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®
IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 18TH DAY OF SEPTEMBER 2013

BEFORE

THE HON’BLE MR. JUSTICE RAM MOHAN REDDY

CIVIL MISCELLANEOUS PETITION No.70/2013

BETWEEN:

M.R.Raghuram,
S/o.late M.S.Ramaiah,
Hindu, Aged 54 years,
Gokula House,
Dr.M.S.Ramaiah Road,
Bangalore-560 054. .. PETITIONER

(By Sri. S.Ganesh Shenoy, Adv.,)

AND:

1. M.R.Jayaram,
Aged about 64 years,

2. M.R.Sampangi Ramaiah,
Aged about 62 years,

3. M.R.Seetharam,
Aged about 61 years,

4. M.R.Janikiram,
Aged about 52 years,

5. M.R.Pattabhiram,
Aged about 52 years,

6. M.R.Kodandaram,
Aged about 50 years,
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7. M.R.Anandaram,
Aged about 48 years,

8. M.R.Prabhavathi,
Aged about 60 years,

9. M.R.Padmavathi,
Aged about 50 year,

All children of
Late M.S.Ramaiah,
Gokula House, Gokula,
Bangalore – 560 054. .. RESPONDENTS

(By Sri. P.N. Nanjunda Reddy, Senior Advocate

For Sri. Nishanth. A.V., Adv.)

This Petition is filed U/s.11(5) read with 2(6) of the

Arbitration and Conciliation Act 1996 praying to appoint
Sri.Kukkaje Ramakrishna Bhat, Retired District Judge, No.2
as the sole arbitrator whose name has already been
suggested by the petitioner or alternatively be pleased to
appoint any other person/s as a sole arbitrator for
adjudication of disputes between the parties hereto in
accordance with the arbitration agreement between the
parties.

This petition coming on for admission this day, the

Court made the following :
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ORDER

The facts briefly stated are thus:

Parties to the Memorandum of Confirmation of Oral

Family Settlement dated 25.7.1998, by consensus, agreed to

appoint Sri. K.R. Prasad, as a sole arbitrator, in respect of

differences arising out of implementation or interpretation of

the settlement and his finding to be binding on all of them.

The arbitrator having entered upon reference and held

proceedings on several dates of hearing during a period of

one year, nevertheless, by notice dated 17.11.2011,

Annexure-F, withdrew from arbitration. Petitioner filed CMP

No.173/2011 invoking Sub Section (5) of Section 11 of the

Arbitration and Conciliation Act, 1996 (for short ‘Act’),

whence, this Court, by order dated 20.2.2013, disposed of

the petition reserving liberty to the petitioner to issue a

notice invoking clause 20 of the Memorandum of Settlement

to appoint an arbitrator. Pursuant thereto, the petitioner,

through learned Counsel, issued a notice dated 23.2.2013,

Annexure-H, to the respondents proposing Sri. Kukkaje

Ramakrishna Bhat, retired District Judge, as a sole

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arbitrator to continue the arbitration proceeding and called

upon the respondents to concur with the appointment,

which when acknowledged was responded to by reply dated

22.3.2013, Annexure-K, informing the petitioner that they do

not concur with the appointment of any substitute

arbitrator, since Sri. K.R. Prasad, an arbitrator, was a family

friend and the intention of the parties was to settle the

dispute by arbitration only through the said person and

none else. Hence this petition.

2. Petition is opposed by filing statement of objections

of respondent Nos.1 to 9 interalia reiterating that clause 20

of the Memorandum of Confirmation Oral Family Settlement

does not provide for appointment of a substitute arbitrator in

place of Sri K.R. Prasad, arbitrator by consensus, and in

view of the settled law that a substitute arbitrator can be

appointed according to the Rules applicable to appointment

of the arbitrator to be replaced and in the absence of the

Rules, since there was no intention of the parties to appoint

a substitute arbitrator, petitioner cannot seek appointment

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of Sri. Kukkaje Ramakrishna Bhat, retired District Judge,

Bangalore, as a substitute arbitrator.

3. Having heard the learned Counsel for the petitioner

and the learned Senior Counsel for the respondents, the

question for decision making is:

“ Whether in the absence of a specific

provision to appoint a substitute arbitrator, if
the original appointment terminates or if the
originally appointed arbitrator withdraws from
the arbitration, in the Memorandum of
Confirmation of Oral Family Settlement dated
25.7.1998, Annexure-A, the omission is made
up by Section 15(2) of the Arbitration and
Conciliation Act, 1996? ”

4. Clause 20 of Annexure-A, reads thus:

“ 20. In respect of any difference arising out of

the implementation or interpretation of this
Recollection of Memorandum of Settlement, the
same shall be referred to Sri. K.R. Prasad, who
shall be the sole arbitrator and his findings shall
be binding on all the parties hereto. ”
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5. The aforesaid clause does not provide for

appointment of a substitute arbitrator in the event of Sri.

K.R. Prasad, the appointed arbitrator, withdraws from

arbitration.

6. Section 15 of the Act reads thus:

“ 15. Termination of mandate and

substitution of arbitrator:

1. In addition to the circumstances

referred to in section 13 or section 14, the
mandate of an arbitrator shall terminate-

a. where he withdraws from office for any

reason; or

b. by or pursuant to agreement of the parties.

2. Where the mandate of an arbitrator

terminates, a substitute arbitrator shall be
appointed according to the rules that were
applicable to the appointment of the arbitrator
being replaced

3. Unless otherwise agreed by the

parties, where an arbitrator is replaced under
subsection (2), any hearings previously held may
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be repeated at the discretion of the arbitral

tribunal.

4. Unless otherwise agreed by the parties,

an order or ruling of the arbitral tribunal made
prior to the replacement of an arbitrator under
this section shall not be invalid solely because
there has been a change in the composition of
the arbitral tribunal. ”

7. Sub Section (2) of Section 15 is attracted in the

matter of appointment of a substitute arbitrator according to

the Rules that are applicable to the appointment of an

arbitrator being replaced. It is obvious that the term “Rules”

set forth supra refers to Clause 20 of Memorandum of

Confirmation of Oral Family Settlement, Annexure-A,

whereunder disputes are referred to arbitration. If there is

no failure on the part of the concerned party as per the

arbitration agreement to fulfill his obligation would not

attract the jurisdiction of the Hon’ble Chief Justice under

Section 11(6) of the Act to appoint a substitute arbitrator.

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8. In the opinion of this Court, the answer to the

question formulated supra is no more res integra in the light

of the observation of the Apex Court in YASHWITH

CONSTRUCTIONS (P) LTD. V. SIMPLEX CONCRETE PILES

INDIA LTD. AND ANOTHER1, which reads thus:

“ 4. In our view, the learned Chief Justice

and the Division Bench have rightly understood
the scope of Section 15 of the Act. When the
arbitrator originally appointed in terms of the
arbitration agreement withdrew for health
reasons, the Managing Director, as authorized
originally by the arbitration agreement, promptly
appointed a substitute arbitrator. It is true that
in the arbitration agreement there is no specific
provision authorizing the Managing Director to
appoint a substitute arbitrator if the original
appointment terminates or if the originally
appointed arbitrator withdraws from the
arbitration. But, this so called omission in the
arbitration agreement is made up by the specific
provision contained in Section 15(2) of the Act.
The withdrawal of an arbitrator from the office
for any reason is within the purview of Section
15(1)(a) of the Act. Obviously, therefore Section
15(2) would be attracted and a substitute
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arbitrator has to be appointed according to the

rules that are applicable for the appointment of
the arbitrator to be replaced. Therefore, what
Section 15(2) contemplates is an appointment of
the substituted arbitrator or the replacing of the
arbitrator by another according to the rules that
were applicable to the appointment of the
original arbitrator who was being replaced. The
term "rules" in Section 15(2) obviously referred
to the provision for appointment, contained in
the arbitration agreement or any Rules of any
Institution under which the disputes were
referred to arbitration. There was no failure on
the part of the concerned party as per the
arbitration agreement, to fulfill his obligation in
terms of Section 11 of the Act so as to attract the
jurisdiction of the Chief Justice under Section
11(6) of the Act for appointing a substitute
arbitrator. Obviously, Section 11(6) of the Act
has application only when a party or the
concerned person had failed to act in terms of
the arbitration agreement. When Section 15(2)
says that a substitute arbitrator can be
appointed according to the rules that were
applicable for the appointment of the arbitrator
originally, it is not confined to an appointment
under any statutory rule or rule framed under

1
2006(6) SCC 204, at paragraph 4.
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the Act or under the Scheme. It only means that

the appointment of the substitute arbitrator
must be done according to the original
agreement or provision applicable to the
appointment of the arbitrator at the initial stage.
We are not in a position to agree with the
contrary view taken by some of the High
Courts. ”
(Emphasis supplied)

9. The decision in Yashwith’s case, supra, was

referred to in the later decision of the Apex Court in

NATIONAL HIGHWAYS AUTHORITY OF INDIA AND

ANOTHER VS BUMIHIWAY DDB LTD. (JV) AND OTHERS2,

which reads thus:

“ Reliance was placed on Yashwith

Construction P. Ltd. vs. Simplex Concrete Piles
India Ltd., wherein this Court had reiterated the
well settled law and held that there was no
failure on the part of the concerned party as per
arbitration agreement, to fulfill his obligation in
terms of Section 11 of the Act so as to attract the
jurisdiction of the Chief Justice under Section
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11(6) of the Act for appointing a substitute

arbitrator. Obviously, Section 11(6) of the Act
has application only when a party had failed to
act in terms of the arbitration agreement.”

10. The facts obtaining therein relates to two appointed

arbitrators who resigned from arbitration proceeding without

appointing the presiding arbitrator and on such default, it

was Indian Road Cross (IRC) which was required to appoint

the presiding arbitrator to whom notice was issued and even

before the appointment, the parties approached the Hon’ble

Chief Justice designate invoking Section 11(6) of the Act to

appoint a presiding arbitrator. It was held that it was for the

petitioning party to approach the IRC for appointment of

presiding arbitrator in terms of the procedure contemplated

under the contract agreement and not to invoke the

jurisdiction of the Hon’ble Chief Justice under Section 11(6)

of the Act. At paragraph 44, it was further observed thus:

“ 44. xxxx xxxx. The parties have entered

into a contract after fully understanding the
import of the terms so agreed to from which
there cannot be any deviation. The courts have

2
2006(10) SCC 763, at paragraph 33.
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held that the parties are required to comply with

the procedure of appointment as agreed to and
the defaulting party cannot be allowed to take
advantage of its own wrong.”

11. Although, learned Senior Counsel for the

respondents placed reliance upon the subsequent decision of

the Apex Court in ACC LIMITED (FORMERLY KNOWN AS

THE ASSOCIATED CEMENT COMPANY LTD.) VS. GLOBAL

CEMENTS LIMITED3, nevertheless, would not come to the

aid of the respondents in the light of the observations at

paragraph 17, which reads thus:

“ Section 15(2) of the Act provides that

where a substitute arbitrator has to be
appointed due to termination of the mandate of
the previous arbitrator, the appointment must
be made according to the rules that were
applicable to the appointment of the arbitrator
being replaced. No further application for
appointment of an independent arbitrator under
Section 11 will lie where there has been
compliance with the procedure for appointment
of a substitute arbitrator. On appointment of
the substitute arbitrator in the same manner as
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the first, no application for appointment of

independent arbitrator under Section 11 could
be filed. Of course, the procedure agreed upon
by the parties for the appointment of the original
arbitrator is equally applicable to the
appointment of a substitute arbitrator, even if
the agreement does not specifically say so.
Reference may be made to the judgment of this
Court in YASHWITH CONSTRUCTIONS (P) LTD.
V. SIMPLEX CONCRETE PILES INDIA LTD.
AND ANOTHER. ”
(Emphasis supplied)

12. Regard being had to the authoritative

pronouncements of the Apex Court noticed supra, and

applying the same to the facts of this case, petition invoking

jurisdiction under Section 11(6) of the Act is maintainable.

The submission of the learned Senior Counsel for the

respondents pales into insignificance. The failure on the

part of the respondents in not extending consent to the

appointment of a substitute arbitrator, it cannot but be said

that the petitioner was entitled in law to invoke the

jurisdiction under Section 11(6) of the Act.

3
2012 (7) SCC 71
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13. Since the parties have, not, by consent, agreed

upon appointment of a substitute arbitrator, it is appropriate

to appoint Sri. Justice N.D. Venkatesh, retired Judge of this

Court, as a substitute arbitrator and to continue the

arbitration proceeding.

14. Sri. Justice N.D. Venkatesh, retired Judge of this

Court, is requested to enter upon reference and conduct the

arbitration proceeding at the Bangalore Arbitration Centre in

accordance with the Appointment of Arbitrators by the Chief

Justice of High Court Scheme, 1996.

Sd/-
JUDGE

Cs/-
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RMRJ:
25.02.2014 CMP No.70/2013

ORDER ON IA No.2/2013

This application by the petitioner has occasioned

since the sole Arbitrator Hon’ble Mr. Justice N.D.

Venkatesh, former Judge of this court, having expressed

his opinion that he will be unable to enter upon

reference and hence for an order to appoint another

Arbitrator.

At the request of learned counsel for the parties,

Hon’ble Mr. Justice A.V. Srinivasa Reddy, former Judge

of this court, is appointed as sole Arbitrator in place of

Hon’ble Mr. Justice N.D. Venkatesh.

IA No.2/2013 is accordingly allowed. This order

shall form part of the order dated 18.9.2013.

Sd/-
JUDGE
AN/-