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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION

ARBITRATION     PETITION     NO.19     OF     2011   

 Bipromasz Bipron Trading SA            ...Petitioner

VERSUS

Bharat Electronics Limited (BEL)                 …Respondent

O     R     D     E     R   

SURINDER     SINGH     NIJJAR,     J.      

1. In this petition, under Section 11(6) of the Arbitration and  

Conciliation Act, 1996 (hereinafter referred to as “the  

Arbitration Act”) read with paragraphs 2 and 3 of the  

appointment of the Arbitrators by the Chief Justice of  

India Scheme, 1996, the petitioner seeks reference of the  

disputes to an independent and impartial sole Arbitrator.  

In terms of the arbitration agreement, the petitioner has  

issued the necessary notice and the respondent has not  

agreed for such appointment of an independent  

arbitrator.

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2.  It appears that the respondent is not opposing the  

petition on the ground that the disputes cannot be  

referred to arbitration. The only objection raised by the  

respondent is that the disputes have to be referred to the  

Chairman and Managing Director of the respondent or  

his nominee, in terms of the arbitration clause 10 of  

General Terms and Conditions of Purchase Order  

(Foreign). The aforesaid arbitration clause reads as  

under:-

“Arbitration – All disputes regarding this order shall  be referred to B E L Chairman & Managing Director  or his nominee for arbitration who shall have all the  powers conferred by the Indian Arbitration &  Conciliation Bill 1996 or any statutory modification  thereof in force.”        

3. In view of the above, reference need only be made to the  

skeletal facts necessary for adjudicating the issues raised  

by the parties.  

4. On 6th October, 2008, the respondent issued a Purchase  

Order (PO) to the petitioner through which it sought to  

purchase the materials/goods, namely, Hydraulic Motor,

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Actuating Cylinder, EL Motor EDM, Converter and GYRO  

Unit.

5. The purchase order was issued along with a printed  

Annexure IV of “General Terms and Conditions of  

Purchase Order (Foreign)”. As noticed above, the relevant  

arbitration clause is contained in the aforesaid general  

terms and conditions. The petitioner claims that fifth  

item, as stated above, was GYRO Unit EK.2.369.113.CE  

in 174 Nos. The entire agreed terms of sale by the  

petitioner was against      100% payment through Letter  

of Credit through the State Bank of India, Trade Finance  

CPC, 16, Whannels Road, Egmore, Chennai, India, to the  

petitioner and the said Letter of Credit was to be opened  

immediately after getting confirmation  regarding  

readiness of the stock with the petitioner.             The  

GYRO Unit (174 in Nos.) were to be provided by the  

petitioner to the respondent as per the aforesaid  

agreement and the petitioner took immediate steps to  

supply the said units to the respondent. The petitioner  

made huge investments in that regard and procured

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required materials. The specifications of GYRO Units, as  

per the specifications, did not stipulate, expressly or  

impliedly, the type of damping. While the entire process  

was going on, the respondent issued a letter dated 5th  

June, 2009 to the petitioner stating that as per the  

respondent’s directives, all pending supplies as on that  

date, from the petitioner were to be “put on hold”  and  

directed the petitioner not to dispatch any pending items  

including those for which Letter of Credit had been  

established until further communication from the  

respondent. After the aforesaid communication, the  

respondent did not issue any communication to the  

petitioner for supply of the said goods till 3rd December,  

2009. In response to the aforesaid communication, the  

petitioner sent 10 units of GYRO Stabilizers along with  

the Certificate which was issued by the Russian Company  

(manufacturer) for a lot of 24 units. It appears that the  

respondent, on the basis of the inspection report dated  

17th November, 2009, rejected two GYRO Units (out of  

total 10) on the ground that the same were defective. The  

defects pointed out were that “Turret not moving in ‘Auto’

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mode” and “vibration in elevation observed in Turret”. The  

other 8 Units were accepted. The petitioner, therefore,  

called for payment of 8 accepted GYRO Units and assured  

the rectification of two rejected units. Through the  

communication dated 28th December, 2009, the  

respondent claimed that the goods supplied by the  

petitioner were not of Russian Origin and, therefore, all  

the 10 GYRO Units supplied by the petitioner were  

rejected. The orders were to be cancelled and  no more  

supply of GYRO Units were to be permitted with electrical  

damping. The petitioner claims that the action of the  

respondent firstly stopping all the supplies of the  

petitioner and secondly rejecting the 10 GYRO Units,  

subsequently supplied, is arbitrary, extra contractual,  

illegal and without any basis whatsoever.

6. The petitioner claims that 10 GYRO Units were rejected  

on the baseless ground that certain corruption cases had  

come to light against certain other companies. The  

respondent, therefore, stopped receiving supply from  

various companies including the petitioner and directly

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contacted the Russian manufacturer company and  

obtained the said units from them through another  

Russian Exporter company to frustrate the purchase  

order of the petitioner. It is claimed that the objection  

taken by the respondent are frivolous and without any  

basis.

7. The petitioner also claims that the order dated  

5th June, 2009 putting on hold the supplies that were to  

be made by the petitioner was issued by the Ministry of  

Defence, under which the respondent is a Public Sector  

Undertaking. The aforesaid order was, however, set aside  

by the Delhi High Court in Writ Petition (Civil) No.821 of  

2010 by an order                            dated 11th February,  

2010. Thereafter, inspite of the efforts made by the  

petitioner, the respondent did not accept the plea that the  

purchase order did not contain any specific, express or  

implied condition for air damping. The petitioner also  

offered to supply 50 GYRO Units with Air damping to  

maintain good relations. The respondent, however, issued  

a letter dated 18th August, 2010 showing interest to

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accept 50 GYRO Units with Air Damping with condition  

that the payment will be made after the acceptance of the  

units by the respondent. According to the petitioner, this  

was contrary to the terms contained in the original  

purchase order. The petitioner, though not obliged as per  

the contract, started process of procuring GYRO with air  

damping but due to the short validity of the Letter of  

Credit, only 14 such units were supplied and the  

petitioner had to stop the procurement of the said unit  

due to the expiry of the Letter of Credit. Thereafter, the  

petitioner has sent a number of communications to the  

respondent to which there has been no response, hence,  

the petitioner claims that number of disputes which are  

mentioned in paragraph 14 (a) to (g) have arisen between  

the parties.  

8. Vide notice dated 20th May, 2011, the petitioner requested  

the respondent to agree on a name of an independent and  

impartial sole arbitrator preferably a former Judge of this  

Court by mutual consent between the petitioner and the  

respondent.

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9. The petitioner claims on the basis of the postal  

acknowledgement that the respondent received the  

aforesaid notice on or about 23rd May, 2011. The receipt  

of the notice has been acknowledged by the respondent  

by a letter        dated 8th June, 2011. On 29th June, 2011,  

the authorised representative of the petitioner has sworn  

the necessary affidavit in Poland for filing of the present  

petition after the expiry of 30 days of the statutory period  

and the same were dispatched to the counsel at New  

Delhi.

10. In the meantime, the respondent replied by a  

communication dated 29th June, 2011 to the notice  

dated 20th May, 2011, stating that the Chairman-cum-

Managing Director is a competent person as the petitioner  

has subscribed the contract which states the nominated  

arbitrator, and hence the correspondence between the  

parties has been placed before the Chairman-cum-

Managing Director for appropriate action. The petitioner

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claims that the aforesaid reply was received on 1st July,  

2011.  

11. The respondent, in the detailed counter affidavit, accepts  

that certain disputes have arisen with regard to the  

supply of GYRO Units. It, however, claims that the  

reference of the disputes has to be made to the  

Chairman-cum-Managing Director of the respondent or  

his nominee for arbitration. Therefore, the prayer made in  

the petition for appointment of a sole arbitrator to  

adjudicate the dispute is contrary to the express clause in  

the contract and thus not maintainable. It is also the case  

of the respondent that prior to the filing of the petition  

before this Court, the Chairman-cum-Managing Director,  

as sole arbitrator, has duly acted and exercised the power  

in appointing Mr. R. Chandra Kumar, General Manager  

(Kot), Bharat Electronics Ltd., District Pauri Garhwal,  

Kotdwara-246149, as the arbitrator and communicated  

by fax on 19th July, 2011 itself. It is denied that merely  

because the Chairman-cum-Managing Director is in  

control and supervision of the respondent Public Sector

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Undertaking would render him ineligible to be appointed  

as the arbitrator. The respondent having accepted the  

arbitration clause with open eyes cannot be permitted to  

avoid the same on the ground of perceived partiality. The  

petitioner in the rejoinder has emphasised that both the  

issues raised by the respondent are without any basis.  

The petitioner relies on the facts enumerated in  

paragraph 4 of the rejoinder. It is claimed that the  

arbitrator had not been appointed on 9th July, 2011 as  

claimed by the petitioner. The following facts have been  

highlighted as under:   

“20.05.2011 – Notice, through counsel was sent to the  

respondent seeking appointment of Arbitrator.  

29.06.2011 – Petitioner sworn affidavit in Poland for filing of  

the petition for appointment of Arbitrator.  

29.06.2011 – Respondent’s sent reply to the advocate at New  

Delhi received on 1.7.2011 stating that the  

correspondence is being placed before the  

Chairman and Managing Director.  

Note: Due to the new communication received, the fresh  affidavit was needed and hence petition was with held to await  fresh affidavit from Poland.

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08.07.2011 – Petitioner sent further Notice to the respondent  

stating that the action shall not be proper.  

21.07.2011 – The present petition seeking the appointment  

of Arbitrator was filed.

26.07.2011 – Respondent sent email to the counsel of the  

petitioner at new attaching the letter of the  

counsel dated 26.7.2011 along with the letter  

of respondent dated 19.7.2011 stating the  

arbitrator had been appointed. The hard copy  

of the said letter was received by the counsel  

for the petitioner at New Delhi on 28.7.2011.”

12. The petitioner further claims that no fax was ever sent by  

the respondent on 19th July, 2011, as no e-mail or postal  

communication was received by the petitioner in Poland  

in the whole month of July, 2011. It is further pointed out  

that neither the said fax nor email was sent to the  

counsel for the petitioner before 26th July, 2011. The  

petitioner further pointed out that a perusal of the copy of  

the letter              dated 19th July, 2011 sent to the

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counsel for the petitioner at New Delhi itself indicates  

that the letter was faxed                  on 25th July, 2011 by  

MD’s Office of the respondent to the concerned person of  

the respondent to communicate further. The petitioner  

further claims that mere passing of the order will not  

have any relevance as the same was not communicated to  

the petitioner till after the filing of the petition.  

13. I have heard the learned counsel for the parties.  

14. Mr. Viswanathan, learned senior counsel appearing for  

the petitioner submits that the disputes cannot be  

referred to CMD or his nominee as neither of them would  

be able to act impartially. In any event, the petitioner  

would always be under a reasonable apprehension that  

CMD or his nominee would be favorably inclined towards  

the respondent. He points out that CMD has been in  

control and supervision of the works of the respondent  

and, therefore, cannot be expected to be impartial in any  

dispute between the petitioner and the respondent.  

Similarly, any employee of the respondent would suffer

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from the same disability. In support of the submission,  

the learned counsel has relied on Indian     Oil     Corporation    

Limited     &     Ors.   Vs. Raja     Transport     Private     Limited  1  ,  

Denel     (Proprietary)     Limited   Vs. Bharat     Electronics    

Limited     &     Anr.  2  , and Denel     (Proprietary)     Limited   Vs.  

Ministry     of     Defence  3  .

15. Mr. Viswanathan then submitted that the plea taken by  

the respondent that one Mr. R. Chandra Kumar, the  

General Manager, Bharat Electronics Limited was  

appointed as the sole arbitrator on 19th July, 2011 and  

communicated by fax on that date itself is without any  

basis. He submits that factually the aforesaid averment  

has not been proved. The affidavit filed by the respondent  

is not supported by any document including purported  

appointment letter dated 19th July, 2011. The said  

affidavit is completely silent as to whom the said  

communication was faxed, where it was faxed and what  

is the proof of same having been faxed. He further  

1 (2009) 8 SCC 520 2 (2010) 6 SCC 394 3 (2012) 2 SCC 759

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submits that, in fact, the said communication was sent to  

the advocate for the petitioner on e-mail on 26th July,  

2011, attaching the letter of counsel which was also  

dated 26th July, 2011. Prior to that, no communication  

had been received by the petitioner or his counsel either  

by fax or otherwise stating that the arbitrator had been  

appointed. He emphasised that even the aforesaid  

appointment letter purportedly signed on 19th July, 2011  

shows that it was faxed from Bangalore Office only  

on 25th July, 2011 to their Solicitor who in turn further  

communicated to the counsel for the petitioner on  

26th July, 2011. Therefore, according to Mr. Viswanathan,  

it is unbelievable that the communication released from  

Bangalore office (Head quarter where the Chairman sits)  

could have been conveyed to the petitioner on 19th July,  

2011, though the communication states “CC”  to the  

petitioner but it was never sent to the petitioner. The  

aforesaid communication was sent by the Solicitor of the  

respondent to the petitioner’s counsel on e-mail on 26th  

July, 2011 and thereafter by way of postal  

communication. He, therefore, submits that even if it is

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assumed that the aforesaid letter was signed on  

19th July, 2011, but it was certainly not communicated  

till after the filing of the present petition, therefore, the  

same would have no legal sanctity.  

16. In support of the submission, the petitioner relies on  

Section 3(2) of the Arbitration Act, 1996 which provides  

that    “The communication is deemed to have been  

received on the day it is so delivered”. He submits that  

without delivery of the communication dated 19th July,  

2011, the same shall be of no effect.

17.  Mr. Viswanathan further submits that apart from the  

Arbitration Act, as a general principle of law, it is settled  

that an order takes effect only when it is served on the  

person affected. In support of this submission, learned  

counsel relied on in the case of Bachhittar     Singh   Vs.  

State     of     Punjab     &     Anr.   4and BSNL     &     Ors.   Vs. Subash  

Chandra     Kanchan     &     Anr.  5   and State     of     Punjab   Vs.  

4 AIR 1963 SC 395 5 (2006) 8 SCC 279

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Amar     Singh     Harika  6  . On the basis of the above, he  

submits that the petition deserves to be allowed and the  

matter be referred to an independent and impartial  

arbitrator.  

18. On the other hand, Mr. Bhat, learned counsel appearing  

for the respondent has submitted that the petitioner  

having agreed to the provisions of arbitration contained in  

Clause 10 of the general conditions cannot now be  

permitted to turn around and contend that someone else  

has to be appointed as an arbitrator, thus giving a go-by  

to the arbitration agreement. He submits that it is well  

settled that once the parties have agreed upon a named  

arbitrator, the parties cannot resile therefrom. In support  

of the submission, he relied on the judgment of this Court  

in the cases of Union     of     India     &     Anr.   Vs. M.P.Gupta  7  ,  

You     One     Engineering     &     Construction     Co.     Ltd.     &     Anr.    

Vs. National     Highways     Authority     of     India     (NHAI)  8  ,  

National     Highways     Authority     of     India     &     Anr.   Vs.  

6 AIR 1966 SC 1313 7  (2004) 10 SCC 504 8  (2006) 4 SCC 372

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Bumihiway     DDB     Ltd.(JV)     &     Ors  9  , Northern     Railway    

Administration,     Ministry     of     Railway,     New     Delhi   Vs.  

Patel     Engineering     Company     Limited  10   and Indian     Oil    

Corporation     Limited     &     Ors.   Vs. Raja     Transport     Private    

Limited  11  .

19. He further submits that the present petition is not  

maintainable as even prior to the filing of the petition, the  

Chairman-cum-Managing Director had duly acted and  

exercised his powers and had appointed Mr. R. Chandra  

Kumar, General Manager (Kot) as the arbitrator. It is his  

claim that the appointment was made on 19th July, 2011  

and the same was duly communicated by fax on 19th  

July, 2011 itself to the petitioner.

20. Mr. Bhat further submits that the order of the Managing  

Director came into force from the moment it was signed  

on 19th July, 2011. In support of this submission, he  

relies on the judgment of this Court in the case of  

9  (2006) 10 SCC 763 10(2008) 10 SCC 240 11 (2009) 8 SCC 520

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Collector     of     Central     Excise,     Madras   Vs. M/s     M.M.    

Rubber     &     Co.,     Tamil     Nadu  12  . According to the learned  

counsel, the aforesaid principle has been reiterated by  

this Court in Municipal     Corporation     of     Delhi   Vs. Qimat  

Rai     Gupta     &     Ors  .13  On the issue of perceived partiality of  

the CMD or his nominee, Mr. Bhat submits that the  

petitioner cannot rely on the judgment of this Court in  

Denel (Proprietary) Limited (supra). The facts in the  

aforesaid case were different from the facts in the present  

case inasmuch as in Denel case (supra) this Court has  

directed the appointment of an independent arbitrator  

only on the ground that there was certain directions  

issued by the Ministry of Defence, Government of India  

and as such the Managing Director of BEL may not be in  

a position to independently decide the dispute between  

the parties. He further submits that in the event this  

Court accepts the submission of the petitioner then  

Chairman and Managing Director of any other Public  

Sector Undertaking, for example, Hindustan Aeronautics  

12 1992 Supp.(1) SCC 471 13 (2007) 7 SCC 309

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Limited or Bharat Earth Movers Ltd. may be appointed to  

arbitrate the dispute.  

21. I have considered the submissions made by the learned  

counsel for the parties.   

22. The first issue which needs to be addressed is as to  

whether the present petition is maintainable in view of  

the claim made by the respondent that Mr. R. Chandra  

Kumar had been appointed as the Sole Arbitrator on 19th  

July, 2011.

23. I am of the considered opinion that the aforesaid  

submission of Mr. Bhat can not be accepted in view of the  

provision contained in Section 3(2) of the Arbitration Act.  

Section 3 of the Act provides for different modes in which  

any written communication is deemed to have been  

received.  Section 3(2) specifically provides as under:-

“The communication is deemed to have been  received on the day it is so delivered.”

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24.  In view of the aforesaid provision even if the order  

appointing the Sole Arbitrator, Mr. R. Chandra Kumar,  

was made on 19th July, 2011, it would be deemed to be  

received only on the day it is delivered.

25. Apart from the aforesaid statutory provision, it is also  

settled that an official order takes effect only when it is  

served on the person affected.  In the case of Bachhittar  

Singh Vs. State     of     Punjab     &     Anr.   (supra), this Court has  

clearly enunciated the Principle of Law in the following  

words:-

“Thus it is of the essence that the order has to be  communicated to the person who would be affected  by that order before the State and that person can  be bound by that order. For, until the order is  communicated to the person affected by it, it would  be open to the Council of Ministers to consider the  matter over and over again and, therefore, till its  communication the order cannot be regarded as  anything more than provisional in character.”

26. Similarly, in this case until the order was communicated  

to the petitioner, the Chairman-cum-Managing Director  

would have been at liberty to reconsider the matter and  

thus rendering the order only provisional in character.

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Similar question arose before this Court in the case of  

BSNL     &     Ors.   Vs. Subash     Chandra     Kanchan     &     Anr.    

(supra) wherein it has been clearly observed as under:-

“12. Evidently, the Managing Director of the  appellant was served with a notice on 7-1-2002. The  letter appointing the arbitrator was communicated  to the respondent on 7-2-2002. By that time, 30  days' period contemplated under the Act lapsed. The  Managing Director of the appellant was required to  communicate his decision in terms of clause 25 of  the contract.”

27. In reaching the aforesaid conclusion, this Court relied on  

earlier judgment rendered in the case of State     of     Punjab    

Vs. Amar     Singh     Harika   (supra), wherein this Court has  

held as follows:-

“The first question which has been raised before us  by Mr. Bishan Narain is that though the respondent  came to know about the order of his dismissal for  the first time on the 28th May 1951, the said order  must be deemed to have taken effect as from the 3rd  June 1949 when it was actually passed.  The High  Court has rejected this contention; but Mr. Bishan  Narain contends that the view taken by the High  Court is erroneous in law.  We are not impressed by  Mr. Bishan Narain’s argument.  It is plain that the  mere passing of an order of dismissal would not be  effective unless it is published and communicated to  the officer concerned.  If the appointing authority

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passed an order of dismissal, but does not  communicate it to the officer concerned,  theoretically it is possible that unlike in the case of a  judicial order pronounced in Court, the authority  may change its mind and decide to modify its order.”  

28. The aforesaid observations make it clear that an order  

passed by an authority can not be said to take effect  

unless the same is communicated to the party affected.  

The order passed by a competent authority or by an  

appropriate authority and kept with itself, could be  

changed, modified, cancelled and thus denuding such an  

order of the characteristics of a final order. Such an  

uncommunicated order can neither create any rights in  

favour of a party, nor take away the rights of any affected  

party, till it is communicated. The aforesaid proposition  

has been reiterated in the case of Laxminarayan     R.    

Bhattad     &     Ors.   Vs. State     of     Maharashtra     &     Anr.  14  ,  

wherein it has been held that “it is now well known that a  

right created under an order of a statutory authority  

must be communicated so as to confer an enforceable  

right.”   Similar view has been reiterated in Greater  

14 (2003) 5 SCC 413

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Mohali     Area     Development     Authority     &     Ors.   Vs. Manju  

Jain     &     Ors.  15  , wherein it is observed as follows:-

“24. Thus, in view of the above, it can be held that if  an order is passed but not communicated to the  party concerned, it does not create any legal right  which can be enforced through the court of law, as  it does not become effective till it is communicated.”

29. Mr. Bhat on the contrary relied on the judgment of this  

Court in the case of Collector     of     Central     Excise,     Madras    

Vs. M/s     M.M.     Rubber     &     Co.,     Tamil     Nadu   (supra) and  

submitted that the order of the Managing Director came  

into force from the moment it was signed on 19th July,  

2011.  In Paragraph 12 of the aforesaid judgment, it is  

observed as follows:-

“12. It may be seen therefore, that, if an authority is  authorised to exercise a power or do an act affecting  the rights of parties, he shall exercise that power  within the period of limitation prescribed therefor.  The order or decision of such authority comes into  force or becomes operative or becomes an effective  order or decision on and from the date when it is  signed by him. The date of such order or decision is  the date on which the order or decision was passed  or made : that is to say when he ceases to have any  authority to tear it off and draft a different order and  when he ceases to have any locus paetentiae.  

15 (2010) 9 SCC 157

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Normally that happens when the order or decision is  made public or notified in some form or when it can  be said to have left his hand. The date of  communication of the order to the party whose  rights are affected is not the relevant date for  purposes of determining whether the power has  been exercised within the prescribed time.”

30. In my opinion, the aforesaid observations do not deviate  

from the observations made by this Court in Bachhittar  

Singh’s case (supra) and reiterated consistently  

thereafter by this Court.  The observations herein were  

made with regard to the exercise of power by the  

competent authority with regard to determination of the  

date from which the period of limitation was to be  

calculated to make an appeal.  In that case, an order in  

favour of the respondent was passed by the Collector of  

Central Excise, as an adjudicating authority on 28th  

November, 1984.  Its copy was supplied to the respondent  

on 21st December, 1984.  The Central Board of Excise  

and Customs, however, in exercise of its powers under  

Section 35-e(1) directed the Collector on 11th December,  

1985 to make an appeal to the Customs, Excise Board  

(Control) Appellate Tribunal against this order.   The point

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at issue was whether limitation under Section 35-e(3) of  

the Central Excise and Salt Act, 1944 for the order of the  

Board under Section 35-e(1) commenced from 28th  

November, 1984 or 21st December, 1984.  The Appellate  

Tribunal rejected the Collector’s application on the  

ground that it was beyond limitation period of one year  

commencing from 28th November, 1984.  The aforesaid  

decision of the Appellate Tribunal was upheld by this  

Court with the observations made in Paragraph 12 above  

(supra).  However, the aforesaid observation can not be  

read divorced from the observations made in Paragraph  

13 and 18, which are as under:-

“13. So far as the party who is affected by the order  or decision for seeking his remedies against the  same, he should be made aware of passing of such  order. Therefore courts have uniformly laid down as  a rule of law that for seeking the remedy the  limitation starts from the date on which the order  was communicated to him or the date on which it  was pronounced or published under such  circumstances that the parties affected by it have a  reasonable opportunity of knowing of passing of the  order and what it contains. The knowledge of the  party affected by such a decision, either actual or  constructive is thus an essential element which  must be satisfied before the decision can be said to  have been concluded and binding on him. Otherwise  the party affected by it will have no means of  obeying the order or acting in conformity with it or

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of appealing against it or otherwise having it set  aside. This is based upon, as observed by  Rajmannar, C.J. in Muthia Chettiar v. CIT “a  salutary and just principle”. The application of this  rule so far as the aggrieved party is concerned is not  dependent on the provisions of the particular  statute, but it is so under the general law.

18. Thus if the intention or design of the statutory  provision was to protect the interest of the person  adversely affected, by providing a remedy against  the order or decision any period of limitation  prescribed with reference to invoking such remedy  shall be read as commencing from the date of  communication of the order. But if it is a limitation  for a competent authority to make an order the date  of exercise of that power and in the case of exercise  of suo moto power over the subordinate authorities'  orders, the date on which such power was exercised  by making an order are the relevant dates for  determining the limitation. The ratio of this  distinction may also be founded on the principle  that the government is bound by the proceedings of  its officers but persons affected are not concluded by  the decision.”

31. From the above, it becomes evident that the order dated  

19th July, 2011 would be binding on the Chairman-cum-

Managing Director for the purposes of working out the  

limitation, but so far as the petitioner is concerned, the  

relevant date would be the date when the order is  

communicated to the petitioner.  The order made by a  

Statutory Authority or an Officer exercising the powers of

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that Authority comes into force so far as the Authority  

Officer is concerned, from the date it is made by the  

concerned Authority Officer.  But, so far as the affected  

party is concerned, the order made by the Appropriate  

Authority would be the date on which it is communicated.  

In my opinion, Section 3(2) of the Arbitration and  

Conciliation Act, 1996, is a mere reiteration of the  

aforesaid general principle of law.  

32. In view of the above, I am of the considered opinion that  

the reliance placed on the aforesaid judgment by Mr.  

Bhat is misplaced.  In my opinion, the reliance placed by  

Mr. Bhat on the judgment in Municipal Corporation of  

Delhi (supra) is also misplaced as therein the Court has  

reiterated the principle laid down in Collector of Central  

Excise, Madras (supra);  by observing as follows:-

“26. A distinction, thus, exists in the construction of  the word “made” depending upon the question as to  whether the power was required to be exercised  within the period of limitation prescribed therefor or  in order to provide the person aggrieved to avail  remedies if he is aggrieved thereby or dissatisfied

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therewith. Ordinarily, the words “given” and “made”  carry the same meaning.

27. An order passed by a competent authority  dismissing a government servant from services  requires communication thereof as has been held in  State of Punjab v. Amar Singh Harika11 but an  order placing a government servant on suspension  does not require communication of that order. (See  State of Punjab v. Khemi Ram12.) What is,  therefore, necessary to be borne in mind is the  knowledge leading to the making of the order. An  order ordinarily would be presumed to have been  made when it is signed. Once it is signed and an  entry in that regard is made in the requisite register  kept and maintained in terms of the provisions of a  statute, the same cannot be changed or altered. It,  subject to the other provisions contained in the Act,  attains finality. Where, however, communication of  an order is a necessary ingredient for bringing an  end result to a status or to provide a person an  opportunity to take recourse to law if he is aggrieved  thereby, the order is required to be communicated.”

These observations, in my opinion, do not support the  

submissions made by Mr. Bhat.   

33. Keeping in view the aforesaid principle of law, the fact  

situation with regard to the making and the  

communication of the order dated 19th July, 2011 can  

now be examined. Even though the respondent claims  

that the order was sent by fax on 19th July, 2011, there is

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clear denial of the same by the petitioner.  Prima facie, it  

would appear that even though the order may have been  

made on 19th July, 2011, it was served for the first time  

on the counsel of the petitioner by e-mail on 26th July,  

2011.  Therefore, prima facie, it would not be possible to  

accept the submission of Mr. Bhat that the petition would  

not be maintainable on the ground that the arbitrator  

had already been appointed at the time when the present  

petition was filed. The issue needs to be decided on the  

basis of the evidence produced by the parties, at the  

appropriate time.

34. I am also not much impressed by the submission made  

by Mr. Bhat that this Court is bound to appoint the  

Chairman-cum-Managing Director or its nominee as the  

arbitrator in view of the arbitration clause.  However, it is  

necessary to consider the judgments relied upon by Mr.  

Bhat.  In the case of Union     of     India     &     Anr.   Vs.  

M.P.Gupta (supra), this Court observed that in view of  

the express provision contained in the arbitration clause  

that two Gazetted Railway Officers shall be appointed as

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arbitrators; a Former Judge of the Delhi High Court can  

not be appointed as the Sole Arbitrator.   It must be  

noticed here that in the aforesaid case, no facts have  

been pleaded in justification of the plea for the  

appointment of an independent arbitrator in spite of the  

arbitration clause.  In You     One     Engineering     &    

Construction     Co.     Ltd.     &     Anr.   Vs. National     Highways    

Authority     of     India     (NHAI)   (supra), Justice B.N.  

Srikrishna, sitting as a Chamber Judge in a petition  

under Section 11(6) has observed as follows:-

“10. In my view, the contention has no merit. The  arbitration agreement clearly envisages the  appointment of the presiding arbitrator by IRC.  There is no qualification that the arbitrator has to  be a different person depending on the nature of the  dispute. If the parties have entered into such an  agreement with open eyes, it is not open to ignore it  and invoke exercise of powers in Section 11(6).”

35. In this matter also, there was no plea that the Arbitral  

Tribunal constituted under the arbitration clause was  

likely to be favorably inclined towards the respondent.  

This Court has merely reiterated the legal position that in  

normal circumstances, arbitrator has to be appointed in

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terms of the agreement of the parties contained in the  

arbitration clause.   

36. In the case of National     Highways     Authority     of     India     &    

Anr. Vs. Bumihiway     DDB     Ltd.(JV)     &     Ors.   (supra), the  

question which was before this Court was again as to  

whether a presiding arbitrator could be appointed beyond  

the scope of the arbitration clause, by the High Court in a  

petition under Section 11(6).  It was submitted on behalf  

of the appellant that when the arbitration agreement  

clearly envisages the appointment of the presiding officer  

by the IRC and there is no specification that the  

arbitrator has to be different person depending on the  

nature of the dispute, it is not open to ignore it and  

invoke the exercise of power under Section 11(6) of the  

Act.  It was also submitted that the High Court was not  

justified in referring to the principle of hierarchy and  

ignoring the express contractual provision for  

appointment of the presiding arbitrator.  Upon  

consideration of the rival submissions, this Court  

considered the questions of law which had arisen.  The

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relevant question for the purposes of this case is  

“Whether an arbitration clause, which is a sacrosanct  

clause, can be rewritten by appointment of a judicial  

arbitrator when no qualification therefor is provided in  

the agreement?”

37. The answer to the aforesaid question was in the negative.  

It was held that the appointment made by the High Court  

was beyond the arbitration agreement which clearly  

envisages the appointment of the presiding arbitrator by  

IRC, there is no qualification that the arbitrator has to be  

a different person depending on the nature of the dispute.  

It was emphasised that “if the parties have entered into  

such an agreement with open eyes, it is not open to ignore it  

and invoke exercise of the powers in Section 11(6).”  The  

observations made by this Court in RITE     Approach    

Group     Ltd.   Vs. Rosoboronexport  16  , were reiterated,  

wherein this Court has clearly held that :-

“In view of the specific provision contained in the  `agreement specifying the jurisdiction of the court to  decide the matter, this Court cannot assume the  jurisdiction, and hence, whenever there is a specific  

16 (2006) 1 SCC 206

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clause conferring jurisdiction on a particular court  to decide the matter, then it automatically ousts the  jurisdiction of the other court.”

38. In Northern     Railway     Administration,     Ministry     of    

Railway,     New     Delhi   Vs. Patel     Engineering     Company    

Limited (supra), a three Judge bench of this Court  

reiterated the general principle as noticed in the  

judgments relied upon by Mr. Bhat.  At the same time, it  

is emphasised that in exercise of its powers under Section  

11(6) of the Act, the Court has to take into consideration  

the provision contained in Section 11(8) of the Act.  The  

aforesaid provision requires that the Chief Justice or the  

person or an institution designated by him in appointing  

an arbitrator shall have due regard to any qualifications  

required of the arbitrator by the agreement of the parties  

and other considerations as are likely to secure the  

appointment of an independent and impartial arbitrator.  It  

is also observed that a bare reading of the Scheme of  

Section 11 shows that the emphasis is on the term of the  

agreement being adhere to and /or give effect to as  

closely as possible.  But it is not mandatory for the Chief

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Justice or any person or institution designated by him to  

appoint the named arbitrator or arbitrators.  But at the  

same time, due regard has to be given to the  

qualifications required by the agreement and other  

considerations.  

39. In Indian     Oil     Corporation     Limited     &     Ors.   Vs. Raja  

Transport     Private     Limited   (supra), this Court whilst  

emphasizing that normally the Court shall make the  

appointment in terms of the agreed procedure, has  

observed that the Chief Justice or his designate may  

deviate from the same after recording reasons for the  

same.  In Paragraph 45 of the aforesaid judgment, it is  

observed as follows:-

“45. If the arbitration agreement provides for  arbitration by a named arbitrator, the courts should  normally give effect to the provisions of the  arbitration agreement. But as clarified by Northern  Railway Admn., where there is material to create a  reasonable apprehension that the person mentioned  in the arbitration agreement as the arbitrator is not  likely to act independently or impartially, or if the  named person is not available, then the Chief  Justice or his designate may, after recording  reasons for not following the agreed procedure of  referring the dispute to the named arbitrator,

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appoint an independent arbitrator in accordance  with Section 11(8) of the Act. In other words,  referring the disputes to the named arbitrator shall  be the rule. The Chief Justice or his designate will  have to merely reiterate the arbitration agreement  by referring the parties to the named arbitrator or  named Arbitral Tribunal. Ignoring the named  arbitrator/Arbitral Tribunal and nominating an  independent arbitrator shall be the exception to the  rule, to be resorted for valid reasons.”   

40. In view of the aforesaid observations, it would not be  

possible to reject the petition merely on the ground that  

this Court would have no power to make an appointment  

of an arbitrator other than the Chairman-cum-Managing  

Director or his designate.  This Court would have the  

power to appoint a person other than the named  

arbitrator, upon examination of the relevant facts, which  

would tend to indicate that the named arbitrator is not  

likely to be impartial.  In this case, the petitioner had  

clearly pleaded that the named arbitrator is a direct  

subordinate of the CMD and employee of the respondent.  

CMD is the controlling authority of all the employees, who  

have been dealing with the subject matter in the present  

dispute and also controlling authority of the named

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arbitrator.  Apprehending that the CMD, who had been  

dealing with the entire contract would not act impartially  

as an arbitrator, the petitioner had issued a notice on 20th  

May, 2011. In this notice, it was pointed out that while  

the entire process of the performance of the contract was  

going on, the CMD had issued a letter on 5th June, 2009  

to the petitioner stating that as per the company’s  

directives, all pending supplies as on that date were “put  

on hold”.  After the aforesaid communication, no  

communication was issued to the petitioner for supply of  

the goods as per the Purchase Order dated 3rd December,  

2009.  Even subsequently, there were difficulties when a  

further lot of 24 units were supplied.  The detailed  

submissions made by the petitioner have been noticed in  

the earlier part of the judgment.   

41. Keeping in view the aforesaid facts, I am of the opinion  

that it would not be unreasonable for the petitioner to  

entertain the plea that the arbitrator appointed by the  

respondent would not be impartial.  The CMD itself would  

not be able to act independently and impartially being

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amenable to the directions issued by the Ministry of  

Defence.  In similar circumstances, this Court in the case  

of Denel     (Proprietary)     Limited   Vs. Bharat     Electronics    

Limited     &     Anr.   (supra), this Court observed as follows:-

“21. However, considering the peculiar conditions in  the present case, whereby the arbitrator sought to  be appointed under the arbitration clause, is the  Managing Director of the Company against whom  the dispute is raised (the respondents). In addition  to that, the said Managing Director of Bharat  Electronics Ltd. which is a “government company”,  is also bound by the direction/instruction issued by  his superior authorities. It is also the case of the  respondent in the reply to the notice issued by the  respondent, though it is liable to pay the amount  due under the purchase orders, it is not in a  position to settle the dues only because of the  directions issued by the Ministry of Defence,  Government of India. It only shows that the  Managing Director may not be in a position to  independently decide the dispute between the  parties.”

42. In my opinion, the facts in the present case are similar  

and, therefore, a similar course needs to be adopted.

43. In exercise of my powers under Sections 11(4) and 11(6)  

of the Arbitration and Conciliation Act, 1996 read with  

Para 2 of the Appointment of Arbitrators by the Chief

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Justice of India Scheme, 1996, I hereby appoint Hon’ble  

Mr. Justice Ashok C. Agarwal, Retired Chief Justice of the  

Madras High Court, r/o No. 20, Usha Kiran, 2nd Pasta  

Lane, Colaba, Mumbai 400 005, as the sole arbitrator, to  

adjudicate the disputes that have arisen between the  

parties, on such terms and conditions as the learned sole  

arbitrator deems fit and proper. Undoubtedly, the learned  

sole arbitrator shall decide all the disputes arising  

between the parties without being influenced by any  

prima facie opinion expressed in this order, with regard to  

the respective claims of the parties.

44. The Registry is directed to communicate this order to the  

sole arbitrator forthwith to enable him to enter upon the  

reference and decide the matter as expeditiously as  

possible.

45. The Arbitration Petition is accordingly disposed of.

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……..…………………..J.                           [Surinder Singh Nijjar]  New Delhi; May 08, 2012.                                         

CORRIGENDUM

PARA NO.39, LAST LINE OF PARA,  FOR (EMPHASIS SUPPLIED),  

READ (THE LINE STANDS DELETED)