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CASE NO.: Appeal (civil)  2440 of 2007

PETITIONER: M/s. Gas Authority of India Ltd. and anr

RESPONDENT: M/s. Keti Construction (I) Ltd. and ors

DATE OF JUDGMENT: 11/05/2007

BENCH: G.P. Mathur & Lokeshwar Singh Panta

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO. 2440 OF 2007 (@ Special Leave Petition (Civil) No.11391 of 2005)

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 accordance with law and give the  award.   

3.      Gas Authority of India \026 (GAIL, appellant no.1 herein) awarded  four contracts for its project at Petro-Chemical Complex, Dibiyapur,  District Etawah (U.P.) to M/s Keti Construction (I) Ltd., Indore \026  (Contractor), which is arrayed as respondent no.1 in the present  appeal.   All the four contracts were awarded in the year 1995 and  they related to construction of certain types of houses for GAIL Vihar  Township, pre-mix bitumen carpeting and repair of roads in GAIL  Vihar Colony, construction of external sewerage line and construction  of certain residential quarters in UPPC Complex, Dibiyapur. Certain  disputes arose between the parties regarding completion of the  construction work in accordance with the design and cost of  construction, etc. The contracts entered into between the parties  contained arbitration clause.   Appellant no.1 referred the dispute with  regard to contract dated 28.9.1995 for arbitration to  Justice N.N.  Goswami (Retd.) who was formerly a Judge of Delhi High Court.   The arbitrator gave a ’no claim award’ on 19.4.2000.  Respondent  no.1 filed a petition under Section 34 of the Act in the Delhi High  Court for setting aside the award.  A learned Single Judge who heard  the petition, after detailed discussion of the material on record, found  that the petition was devoid of merits and accordingly dismissed the  same by the judgment and order dated 20.10.2003.  Respondent no.1  then preferred an appeal before the Division Bench of the High Court  under Section 37 of the Act which allowed the same by the judgment  and order dated 7.12.2004 and set aside the award of the arbitrator.  It

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was further directed in the order that parties shall appear before Brig.  Nardip Singh (Retd.) who had been nominated as arbitrator by  respondent no.1 (contractor) and he shall proceed in accordance with  law and give the award.  

4.      The principal ground on which the petition under Section 34 of  the Act had been filed by respondent no.1 was that it had invoked the  arbitration clause by sending a notice to appellant no.1 on 17.7.1999  and accordingly the appellant no.1 was required to send a panel of  three names for arbitration within 30 days of receipt of notice.   Since  appellant no.1 did not respond to the notice and did not send a panel  within 30 days, it forfeited its right to nominate a panel and thereafter  respondent no.1 sent its own panel on 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 any one from the said panel.  This was again reiterated by a  letter dated 15.11.1999 when respondent no.1 sent its own panel on  28.10.1999. The appointment of Brig. Nardip Singh (Retd.) as an  arbitrator made by respondent no.1 which was communicated by its  letter of 10.12.1999 was challenged by appellant no.1 by sending a  letter dated 31.12.1999 and a letter was also sent in this regard to Brig.  Nardip Singh (Retd.) to desist from proceeding with arbitration.   It  was further submitted that respondent no.1 did not challenge the  jurisdiction of the arbitrator appointed by appellant no.1 in accordance  with Section 16 of the Act.  The contractor did not at all appear before  the arbitrator appointed by appellant no.1, viz. Justice N.N. Goswami  (Retd.) and did not submit any statement of claim.  In these  circumstances, there was no ground for setting aside the award made  by Justice N.N. Goswami (Retd.) on 19.4.2000 and the petition under  Section 34 of the Act filed by respondent no.1 was liable to be  dismissed.   

6.      We have heard Mr. Mohan Parasaran, Additional Solicitor  General for the appellant and Mr. P.C. Markanda, Senior Advocate for  respondent no.1 and have perused the record.    

7.      Gas Authority of India (appellant no.1 herein) awarded four  contracts to M/s Keti Construction (I) Ltd. (respondent no.1 herein)  for various construction work at its Petro-Chemical Complex,  Dibiyapur, District Itawah (U.P.) which were as follows :-  

"(A)    Work Order No. CE/AUR/Ph-II Extn. B. Works/  97A/95 dated 26.5.95: Balance work of  construction of C-6 and D-2 Houses at GAIL  Vihar Township, Dibiyapur; (B)     Work Order No. CE/115/Auriaya/Gail/Gail Vihar  Road Work/95 dated 10.2.95: Construction of  premix bitumen carpeting and repairs of roads in

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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; and (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." 8.      The dispute here pertains to contract no. (D) dated 28.9.1995.   Clause 107 of the agreement, which is relevant for the controversy in  dispute reads as follows :    "107.1   All disputes or differences whatsoever which  shall at any time arise between the parties hereto  touching 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 within thirty days of receipt  of names.  The Appointing Authority shall thereupon  without any delay appoint the said person as the sole  arbitrator.  If the CONTRACTOR fails to communicate  such selection as provided above within the period  specified, the Appointing Authority shall make the  selection and appoint the selected as the Sole Arbitrator.         If the Appointing Authority fails to send to the  CONTRACTOR the panel of three names as aforesaid  within the period specified, the CONTRACTOR shall  send the Appointing Authority a panel of three names of  persons who shall all be unconnected with either party.   The Appointing Authority shall on receipt of the names  as aforesaid select any one of the persons named and  appoint him as the sole arbitrator.  If the Appointing  Authority fails to select the person and appoint him as the  sole Arbitrator within 30 days of the receipt of the panel  and inform the CONTRACTOR accordingly, the  CONTRACTOR shall be entitled to appoint one of the  persons from the panel as the sole arbitrator and  communicate his name to the Appointing Authority.         If the Arbitrator so appointed is unable to or  unwilling to act or resigns his appointment or vacates his  office due to any reason whatsoever, another sole  arbitrator shall be appointed as aforesaid.         The WORK under the CONTRACT shall,  however, continue during the Arbitration proceedings  and no payment due or payable to the CONTRACTOR  shall be withheld on account of such proceedings.

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       The Arbitrator shall be deemed to have entered on  the reference on the date he issues notice to both the  parties fixing the date of the first hearing.         The Arbitrator may, from time to time, with the  consent of the parties, enlarge the time for making and  publishing the award.         The venue of the arbitration shall be New Delhi.         The fees, if any, of the Arbitrator shall, if required  to be paid before the award is made and published, be  paid half AND half by each of the parties.  The costs of  the reference and of the award including the fees, if any,  of the Arbitrator shall be in the discretion of the  Arbitrator who may direct to and by whom and in what  manner, such costs or any part thereof shall be paid and  may fix or settle the amount of costs to be so paid.         The award of the Arbitrator shall be final and  binding on both the parties.         Subject to aforesaid the provisions of the  Arbitration Act, 1940 or any statutory modification 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 its own  panel of three names on 28.10.1999 and finally informed vide letter  dated 10.12.1999 that it had nominated Brig. Nardip Singh (Retd.) as  the arbitrator. Voluminous correspondence was exchanged between  the parties and many such letters were placed on record before the  learned Single Judge of the High Court.   It appears that some dispute  had been raised by respondent no.1 regarding balance work of  construction of C-6 and D-2 numbers of houses at GAIL Vihar  Township at Dibiyapur and a letter had been sent by it to appellant  no.1 on 16.1.1999.  A reply was given on behalf of appellant no.1 to  respondent no.1 on 16.2.1999, relevant part of which reads as under :-

"Sir,         This has reference to your letter vide ref.  no.IND.KT.44(6)/99 DATED 16/1/99, we would like to  bring to your kind notice that you have not so far  informed us the nature of disputes you want to refer for  resolution by the Arbitrator.

       However, in the meantime, we are suggesting you  a panel of three persons to select one of them as Sole  Arbitrator :

1.      Mr. Justice N.N. Goswami Retd. Judge Delhi High Court

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2.      Dr. Avtar Singh Professor of Law

3.      Mr. Harish Chandra  Director General CPWD (Retd.) & Ex.  Member UPSC

       Further, it is suggested to appoint the same  Arbitrator and to club the Arbitration proceedings in both  the matters so as to reduce on cost and time incurred in  the said Arbitration.

       Accordingly, you are called upon to select any one  of the above named persons as Sole Arbitrator in both the  matters."  

10.     The evidence on record shows that in connection with the  dispute with regard to all the four contracts several meetings had  taken place in the office of GAIL also and in the office of their  consultant,    M/s  C.P.  Kukreja   &    Associates     in which the  representatives of respondent no.1 had participated.   This fact is not  in dispute that several meetings did take place to resolve the dispute  regarding all the four contracts between the representatives of  appellant no.1 and respondent no.1.  The Senior Manager (Civil) of  appellant no.1 sent a letter dated 15.11.1999 to respondent no.1 which  has considerable bearing on the controversy in hand and, therefore,  the same is being reproduced below :- "Ref.:CE/GAIL/99                             November 15, 1999 M/s Keti Constructions (I) Ltd. 31/6, Sneh Nagar, Main Road Opp. Sapna Sangeeta Theatre Indore (MP).

SUBJECT : DISPUTES RELATING TO :

(A)     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.         -------------------------------------------------------------

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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 Construction of C-6 and D-2 number of houses  at GAIL Vihar Township of Dibiyapur and (2)   CE/115/AURIAYA/GAIL/GAIL VIHAR ROAD  WORK/95 dated 10.2.95 relating to construction of  premix bitumen carpeting and repairs of roads in Gail  Vihar Colony & Compressor Station.

Subsequently, vide your letters dated 5.10.98 in respect  of the above work orders, you submitted a panel of three  Arbitrators asking us to select one of them to act as Sole  Arbitrator on the above two cases. However, we  responded to your communications vide our letters dated  16.02.99 and as per the terms of the contract suggested  the following panel of three distinguished persons :-

1. Mr. Justice N.N. Goswami (R) Judge Delhi High Court 2. Dr. Avtar Singh, (V) Prof. of Law, IIM, Lucknow. 3. Mr. Harish Chandra, Director General CPWD (Retd.)     & Ex-Member, UPSC. You were requested to select any of them to act as Sole  Arbitrator.  However, no action has been taken by you so  far and even the issues which seem to have been resolved  by discussions have not been confirmed, keeping the  matters pending unnecessarily.   

During our meetings, we have suggested to you that all  the disputes arising out of the above contracts which  cannot be settled by mutual discussions, may be referred  to a Sole Arbitrator selected by you from among the  panel of distinguished persons mentioned above, so that  the resolution of disputes by reference to Arbitration  becomes cost effective, economical and quick.

In view of the above, you are requested once again to  select any of the persons mentioned herein to act as a  Sole Arbitrator in all the above disputes.  

Assuring you of our best co-operation at all times.

                                               Yours faithfully,                                                         Sd/-                                                 ( P.K. Sarkar )                                              Sr. Manager (Civil)"  

11.     It may be noted that the above noted letter of 15.11.1999 was  written by the Senior Manager (Civil) of appellant no.1 in connection  with the disputes relating to all the four contracts, viz. (A), (B), (C)  and (D).  In this letter reference was made to the earlier letter dated  16.2.1999 sent by appellant no.1 and the same panel of three names in  which name of Justice N.N. Goswami (Retd.) was at serial no.1 was  reiterated. The last paragraph of the above quoted letter is very  important where it was clearly mentioned that the dispute arising out  of the four contracts which cannot be mutually settled may be referred  to a sole arbitrator selected by respondent no.1 from amongst the  persons mentioned in the panel so that the resolution of disputes by

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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, there was no occasion for respondent no.1 to appoint Brig.  Nardip Singh (Retd.) as arbitrator by sending a communication to that  effect subsequently on 10.12.1999.   The stand of the appellant had  been made very clear and explicit by the aforesaid two letters and it  was not required to respond again specifically to the letter dated  28.10.1999 sent by respondent no.1 to select an arbitrator from the  panel intimated by it.  The stand of respondent no.1 to the effect that  as the appellant did not respond to its letter dated 28.10.1999, it  selected Brig. Nardip Singh (Retd.) by sending a communication on  10.12.1999 is, therefore, wholly unjustified.  

12.     There is contemporaneous evidence which shows that a number  of meetings had taken place between the representatives of appellant  no.1 and the representatives of respondent no.1, wherein effort was  made to resolve the disputes without reference to arbitration and an  understanding had been reached between the parties that unresolved  disputes of all the four contracts shall be referred to a sole arbitrator to  make the arbitration proceedings quick and cost effective.   After  respondent no.1 had sent the letter dated 10.12.1999 to the appellant  that it had nominated Brig. Nardip Singh (Retd.) for the purpose of  arbitration, the Senior Deputy Manager (Law) of appellant no.1 sent a  letter to him on 31.12.1999 requesting him to desist from entering  upon the reference or taking any further steps in view of the fact that  in the meeting held between the representatives of the two  organisations, it was clearly agreed that the matter shall be referred to  a sole arbitrator and respondent no.1 was expected to select a name  from the panel suggested by appellant no.1.  The letter is self-eloquent  and is being reproduced below :-

"                                             December 31, 1999

Brig. Nardip Singh Chief Engineer, MES (Retd) B-64, Sector 30 NOIDA

Dear Sir,

Sub : Letter by Keti Const. Ltd. IND/KTIL/908/99  dated 20.12.99 in the matter of construction  of residential quarters of UPPC, Dibiyapur,  Etawah, U.P.

This has reference to the captioned communication on  the subject cited above.

M/s Keti Constructions have been awarded contracts by  GAIL for execution of a number of its projects. In  relation to some of which contracts including the contract

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in question now sought to be placed before you, certain  disputes are alleged to remain outstanding, as per Keti  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 sole arbitrator to make the  arbitration proceedings quick and cost effective.   We  would have expected Keti Constructions to have sent a  name from the panel suggested by GAIL in accordance  with the spirit of the discussions held and the principles  accepted therein for resolution of interse disputes, which  have been acted upon as aforesaid.  

Unfortunately, Keti Constructions has unilaterally sought  to nominate your goodself, despite the overwhelming  record to the contrary.

In this factual background we request you to desist from  entering upon the reference or taking any further steps in  pursuance to the captioned communication, keeping the  cherished values you have maintained in high esteem all  through your distinguished career in armed forces.

Assuring you of our best attention at all times.                                                                          Yours faithfully,                                                  Sd/-                                         (CH. HARNATH )                                 SR. DY. MANAGER (LAW)

CC to    Keti Constructions (I) Ltd. 31/6, Sneh Nagar, Main Road Opposite Sapna Sangeeta Theatre INDORE 452 001 (M.P.)"

13.     It may be noted that the four contracts (A), (B), (C) and (D)  were awarded on different dates in quick succession between  10.2.1995 and 1.11.1995 and related to various construction works in  Petro-Chemical Complex, Dibiapur, District Etawah (U.P.). The terms  of the agreement have to be understood in a broad commonsense

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manner. The material placed on record before the learned Single  Judge shows that the discussion which took place in the meetings held  between the representatives of appellant no.1 and representatives of  respondent no.1 were not confined to the  dispute relating to a single  contract, but they related to disputes concerning all the four contracts.    It will not be proper to segregate or compartmentalize the  correspondence exchanged between the parties as if a particular letter  was confined to a particular contract alone. The correspondence  exchanged between the parties is not like evidence in a suit or trial  where a piece of evidence given in a particular suit or trial cannot be  read or taken into consideration in another suit or trial.   The stand of  the appellant right from the beginning was that all the disputes should  be referred to a single arbitrator, which will be cost effective,  economical and quick.  There can be no doubt this stand was very  reasonable.  Appellant no.1 had sent a panel on 16.2.1999, which was  reiterated in the communication dated 15.11.1999.  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 challenged the receipt of the  letter dated 31.7.1999 sent by Mr. Sushil Chauhan. It has been urged  that the said letter was not sent by registered post and was not  received by them. We have, therefore, not taken into consideration the  said letter.  There is other material on record to show that a panel of  three names had already been sent by appellant no.1 to respondent  no.1 which was a sufficient compliance of the clause of the  agreement.  There is neither any such clause in the agreement nor  there is any requirement in law that for each of the contract (A), (B),  (C) and (D) a separate panel ought to have been sent.   The same panel  could very well be utilized for resolving the disputes arising out of the  four contracts.  In fact, as suggested on behalf of the appellant, it  would have been more convenient, time saving and economical to  have the same person as arbitrator in resolving the disputes between  the parties with regard to all the contracts.  The view to the contrary  taken by the Division Bench of the High Court is clearly erroneous in  law.

15.     Appellant no.1 sent a communication to Justice N.N. Goswami  (Retd.) on 13.1.2000 appointing him as sole arbitrator for resolution  of disputes relating to the contract in question and a copy of this letter  was also sent to respondent no.1.   Justice N.N. Goswami (Retd.) then  entered upon the reference and sent notices to the parties on 11.2.2000  to appear before him on 6.3.2000. Respondent no.1, however, chose  not to put in appearance before Justice N.N. Goswami (Retd.).  On  28.3.2000, the arbitrator passed an order holding that his appointment  as arbitrator was in accordance with the terms of the agreement, but in

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the interest of justice he would give another notice to respondent no.1.   The relevant part of the order passed by him reads as under :  "In terms of my order dated 6.3.2000, M/s Gas  Authority have produced the complete file.  On perusal  of the file and after hearing Mr. Chauhan, prima facie I  am satisfied that my appointment as Arbitrator is in  accordance with the terms of Agreement between the  parties. I would have proceeded further, but in the  interest of justice I feel that one final notice be served on  M/s Keti Constructions before publishing the Award.

To come up on April 18, 2000 at 6.30 p.m.  The  parties may file their statements of claim before the next  date of hearing."

       Since respondent no.1 did not appear 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 jurisdiction, but goes to the very root of its jurisdiction  and there is no impediment in contending before the Arbitral Tribunal  that it had been wrongly constituted.  This decision has been partly  overruled on another point by a larger bench of 7 learned Judges in  S.B.P. & Co. v. Patel Engineering Ltd. (2005) 8 SCC 618, but the  aforesaid view has not been dissented from or reversed.  This will be  evident from the conclusions arrived at by the larger bench which  have been summarized in para 47 of the report and sub-para (ix)  thereof reads as under :- "In a case where an Arbitral Tribunal has been  constituted by the parties without having recourse to  Section 11(6) of the Act, the Arbitral Tribunal will have  the jurisdiction to decide all matters as contemplated by  Section 16 of the Act."

17.     It will be useful to take note of the preamble of the Arbitration  and Conciliation Act, 1996 which reads as under :-          WHEREAS the United Nations Commission on  International Trade   Law  (UNCITRAL)  has  adopted   the UNCITRAL Model Law on International  Commercial Arbitration in 1985;         AND  WHEREAS  the  General Assembly of  the   United  Nations has recommended that all countries give  due consideration to the said Model Law, in view of the   desirability of uniformity of the law of arbitral  procedures and the specific needs of international  commercial arbitration practice;         AND  WHEREAS the UNCITRAL has adopted the   UNCITRAL Conciliation Rules in 1980;

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       AND  WHEREAS  the  General Assembly of  the   United  Nations has recommended the use of the said  Rules in cases where a dispute arises in  the context of  international commercial relations and the parties seek    an  amicable settlement  of  that  dispute  by   recourse to conciliation;         AND  WHEREAS  the  said  Model Law  and  Rules   make significant contribution to the establishment of a  unified legal framework for the fair  and  efficient  settlement of disputes arising in international commercial  relations;         AND WHEREAS it is expedient to make law   respecting arbitration and  conciliation,  taking into  account the aforesaid  Model  Law and Rules;   The Preamble of the Act makes it amply clear that the  Parliament has enacted the Arbitration and Conciliation Act, 1996  almost on the same lines as the Model Law, which was drafted by  United Nations Commission on International Trade Law.  In  Sundaram Finance Ltd. v. NEPC Ltd. AIR 1999 SC 565 it has been  observed 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 arbitrator. A plea that the Arbitral  Tribunal is exceeding the scope of its authority shall be  raised promptly after the Arbitral Tribunal has indicated  its intention to decide on the matter alleged to be beyond  the scope of its authority. The Arbitral Tribunal may, in  either case, admit a later plea if it considers the delay  justified. (3) The Arbitral Tribunal may rule on a plea referred to  in paragraph (2) of this article either as a preliminary  question or in an award on the merits. In either case, a  ruling by the Arbitral Tribunal that it has jurisdiction may  be contested by any party only in an action for setting  aside the arbitral award."  The commentary on the three paragraphs of the Model Law  has been given under the headings A, B, C and D. Note 1 under  heading A and Note 11 under heading D, which are relevant for the  controversy in hand, are being reproduced below : "A. "Kompetenz-kompetenz" and separability doctrine,  paragraph (1). 1. Article 16 adopts the important principle that it is  initially and primarily for the Arbitral Tribunal itself to  determine whether it has jurisdiction, subject to ultimate

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Court control (see below paras 12-14). Paragraph (1)  grants the Arbitral Tribunal the power to rule on its own  jurisdiction. Including any objections with respect to the  existence or validity of the arbitration agreement. This  power, often referred to as "Kompetenz-kompetenz", is  an essential and widely accepted feature of modern  international arbitration but, at present is not yet  recognised in all national laws. D. Ruling by Arbitral Tribunal and judicial control,  paragraph (3) [Corr. to Section 16(5), (6)] 11. Objections to the Arbitral Tribunal’s jurisdiction go to  the very foundation of the arbitration. Jurisdictional  questions are, thus, antecedent to matters of substance  and usually ruled upon first in a separate decision, in  order to avoid possible waste of time and costs. However,  in some cases, in particular, where the question of  jurisdiction is intertwined with the substantive issue, it  may be appropriate to combine the ruling on jurisdiction  with partial or complete decision on the merits of the  case. Article 16 (3), therefore, grants the Arbitral  Tribunal discretion to rule on a plea referred to in  paragraph (2) either as a preliminary question or in an  award on the merits.

       So, the commentary on the Model Law which was drafted by  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 aside the award under Section 34(2)(v) of the Act on the  ground that the composition of the arbitral tribunal was not in  accordance with the agreement of the parties.  If  plea of jurisdiction is  not taken before the arbitrator as provided in Section 16 of the Act,  such a plea cannot be permitted to be raised in proceedings under  Section 34 of the Act for setting aside the award, unless good reasons  are shown.       

20.     Though respondent no.1 had ample opportunity to appear  before Justice N.N. Goswami (Retd.) and raise a plea of jurisdiction to  the effect that he had been wrongly appointed as arbitrator by  appellant no.1, yet, it chose not to do so.  This feature of the case  weighs heavily against respondent no.1.  The learned Single Judge has  taken this fact as an additional 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.  

21.     For the reasons discussed above, the 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. The judgment and

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order dated 20.10.2003 of the learned Single Judge dismissing the  petition under Section 34 of  the Act, which was filed by respondent  no.1, is affirmed.