and ii) Judgment/decree on any award or order resulting from an arbitration conducted hereunder may be entered and enforced in any court, having jurisdiction thereof or having jurisdiction over any of the parties or any of their assets. iii) In the event of any dispute or controversy arising out of this arbitration clause, the Courts at Delhi shall have sole and exclusive jurisdiction to entertain such dispute. ( 7 ) CONSEQUENT to the arbitration agreement between the parties and the fact that disputes had arisen between the parties, the petitioner sought appointment of an Arbitrator by a notice dated 14th October, 2005. Under the arbitration agreement the respondent was to appoint an arbitrator for a single consolidated arbitration. The respondent in its reply dated 14th November 2005 denied the appointment of an arbitrator on the ground that no terms of reference are left. The petitioner thereafter, gave a final notice dated 18th December 2005 seeking appointment of an arbitrator in terms of arbitration agreement which notice has not been replied. The respondent in its reply dated 14th November 2005 denied the appointment of an arbitrator on the ground that no terms of reference are left. The petitioner thereafter, gave a final notice dated 18th December 2005 seeking appointment of an arbitrator in terms of arbitration agreement which notice has not been replied. The disputes which have been raised by the petitioner survive or not are to be decided by the arbitrator and on this ground the respondent could not refuse to appoint an arbitrator. Since despite a demand raised by the petitioner to appoint an arbitrator in terms of the arbitration agreement between the parties which is not denied by the respondent, an arbitrator has not been appointed, therefore the respondent has lost its right to appoint an arbitrator in terms of arbitration agreement and it will be for this court to appoint an arbitrator. ( 8 ) A learned Single Judge in Haryana Telecom Ltd. v. Union of India and anr. , 112 (2004) DLT 339=2004 (3) RAJ 147, had held that if the respondent fails to appoint an Arbitrator within the stipulated time of 30 days of the notice, and even after filing of the petition under Section 11 of the Act, it is for the court to appoint an Arbitrator. A Division Bench of this Court in Delkon (India) Pvt. Ltd. v. G. M. , Bharat Heavy Electricals Ltd. , 120 (2005) DLT 542 (DB), relying on Datar Switchgears Ltd Vs Tata Finance Ltd has held paras 4 is as under: "4. We have given our careful consideration to the arguments advanced by learned counsel for both the parties. In view of the law laid down in the case of Datar switchgears Ltd. v. Tata Finance Ltd. and Anr. , IV (2000) CLT 191 (SC) =vii (2000) SLT 543=jt 2000 (Suppl. 2) SC 226 it is no more res integra that the vacancy can be supplied by a party pursuant to the arbitration agreement even after thirty days of the receipt of the notice. However, once a party approaches the Court and files a petition for appointment by the designated authority of the Chief Justice of that Court under Section 11 (6) of the Arbitration and conciliation Act, the right to supply vacancy by the opposite party is extinguished. However, once a party approaches the Court and files a petition for appointment by the designated authority of the Chief Justice of that Court under Section 11 (6) of the Arbitration and conciliation Act, the right to supply vacancy by the opposite party is extinguished. If that right stood extinguished on filing of the petition under section 11 (6) of the Arbitration and Conciliation Act, in September 1998 the appointment of an Arbitrator on 3rd May, 1999 could not be made, therefore in our view, the order passed by the learned Single Judge on 7th May, 1999 suffers from patent illegality. Therefore, the submission of the respondent that the petitioner had appeared before the Arbitrator and the application of the petitioner raising preliminary objections is pending adjudication which inter alia challenges the jurisdiction of the Arbitrator to decide the dispute is of no consequence as from the order reproduced above it was pursuant to the directions passed by the learned Single Judge that the parties were directed to appear before the Arbitrator. The petitioner had no other option but to appear before the Arbitrator and after appearing before the Arbitrator the petitioner has not submitted to the jurisdiction of the Arbitrator, rather has at first opportunity taken the objection that the Arbitrator had no jurisdiction to proceed with the matter. ( 9 ) IN Union of India v. M/s. R. R. Industries, 120 (2005) DLT 572 (DB) also it was held that once a party does not supply the vacancy or fails to supply the vacancy before filing of a petition under Section 11 (6) of the Arbitration and conciliation Act, such a party forfeits the right to supply the vacancy in terms of the arbitration clause and what remains is only the arbitration clause, i. e. the dispute has to be resolved under the mechanism of alternative dispute redressal scheme but no right survives to the respondent to supply the named arbitrator in the arbitration clause. ( 10 ) DESPITE the service of notice of the petition, no one has appeared on behalf of respondent today nor has any reply been filed. In totality of circumstances, it is inevitable to infer that there is arbitration agreement between the parties which is reproduced hereinabove. The respondent failed to appoint an arbitrator within four weeks time pursuant to notice given by the petitioner for appointment of an arbitrator. In totality of circumstances, it is inevitable to infer that there is arbitration agreement between the parties which is reproduced hereinabove. The respondent failed to appoint an arbitrator within four weeks time pursuant to notice given by the petitioner for appointment of an arbitrator. Even before filing of the petition the arbitrator has not been appointed. Therefore, it will be just and appropriate to appoint an arbitrator to adjudicate the disputes between the parties. ( 11 ) CONSEQUENTLY, I appoint Ms. Justice Usha Mehra (Retired), C-1/36, safdarjung Development Area, New Delhi, (Mobile No. 9818421144, residence no. 26531100, 26561316) as an arbitrator to adjudicate all the disputes between the parties. The learned Arbitrator shall decide her fees and the procedure for adjudication of disputes between the parties. The parties shall appear before the arbitrator on 26. 11. 2007 at 4. 30 PM. A copy of this order be sent to the learned arbitrator forthwith. The parties are also directed to give a copy of this order to the arbitrator. Copy of this order be given dasti to the counsel for the petitioner.