2024:BHC-AS:14828

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION
COMMERCIAL ARBITRATION PETITION NO. 16 OF 2023

Kirloskar Pneumatic Company Ltd .. Petitioner

Versus
Kataria Sales Corporation .. Respondent
…
Mr. Sunny Shah a/w. Devanshi Sethi i/b Hemant Sethi, for the
Petitioner.
Mr. Dormaan Dalal, for respondent.

CORAM: BHARATI DANGRE, J.

DATED : 21st MARCH 2024
ORAL JUDGMENT:-

1 The arbitration petition filed by the Kirloskar

Pneumatic Company Ltd, seek relief of appointment of Sole
Arbitrator to adjudicate the disputes with the respondent Kataria
Sales Corporation, out of the Dealership Agreement dated
19/06/2013.
The Petitioner being engaged in the business of
manufacturing and selling various types of air & gas
compressors, accessories, spare parts and providing for after sale
services of the equipment struck a deal with the respondent,
which is also interalia engaged in the similar business and the
business deal found its way in the Dealership Agreement.
2 Pursuant thereto purchase order raised by the
respondent Kataria Sales on the petitioner Kirloskar Pneumatic
Company, which raised an invoice for an amount of
Rs. 14, 86,932 on 27/03/2015, but Kataria Sales refused to pay

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the amounts.
The above event was followed by exchange of
multiple emails for almost one year with accusations being
flunged at each other and explanations offered dealing with the
same. However, the parties were unable to reconcile their
differences.
3 One more purchase order was placed by Kataria
Sales on Kirloskar Pneumatic Company for which it raised an
invoice for an amount of Rs. 6,18,879/- but what was received
by Kirloskar Pneumatic Company was only part payment,
despite the whole amount under the purchase order becoming
due and payable.
4 In this background, on 30/10/2018, Kirloskar
Pneumatic Company invoked arbitration and appointed
Advocate. Anurag Jain to act as a sole arbitrator.
The arbitrator on 23/11/2020 declared an award in its
favour directing Kataria Sales to pay to the claimant (Kirloskar
Pneumatic Company) an amount of Rs. 29,90,524/- together
with interest @ 18% per annum from 22/02/2019 till payment
and/or realization. Kataria Sales was also levied with cost of
Rs. 4,42,500/-, together with an interest @ of 12% per annum
from the date of the award till payment and/or realization.
5 This judgment however faced a challenge before the
District Judge, Pune in form of Civil Miscellaneous Application
No. 262 of 2021 and by judgment dated 7/01/2023, the arbitral
award dated 23/11/2020, passed by the Sole Arbitrator was set

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aside on the ground that the Sole Arbitrator was appointed

unilaterally by the claimant/ Kirloskar Pneumatic Company and
in the wake of the ruling of the Apex Court in case of Perkins
Eastman Architects DPC & Anr. Vs. HSCC (India) Limited
(2020) 20 SCC 760, as well as the position of law as laid down
in TRF Limited vs. Energo Engineering Projects Limited (2017)
8 SCC 377, such an appointment cannot be sustained.
6 It is in this background, the present application is
filed by Kirloskar Pneumatic Company, seeking appointment of
an Arbitrator as the disputes arising between the parties out of
the dealership agreement could be resolved only through the
process of arbitration.
7 I have heard learned counsel Mr. Sunny Shah for the
petitioner, who would justify the prayer in the petition and seek
appointment of the Sole Arbitrator in the background facts. He is
opposed in his submission by Adv. Dormaan Dalal representing
Kataria Sales, who would raise a preliminary objection about the
maintainablity of the petition and according to Mr. Dalal it being
‘pre-mature’ since the petition is filed under Section 11 (6)
without first invoking the arbitration clause under Section 21.
According to him, the dispute commences only from
the date on which the request for arbitration is received by the
other side, unless otherwise agreed between the parties.
According to him, the arbitration clause do not contemplate ‘re-
invocation of arbitration’ and it is the submission of Mr. Dalal
that without invocation, the proceedings under Section 11(6) are
not maintainable.

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Highlighting the scheme of the enactment, the

submission is by now it is a fairly settled position of law that the
cause for filing an application under Section 11, would arise
upon the failure to make the appointment of arbitrator within
period of 30 days from issuance of the notice by invoking
arbitration. He would invoke the relevant observation of the
Apex Court in case of BSNL vs Nortel Networks (India) Private
Limited (2021) 5 SCC 738 and in particular the following
observation:
“An application under Section 11 can be filed only after a notice
of arbitration in respect of the particular claim(s)/ dispute(s) to
be referred to arbitration [as contemplated by Section 21 of the
Act] is made, and there is failure to make the appointment.”
He would also place reliance upon decision of the
learned Single Judge of this Court in case of Associated
Constructions vs. Mormugoa Port Trust (2010), 5 MHLJ 739
and another decision in case of Wadhwa Group Holdings Pvt Ltd
vs. Homi Pheroze Ghandhy and anr (CARBAP No.414 of 2019)
dated 7/03/2022, to buttress his submission that when there is no
invocation, the appointment of the arbitrator cannot be sustained.
Another decision delivered by me in case of R J
Shah and Co Ltd vs State of Maharashtra and ors. (CARBAP
NO. 13 of 2021 is also relied upon by Mr. Dalal.

8 In order to dispel the said contention, I must first turn

my attention to the Scheme of the Act of 1996 and the procedure
for appointment of Arbitrator (s).

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In light of an existing ‘arbitration agreement’

between the parties as contemplated under Section 7 of the Act,
the parties are free to agree on a procedure for appointing the
Arbitrator or Arbitrators.
This provision is however subjected to sub-section
(6) of Section 11, which provide for appointment of an arbitrator
by the arbitral institution designated by the Supreme Court in
case of International Commercial Arbitration or by the High
Court, in case of Arbitrations other than the International
Commercial Arbitration in the following scenario:
“(6) Where, under an appointment procedure agreed upon
by the parties,-
(a) A party fails to act as required under that procedure;
or
(b) the parties, or the two appointed arbitrators, fail to
reach an agreement expected of them under that procedure;
or
(c) a person, including an institution, fails to perform any
function entrusted to him or it under that procedure,”
9 Chapter- III of the Arbitration and Conciliation Act,
1996 set out the ground for challenge and also set out the
challenge procedure, once an arbitrator or arbitrators are
appointed.
Chapter- V of the Act relate to the Conduct of
Arbitral proceedings and it includes provisions for determination
of the rules of procedure, the place of arbitration, language, etc.
In this chapter, Section 21, which in normal parlance
is referred to as ‘invocation of arbitration’, though this specific
terminology is not part of the Section is to be found.

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For the sake of convenience the Section itself

deserve a reproduction.
“21. Commencement of arbitral proceedings.- Unless
otherwise agreed by the parties, the arbitral proceedings in
respect of a particular dispute commence on the date on which a
request for that dispute to be referred to arbitration is received
by the respondent.”
10 Reading of the Section would clearly indicate that
the arbitral proceedings in respect of a particular dispute,
commence on the date on which the request for the dispute to be
referred to arbitration is received by the respondent.
In other words, section 21 has fixed the date of
commencement of the arbitral proceedings, premised on the
arbitration agreement between the parties and Section 21 provide
that the commencement shall be the date on which the
respondent received a request from the applicant for referring the
dispute to arbitration.
11 The above procedure is normally understood as
‘invocation of arbitration’ proceedings i.e. triggering of the
process, which is accepted between the parties as a mode for
settlement of the dispute/s that has arisen between the parties, to
an arbitration agreement.
When the above provision is read as it stands, it shall
be applicable to all arbitration proceedings, unless it is otherwise
agreed between the parties. The moment a request for referring a
dispute to arbitration is received by one party from the other, it

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shall mark the commencement of arbitral proceedings.

12 Upon receipt of such a notice at the end of the
respondent, the applicant has triggered the arbitral proceedings,
but if the party at the other end fails to act as required i.e. agree
to the appointment of the arbitrator or a panel of arbitrators as
decided between the parties and set out in the arbitration
agreement, which comply the test of Section 7, or if the parties,
who have appointed the respective arbitrator fail to reach a
consensus, under the procedure, upon an application being
preferred under sub-section (6) of Section 11, the arbitrator/s
shall be appointed to take the process of arbitration ahead.
Once an arbitral tribunal is constituted in this
manner, follows the regime of arbitration, which is set out in
chapter -V by filing of statement of claim and defence, hearing,
appointment of an expert etc and this proceeding would
culminate on declaration of an award by the arbitrator under
Section 31.
13 The argument of Mr. Dalal, will have to be
appreciated in the aforesaid statutory scheme, as it is his
contention that when an unilateral appointment of an arbitrator
was frowned upon and resultantly, the award passed by such an
arbitrator, who was de jure ineligible to act is set aside, once
again the arbitration, will have to be invoked by issuing a notice
under Section 21.
The above argument on its face is fallacious, since
the petitioner has already forwarded a request to the respondent
for referring the dispute, that had arisen between them to

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arbitration and the arbitral proceedings in respect of that dispute

has commenced. Merely because the award passed by an
ineligible arbitrator is set aside, is not sufficient enough to give
new contour to the dispute, as the dispute between the parties
still remain the same but now what is sought by the petitioner
today, is appointment of a competent arbitrator to arbitrate the
dispute and the petitioner expect the arbitrator to be eligible to
act as such i.e he shall be a neutral and independent person and
his appointment is not in teeth of Section 12 of the Act of 1996
or schedule V and VII of the Act.
14 Dispute which in colloquial language is understood
as a disagreement between two parties is often referred to as
altercation, squabble, bickering etc. As per Cambridge dictionary
the word dispute is defined as ‘an argument or disagreement,
especially an official one between, e.g workers and employers or
two countries with a common border’
The disagreement between the parties before me
arose long back, when the respondent refused to pay the amounts
due under the invoices and made only part payment.
This constrained the petitioner to invoke arbitration,
and once again it must be clarified that when it is said that it
invoked arbitration, what it did was it forwarded a notice to
respondent apprising it about the amount due and payable under
the Dealership Agreement between the parties, with respective
obligations cast on each of them and which contained the clause,
providing that any dispute that would arise between the parties
shall be referred to and settled through Arbitration.

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The only problem arose, is the appointment of an

Arbitrator was unilaterally made by the petitioner and as such it
was capable, of casting a doubt on the independence and
impartiality of the arbitrator and hence not permissible in law.
Though the Sole Arbitrator unilaterally appointed
continued with the proceedings and even declared an award
dated 23/11/2023, it is set aside on 7/01/2023, by the competent
Court on this very ground.
15 In the sequence of events mentioned above, when
the arbitration mechanism is already triggered and the
proceedings have commenced upon the issuance of the notice by
the petitioner to the respondent on 30/10/2018, and therefore
when the petitioner now seek appointment of an independent and
impartial arbitrator, through the mechanism of sub-section (6) of
Section 11, I do not deem it necessary that it should be preceded
by a fresh notice under Section 21, though the respondent
preferred to call it as ‘invocation notice’, as the arbitration
proceedings are already commenced and the respondent is aware
about the existence of a dispute and also of the fact, that this
dispute in terms of the agreement between the parties deserve to
be resolved through an independent arbitrator.
For the above, the submission of Mr. Dalal do not
deserve any consideration and is rejected.
16 In the wake of the above by exercising the power
under sub-section (6) of Section 11 following order is passed:

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In the wake of the above, Mr. Jayprakash Shridhar

Kapare (Retd. District Judge), is appointed as Sole Arbitrator to
adjudicate the disputes and differences that have arisen between
the petitioner and the respondent. The details of the Arbitrator
are as below:
Name :- Mr. Jayprakash Shridhar Kapare (Retd. District
Judge)

Address :- H705, Saptsur Society, DSK Wishwa Dhayri,

Pune-411041

The Arbitrator shall, within a period of 15 days

before entering the arbitration reference forward a statement of
disclosure as contemplated u/s.11(8) r/w Section 12 of the
Arbitration and Conciliation Act, 1996, to the Registrar Judicial-
II, of this Court to be placed on record.
The Arbitrator, shall after entering the reference fix
the date of first hearing and issue further directions as are
necessary.
The Sole Arbitrator shall be entitled for the fees as
per Bombay High Court (Fee Payable to Arbitrators) Rules, 2018
and the arbitral costs and fees of the Arbitrator shall be borne by
the parties in equal portion and shall be subject to the final
Award that may be passed by the Tribunal.
All rights and contentions of the parties are kept
open.

(SMT. BHARATI DANGRE, J.)

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