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CASE NO.: Arbitration Petition  12 of 2007

PETITIONER: YOU ONE MAHARIA \026 JV THR.YOU ONE ENG.& CONSTRUCTION CO.LTD. & ANR

RESPONDENT: NATIONAL HIGHWAYS AUTHORITY OF INDIA

DATE OF JUDGMENT: 21/08/2007

BENCH: C.K. THAKKER

JUDGMENT: J U D G M E N T

C.K. THAKKER, J.

       This petition is filed by the petitioners under Section  11(6) and Section 11(12) of the Arbitration and  Conciliation Act, 1996 (hereinafter referred to as \021the Act\022)  read with paragraph 2 of the Appointment of Arbitrators  by the Chief Justice of India Scheme, 1996 for  appointment of Third/Presiding Arbitrator in accordance  with the Agreement/Contract Package No. NS-23/AP  dated May 31, 2001 entered into between the petitioners  and the respondent.         The petitioners are a \021Joint Venture\022 who came  together by virtue of Joint Venture Agreement dated May  10, 2001 for execution of certain contracts for National  Highways Authority of India (\021NHAI\022 for short). Petitioner  No.1 is a Company registered under the Laws of the  Republic of Korea having its registered office at 75-95,  Seosomoon Dong, Chung Ku, Seoul, Korea 100 110.  Originally it was known as YOU ONE Engineering and  Construction Co. Ltd. at the time of Joint Venture  Agreement and also at the time of contract dated May 31,  2001 with NHAI. The Company has since merged with  and known as Ultra Construction and Engineering Co.  Ltd., Seoul, Korea; i.e. in a country other than India  within the meaning of Section 2(f)(ii) of the Act. Petitioner  No.2 is a Private Limited Company incorporated and  registered under the Companies Act, 1956 having its  registered office at A-10, Panchvati, Azadpur, Delhi 110  033.         According to the petitioners, they entered into an  Agreement on May 31, 2001 with the respondent for  execution of Contract Package No. NS-23/AP being a  project for 4-Laning of KM. 464.000 to KM. 474.000 of  Nagpur-Hyderabad section and KM. 9.400 and KM.  22.300 of Hyderabad-Bangalore section of National  Highway 7 in the State of Andhra Pradesh at a contract  price of Rs.74,88,79,544.69. The Agreement contains an  arbitration clause which I will refer to at an appropriate  stage.         According to the petitioners, in September, 2004,  i.e. after more than three years of Contract-Agreement, it  was alleged by the respondent that the petitioners had  furnished forged Bank Guarantees for availing  mobilization and other advances under the Contract  Agreement. The respondent, in view of the Arbitration  Clause, filed OMP No. 342 of 2004 in the High Court of  Delhi against the petitioners under Section 9 of the Act

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for interim relief. The High Court passed interim  directions restraining the petitioners from removing  and/or transferring machinery and stock placed by them  at the site for execution of work. On December 13, 2004,  the respondent invoked Clause 59 of the Agreement and  terminated the contract. There was exchange of letters  and notices between the parties. Ultimately, by a  communication dated April 7, 2005, the petitioners  intimated the respondent that in accordance with the  Arbitration Clause, they had appointed Hon\022ble Mr.  Justice A.K. Srivastava, a retired Judge of the High Court  of Delhi as their nominee Arbitrator. According to the  petitioners, in the second half of June, the respondent  addressed a letter to Mr. C.S. Balaramamurthi,  purported to have been written on April 7, 2005  appointing him as the nominee Arbitrator of NHAI. From  the record, it appears that the two Arbitrators could not  agree to an appointment of Third Arbitrator. The  respondent intended to appoint a \021technical\022 man as the  Third Arbitrator as the matter was of a \021highly technical  nature\022, but the arbitrator appointed by the petitioners  insisted that the Presiding Arbitrator should be a retired  Chief Justice or a Judge of a High Court, who should be  senior to him (Justice Srivastava). It is also on record  that the respondent appointed Mr. K.P. Mohanty as the  Presiding Arbitrator. Subsequently, however, his  appointment was not continued. In February, 2006,  Justice Srivastava had shown his unwillingness to  continue as Arbitrator and the petitioners nominated  Hon\022ble Mr. Justice V.A. Mohta, retired Chief Justice of  High Court of Orissa as their nominee Arbitrator in place  of Justice Srivastava. Since the parties could not agree as  to appointment of Third/Presiding Arbitrator, the  petitioners have filed the present petition praying therein  that the Chief Justice of India may be pleased to appoint  a retired Judge of the Supreme Court of India or a retired  Chief Justice of a High Court as Presiding Arbitrator. The  Hon\022ble Chief Justice of India designated me to deal with  the matter and to pass an appropriate order on the  application. Accordingly the petition was placed before  me.         On January 24, 2007 notice was issued. Affidavits  and further affidavits had been filed by the parties.         I have heard learned counsel on both the sides.         The learned counsel for the petitioners submitted  that the respondent-NHAI ought to have agreed to  appoint a retired Judge of the Supreme Court or a retired  Chief Justice of a High Court as Presiding/Third  Arbitrator. It was submitted that when the petitioners  have nominated a retired Chief Justice of a High Court as  their Arbitrator, the respondent ought to have considered  the said fact and ought to have agreed to nominate a  Judge, senior in rank to the Arbitrator appointed by the  petitioners. It was also submitted that the dispute relates  to interpretation of terms and conditions of the contract  and there is no \021technical\022 element which requires  appointment of a \021technical\022 man. It was also stated that  in similar circumstances, between the same parties, a  dispute had arisen earlier, arbitration petitions were filed  before the Chief Justice of High Court of Delhi and the  nominee of the Chief Justice had appointed Hon\022ble Mr.  Justice Arun Kumar, retired Judge of this Court as the  Presiding Arbitrator. In the instant case also, such a  course ought to have been adopted by the respondent.   Since it was not done, the petitioners are constrained to

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approach this Court.         The learned counsel for the respondent, on the  other hand, submitted that the relevant clause empowers  the Council of Indian Road Congress (\021IRC\022 for short) to  appoint Presiding Arbitrator in case of failure of the two  Arbitrators to appoint Third Arbitrator. Since two  Arbitrators appointed by the parties (the petitioners on  the one hand and the respondent on the other hand)  could not arrive at a consensus, it is the power of IRC to  appoint a Third Arbitrator and the petition is liable to be  dismissed. It was also submitted that a similar question  came up for consideration before this Court between the  same parties in YOU ONE Engineering & Construction Co.  Ltd. & Anr. v. National Highways Authority of India,  (2006) 4 SCC 372 and this Court has held that it is the  right of IRC to appoint Third Arbitrator and the  petitioners could not insist for a particular Arbitrator.  Regarding the order passed by the Nominee of the Chief  Justice of High Court of Delhi, it was submitted that it  was an agreed order and the respondent had consented  to in appointing Hon\022ble Mr. Justice Arun Kumar, retired  Judge of this Court as the Third Arbitrator. The said  decision, therefore, does not help the petitioner. It was  also urged that the question is of \021highly technical\022 nature  and hence IRC is insisting to appoint a \021technical\022 man as  the Third/Presiding Arbitrator. It was, therefore, prayed  that the petition be dismissed.         Having considered rival contentions of the parties  and having gone through the Agreement and Arbitration  Clause, I am of the view that the prayer of the petitioners  cannot be granted. It is not in dispute that the  Agreement, dated May 31, 2001 contains an Arbitration  Clause (Clause 3). The relevant part of the said Clause  reads thus: \023In case of dispute or difference arising  between the employer and a domestic  contractor relating to any matter arising out  of or connected with this Agreement, such  dispute or difference shall be settled in  accordance with the Arbitration and  Conciliation Act, 1996. The Arbitral  Tribunal shall consist of 3 Arbitrators, one  each to be appointed by the employer and  the contractor. The third arbitrator shall be  chosen by the two arbitrators so appointed  by the parties and shall act as Presiding  Arbitrator. In case of the failure of the  two arbitrators appointed by the parties  to reach upon a consensus within a  period of 30 days from the appointment  of the arbitrator appointed  subsequently, the Presiding Arbitrator  shall be appointed by the Council of  Indian Road Congress\024.                                       (emphasis supplied)

    A bare reading of the above clause leaves no room  for doubt that in case of failure of the two Arbitrators  appointed by the parties to reach upon a consensus, the  Presiding Arbitrator \021shall be appointed by the Council of  IRC\022.      It may be stated at this stage that when the matter  was placed before me on April 24, 2007, the parties  invited my attention to the aforesaid clause and it was  submitted that no consensus could be arrived at by the

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parties. Considering the fact situation and the  Agreement, I thought it proper that the parties should  undertake fresh exercise in the direction. I accordingly  passed an order to make one more attempt.  Unfortunately, however, the effort could not succeed and  both the counsel stated that the matter will have to be  decided on merits. Accordingly, the matter was heard.      In my opinion, the learned counsel for the  respondent is right that apart from clear language of  Arbitration Clause, the point is also covered by YOU ONE  Engineering. Almost in identical circumstances, this  Court was called upon to consider the provisions of the  Act and the right of the respondent to appoint Presiding  Arbitrator under the Agreement. The Court held that it is  the right of IRC to appoint Presiding Arbitrator in case  the parties are not ad idem in appointment of  Third/Presiding Arbitrator.      This Court stated: \023The arbitration agreement clearly envisages  the appointment of the presiding arbitrator by  IRC. There is no qualification that the  arbitrator has to be a different person  depending on the nature of the dispute. If the  parties have entered into such an  agreement with open eyes, it is not open to  ignore it and invoke exercise of powers in  Section 11(6)\024.                                          (emphasis supplied)

    It is, no doubt, true that the High Court of Delhi has  appointed Hon\022ble Mr. Justice Arun Kumar, retired  Judge of this Court as Presiding Arbitrator in OMP No.  342 of 2004 vide its order dated May 22, 2006. The said  order is on record of this case. Three paragraphs of the  said order are important and they read as under: \0233.  Learned counsel for the parties jointly  state that whole issue can be sorted  out by having a panel of three arbitrators, with  one arbitrator as nominated by  each of the parties and the presiding arbitrator  to be appointed by this Court  with the joint consent of the learned counsel  for the parties. It may be  noticed that as on date the petitioner has  nominated Mr.L.R.Gupta, Director  General Works, CPWD (Retd.) while  respondent has nominated Justice S.B.Wad  (Retd.). Justice S.B.Wad was nominated in  place of Justice A.K.Srivastava  (Retd.), who expressed his inability to act as an  arbitrator.   4.      Learned counsel for the parties  propose that Justice Arun Kumar (Retd.  Judge of the Supreme Court), 10, Krishna  Menon Marg, New Delhi - 110 001 (Phone :  2301-2175) be appointed as the presiding  arbitrator and arbitral tribunal be  constituted accordingly.   5.      The constitution of the presiding  arbitrator and arbitral tribunal as  proposed by learned counsel for the parties  is accepted by this Court and the said  tribunal shall proceed to enter upon reference

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and determine the dispute between  the parties. Ordered accordingly. The  constitution of the tribunal be Justice  Arun Kumar (Retd.) as the presiding arbitrator,  Mr.L.R. Gupta and Justice S.B. Wad  (Retd.) as the two other members of the  arbitral tribunal. The fee shall be  fixed by the tribunal itself\024.                                          (emphasis supplied)            The learned counsel for the respondent was right  when he submitted that the order was based on \021consent\022  of the parties. As in the present case, there is no such  consent, the Court has to consider the matter by  interpreting an Arbitration Clause. Clause 3, as observed  earlier, is explicitly clear and there is no ambiguity.  Again, the controversy is decided by this Court in YOU  ONE Engineering. In my view, therefore, the petitioners  cannot compel the respondent to agree for a retired  Judge of this Court or retired Chief Justice of a High  Court, senior to Hon\022ble Mr. Justice Mohta as Presiding  Arbitrator.      It was finally submitted that even if this Court is of  the view that no such direction can be issued or order  can be passed, it may be appreciated that the petitioners  have chosen a retired Chief Justice of a High Court as  their Arbitrator and appropriate observations may be  made so that IRC may appoint retired Judge of this Court  or a retired Chief Justice of a High Court to be the  Presiding Arbitrator. That would enable the petitioners to  avail services of an Arbitrator appointed by them.      I appreciate the anxiety of the petitioners. In my  view, however, when the Arbitration Clause is clear and  the point is concluded by a decision of this Court, it  would not be proper on my part to make any such  observation. It is, however, open to the respondent to  take an appropriate decision in the matter keeping in  view the facts in their entirety. I may only state that this  decision will not inhibit the respondent in taking any  decision as it thinks fit.      In view of the above legal position, I express no  opinion on the contention of the parties as to whether the  controversy raised is or is not of a \021technical\022 nature.  Since it is not necessary for me to enter into that  question, I leave the matter there.      For the foregoing reasons, the application deserves  to be dismissed and is accordingly dismissed, however,  leaving the parties to bear their own costs.