(Taken up through video conferencing)
1. Heard Mr. S.S.Prasad, learned Senior Counsel assisted by Mr. V.V.Ramakrishna – learned counsel for the applicants. Also heard Mr. O.Manoher Reddy, learned counsel for the respondents.
2. This is an application filed by the applicants under Section 11(5) & (6) of the Arbitration and Conciliation Act, 1996 (for short “the Act, 1996”) for appointment of an arbitrator.
3. The applicant No.1 is the father and the applicant Nos.2 and 3 are his sons and the applicant No.1 is the general power of attorney holder of the applicant No.2.
4. The case of the applicants is that they are the absolute owners and possessors of land admeasuring 1877 sq. yards out of 2824 sq. yards along with ACC shed of old municipal ward No.52, present ward No.17, Old Assessment No.26202T/3, New Assessment No.575842, Door No.40-17-192/1H, in RS.No.28/1, situated near Greenlands Hotel, Labbipet, Vijayawada, Krishna District. The above land, which is described in schedule ‘C’, had fallen into the share of the applicant No.1 under a registered deed of partition dated 18.09.2010.
5. In order to develop the property commercially, the applicants were looking for prospective builders and in that context, the respondents had approached the applicants. After detailed discussions and deliberations, a Development Agreement coupled with General Power of Attorney (for short, ‘Agreement’) dated 26.09.2016 came to be executed. Consequent upon the execution of the Agreement, the ‘C’ schedule property was handed over to the respondents. Though the building plan was approved in the month of December, 2016 and, yet, they did not proceed further to start the project. However, the respondents started raising demands for handing over of additional land for a road contrary to the terms and conditions of the Agreement.
6. Thus, a dispute having arisen, a legal notice dated 06.04.2017 was issued by the applicants for referring the dispute to an arbitrator and proposing to appoint Mr.K.V.V.Satyanarayana Murthy, Advocate to resolve the dispute between the parties or to come forward for execution of cancellation of the Agreement. However, the respondents, by reply notice dated 28.04.2017, rejected the name of the arbitrator proposed by the applicants and in turn, proposed to appoint Mr. Doguparthi Murali Krishna Rao, Advocate as arbitrator and also made claims which are not subject matter of the Agreement. Another notice dated 05.08.2017 was issued by the applicants raising claim against the respondents, as against which, a reply was issued by the respondents by rejecting the claim of the applicants as well as the name of arbitrator proposed. One more notice was issued calling upon the respondents to appoint an arbitrator within 30 days from the date of receipt of the notice. The respondents replied back proposing the name of Mr. Doguparthi Murali Krishna Rao, Advocate as arbitrator to resolve the dispute which, however, was not accepted by the applicants.
7. In the backdrop of the aforesaid facts, the present application came to be filed for appointment of an arbitrator.
8. A counter-affidavit was filed on behalf of the respondents.
9. Before the objection taken in the counter-affidavit and the arguments of the learned counsel for the parties are noted, it would be appropriate to extract Clause 20 of the Agreement, based on which this application is filed.
“20. If any dispute arises between the parties hereto on account of this agreement, the same shall be referred to an Arbitrator mutually appointed and the decision of the Arbitrator shall be final and conclusive. If there is no mutual agreement for appointment of the Arbitrator, then the disputes can be resolved by filing civil suits in a competent court of law at Vijayawada jurisdiction.”
10. In the counter-affidavit, it is stated that there was no mutual agreement for appointment of the arbitrator and since there is no consensus with regard to the arbitrator, the application is not maintainable and the applicants have to seek remedy by filing a civil suit and they cannot invoke the provisions under section 11(5) and (6) of the Act, 1996.
11. Mr. S.S.Prasad, learned Senior Counsel contends that in the instant case, the parties initially agreed for appointment of an arbitrator, but they could not come up with a consensus with regard to a particular person to be appointed as the arbitrator. He submits that under Clause 20 of the Agreement, question of filing civil suit will arise only when there is no mutual agreement for appointment of the arbitrator. Accordingly, he submits that as the parties have failed to reach an agreement in the appointment procedure as agreed upon in terms of Clause 20 of the Agreement, this application is maintainable and, therefore, urges this Court to appoint an arbitrator.
12. Mr. O.Manoher Reddy, learned counsel for the respondents, abiding by the stand taken in the counter-affidavit, has submitted that as the arbitrator could not be mutually appointed, this application for appointment of an arbitrator is misconceived, and the applicants, if so desire, may take recourse to filing of a civil suit for redressal of their grievances, if any.
13. I have considered the submissions of learned counsel for the parties and perused the material on record.
14. Section 11 (2) of the Act, 1996 provides that “subject to subsection (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators”. Sub-section (3) provides that “failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.”
15. In the instant case, parties have agreed on the procedure for appointing the sole arbitrator. Clause 20 envisages that the arbitrator shall be mutually appointed. The crucial expression is “shall be referred to an arbitrator mutually appointed”, which, in other words, mean that there should be a mutual agreement with regard to the person who is to act as the arbitrator.
16. Sub-section (6) of Section 11 of the Act, 1996, provides that where, under an appointment procedure agreed upon by the parties,—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
17. In the instant case, the parties failed to reach a mutually agreed name for the purpose of appointment as the arbitrator under the aforesaid procedure for appointment of an arbitrator. It is not a case where there was no mutual agreement for appointment of “the arbitrator”. It is only in the event of there being no agreement for appointment of the arbitrator, a party to the dispute is obligated to file civil suit in a competent court of law. In the instant case, in principle, there is no dispute with regard to appointment of the arbitrator. There is a mutual agreement for appointment of the arbitrator, but the parties failed to reac
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h a mutually agreed name for the purpose of appointment of the arbitrator. 18. In view of the above discussion, I am of the considered opinion that this application is maintainable and, accordingly, I appoint Mr. T.Venugopal Rao, District Judge (Retired), D.No.54-14/2-3B, Plot No.52, R.No.1-A, Srinivasa Nagar, Bank Colony, Vijayawada-520 008, as arbitrator to adjudicate the disputes between the parties. 19. The fee of the arbitrator as well as the other terms and conditions shall be settled by the parties in consultation with the arbitrator so appointed. 20. Registry will send a copy of this order to Mr. T.Venugopal Rao, District Judge (Retired), in his proper address. 21. Accordingly, the Arbitration Application is disposed of. No costs. Pending miscellaneous applications, if any, shall stand closed.