TaxTMI 
TaxTMI 
2007 (5) TMI 563
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....ty of India (GAIL, appellant no.1 herein) awarded four contracts for its project at Petro-Chemical Complex, Dibiyapur, District Etawah (U.P.) to M/s Keti Construction (I) Ltd., Indore (Contractor), which is arrayed as respondent no.1 in the present appeal. All the four contracts were awarded in the year 1995 and they related to construction of certain types of houses for GAIL Vihar Township, pre-mix bitumen carpeting and repair of roads in GAIL Vihar Colony, construction of external sewerage line and construction of certain residential quarters in UPPC Complex, Dibiyapur. Certain disputes arose between the parties regarding completion of the construction work in accordance with the design and cost of construction, etc. The contracts entered into between the parties contained arbitration clause. Appellant no.1 referred the dispute with regard to contract dated 28.9.1995 for arbitration to Justice N.N. Goswami (Retd.) who was formerly a Judge of Delhi High Court. The arbitrator gave a 'no claim award' on 19.4.2000. Respondent no.1 filed a petition under Section 34 of the Act in the Delhi High Court for setting aside the award. A learned Single Judge who heard the petition, after deta....
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.... by a letter dated 15.11.1999 when respondent no.1 sent its own panel on 28.10.1999. The appointment of Brig. Nardip Singh (Retd.) as an arbitrator made by respondent no.1 which was communicated by its letter of 10.12.1999 was challenged by appellant no.1 by sending a letter dated 31.12.1999 and a letter was also sent in this regard to Brig. Nardip Singh (Retd.) to desist from proceeding with arbitration. It was further submitted that respondent no.1 did not challenge the jurisdiction of the arbitrator appointed by appellant no.1 in accordance with Section 16 of the Act. The contractor did not at all appear before the arbitrator appointed by appellant no.1, viz. Justice N.N. Goswami (Retd.) and did not submit any statement of claim. In these circumstances, there was no ground for setting aside the award made by Justice N.N. Goswami (Retd.) on 19.4.2000 and the petition under Section 34 of the Act filed by respondent no.1 was liable to be dismissed. 6. We have heard Mr. Mohan Parasaran, Additional Solicitor General for the appellant and Mr. P.C. Markanda, Senior Advocate for respondent no.1 and have perused the record. 7. Gas Authority of India (appellant no.1 herein) awarded ....
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....is name to the Appointing Authority within thirty days of receipt of names. The Appointing Authority shall thereupon without any delay appoint the said person as the sole arbitrator. If the CONTRACTOR fails to communicate such selection as provided above within the period specified, the Appointing Authority shall make the selection and appoint the selected as the Sole Arbitrator. If the Appointing Authority fails to send to the CONTRACTOR the panel of three names as aforesaid within the period specified, the CONTRACTOR shall send the Appointing Authority a panel of three names of persons who shall all be unconnected with either party. The Appointing Authority shall on receipt of the names as aforesaid select any one of the persons named and appoint him as the sole arbitrator. If the Appointing Authority fails to select the person and appoint him as the sole Arbitrator within 30 days of the receipt of the panel and inform the CONTRACTOR accordingly, the CONTRACTOR shall be entitled to appoint one of the persons from the panel as the sole arbitrator and communicate his name to the Appointing Authority. If the Arbitrator so appointed is unable to or unwilling to act or resigns his app....
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....el but as there was no response, it sent its own panel of three names on 28.10.1999 and finally informed vide letter dated 10.12.1999 that it had nominated Brig. Nardip Singh (Retd.) as the arbitrator. Voluminous correspondence was exchanged between the parties and many such letters were placed on record before the learned Single Judge of the High Court. It appears that some dispute had been raised by respondent no.1 regarding balance work of construction of C-6 and D-2 numbers of houses at GAIL Vihar Township at Dibiyapur and a letter had been sent by it to appellant no.1 on 16.1.1999. A reply was given on behalf of appellant no.1 to respondent no.1 on 16.2.1999, relevant part of which reads as under :- "Sir, This has reference to your letter vide ref. no.IND.KT.44(6)/99 DATED 16/1/99, we would like to bring to your kind notice that you have not so far informed us the nature of disputes you want to refer for resolution by the Arbitrator. However, in the meantime, we are suggesting you a panel of three persons to select one of them as Sole Arbitrator : 1. Mr. Justice N.N. Goswami Retd. Judge Delhi High Court 2. Dr. Avtar Singh Professor of Law 3. Mr. Harish ....
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....EXTN. B. WORK/97A/95 dated 26.05.95 relating to balance work of Construction of C-6 and D-2 number of houses at GAIL Vihar Township of Dibiyapur and (2) CE/115/AURIAYA/GAIL/GAIL VIHAR ROAD WORK/95 dated 10.2.95 relating to construction of premix bitumen carpeting and repairs of roads in Gail Vihar Colony & Compressor Station. Subsequently, vide your letters dated 5.10.98 in respect of the above work orders, you submitted a panel of three Arbitrators asking us to select one of them to act as Sole Arbitrator on the above two cases. However, we responded to your communications vide our letters dated 16.02.99 and as per the terms of the contract suggested the following panel of three distinguished persons :- 1. Mr. Justice N.N. Goswami (R) Judge Delhi High Court 2. Dr. Avtar Singh, (V) Prof. of Law, IIM, Lucknow. 3. Mr. Harish Chandra, Director General CPWD (Retd.) & Ex-Member, UPSC. You were requested to select any of them to act as Sole Arbitrator. However, no action has been taken by you so far and even the issues which seem to have been resolved by discussions have not been confirmed, keeping the matters pending unnecessarily. During our meetings, we have suggeste....
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....n the earlier panel communicated vide letter dated 16.2.1999 had been reiterated, there was no occasion for respondent no.1 to appoint Brig. Nardip Singh (Retd.) as arbitrator by sending a communication to that effect subsequently on 10.12.1999. The stand of the appellant had been made very clear and explicit by the aforesaid two letters and it was not required to respond again specifically to the letter dated 28.10.1999 sent by respondent no.1 to select an arbitrator from the panel intimated by it. The stand of respondent no.1 to the effect that as the appellant did not respond to its letter dated 28.10.1999, it selected Brig. Nardip Singh (Retd.) by sending a communication on 10.12.1999 is, therefore, wholly unjustified. 12. There is contemporaneous evidence which shows that a number of meetings had taken place between the representatives of appellant no.1 and the representatives of respondent no.1, wherein effort was made to resolve the disputes without reference to arbitration and an understanding had been reached between the parties that unresolved disputes of all the four contracts shall be referred to a sole arbitrator to make the arbitration proceedings quick and cost ef....
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....ns and it was clearly agreed by the parties to refer unresolved disputes of all contracts to a sole arbitrator to make the arbitration proceedings quick and cost effective. We would have expected Keti Constructions to have sent a name from the panel suggested by GAIL in accordance with the spirit of the discussions held and the principles accepted therein for resolution of interse disputes, which have been acted upon as aforesaid. Unfortunately, Keti Constructions has unilaterally sought to nominate your goodself, despite the overwhelming record to the contrary. In this factual background we request you to desist from entering upon the reference or taking any further steps in pursuance to the captioned communication, keeping the cherished values you have maintained in high esteem all through your distinguished career in armed forces. Assuring you of our best attention at all times. Yours faithfully, Sd/- (CH. HARNATH ) SR. DY. MANAGER (LAW) CC to Keti Constructions (I) Ltd. 31/6, Sneh Nagar, Main Road Opposite Sapna Sangeeta Theatre INDORE 452 001 (M.P.)" 13. It may be noted that the four contracts (A), (B), (C) and (D) were awarded on different ....
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....ions in response to your notices. Please take further necessary action." Respondent No.1 has seriously challenged the receipt of the letter dated 31.7.1999 sent by Mr. Sushil Chauhan. It has been urged that the said letter was not sent by registered post and was not received by them. We have, therefore, not taken into consideration the said letter. There is other material on record to show that a panel of three names had already been sent by appellant no.1 to respondent no.1 which was a sufficient compliance of the clause of the agreement. There is neither any such clause in the agreement nor there is any requirement in law that for each of the contract (A), (B), (C) and (D) a separate panel ought to have been sent. The same panel could very well be utilized for resolving the disputes arising out of the four contracts. In fact, as suggested on behalf of the appellant, it would have been more convenient, time saving and economical to have the same person as arbitrator in resolving the disputes between the parties with regard to all the contracts. The view to the contrary taken by the Division Bench of the High Court is clearly erroneous in law. 15. Appellant no.1 sent a communica....
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....greement" shows that the Arbitral Tribunal's authority under Section 16 is not confined to the width of its jurisdiction, but goes to the very root of its jurisdiction and there is no impediment in contending before the Arbitral Tribunal that it had been wrongly constituted. This decision has been partly overruled on another point by a larger bench of 7 learned Judges in S.B.P. & Co. v. Patel Engineering Ltd. (2005) 8 SCC 618, but the aforesaid view has not been dissented from or reversed. This will be evident from the conclusions arrived at by the larger bench which have been summarized in para 47 of the report and sub-para (ix) thereof reads as under :- "In a case where an Arbitral Tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act." 17. It will be useful to take note of the preamble of the Arbitration and Conciliation Act, 1996 which reads as under :- WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model ....
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....oes not have jurisdiction shall be raised not later than in the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the Arbitral Tribunal is exceeding the scope of its authority shall be raised promptly after the Arbitral Tribunal has indicated its intention to decide on the matter alleged to be beyond the scope of its authority. The Arbitral Tribunal may, in either case, admit a later plea if it considers the delay justified. (3) The Arbitral Tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. In either case, a ruling by the Arbitral Tribunal that it has jurisdiction may be contested by any party only in an action for setting aside the arbitral award." The commentary on the three paragraphs of the Model Law has been given under the headings A, B, C and D. Note 1 under heading A and Note 11 under heading D, which are relevant for the controversy in hand, are being reproduced below : "A. "Kompetenz-kompetenz" and separability doctrine, paragraph (1). 1. Article 16 adopts t....