M/S Wheels Motors vs M/S Mahindra Two Wheelers Ltd.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE S.SIRI JAGAN** **FRIDAY, THE 14TH OCTOBER 2011 / 22ND ASWINA 1933** **AR.No. 14 of 2011()** **-----------------------------** **PETITIONER(S):** **------------------------** **M/S.WHEELS MOTORS, A REGISTERED PARTNERSHIP FIRM HAVING ITS REGISTERED OFFICE AT KHADRE CENTRE, N.H.BYE PASS, ALAVA, REPRESENTED BY ITS PARTNER SHEEJA MURALEEDHARAN, AGED 42, W/O.SHRI.V.T.MURALEEDHARAN,RESIDING AT BINDU VIHAR, PARAT LANE, ALUVA,-683 101.** **BY ADVS. SRI.DINESH R.SHENOY, SRI.G.HARIKRISHNAN (TRIPUNITHURA).** **RESPONDENT(S):** **---------------------------** **M/S.MAHINDRA TWO WHEELERS LTD.,** **A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956,WITH ITS HEAD OFFICE AT MAHINDRA 2 WHEELER LTD., D-1 BLOCK, PLOT 18/2, CHINCHWAD, PUNE - 411 019, REPRESENTED BY ITS MANAGING DIRECTOR.** **BY SRI.K.JAYAKUMAR, SENIOR ADVOCATE, BY ADV. SRI.SAJI MATHEW, SRI.JUFIN GEORGE VALOORAN, SRI.DENU JOSEPH.** **THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 14/10/2011,THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **Kss** ## **AR NO.14/2011** ## **APPENDIX** ## **PETITIONER'S ANNEXURES:** **ANNEX.A: COPY OF THE AGREEMENT DTD. 24/12/009.** **ANNEX.B: COPY OF THE NOTICE DTD. 25/11/2010 ISSUED BY THE PETITIONER'S TO THE RESPONDENT.** **ANNEX.C: COPY OF THE LETTER DTD. 8/12/2010 ISSUED BY THE RESPONDENT.** **ANNEX.D: COPY OF FAX LETTER DTD. 8/12/2010 RECEIVED BY THE PETITIONER.** ## **RESPONDENT'S ANNEXURES:** **ANNEX.R1: COPY OF THE LETTER AAA/J/38K/599 DTD. 11/02/2011 ISSUED BY ASHWIN ANKHAD & ASSOCIATES, ADVOCATES APPOINTING MR.JUSTICE M.S.RANE (RETD.) AS THE ARBITRATOR.** **ANNEX.R2: COPY OF THE LETTER DTD. 15/02/2011 ADDRESSED TO MR.JUSTICE M.S.RANE COMMUNICATING THE APPOINTMENT AS ARBITRATOR.** **ANNEX.R3: COPY OF THE LETTER 59/2011 DTD. 15/02/2011 ISSUED BY MR. JUSTICE M.S.RANE (RETD.).** ## **/TRUE COPY/** **P.S.TO JUDGE** **Kss** ## S. Siri Jagan, J. **==> picture [278 x 5] intentionally omitted <==** **==> picture [130 x 11] intentionally omitted <==** =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-= Dated this, the 14[th] day of October, 2011. **==> picture [110 x 13] intentionally omitted <==** In the course of business dealings as per Annexure A agreement between the petitioner and the respondent, there arose a dispute. The petitioner raised a dispute by Annexure B dated 25.11.2010. By Annexure C dated 8.12.2010, the respondent replied stating that the request of the petitioner is under consideration and they will revert to the petitioner soon. In the meanwhile, the petitioner moved the District Court, Ernakulam under Section 9 of the Arbitration and Conciliation Act, 1996 seeking injunction against appointing another dealer in addition to the petitioner. An injunction was granted, which was pending. 2. Since nothing happened in the meanwhile, the petitioner filed this Arbitration Request on 8.2.2011. It came up for admission on 16.2.2011 and notice was ordered to the respondent. The respondent appeared and filed an objection to the effect that as per the arbitration clause in Annexure A agreement, the respondent has already appointed an arbitrator and therefore it is not necessary for this Court to deal with the arbitration request seeking to appoint another arbitrator. They would submit that they received the notice on 18.2.2011, by which time they had already appointed the arbitrator on 11.2.2011. They would also submit that since they have already appointed an arbitrator in accordance with the arbitration clause in Annexure A agreement, this arbitration request has become A.R. No. 14 of 2011 -: 2 :- infructuous and therefore the same is liable to be closed. 3. The petitioner would contend that insofar as the respondent did not appoint an arbitrator within a reasonable time and before appointment of the arbitrator by the respondent, the petitioner has moved this arbitration request, the appointment of the arbitrator made by the respondent is of no avail and this Court has to necessarily appoint an arbitrator in the arbitration request. The learned counsel for the petitioner relies on the decision of the Supreme Court in **Datar Switchgears Ltd., v. Tata Finance Ltd. and another** , (2000) 8 SCC 151, which has been followed in **Punj Lloyd Ltd., v. Petronet MHB Ltd.** , (2006) 2 SCC 638, **Shin Satellite Public Co. Ltd., v. Jain Studios Ltd.** , 2006(2) SCC 628, **Denel (Proprietary) Ltd., v. Bharat Electronics Ltd.,** 2010 (6) SCC 394 and **Jacob N.P. v. Oriental Structural Engineers & Anr., 2008(3) KLJ 404** . 4. Counsel for the respondent would contend that before this Court admitted the arbitration request on 16.2.2011, they had already appointed an arbitrator on 11.2.2011 and therefore they have done what they were expected to do under the arbitration agreement validly and therefore the contention of the petitioner would not stand. 5. I have considered the rival contentions in detail. 6. The issue raised by the respondent has been settled by the Supreme Court in **Datar Switehgears's case** (supra), wherein the Supreme Court has held thus: “11. The question then arises whether for purposes ## A.R. No. 14 of 2011 ## -: 3 :- of S.11(6) the party to whom a demand for appointment is made, forfeits his right to do so if he does not appoint an arbitrator within 30 days. Learned Senior Counsel for the appellant contends that even though S.11(6) does not prescribe a period of 30 days, it must be implied that 30 days is a reasonable time for purposes of S.11(6) and thereafter, the right to appoint is forfeited. Three judgments of the High Courts from Bombay, Delhi and Andhra Pradesh are relied upon in this connection. 12. Learned Senior Counsel for the respondents submits that the Bombay, Delhi and Andhra Pradesh cases relied upon are distinguishable. It is also contended that under S.11(6) no period of time is prescribed and hence the opposite party can make an appointment even after 30 days, provided it is made before the application is filed under S.11. 13. The appellant contended that the 1st respondent did not appoint the arbitrator within a reasonable period and that amounts to failure of the procedure contemplated under the agreement. Our attention was drawn to a decision of the Bombay High Court reported in (Naginbhai C. Patel v. Union of India (1999 (2) Bom CR 189 (Bom)). There, the petitioner, a Government Contractor, as per the form of the arbitration clause requested the Secretary, PWD to appoint the arbitrator. The Secretary, PWD did not take any action and the petitioner filed an application under S.11(6) of the Act. After the filing of this application, the respondent appointed an arbitrator and urged before the Chief Justice that application under S.11(6) filed by the petitioner became infructuous. It was held that the petitioner had waited for 30 days for appointment of the arbitrator and as the respondent had failed to appoint the arbitrator the objection was not sustainable and the appointment of arbitrator made by the respondent was not valid in the eye of law. 14.The above decision has no application to the facts of this case as in the present case, the arbitrator was already appointed before the appellant invoked S.11 of the Act. The counsel for the appellant contended that the arbitrator was appointed after a long lapse of time and that too without any previous consultation with the appellant and therefore it was argued that the Chief Justice should have appointed a fresh arbitrator. We do not find much force in this contention, especially in view of the specific words used in the arbitration clause in the agreement, which is extracted above. This is not a case where the appellant requested and gave a notice period for appointment of an arbitrator and the latter failed to ## A.R. No. 14 of 2011 ## -: 4 :- comply with that request. The 1st respondent asked the appellant to make payment within a stipulated period and indicated that in the event of non payment of the amount within fourteen days, the said notice itself was to be treated as the notice under the arbitration clause in the agreement. The amount allegedly due from the appellant was substantial and the 1st respondent cannot be said to be at fault for having given a larger period for payment of the amount and settling the dispute. It is pertinent to note that the appellant did not file an application even after the 1st respondent invoked S.9 of the Act and filed a petition seeking interim relief. Under such circumstances, it cannot be said that there was a failure of the procedure prescribed under the contract 15. The decision of the Delhi High Court in B.W.L. Ltd. v. MTNI (2000 (2) Arb LR 190 : 2000 (85) DLT 84 (Del)) decided on 23-2-2000 is also distinguishable inasmuch as the respondent, in spite of being given an opportunity on 11-10-1999 by the Court after filing of the application under S.11 to appoint an arbitrator, failed to do so and the Court felt that it was a fit case for appointment of an arbitrator under S.11. This case is also distinguishable as the appointment was not made before the filing of the application under S.11. 16. In Sharma & Sons v. Engineer in Chief, Army Headquarters, New Delhi (2000 (2) ArbLR 31 (AP)) the respondents were requested on 26-6-1995, 6-8-1995 and other dates in 1997 to appoint an arbitrator. Application under S.11 was filed after nearly 4 years on 21-4-1999. Only thereafter the respondent appointed an arbitrator on 13-5-1999, but only in respect of some of the disputes. The respondent felt that the other disputes were outside the ambit of the arbitration clause. The High Court of Andhra Pradesh held that in view of S.11(6) read with S.11(8) the respondent had forfeited his right to appoint an arbitrator after the expiry of 30 days from the date of demand for an arbitrator. Even in the above case, the appointment was not made before the application under S.11 was filed. Hence, the case is not applicable to the facts of this case. 17. In all the above cases, therefore, the appointment of the arbitrator was not made by the opposite party before the application was filed under S.11. Hence, all the above cases are not directly in point. ## A.R. No. 14 of 2011 ## -: 5 :- 18. In the present case, the respondent made the appointment before the appellant filed the application under S.11 but the said appointment was made beyond 30 days. Question is whether in a case falling under S.11(6), the opposite party cannot appoint an arbitrator after the expiry of 30 days from the date of demand? 19. So far as cases falling under S.11(6) are concerned -- such as the one before us -- no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under S.11(4) and S.11(5) of the Act. In our view, therefore, so far as S.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 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 under S.11, that would be sufficient. In other words, in cases arising under S.11 (6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under S.11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an arbitrator under S.11(6) is forfeited.” Going by the said decision, all I have to do in this case is to decide as to whether the respondent has appointed an arbitrator before filing of the arbitration request as held in that decision. Going by the said decision, the party who is entitled to appoint the arbitrator, has to appoint the arbitrator before the other party files the arbitration request. Counsel for the respondent would try to distinguish the same by saying that it should be construed to mean that the party has appointed the arbitrator, before this Court took cognizance of the arbitration request. But, in the decision of the Supreme Court, the court does not make a A.R. No. 14 of 2011 -: 6 :- distinction between filing and taking cognizance. The Honourable Supreme Court specifically says that the appointment of the arbitrator should be before filing of the arbitration request. Admittedly, the respondent has not appointed the arbitrator before the filing of the arbitration request on 8.2.2011. The delay in posting the arbitration request is the delay caused in the registry of this Court and the registry posted the arbitration request only on 16.2.2011 for admission. So, in the light of the decision of the Supreme Court, I cannot countenance the contentions of the respondent. Going by the dates, the respondent has not appointed the arbitrator within a reasonable time, at any rate, before the filing of the arbitration request. Therefore, I do not think that the respondent can rely on the appointment of arbitrator made by them as a defence in the arbitration request. 7. The learned counsel for the respondent submits that in view of the fact that a former High Court Judge of the Bombay High Court has been appointed by the respondent as arbitrator, he may be retained as arbitrator appointed by this Court. But the learned counsel for the petitioner points out that the petitioner is a small-time businessman in Aluva, whereas the respondent is a big business institution having offices all over India, including a regional office at Ernakulam and therefore the balance of convenience is in favour of the petitioner, in appointing an arbitrator who belongs to Ernakulam. On this point also, I agree with the petitioner, particularly in view of the decision of this Court in **Jacob's case** (supra), in paragraph A.R. No. 14 of 2011 -: 7 :- 14 of which, this Court has held thus: “14. . . . . . A perusal of the agreed appointment procedure incorporated under clause 9.03 shows that no special qualifications have been prescribed for the Arbitrator. Therefore, it is not possible to argue that by appointing a retired Judicial Officer with experience in the adjudicatory process, any prejudice will be caused to either of the parties. As already noticed having due regard to the smallness of the stakes involved I feel that it will not be just to drive the applicant said to be in dire financial straits over to Delhi for settlement of the dispute. . . . . .” 8. In the above circumstances, I am inclined to appoint an arbitrator selected by this Court for the purpose. Accordingly, I appoint Sri. Justice P. Krishnamoorthy, (Karthika, Krishnaswami Road, Ernakulam - 682035), a formerJudge of this Court and the Karnataka High Court, who is stationed at Ernakulam now, as the arbitrator for arbitrating the dispute between the parties. The Arbitration Request is disposed of as above. Sd/- S. Siri Jagan, Judge. Tds/