MIS DAKSHIN SHELTERS PVT. LTD.versusGEETA S. JOHARI

                           [2012) 3 S.C.R. 540


A               MIS DAKSHIN SHELTERS PVT. LTD.
                                     v.
                         GEETA S. JOHARI
           (Special Leave Petition (c) No. 33448 of 2011)
                         FEBRUARY
                          ,,      21, 2012
B
              [R.M. LODHA AND H.L. GOKHALE, JJ.]

           Arbitration and Conciliation Act, 1996 - s. 11 -
     Appointment of arbitrator - Agreement between the parties -
C    Disputes arose out of the agreement - Respondent issued
     notice to petitioner invoking arbitration clause in the
     agreement and nominated a former High Court Judge on her
     behalf and called upon the petitioner to nominate its arbitrator
     - Petitioner raised objections - Respondent filed application
D    before High Court for appointment of arbitrator! arbitrators -
     Designate Judge appointed a Sr. Advocate as arbitrator on
    ,behalf of the petitioner- This was opposed by the Petitioner
     - Petitioner submitted that instead, a retired High Court
     Judge, stationed in Hyderabad, may be appointed as
E    arbitrator - Respondent did not agree to substitution of the
     arbitrator appointed by the Designate Judge on behalf of the
     petitioner and further submitted that opportunity was given to
     the petitioner to nominate its arbitrator by notice but it failed
     tb availof the opportunity, and thus ceased to have any right
F    to appoint arbitrator in, terms of the arbitration clause in the
     Agreement - ,Held: From the petitioner's reply to the notice,
     it is clear that it declined to appoint its arbitrator as according
     to it there was no question of appointment of arbitrator by
     either of the parties and there being no arbitral dispute, there
     was no occasion for resolution of dispute as provided in the
G    Agreement - The stance of the petitioner amounted to failure
     on its part to appoint its arbitrator on receipt of the request to
     do so from the respondent - The petitioner's right to appoint
     its arbitrator in terms of the Agreement got extinguished once
                                   540
    DAKSHIN SHELTERS PVT. LTD. v. GEETA S.                  541
                  JOHAR I
it failed to appoint the arbitrator on receipt of the notice - It   A
cannot be said that the Designate Judge committed any e"or
in nominating a Sr. Advocate as an arbitrator on behalf of the
petitioner.

    A Development Agreement-cum-General Power of                    8
Attorney was executed between the parties. Certain
disputes arose out of that agreement. On December 10,
2010, the respondent issued a notice to the petitioner
invoking arbitration clause in the above agreement and
nominated a former Judge of the High Court of Andhra                C
Pradesh on her behalf and called upon the petitioner to
nominate its arbitrator. By reply dated January 10, 2011,
the petitioner raised objections to this request.

    Respondent thereafter invoked Section 11 of the
Arbitration and Conciliation Act,1996 and filed application         D
before the High Court requesting the Chief Justice or the
Designate Judge to appoint ar~itrator/arbitrator5.
     The Designate Judge appoi~ted a Sr. Advocate as an
arbitrator on behalf of the petit¥>ner; This was opposed E
by the Petitioner. The petitioner 'ubmitted that instead of
the senior advocate as appoipted by the designate
Judge, a retired High Court\ Judge, stationed in
Hyderabad, may be appointed i,as arbitrator. Limited
notice was issued to the resp~ndent in this regard
                                                             F
subject to deposit of Rs 1 lakh by the petitioner in the
Registry towards costs. The respondent did not agree to
substitution of the arbitrator appointed by the Designate
Judge on behalf of the petitioner and further submitted
that once an opportunity was given to the petitioner to
nominate its arbitrator by notice dated December 10, 2010 G
and it failed to avail of the opportunity, it ceased to have
any right to appoint the arbitrator in terms of the
arbitration clause in the Development Agreement.
    Dismissing the Special Leave Petition, the Court                H
    542     SUPREME COURT REPORTS               [2012] 3 S.C.R.


A        HELD: 1. On the disputes having (!risen between the
    parties, the notice was sent by the respondent to the
    petitioner on December 10, 2010. The petitioner did
    respond to the above notice within 30 days of its receipt
    by sending its reply on January 10, 2011.Various pieas          1


B were raised in that reply and ultimately, the petitioner
  . responded by stating "it is stated that the question of
    appointment of Arbitrator does not raise.either from your
    side or from our side. There is -no arbitral dispute to be
    decided by the arbitrator." From the above response,· it
c is clear that the petitioner declined to appoint its arbitrator
    as according to it there. was no question of appointment
    of arbitrator by either of the parties and there being no
    arbitral dispute, there was no occasion for resolution of
    dispute as provided in the Development Agreement. The
    stance of the petitioner amounted to failure on its part to
D appoint its arbitrator on receipt of the request to do so
    from the. respondent. In view of the above, it cannot be
    said that the Designate Judge committed a11y error in
    nominating a Sr; Advocate as an arbitrator on behalf of
E the petitioner. [Paras 14, 15, 16 and 17] [547-H; 548-D-G]
                                                    ,_!:

         Union of India vs. Bharat Battery Manufacturing Co. (P)
    Ltd (2007) 7 sec 684 : 2001 (8) SqR 993 - relied on

     National Highways Authority of India and another vs.
F Bumihiway DOB Ltd. (JV) and others (2006) 10 SCC 763 :
    2006 (6) Suppl. SCR 586 - held inapplicable ;

       2. The petitioner's right to appoint its arbitrator in
  terms of clause 25 of the. Development Agreement got
  extinguished once it failed to appoint the arbitrator on
G receipt of the notice dated December 10, 2010. There is
  no merit in the submission ofthe petitioner that the
  Designate Judge ought to have given an opportunity to
  the petitioner to nominate its arbitrator. The impugned
  order does not suffer from any infirmity. The amount of
H
    DAKSHIN SHELTERS PVT. LTD. v. GEETA S.                   543
                  JOHAR I
Rs. One lakh deposited by the petitioner in the Registry            A
of this Court shall be paid to the respondent. [Paras 18,
19] [549-C-D]

                      Case Law Reference:

 2007 (8) SCR 993                relied on         Para 10          B

 2006 (6) Suppl. SCR 586 held inapplicable Para 11
    CIVIL APPELLATE JURISDICTION : SLP (Civil) No.
33448 of 2011.
                                                                    c
     From the Judgment & Order dated 09,09.2011 of the High
Court of Judicature, Andhra Prades~ at Hyderabad in
Arbitration Application No. 41 of 2011, .

    Pallav Shishodia, Annam D.N. ~ao, Neelam .Jain , K.K.           D
Kota for the Petitioner.

,     Shyam Divan, Y. Rajagopala Rao, V. Vismain Rao,
 Hitendra Nath Rath for the Respondent.

   . The Judgment of the Court was delivered by                     E
     R.M. LODHA, J. 1. We have heard Mr. Pallav Shishodia,
learned senior counsel for the petitioner and Mr. Shyam Divan,
learned senior counsel for the respondent.

     2. A Development Agreement~cum-General Power of                F
Attorney (for short "Development Agreemenr) was executed
between the parties on February 7, 2006. Certain disputes
arose out of that agreement. On December 10, 2010, the
respondent issued a notice to the petitioner invoking arbitration
clause in the above agreement and nominated a former Judge          G
of the High Court of Andhra Pradesh"'." Justice P.L.N. Sharma
-on her behalf and called upon the present petitioner to
nominate its arbitrator.

   3. By reply dated January 10, 2011, the petitioner
communicated to the respondent that since the Development           H
    544      SUPREME COURT REPORTS                  [2012] 3 S.C.R.


A Agreement has been cancelled by her, there was no question
  for resolution of disputes between the parties by the Arbitrator.
  The reply sent by the petitioner necessitated the invocation of
  Section 11 ()f the Arbitration and Conciliation Act, 1996 (for
  short "the Act") by the respondent and an application was made
s before the High Court of Andhra Pradesh requesting the Chief
  Justice or the Designate Judge to appoint the arbitrator/
  arbitrators to decide the disputes arising out of the above
  agreement.

C      4. On hearing the parties, the Designate Judge by his
  order dated September 9, 2011 appointed Mr. D.V.
  Seetharama Murthy, Sr. Advocate as an arbitrator on behalf of
  the petitioner (respondent therein). It was further observed in
  the order that the arbitrator nominated by the applicant (present
  respondent) and the arbitrator appointed by the Designate
D Judge on behalf of the petitioner (respondent therein) are
  required to appoint the third arbitrator before entering into
  reference.
                                                           .
                                                           -;,
                                                               ..
        5. The order dated September 9, 2011 is under challenge
E in this Special Leave. Petition.

         6. On December 16, 2011, a limited notice was issued by
    this Court to the respondent. The order issuing notice reads as
    follows:
F         "Mr. Pallav Shishodia, learned senior counsel for the
          petitioner submits that instead of senior advocate, who has
          been appointed as arbitrator by the designate Judge, a
          retired High Court Judge, stationed in Hyderabad, may be
          appointed. He further submits that the petitioner is willing
G         to bear the expenses, if limited notice is issued to the
          respondent.

          Issue notice limited to the above, returnable in five weeks
          subject to deposit of Rs. one lakh by the petitioner In the
          Registry towards costs.
H
    DAKSHIN SHELTERS PVT. LTD. v. GEETA S.                        545
            JOHAR! [R.M. LODHA, J.]
     In the meanwhile, further proceedings before the                     A
     arbitrators shall remain stayed."

     7. In compliance of the above order, the petitioner has
deposited Rs. 1 lakh in the Registry of this Court towards the
costs of the respondent.                                                  B

     8. After service, respondent has entered appearance
through Mr. Y. Rajagopala Rao, advocate-on-record. Mr. Shyam
Divan, learned senior counsel appearing for the respondent, at
the outset, submitted that the respondent was not agreeable
to the substitution of arbitrator appointed by the Designate              C
Judge on behalf of the petitioner.

      9. Mr. Pallav Shishodia, learned senior counsel for the
petitioner vehemently contended that the Designate Judge
ought to have given an opportunity to the petitioner to nominate          D
its arbitrator. He referred to the suit filed by the petitioner against
the respondent challenging the cancellation of the Development
Agreement. He also submitted that the respondent made an
application under Section 8 of the Act but that came to be
dismissed. In backdrop of these facts, Mr. Pallav Shishodia               E
submitted that when the petitioner received the notice dated
December 10, 2012, it was communicated by the petitioner to
the respondent in its reply dated January 10, 2011 that there
was no question for appointment of arbitrator and the disputes
between the parties could not be decided by the arbitrator.
                                                                          F
Learned senior counsel, thus, submitted that the petitioner had
not failed to appoint the arbitrator as contemplated under
Section 11 (4) of the Act.

     10. Mr. Shyam Divan, learned senior counsel for the
respondent, on the other hand, submitted that once an                     G
opportunity was given to the petitioner to nominate its arbitrator
by notice dated December 10, 2010 and it failed to avail of the
opportunity, it ceased to have any right to appoint the arbitrator
in terms of the arbitration clause in the Development
Agreement. In support of his submission, Mr. Shyam Divan                  H
    546       SUPREME COURT REPORTS                   [2012] 3 S.C.R.


A   relied upon the decision of this Court in Union of India vs.
    Bharat Battery Manufacturing Co. (P) Ltd. 1•

          11. Mr. Pallav Shishodia, learned senior counsel for the
  . petitioner, in rejoinder, referred to the decision of this Court in
    National Highways Authority of India and another vs.
8
    Bumihiway DOB Ltd. (JV) and others 2 • He particularly referred
    to paragraphs 37 and 38 of the above decision.

         12. We must immediately observe that the judgment of this
 , Court in National Highways Authority2 relied upon by Mr. Pallav
C Shishodia has no application to the controversy involved in the
   present matter. The main question in National Highways
   Authority2 related to the process of appointment of arbitrator
   to be followed on resignation or termination of mandate of an
   arbitrator and one of the questions framed by this Court for
D determination was whether on resignation of one of the
   arbitrators, the statutory provision that comes into play was
   Section 15(2) or Section 11 (6) of the Act. The other three
   questions noted in para 20 of the Report have also no bearing
   on the question with which we are concerned in the present
E matter.

        13. The arbitration clause in the Development Agreement
    between the parties reads as follows:

          "25: Arbitration:
F
          25.1 Tribunal: Disputes relating to this Agreement or its
          interpretation shall be referred to the arbitration of an
          arbitral tribunal, consisting of three arbitrators (Tribunal),
          one each to be appointed by the parties hereto and the
          third to be appointed by the two arbitrators so appointed.
G
          The award of the Tribunal shall be final and binding on the
          parties. The arbitration proceedings will be held only in

    1.   (2007) 7 sec 684.
H   2.   (2006) 10 sec 763.
    DAKSHIN SHELTERS PVT. LTD. v. GEETA S.                  547
            JOHAR! [R.M. LODHA, J.]

    Secunderabad and the courts situated in the Ranga Reddy        A
    District alone shall have the territorial jurisdiction to
    entertain the dispute. The provisions of Arbitration and
    Conciliation Act shall comply to the arbitration procedures.

    25.2 Powers of Tribunal: The Tribunal shall be at liberty to   8
    (1) proceed summarily (2) avoid all rules, procedures and/
    or evidences that can be lawfully avoided by the mutual
    consent and/or directions by the parties and (3) award
    damages along with the final award against the party not
    complying with any interim award or order passed by the        C
    Tribunal. The Tribunal shall:

           (a) Make the award in English and within four
           months from the date of appointment with the right
           to give extension of not more than one month at a
           time on emergent grounds but the total extensions       D
           shall not be more than four months.

           (b) Conduct the proceedings from day-to-day and
           for about 5 hours per day save for initial sittings.

           (c) Not grant to either of the parties any extension    E
           of time and/or adjournment except on grounds
           beyond their control and only for such periods as
           be of the abosute3 minimum.

           (d) The Tribunal shall be entitled to pass interim      F
           award granting interim relief to the parties.

           25.3 Mechanism and Procedure: The procedure to
           be followed shall be decided by the Tribunal. The
           directions/award of the Tribunal shall be final and     G
           binding on the parties."

    14. On the disputes having arisen between the parties, the
noti~e was sent by the respondent to the petitioner on
December 10, 2010. Paragraph 4 of the said notice reads as
under:                                                             H
    548       SUPREME COURT REPORTS                 [2012] 3 S.C.R.


A         "I do hereby invoke the Arbitration Clause in the agreement
          bearing Doc. No. 2778 of 2006 and appoint Hon'ble Mr.
          Justice P.L.N. Sharma, a retired Judge of A.P. High Court,
          r/o Gandhi Nagar, Hyderabad as arbitrator within a week
          from the date of receipt of this notice to adjudicate all
B         claims, disputes, differences, restitutions, restorations
          whatsoever in law and in equity, in terms of the registered
          Development Agreement cum GPA document registered
          as Doc. No. 2778 of 2006, failing which I shall be
          constrained to initiate appropriate legal action under
c         Section 11 of the Arbitration Act for appointment of
          arbitrator on your behalf as well as you shall be solely
          responsible fro all costs and consequences."

        15. The petitioner did respond to the above notice within
  30 days of its receipt by sending its reply on January 10, 2011.
D Various pleas were raised in that reply and ultimately, the
  petitioner responded by stating "it is stated that the question
  of appointment of Arbitrator does not raise either from your side
  or from our side. There is no arbitral dispute to be decided by
  the arbitrator."
E
        16. From the above response, it is clear that the petitioner
  declined to appoint its arbitrator as according to it there was
  no question of appointment of arbitrator by either of the parties
  and there being no arbitral dispute, there was no occasion for
F resolution of dispute as provided in the Development
  Agreement. The stance of the petitioner amounted to failure on
  its part to appoint its arbitrator on receipt of the request to do
  so from the respondent.
        17. In view of the above, it cannot be said that the
G Designate Judge committed any error in nominating Mr. D.V.
  Seetharama Murthy, Sr. Advocate as an arbitrator on behalf of
  the petitioner. The order of the learned Single Judge is in
  conformity with the decision of this Court in Bharat Battery
  Manufacturing Co. (P) Ltd. 1 wherein this Court stated as
H follows:
    DAKSHIN SHELTERS PVT. LTD. v. GEETA S.                     549
            JOHARI [R.M. LODHA, J.]
     "Once a party files an application under section 11 (6) of       A
     the Act, the other party extinguishes its right to appoint an
     arbitrator in terms of the clause of the agreement
     thereafter. The right to appoint arbitrator under the clause
     of agreement ceases after Section 11 (6) petition has been
     filed by the other party before the Court seeking                B
     appointment of an arbitrator."

      18. The petitioner's right to appoint its arbitrator in terms
of clause 25 of the Development Agreement got extinguished
once it failed to appoint the arbitrator on receipt of the notice     C
dated December 10, 2010. There is no merit in the submission
of the learned senior counsel for the petitioner that the
Designate Judge ought to have given an opportunity to the
petitioner to nominate its arbitrator.

     19. The order impugned in the present Special Leave              D
Petition does not suffer from any infirmity. Special Leave
Petition is, accordingly, dismissed with costs. The amount of
Rs. one lakh deposited by the petitioner in the Registry of this
Court shall be paid to the respondent.
                                                                      E
B.B.B.                       Special Leave Petition dismissed.