TMI Blog2007 (5) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... on 17.2.2003 for transportation of pig iron and steel material from Burnpur/Kolkata stockyard to different customer locations in various parts of the country. The tender submitted by the respondent M/s. Tiwari Road Lines was accepted and a letter was issued on 14.5.2003 awarding the contract to the respondent to transport the material with effect from 17.5.2003 for a period of two years. The tender was submitted by the respondent at the Head Office of the company at Kolkata and the agreement was also signed between the parties at Kolkata. In terms of the agreement the respondent furnished a bank guarantee for ₹ 5,00,000/-. According to the appellant there was failure on the part of the respondent to comply with the terms of the agreement and accordingly the appellant invoked the bank guarantee on 16.9.2003. Feeling aggrieved by the encashment of the bank guarantee, the respondent filed an application before the Chief Judge, City Civil Courts, Hyderabad, who was the designated authority under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') under the scheme framed by the Andhra Pradesh High Court, for appointment of an ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising between the parties out of or relating to the construction, meaning and operation or effect of this contract or the breach thereof shall be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties. 13.2 In all above cases, the work under the contract shall, if reasonably possible, continue during the arbitration proceedings and no payment due or payable to the contractor as advised by the company will be withheld by the companion account of such proceedings. A perusal of Clause 13.1 will show that under the terms of the agreement all disputes or differences whatsoever arising between the parties have to be decided by arbitration in accordance with the Rules or Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties. 5. It is not disputed that the respondent did not make any effort to have the dispute settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration. On the contrary, it straightaway moved an application under Section 11 of the Arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (5) or Sub-section (6) to the Chief Justice or the person or institution designated by him is final. Sub-section (2) of Section 11 of the Act provides that subject to Sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator. The opening part of Sub-sections (3) and (5) of Section 11 of the Act use the expression failing any agreement referred to in Sub-section (2) . Therefore, Sub-sections (3) and (5) will come into play only when there is no agreement between the parties as is referred to in Sub-section (2) of Section 11 of the Act, viz., that the parties have not agreed on a procedure for appointing the arbitrator or arbitrators. If the parties have agreed on a procedure for appointing arbitrator or arbitrators, Sub-sections (3) and (5) of Section 11 of the Act can have no application. Similarly, under Sub-section (6) of Section 11 request to the Chief Justice or to an institution designated by him to take the necessary measures, can be made if the conditions enumerated in Clauses (a) or (b) or (c) of this sub-section are satisfied. Therefore, recourse to Sub-section (6) can be had only where the parties have agreed on a procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitrator is clearly without jurisdiction and has to be set aside. 7. The legislative scheme of Section 11 is very clear. If the parties have agreed on a procedure for appointing the arbitrator or arbitrators as contemplated by Sub-section (2) thereof, then the dispute between the parties has to be decided in accordance with the said procedure and recourse to the Chief Justice or his designate cannot be taken straightaway. A party can approach the Chief Justice or his designate only if the parties have not agreed on a procedure for appointing the arbitrator as contemplated by Sub-section (2) of Section 11 of the Act or the various contingencies provided for in Sub-section (6) have arisen. Since the parties here had agreed on a procedure for appointing an arbitrator for settling the dispute by arbitration as contemplated by Sub-section (2) and there is no allegation that anyone of the contingencies enumerated in Clauses (a) or (b) or (c) of Sub-section (6) had arisen, the application moved by the respondent herein to the City Civil Court, Hyderabad, was clearly not maintainable and the said court had no jurisdiction to entertain such an application and pass any order. The order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the court. (5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by, the other provisions of this Act so far as they can be made applicable. The Court considered the scope of Sub-section (4) of Section 20 of the Arbitration Act, 1940 and held as under: Sub-section (4) of Section 20 says that the reference shall be to the arbitrator appointed by the parties. Such agreed appointment may be contained in the agreement itself or may be expressed separately. Where the agreement itself specifies and names the arbitrator, it is obligatory upon the court, in case it is satisfied that the dispute ought to be referred to the arbitrator, to refer the dispute to the arbitrator specified in the agreement. It is not open to the Court to ignore such an arbitration clause of the agreement and to appoint another person as an arbitrator. Only in cases where the arbitrator specified and named in the agreement refuses or fails to act or where the agreement does not specify the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntment of an arbitrator was not maintainable. Consequently, the order passed by the City Civil Court, Hyderabad dated 27.12.2004 is wholly illegal and without jurisdiction and is liable to be set aside. 11. Learned Counsel for the appellant has also submitted that City Civil Court, Hyderabad had no jurisdiction to entertain the application moved by the respondent as no part of cause of action had accrued there. In this connection, he has referred to Clause (b) of Sub-section (12) of Section 11 and Clause (e) of Sub-section (1) of Section 2 of the Act which will govern the question of jurisdiction as to Chief Justice of which High Court has to be approached for moving an application under Section 11 of the Act. Learned Counsel has submitted that the tenders were floated at Kolkata, the respondent submitted the tender at Kolkata, the agreement was executed at Kolkata and, therefore, the court at Hyderabad had no jurisdiction to entertain the application. Learned Counsel has also submitted that the view taken by the High Court that as the bank guarantee was furnished at Hyderabad and was encashed at Hyderabad, the court at Hyderabad has jurisdiction is erroneous in law inasmuch as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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