M/S. Omcon Infrastructure Pvt. Ltd V/s. Indiabulls Investment Advisors Ltd

“Once the Managing Director of the Respondent Company was ineligible to appoint the arbitrator, the same would also bar the Company itself from unilaterally appointing the sole arbitrator”

Case name:M/S. Omcon Infrastructure Pvt. Ltd V/s. Indiabulls Investment Advisors Ltd
Case number/Citation:O.M.P. (T) (COMM.) 35/2020 & I.A.6153/2020
Court:High Court of Delhi
Bench:HON’BLE MS. JUSTICE REKHA PALLI
Decided on:September 01, 2020
Relevant Act/Sections:Section 12 of Arb. And Conciliation Act, 2015

BRIEF FACTS AND PROCEDURAL HISTORY:

  • The dispute arose out of an agreement entered into between the parties on 01.07.2017, whereby the respondent was appointed by the petitioner as its marketing representative for the development of its project “Reign Forest” at Visakhapatnam. The said agreement provided for the resolution of disputes by way of arbitration under Clause 7.2.
  • Upon disputes having arisen between the parties, the respondent, vide its legal notice dated 15.02.2019, called upon the petitioner to pay a sum of Rs.4,11,44,163/- towards refund of security fee and marketing fee, which the petitioner refused to pay. The respondent then invoked arbitration on 14.06.2019 and simultaneously appointed Justice S.K. Katriar, a former Judge of Patna High Court, as its sole Arbitrator by exercising its power under Clause 7.2 of the agreement.
  • Upon receiving information about the unilateral appointment of the Arbitrator by the respondent, the petitioner, vide its letter dated 25.08.2019, informed the learned Arbitrator that the said unilateral appointment was not acceptable to it. However, since the petitioner did not appear before the learned Arbitrator on 26.08.2019, i.e., the date of the first sitting; the learned Arbitrator adjourned the matter and vide its subsequent order passed on 25.09.2019, fixed the schedule for conduct of further proceedings and also directed the parties to deposit his fees in accordance with the terms of para 5 thereof.
  • The petitioner, however, did not appear before the learned Arbitrator even on the next date and on 20.01.2020, filed an application under Section 12 of the Act before the learned Arbitrator, challenging his very jurisdiction to continue with the arbitration. In the said application, the primary plea of the petitioner was that the unilateral appointment of the arbitrator by the respondent, by resorting to clause 7.2 of the agreement dated 01.07.2017, was contrary to the decision of the Hon’ble Supreme Court in Perkins Eastman Architects DPC & Anr. V. HSCC India Ltd., [2019 SCC Online SC 1517].
  • Vide his order dated 03.02.2020, the learned Arbitrator had rejected the petitioner’s application by holding that the same was barred by delay and laches and that the decision of the Apex Court in Perkins Eastman Architects DPC & Anr. (supra) was not applicable to the present case, as the authority to nominate the arbitrator in the present case was vested in a Company, and not in an individual.
  • Assailing the aforesaid order passed by the learned Arbitrator, the present petition was filed praying for the termination of his mandate.

ISSUE BEFORE THE COURT:

  • Whether the unilateral appointment of the arbitrator was sustainable?

RATIO OF THE COURT

  • In support of the petition, learned senior counsel for the petitioner submitted that once it is an admitted position that the respondent had unilaterally appointed the sole Arbitrator on 14.06.2019 and that the petitioner had, even before the first date of hearing before the learned Arbitrator i.e. 26.08.2019, informed the learned Arbitrator that his appointment was not acceptable to the petitioner, its objection could not be rejected on the ground of delay and laches.
  • This court held that the unilateral appointment of the learned sole Arbitrator by the Respondent Company on 14.06.2019, in terms of Clause 7.2, could not be sustained. The ratio of the decision in Perkins Eastman Architects DPC & Anr. (supra) cannot be read in such a narrow manner as has been sought to be done by the learned Arbitrator. In the court’s view, once the Managing Director of the Respondent Company was ineligible to appoint the arbitrator in the light of the decision in Perkins Eastman Architects DPC & Anr. (supra), the same would also bar the Company itself from unilaterally appointing the sole arbitrator.
  • The court also rejected the conclusion arrived at by the learned Arbitrator that there was any inordinate delay on the part of the petitioner in raising an objection to his appointment. The petitioner had admittedly conveyed its objection to the learned Arbitrator even before the first sitting was held by him and, therefore, it cannot be stated that the petitioner was in any way guilty of delay, laches or negligence.

DECISION HELD BY COURT:

  • The mandate of the learned Arbitrator, namely Justice (Retd.) S.K. Katriar was terminated, and Justice Reva Khetrapal, a former Judge of this Court (Mobile No. 9871300030) was appointed as the sole Arbitrator for adjudication of the disputes between the parties in relation to the Agreement dated 01.07.2017.

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