REPORTABLE   IN THE SUPREME COURT OF INDIA

  CIVIL APPELLATE JURISDICTION

                 SPECIAL LEAVE PETITION NO. 33448 OF 2011       

M/S. DAKSHIN SHELTERS P. LTD. ...   PETITIONER(s)

                     Versus

GEETA S. JOHARI .   RESPONDENT(s)

J U D G M E N T       R.M. LODHA, J.

We have heard Mr. Pallav Shishodia, learned senior  

counsel  for  the  petitioner  and  Mr.  Shyam  Divan,  learned  

senior counsel for the respondent.

2. A Development Agreement-cum-General Power of Attorney  

(for short “Development Agreement”) was executed between the  

parties on February 7, 2006.  Certain disputes arose out of  

that agreement.  On December 10, 2010, the respondent issued  

a notice to the petitioner invoking arbitration clause in the  

above agreement and nominated a former Judge of the  High  

Court  of  Andhra  Pradesh  –  Justice  P.L.N.  Sharma  -on  her  

behalf  and called  upon the present petitioner to nominate  

its arbitrator.

3. By  reply  dated  January  10,  2011,  the  petitioner  

communicated to the  respondent that since the Development  

Agreement  has been cancelled by her, there was no question  

for  resolution  of  disputes  between  the  parties  by  the  

Arbitrator.  The reply sent by the petitioner necessitated

the  invocation  of  Section  11  of  the  Arbitration  and  

Conciliation  Act,  1996  (for  short  “the  Act”)   by  the  

respondent and an application was made before the High Court  

of  Andhra  Pradesh  requesting  the  Chief  Justice  or  the  

Designate Judge  to appoint the arbitrator/arbitrators to  

decide the disputes arising out of the above agreement.

4. On hearing the parties, the Designate Judge by his  

order dated September 9, 2011 appointed Mr. D.V. Seetharama  

Murthy,  Sr.  Advocate  as  an  arbitrator  on  behalf  of  the  

petitioner (respondent therein).  It was further observed in  

the order that the  arbitrator nominated by  the  applicant  

(present  respondent)  and  the  arbitrator  appointed  by  the  

Designate  Judge  on  behalf  of  the  petitioner  (respondent  

therein) are required to appoint the third arbitrator before  

entering into  reference.

5. The order dated September 9, 2011 is under challenge  

in this Special Leave Petition.

6. On December 16, 2011, a limited notice was issued by  

this Court to the respondent.  The order issuing notice reads  

as follows:

“Mr. Pallav Shishodia, learned senior counsel for  the  petitioner  submits  that  instead  of  senior  advocate, who has been appointed as  arbitrator by  the designate Judge, a retired High Court Judge,  stationed  in  Hyderabad,  may  be  appointed.   He  further submits that the petitioner is willing to  bear the expenses, if limited notice is issued to  the respondent. Issue notice limited to the above, returnable in  five weeks subject to deposit of Rs. one lakh by  the petitioner in the Registry  towards costs. In the meanwhile, further proceedings before the

arbitrators shall remain stayed. “

7. In compliance of the above order, the petitioner has  

deposited Rs. 1 lakh in the Registry of this Court towards  

the costs of the respondent.

8. After  service,  respondent  has  entered  appearance  

through  Mr.  Y.  Rajagopala  Rao,  advocate-on-record.   Mr.  

Shyam   Divan,  learned  senior  counsel  appearing  for  the  

respondent, at the outset, submitted that the respondent was  

not agreeable to the substitution of arbitrator appointed by  

the Designate Judge on behalf of the petitioner.  

9. Mr. Pallav Shishodia, learned senior counsel for the  

petitioner  vehemently  contended  that  the  Designate  Judge  

ought  to  have  given  an  opportunity  to  the  petitioner  to  

nominate its arbitrator.  He referred to the suit filed by  

the  petitioner  against  the  respondent  challenging  the  

cancellation of the Development Agreement.  He also submitted  

that the  respondent made an application under Section 8 of  

the Act but that came to be  dismissed.  In  backdrop of  

these facts,  Mr. Pallav Shishodia submitted that when the  

petitioner received the notice dated December 10, 2012,  it  

was communicated by the petitioner to the respondent in its  

reply dated January 10, 2011  that there was no question for  

appointment  of  arbitrator  and  the  disputes  between  the  

parties could not be decided by the arbitrator.  Learned  

senior counsel, thus, submitted that the petitioner had not  

failed  to  appoint  the  arbitrator  as  contemplated  under  

Section 11(4) of the Act.

10. Mr.  Shyam   Divan,  learned  senior  counsel  for  the  

respondent,  on  the  other  hand,  submitted  that  once  an  

opportunity  was  given  to  the  petitioner  to  nominate  its  

arbitrator by notice dated December 10, 2010 and it failed to  

avail of the opportunity, it ceased to have any right to  

appoint the arbitrator in terms of the arbitration clause in  

the Development Agreement. In support of his  submission,  

Mr. Shyam Divan relied upon the decision of this Court in  

Union of India vs. Bharat Battery Manufacturing Co. (P) Ltd.1  

.

11. Mr. Pallav Shishodia, learned senior counsel for the  

petitioner, in rejoinder, referred to the  decision of this  

Court in National Highways Authority of India and another vs.  

Bumihiway  DDB  Ltd.  (JV)  and  others2.    He  particularly  

referred to  paragraphs 37 and 38 of the above decision.

12. We must immediately observe that the judgment of this  

Court  in  National  Highways  Authority2 relied  upon  by  Mr.  

Pallav  Shishodia  has  no  application  to  the  controversy  

involved  in  the  present  matter.   The   main  question  in  

National  Highways  Authority2  related  to  the  process  of  

appointment of arbitrator to be  followed on resignation or  

termination  of  mandate  of  an  arbitrator  and  one  of  the  

questions framed by this Court for determination was whether  

on  resignation  of  one  of  the  arbitrators,  the  statutory  

provision that comes into play was Section 15(2) or Section  

11(6)  of the Act.  The other  three questions noted in para  

1 (2007) 7 SCC 684 2 (2006) 10 SCC 763

20 of the Report have also no bearing on the question with  

which we are concerned in the present matter.

13. The arbitration clause in the Development Agreement  

between the parties reads as follows:

“25:  Arbitration: 25.1 Tribunal: Disputes relating to this Agreement or  its interpretation shall be referred to the arbitration  of  an  arbitral  tribunal,  consisting  of  three  arbitrators (Tribunal), one each to be appointed by the  parties hereto and the third  to be appointed by the  two  arbitrators  so  appointed.   The  award  of  the  Tribunal shall be final and binding on the parties.  The  arbitration  proceedings  will  be  held  only  in  Secunderabad and the courts situated in the Ranga Reddy  District alone shall have the territorial jurisdiction  to  entertain  the  dispute.   The  provisions  of  Arbitration and Conciliation Act shall comply to the  arbitration procedures.

25.2 Powers of Tribunal:  The Tribunal shall be at  liberty to (1) proceed summarily (2) avoid all rules,  procedures  and/or  evidences  that  can  be  lawfully  avoided by the mutual consent and/or directions by the  parties  and  (3)  award  damages  along  with  the  final  award against the party not complying with any interim  award or order passed by the Tribunal.  The Tribunal  shall:

(a) Make  the  award in  English  and  within  four  months from the date of appointment with the right to  give extension of not more than one month at a time  on emergent grounds but the total extensions shall  not be more than four months. (b) Conduct the proceedings from  day-to-day and  for about 5 hours per day save for initial sittings. (c) Not  grant  to  either  of  the  parties  any  extension  of  time  and/or  adjournment  except  on  grounds  beyond  their  control  and  only  for  such  periods as be of the abosute3 minimum. (d) The  Tribunal  shall  be  entitled  to  pass  interim award granting interim relief to the parties. 25.3 Mechanism and Procedure:  The procedure to be  followed  shall  be  decided  by  the  Tribunal.   The  directions/award of the Tribunal shall be final and  binding on the parties.”

14. On the disputes  having  arisen between the parties,

the notice was sent by the respondent to the petitioner on  

December 10, 2010.  Paragraph 4 of the said notice reads as  

under:

“I do hereby invoke the Arbitration Clause in the  agreement bearing Doc. No. 2778 of 2006 and appoint  Hon'ble Mr. Justice P.L.N. Sharma, a retired Judge  of A.P. High Court, r/o Gandhi Nagar, Hyderabad as  arbitrator within a week from the date of receipt of  this   notice  to  adjudicate  all  claims,  disputes,  differences,  restitutions,  restorations  whatsoever  in law and in equity, in terms of the registered  Development Agreement cum GPA document registered as  Doc. No.  2778  of  2006, failing  which I  shall  be  constrained  to  initiate  appropriate  legal  action  under  Section  11  of  the  Arbitration  Act  for  appointment of arbitrator on your behalf as well as  you shall be solely responsible fro all costs and  consequences.”

15. The petitioner did respond to the above notice within  

30 days of its receipt by sending its reply on January 10,  

2011. Various  pleas  were  raised  in  that  reply  and  

ultimately,  the  petitioner  responded  by  stating   “it  is  

stated that the question of appointment of Arbitrator does  

not raise either from your side or from our side. There is no  

arbitral dispute to be decided by the arbitrator.”

16. From  the  above  response,  it  is  clear   that  the  

petitioner declined to appoint its arbitrator as according to  

it there was no question  of appointment of arbitrator  by  

either of the parties and there being no arbitral dispute,  

there was no occasion for resolution of dispute as provided  

in the Development  Agreement.  The stance of the petitioner  

amounted to failure on its part to appoint  its arbitrator on  

receipt of the request to do so from the respondent.   

17. In view of the above, it cannot be said that the  

Designate Judge  committed any error in nominating Mr. D.V.

Seetharama Murthy, Sr. Advocate as an arbitrator on behalf of  

the petitioner.  The order of the learned Single Judge is in  

conformity with the decision of this Court in Bharat Battery  

Manufacturing  Co.  (P)  Ltd.1 wherein  this  Court  stated  as  

follows:

“Once a party files an application under section  11(6) of the Act, the other party extinguishes its  right  to  appoint  an  arbitrator  in  terms  of  the  clause of the agreement thereafter.   The right to  appoint arbitrator under the clause of agreement  ceases after Section 11(6) petition has been filed  by  the  other  party  before  the  Court  seeking  appointment of an arbitrator.”

18 The petitioner's right to appoint its arbitrator in  

terms  of  clause  25  of  the  Development  Agreement  got  

extinguished once  it  failed to appoint the  arbitrator on  

receipt of the notice dated December 10, 2010. There  is no  

merit in the submission of the learned senior counsel for the  

petitioner that the Designate Judge ought to have given an  

opportunity to the petitioner to nominate its arbitrator.

19. The  order  impugned  in  the  present  Special  Leave  

Petition  does not suffer from any infirmity.  Special Leave  

Petition is, accordingly, dismissed with costs. The amount of  

Rs. one lakh  deposited by the petitioner in the Registry of  

this Court shall be paid to the respondent.

              .....................J.                                  (R.M. LODHA)

              .....................J.                           (H.L. GOKHALE)

  NEW DELHI    FEBRUARY 21, 2012.

ITEM NO.3               COURT NO.8             SECTION XIIA

           S U P R E M E   C O U R T   O F   I N D I A                          RECORD OF PROCEEDINGS                      Petition(s) for Special Leave to Appeal (Civil) No(s).33448/2011

(From the judgement and order  dated 09/09/2011 in AA No.41/2011 of  The HIGH COURT OF A.P  AT HYDERABAD)

M/S DAKSHIN SHELTERS P.LTD.                       Petitioner(s)

                VERSUS

GEETA S. JOHARI                                    Respondent(s)

( office report for direction )

Date: 21/02/2012  This Petition was called on for hearing today.

CORAM :         HON'BLE MR. JUSTICE R.M. LODHA         HON'BLE MR. JUSTICE H.L. GOKHALE

For Petitioner(s) Mr. Pallav Shishodia, Sr. Adv.                       Mr. Annam D.N. Rao,Adv.

Ms. Neelam Jain,Adv.

For Respondent(s) Mr. Shyam Divan, Sr. Adv.                       Mr. Y. Raja Gopala Rao,Adv.

          UPON hearing counsel the Court made the following                                O R D E R  

We have heard Mr. Pallav Shishodia, learned senior  

counsel  for  the  petitioner  and  Mr.  Shyam  Divan,  learned  

senior counsel for the respondent.

2. A Development Agreement-cum-General Power of Attorney  

was  executed  between  the  parties  on  February  7,  2006.

Certain disputes arose out of the above agreement between the  

parties.  On December 10, 2010, the present respondent issued  

a notice to the petitioner invoking the arbitration clause in  

the above agreement and nominated a former Judge of the  High  

Court  of  Andhra  Pradesh  –  Justice  P.L.N.  Sharma  -on  her  

behalf calling upon the present petitioner to nominate its  

arbitrator.

3. By  reply  dated  January  10,  2011,  the  petitioner  

communicated  to  the  present  respondent  that  since  the  

Development  Agreement  itself  has  been  cancelled  by  the  

present respondent, there is no occasion for resolution of  

disputes between the parties by the Arbitrator.  The reply  

sent by the petitioner necessitated the invocation of Section  

11 of the Arbitration and Conciliation Act, 1996 (for short  

“the Act”)  by the present respondent and an application was  

made before the High Court of Andhra Pradesh requesting the  

Chief  Justice  or  the  designate  Judge   to  appoint  the  

arbitrator-arbitrators to decide the disputes arising out of  

the above agreement.

4. On hearing the parties, the designate Judge by his  

order dated September 9, 2011 appointed Mr. D.V. Seetharama  

Murthy,  Sr.  Advocate  as  an  arbitrator  on  behalf  of  the  

petitioner  (respondent  therein)  for  adjudication  of  the  

disputes between the parties.  It was further observed in the  

order  that  the  arbitrator  nominated  by  the  present  

respondent-cum-applicant therein and the arbitrator appointed  

by the designate Judge on behalf of the present petitioner

are required to appoint the third arbitrator before entering  

into a reference.

5. It  is the order  dated September 9,  2011 which is  

under challenge in this Special Leave Petition.

6. On December 16, 2011, a limited notice was issued by  

this Court to the respondent.  The order issuing notice reads  

as follows:

“Mr. Pallav Shishodia, learned senior counsel for  the  petitioner  submits  that  instead  of  senior  advocate, who has been appointed as  arbitrator by  the designate Judge, a retired High Court Judge,  stationed  in  Hyderabad,  may  be  appointed.   He  further submits that the petitioner is willing to  bear the expenses, if limited notice is issued to  the respondent. Issue notice limited to the above, returnable in  five weeks subject to deposit of Rs. one lakh by  the petitioner in the Registry  towards costs. In  the  meanwhile,  further  proceedings  before  the  arbitrators shall remain stayed. “

7. In compliance of the above order, the petitioner  

has deposited Rs. 1 lakh in the Registry of this Court  

towards the costs of the respondent.

8. After service, respondent has entered appearance  

through Mr. Y. Rajagopala Rao, advocate-on-record  and  

he is represented by Mr. Shyam Divan, learned senior  

counsel.

9. Mr. Pallav Shishodia, learned senior counsel for  

the petitioner refers to the suit filed by the present  

petitioner  against  the  respondent  cancelling  the

Development  Agreement  between  the  parties.   He  also  

submits that the present respondent made an application  

under  Section  8  of  the  Act  but  that  came  to  be  

dismissed.   

10. In  the  backdrop  of  the  above  facts,  when  the  

petitioner received the notice dated December 10, 2012,  

by  its  reply  dated  January   10,  2011,  it  was  

communicated by the petitioner to the respondent that  

there was no occasion for appointment of arbitrator and  

the disputes between the parties could not be decided  

by  the  arbitrator.   Learned  senior  counsel  further  

submits that the petitioner had not failed to appoint  

the arbitrator as contemplated under Section 11(4) of  

the Act and, therefore, the Designate Judge ought to  

have given an opportunity to the petitioner to nominate  

its arbitrator.

11. Mr. Shyam  Divan, learned senior counsel for the  

respondent, on the other hand, submitted that once an  

opportunity was given to the petitioner to nominate its  

arbitrator which it failed to do, it ceases to have any  

right  to  appoint  the  arbitrator  in  terms  of  the  

arbitration clause in the Development Agreement.

12. In support of his submissions,  Mr. Shyam Divan  

relied upon a decision of this Court in Union of India

vs. Bharat Battery Manufacturing Co. (P) Ltd.1 .

13. Mr. Pallav Shishodia, learned senior counsel for  

the petitioner, in rejoinder, referred to a decision of  

this Court in National Highways Authority of India and  

another vs. Bumihiway DDB Ltd. (JV) and others2.   He  

particularly referred to the  paragraphs 37 and 38 of  

the above decision.

14. We must immediately observe that the judgment of  

this  Court  in  National  Highways  Authority  of  India2  

relied upon by Mr. Pallav Shishodia has no application  

to the controversy involved in the present matter.  The  

controversy in National Highways2 related to the process  

of  appointment  of  arbitrator  to  be   followed  on  

resignation or termination of mandate of an arbitrator.  

That matter related to the appointment of substitute  

arbitrator which is not the present case.

15. Insofar as the present case is concerned, the  

arbitration clause reads as follows:

“25:  Arbitration: 25.1 Tribunal:  Disputes  relating  to  this  Agreement or its interpretation shall be referred  to  the  arbitration  of  an  arbitral  tribunal,  consisting  of  three  arbitrators  (Tribunal),  one  each to be appointed by the parties hereto and the  third  to be appointed by the two arbitrators so  appointed.  The award of the Tribunal shall be  final and binding on the parties.  The arbitration  

1 (2007) 7 SCC 684 2 (2006) 10 SCC 763

proceedings will be held only in Secunderabad and  the courts situated in the Ranga Reddy District  alone shall have the territorial jurisdiction to  entertain  the  dispute.   The  provisions  of  Arbitration and Conciliation Act shall comply to  the arbitration procedures.

25.2 Powers of Tribunal:  The Tribunal shall be at  liberty  to  (1)  proceed  summarily  (2)  avoid  all  rules,  procedures  and/or  evidences  that  can  be  lawfully  avoided  by  the  mutual  consent  and/or  directions by the parties and (3) award damages  along with the final award against the party not  complying with any interim award or order passed  by the Tribunal.  The Tribunal shall:

(a) Make the award in English and within four  months  from  the date of appointment  with  the  right to give extension of not more than one  month  at  a  time  on  emergent  grounds  but  the  total  extensions  shall not  be  more  than  four  months. (b) Conduct the proceedings from  day-to-day  and for about 5 hours per day save for initial  sittings. (c) Not grant to either of the parties any  extension of time and/or adjournment except on  grounds beyond their control and only for such  periods as be of the abosute3 minimum. (d) The Tribunal shall be entitled to pass  interim  award  granting  interim  relief  to  the  parties. 25.3 Mechanism and Procedure:  The procedure  to be followed shall be decided by the Tribunal.  The directions/award of the Tribunal shall be  final and binding on the parties.”

16. On the dispute- as having been arisen between  

the parties, notice was sent by the respondent to the  

petitioner on December 10, 2010.  Paragraph 4 of the  

said notice reads as under:

“I do hereby invoke the Arbitration Clause in  the agreement bearing Doc. No. 2778 of 2006 and  appoint  Hon'ble  Mr.  Justice  P.L.N.  Sharma,  a  retired Judge  of A.P. High Court, r/o Gandhi

Nagar,  Hyderabad  as  arbitrator  within  a  week  from the date of receipt of this  notice to  adjudicate  all  claims,  disputes,  differences,  restitutions, restorations whatsoever in law and  in  equity,  in  terms  of  the  registered  Development  Agreement  cum  GPA  document  registered  as Doc. No. 2778 of 2006, failing  which  I  shall  be  constrained  to  initiate  appropriate legal action under Section 11 of the  Arbitration Act for appointment of arbitrator on  your  behalf  as  well  as  you  shall  be  solely  responsible fro all costs and consequences.”

17. The petitioner did respond to the above notice  

by sending its reply on January 10, 2011.

18. Various  pleas  were  raised  in  that  reply  and  

ultimately,  the  petitioner  responded by  stating  that  

“it  is  stated  that  the  question  of  appointment  of  

Arbitrator does not raise either from your side or from  

our side. There is no arbitral dispute to be decided by  

the arbitrator.”

19. From the above response, no  doubt is left that  

the petitioner failed to appoint  its arbitrator on  

receipt of the request to do so from the respondent.   

20. In view of the above, the designate Judge did  

not commit any error in nominating Mr. D.V. Seetharama  

Murthy, Sr. Advocate as an arbitrator on behalf of the  

petitioner.  The order of the learned Single Judge is  

in conformity with the decision of this Court in Bharat  

Battery Manufacturing Co. (P) Ltd.1 wherein this Court  

stated as follows:

“Once  a  party  files  an  application  under

section  11(6)  of  the  Act,  the  other  party  extinguishes  its  right  to  appoint  an  arbitrator  in  terms  of  the  clause  of  the  agreement thereafter.   The right to appoint  arbitrator  under  the  clause  of  agreement  ceases after Section 11(6) petition has been  filed  by  the  other  party  before  the  Court  seeking appointment of an arbitrator.”

21. The order impugned in the present Special Leave  

Petition  does not suffer from any infirmity and is  

dismissed. The amount of Rs. one lakh  deposited by the  

petitioner in the Registry of this Court shall be paid  

to the respondent.

(Pardeep Kumar) Court Master

(Renu Diwan)  Court Master