DATAR SWITCHGEARS LIMITED Vs. TATA FINANCE LIMITED

JUDGEMENT

(1.) Leave granted.

(2.) The appellant challenges an order passed by the Chief Justice of the Bombay High Court, under section 11 of the Arbitration and Conciliation Act, 1996 (for short "the Act"). The appellant had entered into a lease agreement with the 1st respondent in respect of certain machineries. Dispute arose between the parties and the 1st respondent sent a notice to the appellant on 5-8-1999 demanding payment of Rs. 2,84,58,701 within fourteen days and in the notice it was specifically stated that in case of failure to pay the amount, the notice be treated as one issued under Clause 20.9 (arbitration clause) of the lease agreement. The appellant did not pay the amount as demanded by the 1st respondent. The 1st respondent did not appoint an arbitrator even after the lapse of thirty days, but filed Arbitration Petition No. 405 of 1999 on 26-10-1999 under section 9 of the Act for interim protection. On 25-11-1999, the 1st respondent appointed the 2nd respondent as the sole arbitrator by invoking Clause 20.9 of the lease agreement and the arbitrator in turn issued a notice to the appellant asking them to make their appearance before him on 13-3-2000. Thereafter, the appellant filed Arbitration Application No. 2 of 2000 before Hon'ble the Chief Justice of Bombay and prayed for appointment of another arbitrator and the 1st respondent opposed this application. This petition was rejected by the Chief Justice holding that as the arbitrator had already been appointed by the first respondent, the lessor, the petition was not maintainable. This order is challenged before us.

(3.) We heard the appellant's Counsel Mr. V.A. Mohta and respondent's Counsel Mr. R.F. Nariman. The appellant's Counsel questioned the authority of the 1st respondent in appointing an arbitrator after the long lapse of the notice period of 30 days. According to the appellant, the power of appointment should have been exercised within a reasonable time. The appellant's Counsel also urged that unilateral appointment of arbitrator was not envisaged under the lease agreement and the 1st respondent should have obtained the consent of the appellant and the name of the arbitrator should have been proposed to the appellant before appointment. On the other hand, the Counsel for the 1st respondent supported the impugned order.