BIPROMASZ BIPRON TRADING SAversusBHARAT ELECTRONICS LIMITED (BEL)

                     [2012] 5 S.C.R. 743


            BIPROMASZ BIPRON TRADING SA                          A
                               v.
          BHARAT ELECTRONICS LIMITED (BEL)
            (Arbitration Petition No. 19 of 2011)
                        MAY 8, 2012
                                                                 B
              [SURINDER SINGH NIJJAR, J.]

      Arbitration and Conciliation Act, 1996: s. 11 (6) -
Appointment of arbitrator - Dispute between parties - Petitioner
filing petition seeking appointment of independent and C
impartial arbitrator - Respondent seeking appointment in
terms of arbitration agreement which stated that in case of
dispute the matter would be arbitrated by the Chairman and
Managing Director (GMO) of the respondent or nominee
appointed by him - Held: The Supreme Court has power to
appoint a person other than the named arbitrator if the
relevant facts indicate that the named arbitrator is not likely
to be impartial - In this case, the petitioner had clearly pleaded
that the named arbitrator is a direct subordinate of the CMD
and employee of the respondent - CMD is the controlling
authority of all the employees, who have been dealing with
the subject matter in the said dispute and also controlling
authority of the named arbitrator - Therefore, it would not be
unreasonable for the petitioner to entertain the plea that the
arbitrator appointed by the respondent would not be impartial
- The CMD itself would not be able to act independently and
impartially being amenable to the directions issued by the
Ministry of Defence - In exercise of powers u/ss. 11 (4) and 11 (6)
read with Para 2 of the Appointment of Arbitrators by the Chief
Justice of India Scheme, 1996, Retired Chief Justice of the
Madras High Cou.rt appointed as the sole arbitrator, to
adjudicate the disputes that have arisen between the parties,
on such terms and conditions as the sole arbitrator deems fit
and proper - The sole arbitrator shall decide all the disputes

                             743
    744      SUPREME COURT REPORTS                 [2012] 5 S.C.R.


A arising between the parties without being influenced by any
    prima facie opinion expressed in this order, with regard to the
    respective claims of the parties.

      BSNL & Ors. v. Subash Chandra Kanchan & Anr. (2006)
B 8 SCC 279: 2006 (6) Suppl. SCR 93; State of Punjab v. Amar
  Singh Harika AIR 1966 SC 1313 - relied on.

      Administrative law: Administrative order -
  Communication of an order - Held: An order passed by
  an authority cannot be :said to take effect unless the
C same is communicated to the party affected - The order
  passed by competent authority or by an appropriate
  authority and kept with itself, could be changed, modified,
  canceled and thus denuding such an order of the
  characteristics of a final order - Such an
D uncommunicated order can neither create any rights in
  favour of a. party nor take away the rights of any affected
  party till it is communicated.

      Laxminarayan R. Bhattad & Ors. v. State of Maharashtra
E & Anr. (2003) 5 SCC 413: 2003 (3) SCR 409; Greater Mohali
  Area Development Authority & Ors. v. Manju Jain & Ors.
  (201 O) 9 sec 157: 201 o (1 O) SCR 134; Indian Oil
  Corporation Limited and Ors. v. Raja Transport Private
  Limited (2009) 8 SCC 520: 2009 (13) SCR 51 O; Dene/
F (Proprietary) Limited v. Bharat Electronics Limited and Anr.
    (2010) 6 sec 394: 2010 (6) SCR 784 - relied on.

        Collector of Central Excise, Madras v. Mis M. M. Rubber
    & Co., Tamil Nadu 1992 Supp.(1} SCC 471: 1991 (3) SCR
    862; Bachhittar Singh v. State of Punjab & Anr. AIR 1963 SC
G 395 - held inapplicable.

         You One Engineering ~~ Construction Co. Ltd. & Anr. v.
    National Highways Authority of India (NHAI) (2006) 4 SCC
    372 - Distinguished.
H
      BIPROMASZ BIPRON TRADING SA v. BHARAT                745
             ELECTRONICS LTD. (BEL)

    Dene/ (Proprietary) Limited v. Ministry of Defence (2012)    A
2 SCC 759; Union of India & Anr. v. MP.Gupta (2004) 10
SCC 504; National Highways Authority of India & Anr. v.
Bumihiway DOB Ltd.(JV) & Ors. (2006) 10 SCC 763: 2006
(6) Suppl. SCR 586; Northern Railway Administration,
Ministry of Railway, New Delhi v. Patel Engineering Company      B
Limited (2008) 10 sec 240: 2008 (12) SCR 216; RITE
Approach Group Ltd. v. Rosoboronexport (2006) 1 SCC 206:
2005 (5) Suppl. SCR 266 - referred to.

                     Case Law Reference:
                                                                 c
  2009 (13) SCR 510          referred to     Para 14
  2010 (6) SCR 784           referred to     Para 14
  (2012) 2 sec 759           referred to     Para 14, 20, 41
                                                                 D
  AIR 1963 SC 395            referred to     Para 17, 25, 30
  2006 (6) Suppl. SCR 93     referred to     Para 17, 26
  AIR 1966 SC 1313           referred to     Para 17, 27
  (2004) 10 sec 504          referred to     Para 18, 34         E
  (2006) 4 sec 372            referred to    Para 18, 34
  2006 (6) Suppl. SCR 586 referred to        Para 18, 36
  2008 (12) SCR 216          referred to     Para 18             F
  2009 (13) SCR 510          referred to     Para 18
  1991 (3) SCR 862           referred to
                                             Para 20,29, 32
  2007 (8) SCR 570           referred to     Para 20, 32         G

  2003 (3) SCR 409           referred to     Para 28
  2010 (10) SCR 134          referred to     Para 28
  2005 (5) Suppl. SCR 266 referred to        Para 37             H
    746      SUPREME COURT REPORTS                  (2012] 5 S.C.R.


A       CIVIL ORIGINAL JURISDICTION : Arbitration Petition No.
    19 of 2011.

        Under Section 11 (6) of the Arbitration and Conciliation Act,
    1996.

B        K.V. Vishwanathan, M.R. Shamshad, Vivek Vishnoi,
    Abhishek Kaushik, Zaki Ahmad Khan, Adeeba Mujahid for the
    Petitioner.

          S.N. Bhat, Ravi Panwar, Poornima for the Respondent.
c         The order of the Court was delivered by

       SURINDER SINGH NIJJAR, J. 1. In this petition, under
  Section 11 (6) of the Arbitration and Conciliation Act, 1996
  (hereinafter referred to as "the Arbitration Act") read with
D paragraphs 2 and 3 of the appointment of the Arbitrators by
  the Chief Justice of India Scheme, 1996, the petitioner seeks
  reference of the disputes to an independent and impartial sole
  Arbitrator. In terms of the! arbitration agreement, the petitioner
  has issued the necessary notice and the respondent has not
E agreed for such appointment of an independent arbitrator.

          2. It appears that the respondent is not opposing the
    petition on the ground that the disputes cannot be referred to
    arbitration. The only objection raised by the respondent is that
F   the disputes have to be re!ferred to the Chairman and Managing
    Director of the respond1mt or his nominee, in terms of the
    arbitration clause 10 of General Terms and Conditions of
    Purchase Order (Foreign). The aforesaid arbitration clause
    reads as under:-

G         "Arbitration - All disputes regarding this order shall be
          referred to B E L Chairman & Managing Director or his
          nominee for arbitration who shall have all the powers
          conferred by the Indian Arbitration & Conciliation Bill 1996
          or any statutory modification thereof in force."
H
    BIPROMASZ Bl PRON TRADING SA v. BHARAT         74 7
ELECTRONICS LTD. (BEL) [SURINDER SINGH NIJJAR, J.]

     3. In view of the above, reference need only be made to          A
the skeletal facts necessary for adjudicating the issues raised
by the parties.

    4. On 6th October, 2008, the respondent issued a
Purchase Order (PO) to the petitioner through which it sought         B
to purchase the materials/goods, namely, Hydraulic Motor,
Actuating Cylinder, EL Motor EDM, Converter and GYRO Unit.

      5. The purchase order was issued along with a printed
 Annexure IV of "General Terms and Conditions of Purchase
 Order (Foreign)". As noticed above, the relevant arbitration         C
clause is contained in the aforesaid general terms and
conditions. The petitioner claims that fifth item, as stated above,
was GYRO Unit EK.2.369.113.CE in 174 Nos. The entire
agreed terms of sale by the petitioner was against 100%
payment through Letter of Credit through the State Bank of            D
 India, Trade Finance CPC, 16, Whannels Road, Egmore,
Chennai, India, to the petitioner and the said Letter of Credit
was to be opened immediately after getting confirmation
regarding readiness of the stock with the petitioner. The GYRO
Unit (174 in Nos.) were to be provided by the petitioner to the       E
respondent as per the aforesaid agreement and the petitioner
took immediate steps to supply the said units to the respondent.
The petitioner made huge investments in that regard and
procured required materials. The specifications of GYRO Units,
as per the specifications, did not stipulate, expressly or            F
impliedly, the type of damping. While the entire process was
going on, the respondent issued a letter dated 5th June, 2009
to the petitioner stating that as per the respondent's directives,
all pending supplies as on that date, from the petitioner were
to be "put on hold" and directed the petitioner not to dispatch       G
any pending items including those for which Letter of Credit had
been established until further communication from the
respondent. After the aforesaid communication, the respondent
did not issue any communication to the petitioner for supply of
the said goods till 3rd December, 20~9. In response to the            H
    748      SUPREME COURT REPORTS                  [2012] 5 S.C.R.


A aforesaid communication, the petitioner sent 1O units of GYRO
  Stabilizers along with the Certificate which was issued by the
  Russian Company (manufacturer) for a lot of 24 units. It appears
  that the respondent, on the basis of the inspection report dated
  17th November, 2009, rejected two GYRO Units (out of total
s 10) on the ground that the same were defective. The defects
  pointed out were that "Turret not moving in 'Auto' mode" and
  "vibration in elevation observed in Turret". The other 8 Units
  were accepted. The petitioner, therefore, called for payment of
  8 accepted GYRO Units and assured the rectification of two
c rejected units. Through the communication dated 28th
  December, 2009, the respondent claimed that the goods
  supplied by the petitioner were not of Russian Origin and,
  therefore, all the 10 GYRO Units supplied by the petitioner were
  rejected. The orders were to be cancelled and no more supply
D of GYRO Units were to bH permitted with electrical damping.
  The petitioner claims that the action of the respondent firstly
  stopping all the supplies of the petitioner and secondly rejecting
  the 10 GYRO Units, subseiquently supplied, is arbitrary, extra
  contractual, illegal and without any basis whatsoever.

E        6. Thei petitioner claims that 10 GYRO Units were rejected
    on the baseless ground that certain corruption cases had come
    to light against certain other companies. The respondent,
    therefore, stopped receiving supply from various companies
    including ttiie petitioner and directly contacted the Russian
F   manufactu.er company and obtained the said units from them
    through another Russian Exporter company to frustrate the
    purchase order of the petitioner. It is claimed that the objection
    taken by the respondent are frivolous and without any basis.

G       7. The petitioner also claims that the order dated 5th June,
  2009 putting on hold the supplies that were to be made by the
  petitioner was issued by the1 Ministry of Defence, under which
  the respondent is a Public Sector Undertaking. The aforesaid
  order was, however, set aside by the Delhi High Court in Writ
H Petition (Civil) No.821 of 2010 by an order dated 11th February,
  2010. Thereafter, inspite of the efforts made by the petitioner,
     BIPROMASZ BIPRON TRADING SAv. BHARAT           749
 ELECTRONICS LTD. (BEL) [SURINDER SINGH NIJJAR, J.]
the respondent did not accept the plea that the purchase order            A
did not contain any specific. express or implied condition for
air damping. The petitioner also offered to supply 50 GYRO
Units with Air damping to maintain good relations. The
respondent, however, issued a letter dated 18th August, 2010
showing interest to accept 50 GYRO Units with Air Damping                 B
with condition that the payment will be made after the
acceptance of the units by the respondent. According to the
petitioner, this was contrary to the terms contained in the
original purchase order. The petitioner, though not obliged as
per the contract, started process of procuring GYRO with air              c
damping but due to the short validity of the Letter of Credit, only
14 such units were supplied and the petitioner had to stop the
procurement of the said unit due to the expiry of the Letter of
Credit. Thereafter, the petitioner has sent a number of
communications to the respondent to which there has been no               D
response, hence, the petitioner claims that number of disputes
which are mentioned in paragraph 14 (a) to (g) have arisen
between the parties.

    8. Vide notice dated 20th May, 2011, the petitioner
requested the respondent to agree on a name of an                         E
independent and impartial sole arbitrator preferably a former
Judge of this Court by mutual consent between the petitioner
and the respondent.

     9. The petitioner claims on the basis of the postal                  F
acknowledgement that the respondent received the aforesaid
notice on or about 23rd May, 2011. The receipt of the notice
has been acknowledged by the respondent by a letter dated
8th June, 2011. On 29th June, 2011, the authorised
representative of the petitioner has sworn the necessary                  G
affidavit in Poland for filing of the present petition after the expiry
of 30 days of the statutory period and the same were
dispatched to the counsel at New Delhi.

   10. In the meantime, the respondent replied by a
communication dated 29th June, 2011 to the notice dated 20th              H
    750     SUPREME COURT REPORTS                    [2012] 5 S.C.R.


A May, 2011, stating that the Chairman-cum-Managing Director
  is a competent person as the petitioner has subscribed the
  contract which states the nominated arbitrator, and hence the
  correspondence between the parties has been placed before
  the Chairman-cum-Managing Director for appropriate action.
B The petitioner claims that the aforesaid reply was received on
  1st July, 2011.

         11. The respondent, in the detailed counter affidavit,
    accepts that certain disputes have arisen with regard to the
C   supply of GYRO Units. It, however, claims that the reference of
    the disputes has to be made to the Chairman-cum-Managing
    Director of the respondent or his nominee for arbitration.
    Therefore, the prayer made in the petition for appointment of a
    sole arbitrator to adjudicate the dispute is contrary to the
    express clause in the contract and thus not maintainable. It is
D   also the case of the mspondent that prior to the filing of the
    petition before this Court, the Chairman-cum-Managing
    Director, as sole arbitrator, has duly acted and exercised the
    power in appointing Mr. R. Chandra Kumar, General Manager
    (Kot), Bharat Electronic:;; Ltd., District Pauri Garhwal, Kotdwara-
E   246149, as the arbitrator and communicated by fax on 19th
    July, 2011 itself. It is denied that merely because the Chairman-
    cum-Managing Director is in control and supervision of the
    respondent Public Se·ctor Undertaking would render him
    ineligible to be appointed as the arbitrator. The respondent
F   having accepted the arbitration clause with open eyes cannot
    be permitted to avoid the same on the ground of perceived
    partiality. The petitioner in the rejoinder has emphasised that
    both the issues raised by the respondent are without any basis.
    The petitioner relies on the facts enumerated in paragraph 4
G   of the rejoinder. It is claimed that the arbitrator had not been
    appointed on 9th July, 2011 as claimed by the petitioner. The
    following facts have been highlighted as under:



H
    BIPROMASZ BIPRON TRADING SA v. BHARAT          751
ELECTRONICS LTO. (BEL) [SURINDER SINGH NIJJAR, J.]

   "20.05.2011 - Notice, through counsel was sent to the            A
                 respondent seeking appointment of Arbitrator.

   29.06.2011 - Petitioner sworn affidavit in Poland for filing
                of the petition for appointment of Arbitrator.

   29.06.2011 - Respondent's sent reply to the advocate at          B
                New Delhi received on 1.7.2011 stating that
                the correspondence is being placed before
                the Chairman and Managing Director.

     Note: Due to the new communication received, the fresh         C
     affidavit was needed and hence petition was with held to
     await fresh affidavit from Poland.

   08.07.2011 - Petitioner sent further Notice to the
                respondent stating that the action shall not be
                                                                    0
                proper.

   21.07.2011 - The present petition seeking the appointment
                of Arbitrator was filed.

   26.07.2011 - Respondent sent email to the counsel of the         E
                petitioner at new attaching the letter of the
                counsel dated 26. 7.2011 along with the letter
                of respondent dated 19.7.2011 stating the
                arbitrator had been appointed. The hard copy
                of the said letter was received by the counsel
                                                                    F
                for the petitioner at New Delhi on 28.7.2011."

     12. The petitioner further claims that no fax was ever sent
by the respondent on 19th July, 2011, as no e-mail or postal
communication was received by the petitioner in Poland in the
whole month of July, 2011. It is further pointed out that neither   G
the said fax nor email was sent to the counsel for the petitioner
before 26th July, 2011. The petitioner further pointed out that a
perusal of the copy of the letter dated 19th July, 2011 sent to
the counsel for the petitioner at New Delhi itself indicates that
the letter was faxed on 25th July, 2011 by MD's Office of the       H
    752         SUPREME COURT REPORTS                [2012] 5 S.C.R.


A   respondent to the concerned person of the respondent to
    communicate further. The petitioner further claims that mere
    passing of the order will not have any relevance as the same
    was not communicated to the petitioner till after the filing of the
    petition.
B
          13. I have heard the learned counsel for the parties.

       14. Mr. Viswanathan, learned senior counsel appearing for
  the petitioner submits that the disputes cannot be referred to
  CMD or his nominee as neither of them would be able to act
C impa1tially. In any event, the petitioner would always be under
  a reasonable apprehension that CMD or his nominee would be
  favorably inclined towards the respondent. He points out that
  CMD has been in control and supervision of the works of the
  respondent and, therefore, cannot be expected to be impartial
D in any dispute between the petitioner and the respondent.
  Similarly, any employee of the respondent would suffer from the
  same disability. In support of the submission, the learned
  counsel has relied on Indian Oil Corporation Limited & Ors.
   Vs. Raja Transport Private Limited 1, Denet (Proprietary)
E Limited Vs. Bharat Electronics Limited & Anr. 2, and Dene/
  (Proprietary) Limited 'Vs. Ministry of Defence 3•

       15. Mr. Viswanathan then submitted that the plea taken by
  the respondent that one Mr. R. Chandra Kumar, the General
F Manager, Bharat Electronics Limited was appointed as the
  sole arbitrator on 19th July, 2011 and communicated by fax on
  that date itself is withciut any basis. He submits that factually
  the aforesaid avermenlt has not been proved. The affidavit filed
  by the respondent is not supported by any document including
  purported appointment letter dated 19th July, 2011. The said
G affidavit is completely silent as to whom the said communication
  was faxed, where it was faxed and what is the proof of same

    1.   c2009) a sec 520.
    2.   (20"1D) 6sec 394.
H 3.     c2012) 2 sec 759.
     BIPROMASZ BIPRON TRADING SA v. BHARAT          753
 ELECTRONICS LTD. (BEL) [SURINDER SINGH NIJJAR, J.]
having been faxed. He further submits that, in fact, the said        A
communication was sent to the advocate for the petitioner on
e-mail on 26th July, 2011, attaching the letter of counsel which
was also dated 26th July, 2011. Prior to that, no communication
had been received by the petitioner or his counsel either by fax
or otherwise stating that the arbitrator had been appointed. He      B
emphasised that even the aforesaid appointment letter
purportedly signed on 19th July, 2011 shows that it was faxed
from Bangalore Office only on 25th July, 2011 to their Solicitor
who in turn further communicated to the counsel for the
petitioner on 26th July, 2011. Therefore, according to Mr.           c
Viswanathan, it is unbelievable that the communication
released from Bangalore office (Head quarter where the
Chairman sits) could have been conveyed to the petitioner on
19th July, 2011, though the communication states "CC" to the
petitioner but it was never sent to the petitioner. The aforesaid    0
communication was sent by the Solicitor of the respondent. to
the petitioner's counsel on e-mail on 26th July, 2011 and
thereafter by way of postal communication. He, therefore,
submits that even if it is assumed that the aforesaid letter was
signed on 19th July, 2011, but it was certainly not
communicated till after the filing of the present petition,          E
therefore, the same would have no legal sanctity.

     16. In support of the submission, the petitioner relies on
Section 3(2) of the Arbitration Act, 1996 which provides that
"The communication is deemed to have been received on the            F
day it is so delivered". He submits that without delivery of the
communication dated 19th July, 2011, the same shall be of no
effect.

     17. Mr. Viswanathan further submits that apart from the         G
Arbitration Act, as a general principle of law, it is settled that
an order takes effect only when it is served on the person
affected. In support of this submission, learned counsel relied
on in the case of Bachhittar Singh Vs. State of Punjab & Anr. 4
4.   AIR 1963 SC 395.                                                H
    754       SUPREME COURT REPORTS               [2012] 5 S.C.R.


A   and BSNL & Ors. Vs. Subash Chandra Kanchan & Anr. 5 and
    State of Punjab Vs. Amar Singh Harika 6 . On the basis of the
    above, he submits that tl1e petition deserves to be allowed and
    the matter be referred to an independent and impartial
    arbitrator.
B
       18. On the other hand, Mr. Bhat, learned counsel appearing
  for the respondent has submitted that the petitioner having
  agreed to the provisions of arbitration contained in Clause 10
  of the general conditions cannot now be permitted to turn
  around and contend that someone else has to be appointed
C as an arbitrator, thus giving a go-by to the arbitration
  agreement. He submits that it is well settled that once the
  parties have agreed upon a named arbitrator, the parties
  cannot resile therefrom. In support of the submission, he relied
  on the judgment of this Court in the cases of Union of India &
D Anr. Vs. M.P. Gupta 7, You One Engineering & Construction
  Co. Ltd. & Anr. Vs. Nc.1tional Highways Authority of India
  (NHAl)8, National Highways Authority of India & Anr. Vs.
  Bumihiway DOB Ltd. (JV) & Ors 9, Northern Railway
  Administration, Ministry of Railway, New Delhi Vs. Patel
E Engineering Company Limited10 and Indian Oil Corporation
  Limited & Ors. Vs. Raja Transport Private Limited11 .

       19. He further submits that the present petition is not
  maintainable as even prior to the filing of the petition, the
F Chairman-cum-Manag~ng Director had duly acted and
  exercised his powers and had appointed Mr. R. Chandra
  Kumar, General Manager (Kot) as the arbitrator. It is his claim
  that the .appointment wa!; made on 19th July, 2011 and the
    5.   (2006) 8 sec 279.
G 6. AIR 1966 SC 1313.
    1.   (2004) 10 sec 504.
    8.   c2006) 4 sec 372.
    9.   (2006) 10 sec 763.
    10. (2008) 10 sec 240.
H 11. (2009) s sec s20.
     BIPROMASZ BIPRON TRADING SAv. BHARAT           755
 ELECTRONICS LTD. (BEL) [SURINDER SINGH NIJJAR, J.]
same was duly communicated by fax on 19th July, 2011 itself         A
to the petitioner.

      20. Mr. Bhat further submits that the order of the Managing
Director came into force from the moment it was signed on 19th
July, 2011. In support of this submission, he relies on the         B
judgment of this Court in the case of Collector of Central
Excise, Madras Vs. Mis M.M. Rubber & Co., Tamil Nadu 12•
According to the learned counsel, the aforesaid principle has
been reiterated by this Court in Municipal Corporation of Delhi
 Vs. Qimat Rai Gupta & Ors. 13 On the issue of perceived            C
partiality of the CMD or his nominee, Mr. Bhat submits that the
petitioner cannot rely on the judgment of this Court in Dene/
(Proprietary) Limited (supra). The facts in the aforesaid case
were different from the facts in the present case inasmuch as
in Dene/ case (supra) this Court has directed the appointment
of an independent arbitrator only on the ground that there was      D
certain directions issued by the Ministry of Defence,
Government of India and as such the Managing Director of BEL
may not be in a position to independently decide the dispute
between the parties. He further submits that in the event this
Court accepts the submission of the petitioner then Chairman        E
and Managing Director of any other Public Sector Undertaking,
for example, Hindustan Aeronautics Limited or Bharat Earth
Movers Ltd. may be appointed to arbitrate the dispute.

     21. I have considered the submissions made by the              F
learned counsel for the parties.

    22. The first issue which needs to be addressed is as to
whether the present petition is maintainable in view of the claim
made by the respondent that Mr. R. Chandra Kumar had been
appointed as the Sole Arbitrator on 19th July, 2011.                G

     23. I am of the considered opinion that the aforesaid

12. 1992 Supp.(1) sec 471.
13. c2007) 7 sec 309.                                               H
    756       SUPREME COURT REPORTS                 [2012] 5 S.C.R.


A   submission of Mr. Bhat can not be accepted in view of the
    provision contained in SHction 3(2) of the Arbitration Act.
    Section 3 of the Act provides for different modes in which any
    written communication is deemed to have been received.
    Section 3(2) specifically provides as under:-
B
          "The communication is deemed to have been received on
          the day it is so delivered."

       24. In view of the aforesaid provision even if the order
  appointing the Sole Arbitrator, Mr. R. Chandra Kumar, was
C made on 19th July, 2011, it would be deemed to be received
  only on the day it is delivered.

         25. Apart from the aforesaid statutory provision, it is also
    settled that an official order takes effect only when it is served
0   on the person affected. In the case of Bachhittar Singh Vs.
    State of Punjab & Anr. {supra), this Court has clearly
    enunciated the Principle of Law in the following words:-

          "Th us it is of the essence that the order has to be
          communicated to the person who would be affected by that
E         order before the State and that person can be bound by
          that order. For, until the order is communicated to the
          person affected by it, it would be open to the Council of
          Ministers to consider the matter over and over again and,
          therefore, till its communication the order cannot be
F         regarded as anything more than provisional in character."

       26. Similarly, in this case until the order was
  communicated to the petitioner, the Chairman-cum-Managing
  Director would have been at liberty to reconsider the matter and
G thus rendering the order only provisional in character. Similar
  question arose before this Court in the case of BSNL & Ors.
  Vs. Subash Chandra Kanchan & Anr. (supra) wherein it has
  been clearly observed as under:-

          "12. Evidently, the Mana!~ing Director of the appellant was
H         served with a notice on 7-1-2002. The letter appointing the
     BIPROMASZ BIPRON TRADING SA v. BHARAT          757
 ELECTRONICS LTD. (BEL) [SURINDER SINGH NIJJAR, J.]

     arbitrator was communicated to the respondent on 7-2-             A
     2002. By that time, 30 days' period contemplated under
     the Act lapsed. The Managing Director of the appellant
     was required to communicate his decision in terms of
     clause 25 of the contract."
                                                                       B
     27. In reaching the aforesaid conclusion, this Court relied
on earlier judgment rendered in the case of State of Punjab
Vs. Amar Singh Harika (supra), wherein this Court has held
as follows:-

     "The first question which has been raised before us by Mr.        C
     Bishan Narain is that though the respondent came to know
     about the order of his dismissal for the first time on the 28th
     May 1951, the said order must be deemed to have taken
     effect as from the 3rd June 1949 when it was actually
     passed. The High Court has rejected this contention; but          D
     Mr. Bishan Narain contends that the view taken by the High
     Court is erroneous in law. We are not impressed by Mr.
     Bishan Narain's argument. It is plain that the mere
     passing of an order of dismissal would not be effective
     unless it is published and communicated to the officer            E
     concerned. If the appointing authority passed an order of
     dismissal, but does not communicate it to the officer
     concerned, theoretically it is possible that unlike in the case
     of a judicial order pronounced in Court, the authority may
     change its mind and decide to modify its order."                  F

     28. The aforesaid observations make it clear that an order
passed by an authority can not be said to take effect unless
the same is communicated to the party affected. The order
passed by a competent authority or by an appropriate authority
and kept with itself, could be changed, modified, cancelled and        G
thus denuding such an order of the characteristics of a final
order. Such an uncommunicated order can neither create any
rights in favour of a party, nor take away the rights of any
affected party, till it is communicated. The aforesaid proposition
has been reiterated in the case of Laxminarayan R. Bhattad             H
    758      SUPREME COUl~T REPORTS                [2012] 5 S.C.R.


A & Ors. Vs. State of Maharashtra & Anr. 14 , wherein it has been
  held that "it is now well known that a right created under an order
  of a statutory authority must be communicated so as to confer
  an enforceable right." Similar view has been reiterated in
  Greater Mohali Area Development Authority & Ors. Vs. Manju
B Jain & Or.s. 15, wherein it is observed as follows:-

          "24. Thus, in view of the above, it can be held that if an
          order is passed but not communicated to the party
          concerned, it does not create any legal right which can be
          enforced through the court of law, as it does not become
c         effective till it is communicated."

       29. Mr. Bhat on the contrary relied on the judgment of this
  Court in the case of Collector of Central Excise, Madras Vs.
  Mis M.M. Rubber & Co., Tamil Nadu (supra) and submitted
D that the order of the Mana1~ing Director came into force from
  the moment it was signed on 19th July, 2011. In Paragraph 12
  of the aforesaid judgment, it is observed as follows:-

          "12. It may be seen therefore, that, if an authority is
          authorised to exercise a power or do an act affecting the
E
          rights of parties, he shall exercise that power within the
          period of limitation prescribed therefor. The order or
          decision of such authority comes into force or becomes
          operative or becomes an effective order or decision on
          and from the date when it is signed by him. The date of
F         such order or decision is the date on which the order or
          decision was passed or made : that is to say when he
          ceases to have any authority to tear it off and draft a
          different order and when he ceases to have any locus
          paetentiae. Normally that happens when the order or
G         decision is made public or notified in some form or when
          it can be said to have left his hand. The date of
          communication of the order to the party whose rights are

    14. (2003) 5 sec 413.
H   15. (2010) g sec 157.
    BIPROMASZ BIPRON TRADING SA v. BHARAT          759
ELECTRONICS LTD. (BEL) [SURINDER SINGH NJJJAR, J.]

     affected is not the relevant date for purposes of              A
     determining whether the power has been exercised within
     the prescribed time."

      30. In my opinion, the aforesaid observations do not
deviate from the observations made by this Court in Bachhittar      B
Singh's case (supra) and reiterated consistently thereafter by
this Court. The observations herein were made with regard to
the exercise of power by the competent authority with regard
to determination of the date from which the period of limitation
was to be calculated to make an appeal. In that case, an order      C
in favour of the respondent was passed by the Collector of
Central Excise, as an adjudicating authority on 28th November,
1984. Its copy was supplied to the respondent on 21st
December, 1984. The Central Board of Excise and Customs,
however, in exercise of its powers under Section 35-e(1)
directed the Collector on 11th December, 1985 to make an            D
appeal to the Customs, Excise Board (Control) Appellate
Tribunal against this order. The point at issue was whether
limitation under Section 35-e(3) of the Central Excise and Salt
Act, 1944 for the order of the Board under Section 35-e(1)
commenced from 28th November, 1984 or 21st December,                E
1984. The Appellate Tribunal rejected the Collector's application
on the ground that it was beyond limitation period of one year
commencing from 28th November, 1984. The aforesaid
decision of the Appellate Tribunal was upheld by this Court with
the observations made in Paragraph 12 above (supra).                F
However, the aforesaid observation can not be read divorced
from the observations made in Paragraph 13 and 18, which are
as under:-

    "13. So far as the party who is affected by the order or        G
    decision for seeking his remedies against the same, he
    should be made aware of passing of such order. Therefore
    courts have uniformly laid down as a rule of law that for
    seeking the remedy the limitation starts from the date on
    which the order was communicated to him or the date on          H
    760       SUPREME COURT REPORTS                   (2012] 5 S.C.R.


A         which it was pronounced or published under such
          circumstances that the parties affected by it have a
          reasonable opportunity of knowing of passing of the order
          and what it contains . The knowledge of the party affected
          by such a decision, E~ither actual or constructive is thus an
B         essential element which must be satisfied before the
          decision can be said to have been concluded and binding
          on him. Otherwise the party affected by it will have no
          means of obeying the order or acting in conformity with it
          or of appealing against it or otherwise having it set aside.
c         This is based upon, as observed by Rajmannar, C.J. in
          Muthia Chettiar v. CIT "a salutary and just principle". The
          application of this rule so far as the aggrieved party is
          concerned is not dependent on the provisions of the
          particular statute, but it is so under the general law.
D         18. Thus if the intention or design of the statutory provision
          was to protect the interest of the person adversely affected,
          by providing a remedy against the order or decision any
          period of limitation prescribed with reference to invoking
          such remedy shall be read as commencing from the date
E         of communication of the order. But if it is a limitation for a
          competent authority to make an order the date of exercise
          of that power and in the case of exercise of suo moto
          power over the subordinate authorities' orders, the date on
          which such power was exercised by making an order are
F         the relevant dates for determining the limitation. The ratio
          of this distinction may also be founded on the principle that
          the government is bound by the proceedings of its officers
          but persons affected are not concluded by the decision."

G       31. From the above, it becomes evident that the order
  dated 19th July, 2011 would be binding on the Chairman-cum-
  Managing Director for the purposes of working out the
  limitation, but so far as the petitioner is concerned, the relevant
  date would be the date when the order is communicated to the
H petitioner. The order made by a Statutory Authority or an Officer
    BIPROMASZ BJPRON TRADING SA v. BHARAT          761
ELECTRONICS LTD. (BEL) [SURINDER SINGH NIJJAR, J.]
exercising the powers of that Authority comes into force so far    A
as the Authority Officer is concerned, from the date it is made
by the concerned Authority Officer. But, so far as the affected
party is concerned, the order made by the Appropriate Authority
would be the date on which it is communicated. In my opinion,
Section 3(2) of the Arbitration and Conciliation Act, 1996, is a   B
mere reiteration of the aforesaid general principle of Jaw.

      32. In view of the above, I am of the considered opinion
that the reliance placed on the aforesaid judgment by Mr. Bhat
is misplaced. In my opinion, the reliance placed by Mr. Bhat
on the judgment in Municipal Corporation of Delhi (supra) is       C
also misplaced as therein the Court has reiterated the principle
laid down in Collector of Central Excise, Madras (supra); by
observing as follows:-

    "26. A distinction, thus, exists in the construction of the    D
    word "made" depending upon the question as to whether
    the power was required to be exercised within the period
    of limitation prescribed therefor or in order to provide the
    person aggrieved to avail remedies if he is aggrieved
    thereby or dissatisfied therewith. Ordinarily, the words       ·E
    "given" and "made" carry the same meaning.

     27. An order passed by a competent authority dismissing
a government servant from services requires communication
thereof as has been held in State of Punjab v. Amar Singh
Harika 11 but an order placing a government servant on             F
suspension does not require communication of that order. (See
State of Punjab v. Khemi Ram 12 .) What is, therefore,
necessary to be borne in mind is the knowledge leading to the
making of the order. An order ordinarily would be presumed to
have been made when it is signed. Once it is signed and an         G
entry in that regard is made in the requisite register kept and
maintained in terms of the provisions of a statute, the same
cannot be changed or altered. It subject to the other provisions
contained in the Act, attains finality. Where, however,
communication of an order is a necessary ingredient for            H
    762      SUPREME COURT REPORTS                  [2012] 5 S.C.R.


A bringing an end result to a status or to provide a person an
  opportunity to take recou1rse to law if he is aggrieved thereby,
  the order is required to be communicated."

    These observations, in my opinion, do not support the
    submissions made by Mr. Bhat.
8
          33. Keeping in view the aforesaid principle of law, the fact
  situation with regard to the making and the communication of
  the order dated 19th July, 2011 can now be examined. Even
  though the respondent claims that the order was sent by fax on
C 19th July, 2011, there is clear denial of the same by the
  petitioner. Prima facie, it would appear that even though the
  order may have been made on 19th July, 2011, it was served
  for the first time on the counsel of the petitioner by e-mail on
  26th July, 2011. Therefori3, prima facie, it would not be possible
D to accept the submission of Mr. Bhat that the petition would not
  be maintainable on the fJround that the arbitrator had already
  been appointed at the time when the present petition was filed.
  The issue needs to be decided on the basis of the evidence
  produced by the parties, at the appropriate time.
E
         34. I am also not much impressed by the submission made
   by Mr. Bhat that this Court is bound to appoint the Chairman-
   cum-Managing Director or its nominee as the arbitrator in view
  of the arbitration clause. However, it is necessary to consider
  the judgments relied upon by Mr. Bhat. In the case of Union of
F India & Anr. Vs. MP.Gupta (supra), this Court observed that
   in view of the express provision contained in the arbitration
  clause that two Gazetted Railway Officers shall be appointed
  as arbitrators; a Former Judge of the Delhi High Court can not
  be appointed as the Sole Arbitrator. It must be noticed here
G that in the aforesaid case, no facts have been pleaded in
  justification of the plea for the appointment of an independent
  arbitrator in spite of the arbitration clause. In You One
  Engineering & Construction Co. Ltd. & Anr. Vs. National
  Highways Authority of India (NHAI) (supra), Justice B.N.
H
    BIPROMASZ BIPRON TRADING SA v. BHARAT          763
ELECTRONICS LTD. (BEL) [SURINDER SINGH NIJJAR, J.]

Srikrishna, sitting as a Chamber Judge in a petition under           A
Section 11 (6) has observed as follows:-

     "10. In my view, the contention has no merit. The arbitration
     agreement clearly envisages the appointment of the
     presiding arbitrator by IRC. There is no qualification that     8
     the arbitrator has to be a different person depending on
     the nature of the dispute. If the parties have entered into
     such an agreement with open eyes, it is not open to ignore
     it and invoke exercise of powers in Section 11(6)."

     35. In this matter also, there was no plea that the Arbitral    C
Tribunal constituted under the arbitration clause was likely to
be favorably inclined towards the respondent. This Court has
merely reiterated the legal position that in normal
circumstances, arbitrator has to be appointed in terms of the
agreement of the parties contained in the arbitration clause.        D

      36. In the case of National Highways Authority of India &
Anr. Vs. Bumihiway DOB Ltd.(JV) & Ors. (supra), the question
which was before this Court was again as to whether a
presiding arbitrator could be appointed beyond the scope of          E
the arbitration clause, by the High Court in a petition under
Section 11 (6). It was submitted on behalf of the appellant that
when the arbitration agreement clearly envisages the
appointment of the presiding officer by the IRC and there is no
specification that the arbitrator has to be different person
                                                                     F
depending on the nature of the dispute, it is not open to ignore
it and invoke the exercise of power under Section 11 (6) of the
Act. It was also submitted that the High Court was not justified
in referring to the principle of hierarchy and ignoring the
express contractual provision for appointment of the presiding
arbitrator. Upon consideration of the rival submissions, this        G
Court considered the questions of law which had arisen. The
relevant question for the purposes of this case is "Whether an
arbitration clause, which is a sacrosanct clause, can be
rewritten by appointment of a judicial arbitrator when no
qualification therefor is provided in the agreement?"                H
    764       SUPREME COURT REPORTS                   [2012) 5 S.C.R.


A      37. The answer to the aforesaid question was in the
  negative. It was held that the appointment made by the High
  Court was beyond the arbitration agreement which clearly
  envisages the appointment of the presiding arbitrator by IRC,
  there is no qualification that the arbitrator has to be a different
B person depending on the nature of the dispute. It was
  emphasised that "if the parties have entered into such an
  agreement with open eyes, it is not open to ignore it and invoke
  exercise of the powers in Section 11 (6)." The observations
  made by this Court in RITE Approach Group Ltd. Vs.
c Rosoboronexporl 16, were reiterated, wherein this Court has
  clearly held that :-

          "In view of the specific provision contained in the
          'agreement specifying the jurisdiction of the court to decide
          the matter, this Court cannot assume the jurisdiction, and
D         hence, whenever there is a specific clause conferring
          jurisdiction on a particular court to decide the matter, then
          it automatically ou:;ts the jurisdiction of the other court."

          38. In Northern Railway Administration, Ministry of
E Railway, New Delhi Vs. Patel Engineering Company Limited
  (supra}, a three Judge bench of this Court reiterated the general
  principle as noticed in the judgments relied upon by Mr. Bhat.
  At the same time, it is emphasised that in exercise of its
  powers under Section 11 (6} of the Act, the Court has to take
F into consideration the provision contained in Section 11(8) of
  the Act. The aforesaid provision requires that the Chief Justice
  or the person or an institution designated by him in appointing
  an arbitrator shall have due regard to any qualifications required
  of the arbitrator by the agreement of the parties and other
G considerations as are likely to secure the appointment of an
  independent and impartial arbitrator. It is also observed that a
  bare reading of the Scheme of Section 11 shows that the
  emphasis is on the term of the agreement being adhere to and
  /or give effect to as closely as possible. But it is not mandatory
H   16. (2006) 1 sec 206.
          BIPROMASZ BIPRON TRADING SAv. BHARAT           765
      ELECTRONICS LTD. (BEL) [SURINDER SINGH NIJJAR, J.]

      for the Chief Justice or any person or institution designated by    A
      him to appoint the named arbitrator or arbitrators. But at the
      same time, due regard has to be given to the qualifications
      required by the agreement and other considerations.

            39. In Indian Oil Corporation Limited & Ors. Vs. Raja         B
      Transport Private Limited (supra), this Court whilst
      emphasizing that normally the Court shall make the appointment
      in terms of the agreed procedure, has observed that the Chief
      Justice or his designate may deviate from the same after
      recording reasons for the same. In Paragraph 45 of the              C
      aforesaid judgment, it is observed as follows:-

          "45. If the arbitration agreement provides for arbitration by
          a named arbitrator, the courts should normally give effect
          to the provisions of the arbitration agreement. But as
          clarified by Northern Railway Admn., where there is             D
          material to create a reasonable apprehension that the
          person mentioned in the arbitration agreement as the
          arbitrator is not likely to act independently or impartially,
          or if the named person is not available, then the Chief
          Justice or his designate may, after recording reasons for       E
          not following the agreed procedure of referring the dispute
...
          to the named arbitrator, appoint an independent arbitrator
          in accordance with Section 11 (8) of the Act. In other words,
          referring the disputes to the named arbitrator shall be the
          rule. The Chief Justice or his designate will have to merely    F
          reiterate the arbitration agreement by referring the parties
          to the named arbitrator or named Arbitral Tribunal. Ignoring
          the named arbitrator/Arbitral Tribunal and nominating an
          independent arbitrator shall be the exception to the rule,
          to be resorted for valid reasons."
                                                                          G
           40. In view of the aforesaid observations, it would not be
      possible to reject the petition merely on the ground that this
      Court would have no power to make an appointment of an
      arbitrator other than the Chairman-cum-Managing Director or
      his designate. This Court would have the power to appoint a         H
    766      SUPREME COURT REPORTS                   [2012] 5 S.C.R.


A person other than the named arbitrator, upon examination of
  the relevant facts, which would tend to indicate that the named
  arbitrator is not likely to be impartial. In this case, the petitioner
  had clearly pleaded that the named arbitrator is a direct
  subordinate of the CMD and employee of the respondent. CMD
B is the controlling authority of all the employees, who have been
  dealing with the subject matter in the present dispute and also
  controlling authority of the named arbitrator. Apprehending that
  the CMD, who had been dealing with the entire contract would
  not act impartially as an arbitrator, the petitioner had issued a
c notice on 20th May, 2011. In this notice, it was pointed out that
  while the entire process of the performance of the contract was
  going on, the CMD had issued a letter on 5th June, 2009 to
  the petitioner stating that as per the company's directives, all
  pending supplies as on that date were "put on hold". After the
0 aforesaid communication, no communication was issued to the
  petitioner for supply of the goods as per the Purchase Order
  dated 3rd December, 2009. Even subsequently, there were
  difficulties when a further lot of 24 units were supplied. The
  detailed submissions made by the petitioner have been noticed
E in the earlier part of the judgment.

       41. Keeping in view the aforesaid facts, I am of the opinion
  that it would not be unreasonable for the petitioner to entertain
  the plea that the arbitrator appointed by the respondent would
  not be impartial. The CMD itself would not be able to act
F independently and impartially being amenable to the directions
  issued by the Ministry of Defence. In similar circumstances, this
  Court in the case of Denet (Proprietary) Limited Vs. Bharat
  Electronics Limited & Anr. (supra), this Court observed as
  follows:-
G
          "21. However, considering the peculiar conditions in the
          present case, whereby the arbitrator sought to be
          appointed under the arbitration clause, is the Managing
          Director of the Company against whom the dispute is
          raised (the respondents). In addition to that, the said
H
    BIPROMASZ BIPRON TRADING SA v. BHARAT          767
ELECTRONICS LTD. (BEL) [SURINDER SINGH NIJJAR, J.]

       Managing Director of Bharat Electronics Ltd. which is a          A
       "government company", is also bound by the direction/
       instruction issued by his superior authorities. It is also the
       case of the respondent in the reply to the notice issued by
       the respondent, though it is liable to pay the amount due
       under the purchase orders, it is not in a position to settle     B
       the dues only because of the directions issued by the
       Ministry of Defence, Government of India. It only shows that
       the Managing Director may not be in a position to
       independently decide the dispute between the parties."

    42. In my opinion, the facts in the present case are similar
                                                                        c
and, therefore, a similar course needs to be adopted.

     43. In exercise of my powers under Sections 11 (4) and
11 (6) of the Arbitration and Conciliation Act, 1996 read with
Para 2 of the Appointment of Arbitrators by the Chief Justice           D
of India Scheme, 1996, I hereby appoint Hon'ble Mr. Justice
Ashok C. Agarwal, Retired Chief Justice of the Madras High
Court, r/o No. 20, Usha Kiran, 2nd Pasta Lane, Colaba, Mumbai
400 005, as the sole arbitrator, to adjudicate the disputes that
have arisen between t.he parties, on such terms and conditions          E
as the learned sole arbitrator deems fit and proper.
Undoubtedly, the learned sole arbitrator shall decide all the
disputes arising between the parties without being influenced
by any prima facie opinion expressed in this order, with regard
to the respective claims of the parties.                                F
     44. The Registry is directed to communicate this order to
the sole arbitrator forthwith to enable him to enter upon the
reference and decide the matter as expeditiously as possible.

       45. The Arbitration Petition is accordingly disposed of.         G

D.G.                             Arbitration petition disposed of.