Jay Bhagwani Construction Co vs Haware Engineers And Builders Pvt. Ltd

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

COMMERCIAL ARBITRATION APPLICATION NO.121 OF 2018

M/s. Jay Bhagwati Construction Co. ) a partnership firm registered under ) The Indian Partnership Act, 1932 ) (Regn. No.MU 000003339) and having ) its head office at II No.6, Shastri Nagar, ) Near Samaj Mandir Hall, Bandra (East), ) Mumbai - 400 051 through its Partner ) Mr.Chandan Mithbavkar ) .. Applicant

Versus

Haware Engineers & Builders Pvt. Ltd. ) A Company registered under the ) Indian Companies Act, 1956, ) having its registered address at ) 416, Vardhaman Market, Sector-17, ) Vashi, Navi Mumbai - 400 705. ) .. Respondent ---

Mr.Aditya Thakkar a/w Ms.Rishika Harish a/w Mr.Deepak Shukla a/w Ms.Swapna Samant i/by Vinod Mistry Co. for the applicant.

Mr.Atul Rajadhyaksha, Senior Advocate a/w Mr.Nishant Tripathi a/w Mr.Somnath Iyer i/by M. Tripathi & Co. for the respondent. --- CORAM : R.D. DHANUKA, J.

RESERVED ON : 19th October 2018 PRONOUNCED ON : 25th October 2018

Judgment :-

. By this application filed under Section 11(6) of the

Arbitration and Conciliation Act, 1996, the applicant seeks appointment

of a sole arbitrator to adjudicate upon the disputes and differences

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between the parties under the Work Order dated 18th June 2013 by

invoking Clause 32 of the said work order annexed at Exhibit-A to the

arbitration application. Some of the relevant facts for the purpose of

deciding this application are as under : -

2. The respondent issue a Work Order dated 18th June 2013

thereby appointing the applicant as a Contractor for certain works in

respect of the development of a building at Kasar Wadavali, Ghodbunder

Road, Thane. Clause 32 of the said work order is extracted as under : -

"Incase of any dispute, our Managing Director's decision will be final and binding on both the parties any dispute shall be referred to arbitration or any court."

3. The dispute arose between the parties. The applicant vide its

advocate's letter dated 15th September 2017 called upon the respondent

to pay a sum of Rs.5,13,29,560.49 and with interest @ 18% p.a. In

paragraph 28 of the said letter, the applicant pointed out clause 32 of

the said work order stating that the said clause was an arbitration clause

and the applicant reserved their rights to invoke the said clause. There

was no response to the said letter addressed by the applicant through its

advocate.

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4. On 16th October 2017, the applicant through its advocate

invoked clause 32 of the said work order and nominated a counsel of

this Court to be the sole arbitrator and called upon the respondent to

confirm the same within a period of 30 days from the date of the receipt

of the said letter. In response to the said letter invoking clause 32, the

respondent through its advocate's letter denied that clause 32 of the

work order was an arbitration agreement. It was contended that first part

of the said clause contemplates a reconciliation process whereby the

decision of the Managing Director was given a finality. In the event of

the dispute still persisting, the parties had option either to agree for

arbitration or seek remedies through he judicial process. Clause 32 does

not reveal any concluded arbitration agreement. Since the respondent

refused to appoint an arbitrator, the applicant filed this application under

Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short

"the said Act") inter alia praying for appointment of a sole arbitrator.

5. Mr.Thakkar, learned counsel for the applicant invited my

attention to clause 32 of the work order dated 18th June 2013 and the

correspondence exchanged between the parties including the notice

invoking clause 32 by the applicant, response of the respondent thereto

and would submit that the said clause 32 clearly contemplated an

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arbitration agreement between the parties. He submits that first part of

the said clause refers to dispute, decision of the managing director upon

the such dispute being final and binding on both the parties and the

second part of the said clause refers to arbitration or any Court. He

submits that the intention of the parties is thus absolutely clear that in

case of any dispute between the parties, such dispute was required to be

referred to the arbitration of the Managing Director of the respondent.

He submits that however, in view of Section 12(5) read with Seventh

Schedule of the Arbitration and Conciliation Act, 1996, the managing

director of the respondent who was the named arbitrator would be

ineligible to act an arbitrator. The applicant has thus suggested the name

of a counsel of this Court to be appointed as a sole arbitrator and the said

appointment shall be confirmed within a period of 30 days from the

receipt of the said notice failing which the applicant would adopt

appropriate remedy for seeking such appointment. He submits that the

managing director of the respondent thus could not have been appointed

as an arbitrator in view of the said provision under Section 12(5) read

with Seventh Schedule of the said Act.

6. Learned counsel placed reliance on an unreported judgment

of this Court delivered on 19th March 2015 in the case of Tatva Global

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Environment (Deonar) Ltd. Vs. The Municipal Corporation of Gr.

Mumbai in Arbitration Application No.15 of 2014 and would submit that

this Court after considering a similar arbitration clause and after adverting

to the judgment of the Hon'ble Supreme Court in the case of Bihar State

Mineral Development Corporation & Anr. Vs. Encon Builders (I) (P)

Ltd., (2003) 7 SCC 418 and another judgment of the Hon'ble Supreme

Court in the case of Jagdish Chander Vs. Ramesh Chander & Ors.,

(2007) 5 SCC 719 and in case of Datar Switchgears Ltd. Vs. Tata

Finance Ltd., (2000) 8 SCC 151 and in the case of Deep Trading

Company Vs. Indian Oil Corporation, (2013) 4 SCC 35 has held that

there existed a valid and subsisting arbitration agreement between the

parties. He submits that the respondent did not agree to the name

suggested by the applicant within a period of 30 days and did not even

suggest any other name to the applicant for appointment of a sole

arbitrator by consensus of the parties within the time prescribed, this

Court has an ample power to appoint an independent arbitrator.

7. Learned counsel for the applicant placed reliance on the

judgment of the Hon'ble Supreme Court in the case of Zhejiang Bonly

Elevator Guide Rail Manufacture Co. Ltd. Vs. Jada Elevator

Components, 2018 SCC OnLine SC 1503 and in particular paragraphs

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4, 10 and 11 thereof and would submit that the Hon'ble Supreme Court

has considered the identical arbitration clause and has held that the

intention of the parties to have their disputes resolved by arbitration was

clear and thus the Hon'ble Supreme Court has appointed an arbitrator on

interpretation of the said clause.

8. Mr.Rajadhyaksha, learned senior counsel for the respondent,

on the other hand, invited my attention to the averments made in

paragraphs 4, 5, 27 and 29 of the arbitration application and also affidavit

in rejoinder filed by the applicant and would submit that it is the case of

the applicant that the dispute between the parties was required to be

referred to the arbitration of the named arbitrator who was the

managing director of the respondent.

9. It is submitted that the said clause 32 cannot be construed as

an arbitration agreement. The managing director was not required to act

judicially or to exercise any power to resolve the dispute between the

parties. The said clause 32 does not indicate any adjudication of dispute

by complying with the provisions of law and principles of natural

justice. The said clause 32 does not postulate a binding agreement

between the parties contemplating appointment of an arbitrator. The said

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clause has to be read in totality. The said clause when read in its totality

does not constitute a binding obligation to refer the dispute to arbitration,

but merely contemplates a possibility of going to arbitration subject to

a further agreement between the parties in that regard. The said procedure

contemplated under clause 32 was for primary and secondary approaches

to the dispute resolution. When the dispute was not resolved at the

execution level, it becomes inevitable that the administrative head

intervened to amicably resole the same.

10. It is submitted that the first part of the said clause 32 has to

be read in context which was engrafted merely to avoid delay and

stoppage of work and for the purpose of smooth carrying on of the

works. He submits that if the managing director fails to resolve the

dispute, the parties have option either to refer the dispute to arbitration

or seeks remedies through the judicial process. At the most, the second

part of the said clause 32 shows that it was not the intention of the parties

that the arbitration be the sole dispute resolution mechanism. He

submits that the parties have not arrived at an agreement to refer the

dispute to arbitration and thus the dispute cannot be referred to

arbitration.

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11. Learned senior counsel for the respondent placed reliance on

the judgment of the Hon'ble Supreme Court in the case of National

Agricultural Coop. Marketing Federation India Ltd. Vs.Gains Trading

Ltd., (2007) 5 SCC 692 in support to the submission that the said

clause 32 refers to "arbitration or court" and thus the rules of

interpretation required the clause to be read in the ordinary and natural

sense, except where that would lead to an absurdity. No part of a term or

clause should be considered as a meaningless, surplusage, when it is in

consonance with the other parts of the clause and expresses the specific

intention of the parties.

12. Learned senior counsel placed reliance on an unreported

judgment delivered on 10th September 2009 in the case of Dr.Arun

Subrao Prabhu Vs. M/s.Rizvi Builders & Ors. in Suit No.1336 of 1988

and in particular paragraphs 6, 11 and 14 thereof in support of the

submission that while interpreting the words of a contract, the efforts

of the Court must be to read all the provisions harmoniously. A

construction which results in any part of the contract being rendered

otiose must be avoided.

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13. Learned senior counsel placed reliance on the judgment of

the Hon'ble Supreme Court in the case of Jagdish Chander Vs.Ramesh

Chander & Ors. (supra) and in particular paragraphs 2 and 8 thereof

and would submit that the Hon'ble Supreme Court after adverting to

several earlier judgments on interpretation of the arbitration agreement

which has specifically included the words "arbitration or court," has

held that such clause cannot be construed as an arbitration agreement in

view of there being uncertainty, the said clause gives a chance to both

the parties whether to go to the arbitration or court in the event of

dispute having arisen between the parties. The applicant thus could not

have applied for appointment of an arbitrator in view of there being no

further agreement between the parties for referring the dispute to the

arbitration.

14. Learned senior counsel placed reliance on the judgment of

the Hon'ble Supreme Court in the case of Karnataka Power

Transmission Corporation Limited & Anr. Vs.Deepak Cables (India)

Limited, (2014) 11 SCC 148 and more particularly paragraphs 2, 3, 5,

9 to 11, 21, 22, 23 and 26 thereof. He submits that there was no

procedure contemplated in clause 32 for following the principles of

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natural justice. The managing director was not required to act judicially

and thus clause 32 empowering the managing director to resolve the

dispute could not be construed as an arbitration agreement.

15. Learned senior counsel for the respondent placed reliance on

the judgment of this Court in the case of Voltas Limited Vs. M.P.

Entertainment & Developers Pvt. Ltd., 2016 SCC OnLine Bom 7664

and in particular paragraphs 13, 17 and 18 in support of the submission

that since the said clause 32 also provides the expression "court," the

expression "arbitration" mentioned in the same clause cannot be enforced

unless both the parties give consent for the same.

16. Learned senior counsel placed reliance on the judgment of

the Hon'ble Supreme Court in the case of Kerala State Electricity

Board & Anr. Vs. Kurien E. Kalathil & Anr., (2018) 4 SCC 793 and in

particular paragraph 14 thereof and would submit that referring the

parties to arbitration has serious civil consequences procedurally and

substantively and if there is no arbitration agreement between the parties,

without a joint memo or a joint application of the parties, this Court

cannot refer the parties to the arbitration.

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17. In so far as the judgment of the Hon'ble Supreme Court in

the case of Zhejiang Bonly Elevator Guide Rail Manufacture Co.

Ltd. (supra) relied upon by the learned counsel for the applicant is

concerned, it is submitted by the learned senior counsel for the

respondent that the said judgment cannot be considered as a binding

precedent in this matter. The view taken by the Hon'ble Supreme Court

in that matter is based on the facts of that case. In support of his

submission, the learned senior counsel placed reliance on the judgment of

the Hon'ble Supreme Court in the case of Haryana Financial

Corporation and Ors. Vs. Jagdamba Oil Mills & Ors., AIR 2002 SC

834 and would submit that the observations made by the Hon'ble

Supreme Court in the case of Zhejiang Bonly Elevator Guide Rail

Manufacture Co. Ltd. (supra) must be read in context in which those

observations appear to the facts of this case. The judgments of Courts

are not to be construed as statutes.

18. Learned senior counsel for the respondent placed reliance

on the judgment of the Hon'ble Supreme Court in the case of Bank of

India & Anr. Vs. K.Mohandas & Ors., (2009) 5 SCC 313 and in

particular paragraphs 54 to 61 in support of the submission that the

Court has to apply the judgment to the facts of each case. A case is only

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an authority for what it actually decides. He submits that the judgment

in the case of Zhejiang Bonly Elevator Guide Rail Manufacture Co.

Ltd. (supra) is thus clearly distinguishable in the facts of this case and

cannot be construed as a precedent.

19. Mr.Thakkar, learned counsel for the applicant in rejoinder

submits that the second part of clause 32 of the work order clearly

supports the first part. This Court has to read both the parts harmoniously

so as to ascertain the true and correct meaning thereof and the intention

of both the parties.

20. Learned counsel for the applicant distinguishes the judgment

of the Hon'ble Supreme Court in the case of Jagdish Chander

Vs.Ramesh Chander & Ors. (supra) and would submit that all the

attributes and elements of an arbitration agreement exist in clause 32 of

the work order. The arbitration agreement is admittedly in writing. The

parties have agreed to refer the disputes to arbitration. The arbitrator is

empowered to adjudicate upon the dispute. The parties have also agreed

that the decision of the managing director of the respondent would be

final and binding. He submits that the said judgment would support the

case of the applicant and not the respondent. He submits that in that case,

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the Hon'ble Supreme Court had set aside the appointment of the arbitrator

on rendering a finding that the parties had agreed to enter into an

arbitration agreement in future which is not the clause in this matter.

21. Learned counsel for the applicant distinguishes the judgment

of the Hon'ble Supreme Court in the case of Karnataka Power

Transmission Corporation Limited & Anr. (supra) relied upon by the

learned senior counsel for the respondent on the ground that in this case,

the arbitration clause recorded in clause 32 of the work order does not

contemplate the process of resolution at two stages as was the case

before the Hon'ble Supreme Court. He submits that clause under

consideration of the Hon'ble Supreme Court was totally different.

22. Learned counsel for the applicant distinguishes the judgment

of this Court in the case of Voltas Limited (supra) relied upon by the

learned senior counsel for the respondent on the ground that the

arbitration clause in that matter was depending upon the contingencies

provided therein. It was provided that if the matter was referred to

arbitration then, it would be resolved by dual arbitrators, one by client

and another by contractor. He relied upon paragraphs 13, 17 and 18 of

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23. In so far as the judgment of the Hon'ble Supreme Court in

the case of Kerala State Electricity Board & Anr. (supra) relied upon

by the learned senior counsel for the respondent is concerned, learned

counsel for the applicant distinguishes the said judgment on the ground

that the Hon'ble Supreme Court had considered the powers of Court

under Section 89 of the Code of Civil Procedure, 1908 when there was

no arbitration agreement entered into between the parties and in that

context had held that referring the parties to arbitration has serious civil

consequences procedurally and substantively and if there is no arbitration

agreement between the parties, without a joint memo or a joint

application of the parties, this Court cannot refer the parties to the

arbitration.

24. In so far as the the other judgments relied upon by the

learned senior counsel for the respondent in support of the submission

that the judgment of the Hon'ble Supreme Court relied upon by the

applicant cannot be considered as a precedent is concerned, it is

submitted by the learned counsel for the applicant that there is no dispute

about the propositions of law laid down by the Hon'ble Supreme Court or

by the High Court in those judgments relied upon by the learned senior

counsel for the respondent. He however, submits that the judgment of the

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Hon'ble Supreme Court in the case of Zhejiang Bonly Elevator Guide

Rail Manufacture Co. Ltd. (supra) would squarely apply to the facts of

this case in view of the Hon'ble Supreme Court interpreting the identical

arbitration clause which had the expression "dispute should be settled by

arbitration body for arbitration or court."

25. It is submitted that in clause 32 of the work order also the

expression "arbitration or court," both are recorded. After interpreting

such arbitration clause, the Hon'ble Supreme Court held that the said

clause refers to the arbitration or court. Since there was an option and the

applicant had invoked the arbitration clause, the Hon'ble Supreme Court

has no hesitation to appoint an arbitrator to adjudicate upon the dispute

between the parties. The Hon'ble Supreme Court adverted to the earlier

judgment in the case of Indtel Technical Services Private Limited Vs.

W.S. Atkins Rail Limited, (2008) 10 SCC 308 and held that the parties

had intended to resolve their disputes through arbitration and thus the

petition for appointment of an arbitrator was accordingly allowed.

REASONS AND CONCLUSIONS :-

26. A short question arises for consideration of this Court is

whether clause 32 of the work order dated 18th June 2013 constitutes an

arbitration agreement between the parties or not.

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27. A perusal of clause 32 of the work order indicates that the

said clause refers to the expression "dispute" and also refers to the

decision of the Managing Director of the respondent, in case of such

dispute, will be final and binding on both the parties. There is no

punctuation between the words "both the parties" and "any disputes shall

be referred to Arbitration or any Court." It is not the case of the

respondent that the dispute does not exist between the parties. The

application for appointment of an arbitrator is opposed mainly on the

ground that the said clause 32 did not provide for any procedure, for

complying with the principles of natural justice or adjudication of

disputes in a judicial manner by the managing director. It is the case of

the respondent that the said clause would only indicate that inspite of

intervention of the managing director, if the dispute between the parties

is not resolved, in that event, the parties have option either to refer the

dispute to arbitration or seeks remedies through the judicial process and

thus it was not the intention of the parties that the arbitration be the sole

dispute resolution mechanism. In paragraph 6.4 of the affidavit-in-

reply filed by the respondent, it is the contention of the respondent that

at the most, the said clause 32 is only a reflection of a possibility of the

parties agreeing to arbitration in the future. On the other hand, it is the

case of the applicant that the managing director of the respondent was a

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named arbitrator under the said clause 32 for the purpose of resolution

of disputes and differences between the parties.

28. Section 12(1)(a) of the Arbitration and Conciliation Act,

1996 provides that when a person is approached in connection with his

possible appointment as an arbitrator, he shall disclose in writing any

circumstances such as the existence either direct or indirect, of any past

or present relationship with or interest in any of the parties or in relation

to the subject matter in dispute, whether financial, business, professional

or other kind, which is likely to give rise to justifiable doubts as to his

independence or impartiality. Explanation (1) is added to the said

provision which provides that the grounds stated in the Fifth Schedule

shall guide in determining whether circumstances exist which give rise

to justifiable doubts as to the independence or impartiality of the

arbitrator.

29. Section 12(5) of the Arbitration and Conciliation Act, 1996

provides that Notwithstanding any prior agreement to the contrary, any

person whose relationship, with the parties or counsel or the subject

matter of the dispute, falls under any of the categories specified in the

Seventh Schedule shall be ineligible to be appointed as an arbitrator.

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30. The first part of clause 32 of the work order dated 18 th June

2013 is extracted as under :-

"Incase of any dispute, our Managing Director's decision will be final and binding on both the parties."

The said provision thus clearly contemplates that in case of any dispute,

the same shall be referred to the Manging Director whose decision will

be final and binding on both the parties. The managing director referred

to in the said clause obviously refers to the managing director of the

respondent.

31. The second part of clause 32 of the work order dated 18 th

June 2013 is extracted as under :-

"any dispute shall be referred to arbitration or any court."

If the argument of the learned senior counsel for the respondent is

accepted that this clause did not amount to an arbitration agreement, the

words "any dispute shall be referred to arbitration" would be

surplusage or otiose. Even if the argument of the respondent is accepted

that the role of the managing director provided in first part of clause 32

was not adjudicatory, the words "any dispute shall be referred to

arbitration" would be surplusage or otiose. I am thus inclined to accept

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the submission of the learned counsel for the applicant that the parties

had clearly intended that the dispute, if any, between the parties shall be

referred to arbitration of the managing director. In my view, the

managing director would thus fall under Serial Nos.1 and 2 of the

Seventh Schedule i.e. (1) The arbitrator is an employee, consultant,

advisor or has any other past or present business relationship with a party

or (2) The arbitrator currently represents or advises one of the parties

or an affiliate of one of the parties. In my view, Serial Nos.1 and 2 of

the Seventh Schedule have to be read with Section 12(5) of the said Act.

In my view, inspite of this agreement, in this case, which was entered into

on 18th June 2013 i.e. prior to the date of insertion of Section 12(5) w.e.f.

23rd October 2015, the managing director would not be eligible to act as

an arbitrator. Since the managing director himself is not eligible to act as

an arbitrator, he also will not be eligible to appoint any other arbitrator.

In that event, the Court has ample powers under Section 11(6) of the said

Act to appoint an independent arbitrator to adjudicate upon the dispute

between the parties.

32. This Court in the case of Tatva Global Environment

(Deonar) Ltd.(supra) has considered a clause which empowered the

Additional Municipal Commissioner to constitute a committee

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comprising of three officers to resolve the disputes, differences or claim

arising out of the agreement. The said clause further contemplated an

appeal before the committee comprising of three Additional Municipal

Commissioners. This Court rejected the plea of the Municipal

Corporation that the said clause could not be construed as an arbitration

agreement after adverting to several judgments of the Hon'ble Supreme

Court. This Court held that the said clause which provides that the

decision given by the committee shall be final and binding upon the

parties establishes that the said clause has to be construed as an

arbitration agreement and not a mere internal procedure.

33. The Hon'ble Supreme Court in the case of Zhejiang Bonly

Elevator Guide Rail Manufacture Co. Ltd. (supra) has considered the

clause 15 which is extracted as under :-

"15.Dispute handling :

Common processing contract disputes, the parties should be settled through consultation; consultation fails by treatment of to the arbitration body for arbitration or the court."

The Hon'ble Supreme Court held that the intention of the parties, as it

flows from the clause, is that efforts have to be made to settle the

disputes in an amicable manner and, therefore, two options were

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available, either to go for arbitration or for litigation in a court of law.

After adverting to the earlier judgment of the Hon'ble Supreme Court in

the case of Indtel Technical Services Private Limited (supra), the

Hon'ble Supreme Court held that the intention of the parties to have their

disputes resolved by arbitration has to be considered. In the case at hand

before the Hon'ble Supreme Court, the Hon'ble Supreme Court held that

the said clause 15 refers to the arbitration or court. There is thus an

option for the petitioner to invoke the arbitration clause and, therefore,

the Court has no hesitation, in the obtaining factual matrix of the case, for

appointment of an arbitrator and, accordingly, appointed a retired Judge

of the Hon'ble Supreme Court as a sole arbitrator. In my view, in this

case also, the expression "arbitration or court" is incorporated in the said

clause 32 in addition to the words "dispute" and "decision of the

managing director." In my view, the said judgment of the Hon'ble

Supreme Court in the case of Zhejiang Bonly Elevator Guide Rail

Manufacture Co. Ltd. (supra) would squarely apply to the facts of this

case. I am respectfully bound by the said judgment. The entire clause

has to be read harmoniously.

34. Learned senior counsel for the respondent though relied

upon various judgments in support of his submission that the judgment

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of the Hon'ble Supreme Court in the case of Zhejiang Bonly Elevator

Guide Rail Manufacture Co. Ltd. (supra) cannot be considered as a

precedent and was delivered in the facts of that case, in my view, there

is no dispute about the propositions of law laid down by the Hon'ble

Supreme Court in those judgments relied upon by the learned senior

counsel for the respondent. In this case, clause 32 of the work order is

similar to clause 15 of the said clause which fell for consideration of the

Hon'ble Supreme Court. After interpreting the said clause, the Hon'ble

Supreme Court held that the said clause which refers to the 'arbitration'

or 'court', it would amount to an arbitration clause. The judgments thus

relied upon by the learned senior counsel for the respondent would not

assist the case of the respondent. In my view, the judgment of the Hon'ble

Supreme Court in the case of Zhejiang Bonly Elevator Guide Rail

Manufacture Co. Ltd. (supra) is clear authority on the propositions of

law interpreting the identical arbitration clause and thus would be a

precedent under Article 141 of the Constitution of India and being

applicable to the facts of this case would be binding on this matter.

35. A perusal of the reply dated 2nd July 2018 addressed by the

respondent through its advocate in response to the letter dated 15 th

September 2017 and 16th October 2017 addressed by the applicant

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through its advocate indicates that the respondent had contended that the

first part of clause 32 contemplates a reconciliation process whereby the

decision of the managing director of the respondent was given a finality

and in the event of dispute still persisting, the parties had option either

to agree for arbitration or seek remedies through the judicial process.

Similar contention is also raised in the affidavit-in-reply filed by the

respondent. It is also contended in the affidavit-in-reply that the said

clause at the very highest is the clause which reflects a possibility of the

parties agreeing to arbitration in the future. This Submission of the

learned senior counsel for the respondent is contrary to the principles of

law laid down by the Hon'ble Supreme Court in the case of Zhejiang

Bonly Elevator Guide Rail Manufacture Co. Ltd. (supra).

36. In so far as the judgment of the Hon'ble Supreme Court in

the case of National Agricultural Coop. Marketing Federation India

Ltd. (supra) relied upon by the learned senior counsel for the respondent

is concerned, it has been held by the Hon'ble Supreme Court that no part

of a term or clause should be considered as a meaningless, surplusage,

when it is in consonance with the other parts of the clause and expresses

the specific intention of the parties.

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37. The Hon'ble Supreme Court in the case of Enercon (India)

Limited & Ors. Vs. Enercon GMBH & Anr., (2014) 5 SCC 1 after

adverting to several earlier judgments of the Hon'ble Supreme Court has

held that the courts have to adopt a pragmatic approach and not a

pedantic or technical approach while interpreting or construing an

arbitration agreement or arbitration clause. Therefore, when faced with a

seemingly unworkable arbitration clause, it would be the duty of the court

to make the same workable within the permissible limits of the law,

without stretching it beyond the boundaries of recognition. It is held that

a common sense approach has to be adopted to give effect to the intention

of the parties to arbitrate. It is held that the court ought to adopt the

attitude of a reasonable business person, having business common sense

as well as being equipped with the knowledge that maybe peculiar to the

business venture. The arbitrate clause cannot be construed with a purely

legalistic mindset, as if one is construing a provision in a statute. The

Hon'ble Supreme Court in the said judgment adverted to the UNCITRAL

Model Law and held that the Courts play a supportive role in encouraging

the arbitration to proceed rather than letting it come to a grinding halt. In

my view, the principles of law laid down by the Hon'ble Supreme Court

in case of Enercon (India) Limited & Ors. (supra) would squarely apply

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38. In my view, the intention of both the parties was clear that

the matter shall be referred to the arbitration if the dispute arises

between the parties and decision of such arbitrator will be final and

binding on the parties. The Court has to adopt a common sense approach

to give effect to the intention of the parties to arbitrate. In my view, this

Court cannot interpret the said clause 32 as a statute and cannot accept

the interpretation as sought to be canvassed by the learned senior counsel

for the respondent. The Court has to encourage the parties to refer the

dispute to the arbitration and while interpreting an arbitration clause has

to adopt a liberal approach. The judgment of the Hon'ble Supreme Court

in the case of National Agricultural Coop. Marketing Federation India

Ltd. (supra) thus would not assist the case of the respondent.

39. In so far as the unreported judgment of this Court in the

case of Dr.Arun Subrao Prabhu Vs. M/s.Rizvi Builders & Ors.

(supra) relied upon by the learned senior counsel for the respondent is

concerned, this Court had interpreted two clauses in the contract which

were ex facie contrary to each other. This Court in the said suit,

accordingly, held that while interpreting the words of a contract, the

effort of the Court must be to read all the provisions harmoniously. A

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construction which results in any part of the contract being rendered

otiose must be avoided. In my view, the argument of the learned senior

counsel for the respondent that the expression "arbitration or court,"

both are referred in clause 32 and thus the expression "court" would be

otiose if the matter is referred to the arbitration is concerned, is without

any merit. The Court has to interpret the said clause which is entered

into between two business men having business common sense and has

to adopt an attitude of a reasonable business person while interpreting the

said provision. The draft man of the said work order was undoubtedly the

respondent. The benefit of doubt in case of any ambiguity thus has to be

given to other side. The said unreported judgment of this Court in the

case of Dr.Arun Subrao Prabhu Vs. M/s.Rizvi Builders & Ors. (supra)

thus would not assist the case of the respondent.

40. In so far as the judgment of the Hon'ble Supreme Court in

the case of Jagdish Chander Vs.Ramesh Chander & Ors. (supra)

relied upon by the learned senior counsel for the respondent is concerned,

the said judgment interpreted the clause which is extracted as under :-

"(16) If during the continuance of the partnership or at any time afterwards any dispute touching the partnership arises between the partners, the same shall be mutually

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decided by the partners or shall be referred for arbitration if the parties so determine."

After construing the aforesaid clause 16, the Hon'ble Supreme Court

came to the conclusion that the said clause had contemplated that it is not

an arbitration agreement but a provision which enables arbitration only if

the parties mutually decide after due consideration as to whether the

disputes should be referred to arbitration or not and thus the said clause

required the consent of parties before the disputes could be referred to

arbitration and thus could not be construed as an arbitration agreement.

In my view, clause 32 of the work order does not contemplate any such

mutual consent subsequently after arising of dispute between the parties.

The said judgment of the Hon'ble Supreme Court in the case of Jagdish

Chander Vs.Ramesh Chander & Ors. (supra) is thus clearly

distinguishable in the facts of this case.

41. In so far as the judgments of the Hon'ble Supreme Court in

the case of Haryana Financial Corporation and Ors. Vs. Jagdamba

Oil Mills & Ors.(supra) and in the case of Bank of India & Anr. Vs.

K.Mohandas & Ors.(supra) relied upon by the learned senior counsel

for the respondent are concerned, there is dispute about the propositions

of law laid down by the Hon'ble Supreme Court in the said judgment. In

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this case, the judgment of the Hon'ble Supreme Court in the case of

Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd. (supra)

would squarely apply to the facts of this case.

42. For the reasons recorded aforesaid, in my view, the

arbitration agreement exists between the parties. Since the respondent

had failed to appoint an arbitrator, this application filed under Section

11(6) of the Arbitration and Conciliation Act, 1996 is maintainable.

43. I therefore pass the following order :-

(i) I propose to appoint Shri Justice J.P. Devadhar, a former

Judge of this Court having address at 311, Churchgate Chambers, 5, New

Marine Lines, Next to American Centre, Churchgate, Mumbai- 400 020

as a sole arbitrator.

(ii) Learned prospective arbitrator is requested to file a statement

of disclosure in terms of Section 11(8) read with Section 12(1) of the

Arbitration and Conciliation Act, 1996 on or before the next date.

(iii) The applicant is permitted to obtain statement of disclosure

from the learned prospective arbitrator and to tender the same before this

Court on the next date.

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(iv) If the learned prospective arbitrator is appointed, fees and

expenses of the learned arbitrator shall be borne by both the parties

equally at the first instance.

44. Place the arbitration application on supplementary board for

'Directions' on 30th October 2018.

R.D. DHANUKA, J.

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