(Prayer: Original Petition filed under Section 11(6)(a) & (c) of the Arbitration and Conciliation (Amendment) Act, 2015 read with Rule 2 of Appointment of Arbitrators of Madras High Court Scheme 1996 praying (a) for appointing a Presiding Arbitrator to decide the dispute between the petitioner and the respondent arising out of the claim made by the petitioner to the respondents under the CAR Policy bearing Policy No.71070144170300000001 issued by petitioner Insurance company in favour of the respondent; (b) for the cost of this petition;)
1. This order will now dispose of the captioned 'Arbitration Original Petition' [hereinafter 'Arb OP' for the sake of brevity and convenience].
2. This order is to be read in conjunction with and in continuation of proceedings made by this Court on 23.03.2022 when the captioned Arb OP was listed before this Court in the Admission Board. This 23.03.2022 proceedings of this Court reads as follows:
Proceedings dated 23.03.2022:
1. 'Captioned 'Arbitration Original Petition' [hereinafter 'Arb OP' for the sake of convenience and clarity] has been presented in this Court on 04.03.2022 inter alia under Section 11(6) of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)' [hereinafter 'A and C Act' for the sake of convenience and clarity].
2. Mr.S.R.Sundar, learned counsel for petitioner who is before this Court submits that the captioned Arb OP is predicated on a clause in an agreement between the petitioner and respondent which is in the nature of an Insurance Policy and it is captioned 'CONTRACTORS ALL RISK INSURANCE POLICY'. To be noted, this policy shall hereinafter be referred to as 'primary contract' for the sake of convenience and clarity.
3. Adverting to the petition in captioned Arb OP, more particularly paragraph No.17 thereat, learned counsel submits that the arbitration clause in the primary contract has been extracted and reproduced therein. Paragraph No.17 of petition in captioned Arb OP reads as follows:
'17. The arbitration clause under the terms of the policy is as follows:
If any dispute or difference shall arise as to the quantum to be paid under this Policy (liability being otherwise admitted) such difference shall independently of all other questions be referred to the decision of a sole arbitrator, to be appointed in writing by the parties thereto or, if they cannot agree upon a single arbitrator within 30 days of any party invoking arbitration, the same shall be referred to a panel of three Arbitrators comprising of two Arbitrators - one to be appointed by each of the parties to the dispute/difference, and the third Arbitrator to be appointed by such two Arbitrators and arbitration shall be conducted under and in accordance with the provisions of the Arbitration and Conciliation Act 1996.
It is clearly agreed and understood that no dispute or difference shall be referable to arbitration as hereinbefore provided, if the Company has disputed or not accepted liability under or in respect of this Policy.
It is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this Policy that the award by such Arbitrator/Arbitrators or Umpire of the amount of the loss or damage shall be first obtained.'
4. Learned counsel submits that arbitral disputes erupted between the petitioner and respondent resulting in correspondence but there is a deadlock regarding nomination of arbitrator necessitating the presentation of captioned Arb OP in this Court.
5. Prima facie case for issue of notice made out.
6. Issue notice to respondent returnable in four weeks i.e., returnable by 20.04.2022. Private notice permitted.
7. List on 20.04.2022.'
3. The above proceedings shall be read as an integral part and parcel of this order. The short forms, abbreviations and short references used in the aforementioned earlier proceedings shall continue to be used in the instant order also for the sake of convenience and clarity.
4. Post aforementioned proceedings, notice was issued to lone respondent, lone respondent was duly served and lone respondent Company has entered appearance through a counsel. Thereafter, there were two listings, one on 20.04.2022 and another on 26.04.2022 and the proceedings made by this Section 11 Court on these two listings are as follows:
Proceedings dated 20.04.2022:
1.'Read this in conjunction with and in continuation of earlier proceedings made in the previous listing on 23.03.2022.
2. Mr. S.R. Sundar, learned counsel for petitioner and Mr.K.Shiva, learned counsel for lone respondent are before this Court.
3. To be noted, the lone respondent has been served and Mr.K.Shiva submits that he along with his co-counsel will be filing vakalatnama by tomorrow. Learned counsel for lone respondent requests for a short accommodation to get instructions and revert to this Court including instructions regarding downsizing the 'Arbitral Tribunal' ['AT'] and making it as AT to be constituted by a sole Arbitrator who shall be appointed by this Court in exercise of powers under Section 11 of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)' [hereinafter 'A and C Act' for the sake of convenience and clarity]
4. List on Tuesday i.e., on 26.04.2022.'
Proceedings dated 26.04.2022:
1. 'Read this in conjunction with and in continuation of earlier proceedings made in the previous listing on 20.04.2022.
2. Mr. S.R. Sundar, learned counsel for petitioner is before this Court. Mr.Adarsh Subramanian, learned counsel with address for service at No.20, Madhumalathi, Seethammal Road, Seethammal Colony, Alwarpet, Chennai – 600 018, who is before this Court submits that he has instructions to file vakalatnama on behalf of the lone respondent along with his cocounsel. Learned counsel requests for a short accommodation to get instructions and file vakalatnama. Request acceded to.
3. List on 29.04.2022.'
5. Today, Mr.S.R.Sundar, learned counsel for sole petitioner and Mr.Adarsh Subramanian, learned counsel for lone respondent are before this Court.
6. Adverting to the aforementioned earlier proceedings dated 20.04.2022, learned counsel for respondent submits that the lone respondent is not inclined to consent for downsizing of the 'Arbitral Tribunal' ['AT' for the sake of brevity]. In other words, learned counsel submits that the lone respondent insists that arbitrable disputes that have arisen between the petitioner and respondent should be adjudicated upon by a three member AT as provided for in the arbitration agreement i.e., clause 7 of primary contract. To be noted, clause 7 of primary contract has been extracted and reproduced in paragraph No.17 of captioned Arb OP by petitioner and the same has in turn been extracted and reproduced by this Court in paragraph No.3 of the aforementioned proceedings made in the listing on 23.03.2022. To be noted there is no disputation or contestation about existence of this arbitration agreement as between parties before this Section 11 Court.
7. Learned counsel for respondent also points out that the primary contract has been drafted by the petitioner Insurance Company. It may not be necessary to dilate any further on this as making of an arbitration agreement and constitution of AT more particularly the size of AT are matters that are indisputably in the realm of party Autonomy which is one of the sublime philosophies underlying the A and C Act. In the case on hand, inter alia as the primary contract has admittedly been drafted by the petitioner Insurance Company, considering the facts and circumstances of the case including the nature of the arbitrable disputes that have arisen, this Court deems it appropriate to go by the party Autonomy principle rather than venturing into the exercise of downsizing the AT which is not akin to the legal drill in a Section 11 Court.
8. The above approach is being adopted owing to the limited legal landscape within which a legal drill under Section 11 of A and C Act has to be performed. A legal drill under Section 11 of A and C Act should perambulate within the statutory perimeter sketched by sub-section (6A) thereat, this came up for consideration in oft-quoted Mayavati Trading case law i.e., Mayavati Trading Pvt. Ltd vs Pradyuat Deb Burman reported in (2019) 8 SCC 714, relevant paragraph is paragraph No.10 and the same reads as follows:
'10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgments, as Section 11(6- A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment in Duro Felguera SA.'
(underlining made by this Court to supply emphasis and highlight)
9. Aforementioned paragraph No.10 of Mayavati Trading case law takes this Court to Duro Felguera principle i.e., M/s.Duro Felguera S.A. Vs M/s. Gangavaram Port Limited reported in 2017 (9) SCC 729, relevant paragraphs in Duro Felguera case law are paragraph Nos.47, 59 and the same read as follows:
'47. What is the effect of the change introduced by the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as "the 2015 Amendment") with particular reference to Section 11(6) and the newly added Section 11(6-A) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act") is the crucial question arising for consideration in this case.
59. The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. and Boghara Polyfab. This position continued till the amendment brought about in 2015. After the amendment, all that the Courts need to see is whether an arbitration agreement exists – nothing more, nothing less. The legislative policy and purpose is essentially to minimize the Courts intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected.'
10. To be noted, the above has been mentioned for the limited purpose of highlighting the limited scope of a legal drill under Section 11 of A and C Act.
11. Be that as it may, reverting to the specific facts qua the case on hand, both learned counsel submit that the deadlock is only with regard to appointment of third Arbitrator. It is also to be noted that the expression used in the Arbitration Agreement is 'Third Arbitrator'. However, this Court chooses to use the expression 'Presiding Arbitrator' for the sake of convenience, clarity and specificity. Both learned counsel submit that the petitioner and respondent have nominated a former Hon'ble High Court Judge as their respective nominees. In this regard, a communication dated 05.11.2021 from the respondent to the petitioner and the petitioner's reply to the same dated 17.01.2022 are relevant.
12. Therefore, without dilating on exchange of correspondence preceding the aforementioned two communications are scanned and
13. Both learned counsel submit that it will suffice if
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this Court breaks the deadlock by appointing a Presiding Arbitrator. Therefore, this Court passes the following order: (a) This Court appoints Hon'ble Mr.Justice N.Paul Vasantha Kumar, (retired Former Chief Justice, High Court of Jammu & Kashmir), No.24-A, 2nd Street, Kamaraj Avenue, Adyar, Chennai-600 020, Mobile No.9444390958, Email Id: email@example.com as Presiding Arbitrator; (b) The sequitur to the above (in the light of the narrative thus far supra) is a three Member Arbitral Tribunal is now constituted and the same will be constituted by Hon'ble Justice K.P. Sivasubramaniam (retired Judge of High Court of Judicature at Madras), Hon'ble Mr. Justice N. Paul Vasantha Kumar (retired Former Chief Justice, High Court of Jammu & Kashmir) and Hon'ble Mr. Justice Challa Kodanda Ram (retired High Court Judge of Telangana) with Hon'ble Mr. Justice N. Paul Vasantha Kumar (retired Former Chief Justice, High Court of Jammu & Kashmir) as the Presiding Arbitrator; (c) Hon'ble AT is requested to enter upon reference, adjudicate the arbitrable disputes that have arisen between the parties qua primary contract and render an award; 14. Captioned Arb OP is disposed of in the aforesaid manner. There shall be no order as to costs.