TMI Blog2007 (5) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... ional ground for rejecting the petition filed by respondent no.1 under Section 34 of the Act and we are in agreement with the said view. Appeal is allowed with costs throughout and the judgment and order dated 7.12.2004 of the Division Bench of the High Court is set aside. - Appeal (civil) 2440 of 2007 - - - Dated:- 11-5-2007 - MATHUR, G.P. AND PANTA, LOKESHWAR SINGH, JJ. JUDGMENT G.P. Mathur, J. Leave granted. 2. This appeal, by special leave, has been preferred against the judgment and order dated 7.12.2004 of a Division Bench of Delhi High Court by which the appeal filed by M/s Keti Construction (I) Ltd. - Contractor (Respondent No.1 herein) under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') was allowed and the judgment and order dated 20.10.2003 of a learned Single Judge by which the petition filed by respondent no.1 under Section 34 of the Act was dismissed, was set aside and the award given by the arbitrator (respondent no.2 in the present appeal) on 19.4.2000, was also set aside. It was further directed that Brig. Nardip Singh (Retd.) who was appointed by respondent no.1 shall proceed with the arbitration in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 28.10.1999. Appellant no.1 again did not make any response and did not choose anyone from the panel nominated by respondent no.1 and accordingly it informed appellant no.1 on 10.12.1999 that it had selected Brig. Nardip Singh (Retd.) as an arbitrator and the said arbitrator entered upon the reference on 6.1.2000. Appellant no.1 appointed Justice N.N. Goswami (Retd.) as an arbitrator subsequently on 13.1.2000 which appointment was not valid being contrary to the terms of the agreement entered into between the parties. Respondent no.1 thus submitted that the appointment of Justice N.N. Goswami (Retd.) was invalid and the award given by him was liable to be set aside in view of Section 34(2)(v) of the Act. 5. The petition was contested by the appellants on the grounds, inter alia, that appellant no.1 had already sent a panel of three names on 16.2.1999 in which the name of Justice N.N. Goswami (Retd.) was mentioned at serial no.1 and it was mentioned that disputes between the parties relating to all the contracts be resolved by the same arbitrator. In reply to the notice of respondent no.1, the appellants' advocate Mr. Sushil Chauhan had sent a reply on 31.7.1999 asking to choose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or concerning the WORKS or the execution or maintenance thereof of this CONTRACT or the rights touching or concerning the WORKS or the execution effect thereof or to the rights or liabilities or the construction meaning operation or effect whether during or after completion of the CONTRACT or whether before or after determination, foreclosure or breach of the CONTRACT (other than those in respect of which the decision of any person is by the CONTRACT expressed to be final and binding) shall after written notice by either party to the CONTRACT to the other of them and to the Appointing Authority hereinafter mentioned be referred for adjudication to a sole arbitrator to be appointed as hereinafter provided. 107.2 For the purpose of appointing the sole arbitrator referred to above, the Appointing Authority will send within thirty days of the receipt of the notice to the CONTRACTOR, a panel of three persons who shall all be presently unconnected with the organization for which the WORK is executed. The CONTRACTOR shall on receipt of the names, as aforesaid, select any one of the persons named to be appointed as a sole Arbitrator and communicate his name to the Appointing Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication or re- enactment thereof and the rules made thereunder, and for the time being in force, shall apply to the arbitration proceedings under this clause." A perusal of clause 107 would show that on a dispute being raised by the contractor, the appointing authority was required to send a panel of three names to the contractor and he was entitled to select anyone of them as sole arbitrator and to communicate his decision to the appointing authority within 30 days. Thereafter, the appointing authority was under an obligation to appoint the said person as sole arbitrator. However, if the appointing authority failed to send the panel of three names within the stipulated period, the contractor was given the option to send a panel of three names to appellant no.1, which was required to select anyone of them and communicate the said fact within 30 days. 9. The plea taken by respondent no.1 is that the completion certificate with regard to the work in dispute was issued on 24.1.1998 and it wrote several times for settling the accounts. It invoked the arbitration clause on 17.7.1999 by sending a letter to the appointing authority to send a panel but as there was no response, it sent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) WORK ORDER NO.: CE/AUR/PH-II EXTN. B. WORKS/97A/95 DATED 26.05.95. BALANCE WORK OF CONSTRUCTION OF C-6 AND D-2 NOS. OF HOUSES AT GAIL VIHAR TOWNSHIP, DIBIYAPUR; (B) WORK ORDER NO. CE/115/AURIAYA/GAIL/ GAIL VIHAR ROAD WORK/95 DATED 10.02.95 CONSTRUCTION OF PREMIX BITUMEN CARPETING AND REPAIRS OF ROADS IN GAIL VIHAR COLONY AND COMPRESSOR STATION. (C) WORK ORDER NO. CE/137/AURIAYA/EXT/SER/95 DATED 1.11.95: CONSTRUCTION OF EXTERNAL SEWERAGE LINE AT UPPC NAGAR, DIBIYAPUR. (D) WORK ORDER NO. CE/136/AURIAYA/HOUSING/95 DATED 28.9.95 CONSTRUCTION OF RESIDENTIAL QUARTERS TYPE A-25 UNITS, TYPE B-105 UNITS, TYPE C-55 UNITS FOR UPPC COMPLEX, DIBIYAPUR. Dear Sir, Kindly recall various meetings held in our office and also in the office of Consultant, M/s C.P. Kukreja Associates in respect of the above referred contracts and the disputes arising therefrom, wherein it was agreed between us to settle the disputes amicably and through discussions. Despite this clear understanding, you had vide your letters dated 25.08.98 invoked Arbitration clause in respect of Work Order Nos. : (1) CE/AUR/PH-II/EXTN. B. WORK/97A/95 dated 26.05.95 relating to balance work of Construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent no.1 from amongst the persons mentioned in the panel so that the resolution of disputes by reference to arbitration becomes cost effective, economical and quick. Towards the end of the letter a request was made to respondent no.1 to select anyone of the persons mentioned in the said letter to act as sole arbitrator in all the above disputes, which means all the disputes relating to contract nos.(A), (B), (C) and (D). It is, therefore, clear that a panel of three names had been sent by the appellant to respondent no.1 on 16.2.1999 which was categorically reiterated in the letter dated 15.11.1999, sent by the Senior Manager (Civil) of Gas Authority of India Ltd. (appellant no.1) to respondent no.1. This letter was not confined to any particular contract but specifically referred to all the four contracts including the disputed contract no.(D) dated 28.9.1995. The stand of appellant no.1 was quite reasonable that if all the disputes were referred to a single arbitrator, the arbitration proceedings would be cost effective, economical and quick. After receipt of this letter dated 15.11.1999, wherein the earlier panel communicated vide letter dated 16.2.1999 had been reiterated, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eti Constructions. Keti Constructions made their requests for resolution of interse disputes with GAIL by reference to Arbitration, including in the contract in question. Upon receipt of these requests of Keti Constructions by GAIL, GAIL made suggestion for resolution of disputes by a Sole Arbitrator and sent to Keti Constructions a panel of three distinguished persons who may be appointed as Sole Arbitrator. Thereupon, Keti Constructions came forward for negotiations. During these discussions/negotiation, the representatives of Keti Constructions were repeatedly suggested to refer all unresolved issues of various contracts to a Sole Arbitrator selected by them from amongst the panel suggested by GAIL. Representatives of Keti Constructions agreed to our suggestion as it was less time consuming and GAIL in turn took liberal view on various issues with clear objective of resolving these disputes without reference to arbitration. These efforts yielded results and the requests for arbitration of Keti Constructions were withdrawn by them. As all these matters were between two organisations and it was clearly agreed by the parties to refer unresolved disputes of all contracts to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In these circumstances, respondent no.1 was not at all entitled to nominate Brig. Nardip Singh (Retd.) as an arbitrator which it chose to do subsequently on 10.12.1999. We do not find anything wrong on the part of the appellant when it intimated vide letter dated 15.11.1999 that a panel had already been sent earlier on 16.2.1999 for appointment of a single arbitrator for resolution of all the disputes between the parties. 14. According to the appellants, after respondent no.1 had sent the notice dated 17.7.1999 invoking the arbitration clause, a reply thereto was given on their behalf by Mr. Sushil Chauhan, Advocate, on 31.7.1999 wherein it was mentioned as under : "Ref: Your letter IND/KT/522/99 dated 17.7.99 Pursuant to the discussions held on various occasions by you and my client, GAIL officials with regard to settlement of disputes and appointment of sole arbitrator, I am instructed by my client, Gas Authority of India Ltd. (GAIL) to call upon you to select the sole arbitrator from the names of three distinguished persons already suggested by my clients during discussions in response to your notices. Please take further necessary action." Respondent No.1 has seriously chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pear on the date fixed, the arbitrator passed an order fixing 19.4.2000 as the next date of hearing. A no claim award was finally given by him on 19.4.2000. 16. Respondent no.1 did not at all appear before the arbitrator appointed by appellant no.1. Respondent no.1 neither filed any statement of claim nor raised any plea of jurisdiction before the arbitrator. Section 16 of the Act says that the arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement. In Konkan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd. (2002) 2 SCC 388 in para 21 a Constitution Bench of 5 learned Judges has ruled that if the arbitral Tribunal has been improperly constituted, it would be open to the aggrieved party to require the Arbitral Tribunal to rule on its own jurisdiction in view of Section 16 of the Act. It was also observed that the expression used in Sub-section (1) that the "Arbitral Tribunal may rule on any objections with respect to the existence or validity of the arbitration agreement" shows that the Arbitral Tribunal's authority under Section 16 is not confined to the width of its juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the provisions of the Arbitration and Conciliation Act, 1996 should be interpreted keeping in mind the Model Law as the concept under the present Act has undergone a complete change. It will, therefore, be useful to take note of the corresponding provisions of the UNCITRAL Model Law. Article 16 of the Model Law, which corresponds to Section 16 of the Act, is being reproduced below : UNCITRAL Model Law "Article 16. Competence to rule on own jurisdiction.- (1) The Arbitral Tribunal has the power to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For the purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the Arbitral Tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the Arbitral Tribunal does not have jurisdiction shall be raised not later than in the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UNCITRAL and has been adopted by many countries including India shows that where a party asserts that the arbitral tribunal has not been properly constituted or it has no jurisdiction, then such a plea must be raised before the arbitral tribunal right at the beginning and normally not later than in the statement of defence. 18. The whole object and scheme of the Act is to secure an expeditious resolution of disputes. Therefore, where a party raises a plea that the arbitral tribunal has not been properly constituted or has no jurisdiction, it must do so at the threshold before the arbitral tribunal so that remedial measures may be immediately taken and time and expense involved in hearing of the matter before the arbitral tribunal which may ultimately be found to be either not properly constituted or lacking in jurisdiction, in proceedings for setting aside the award, may be avoided. The commentary on Model Law clearly illustrates the aforesaid legal position. 19. Where a party has received notice and he does not raise a plea of lack of jurisdiction before the arbitral tribunal, he must make out a strong case why he did not do so if he chooses to move a petition for setting asi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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