Ali Mohd. Magrey ORDER
Ali Mohd. Magrey, J.
1. Since similar question of facts and law are raised in these applications, filed under Section 11(6) of the J & K Arbitration and Conciliation Act, 1997 (hereinafter referred to as "The Act"), coupled with similar relief sought for, as such, it shall be appropriate to decide all these applications by way of a common order.
2. The applicants have filed these applications before this Court for the appointment of a sole Arbitrator under Section 11(6) of the Act, pursuant to the 'Arbitration Clause' between the parties contained in the 'Contract Agreement'-Supply Order No. SIMS 324 13 2006 (Eq)-1690-94 dated 20th of July, 2006, issued by the Respondent to the applicants for the supply/installation/testing/commissioning and handing over of a High Frequency Digital X-Ray with Image Intensifier (the X-Ray Machine).
3. The facts leading to the filing of these applications, briefly and as stated by the applicants, are that the applicants herein are leading suppliers of medical imaging equipment, e.g. computed tomography and magnetic resonance imaging systems-and leaders in laboratory diagnostics as well as clinical IT. The respondent-Sher-i-Kashmir Institute of Medical Sciences (SKIMS), is a deemed University and a medical Centre located in the State of Jammu and Kashmir. On 10th of March, 2006, the respondent-SKIMS floated a tender for the supply/installation/testing and commissioning of, inter alia, a Digital High Frequency 500,800 and 1000 MA X-ray machine with image intensifier. The applicants submitted their bid in relation to the X-Ray Machine on 11th of May, 2006, which was declared successful and, accordingly, the contract for the supply/installation/testing and commissioning of the aforesaid equipment was awarded in favour of the applicants by way of supply order No. SIMS 324 13 2006(Eq) 1690-94 dated 20th of July, 2006. The applicants successfully completed the allotted works in terms of the supply order aforesaid and, as of June, 2007, i.e. the date when the equipment was handed over to the respondent-SKIMS, almost 400 patients had been scanned on the X-Ray Machine on a trial basis. It is stated that despite the applicants having completed their obligations under the supply order, the respondent-SKIMS failed to issue a Civil Completion Report, which constrained the applicants to raise an invoice dated 15th of October, 2009, in relation to the payments outstanding as regards the works undertaken by the applicants under the supply order for an amount of Rs. 4,77,460/-. On 21st of October, 2009, the applicants represented to the respondent-SKIMS to inspect the site where the equipment had been installed so that outstanding payments could be released in their favour. Thereafter, the applicants submitted several letters before the respondent-SKIMS requesting therein that the above outstanding amounts be released. On 20th of November, 2012, a site inspection of the Civil, Electrical and Mechanical works was carried out on part of the respondent-SKIMS, however, they continued to fail to release the outstanding amounts payable to the applicants. In a meeting held on 18th of June, 2013, the Executive Engineers of the respondent-SKIMS stated their inability to verify the bills raised by the applicants on the pretext that the work was executed long back, as a result whereof, the respondent-SKIMS, thereafter, decided to send the bills of works to the then Engineers of the respondent-SKIMS for verification and for taking up the matter with the Director Finance. Thereafter, the respondent-SKIMS made attempts to contact its former Executive Engineers to verify the claim of the applicants, but failed to ultimately verify the same. Finally, as stated, on 13th of December, 2013, the respondent-SKIMS formed a committee to check/verify the work done by the applicants and their pending claims in respect thereto. At a meeting held on 4th of March, 2014, Mr. G.M. Bhat, the former Chief Engineer of the respondent-SKIMS, confirmed that the works had been completed by the applicants and the Head of the Department of Radiology also confirmed that the equipment installed by the applicants had been functioning efficiently till date. However, the Executive Engineers, once again, expressed their inability to verify the claim put forth by the applicants. The matter was, therefore, referred to the authorities to take a final decision. On 10th of April, 2015, the applicants again submitted an application to the respondent-SKIMS requesting therein for the requisite information on the pending decision of the authorities by 16th of April, 2015, failing which, it was intimated that the applicants would be constrained to initiate legal action against the respondent-SKIMS. The respondent-SKIMS has, till date, failed to reply the aforesaid application from the applicants. Since the respondent-SKIMS entirely failed in fulfilling its obligations under the supply order by refusing to pay the amounts due to the applicants, on one pretext or the other, the applicants were constrained to invoke the 'Arbitration Clause' contained in Clause 26 of the 'Contract Agreement', by way of the Notice dated 7th of August, 2015, by which the respondent-SKIMS were called upon to nominate an Arbitrator on their own behalf within 30 days from the date of the receipt of the notice. This 30-day period, as stated, has since expired and the respondent-SKIMS are yet to nominate an Arbitrator in the matter. In fact, it has been stated, that the applicants have not received any communication whatsoever from the respondent-SKIMS, since it received the said notice. It is submitted that the subject matter of the said notice raises a small claim of Rs. 4,77,460/- only against the respondent-SKIMS and it will, therefore, be time and cost effective if this Court appoints a sole Arbitrator to adjudicate the present dispute between the parties. The applicants have also filed similar Section 11 applications praying therein for the appointment of a sole Arbitrator with respect to two other equipments-CT Scanner and CT Simulator. These equipments were also supplied by the applicants to the respondent-SKIMS around the same time as the X-Ray Machine. It is submitted that the three disputes contain similar facts and, therefore, same may be consolidated and adjudicated by the same Arbitrator.
4. The respondent-SKIMS, despite availing umpteen opportunities, have failed to file the objections, meaning thereby, that they have not joined any issue with the applicants. It is a settled principle of the law of pleadings that the averments set up by the applicants are expected to be specifically denied by the replying party. If there is no specific denial, then such an averment is deemed to have been admitted by the otherside. In the present case, it is evident that the averments set up in the applications, which were relevant and material to the case, have not been rebutted by the respondent-SKIMS. It was expected of the respondent-SKIMS to reply all the averments specifically and make a proper reference to the records relevant to the case. Since the respondent-SKIMS have omitted to do so and have failed to specifically deny the averments made by the applicants, therefore, the applicants have been able to make out a case for interference.
5. Heard the learned counsel for the parties, perused the record and considered the matter.
6. Section 11 of the Act deals with the procedure for the appointment of an Arbitrator, which reads as under:
11:- Appointment of arbitrators:
(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) 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.
(4) If the appointment procedure in sub-section (3) applies and:
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(6) 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 Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final.
(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to:
(a) any qualifications required of the arbitrator by the agreement of the parties; and
(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6) to him.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12)(a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the "Chief Justice of India".
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court."
7. From a bare perusal of Section 11, it is manifest that, in terms of Sub-Section (2), parties are free to agree on the procedure for the appointment of an Arbitrator. If only there is any failure of that procedure, the aggrieved party can invoke sub-sections (4), (5) or (6) of Section 11, as the case may be.
8. In the case on hand, in terms of sub-section (2) of Section 11, procedure for appointment of an Arbitrator stands agreed upon by the parties in clause 26 of the 'Contract Agreement'. In Clause 26(A), it has been laid down as follows:
"A. If at any time any question, dispute or difference whichever shall arise between the parties upon or its relation to or in connection with this contract, either of the parties may give to the other party in writing of the existence of a such a question, dispute or difference and the same shall be referred to two arbitrators, one to be nominated by us and other to be nominated by you/your Indian subsidiary or in case of such arbitrators not agreeing to, then to the award of an umpire to be appointed by them in writing before proceedings with the reference and the decision of the arbitrators or in the event of their not agreeing of the umpire appointed by them shall be final and binding on the parties."
9. From the perusal of the above 'Arbitration Clause', what gets revealed is that the parties have agreed that in the event of disputes arising out of the 'Contract Agreement', then, in such eventuality, the same shall be referred to the award of two Arbitrators, one each to be nominated by either of the parties. It is the specific case of the applicants that they issued notice to the respondent-SKIMS for demanding the appointment of the Arbitrator, but, despite that, the Arbitrator has not been appointed and, therefore, they are entitled to invoke Sub-Section (6) of Section 11 of the Act.
10. The Hon'ble Supreme Court, in the case of "Datar Switchgears Ltd. v. Tata Finance Ltd.", reported in "MANU/SC/0651/2000 : (2000) 8 SCC 151", while dealing with an almost identical issue, held as follows:
"So far as cases falling under Section 11(6) are concerned such as the one before us no time limit has been prescribed under the Act. In our view, therefore, so far as section 11(6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after the expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court u/s. 11, that would be sufficient. In other words, in cases arising u/s. 11(6) if the opposite party has not make an appointment within 30 days of the demand right to make appointment is not forfeited but continues, but an appointment has to be made before the former files an application under section 11 of the Act seeking appointment of an arbitrator. Only then the right of opposite party ceases. We do not therefore, agree with the observations in the above judgment that if an appointment is not made within 30 days of the demand right to contractual arbitrator u/s. 11(5) is forfeited."
In the present case, the applicants issued the notice to the respondent-SKIMS for seeking appointment of the Arbitrator on 7th of August, 2015 and, upon failure of the respondent to do so, they filed the instant applications before this Court under Section 11 of the Act on 18th of March, 2016. Since the respondent declined the request of the applicants for the appointment of the Arbitrator in the matter, therefore, the applicants were justified in filing the instant applications under Section 11 of the Act. The respondent-SKIMS, having failed in appointing the Arbitrator before filing of the applications under Section 11 of the Act, therefore, in view of the law laid down by the Supreme Court (supra), have forfeited their right to appoint the Arbitrator.
11. It will not be impertinent to note here that it is a settled principle of law that jurisdiction of Court under Section 11 of the Act is limited and confine to examine as to whether there is an 'Arbitration Agreement' between the contracting parties and, if so, whether any dispute has arisen between them out of such agreement which may call for appointment of Arbitrator to decide such dispute(s). In the present case, the applicants, in all the three applications, have raised a dispute, which has gone unrebutted on part of the respondent-SKIMS. Before availing the remedy of Section 11 of the Act, the applicants, as stated hereinbefore, by way of repeated requests before the concerned authorities, made all the efforts that they could have in order to redress their grievances, but all their efforts went in vain. Thereafter, the applicants invoked the 'Arbitration Clause' contained in Clause 26 of the 'Contract Agreement' by way of the notice dated 7th of August, 2015, which, too, did not find any favour with the respondent-SKIMS and they did not appoint an Arbitrator on their own behalf. Left with no other option, the applicants have been constrained to approach this Court seeking the appointment of a sole Arbitrator in the matter.
12. Once it is found that a dispute has arisen between the parties in relation to an agreement which contained an 'Arbitration Clause' for resolving such disputes, then, in such eventuality, reference to the Arbitrator has to be made leaving the parties to approach the Arbitrator with their claim and counterclaim so as to enable the Arbitrator to decide all such disputes on the basis of case set up by the parties before him.
13. For all that has been said and done above, all these applications filed under Section 11 of the Act are allowed and Hon'ble Shri Justice Hasnain Masoodi, a former judge of this Court, is appointed as the sole Arbitrator to decide the dispute(s), which has/have arisen between the parties in relation to the agreement in question. The Arbitrator shall enter upon the reference and, after giving an opportunity to the parties to file their claims/counterclaims, adjudicate thereon and make his award in accordance with the Act coupled with the rules made thereunder. The Arbitrator would be at liberty to settle the terms for deciding the dispute(s), such as fees, expenses, etc., to be shared equally by the parties in dispute.
14. Registry to place a copy of this order on each file. It shall also send copies of this order to the learned Arbitrator so appointed as also to the parties in dispute for information.
15. Parties to appear before the sole Arbitrator on the appointed date to be fixed by the Arbitrator himself.
16. Arbitration applications, alongwith all connected MP(s), disposed of as above.
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