2010 (1) TMI 1140 - SC - Companies Law

Supreme Court affirms arbitrator's mandate termination for delay in award, stresses adherence to arbitration agreement.

NBCC. LTD. Versus JG. ENGINEERING PVT. LTD.

The Supreme Court upheld the High Court's decision to terminate the arbitrator's mandate due to failure to publish the award within the agreed time. The ... Whether the High Court was correct in allowing the petition of the respondent and thereby terminating the mandate of the arbitrator and thus appointing a new Arbitrator for deciding the dispute between the parties? Held that:- Appeal allowed. Set aside the impugned order and remand the case back to the High Court for fresh decision of the application under Section 11(6) of the Act and while considering the application afresh, the High Court is directed to take into consideration the aforesaid decision of this Court as the High Court did not appear to have focused on the requirement to have due regard to the qualifications required by the agreement or other conditions necessary to secure the appointment of an independent and impartial arbitrator. Since the requirement of sub-section (8) of Section 11 was not at all dealt with by the High Court in its order, the appointment of an arbitrator without dealing with Sub-Section 8 of Section 11 of the Act became vulnerable and accordingly, such appointment must be set aside Issues Involved:1. Termination of the mandate of the arbitrator.2. Appointment of a new arbitrator.3. Jurisdiction and powers of the court under the Arbitration and Conciliation Act, 1996.4. Extension of time for making and publishing the award.5. Applicability of previous judgments under different arbitration laws.Detailed Analysis:1. Termination of the Mandate of the Arbitrator:The High Court terminated the mandate of the arbitrator, Shri A.K. Gupta, due to his failure to publish the award within the stipulated time. The arbitrator was initially appointed with a directive to conclude the proceedings within six months, which was mutually extended by the parties until 30th September 2005. However, the arbitrator failed to publish the award within this extended period. The High Court found that the arbitrator had no power to further extend the time without mutual consent, thus his mandate automatically terminated post the expiry of the agreed time. The Supreme Court upheld the High Court's decision, emphasizing that the arbitrator's authority ceased after the time limit expired without further consent from the parties.2. Appointment of a New Arbitrator:Following the termination of the mandate, the High Court appointed a new arbitrator, Mr. Justice Chittatosh Mookherji. The appellant challenged this appointment, arguing that the appointing authority should have been allowed to appoint the new arbitrator. The Supreme Court referred to Section 15(2) of the Arbitration and Conciliation Act, 1996, which mandates that a substitute arbitrator should be appointed according to the rules applicable to the original appointment. The Supreme Court remanded the case back to the High Court for fresh consideration, emphasizing the need to adhere to the appointment procedure outlined in the arbitration agreement.3. Jurisdiction and Powers of the Court under the Arbitration and Conciliation Act, 1996:The Supreme Court discussed the inherent powers of the court under the Act. It noted that the court does not have the power to extend the time for making and publishing an award, unlike the provisions under the Arbitration Act of 1940. The court can, however, fix a time limit for the conclusion of arbitration proceedings in the exercise of its inherent power, provided the arbitration agreement allows for such extensions with mutual consent.4. Extension of Time for Making and Publishing the Award:The Supreme Court examined the provisions of the arbitration agreement, which allowed the arbitrator to extend the time for making and publishing the award by mutual consent of the parties. The arbitrator had extended the time twice with mutual consent but failed to publish the award within the final extended period. The court held that without further mutual consent, the arbitrator had no authority to extend the time, and his mandate automatically terminated.5. Applicability of Previous Judgments under Different Arbitration Laws:The appellant cited previous judgments under the Arbitration Act of 1940 to argue that the award should not be nullified due to the delay. The Supreme Court clarified that those judgments were not applicable as they were decided under a different legal framework. The court emphasized that under the Arbitration and Conciliation Act, 1996, the mandate of the arbitrator terminates if the award is not published within the agreed time, and the court does not have the power to extend this time without mutual consent from the parties.Conclusion:The Supreme Court upheld the High Court's decision to terminate the mandate of the arbitrator due to the delay in publishing the award. It remanded the case back to the High Court for fresh consideration regarding the appointment of a new arbitrator, ensuring adherence to the arbitration agreement and the provisions of the Arbitration and Conciliation Act, 1996. The court emphasized the importance of mutual consent for extending the time for making and publishing the award and clarified the limitations of the court's powers under the current arbitration law.