Reva Khetrapal, J.
1. This present petition under Section 11(6)(c) read with Sections 13 and 15 of the Arbitration and Conciliation Act, 1996 has been filed by the petitioner praying for a direction to the respondent No. 1 to place on record the arbitration agreement and to appoint a retired Judge of this Court as a sole arbitrator to adjudicate upon the claims of the petitioner raised in the petition against respondent No. 1. It is further prayed by the petitioner that the arbitration proceedings before the respondent No. 3 be stayed while declaring that respondent No. 3 has not been appointed as per the procedure agreed upon by the parties and has no mandate to continue with the arbitration proceedings.
2. The relevant facts are not in dispute. The respondent No. 1 had invited tenders for design engineering, supply, erection, testing and commissioning of POL tank terminals including land development and all other related works, which culminated in the award of the Works Contract by the respondent No. 1 to the petitioner (Annexure P-1). After execution of the Works Contract, the petitioner raised a final bill in May, 2003 (Annexure P-2), but the respondent No. 1 failed to pay the said final bill. The Works Contract contained an arbitration clause, that is, Clause 18 in terms whereof, all questions, issues, disputes and differences between the petitioner and the respondent No. 1 were to be referred by the aggrieved party to the sole arbitration of the Executive Director (NR) of the respondent Corporation. If such Executive Director (NR) was unable or unwilling to act as the sole arbitrator, the matters were to be referred to the sole arbitration of some other person designated by such Executive Director (NR) in his place. The said clause reads as follows:
18. Except in respect of 'Excepted Matters' referred to in Clause 17 hereof, all the questions, issues, disputes and differences between the Corporation and the contractors (whether relating to the Contractor's claim against the Corporation or vice versa relating to any clause or provision of this contract including those relating to General Conditions and special conditions as provided in work order) or any interpretation thereof or the right or liability or any party or as to any act or omission, etc, or either party whether arising during the course of the work or after the completion or abandonment thereof, its termination, expiry or otherwise howsoever relating to the said work order and this contract, shall be referred by any aggrieved party to the contract which term will include the Corporation to the sole arbitration of the ED(NR) of the Corporation. If such ED(NR) is unable or unwilling to act the sole arbitrator, the matter shall be referred to the sole arbitration of some other person designated by such ED(NR) in his place, who is willing to act as such sole arbitrator. It is known to the parties herein that the arbitrator appointed hereunder is an employee of the Corporation and he is a share holder of the Corporation. The arbitrator to whom the matter is originally referred, whether the ED(NR) the employee or officer or Government Servant on deputation, as the case may be, on his being transferred or vacating his office or being unable to act, for any reason, the ED(NR) shall designate any other person to act as arbitrator in accordance with the terms of the contract and such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also the terms of this contract that no person other than the ED(NR) or the person designated by the ED(NR) as aforesaid should act arbitrator. The award of the arbitrator so appointed shall be final, conclusive and binding on all the parties to the contract and provision of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the Rules made there under and for the time being in force shall apply to the arbitration proceedings under this clause.
3. Disputes having arisen between the parties, the following correspondence was exchanged between the parties:
(i) By letter dated 28th February, 2004 (Annexure P-3), the petitioner requested the respondent No. 1 to appoint an Arbitrator in accordance with the arbitration agreement contained in the Works Contract.
(ii) In response to the aforesaid letter, respondent No. 1 vide its letter dated 28th April, 2004 (Annexure P-4), pointed out that the office of the Executive Director (NR) had ceased to exist due to internal reorganisation in the respondent Corporation and called upon the petitioner to send a written confirmation giving their consent to the substitution of the named Arbitrator, that is, Executive Director (NR) with Director (Marketing), Indian Oil Corporation Ltd.
(iii) The petitioner by letter dated 19th May, 2004 (Annexure P-5) replied that the petitioner was willing to have the arbitration as per the latest Indian Arbitration and Conciliation Act, 1996, whereby each of the parties would be appointing one Arbitrator each.
(iv) By letter dated 8th July, 2004 (Annexure P-7), the respondent No. 1 rejected the aforesaid proposal of the petitioner for the appointment of an Arbitrator each by the parties on the ground that 'what has been agreed by the parties is the arbitration by the Sole Arbitrator under the aforesaid clause No. 18 i.e. the intention of both the parties is for arbitration by the Sole Arbitrator only.' It was further stated by the respondent No. 1 that the respondent No. 1 was agreeable for arbitration by the Director (Marketing) or his nominee, the post of Executive Director (NR) having ceased to exist.
(v) The petitioner, by letter dated 14th July, 2004 (Annexure P-6), communicated to the respondent No. 1 the appointment of one Shri J.K. Srivastava, a retired Engineer from a Government of India undertaking as their Arbitrator to arbitrate in the case. There is some controversy between the parties as to whether this letter was written by the petitioner after the receipt of letter dated 8th July, 2004 (Annexure P-7) or before receipt of the same. According to the petitioner, letter dated 8th July, 2004 was faxed to them on 20th July, 2004 and was received by them after they had appointed Shri J.K. Srivastava as their Arbitrator.
(vi) By a registered AD letter dated 20th July, 2004 (Annexure P-8), the petitioner wrote to the respondent No. 1 that their failure to respond to the petitioner's earlier request for appointment of an Arbitrator by the Executive Director (NR) in terms of the contract has resulted in forfeiture of their right to act now that the petitioner had already appointed Shri J.K. Srivastava, Ex-Executive Director, Engineering Projects India Ltd.
(vii) In response thereto, the respondent No. 1 by its letter dated 22nd July, 2004 (Annexure P-9) wrote to the petitioner that it was surprising that despite the respondent No. 1 not having given consent, the petitioner had opted to appoint Shri J.K. Srivastava as Arbitrator. It was further stated that this unilateral decision of the petitioner to appoint Shri J.K. Srivastava as their Arbitrator was contrary to the express provisions of the arbitration clause, and the same was not acceptable to the respondent No. 1. The petitioner was once again requested to convey his acceptance to arbitration by the Director (Marketing) or his nominee.
(viii) This resulted in a legal notice given by the petitioner to the respondent No. 1 dated 26th October, 2004 (Annexure P-10), wherein, the petitioner stated that the only option left to the petitioner was to approach this Court for appointment of a Sole Arbitrator unless payment of the amounts demanded in the notice was made by the respondent No. 1.
(ix) In the meanwhile, however, the Director (Marketing) of the respondent No. 1 vide registered AD letter dated 14th October, 2004 (Annexure P-11) appointed Shri S. Nagrajan, Deputy General Manager (Finance), Indian Oil Corporation Ltd. (Marketing Division) Delhi & Haryana State Office as the Sole Arbitrator to adjudicate upon the disputes and differences between the parties and to give his award thereon. It may be mentioned that though according to the petitioner, letter dated 14th October, 2004 was received after the dispatch of the notice dated 26th October, 2004 (Annexure P-10), according to the respondent No. 1, it was after receipt of letter dated 14th October, 2004 that the petitioner gave legal notice to the respondent vide Annexure P-10.
(x) On receipt of communication dated 14th October, 2004, a reply dated 5th November, 2004 (Annexure P-12) was addressed by the petitioner to the respondent No. 2 with copies marked to respondents No. 1 & 3, clarifying the position of the petitioner in this regard.
(xi) In the meantime, respondent No. 3 issued notice dated 4th November, 2004 to enter upon the reference, calling upon the petitioner to file its claims within 30 days (Annexure P-13).
4. The petitioner's case is that the procedure agreed upon by the parties in terms of Section 11 of the Arbitration and Conciliation Act, 1996 cannot be implemented for the reason that the officer in the designated office no longer exists in view of the abolition of the post, and the parties having failed to reach an agreement based on the prescribed procedure for any other Sole Arbitrator to be appointed, the present petition has been filed seeking appointment of any retired Hon'ble Judge as the Sole Arbitrator to adjudicate upon the claims of the petitioner.
5. The petition is contested by the respondent No. 1 on the ground that the unqualified intent of the arbitration agreement is that only an officer of the respondent Corporation would act as a Sole Arbitrator. In this context, reliance is placed upon paragraph 4 of an Additional Affidavit dated 15th April, 2005 filed by the respondent No. 1, which reads as follows:
4. That I say the Petitioner vide its letter dated 28.02.2004, requested for appointment of an Arbitrator in accordance with the Arbitration Agreement contained in the Works Contract. The said communication was duly replied to by the Respondent vide its letter dated 28/04/04 seeking petitioners consent for substituting the name of Director (M) in place of ED(NR). This was done because the post of the Executive Director (NR) of Respondent No. 1 had ceased to exist in the year 2003 due to internal reorganisation in the Respondent Corporation and thereforee the power of act as an arbitrator (sic.) reverted back to Director (Marketing) of the Respondent No. 1 It is clarified that it was Director (M) had down delegated these powers to Executive Directors of the four regions in the year 1995 (sic.). Copy of Circulars dated 8/8/95 and 25/7/95 are enclosed herewith as Annexure A. Now, with the abolition of post of ED(NR) (as also ED(WR), ED(ER) and ED(SR), the powers so down delegated have reverted to Director(M).
6. Reliance is also placed by the respondents in the aforesaid affidavit upon an order of the Mumbai High Court dated 09.01.2004, where in a similar matter regarding a work contract titled as Payal Builders & Associates (P) Ltd. v. Indian Oil Corporation Ltd., the Mumbai High Court by an order dated 09.01.2004 in AA No. 247 of 2003, keeping in view the intent of the arbitration clause, was pleased to allow the applicant therein to choose an arbitrator from a panel of three officers of the Indian Oil Corporation Ltd. It is submitted by learned Counsel for the respondent Corporation that the facts in the matter before the Mumbai High Court and the present matter are identical, having arisen consequent to abolishing of the post of Executive Director and Deputy General Manager (Eng.) at Western Region, and the obligation of the Executive Director to act as Arbitrator having reverted to Director (Marketing).
7. I have heard learned Counsel for the petitioner and learned Counsel for the respondents at length.
8. Learned Counsel for the petitioner contends that there is no legal mandate accorded to the Director (Marketing) and/or his nominee to act as Sole Arbitrator. In this context, reliance has been placed by him upon a judgment of this Court in A.M. Rasool Construction & Engineering Services Pvt. Ltd. v. National Buildings Construction Corporation Ltd. reported in : 71(1998)DLT298 . In the said case, the question arose as to whether in the absence of the Project Director, who was to act as an Arbitrator, the Chairman-cum-Managing Director could appoint another person to be the Arbitrator. Clause 14 of the contract provided for the sole arbitration of the Project Director in clear terms and/or his appointee. The post of Project Director having ceased to exist, the respondent corporation contended that the Chairman-cum-Managing Director could appoint another person to be the Arbitrator instead of the Project Director, as according to a circular issued by the Chairman-cum-Managing Director, the powers exercisable by the Project Director were to be henceforth exercised by the Chairman-cum-Managing Director. A Division Bench of this Court negated the said contention, holding that it is not possible for one of the parties to the arbitration agreement to unilaterally change the person who is to act as Arbitrator or who is to nominate the person to act as an Arbitrator, and that the only course which was open was to make an appointment by the Court itself under Section 20(4) of the Act.
9. Learned Counsel for the petitioner also placed reliance on a judgment of the Apex Court in Wellington Associates Ltd. v. Kirit Mehta : AIR2000SC1379 , wherein the Apex Court had the occasion to consider the scope and ambit of Section 16 of the Act in juxtaposition with Section 11 of the Act. The interpretation put on Section 16 by the petitioner's counsel in the said case was that only the Arbitral Tribunal can decide about the existence of the arbitration clause. The Apex Court, while holding that undoubtedly if the question as to the existence of arbitration clause is raised before the Arbitral Tribunal, it has power to decide the question, held that in cases where --- to start with --- there is a dispute raised at the stage of the application under Section 11 that there is no arbitration clause at all, then it will be absurd to refer the very issue to an Arbitrator without deciding whether there is an arbitration clause at all between the parties. It was held that the jurisdiction of the Chief Justice of India or his designate to decide the question as to the existence of the arbitration clause cannot be doubted and cannot be said to be excluded by Section 16. Learned Counsel for the petitioner in the case in hand contended that in view of the decision of the Apex Court in the aforesaid case, this Court undoubtedly has jurisdiction to decide the issue of whether the Arbitrator's mandate is liable to be terminated.
10. Reliance was also placed by learned Counsel for the petitioner in this regard upon the judgment of the Constitution Bench of the Hon'ble Supreme Court in S.B.P. & Co. v. Patel Engineering Ltd. and Anr. 2005 (9) Sca 1 to contend that Section 16 of the Act merely recognises the principle of 'Kompetenz - Kompetenz' and that Section 16 cannot be held to empower the Arbitral Tribunal to ignore the decisions given by the judicial authority or the Chief Justice, and that this is clear from a bare reading of paragraph 19 of the judgment, which reads as follows:
19. Section 16 is said to be the recognition of the principle of Kompetenz - Kompetenz. The fact that the arbitral tribunal has the competence to rule on its own jurisdiction and to define the contours of its jurisdiction, only means that when such issues arise before it, the Tribunal can and possibly, ought to decide them. This can happen when the parties have gone to the arbitral tribunal without recourse to Section 8 or 11 of the Act. But where the jurisdictional issues are decided under these Sections, before a reference is made, Section 16 cannot be held to empower the arbitral tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made. The competence to decide does not enable the arbitral tribunal to get over the finality conferred on an order passed prior to its entering upon the reference by the very statute that creates it. That is the position arising out of Section 11(7) of the Act read with Section 16 thereof. The finality given to the order of the Chief Justice on the matters within his competence under Section 11 of the Act, are incapable of being reopened before the arbitral tribunal....
11. The contention of learned Counsel for the respondents on the other hand, is that there is not a single provision in the Act by which this Court can exercise jurisdiction to remove an Arbitrator who has entered upon the reference. Counsel for respondents contends that there is an extremely fine line of distinction between challenging the jurisdiction of the appointed Arbitrator and challenging the jurisdiction of the Arbitral Tribunal. The former is dealt with in Section 13 which delineates the 'Challenge Procedure' as is clear from the heading of the Section itself. The latter is dealt with by Section 16, the heading of which is 'Competence of arbitral tribunal to rule on its jurisdiction'.
12. Reference is made by counsel for respondents to the following judgments to buttress his contention that the Act contains no provision empowering this Court to exercise jurisdiction to remove an Arbitrator who has entered upon the reference and the only proper procedure prescribed by the Act which is open to the petitioner is to take recourse to the provisions of Section 13(2) of the Act:
(i) Rail India Technical and Economic Services Ltd., Bangalore v. Ravi Constructions, Bangalore and Anr. AIR 2002 NOC 30 (DB)
(ii) Bharat Heavy Electricals Ltd. v. C.N. Garg and Ors. 88 (2000) DLT 242 (DB)
(iii) Bharat Heavy Electricals Ltd. v. C.N. Garg and Ors. 2001 (2) Arb. LR 545 (SC)
(iv) Pinaki Das Gupta v. Publicis (India) Communications and Ors. : 115(2004)DLT345
(v) Grid Corporation of Orissa Ltd. v. AES Corporation and Ors. : (2002)7SCC736a
13. Adverting to the aforesaid decisions one by one, reliance is placed by counsel for the respondents on the following observations made by a Division Bench of the Karnataka High Court in Rail India Technical and Economic Services Ltd., Bangalore (supra) at page 15 of the Report:
A combined reading of Sections 4, 12(3) and 13 of the Arbitration and Conciliation Act (1996) makes it clear that if the employer wanted to challenge the appointment of the person of the choice of contractor as Arbitrator (either on the ground that he was not an officer of the employer or on the ground that his appointment was not in accordance with the appointment procedure), it ought to have raised it before the Arbitrator in the manner provided in Section 13(2). As it failed to do so, it is deemed to have waived its right to object the appointment of Arbitrator.
14. Next, reference may be made to the judgment of a Division Bench of this Court in Bharat Heavy Electricals Ltd. (supra) relied upon by learned Counsel for the respondents. In the said case, a writ petition under Article 226 of the Constitution of India was filed challenging the virus of Section 13(3) & (4) of the Act on the ground that there is no provision in the new Act for removal of an Arbitrator by the Court, though such a provision was contained in Section 11 of the Arbitration Act, 1940 and hence no remedy is available to the aggrieved party under the Act for challenging the award on the ground of bias and prejudice on the part of the Arbitrator. Rejecting the aforesaid contention, the Division Bench held that such a challenge was permitted by Sub-section (5) of Section 13 and thus, there was no merit in the petitioner's contention that Section 13(3) & (4) were ultra virus the Constitution of India. In paragraph 8 of its Judgment, which appears at page 247 of the Report, the following observations were made:
8. The legislature was more than cautious while providing in explicit term that no judicial Authority shall intervene except where so provided (Section 5). Thus clear mandate is to bar judicial interference except in the manner provided in the Act. Conversely if there is no provision to deal with a particular situation, Courts cannot assume jurisdiction and interfere. Comparing this legislation with the earlier legislation on the subject-namely the Arbitration Act, 1940, the message is loud and clear. The legislature found mischief in various provisions contained in the Arbitration Act, 1940 which would enable a party to approach the Court time and again during the pendency of arbitration proceedings resulting into delays in the proceedings. Law makers wanted to do away with such provisions. So that arbitration proceedings are not unduly hampered. The very purpose of arbitration, which is an alternate Dispute Redressal Forum, is defeated once the Courts interfere with these proceedings. The experience in the working of the old Arbitration Act showed that it was resulting in more delays than in civil suits. thereforee, not only such provisions were omitted in the new Act, provision in the form of Section 5 was inserted to convey the message. The scheme of the new Act is clear enough, i.e. during the arbitration proceedings Court's interference is done way with. The new Act deals with the situation even when there is challenge to the constitution of the Arbitral Tribunal. It is left to the Arbitrator to decide the same in the first instance. If a challenge before the Arbitrator is not successful, the Arbitral Tribunal is permitted to continue the Arbitral proceedings and make an Arbitral award. Such a challenge to the constitution of the Arbitral Tribunal before the Court is then deferred and it could be only after the arbitral award is made that the party challenging the Arbitrator may make an application for setting aside an arbitral award and it can take the ground regarding the constitution of Arbitral Tribunal while challenging such an award. Thus course of action to be chartered in such contingency is spelt out in the Act itself. Court interference on basis of petitions challenging Arbitral Tribunal during the pendency of the arbitration proceedings would be clearly against the very spirit with which the Arbitration and Conciliation Act, 1996 has been enacted. The mischief which existed in the earlier enactment and is sought to be removed by the present enactment cannot be allowed to be introduced by entertaining writ petitions in the absence of any provision in the new Act in this respect. A statute is an edict of the legislature and the conventional way of interpreting or construing a statute is to seek the 'intention' of its maker. A statute is to be construed according 'to the intent of them that make it' and 'the duty of judicature is to act upon the true intention of the legislature - the means or sentential legis'.
15. Pertinently, the Division Bench in Bharat Heavy Electricals Ltd. (supra) further held that the ethos of the new Act was speedy progress of arbitration proceedings without judicial interference and thus, the absence of a provision regarding removal of an Arbitrator did not render the relevant provisions of the statute ultra virus the Constitution. The observations made in paragraph 15 at pages 250-251 are pertinent and are being reproduced hereunder:
15. A possible question in this connection may arise about there being no provision for removal of an Arbitrator during the arbitration proceedings by the Court. Admittedly the Act does not contain any provision where the Court can remove an Arbitrator during the pendency of arbitration proceedings. In this connection we have to remind ourselves of the intention behind the legislation, i.e. the Arbitration and Conciliation Act, 1996. As already observed, the Act is modelled after the UNCITRAL Model Law. This Model Law has been adopted by various countries. The need for such a Model Law arose because of increased international commercial activity. Such activity in modern times is at Government or Semi-Government level. In such circumstances it was only fair and proper that all the participating countries should have similar legal provisions when it came to Arbitration. In fact Arbitration is envisaged as a method for speedy alternate redressal of disputes between the parties to commercial transactions. If Court interference was permitted during arbitration proceedings, the very object of speedy redressal of disputes would have been frustrated. That is why keeping the peculiar conditions in India, coupled with the need for speedy resolution of disputes, the provision of Court interference was avoided. Rather Section 5 was inserted which provides that there will be no judicial intervention. We have already noted that a party having grievances against an Arbitrator on account of bias and prejudice is not without remedy. In has only to wait till the arbitral award comes and it can challenge the award on various grounds including bias and prejudice on the part of the Arbitrator. Before the stage of challenge of award under Section 34 comes, Sub-sections (1), (2) and (3) of Section 13 envisage a situation where the Arbitrator may on his own recluse himself on objection being taken qua his functioning as an Arbitrator or where both the parties agree to his removal as per procedure accepted by them. If both fail, the Arbitrator is required to decide on the challenge to his functioning as an Arbitrator leveled by a party. The Arbitrator is expected to be a fair person and if he finds that there is substance in the allegations, an Arbitrator is expected to dispassionately rule on such an objection. Failing all this the last resort for an aggrieved party is the challenge under Section 13(5) read with Section 34. Thus going on with the ethos of the new Act of speedy progress of arbitration proceedings without judicial interference coupled with the fact that an aggrieved party is not without remedy, it cannot be said that the absence of a provision regarding removal of an Arbitrator renders the relevant provisions of the statute ultra virus the Constitution. We are of the considered view that absence of a provision of removal of an Arbitrator does not render the relevant statutory provisions invalid or ultra virus the Constitution of India.
16. On an appeal from the decision of this Court to the Supreme Court, after noticing that the High Court had upheld the constitution validity of the relevant portions of the Arbitration and Conciliation Act, 1996 and the right of the petitioner to challenge the award of the Arbitral Tribunal on grounds of bias and prejudice on the part of the Arbitrator under Section 34 of the Act, the Apex Court held that in view of the aforesaid findings, appellant's grievance did not subsist.
17. Before proceeding any further, it may be mentioned that a plea was raised in the course of arguments by counsel for petitioner that his petition though purported to be under Section 11(6)(c) read with Sections 13 & 15 of the Act, the same was a typing mistake, in as much as the petition was in fact under Section 11(6)(c) read with Sections 13 to 15 of the Act. In other words, the petitioner was also invoking Section 14 of the Act. The contention of learned Counsel for the respondents, on the other hand, was that reliance placed by counsel for the petitioner upon Section 14 of the Act was entirely misplaced, in as much as Section 14 pre-supposes that the Arbitrator had a mandate and relates to the termination of the said mandate. If, as is the case of the petitioner, the Arbitrator appointed by the respondent No. 1 had no mandate, the question of its termination does not arise. If, on the contrary, he enjoys a mandate, the case is squarely covered by Section 13(2) of the Act, which provides that a party who intends to challenge an Arbitrator shall, within fifteen days after becoming aware of the constitution of the Arbitral Tribunal or after becoming aware of any circumstances referred to in Sub-section (3) of Section 12, send a written statement of the reasons for the challenge to the Arbitral Tribunal. Sub-section (3) of Section 13 provides that unless the Arbitrator challenged under Sub-section (2) withdraws from his office or the other party agrees to the challenge, the Arbitral Tribunal shall itself decide on the challenge. Sub-section (4) lays down that if the challenge is not successful, the Arbitral Tribunal shall continue the arbitral proceedings and make an arbitral award. Sub-section (5) provides that where an arbitral award is made under Sub-section (4), that is, in the teeth of the challenge to the Arbitrator, the party challenging the Arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34. Thus, the entire procedure for challenge to the appointment of an Arbitrator is delineated by Section 13.
18. In order to contend that Section 14 of the Act had no application to the facts of the present case, learned Counsel for the respondents placed reliance upon the judgment of the Supreme Court in the case of M/s. Grid Corporation of Orissa Ltd. (supra). In the said case where a conjoint petition under Section 11(6) and Section 14 of the Arbitration and Conciliation Act, 1996 was filed, the Hon'ble Supreme Court made the following pertinent observations at page 206 of the Report:
2. Let it be stated at the very outset that a conjoint petition under Section 11(6) and Section 14 of the Act would not lie for the simple reason that the petition under Section 11(6) is to be heard and decided by the Chief Justice or any person or institution designated by him while a petition under Section 14 of the Act lies to the Court....
19. In Pinaki Das Gupta (supra), a learned Single Judge of this Court after observing that the purpose of expeditious disposal, the avowed rationale behind the process of arbitration, would be the first casualty in case judicial intervention at the preliminary stage is allowed by the Court to permit the plea of the petitioner that there was termination of the mandate of the arbitrator, in the context of Section 14 of the Act observed as follows:
6. ... That there was lack of authority for starting the proceedings cannot in my view be questioned under Section 14 of the Act. I am of the view that de jure or de facto, the authority of the arbitrator cannot be questioned under Section 14. In my view Section 16 of the Act provides the procedure for contesting the jurisdiction of the Arbitrator or the Arbitral Tribunal and such a plea could also form the basis of a ground of challenge under Section 34(2)(a)(iii) and (v). If the course suggested by the learned Counsel is petitioner is adopted, rather than minimizing the role of Court, it would be maximized and the intervener role or exercise of jurisdiction of the Court during the arbitration proceedings would be contrary to the legislative mandate emphasized by the Statement of Objects and Reasons of the Act and settled by the decisions of the Supreme Court summarized in Prasar Bharati's case (supra).
20. It would be appropriate at this juncture to reproduce the relevant provisions of Chapter III and IV of the Act, which read as under:
Section 11. Appointment of arbitrators. -
(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to Sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in Sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and -
(a) A party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in Sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(6) Where, under an appointment procedure agreed upon by the parties, -
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request the chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted by Sub-section (4) or Sub-section (5) or Sub-section (6) to the Chief Justice or the person or institution designated by him is final.
(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to -
(a) any qualifications required of the arbitrator by the agreement of the parties; and
(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by Sub-section (4) or Sub-section (5) or Sub-section (6) to him.
(11) Where more than one request has been made under sub-section(4) or sub-section(5) or sub-section(6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5),(6),(7),(8) and (10) arise in an international commercial arbitration, the reference to 'Chief Justice' in those sub-sections shall be construed as a reference to the 'Chief Justice of India'.
(b) Where the matters referred to in sub-sections (4),(5),(6),(7),(8) and (10) arise in any other arbitration, the reference to 'Chief Justice' in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal civil Court referred to in Clause(e) of sub-section(1) of Section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court.
Section 12. Grounds for challenge. -
(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality.
(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in Sub-section (1) unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if -
(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or
(b) he does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.
Section 13. Challenge procedure. -
(1) Subject to Sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator.
(2) Failing any agreement referred to in Sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in Sub-section (3) of Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.
(3) Unless the arbitrator challenged under Sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.
(4) If a challenge under any procedure agreed upon by the parties or under the procedure under Sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.
(5) Where an arbitral award is made under Sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34.
(6) Where an arbitral award is set aside on an application made under Sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.
Section 14. Failure or impossibility to act. -
(1) The mandate of an arbitrator shall terminate if -
(a) be becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and
(b) he withdraws from his office or the parties agree to the termination of his mandate.
(2) If a controversy remains concerning any of the grounds referred to in Clause (a) of Sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.
(3) If, under this section or Sub-section (3) of Section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or Sub-section (3) of Section 12.
Section 15. Termination of mandate and substitution of arbitrator. -
(1) In addition to the circumstances referred to in Section 13 or Section 14, the mandate of an arbitrator shall terminate -
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.
(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under Sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal.
(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal.
Section 16. Competence of arbitral tribunal to rule on its jurisdiction. -
(1) 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, and for that purpose, -
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) 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 the submission of the statement of defense, however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in Sub-section (2) or Sub-section (3), admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in Sub-section (2) or Sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with Section 34.
21. A conjoint reading of Sections 11, 12, 13, 14 and 15 contained in Chapter III of the Act and Section 16 contained in Chapter IV of the Act impels me to hold that Section 13 of the Act visualises a 'Challenge Procedure' where the mandate of the Arbitrator is challenged by one of the parties to the arbitration whereas Section 14 of the Act deals with the failure or impossibility of the Arbitrator to act on account of other circumstances such as his inability to perform his functions on account of death, resignation or other reasons, his withdrawal from his office or the parties agreeing to the termination of his mandate. Section 15 lays down the procedure to be followed upon the termination of the mandate of the Arbitrator inter alias in the circumstances referred to in Section 13 or Section 14. Thus, in a sense, Sections 13 and 14 are to some extent overlapping, in as much as the words contained in Section 14(1)(b) that the mandate of an arbitrator shall terminate if 'he withdraws from his office or the parties agree to the termination of his mandate' are contained in Sub-section (3) of Section 13 which provides that unless the Arbitrator 'withdraws from his office or the other party agrees to the challenge', the arbitral tribunal shall decide on the challenge. Section 15, as already stated, provides for the procedure to be followed upon termination of the mandate of the Arbitrator and for substitution of Arbitrator in the circumstances set out in Sub-section (1) including those referred to in Section 13 or Section 14. Sub-section (2) of Section 15 expressly stipulates that where the mandate of an Arbitrator terminates, a substitute Arbitrator shall be appointed according to the Rules that were applicable to the appointment of the Arbitrator being replaced.
22. In the present case, the petitioner instead of pursuing the course available to him for challenging the Arbitrator as laid down in Section 13 has sought appointment of a substitute Arbitrator through this Court on the ground that the post of Executive Director (NR) having been abolished, the respondents could not have appointed an Arbitrator of their choice. Such a plea, in my considered opinion, is not open to the petitioner for the reason that Section 13 clearly provides that unless an Arbitrator on the objection of the party challenging his appointment recluses himself/withdraws himself from the arbitration, or unless the other party (the respondents herein) agrees to the termination of his mandate, the only way open to the petitioner is to wait for the Arbitral Tribunal to decide on its challenge (Sub-section (3) of Section 13). If such a challenge is not successful, the petitioner shall then have the right to challenge the award made by the Arbitral Tribunal in accordance with Section 34 of the Act (Sub-section (5) of Section 13).
23. I am fortified in coming to the above conclusion by a recent judgment of the Hon'ble Supreme Court in Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. and Anr. : AIR2006SC2798 . In the said case, on a dispute having arisen, the Managing Director of the respondent company appointed an Arbitrator in terms of the arbitration clause. The arbitrator resigned. Thereupon, the Managing Director of the respondent company, in view of the mandate in the arbitration agreement, promptly appointed another Arbitrator. At that stage, the petitioner approached the Chief Justice of the High Court under Section 11 Sub-section (5) read with Section 15(2) of the Act praying that the Chief Justice may appoint a substitute Arbitrator to resolve the disputes between the parties. The Chief Justice found that the appointment of the second Arbitrator by the Managing Director, after the resignation of the first Arbitrator, was valid in law since it was permissible under the contract and the right to make such an appointment was saved by Section 15(2) of the Act. The petitioner challenged the decision of the Chief Justice by way of a writ petition in the High Court. A Division Bench of the concerned High Court, relying upon the decision of the Supreme Court in S.B.P. & Co. v. Patel Engineering Ltd. and Anr. (2005) 8 SCC 618, dismissed the said writ petition. This decision of the Division Bench was sought to be challenged by a Special Leave to Appeal before the Supreme Court. The Supreme Court endorsing the view of the High Court held that Section 11(6) of the Act has application only when a party or the person concerned has failed to act in terms of the arbitration agreement. Where there is no failure on the part of the party concerned as per the arbitration agreement to fulfill his obligation in terms of Section 11 of the Act, the jurisdiction of the Chief Justice under Section 11(6) of the Act for appointing a substitute Arbitrator does not arise. [see Datar Switchgears Ltd. v. Tata Finance Ltd. and Anr. : (2000)8SCC151 , Punj Lloyd Ltd. v. Petronet MHB Ltd. (2006) 2 SCC 638 and Shin Satellite Public Co. Ltd. v. Jain Studios Ltd. : AIR2006SC963 ].
24. To conclude, I have no hesitation in holding that there is no provision in the Act empowering this Court to terminate the mandate of the Arbitrator who has entered upon the reference and/or to substitute the same with an Arbitrator appointed by this Court. The necessary corollary is that the challenge to the appointment of the Arbitrator must be raised by the petitioner before the Arbitral Tribunal itself. If such challenge succeeds, the petitioner shall have no cause for grievance left. If, however, the petitioner is unable to succeed before the Arbitral Tribunal, it shall have no option except to participate in the arbitral proceedings and if aggrieved by the arbitral award, to challenge the same in accordance with the provisions of Section 34 of the Act.
25. In view of my aforesaid findings, the stay granted by this Court by order dated 13.12.2004 is liable to be vacated and is hereby vacated. The petitioner is directed to appear before the Arbitral Tribunal on the date fixed by the Arbitral Tribunal. The Arbitral Tribunal shall forthwith enter into the reference and shall decide the same as expeditiously as possible, preferably within a period of three months.
26. Arbitration Petition No. 292/2004 and is No. 8382/2004 stand disposed of accordingly, leaving the parties to bear their own costs.