Case Note & Summary
The applicant, Vijay Hiralal Jaiswal, a sole proprietor of M/s. Three Circles, submitted a tender for construction works at Indian Airlines' NEC Sahar, Mumbai, valued at Rs.1,53,90,189.75. The tender was accepted on 22nd February 1997. The applicant completed the work with extended time granted without penalty. The final bill was jointly prepared with consultants and submitted on 22nd June 2001. Despite reminders, the respondents did not pay the final bill and also refunded the security deposit. The applicant invoked the arbitration clause (Clause 57) which named the Managing Director as arbitrator, calling upon him to enter reference within 30 days. The respondents failed to act. The applicant then sent letters dated 17th January 2004 and 23rd January 2004 demanding payment and proposing three names for appointment as sole arbitrator. No response was received. The applicant filed Arbitration Application No. 166 of 2004 under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator. The court found that the respondents did not file any reply or appear to oppose the application. The court noted that the named arbitrator failed to act and the respondents did not respond to the applicant's proposal. The court allowed the application and appointed Mr. Justice S.H. Kapadia (Retired Judge of the Bombay High Court) as the sole arbitrator to adjudicate the disputes between the parties.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11(6) Arbitration and Conciliation Act, 1996 - Failure of Named Arbitrator to Act - Where the contract contained a dispute resolution clause naming the Managing Director as arbitrator, and the applicant invoked the clause but the named arbitrator failed to enter upon reference within 30 days, the court has power to appoint an independent arbitrator. The court held that the applicant's request for appointment of an arbitrator was justified as the respondents did not respond to the notice and the named arbitrator did not act. (Paras 1-8)
Issue of Consideration
Whether the applicant is entitled to appointment of an arbitrator by the court under Section 11(6) of the Arbitration and Conciliation Act, 1996, when the named arbitrator (Managing Director) failed to enter upon reference within 30 days of notice.
Final Decision
The court allowed the application and appointed Mr. Justice S.H. Kapadia (Retired Judge of the Bombay High Court) as the sole arbitrator to adjudicate the disputes between the parties. The arbitrator was directed to enter upon reference and decide the matter in accordance with law.
Law Points
- Arbitration agreement
- appointment of arbitrator
- failure to act
- Section 11(6) Arbitration and Conciliation Act
- 1996
- dispute resolution clause
- named arbitrator
- refusal to enter reference
Case Details
2005 LawText (BOM) (04) 27
Arbitration Application No. 166 of 2004
Ms. Krishna Tanna instructed by M/s. Lex Consultants for the Applicant; Mr. P.N. Mody instructed by M/s. Mulla & Mulla & Craigie Blunt & Caroe for the Respondents
Managing Director, Indian Airlines, New Delhi and Senior Manager (Civil), Indian Airlines Ltd., Mumbai
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Nature of Litigation
Arbitration application under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator.
Remedy Sought
The applicant sought appointment of an arbitrator to adjudicate disputes regarding non-payment of final bill and other dues under a construction contract.
Filing Reason
The respondents failed to pay the final bill and the named arbitrator (Managing Director) failed to enter upon reference within 30 days of notice invoking the arbitration clause.
Issues
Whether the applicant is entitled to appointment of an arbitrator by the court under Section 11(6) of the Arbitration and Conciliation Act, 1996 when the named arbitrator failed to act.
Submissions/Arguments
The applicant submitted that the respondents did not pay the final bill despite reminders and did not respond to the notice invoking arbitration. The applicant proposed three names for appointment as sole arbitrator, but the respondents did not reply. The applicant argued that the named arbitrator failed to enter upon reference, entitling the applicant to seek court appointment.
Ratio Decidendi
Under Section 11(6) of the Arbitration and Conciliation Act, 1996, if a party fails to act as required under the arbitration agreement, the other party may approach the court for appointment of an arbitrator. Here, the named arbitrator (Managing Director) failed to enter upon reference within 30 days of notice, and the respondents did not respond to the applicant's proposal for appointment. Therefore, the court has the power to appoint an independent arbitrator.
Judgment Excerpts
The applicant submitted the tender for the construction of Engine Run-up Bay at NEC, construction of New Apron at NEC Sahar at Mumbai for the value of Rs.1,53,90,189.75.
The applicant required some more time to complete the work and the same was extended by the respondents without any penal action.
The applicant has sent a letter dated 17th January, 2004 to the Managing Director, Indian Airlines, in which it is requested that the unpaid amount of Rs.12,67,340.05 be paid to the applicant forthwith.
In this letter (Exhibit 'J'), the applicant has named three arbitrators, and submitted that one of them be appointed as the sole arbitrator.
Procedural History
The applicant filed Arbitration Application No. 166 of 2004 under Section 11 of the Arbitration and Conciliation Act, 1996. The respondents did not file any reply or appear to oppose the application. The court heard the applicant's counsel and passed the order on 29th April 2005.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 11, Section 11(6)
