Cynosure Designs vs The MSTC Ltd. and Others

Rajiv Sahai Endlaw, J.—The petition is preferred u/s 11(6) of the Arbitration Act, 1996. The counsel for the respondent No. 1 accepted notice of the petition on 29th May, 2009. No reply has been filed. Notice was also ordered to be issued to the other respondents. Besides the respondent No. 1, the Commissioner of Customs (Preventive) Mumbai has been impleaded as the respondent No. 2 and the Chairman-cum-Managing Director of the respondent No. 1 has been impleaded as the respondent No. 3. The respondent No. 2 Commissioner of Customs (Preventive) has filed a reply to the petition. The respondent No. 3 Chairman-cum-Managing Director of the respondent No. 1 has been impleaded merely as a appointing authority. The counsels for the petitioner, respondent No. 1 and respondent No. 2 have been heard.

It is not in dispute that the petitioner and the respondent No. 1 are parties to an agreement in writing containing a clause for resolution of disputes arising in connection with the interpretation or implementation of the terms & conditions of the agreement by arbitration under the Arbitration Act, 1996; the language of arbitration was agreed as English, the place of arbitration as Kolkata and it was further agreed that the disputes covered under the agreement shall be referred to the Chairman-cum-Managing Director of the respondent No. 1 for adjudication by him or by his nominee.

The said agreement also provides that only the courts at Kolkata shall have the exclusive jurisdiction to entertain any dispute connected with the arbitration proceedings. Upon enquiry, being made from the counsel for the petitioner as to how this petition was maintainable before this Court, attention was invited to the order dated 8th April, 2009 of this Court in OMP No. 154/2009 u/s 9 of the Act between the parties wherein also the respondent No. 1 herein had taken objection about the territorial jurisdiction; it was held that the courts at Kolkata had no jurisdiction in law qua the disputes between the parties and the parties could not by agreement vest jurisdiction in the courts at Kolkata. The petition u/s 9 of the Act was thus held maintainable in this Court. The said order having attained finality, the question of territorial jurisdiction need not detain me any further.

Though the petitioner and the respondent No. 1 only are parties to the agreement containing the arbitration clause aforesaid but the said agreement inter-alia was of participation by the petitioner in the e-auction conducted by the respondent No. 1 on behalf of others. The disputes between the parties requiring arbitration are stated to be in respect of an auction conducted by the respondent No. 1 on behalf of the respondent No. 2 and in which the petitioner had participated. It is the pleading of the petitioner that the respondent No. 1 in the matter of the said e-auction had been acting on behalf of the respondent No. 2. The respondent No. 2 has in its reply stated that it is not concerned with the arbitration proceedings between the respondent No. 1 and its buyers. Else the reply of the respondent No. 2 is on the merits of the disputes. The counsels have also not addressed any arguments in this respect. All that can be said at this stage is that the order u/s 9 of the Act in the OMP aforesaid were issued qua the respondent No. 2 as well and the respondent No. 2 from a perusal of the said order does not appear to have taken any objection as to the maintainability of the petition u/s 9 of the Act qua the respondent No. 2.

It is the case of the petitioner and which is not rebutted that the petitioner vide its letter dated 14th April, 2009 to the Chairman- cum-Managing Director of the respondent No. 1 being the named arbitrator and/or the appointing authority for the arbitrator called upon to either arbitrate or to appoint an arbitrator and that no action has been taken pursuant thereto.

I am satisfied that the petitioner and the respondent No. 1 are parties to an arbitration agreement and disputes have arisen. There is ambiguity as to whether the disputes raised by the petitioner are with the respondent No. 1 acting on behalf of respondent No. 2 and whether the same are arbitrable or not. However, since the Supreme Court in National Insurance Co. Ltd. Vs. Boghara Polyfab Pvt. Ltd., has held that whether a claim falls within the arbitration clause or not should be left to be determined by the arbitrator, the question whether the claims made by the petitioner before the arbitrator are against the respondent No. 1 only or if against the respondent No. 2 are arbitrable or not is left to be determined by the Arbitral Tribunal.

Though the petitioner has applied for appointment of an arbitrator in accordance with law and though the appointing authority has failed to appoint the arbitrator but the Supreme Court in Ace Pipeline Contracts Private Limited Vs. Bharat Petroleum Corporation Limited, and in Northern Railway Administration, Ministry of Railway, New Delhi Vs. Patel Engineering Company Ltd., has held that even in exercise of powers u/s 11(6) of the Act the Chief Justice or his designate can give a mandate to the appointing authority to appoint the arbitrator as per the agreement or appoint the arbitrator in terms of the agreed mechanism, I consider the present case to be such where it is more appropriate to call upon the Chairman-cum-Managing Director of the respondent No. 1 to appoint the arbitrator rather than this Court appointing an independent arbitrator. I may also notice that though this Court has in OMP No. 154/2009 held that the Kolkata courts have no jurisdiction but the same will not interfere with the venue of the arbitration agreed by the parties in as much as u/s 20 of the Act the parties are free to agree on the place of arbitration and the same is not relatable to Section 2(e) of the Act and the parties in this case have agreed to Kolkata being the venue of arbitration.

This petition is accordingly allowed.

The Chairman-cum-Managing Director of the respondent No. 1 MSTC Ltd. is directed to appoint an arbitrator within four weeks of today.

No order as to costs.