Lakshmanan, CJ. - (1.) HEARD Mr. G. G. Sharma and Shri Abhay Bhandari, learned counsel for the parties.
(2.) M/s. Paramount Pollution Control Ltd. , the applicant herein, filed the above application u/s. 11 of the Arbitration and Conciliation Act, 1996. The applicant Company was awarded a contract for a sum of Rs. 8,26,81,000/ -. After observing the formalities, the work was entrusted to the applicant Company and the applicant has completed the work on time and in accordance with the prescribed parameters. Certain differences have cropped up with regard to the above work. It is the case of the applicant Company herein that they have literally abided by the terms and conditions of the contract, whereas, the respondent company finds faults with the applicant company on one pretext or the other, and a huge amount of Rs. 1,21,43,832/-remains outstanding against the respondent Company. The parties have entered into an agreement, Annexure-1, dated, 22. 06. 1994. Clause 3. 67 is the relevant clause for appointment of an Arbitrator, which is reproduced below: "arbitration: All the disputes and difference arising out of or in any way touching or concerning this contract shall be referred to the sole arbitration of the Chairman-cum-Managing Director, Hindustan Copper Ltd. or any Officer nominated by him in this behalf No objection shall be taken on the ground that the Arbitrator so appointed is an employee of the Company and that he has or had to deal with the matters to which the agreement or the reference relates or that in the course of his duties he had dealt with or expressed views on all or any of the matters covered by the reference. The award of the Arbitrator shall be final, conclusive and binding on all the parties to the contract. In the event of the Arbitrator dying, neglecting or refusing to act or resigning or being unable to act for any reason or his award being set aside by the court for any reason, it shall be lawful for the Chairman-cum-Managing Director, HCL to appoint another Arbitrator in the place of the outgoing Arbitrator in the manner aforesaid. The Arbitrator may from time to time with the consent of all the parties to the contract enlarge the time for making the award. Upon every and such reference, the assessment of the costs incidental to the reference and award respectively shall be in the discretion of the Arbitrator. Subject as aforesaid, the Arbitration Act, 1940 and the rules thereunder and any statutory modifications thereof, for the time being in force shall be deemed to apply to the arbitration proceedings under this clause. " According to Mr. G. G. Sharma, the applicant company wrote to the respondent company on 1. 11. 99 bringing to their notice that there exist a dispute between them with regard to payment of the amount which shall be referred to the Arbitrator in accordance with the Arbitration Agreement. The applicant company also informed that this letter dated 1. 11. 99 should be treated as a notice of Arbitration, which is Annex. 5. The said letter is reproduced herein below : "paramount POLLUTION CONTROL LIMITED. BY REGISTERED POST AD Ref. PPCL/ap-324/99/5249 1. 11. 1999 To The Executive Director, Hindustan Copper Ltd. Khetri Copper Complex, Khetri Nagar- 333 504, Sub : Settlement of the final dues/invocation of Arbitration. Dear Sir, This has reference to our letter Ref. No. PPCL/ap- 324/99/4020 dated, 1. 9. 99. We hereby inform you that till today we have not heard anything from your end nor we have received the outstanding payments. Meanwhile, we would like to inform you that in terms of the Contract dated 22. 6. 1994, we have fully discharged all our obligations. HCL was obliged to release the last 5 percent of the Contract amount immediately after 27. 01. 1997 which ought to have been paid by your Company on or before 31 March, 1997. Under the circumstances, explained above, we hereby call upon you to effect the payment of Rs. 1,21,43,832/- as per our letter referred above with interest at the rate of 18 percent per annum till payment within 3 weeks hereof, failing which it shall be assumed that, there new exists dispute between us with regard to the payment of this amount which shall be referred to Arbitration in accordance with the Arbitration Agreement between your Company and our Company. Therefore, please treat this as a Notice for Arbitration in the event your Company fails or denies to effect the payment of the amount as stated above with interest. Thanking you, Yours faithfully, For PARAMOUNT POLLUTION CONTROL LTD. Sd/- P. D. PATEL DIRECTOR". It is further submitted by Mr. Sharma that the respondent company has received this notice, but they have not cared to take any action in the matter. Thus, from the conduct of the respondent company, it is clear that the respondent company is not interested in appointing an Arbitrator in terms of the contract, whereas, they are duty bound to appoint an Arbitrator within 30 days of the receipt of the notice dated, 1. 11. 99. Mr. Sharma, in support of his contention, has placed reliance on the judgment of the Supreme Court in G. Ramchandra Reddy and Co. vs. Chief Engineer, Madras Zone, Military Engineering Service (1 ). In the said case, the Supreme Court has observed that the Court should endeavour that the contract should always be given effect to, though the contracting party had failed to act according to the contract. The judgment further proceeds to hold that in the absence of any named Arbitrator it would be open to the contracting parties to agree for an appointment of an Arbitrator by agreement even after the proceedings were laid in the Court and that in the absence of any such agreement, the Court gets jurisdiction and power to appoint an Arbitrator. It is also observed that since the respondent in that case, did not appoint the Arbitrator even after the notice was received and that even before the Court he did not state that he was willing to appoint an Arbitrator, the appointment of Arbitrator made by the Court was proper. Placing strong reliance on the observations in the above judgment Shri Sharma submitted that since the Arbitrator was not appointed within 30 days, the Court gets jurisdiction and power to appoint an independent Arbitrator. The above judgment, in my opinion, is distinguishable on facts and on law. In the instant case, the applicant issued a notice, Annexure-5. It is stated in the second paragraphs of Annexure-5 that if the respondent failed to effect payment of the amount of Rs. 1,21,43,832/- as per letter of the applicant referred to in the said letter with interest at the rate of 18% per annum till payment within 3 weeks, it shall be assumed that, there now exists dispute between the parties with regard to payment of this amount, which shall be referred to Arbitration in accordance with the Arbitration Agreement between the applicant and the respondent company. Therefore, the respondent was requested to treat the said letter (Annex. 5 ) as notice for Arbitration.
(3.) IN this context, it is useful to refer to the reply sent by the respondent company (Annex. R- 1), which reads as under: "registered Post with A. D. WITHOUT PREJUDICE 26. 5. 2000 No. HCL/kcc/pcc/4965 M/s. Paramount Pollution Control Ltd. Paramount Complex, Gotri Road, Race Course, BARODA- 390007 (Gujarat ). Attn: Mr. P. D. Patel, Director. Sub: Settlement of the final dues/invocation of arbitration. Dear Sir, This has reference to your letter Number PPCL/ap/324/99/5349 dated 1. 11. 99 on the above subject. IN this regard, I have been directed to inform you that since you have submitted your reference for arbitration vide your above letter to ED, KCC, he is unable to appoint an Arbitrator as per your request. IN case you have any dispute (s) with HCL/kcc arising out of contract dated, 22. 6. 94, you may submit your reference for arbitration only to the CMD, Hindustan Copper Ltd. , Tamara Bhawan, 1, Ashutosh Chowdhury Avenu, Calcutta- 19, who is the appointed Arbitrator in terms of Arbitration agreement per clause No. 3. 67 of the contract. under reference. For appointment of Arbitrator, a party is to approach the appropriate forum; and in this case since our CMO is the appointed Arbitrator as selected by the parties, in the above arbitration agreement, you are required to invoke the above clause and submit your reference for arbitration to him only, and not to ED, KCC. Trust this clarifies the legal position. Yours faithfully, (D. K. Mehta) AGM (Projects) CC- GM (Proj) HO/ Cal. DGM (W) TA to ED Manager (Law)". Two things will emerge from the above reply and was also brought to the notice of the applicant. (i) the letter, Annexures 5, was not addressed to the Chairman and Managing Director as per Clause 3. 67 of the Agreement; (ii) the letter was addressed to the Executive Director of the respondent company who is not competent authority to appoint an Arbitrator as per the request made by the applicant. The applicant was further informed that if the applicant company has any dispute with the respondent arising out of the contract dated, 22. 6. 94, he may submit his reference for arbitration to the Chairman and Managing Director of the respondent company who is appointed and nominated in terms of the Arbitration Agreement as per Clause-3. 67 of the contract. Inviting my attention to the above recital, Shri Abhay Bhandari submitted that the applicant company has not approached the appropriate forum and in this case, since the Chairman and Managing Director is appointed as an Arbitrator and selected by the parties as per the agreement, the applicant was required to invoke the above clause and submit reference for arbitration to the Chairman and Managing Director only and not to the Executive Director. Mr. Bhandari has also drew my attention to the reply filed by the respondent to the above application and in particular, the additional pleas, which reads thus: "additional PLEAS; The Chairman cum Managing Director HCL Calcutta is ready to act in accordance with arbitration clause contained in para 3. 67 of the contract. The writ petition is wholly misconceived. It is, therefore, prayed that the application of the petitioner company be dismissed with cost. " In the case of G. Ramchandra Reddy & Co. (supra), cited by Mr. G. G. Sharma, the respondent has averred in the written statement that the request for appointment of Arbitrator was under consideration, but, before the Court the respondent did not state that he was willing to appoint an Arbitrator. Therefore, the Supreme Court held that the appointment of an Arbitrator made by the court was proper. But, in the instant case, the respondent has pointed out the errors committed by the applicant company as would be seen from the letter dated, 26. 5. 2000. This apart, it has been clearly averred in the additional pleas. that the Chairman cum Managing Director, HCL, Calcutta, is ready to act in accordance with the arbitration clause contained in Para 3. 67 of the contract. Thus, I am of the view that the judgment of G. Ramchandra Reddy & Co. (supra) cited by Shri Sharma, will not be of any assistance to the applicant and is distinguishable on facts. ;