Court refers preliminary issues to Arbitrator, rules Indian nationality not mandatory in int'l arbitration

The Court declined to decide preliminary issues raised by the respondent and directed the matter to be referred to an Arbitrator, following the principle that the Chief Justice or nominee cannot decide such issues. Regarding the appointment of an Arbitrator of Indian nationality in an international arbitration agreement, the Court held that it is not mandatory to appoint a non-national Arbitrator if parties do not object. The Court appointed a retired Supreme Court Judge as the sole Arbitrator, emphasizing that the provision requiring a non-national Arbitrator is a guideline, not a mandate.

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Issues Involved:
1. Preliminary issues raised by the respondent.
2. Appointment of an arbitrator of Indian nationality in an international arbitration agreement.

Issue-wise Detailed Analysis:

Point 1: Preliminary Issues Raised by the Respondent

The respondent contended that the agreements dated 15-9-1986 and 11-1-1989 had ceased to exist with effect from 1-5-1999, and therefore, there was no arbitration clause. Additionally, the respondent argued that the petitioner had not produced the original agreements and questioned the authorization of Mr. Noor Amiruddin to file the suit on behalf of the petitioner. The respondent also denied any liability to pay the claimed sums and interest, asserting that no sums were due.

The Court considered whether these preliminary issues could be decided at this stage or should be referred to the Arbitrator. The Court referred to the judgment in *Konkan Railway Corpn. Ltd. v. Mehul Construction Co.* where it was held that the Chief Justice or his nominee performs an administrative duty and cannot decide preliminary issues at this stage; it is for the Arbitrator to decide. Consequently, the Court declined to decide the preliminary issues and directed that the matter be referred to an Arbitrator.

Point 2: Appointment of an Arbitrator of Indian Nationality

The petitioner, a foreign company, had no objection to appointing an Indian Judge as an Arbitrator. The Court examined whether it was mandatory under section 11(9) of the Arbitration and Conciliation Act, 1996, to appoint an Arbitrator not belonging to the nationality of either party in an international commercial arbitration.

Section 11(9) states: "In the case of appointment of a sole or third Arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an Arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities."

The Court analyzed various international arbitration rules and practices, including the Uncitral Model Law, which influenced the Indian Act of 1996. It was observed that the nationality of the Arbitrator is a factor to be considered but not a mandatory requirement. The Court concluded that the word "may" in section 11(9) is not intended to be read as "must" or "shall." Therefore, it is not mandatory to appoint an Arbitrator of a nationality other than that of the parties if the foreign company has no objection to an Indian Arbitrator.

In the light of these considerations, the Court appointed Shri Justice D.P. Wadhwa, a retired Judge of the Supreme Court, as the sole Arbitrator. The remuneration and other costs were to be fixed by the Arbitrator after hearing both parties.

Conclusion:

The petition was disposed of with the appointment of an Indian Arbitrator, emphasizing that the provision under section 11(9) is not mandatory but a guideline to be considered.

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