Bangalore Housing Development and Investment, a Partnership Firm Represented by Its Partner, Mr. AshwIn Pai Vs. Ibc Knowledge Park Private Limited, a Company Registered Under the Indian Companies Act, 1956 Represented by Its Managing Director, Mr. Yunus Zia - Court Judgment

Excerpt:
- section 11: [k. ramanna, j] res judicata held, the law of res judicata cannot be made applicable to a party succeeding in the suit. in the facts and circumstances of the case, the parties are only estopped from taking divergent contentions than what they have taken in the earlier suit proceedings. in our country, since most of the people are from rural background and are economically and socially backward and since most of the people will nto be known of consequences of certain facts that took place in the courts of law, people may not ordinarily challenge the findings recorded against them if ultimately they succeed in the suit. as such, in the instant case, merely because defendant failed to challenge the findings recorded in judgment and decree passed in o.s. 966/1980 the same may not be termed as having attained finality.orderk. bhakthavatsala, j.1. a short question that arises for consideration in this petition iswhether the petition filed under section 11(6) read with section 15(2) of the arbitration and conciliation act, 1996 (hereinafter called 'the act') for appointment of an arbitrator in the vacancy that arose due to withdrawal of sri. r.n. narasimha murthy, senior advocate from the office of the arbitrator is maintainable in the absence of non-compliance of sub-section 4(a) of section 11 of the act?answer to the above point is in the negative for the following reasons:2. the brief facts of the case leading to the filing of the petition may be stated as under:the respondent herein is the claimant before the arbitral tribunal which is comprising of sri .justice k. shivashankar bhat, retired high court judge, as a presiding officer and m/s. r.n. narasimha murthy and sri. b.v. acharya, senior advocates as arbitrators to adjudicate the dispute between the parties.on 09.07.2008, in the 17th sitting of the arbitral tribunal, sri. r.n. narasimha murthy, arbitrator on behalf of the claimant, indicated that he wanted to rescue himself from the case. he sent a letter dated 12.07.2008 to the presiding officer as well as the counsels appearing for the parties expressing his desire to withdraw from the office of the arbitrator. in view of the withdrawal from the office of the arbitrator by sri. r.n. narasimha murthy, the remaining arbitrators decided to continue the proceedings after the arbitral tribunal is reconstituted and adjourned the proceedings.the present petition was filed on 18.09.2008 seeking appointment of an arbitrator in place of sri. r.n. narasimha murthy contending that the respondent failed to nominate its arbitrator in place of sri. r.n. narasimha murthy.on 22.09.2008, emergent notice was issued regarding admission. the respondent entered appearance through its counsel m/s. kamal and bhanu, advocates. they filed vakalath on 13.10.2008 in the office.3. learned senior counsel sri. jayavittal rao kolar appearing for the petitioner submits that the cause of action for the proceedings arose on 09.07.2008 when sri. r.n. narasimha murthy expressed his willingness not to continue as arbitrator on behalf of the respondent/claimant and on 12.07.2008, when sri. r.n. narasimha mutiny addressed a letter to the presiding officer and marking a copy to the respective counsels for the parties. but the respondent/claimant did not take steps to appoint arbitrator in place of sri. r.n. narasimha murthy within the prescribed time limit within 30 days from the date of notice given by sri. r.n. narasimha murthy and therefore, the present petition was filed for appointment of an arbitrator. he further submits that the nomination made by the respondent after lapse of 30 days from the knowledge as to retirement is not valid and the same shall be rejected.4. on the other hand, learned counsel for the respondent/claimant submits that the petitioner has not issued notice calling upon the respondent/claimant to fill the vacancy of the arbitrator that arose on 12.07.2008 and therefore, the petition is liable to be rejected. he further submits that in pursuance of the request made, the respondent/claimant's advocate sri. chaitanya a.mehta, by his letter dated 20.09.2008 consented to be arbitrator on behalf of the respondent/claimant in the dispute. thereafter, the claimant filed a memo dated 22.09.2008 before the arbitral tribunal appointing sri. chaitanya mehta, solicitor, india, united kingdom and wales of dhruve liladhar and company, 13 'a b', ismail building, 381, d.n. road, flora fountain, mumbai-400001, as its arbitrator in place of sri. r.n. narasimha murthy and on receipt of the memo on 26.09.2008, the arbitral tribunal ordered to await further order in this petition. the bone of contention of the learned counsel for the respondent may be stated as under:(i) that the petitioner has not issued notice calling upon the respondent to fill up the vacancy under section 11 of the act;(ii) that the arbitrator's letter of retirement dated 12.07.2008 cannot be treated as notice within the scops of section 11(4) of the act;(iii) that if a party having responsibility of appointing arbitrator does not do so within 30 days of demand being made by the other party, the right to make appointment is not automatically forfeited and the appointment can still be made.5. learned counsel for the respondent has cited the following decisions:i) : 2000 (8) scc 151 (datar switchgears ltd. v. tata finance ltd., and anr.) on the point that if a party having responsibility of appointing arbitrator does not do so within 30 days of demand being made by the other party, the right to make the appointment is not automatically forfeited.ii) 2007 (7) scc 684 (union of india v. bharath battery manufacturing co. (p) limited). (the decision rendered in datar switchgears limited, supra, was followed.)iii) : 2006 (10) scc 763 (national highways authority of india and anr. v. bimihiway ddb ltd., (jv) and ors. (the ratio laid down in datar switchgears limited, supra, was followed and held that the invocation of section 11(6) of the act is squarely based on a default of a party.iv) : air 2006 sc 2798 (yashwith constructions (p) ltd. v. simplex concrete piles india ltd., and anr.) on the point that the appointment of the substitute arbitrator must be done according to the original agreement or provision applicable to the appointment of the arbitrator at the initial stage.v) : 2007 (5) scc 703 (iron and steel co. limited v. tiwari road lines) on the point that if there is no agreement between the parties as to procedure for appointment of arbitrators, section 11(3), (4) and (5) of the act are applicable.vi) : air 2007 sc 1764 (ace pipeline contracts private limited v. bharat petroleum corporation limited) on the point that so far as the period of thirty days is concerned, it is not mentioned in sub-section (6) of section 11. the period of limitation is only provided under sub-sections (4) and (5) of section 11.6. it is useful to excerpt section 11 of the act for immediate reference. section 11 reads as under: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 falls 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 m 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, fall 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 jutice 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.7. it is pertinent to mention that the arbitration clause in the agreement does not provide a procedure for filling up of the vacancy that arose after the arbitral tribunal is constituted. admittedly, as per section 11(4)(a) of the act, the petitioner has not called upon the respondent to fill up the vacancy that arose due to withdrawal from the office of arbitrator by sri. r.n. narasimha murthy. the letter of withdrawal from the office of the arbitrator by sri. r.n. narasimha murthy cannot be construed as a request to fill up the vacancy within the scope of section 11 of the act by the petitioner to the respondent. on the other hand, the respondent/claimant has taken appropriate steps to nominate his arbitrator and in that regard, a letter was addressed to the arbitrator seeking his consent and after he agreed to be arbitrator, a memo dated 22.09.2008 was filed filling the vacancy. therefore, the petition filed by the petitioner without calling upon the respondent to fill up the vacancy of the office of the arbitrator on behalf of the respondent as required under section 11(4)(a) of the act, is not maintainable. the decisions cited by the learned counsel for the respondent are of avail to the case of the respondent. there is no merit in the petition as the respondent has already nominated his arbitrator and filled up the vacancy that arose due to withdrawal from the office of arbitrator by sri. r.n. narasimha murthy.8. in the result, the petition fails and the same is hereby dismissed. no costs.

Judgment:
ORDER

K. Bhakthavatsala, J.

1. A short question that arises for consideration in this petition is

Whether the petition filed under Section 11(6) read with Section 15(2) of the Arbitration and Conciliation Act, 1996 (hereinafter called 'the Act') for appointment of an arbitrator in the vacancy that arose due to withdrawal of Sri. R.N. Narasimha Murthy, senior advocate from the office of the Arbitrator is maintainable in the absence of non-compliance of Sub-section 4(a) of Section 11 of the Act?

Answer to the above point is In the negative for the following reasons:

2. The brief facts of the case leading to the filing of the petition may be stated as under:

The respondent herein is the claimant before the Arbitral Tribunal which is comprising of Sri .Justice K. Shivashankar Bhat, retired High Court Judge, as a Presiding Officer and M/s. R.N. Narasimha Murthy and Sri. B.V. Acharya, senior advocates as arbitrators to adjudicate the dispute between the parties.

On 09.07.2008, in the 17th sitting of the Arbitral Tribunal, Sri. R.N. Narasimha Murthy, arbitrator on behalf of the claimant, indicated that he wanted to rescue himself from the case. He sent a letter dated 12.07.2008 to the Presiding Officer as well as the counsels appearing for the parties expressing his desire to withdraw from the office of the arbitrator. In view of the withdrawal from the office of the arbitrator by Sri. R.N. Narasimha Murthy, the remaining arbitrators decided to continue the proceedings after the Arbitral Tribunal is reconstituted and adjourned the proceedings.

The present petition was filed on 18.09.2008 seeking appointment of an arbitrator in place of Sri. R.N. Narasimha Murthy contending that the respondent failed to nominate its arbitrator in place of Sri. R.N. Narasimha Murthy.

On 22.09.2008, emergent notice was issued regarding admission. The respondent entered appearance through its Counsel M/s. Kamal and Bhanu, Advocates. They filed vakalath on 13.10.2008 in the office.

3. Learned senior Counsel Sri. Jayavittal Rao Kolar appearing for the petitioner submits that the cause of action for the proceedings arose on 09.07.2008 when Sri. R.N. Narasimha Murthy expressed his willingness not to continue as arbitrator on behalf of the respondent/claimant and on 12.07.2008, when Sri. R.N. Narasimha Mutiny addressed a letter to the Presiding Officer and marking a copy to the respective counsels for the parties. But the respondent/claimant did not take steps to appoint Arbitrator in place of Sri. R.N. Narasimha Murthy within the prescribed time limit within 30 days from the date of notice given by Sri. R.N. Narasimha Murthy and therefore, the present petition was filed for appointment of an arbitrator. He further submits that the nomination made by the respondent after lapse of 30 days from the knowledge as to retirement is not valid and the same shall be rejected.

4. On the other hand, learned Counsel for the respondent/claimant submits that the petitioner has not issued notice calling upon the respondent/claimant to fill the vacancy of the arbitrator that arose on 12.07.2008 and therefore, the petition is liable to be rejected. He further submits that in pursuance of the request made, the respondent/claimant's advocate Sri. Chaitanya A.Mehta, by his letter dated 20.09.2008 consented to be arbitrator on behalf of the respondent/claimant in the dispute. Thereafter, the claimant filed a memo dated 22.09.2008 before the Arbitral Tribunal appointing Sri. Chaitanya Mehta, Solicitor, India, United Kingdom and Wales of Dhruve Liladhar and Company, 13 'A B', Ismail Building, 381, D.N. Road, Flora Fountain, Mumbai-400001, as its arbitrator in place of Sri. R.N. Narasimha Murthy and on receipt of the memo on 26.09.2008, the Arbitral Tribunal ordered to await further order in this petition. The bone of contention of the learned Counsel for the respondent may be stated as under:

(i) that the petitioner has not issued notice calling upon the respondent to fill up the vacancy under Section 11 of the Act;

(ii) that the arbitrator's letter of retirement dated 12.07.2008 cannot be treated as notice within the scops of Section 11(4) of the Act;

(iii) that if a party having responsibility of appointing arbitrator does not do so within 30 days of demand being made by the other party, the right to make appointment is not automatically forfeited and the appointment can still be made.

5. Learned Counsel for the respondent has cited the following decisions:

i) : 2000 (8) SCC 151 (Datar Switchgears Ltd. v. Tata Finance Ltd., and Anr.) on the point that if a party having responsibility of appointing Arbitrator does not do so within 30 days of demand being made by the other party, the right to make the appointment is not automatically forfeited.

ii) 2007 (7) SCC 684 (Union of India v. Bharath Battery Manufacturing Co. (P) Limited). (The decision rendered in Datar Switchgears Limited, supra, was followed.)

iii) : 2006 (10) SCC 763 (National Highways Authority of India and Anr. v. Bimihiway DDB Ltd., (JV) and Ors. (The ratio laid down in Datar Switchgears Limited, supra, was followed and held that the invocation of Section 11(6) of the Act is squarely based on a default of a party.

iv) : AIR 2006 SC 2798 (Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd., and Anr.) on the point that the appointment of the substitute arbitrator must be done according to the original agreement or provision applicable to the appointment of the arbitrator at the initial stage.

v) : 2007 (5) SCC 703 (Iron and Steel Co. Limited v. Tiwari Road Lines) on the point that if there is no agreement between the parties as to procedure for appointment of arbitrators, Section 11(3), (4) and (5) of the Act are applicable.

vi) : AIR 2007 SC 1764 (ACE Pipeline Contracts Private Limited v. Bharat Petroleum Corporation Limited) on the point that so far as the period of thirty days is concerned, it is not mentioned in Sub-section (6) of Section 11. The period of limitation is only provided under Sub-sections (4) and (5) of Section 11.

6. It is useful to excerpt Section 11 of the Act for immediate reference. Section 11 reads as under:

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 falls 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 m 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, fall 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 Jutice 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.

7. It is pertinent to mention that the Arbitration Clause in the agreement does not provide a procedure for filling up of the vacancy that arose after the Arbitral Tribunal is constituted. Admittedly, as per Section 11(4)(a) of the Act, the petitioner has not called upon the respondent to fill up the vacancy that arose due to withdrawal from the office of Arbitrator by Sri. R.N. Narasimha Murthy. The letter of withdrawal from the office of the arbitrator by Sri. R.N. Narasimha Murthy cannot be construed as a request to fill up the vacancy within the scope of Section 11 of the Act by the petitioner to the respondent. On the other hand, the respondent/claimant has taken appropriate steps to nominate his arbitrator and in that regard, a letter was addressed to the arbitrator seeking his consent and after he agreed to be arbitrator, a memo dated 22.09.2008 was filed filling the vacancy. Therefore, the petition filed by the petitioner without calling upon the respondent to fill up the vacancy of the office of the Arbitrator on behalf of the respondent as required under Section 11(4)(a) of the Act, is not maintainable. The decisions cited by the learned Counsel for the respondent are of avail to the case of the respondent. There is no merit in the petition as the respondent has already nominated his arbitrator and filled up the vacancy that arose due to withdrawal from the office of arbitrator by Sri. R.N. Narasimha Murthy.

8. In the result, the petition fails and the same is hereby dismissed. No costs.