IN THE SUPREME COURT OF INDIA 

CIVIL ORIGINAL JURISDICTION

Surinder Singh Nijjar, J.

May 08, 2012

ARBITRATION PETITION NO.19 OF 2011  

Head Note:-

Arbitration and Conciliation Act, 1996 - Sections 11(4) and 11(6) - Chief Justice of India Scheme, 1996, - Appointment of Arbitrators - Impartiality - The Court would have the power to appoint a person other than the named arbitrator, upon examination of the relevant facts, which would tend to indicate that the named arbitrator is not likely to be impartial. In this case, the petitioner had clearly pleaded that the named arbitrator is a direct subordinate of the CMD and employee of the respondent. CMD is the controlling authority of all the employees, who have been dealing with the subject matter in the present dispute and also controlling authority of the named arbitrator. Court appointed Hon’ble Mr. Justice Ashok C. Agarwal, Retired Chief Justice of the Madras High Court, r/o No. 20, Usha Kiran, 2nd Pasta Lane, Colaba, Mumbai 400 005, as the sole arbitrator, to adjudicate the disputes that have arisen between the parties, on such terms and conditions as the learned sole arbitrator deems fit and proper.

O R D E R 

SURINDER SINGH NIJJAR , J .

1. In this petition, under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Arbitration Act”) read with paragraphs 2 and 3 of the appointment of the Arbitrators by the Chief Justice of India Scheme, 1996, the petitioner seeks reference of the disputes to an independent and impartial sole Arbitrator. In terms of the arbitration agreement, the petitioner has issued the necessary notice and the respondent has not agreed for such appointment of an independent arbitrator. 

2. It appears that the respondent is not opposing the petition on the ground that the disputes cannot be referred to arbitration. The only objection raised by the respondent is that the disputes have to be referred to the Chairman and Managing Director of the respondent or his nominee, in terms of the arbitration clause 10 of General Terms and Conditions of Purchase Order (Foreign). The aforesaid arbitration clause reads as under:- 

“Arbitration – All disputes regarding this order shall be referred to B E L Chairman & Managing Director or his nominee for arbitration who shall have all the powers conferred by the Indian Arbitration & Conciliation Bill 1996 or any statutory modification thereof in force.” 

3. In view of the above, reference need only be made to the skeletal facts necessary for adjudicating the issues raised by the parties.

4. On 6th October, 2008, the respondent issued a Purchase Order (PO) to the petitioner through which it sought to purchase the materials/goods, namely, Hydraulic Motor, Actuating Cylinder, EL Motor EDM, Converter and GYRO Unit.

5. The purchase order was issued along with a printed Annexure IV of “General Terms and Conditions of Purchase Order (Foreign)”. As noticed above, the relevant arbitration clause is contained in the aforesaid general terms and conditions. The petitioner claims that fifth item, as stated above, was GYRO Unit EK.2.369.113.CE in 174 Nos. The entire agreed terms of sale by the petitioner was against 100% payment through Letter of Credit through the State Bank of India, Trade Finance CPC, 16, Whannels Road, Egmore, Chennai, India, to the petitioner and the said Letter of Credit was to be opened immediately after getting confirmation regarding readiness of the stock with the petitioner. The GYRO Unit (174 in Nos.) were to be provided by the petitioner to the respondent as per the aforesaid agreement and the petitioner took immediate steps to supply the said units to the respondent. The petitioner made huge investments in that regard and procured required materials. The specifications of GYRO Units, as per the specifications, did not stipulate, expressly or impliedly, the type of damping. While the entire process was going on, the respondent issued a letter dated 5th June, 2009 to the petitioner stating that as per the respondent’s directives, all pending supplies as on that date, from the petitioner were to be “put on hold” and directed the petitioner not to dispatch any pending items including those for which Letter of Credit had been established until further communication from the respondent. After the aforesaid communication, the respondent did not issue any communication to the petitioner for supply of the said goods till 3rd December, 2009. In response to the aforesaid communication, the petitioner sent 10 units of GYRO Stabilizers along with the Certificate which was issued by the Russian Company (manufacturer) for a lot of 24 units. It appears that the respondent, on the basis of the inspection report dated 17th November, 2009, rejected two GYRO Units (out of total 10) on the ground that the same were defective. The defects pointed out were that “Turret not moving in ‘Auto’ mode” and “vibration in elevation observed in Turret”. The other 8 Units were accepted. The petitioner, therefore, called for payment of 8 accepted GYRO Units and assured the rectification of two rejected units. Through the communication dated 28th December, 2009, the respondent claimed that the goods supplied by the petitioner were not of Russian Origin and, therefore, all the 10 GYRO Units supplied by the petitioner were rejected. The orders were to be cancelled and no more supply of GYRO Units were to be permitted with electrical damping. The petitioner claims that the action of the respondent firstly stopping all the supplies of the petitioner and secondly rejecting the 10 GYRO Units, subsequently supplied, is arbitrary, extra contractual, illegal and without any basis whatsoever.

6. The petitioner claims that 10 GYRO Units were rejected on the baseless ground that certain corruption cases had come to light against certain other companies. The respondent, therefore, stopped receiving supply from various companies including the petitioner and directly contacted the Russian manufacturer company and obtained the said units from them through another Russian Exporter company to frustrate the purchase order of the petitioner. It is claimed that the objection taken by the respondent are frivolous and without any basis.

7. The petitioner also claims that the order dated 5th June, 2009 putting on hold the supplies that were to be made by the petitioner was issued by the Ministry of Defence, under which the respondent is a Public Sector Undertaking. The aforesaid order was, however, set aside by the Delhi High Court in Writ Petition (Civil) No.821 of 2010 by an order dated 11th February, 2010. Thereafter, inspite of the efforts made by the petitioner, the respondent did not accept the plea that the purchase order did not contain any specific, express or implied condition for air damping. The petitioner also offered to supply 50 GYRO Units with Air damping to maintain good relations. The respondent, however, issued a letter dated 18th August, 2010 showing interest to accept 50 GYRO Units with Air Damping with condition that the payment will be made after the acceptance of the units by the respondent. According to the petitioner, this was contrary to the terms contained in the original purchase order. The petitioner, though not obliged as per the contract, started process of procuring GYRO with air damping but due to the short validity of the Letter of Credit, only 14 such units were supplied and the petitioner had to stop the procurement of the said unit due to the expiry of the Letter of Credit. Thereafter, the petitioner has sent a number of communications to the respondent to which there has been no response, hence, the petitioner claims that number of disputes which are mentioned in paragraph 14 (a) to (g) have arisen between the parties. 

8. Vide notice dated 20th May, 2011, the petitioner requested the respondent to agree on a name of an independent and impartial sole arbitrator preferably a former Judge of this Court by mutual consent between the petitioner and the respondent.

9. The petitioner claims on the basis of the postal acknowledgement that the respondent received the aforesaid notice on or about 23rd May, 2011. The receipt of the notice has been acknowledged by the respondent by a letter dated 8th June, 2011. On 29th June, 2011, the authorised representative of the petitioner has sworn the necessary affidavit in Poland for filing of the present petition after the expiry of 30 days of the statutory period and the same were dispatched to the counsel at New Delhi.

10. In the meantime, the respondent replied by a communication dated 29th June, 2011 to the notice dated 20th May, 2011, stating that the Chairman-cumPage9 Managing Director is a competent person as the petitioner has subscribed the contract which states the nominated arbitrator, and hence the correspondence between the parties has been placed before the Chairman-cum-Managing Director for appropriate action. The petitioner claims that the aforesaid reply was received on 1st July, 2011.

11. The respondent, in the detailed counter affidavit, accepts that certain disputes have arisen with regard to the supply of GYRO Units. It, however, claims that the reference of the disputes has to be made to the Chairman-cum-Managing Director of the respondent or his nominee for arbitration. Therefore, the prayer made in the petition for appointment of a sole arbitrator to adjudicate the dispute is contrary to the express clause in the contract and thus not maintainable. It is also the case of the respondent that prior to the filing of the petition before this Court, the Chairman-cum-Managing Director, as sole arbitrator, has duly acted and exercised the power in appointing Mr. R. Chandra Kumar, General Manager (Kot), Bharat Electronics Ltd., District Pauri Garhwal, Kotdwara-246149, as the arbitrator and communicated by fax on 19th July, 2011 itself. It is denied that merely because the Chairman-cum- Managing Director is in control and supervision of the respondent Public Sector Undertaking would render him ineligible to be appointed as the arbitrator. The respondent having accepted the arbitration clause with open eyes cannot be permitted to avoid the same on the ground of perceived partiality. The petitioner in the rejoinder has emphasised that both the issues raised by the respondent are without any basis. The petitioner relies on the facts enumerated in paragraph 4 of the rejoinder. It is claimed that the arbitrator had not been appointed on 9th July, 2011 as claimed by the petitioner. The following facts have been highlighted as under:

“20.05.2011 – Notice, through counsel was sent to the respondent seeking appointment of Arbitrator. 

29.06.2011 – Petitioner sworn affidavit in Poland for filing of the petition for appointment of Arbitrator. 

29.06.2011 – Respondent’s sent reply to the advocate at New Delhi received on 1.7.2011 stating that the correspondence is being placed before the Chairman and Managing Director. Note: Due to the new communication received, the fresh affidavit was needed and hence petition was with held to await fresh affidavit from Poland. 

08.07.2011 – Petitioner sent further Notice to the respondent stating that the action shall not be proper. 

21.07.2011 – The present petition seeking the appointment of Arbitrator was filed. 

26.07.2011 – Respondent sent email to the counsel of the petitioner at new attaching the letter of the counsel dated 26.7.2011 along with the letter of respondent dated 19.7.2011 stating the arbitrator had been appointed. The hard copy of the said letter was received by the counsel for the petitioner at New Delhi on 28.7.2011.” 

12. The petitioner further claims that no fax was ever sent by the respondent on 19th July, 2011, as no e-mail or postal communication was received by the petitioner in Poland in the whole month of July, 2011. It is further pointed out that neither the said fax nor email was sent to the counsel for the petitioner before 26th July, 2011. The petitioner further pointed out that a perusal of the copy of the letter dated 19th July, 2011 sent to the counsel for the petitioner at New Delhi itself indicates that the letter was faxed on 25th July, 2011 by MD’s Office of the respondent to the concerned person of the respondent to communicate further. The petitioner further claims that mere passing of the order will not have any relevance as the same was not communicated to the petitioner till after the filing of the petition.

13. I have heard the learned counsel for the parties. 

14. Mr. Viswanathan, learned senior counsel appearing for the petitioner submits that the disputes cannot be referred to CMD or his nominee as neither of them would be able to act impartially. In any event, the petitioner would always be under a reasonable apprehension that CMD or his nominee would be favorably inclined towards the respondent. He points out that CMD has been in control and supervision of the works of the respondent and, therefore, cannot be expected to be impartial in any dispute between the petitioner and the respondent. Similarly, any employee of the respondent would suffer from the same disability. In support of the submission, the learned counsel has relied on Indian Oil Corporation Limited & Ors. Vs. Raja Transport Private Limited, (2009) 8 SCC 520 Denel (Proprietary) Limited Vs. Bharat Electronics Limited & Anr., (2010) 6 SCC 394 and Denel (Proprietary ) Limited Vs. Ministry of Defence, (2012) 2 SCC 759. 

15. Mr. Viswanathan then submitted that the plea taken by the respondent that one Mr. R. Chandra Kumar, the General Manager, Bharat Electronics Limited was appointed as the sole arbitrator on 19th July, 2011 and communicated by fax on that date itself is without any basis. He submits that factually the aforesaid averment has not been proved. The affidavit filed by the respondent is not supported by any document including purported appointment letter dated 19th July, 2011. The said affidavit is completely silent as to whom the said communication was faxed, where it was faxed and what is the proof of same having been faxed. He further submits that, in fact, the said communication was sent to the advocate for the petitioner on e-mail on 26th July, 2011, attaching the letter of counsel which was also dated 26th July, 2011. Prior to that, no communication had been received by the petitioner or his counsel either by fax or otherwise stating that the arbitrator had been appointed. He emphasised that even the aforesaid appointment letter purportedly signed on 19th July, 2011 shows that it was faxed from Bangalore Office only on 25th July, 2011 to their Solicitor who in turn further communicated to the counsel for the petitioner on 26th July, 2011. Therefore, according to Mr. Viswanathan, it is unbelievable that the communication released from Bangalore office (Head quarter where the Chairman sits) could have been conveyed to the petitioner on 19th July, 2011, though the communication states “CC” to the petitioner but it was never sent to the petitioner. The aforesaid communication was sent by the Solicitor of the respondent to the petitioner’s counsel on e-mail on 26th July, 2011 and thereafter by way of postal communication. He, therefore, submits that even if it is assumed that the aforesaid letter was signed on 19th July, 2011, but it was certainly not communicated till after the filing of the present petition, therefore, the same would have no legal sanctity.

16. In support of the submission, the petitioner relies on Section 3(2) of the Arbitration Act, 1996 which provides that “The communication is deemed to have been received on the day it is so delivered”. He submits that without delivery of the communication dated 19th July, 2011, the same shall be of no effect.

17. Mr. Viswanathan further submits that apart from the Arbitration Act, as a general principle of law, it is settled that an order takes effect only when it is served on the person affected. In support of this submission, learned counsel relied on in the case of Bachhittar Singh Vs. State of Punjab & Anr., AIR 1963 SC 395 and BSNL & Ors . Vs. Subash Chandra Kanchan & Anr., (2006) 8 SCC 279 and State of Punjab Vs. Amar Singh Harika, AIR 1966 SC 1313 . On the basis of the above, he submits that the petition deserves to be allowed and the matter be referred to an independent and impartial arbitrator.

18. On the other hand, Mr. Bhat, learned counsel appearing for the respondent has submitted that the petitioner having agreed to the provisions of arbitration contained in Clause 10 of the general conditions cannot now be permitted to turn around and contend that someone else has to be appointed as an arbitrator, thus giving a go-by to the arbitration agreement. He submits that it is well settled that once the parties have agreed upon a named arbitrator, the parties cannot resile therefrom. In support of the submission, he relied on the judgment of this Court in the cases of Union of India & Anr. Vs. M.P.Gupta, (2004) 10 SCC 504 You One Engineering & Construction Co . Ltd . & Anr. Vs. National Highways Authority of India (NHAI), (2006) 4 SCC 372 National Highways Authority of India & Anr . Vs. Bumihiway DDB Ltd.(JV ) & Ors, (2006) 10 SCC 763 Northern Railway Administration, Ministry of Railway , New Delhi Vs. Pate l Engineering Company Limited, (2008) 10 SCC 240 and Indian Oi l Corporation Limited & Ors. Vs. Raja Transport Private Limited, (2009) 8 SCC 520.

19. He further submits that the present petition is not maintainable as even prior to the filing of the petition, the Chairman-cum-Managing Director had duly acted and exercised his powers and had appointed Mr. R. Chandra Kumar, General Manager (Kot) as the arbitrator. It is his claim that the appointment was made on 19th July, 2011 and the same was duly communicated by fax on 19th July, 2011 itself to the petitioner.

20. Mr. Bhat further submits that the order of the Managing Director came into force from the moment it was signed on 19th July, 2011. In support of this submission, he relies on the judgment of this Court in the case of Collector of Centra l Excise , Madras Vs. M/s M.M . Rubber & Co. , Tamil Nadu, 1992 Supp.(1) SCC 471. According to the learned counsel, the aforesaid principle has been reiterated by this Court in Municipa l Corporation of Delhi Vs. Qimat Rai Gupta & Ors ., (2007) 7 SCC 309 On the issue of perceived partiality of the CMD or his nominee, Mr. Bhat submits that the petitioner cannot rely on the judgment of this Court in Denel (Proprietary) Limited (supra). The facts in the aforesaid case were different from the facts in the present case inasmuch as in Denel case (supra) this Court has directed the appointment of an independent arbitrator only on the ground that there was certain directions issued by the Ministry of Defence, Government of India and as such the Managing Director of BEL may not be in a position to independently decide the dispute between the parties. He further submits that in the event this Court accepts the submission of the petitioner then Chairman and Managing Director of any other Public Sector Undertaking, for example, Hindustan Aeronautics Limited or Bharat Earth Movers Ltd. may be appointed to arbitrate the dispute.

21. I have considered the submissions made by the learned counsel for the parties. 

22. The first issue which needs to be addressed is as to whether the present petition is maintainable in view of the claim made by the respondent that Mr. R. Chandra Kumar had been appointed as the Sole Arbitrator on 19th July, 2011.

23. I am of the considered opinion that the aforesaid submission of Mr. Bhat can not be accepted in view of the provision contained in Section 3(2) of the Arbitration Act. Section 3 of the Act provides for different modes in which any written communication is deemed to have been received. Section 3(2) specifically provides as under:- 

“The communication is deemed to have been received on the day it is so delivered.” 

24. In view of the aforesaid provision even if the order appointing the Sole Arbitrator, Mr. R. Chandra Kumar, was made on 19th July, 2011, it would be deemed to be received only on the day it is delivered. 

25. Apart from the aforesaid statutory provision, it is also settled that an official order takes effect only when it is served on the person affected. In the case of Bachhittar Singh Vs. State of Punjab & Anr . (supra), this Court has clearly enunciated the Principle of Law in the following words:- 

“Thus it is of the essence that the order has to be communicated to the person who would be affected by that order before the State and that person can be bound by that order. For, until the order is communicated to the person affected by it, it would be open to the Council of Ministers to consider the matter over and over again and, therefore, till its communication the order cannot be regarded as anything more than provisional in character.” 

26. Similarly, in this case until the order was communicated to the petitioner, the Chairman-cum-Managing Director would have been at liberty to reconsider the matter and thus rendering the order only provisional in character. Similar question arose before this Court in the case of BSNL & Ors. Vs. Subash Chandra Kanchan & Anr . (supra) wherein it has been clearly observed as under:- 

“12. Evidently, the Managing Director of the appellant was served with a notice on 7-1-2002. The letter appointing the arbitrator was communicated to the respondent on 7-2-2002. By that time, 30 days' period contemplated under the Act lapsed. The Managing Director of the appellant was required to communicate his decision in terms of clause 25 of the contract.” 

27. In reaching the aforesaid conclusion, this Court relied on earlier judgment rendered in the case of State of Punjab Vs. Amar Singh Harika (supra), wherein this Court has held as follows:- 

“The first question which has been raised before us by Mr. Bishan Narain is that though the respondent came to know about the order of his dismissal for the first time on the 28th May 1951, the said order must be deemed to have taken effect as from the 3rd June 1949 when it was actually passed. The High Court has rejected this contention; but Mr. Bishan Narain contends that the view taken by the High Court is erroneous in law. We are not impressed by Mr. Bishan Narain’s argument. It is plain that the mere passing of an order of dismissal would not be effective unless it is published and communicated to the officer concerned. If the appointing authority passed an order of dismissal, but does not communicate it to the officer concerned, theoretically it is possible that unlike in the case of a judicial order pronounced in Court, the authority may change its mind and decide to modify its order.” 

28. The aforesaid observations make it clear that an order passed by an authority can not be said to take effect unless the same is communicated to the party affected. The order passed by a competent authority or by an appropriate authority and kept with itself, could be changed, modified, cancelled and thus denuding such an order of the characteristics of a final order. Such an uncommunicated order can neither create any rights in favour of a party, nor take away the rights of any affected party, till it is communicated. The aforesaid proposition has been reiterated in the case of Laxminarayan R. Bhattad & Ors. Vs. State of Maharashtra & Anr., (2003) 5 SCC 413 wherein it has been held that “it is now well known that a right created under an order of a statutory authority must be communicated so as to confer an enforceable right.” Similar view has been reiterated in Greater Mohali Area Development Authority & Ors. Vs. Manju Jain & Ors., (2010) 9 SCC 157 wherein it is observed as follows:-   

“24. Thus, in view of the above, it can be held that if an order is passed but not communicated to the party concerned, it does not create any legal right which can be enforced through the court of law, as it does not become effective till it is communicated.” 

29. Mr. Bhat on the contrary relied on the judgment of this Court in the case of Collector of Central Excise , Madras Vs. M/s M.M . Rubber & Co., Tamil Nadu (supra) and submitted that the order of the Managing Director came into force from the moment it was signed on 19th July, 2011. In Paragraph 12 of the aforesaid judgment, it is observed as follows:- 

“12. It may be seen therefore, that, if an authority is authorised to exercise a power or do an act affecting the rights of parties, he shall exercise that power within the period of limitation prescribed therefor. The order or decision of such authority comes into force or becomes operative or becomes an effective order or decision on and from the date when it is signed by him. The date of such order or decision is the date on which the order or decision was passed or made : that is to say when he ceases to have any authority to tear it off and draft a different order and when he ceases to have any locus paetentiae. Normally that happens when the order or decision is made public or notified in some form or when it can be said to have left his hand. The date of communication of the order to the party whose rights are affected is not the relevant date for purposes of determining whether the power has been exercised within the prescribed time.” 

30. In my opinion, the aforesaid observations do not deviate from the observations made by this Court in Bachhittar Singh’s case (supra) and reiterated consistently thereafter by this Court. The observations herein were made with regard to the exercise of power by the competent authority with regard to determination of the date from which the period of limitation was to be calculated to make an appeal. In that case, an order in favour of the respondent was passed by the Collector of Central Excise, as an adjudicating authority on 28th November, 1984. Its copy was supplied to the respondent on 21st December, 1984. The Central Board of Excise and Customs, however, in exercise of its powers under Section 35-e(1) directed the Collector on 11th December, 1985 to make an appeal to the Customs, Excise Board (Control) Appellate Tribunal against this order. The point at issue was whether limitation under Section 35-e(3) of the Central Excise and Salt Act, 1944 for the order of the Board under Section 35-e(1) commenced from 28th November, 1984 or 21st December, 1984. The Appellate Tribunal rejected the Collector’s application on the ground that it was beyond limitation period of one year commencing from 28th November, 1984. The aforesaid decision of the Appellate Tribunal was upheld by this Court with the observations made in Paragraph 12 above (supra). However, the aforesaid observation can not be read divorced from the observations made in Paragraph 13 and 18, which are as under:- 

“13. So far as the party who is affected by the order or decision for seeking his remedies against the same, he should be made aware of passing of such order. Therefore courts have uniformly laid down as a rule of law that for seeking the remedy the limitation starts from the date on which the order was communicated to him or the date on which it was pronounced or published under such circumstances that the parties affected by it have a reasonable opportunity of knowing of passing of the order and what it contains. The knowledge of the party affected by such a decision, either actual or constructive is thus an essential element which must be satisfied before the decision can be said to have been concluded and binding on him. Otherwise the party affected by it will have no means of obeying the order or acting in conformity with it or of appealing against it or otherwise having it set aside. This is based upon, as observed by Rajmannar, C.J. in Muthia Chettiar v. CIT “a salutary and just principle”. The application of this rule so far as the aggrieved party is concerned is not dependent on the provisions of the particular statute, but it is so under the general law. 

18. Thus if the intention or design of the statutory provision was to protect the interest of the person adversely affected, by providing a remedy against the order or decision any period of limitation prescribed with reference to invoking such remedy shall be read as commencing from the date of communication of the order. But if it is a limitation for a competent authority to make an order the date of exercise of that power and in the case of exercise of suo moto power over the subordinate authorities' orders, the date on which such power was exercised by making an order are the relevant dates for determining the limitation. The ratio of this distinction may also be founded on the principle that the government is bound by the proceedings of its officers but persons affected are not concluded by the decision.” 

31. From the above, it becomes evident that the order dated 19th July, 2011 would be binding on the Chairman-cum- Managing Director for the purposes of working out the limitation, but so far as the petitioner is concerned, the relevant date would be the date when the order is communicated to the petitioner. The order made by a Statutory Authority or an Officer exercising the powers of that Authority comes into force so far as the Authority Officer is concerned, from the date it is made by the concerned Authority Officer. But, so far as the affected party is concerned, the order made by the Appropriate Authority would be the date on which it is communicated. In my opinion, Section 3(2) of the Arbitration and Conciliation Act, 1996, is a mere reiteration of the aforesaid general principle of law.

32. In view of the above, I am of the considered opinion that the reliance placed on the aforesaid judgment by Mr. Bhat is misplaced. In my opinion, the reliance placed by Mr. Bhat on the judgment in Municipal Corporation of Delhi (supra) is also misplaced as therein the Court has reiterated the principle laid down in Collector of Central Excise, Madras (supra); by observing as follows:- 

“26. A distinction, thus, exists in the construction of the word “made” depending upon the question as to whether the power was required to be exercised within the period of limitation prescribed therefor or in order to provide the person aggrieved to avail remedies if he is aggrieved thereby or dissatisfied therewith. Ordinarily, the words “given” and “made” carry the same meaning. 

27. An order passed by a competent authority dismissing a government servant from services requires communication thereof as has been held in State of Punjab v. Amar Singh Harika11 but an order placing a government servant on suspension does not require communication of that order. (See State of Punjab v. Khemi Ram12.) What is, therefore, necessary to be borne in mind is the knowledge leading to the making of the order. An order ordinarily would be presumed to have been made when it is signed. Once it is signed and an entry in that regard is made in the requisite register kept and maintained in terms of the provisions of a statute, the same cannot be changed or altered. It, subject to the other provisions contained in the Act, attains finality. Where, however, communication of an order is a necessary ingredient for bringing an end result to a status or to provide a person an opportunity to take recourse to law if he is aggrieved thereby, the order is required to be communicated.” 

These observations, in my opinion, do not support the submissions made by Mr. Bhat.

33. Keeping in view the aforesaid principle of law, the fact situation with regard to the making and the communication of the order dated 19th July, 2011 can now be examined. Even though the respondent claims that the order was sent by fax on 19th July, 2011, there is clear denial of the same by the petitioner. Prima facie, it would appear that even though the order may have been made on 19th July, 2011, it was served for the first time on the counsel of the petitioner by e-mail on 26th July, 2011. Therefore, prima facie, it would not be possible to accept the submission of Mr. Bhat that the petition would not be maintainable on the ground that the arbitrator had already been appointed at the time when the present petition was filed. The issue needs to be decided on the basis of the evidence produced by the parties, at the appropriate time.

34. I am also not much impressed by the submission made by Mr. Bhat that this Court is bound to appoint the Chairman-cum-Managing Director or its nominee as the arbitrator in view of the arbitration clause. However, it is necessary to consider the judgments relied upon by Mr. Bhat. In the case of Union of India & Anr . Vs. M.P.Gupta (supra), this Court observed that in view of the express provision contained in the arbitration clause that two Gazetted Railway Officers shall be appointed as arbitrators; a Former Judge of the Delhi High Court can not be appointed as the Sole Arbitrator. It must be noticed here that in the aforesaid case, no facts have been pleaded in justification of the plea for the appointment of an independent arbitrator in spite of the arbitration clause. In You One Engineering & Construction Co . Ltd . & Anr . Vs. Nationa l Highways Authority of India (NHAI ) (supra), Justice B.N. Srikrishna, sitting as a Chamber Judge in a petition under Section 11(6) has observed as follows:- 

“10. In my view, the contention has no merit. The 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).” 

35. In this matter also, there was no plea that the Arbitral Tribunal constituted under the arbitration clause was likely to be favorably inclined towards the respondent. This Court has merely reiterated the legal position that in normal circumstances, arbitrator has to be appointed in terms of the agreement of the parties contained in the arbitration clause.

36. In the case of National Highways Authority of India & Anr. Vs. Bumihiway DDB Ltd.(JV ) & Ors. (supra), the question which was before this Court was again as to whether a presiding arbitrator could be appointed beyond the scope of the arbitration clause, by the High Court in a petition under Section 11(6). It was submitted on behalf of the appellant that when the arbitration agreement clearly envisages the appointment of the presiding officer by the IRC and there is no specification that the arbitrator has to be different person depending on the nature of the dispute, it is not open to ignore it and invoke the exercise of power under Section 11(6) of the Act. It was also submitted that the High Court was not justified in referring to the principle of hierarchy and ignoring the express contractual provision for appointment of the presiding arbitrator. Upon consideration of the rival submissions, this Court considered the questions of law which had arisen. The relevant question for the purposes of this case is “Whether an arbitration clause, which is a sacrosanct clause, can be rewritten by appointment of a judicial arbitrator when no qualification therefor is provided in the agreement?” 

37. The answer to the aforesaid question was in the negative. It was held that the appointment made by the High Court was beyond the arbitration agreement which 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. It was emphasised that “if the parties have entered into such an agreement with open eyes, it is not open to ignore it and invoke exercise of the powers in Section 11(6).” The observations made by this Court in RITE Approach Group Ltd . Vs. Rosoboronexport, (2006) 1 SCC 206 were reiterated, wherein this Court has clearly held that :- 

“In view of the specific provision contained in the `agreement specifying the jurisdiction of the court to decide the matter, this Court cannot assume the jurisdiction, and hence, whenever there is a specific clause conferring jurisdiction on a particular court to decide the matter, then it automatically ousts the jurisdiction of the other court.” 

38. In Northern Railway Administration, Ministry of Railway , New Delhi Vs. Pate l Engineering Company Limited (supra), a three Judge bench of this Court reiterated the general principle as noticed in the judgments relied upon by Mr. Bhat. At the same time, it is emphasised that in exercise of its powers under Section 11(6) of the Act, the Court has to take into consideration the provision contained in Section 11(8) of the Act. The aforesaid provision requires that the Chief Justice or the person or an institution designated by him in appointing an arbitrator shall have due regard to any qualifications required of the arbitrator by the agreement of the parties and other considerations as are likely to secure the appointment of an independent and impartial arbitrator. It is also observed that a bare reading of the Scheme of Section 11 shows that the emphasis is on the term of the agreement being adhere to and /or give effect to as closely as possible. But it is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations.

39. In Indian Oil Corporation Limited & Ors. Vs. Raja Transport Private Limited (supra), this Court whilst emphasizing that normally the Court shall make the appointment in terms of the agreed procedure, has observed that the Chief Justice or his designate may deviate from the same after recording reasons for the same. In Paragraph 45 of the aforesaid judgment, it is observed as follows:- 

“45. If the arbitration agreement provides for arbitration by a named arbitrator, the courts should normally give effect to the provisions of the arbitration agreement. But as clarified by Northern Railway Admn., where there is material to create a reasonable apprehension that the person mentioned in the arbitration agreement as the arbitrator is not likely to act independently or impartially, or if the named person is not available, then the Chief Justice or his designate may, after recording reasons for not following the agreed procedure of referring the dispute to the named arbitrator, appoint an independent arbitrator in accordance with Section 11(8) of the Act. In other words, referring the disputes to the named arbitrator shall be the rule. The Chief Justice or his designate will have to merely reiterate the arbitration agreement by referring the parties to the named arbitrator or named Arbitral Tribunal. Ignoring the named arbitrator/Arbitral Tribunal and nominating an independent arbitrator shall be the exception to the rule, to be resorted for valid reasons.” 

(emphasis supplied) 

40. In view of the aforesaid observations, it would not be possible to reject the petition merely on the ground that this Court would have no power to make an appointment of an arbitrator other than the Chairman-cum-Managing Director or his designate. This Court would have the power to appoint a person other than the named arbitrator, upon examination of the relevant facts, which would tend to indicate that the named arbitrator is not likely to be impartial. In this case, the petitioner had clearly pleaded that the named arbitrator is a direct subordinate of the CMD and employee of the respondent. CMD is the controlling authority of all the employees, who have been dealing with the subject matter in the present dispute and also controlling authority of the named arbitrator. Apprehending that the CMD, who had been dealing with the entire contract would not act impartially as an arbitrator, the petitioner had issued a notice on 20th May, 2011. In this notice, it was pointed out that while the entire process of the performance of the contract was going on, the CMD had issued a letter on 5th June, 2009 to the petitioner stating that as per the company’s directives, all pending supplies as on that date were “put on hold”. After the aforesaid communication, no communication was issued to the petitioner for supply of the goods as per the Purchase Order dated 3rd December, 2009. Even subsequently, there were difficulties when a further lot of 24 units were supplied. The detailed submissions made by the petitioner have been noticed in the earlier part of the judgment.

41. Keeping in view the aforesaid facts, I am of the opinion that it would not be unreasonable for the petitioner to entertain the plea that the arbitrator appointed by the respondent would not be impartial. The CMD itself would not be able to act independently and impartially being amenable to the directions issued by the Ministry of Defence. In similar circumstances, this Court in the case of Dene l (Proprietary ) Limited Vs. Bharat Electronics Limited & Anr . (supra), this Court observed as follows:- 

“21. However, considering the peculiar conditions in the present case, whereby the arbitrator sought to be appointed under the arbitration clause, is the Managing Director of the Company against whom the dispute is raised (the respondents). In addition to that, the said Managing Director of Bharat Electronics Ltd. which is a “government company”, is also bound by the direction/instruction issued by his superior authorities. It is also the case of the respondent in the reply to the notice issued by the respondent, though it is liable to pay the amount due under the purchase orders, it is not in a position to settle the dues only because of the directions issued by the Ministry of Defence, Government of India. It only shows that the Managing Director may not be in a position to independently decide the dispute between the parties.” 

42. In my opinion, the facts in the present case are similar and, therefore, a similar course needs to be adopted.

43. In exercise of my powers under Sections 11(4) and 11(6) of the Arbitration and Conciliation Act, 1996 read with Para 2 of the Appointment of Arbitrators by the Chief Justice of India Scheme, 1996, I hereby appoint Hon’ble Mr. Justice Ashok C. Agarwal, Retired Chief Justice of the Madras High Court, r/o No. 20, Usha Kiran, 2nd Pasta Lane, Colaba, Mumbai 400 005, as the sole arbitrator, to adjudicate the disputes that have arisen between the parties, on such terms and conditions as the learned sole arbitrator deems fit and proper. Undoubtedly, the learned sole arbitrator shall decide all the disputes arising between the parties without being influenced by any prima facie opinion expressed in this order, with regard to the respective claims of the parties.

44. The Registry is directed to communicate this order to the sole arbitrator forthwith to enable him to enter upon the reference and decide the matter as expeditiously as possible.

45. The Arbitration Petition is accordingly disposed of.

IN THE SUPREME COURT OF INDIA 

CIVIL ORIGINAL JURISDICTION

Surinder Singh Nijjar, J.

May 08, 2012

ARBITRATION PETITION NO.6 OF 2009 

Head Note:-

Arbitration and Conciliation Act, 1996 - Sections 11(5) and (9) -  Chief Justice of India Scheme, 1996 - appointment of an independent and impartial person as an Arbitrator -  the facts and circumstances are sufficient to show that the bonafide disputes have arisen between the parties, which are within the scope and ambit of the arbitration clause and need to be resolved through arbitration. The disputes having arisen in September, 2008 and the present application having been filed on 4th February, 2009, the petition can not be said to be belated.  All the disputes that have arisen between the parties are hereby referred to arbitration and hereby appoint Hon. Mr. Justice S.N. Variava, Former Judge of Supreme Court of India, as the Sole Arbitrator to adjudicate upon all the disputes and differences that have arisen between the parties, on such terms and conditions as the learned Sole Arbitrator deems fit and proper. Undoubtedly, the learned Sole Arbitrator shall decide all the disputes arising between the parties without being influenced by any prima facie opinion expressed in this order, with regard to the respective claims of the parties.

O R D E R 

SURINDER SINGH NIJJAR , J .

1. This petition under Sections 11(5) and (9) of the Arbitration and Conciliation Act, 1996 read with paragraphs 2 and 3 of the appointment of the Arbitrators by the Chief Justice of India Scheme, 1996 seeks appointment of an independent and impartial person as an Arbitrator.

2. The applicant is a Company incorporated in Oman having Registration No.1550438 and having its registered office at Sohar Industrial Estate, PO Box 40, PC 327, Sohar, Sultanate of Oman. The respondent is an Indian Company incorporated under the provisions of the Companies Act, 1956 and having its registered office at Shanti Heights, 32/2, South Tukoganj, 2nd Floor, Above Cosmos Bank, Indore 452001 (Madhya Pradesh).

3. The applicant entered into a Sale Purchase Contract dated 18th June, 2008 bearing No.MIPSL/BILLET/EXP/08-09/003 (hereinafter referred to as the ‘Contract’) with the respondent for supply of 2000 metric ton Prime Alloy Steel Billets of specific chemical composition and physical specifications more particularly described in Article 3 of the Contract. In accordance with the terms and conditions of the Contract, the applicant had opened a Letter of Credit bearing No. DC BAF 080939 through HSBC Bank Middle East Limited Muscat. The Letter of Credit was encashed by the respondent on 21st August, 2008 through its bankers, State Bank of Travancore. On 23rd August, 008, the applicant took delivery of first shipment of 243.2 Metric Ton of Billets at Sohar Port. Upon unloading the containers, the applicant noticed that far from complying with the specifications mentioned in the Contract, the Billets supplied by the respondents were of a very poor quality. The Billets had cracks which were visible to naked eyes. Even then, to confirm the defects, the applicant chose some random Billets and sent the same to two independent laboratories for testing. Both the laboratories, after conducting the requisite tests, confirmed that the Billets supplied by the respondent did not comply with the specifications mentioned in the Contract. The applicant sent an e-mail dated 31st August, 2008, informed the respondent about the non-conformity and made it clear that the same were not acceptable. On the same day, i.e., 31st August, 2008, another e-mail was sent setting out in detail the defects in the Billets. It was also mentioned that the applicant had done random cross verifications on chemical composition, and the respondents will be intimated after getting results. It is further stated that the applicant has stopped de-stuffing of containers, the respondent was requested to kindly arrange to take back the rejected goods urgently and arrange for the refund of the amount paid at the earliest. The applicant informed the respondent that all unloading, loading and demurrage at Port and with the shipping company will be to your account.

4. The respondent by its letter dated 1st September, 2008 stated that the complaint has been noted and they were equally and greatly concerned. The applicant was informed that the complaint was being accorded highest priority by the respondent that they were investigating at their end the reasons for the same. The letter states that it was never the intention of the respondent to send substandard material to any of their esteemed customers. It notes that “we understand your concern and deeply regret the inconvenience caused to you. However, we would like to assure you that we will sort out this problem to your entire satisfaction. We wish to assure that we believe in ethical business practices and strive hard for customer satisfaction.” The applicant was further informed that “in order to ascertain the intensity of the problem and discuss the various issues involved for an amicable resolution of the same, it is planned to send a high level delegation to your site within the next few days”. In the meanwhile, the applicant was requested to carry out de-stuffing of the containers and take delivery of lot 2, 3 and 4 as the same will unnecessarily incur charges on account of detention and demurrage. The applicant was once again re-assured that the issue would be resolved to their entire satisfaction. Pursuant to the aforesaid assurances, the respondent cleared the remaining 1234.63 MT of the Billets which, according to the applicant, were defective. On 10th September, 2008, there was a meeting between the representatives of the applicant and the respondent. It was decided that the joint inspection would be undertaken to have the sample analyzed from independent recognized laboratories in Dubai on 13th September, 2008. The joint inspection was not arranged. The applicant issued several reminders informing the respondent that the defective Billets stood rejected, and they were requested to remove the same. Since the joint inspection was not carried out, the applicant got an inspection conducted through one of the reputed firms in Dubai on 9th October, 2008. The Expert, known as SGS Dubai, in its report dated 16th October, 2008 concluding that “the lot is having lot of serious visual defects” and that “all the analyzed samples were not complying with provided contractual specification”. All efforts and settlements having failed, the applicant invoked the arbitration clause in terms of Article 10 of the Contract, through its notice dated 17th December, 2008.

5. No reply was received from the respondent. The applicant, therefore, nominated the Sole Arbitrator (Hon.Mr.Justice S.N.Variava, a former Judge of this Court). Since the respondent did not reply to the aforesaid letter, the applicant was left with no alternative but to move the present petition.

6. In the reply, the respondent claimed that it was issued inspection certificates dated 28th July, 2008 and 31st July, 2008 of quality and quantity by Inspectorate Griffith India Pvt. Ltd., an independent third party inspection agency of international repute, with respect to the goods that were to be dispatched to the applicant as per the said Contract. The goods were duly accepted by the applicant. The Letter of Credit had been opened by the applicant in accordance with Article 5 of the Contract. The applicant took delivery of the first shipment on 27th August, 2008. It accepts that applicant had sent e-mail dated 31st August, 2008 to the representative of the respondent alleging that the Billets were defective and making the demands, as noticed earlier. The respondent gave another version as to why the joint inspection was not carried out. According to the respondents, all efforts to persuade the applicant had failed. They had a cursory meeting with the CEO of the applicant which lasted two minutes. The applicant insisted that the respondent lift the material and refund the money. The applicant, according to the respondent, is arbitrarily calling upon the respondent to pay warehousing charges @ US $ 20 per metric ton per day after 30th September, 2008. The respondent claimed that the application is not maintainable in view of the fact that the dispute sought to be referred to arbitration is “not a dispute arising out of contract” but rather a dispute which has been deliberately planted post the completion of the Contract to escape a liability that the applicant has already incurred, i.e., payment of price for the goods supplied. According to the respondents, it is not a dispute in real sense but a “moon shine dispute”. Further it is a dispute that has been raised after the Contract has been validly completed. The dispute about the defective goods is a belated attempt by the applicant to evade its liability under the Contract. The real reason for trying to avoid the Contract is the downfall of the price in the international market of steel Billets.

7. The applicant in its rejoinder has reiterated the averments made in the application. It is stated that the inspection notes mentioned by the respondent had come to the knowledge of the applicant only from the reply filed by the respondent to the application. The applicant denies that the material supplied by the respondent was in accordance with the specifications given in the Contract. It is stated that the applicant has not tried to evade the liability under the Contract. It is also denied that the Contract has become commercially unviable. The applicant also denied that the respondent has made attempts to resolve the issues raised by the applicant. The further details given by the applicant need not be noticed at this stage.

8. I have heard the learned counsel for the parties. 

9. Mr. Viswanathan, learned senior counsel appearing for the applicant submits that the matter herein is specifically covered by the judgment of this Court in SBP & Co . Vs. Patel Engineering Ltd. & Anr., (2005) 8 SCC 618 and National Insurance Company Limited Vs. Boghara Polyfab Private Limited, (2009) 1 SCC 267 In reference to the arbitration clause, Mr. Viswanathan submits that the disputes have arisen between the parties. The disputes relate to live claims which are not belated. The disputes fall within the scope and ambit of the arbitration clause which are worded very widely. The arbitration clause clearly states that “all disputes and differences whatsoever arising between the buyer and seller out of or relative to the construction meaning and operation of effect of this Contract or any breach thereof shall be settled by the arbitration.” 

10. Learned counsel also relied on Nandan Biomatrix Limited Vs. D 1 Oils Limited, (2009) 4 SCC 495 and Visa International Limited Vs. Continental Resources (USA) Limited, (2009) 2 SCC 55 and Reva Electric Car Company Private Limited Vs. Green Mobil, (2012) 2 SCC 93.

11. On the other hand, counsel for the respondent submits that the petition is not maintainable as the condition precedent for invoking arbitration, as agreed in the agreement, has not been satisfied. Since there has been no joint inspection of the material, no reliance can be placed on the expert reports submitted by the applicant. In this case, it was agreed that the parties shall try to settle the dispute amicably, which was a condition precedent for invoking the arbitration. According to the learned counsel, in the present case, the applicant has not even raised a proper claim, which can be referred to arbitration.

12. I have considered the submission made by the learned counsel for the parties. I am of the considered opinion that the applicant has clearly raised bonafide disputes arising out of or relative to the construction of the contract which contains the arbitration clause. Article 10 of the contract contemplates resolution of disputes between the applicant and respondent through arbitration, as per the procedure laid down under the Arbitration and Conciliation Act, 1996. The clause reads as under:- 

“All disputes and differences whatsoever arising between buyer and seller out of or relative to the construction meaning and operation of effect of this contract or any breach thereof, shall be settled amicably, failing which it shall be settled as per the Indian Arbitration and Conciliation Act, 1996. The place of arbitration would be Mumbai, India the decision made by the arbitration organization shall be taken as final and binding upon both parties. The arbitration expenses shall be borne by the loosing party unless otherwise awarded by the arbitration organizations.” 

13. A bare perusal of the aforesaid clause is sufficient to indicate that it covers all disputes and differences of any kind arising between the parties. The applicant has clearly raised a number of issues, which can be summarized as follows:- 

(a) Failure of the respondent to remove the defective Billets supplied by the respondent and lying at applicant’s premises 

(b) Failure to remit the amount drawn by respondent against the Letter of Credit 

(c) Failure to pay interests and costs incurred by the applicant 

(d) Failure to pay warehousing charges @ USD 20 per Metric Ton per day on and from 1st October, 2009 till the actual removal of defective Billets from the premises of the applicant.

14. In such circumstances, it can not be said that the applicant has failed to raise bonafide dispute which cannot be referred to arbitration.

15. As noticed earlier, the applicant through its e-mail dated 31st August, 2008 had informed the respondent about defective material. In the second e-mail on the same date, the applicant had set out the details in the Billets and informed the respondent that it has stopped destuffing of containers. The respondent was called upon to take back the rejected goods urgently and arrange to refund the amount paid at the earliest. In response to the aforesaid e-mail, the respondent on 1st September, 2008 had indicated its concern and the inconvenience caused to the applicant was deeply regretted. The applicant was also assured that the problem would be sorted out to the entire satisfaction of the applicant. Thereafter, the respondents have proposed a joint inspection, which according to the applicant was never arranged. On the other hand, the respondent claims that the applicant had rebuffed all the efforts made by the respondents to resolve the issue. The applicant was intent on claiming the refund.

16. In my opinion, the aforesaid facts and circumstances are sufficient to show that the bonafide disputes have arisen between the parties, which are within the scope and ambit of the arbitration clause and need to be resolved through arbitration. I do not find any substance in the submission of the learned counsel for the respondent that the disputes are either belated or raised only to avoid liability under the contract. The disputes having arisen in September, 2008 and the present application having been filed on 4th February, 2009, the petition can not be said to be belated.

17. Keeping in view the facts and circumstances narrated above, the application is allowed. All the disputes that have arisen between the parties are hereby referred to arbitration. I hereby appoint Hon. Mr. Justice S.N. Variava, Former Judge of this Court, as the Sole Arbitrator to adjudicate upon all the disputes and differences that have arisen between the parties, on such terms and conditions as the learned Sole Arbitrator deems fit and proper. Undoubtedly, the learned Sole Arbitrator shall decide all the disputes arising between the parties without being influenced by any prima facie opinion expressed in this order, with regard to the respective claims of the parties.

18. The registry is directed to communicate this order to the Sole Arbitrator to enable him to enter upon the reference and decide the matter as expeditiously as possible.

19. The Arbitration Petition is accordingly disposed of. 

IN THE SUPREME COURT OF INDIA 

CIVIL ORIGINAL JURISDICTION

Surinder Singh Nijjar

January 09, 2012

ARBITRATION PETITION NO.11 OF 2011 

Head Note:-

Arbitration and Conciliation Act, 1996 - Sections 11(4) and (6) - Chief Justice of India Scheme, 1996 - Appointment of an independent arbitrator - Where there is material to create a reasonable apprehension that the person mentioned in the arbitration agreement as the arbitrator is not likely to act independently or impartially, or if the named person is not available, then the Chief Justice or his designate may, after recording reasons for not following the agreed procedure of referring the dispute to the named arbitrator, appoint an independent arbitrator in accordance with Section 11(8) of the Act.

Chronological List of Cases Cited:-

1. Denel (Proprietary) Limited Vs. Bharat Electronics, 2010 (6) SCC 394
2. Indian Oil Corporation Limited Vs. Raja Transport, (2009) 8 SCC 520
3. Bharat Sanchar Nigam Limited Vs. Motorola India, 2009 (2) SCC 337
4. Northern Railway Administration Vs. Patel Engineering Company, 2008 (10) SCC 240
5. Ace Pipeline Contracts Vs. Bharat Petroleum, 2007 (5) SCC 304
6. Yashwith Constructions Vs. Simplex Concrete Piles, 2006 (6) SCC 204
7. Punj Lloyd Ltd. Vs. P etronet MHB Ltd. 2006 (2) SCC 638
8. Datar Switchgears Ltd. Vs. Tata Finance Ltd., 2000 (8) SCC 151

O R D E R 

SURINDER SINGH NIJJAR, J.

1. The petitioner has filed the present application under Sections 11(4) and (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) read with paragraph 2 of the appointment of the Arbitrators by the Chief Justice of India Scheme, 1996. It is stated that a contract was entered into between the parties for the supply of Base Bleed Units. Initially the quantity to be supplied was 42,000 units. Later on, the quantity was increased to 52,000 units as per Clause 20 of the agreement. By 5th January, 2005, the petitioner had supplied substantial quantity of the goods. However, some of the goods supplied by the petitioner were rejected by the respondent. The petitioner, thereafter, informed the respondent that two more lots were ready for discharge on 17th March, 2005. However, Union of India never responded to the letter, hence, loss and damage has been caused to the petitioner. In April, 2005, after various discussions, the petitioner came to know that improper fuzes were used by the Union of India which led to the problem that occurred in the lots which were rejected. Thereafter, on 21st April, 2005, Union of India put on hold all contracts. Further, on 14th May, 2008, Union of India sent a notice seeking refund of amount of US $ 23,20,240, failing which legal action was to issue.

2. The disputes having arisen between the parties, efforts were made to resolve the same. The details of the efforts made are narrated in the petition. Since the disputes could not be resolved through mutual discussions, the DGOF appointed one Mr. A.K. Jain, Additional General Manager, Ordnance Factory, Ambajhari, Nagpur as an arbitrator in terms of Clause 19(F) of the contract, which reads as under:- 

“All the disputes and difference arising out of or in any way touching or concerning the agreement (matters for which the decision of a specific authority as specified in the contract shall be final under this agreement, shall not be subject to arbitration) shall be referred to the sole arbitration of the Director General, Ordnance Fys. Govt. of India for the time being or a Government servant appointed by him. The appointee shall not be a Govt. Servant who had dealt with the matters to which this agreement relates and that in the course of his duties as Govt. Servant has had not expressed views on all or any of the matter is in dispute or difference. In case the appointed Govt. Servant in place of the incumbents.” 

3. The petitioner objected to the appointment of the Arbitrator. The petitioner apprehended that the arbitrator would be favorably inclined towards the employer. Therefore, on 23rd January, 2009, the petitioner issued a notification under Section 14 of the Arbitration Act stating that the mandate of the arbitrator had been terminated. Since inspite of the aforesaid notification, the arbitrator continued with the arbitration proceedings, the petitioner moved the Principal District Court, Chandrapur and filed Civil Misc. Application No. 45 of 2009 under Section 14(2) of the Act. On 21st December, 2010, the Principal District Court, Chandrapur terminated the mandate of the Sole Arbitrator with the observation that the arbitrator has been biased in favour of respondent No.1. A direction was also issued in the following terms:- 

“Director General, Ordnance Factory, Government of India, is appointed as an Arbitrator or he may appoint Government servant as an Arbitrator , as per Clause 19(F) of February 2004 contract and 19(E) of November 2004 contract, after following due procedure.” 

4. It is an admitted fact that pursuant to the aforesaid directions, within 30 days, DGOF did not himself commence the arbitration proceedings; nor did he appoint any Government servant as an arbitrator. The petitioner has, therefore, moved the present petition under Section 11(6) of the Act on 2nd of March, 2011 seeking appointment of an independent arbitrator. The petitioner claims that the directions issued by the District Court are without any authority or jurisdiction and as such void ab initio. According to the petitioner, the direction of the learned District Judge is based upon an incorrect interpretation of Section 15 of the Act, whereby the learned Judge assumed the authority to appoint an arbitrator, which is beyond her jurisdiction. The Act does not make provision for the appointment of an arbitrator other than in accordance with the arbitration agreement and in the limited circumstances provided for in Section 11. The petitioner also claims that the DGOF would be disqualified to act as an arbitrator as the dispute is against the Government of India and particularly against the Ordnance Factory, Ministry of Defence. If the Director General, Ordnance Factory, Government of India (DGOF) or a Government servant is appointed as an arbitrator, he shall always be bound by the directions/instructions issued by his superior authorities and, therefore, such an arbitrator would not be in a position to independently decide the dispute between the parties. According to the petitioner, such an appointment would be contrary to the provisions of Section 12 of the Act. The petitioner further claims that the DGOF has already through his actions in the dispute between the parties demonstrated his lack of independence and impartiality. The learned District Judge in her judgment alluded to the fact that the DGOF without receiving any request for referral of the dispute between the petitioner and the respondent colluded with the previous arbitrator to appoint him as an arbitrator without any notice to the petitioner. The petitioner further claims that the DGOF has been directly involved in the dispute as would be evident from the correspondence between the petitioner and the respondent. The petitioner thereafter makes a reference to the letter dated 30th June, 2008 wherein the DGOF took the view that the petitioner is liable to replace the rejected Base Bleed units, as alleged by the respondent, making specific reference to the correspondence in which respondent stated its claim against the petitioner and cancelled the contract with the petitioner. The petitioner further claims that the DGOF has failed to appoint the arbitrator either as directed by the learned District Judge or in  accordance with Section 15 of the Act within 30 days of the order dated 21st December, 2010. Therefore, the respondent has forfeited the right to make an appointment from the date of the filing of the petition.

5. The respondent has controverted the plea put forward by the petitioner by way of a detailed counter affidavit. It is claimed by the respondent that the petition under Section 11(6) of the Act is not maintainable, as Mr.Satyanarayana has been appointed as a substitute arbitrator on 16th March, 2011. The petitioner was duly notified about the appointment of the arbitrator in its letter dated 26th March, 2011. The petitioner was requested to forward its claim within 10 days. The petitioner was informed that if such a claim does not reach by 8th April, 2011, the arbitrator will presume that the petitioner did not have any further claim. Upon receipt of that letter, the petitioner objected to the appointment of a new arbitrator by its letter dated 15th April, 2011, as being contrary to clause 19(F). The petitioner has wrongly claimed that since the appointment of the arbitrator was not made prior to the filing of the petition under Section 11(6), the respondent has forfeited the right to make the appointment.

6. I have heard the learned counsel for the parties.

7. On the basis of facts narrated above, Mr. Naphade submits that the petitioner has forfeited its right to appoint the arbitrator. In support of the submission, he relied on the judgments of this Court in the case of Datar Switchgears Ltd. Vs. Tata Finance Ltd. & Anr., 2000 (8) SCC 151 Punj Lloyd Ltd. Vs. P etronet MHB Ltd. 2006 (2) SCC 638 and Yashwith Constructions (P) Ltd. Vs. Simplex Concrete Piles India Ltd. & Anr. 2006 (6) SCC 204 

8. On the other hand, Mr. Raval, appearing for the Union of India has submitted that the petitioner has failed to make out a case for not appearing before the arbitrator appointed pursuant to the order of the Principal District Court, Chandrapur on 21st December, 2010. He submits that the respondents have willingly accepted the appointment of the earlier arbitrator in accordance with the arbitration clause. Therefore, they can have no justification to challenge the appointment of the present arbitrator, who has only been appointed as the mandate of the earlier arbitrator had been terminated by the orders of the Court. The petitioner was duly informed about the appointment of the arbitrator on 16th March, 2011. The arbitrator had intimated both the parties about the appointment and had requested them to submit their respective claims within a period of 10 days. It was only at that stage that the petitioner wrote a letter dated 15th April, 2011 stating that the appointment of the arbitrator was in violation of arbitration clause. Mr. Raval further submitted that in the present circumstances, the matter is squarely covered against the petitioner by the judgment in the case of Indian Oil Corporation Limited & Ors. Vs. Raja Transport Private Limited, (2009) 8 SCC 520 . On the basis of the aforesaid judgment, the learned counsel submitted that the present petition under Section 11(6) is misconceived, as the Sole Arbitrator has been appointed in terms of the agreed procedure contained in Clause 19 (F) and (E).

9. I have considered the submissions made by the learned counsel. In my opinion, Mr. Naphade is correct in his submission that the matter is squarely covered by the judgment in Datar Switchgears Ltd. (supra), wherein this Court has observed as follows:- 

“19. So far as cases falling under Section 11(6) are concerned — such as the one before us — no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11(4) and Section 11(5) of the Act. In our view, therefore, so far as Section 11(6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an arbitrator under Section 11(6) is forfeited.” 

The aforesaid ratio has been reiterated in Punj Lloyd Ltd. (supra).

10. In the facts and circumstances of this case, it would not be possible to accept the submission of Mr. Raval that the present petition filed by the petitioner under Section 11(6) of the Act is not maintainable. On the admitted facts, it is evident that the mandate of the earlier arbitrator Mr. Arun Kumar Jain was terminated by the orders passed by the Principal District Court, Chandrapur in Civil Misc. Application No. 45 of 2009 by order dated 21st December, 2010. A perusal of the aforesaid order would show that the petitioner had challenged the validity of Clause 19(F). The aforesaid submission was rejected by the Court with the observation that the same cannot be the subject matter which could be resolved in a petition under Section 14(2) of the Act. The petitioner was given an opportunity to challenge the clauses in an appropriate forum. The District Judge, however, accepted the submission of the petitioner that there are justifiable reasons to indicate that the arbitrator has not acted fairly. Hence the mandate of Mr. A.K. Jain as the Sole Arbitrator was terminated. In accordance with Section 15(2) of the Act, DGOF was appointed as an arbitrator. He was also given an option to appoint Government servant as an arbitrator as per the arbitration clause. It is a matter of record that DGOF did not act himself as an arbitrator, pursuant to the aforesaid order of the Principal District Judge, Chandrapur dated 21st December, 2010. Mr. Satyanarayana, the subsequent arbitrator, had not been appointed till 16th March, 2011. The present petition was moved on 2nd March, 2011. Therefore, the respondents had clearly forfeited their right to make the appointment of an arbitrator. Consequently, the appointment of Mr. Satyanarayana, as an arbitrator, by letter dated 16th March, 2011 cannot be sustained. 

11. Mr. Naphade then submits that in the peculiar facts and circumstances of this case, the respondent cannot now be permitted to insist that the Court should appoint an arbitrator only in terms of the agreed procedure. In support of this submission, he emphasised that DGOF can not act as an arbitrator as the same will be against the principles of natural justice, as no one can be a judge in his own cause. He further submitted that even if any government employee is appointed as an arbitrator, he will not be in a position to act against the Union of India as he will be obliged to follow the instructions of the superiors. He placed reliance on Bharat Sanchar Nigam Limited & Anr. Vs. Motorola India Private Limited, 2009 (2) SCC 337. It is not possible to accept the submissions of Mr. Naphade. This Court in the case of Indian Oil Corporation Limited (supra) has considered such a submission and observed that :- 

“Arbitration is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties. If a party, with open eyes and full knowledge and comprehension of the relevant provision enters into a contract with a Government/statutory corporation/public sector undertaking containing an arbitration agreement providing that one of its Secretaries/Directors shall be the arbitrator, he cannot subsequently turn around and contend that he is agreeable for settlement of the disputes by arbitration, but not by the named arbitrator who is an employee of the other party. It is now well settled by a series of decisions that arbitration agreements in government contracts providing that an employee of the Department (usually a high official unconnected with the work of the contract) will be the arbitrator, are neither void nor unenforceable. All the decisions proceed on the basis that when senior officers of Government/statutory corporations/public sector undertakings are appointed as arbitrators, they will function independently and impartially, even though they are employees of such institutions/organizations.” 

In my opinion, the aforesaid observations are a complete answer to the submission made by Mr. Naphade.

12. Learned senior counsel then submitted that even if the arbitration clause is held to be valid, Mr. Satyanarayana still can not be permitted to continue with arbitration as the petitioner has a strong apprehension that he is biased in favour of the respondents. In support of the submission, the learned senior counsel has relied on the various notices issued by the arbitrator which were invariably received after the expiry of the time fixed by the arbitrator. In support of his submission, he relied on a judgment of this Court in the case of Denel (Proprietary) Limited Vs. Bharat E lectronics Limited & Anr.,  2010 (6) SCC 394 .

13. Replying to the apprehension of bias pleaded by Mr. Naphade, it is submitted by Mr. Raval that non-receipt of the letters in time can not possibly give rise to an apprehension that Mr. Satyanarayana is in any manner biased against the petitioner. He submits that the reliance of the petitioner on the judgment in Denel (Proprietary) Limited (supra) is also misconceived as the aforesaid judgment was confined to the facts of that particular matter. He, therefore, submits that the Court ought to follow the agreed procedure and not to interfere with the appointment of Mr. Satyanarayana as the arbitrator. In the alternative, he submits that even if the appointment of Mr. Satyanarayana is held to be invalid, the matter has to be left to the DGOF to either act as an arbitrator himself or to appoint an officer appointed by him. 

14. It is true that in normal circumstances while exercising jurisdiction under Section 11(6), the Court would adhere to the terms of the agreement as closely as possible. But if the circumstances warrant, the Chief Justice or the nominee of the Chief Justice is not debarred from appointing an independent arbitrator other then the named arbitrator.

15. A Three Judge Bench of this Court in the case of Northern Railway Administration, Ministry of Railway, New Delhi Vs. P atel Engineering Company Limited,  2008 (10) SCC 240 considered the scope and ambit of Section 11(6) of the Act, as divergent views were taken in two decisions of this Court in Ace Pipeline Contracts (P) Ltd. Vs. B harat Petroleum Corpn. Ltd. 2007 (5) SCC 304 and Union of India Vs. Bharat Battery Manufacturing Co. (P) Ltd. (supra). Upon consideration of the relevant provisions it was inter-alia observed as follows:- 

“A bare reading of the scheme of Section 11 shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. The Court must first ensure that the remedies provided for are exhausted. It is true as contended by Mr. Desai, that it is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations.” 

16. Keeping in view the observations made above, I have examined the facts pleaded in this case. I am of the opinion that in the peculiar facts and circumstances of this case, it would be necessary and advisable to appoint an independent arbitrator. In this case, the contract is with Ministry of Defence. The arbitrator Mr. Satyanarayana has been nominated by DGOF, who is bound to accept the directions issued by the Union of India. Mr. Satyanarayana is an employee within the same organization. The attitude of the respondents towards the proceeding is not indicative of an impartial approach. In fact, the mandate of the earlier arbitrator was terminated on the material produced before the Court, which indicated that the arbitrator was biased in favour of the Union of India. In the present case also, Mr. Naphade has made a reference to various notices issued by the arbitrator, none of which were received by the petitioner within time. Therefore, the petitioner was effectively denied the opportunity to present his case before the Sole Arbitrator. Therefore, the apprehensions of the petitioner can not be said to be without any basis.

17. It must also be remembered that even while exercising the jurisdiction under Section 11(6), the Court is required to have due regard to the provisions contained in Section 11(8) of the Act. The aforesaid section provides that apart from ensuring that the arbitrator possesses the necessary qualifications required of the arbitrator by the agreement of the parties, the Court shall have due regard to other considerations as are likely to ensure the appointment of an independent and impartial arbitrator. Keeping in view the aforesaid provision, this Court in the case of Indian Oil Corporation Limited (supra), whilst emphasizing that normally the Court shall make the appointment in terms of the agreed procedure has observed that the Chief Justice or his designate may deviate from the same after recording reasons for the same. In paragraph 45 of the aforesaid judgment, it is observed as follows:- 

“45. If the arbitration agreement provides for arbitration by a named arbitrator, the courts should normally give effect to the provisions of the arbitration agreement. But as clarified by Northern Railway Admn.10, where there is material to create a reasonable apprehension that the person mentioned in the arbitration agreement as the arbitrator is not likely to act independently or impartially, or if the named person is not available, then the Chief Justice or his designate may, after recording reasons for not following the agreed procedure of referring the dispute to the named arbitrator, appoint an independent arbitrator in accordance with Section 11(8) of the Act. In other words, referring the disputes to the named arbitrator shall be the rule. The Chief Justice or his designate will have to merely reiterate the arbitration agreement by referring the parties to the named arbitrator or named Arbitral Tribunal. Ignoring the named arbitrator/Arbitral Tribunal and nominating an independent arbitrator shall be the exception to the rule, to be resorted for valid reasons.” 

(emphasis supplied) 

18. The material placed before the Court by the petitioner would indicate that it would not be unreasonable to entertain the belief that the arbitrator appointed by the respondent would not be independent. That being so, the appointment of Mr. Satyanarayana can not pass the test under Section 11(8) of the Act.

19. Similarly, applying the test laid down in Indian Oil Corporation Ltd. (supra), this Court in the case of Denel (Proprietary) Limited (supra) also observed that the Managing Director, Bharat Electronics Limited, which is a Government company is bound by the directions/instructions issued by his superior authority. The Court also observed that according to the pleaded case of the respondents, though it was liable to pay the amount due under the purchase order, it was not in a position to supply the dues only because of the direction issued by the Ministry of Defence, Government of India. Therefore, the Court concluded that the Managing Director may not be in a position to independently decide the dispute between the parties. Consequently, the Court proceeded to appoint an independent arbitrator.

20. In my opinion, the circumstances in the present case are similar and a similar course needs to be adopted. In view of the above, the petition is allowed.

21. In exercise of my powers under Section 11(4) and (6) of the Arbitration and Conciliation Act, 1996 read with Paragraph 2 of the Appointment of Arbitrator by the Chief Justice of India Scheme, 1996, I hereby appoint Hon. Mr. Justice Ashok C. Agarwal, Retd. Chief Justice of the Madras High Court, R/o No. 20, Usha Kiran, 2nd Pasta Lane, Colaba, Mumbai-400 005, as the Sole Arbitrator, to adjudicate the disputes that have arisen between the parties, on such terms and conditions as the learned Sole Arbitrator deems fit and proper. Undoubtedly, the learned Sole Arbitrator shall decide all the disputes arising between the parties without being influenced by any prima facie opinion expressed in this order, with regard to the respective claims of the parties. 

22. The registry is directed to communicate this order to the Sole Arbitrator forthwith to enable him to enter upon the reference and decide the matter as expeditiously as possible. 

Arbitration and Conciliation Act, 1996 - Section 16(1) - While considering any objection with respect to the existence or validity of the arbitration agreement, the arbitration clause which formed part of the contract, has to be treated as an agreement independent of the other terms of the contract. Even if the arbitral tribunal concludes that the contract is null and void, it should not result, as a matter of law, in an automatic invalidation of the arbitration clause.

“11. Governing Law and Jurisdiction i. This MOU shall be construed and enforced in accordance with the laws of India. ii. In the event of any dispute or difference arising at any time between the parties hereto as to the construction, meaning or effect of this Agreement or thing contained herein or the rights, duties, liabilities and obligations of the parties hereto in relation to this Agreement, the same shall be referred to a single arbitrator, in case the parties can agree upon one (1) within a period of thirty days upon being called by a party to do so and failing such agreement to three (3) arbitrators one (1) each to be appointed by GREENMOBIL and RECC and the third to be appointed by the two arbitrators so appointed. The award passed by such arbitrator(s) shall be final and binding on both the parties. All such arbitration proceedings shall be held in Bangalore as per the Arbitration and Conciliation Act, 1996 as amended from time to time.” 

“RECC, at its sole discretion, may decide to extend the MOU if RECC believes that additional time is required to complete the trial period.” 

“39. It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the petitioner has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral Tribunal.” 

“22. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.

22.1. The issues (first category) which the Chief Justice/his designate will have to decide are:

(a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement.

22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:

(a) Whether the claim is a dead (long-barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. 

22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are:

(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration. 

“These observations were further reiterated by this Court in the case of A.P. Tourism Development Corporation Ltd. Vs. Pampa Hotels Ltd. [2010 (5) SCC 425]. The aforesaid ratio of law has been reiterated by this Court in Alva Aluminium Limited, Bangkok Vs. Gabriel India Limited [2011 (1) SCC 167]. Upon consideration of the entire case law, it has been observed as follows :- 

“18. It is in the light of above pronouncements, unnecessary to delve any further on this issue. It is clear that once the existence of the arbitration agreement itself is questioned by any party to the proceeding initiated under Section 11 of the Act, the same will have to be decided by the Chief Justice/designate as the case may be. That is because existence of an arbitration agreement is a jurisdictional fact which will have to be addressed while making an order on a petition under Section 11 of the Act.” 

“Whereas the first cars of the make REVA were marketed in India from June 2001 onwards, then in the UK in 2003 and worldwide from 2007. That the party summoned below had however promised the arrival of more performing Lithium batteries that would be installed in their vehicles from the middle of 2008, as well as a new or more competitive and more attractive car model by the end of 2008, the REVA ‘NXR’. Whereas the contractual relationships between the petitioner and the party summoned below started in 2007. Whereas the distribution of the REVA cars by the petitioner took place in two stage. That during an initial period the petitioner ran a pilot project for the party summoned below to assess the marketing possibilities of the REVA on the Belgian market. That after a certain period of time the petitioner became an exclusive distributor of REVA cars for the BENULEX.” 

“Whereas, in spite of the absence of the signing of a written contract between the parties, the petitioner de facto became the exclusive distributor of REVA vehicles in the BENELUX starting the month of January, 2008.” 

“Whereas on the 25th of September, 2009, as soon as the first REVA cars fitted with Lithium batteries and of the new REVA NXR model arrive in Belgium the petitioner is going to be ejected all of a sudden by the party summoned below. That during a telephone conversation on 25th September, 2009, confirmed in an email of the same date the party summoned below suddenly announced its decision to terminate the concession granted to the petitioner for the Belelux, with immediate effect; That the party summoned below asked the petitioner to immediately stop the sale and promotion of the REVA cars as well as the use of the REVA mark.” 

“That the parties summoned below terminated the contract in any untimely and brutal manner on 25th September, 2009.” 

“19. It is, no doubt, true that the general rule is that an offer is not accepted by mere silence on the part of the offeree, yet it does not mean that an acceptance always has to be given in so many words. Under certain circumstances, offeree's silence, coupled with his conduct, which takes the form of a positive act, may constitute an acceptance—an agreement sub silentio. Therefore, the terms of a contract between the parties can be proved not only by their words but also by their conduct.” 

“Though the JVA may have been terminated and cancelled as stated but it was a valid JVA containing a valid arbitration agreement for settlement of disputes arising out of or in relation to the subject-matter of the JVA. The argument of the respondent that the disputes cannot be referred to the arbitration as the agreement is not in existence as of today is therefore devoid of merit.” 

“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.” 

“Article 16 – Competence of arbitral tribunal to rule on its jurisdiction – (1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that 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)…………………………………………………….. 

(3)……………………………………………………...”