STANDARD MERCANTILE COMPANY (MINING DIVISION) PVT.LTD., PATNA Vs. STEEL AUTHORITY OF INDIA LTD.BOKARO

JUDGEMENT

(1.) THIS is an application for appointment of an Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') primarily on the ground that although there is a clause for arbitration in the agreement for appointment of an Arbitrator in the case of existence of a dispute under Clause 11.23 of the Agreement, yet this Court should exercise its jurisdiction under Section 11 (6) of the Act by appointing an Arbitrator as Clause 11.23 of the Agreement has not been followed by the respondents in terms of the agreement.

(2.) A dispute admittedly has arisen between the petitioner -applicant (M/s. Standard Mercantile Company) and the respondent -Steel Authority of India Ltd. (in short 'SAIL'), as according to the respondent -SAIL, it had placed purchase order for 24000 Metric Tonne of High Silica Sand at the rate of Rs. 301.16 per Metric Tonne and the applicant although made the supply for some time, it failed to complete the supply in terms of the purchase order. Consequently, the respondent -SAIL suffered a loss and respondents had to make purchase from another supplier. Since the respondents suffered loss and delay in production on account of non -supply, a dispute arose which was not addressed by the applicant, the Managing Director of the respondent -Company appointed an Arbitrator in terms of Clause 11.23 which clearly declared that in case any claims, disputes or differences of any kind arose between the parties on any ground whatsoever, the same shall be referred by the parties thereto for the decision by a Sole Arbitrator to be appointed as per the provisions enumerated therein. Clause 11.23 envisages that the notice regarding the invoking of the Arbitration Clause was to be served by the parties thereto by registered post at their address given in the contract and the matter in question, dispute, claim of differences other than the expected matter in respect of contract was to be submitted to the Arbitrator for adjudication and decision to a sole Arbitrator to be appointed by the Managing Director, Bokaro Steel Plant, Steel Authority of India Ltd. The agreement further envisaged that the sole Arbitrator appointed shall from the time of his appointment and throughout the arbitration proceedings, would decide the dispute without any delay. This was the provision in sum and substance incorporated in the Agreement in Clause 11.23.

(3.) LEARNED Counsel for the applicant submitted that the respondent -SAIL which was a signatory to the agreement between the parties, in view of the purchase order did not appoint an Arbitrator in terms of Clause 11.23 of the Agreement as no notice was served on the applicant -petitioner invoking Clause 11.23 of the Agreement. It was, therefore, submitted that as no notice was served on the applicant in regard to invocation of Clause 11.23 of the Agreement, the appointment made by the respondents cannot be treated to be an appointment in consonance with Clause 11.23 of the Agreement. It was further submitted that as the respondents failed to appoint an Arbitrator in terms of Clause 11.23 of the Agreement, this Court should exercise its jurisdiction and appoint a new Arbitrator in view of Section 11 (6) of the Act. shown to have been appointed by the Managing Director was, in fact, not an appointment by the Managing Director as it was the letter of AGM (Law Officer) of the Company, who had issued a letter to the Equivalent Citation:2009 -JX(Jhar) -0 -1154 Arbitrator communicating him that he had been appointed as an Arbitrator as there is no order on record issued by the Managing Director for appointment of an Arbitrator, the communication sent by Law Officer of the Company cannot be treated to be an appointment of the Arbitrator by the Managing Director, as a result of which the appointment ought not to be held as an appointment of an Arbitrator under the procedure laid down under Clause 11.23 of the Agreement.