2005 (4) TMI 612 - SC - Indian Laws

Supreme Court restores application for arbitrator appointment under Section 11(6) emphasizing timely exercise

The Supreme Court set aside the lower court orders and directed the application under Section 11(6) to be restored before the Chief Justice of the High ... Arbitration clause providing appointment by Functional Director - Appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 - Right to appoint not forfeited by mere expiry of 30 days - Power of the Chief Justice/High Court to appoint arbitrator when party fails to appoint - Restoration and fresh consideration of Section 11(6) applicationAppointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 - Right to appoint not forfeited by mere expiry of 30 days - Whether the High Court (designated Judge) was right in refusing to exercise jurisdiction under Section 11(6) on the ground that the contractual arbitration clause vested sole appointing authority in the Functional Director of the owner. - HELD THAT: - The Court applied the principle laid down in Datar Switchgears Ltd. v. Tata Finance Ltd. that where one party requests the other to appoint an arbitrator and the other party fails to do so within 30 days, the right to appoint does not automatically get forfeited; the opposite party may still make an appointment up to the point when the first party files an application under Section 11. In the present case the respondent had not made any appointment even up to the filing of the Section 11 application; consequently the High Court was empowered to consider appointment under Section 11(6). The designated Judge and the Division Bench were therefore incorrect to hold that the contractual clause precluded the High Court's jurisdiction in the circumstances shown.The Court held the High Court erred in refusing to exercise jurisdiction under Section 11(6); the Datar Switchgears principle applies and the application under Section 11(6) is maintainable.Restoration and fresh consideration of Section 11(6) application - Power of the Chief Justice/High Court to appoint arbitrator when party fails to appoint - Whether the Section 11(6) application should be restored and taken up afresh by the Chief Justice/High Court for appointment of an arbitrator. - HELD THAT: - The Court set aside the orders of the designated Judge and the Division Bench and directed that the Section 11(6) application stand restored before the Chief Justice of the High Court for fresh consideration in accordance with Section 11(6). The direction contemplates that the Chief Justice (or a Judge designated by him) shall consider appointment having regard to the contractual arbitration clause and the principles governing exercise of jurisdiction under Section 11(6).The Section 11(6) application is restored and remitted for fresh consideration and appointment of an arbitrator in accordance with Section 11(6).Final Conclusion: Appeal allowed; orders of the High Court set aside, the Section 11(6) application restored for fresh consideration and appointment of an arbitrator in accordance with Section 11(6) of the Arbitration and Conciliation Act, 1996; no order as to costs. Issues involved: Interpretation of arbitration clause and appointment of arbitrator under section 11(6) of the Arbitration and Conciliation Act, 1996.Interpretation of Arbitration Clause:The judgment dealt with a case where disputes arose between parties governed by an agreement with an arbitration clause. The clause specified that disputes shall be referred to the Functional Director of the owner for arbitration. The clause also outlined the procedure for appointment of an arbitrator and continuation of arbitration in case of transfer or vacancy. The appellant demanded appointment of an arbitrator as per the clause, but the respondent failed to act, leading to a legal dispute.Appointment of Arbitrator under Section 11(6):The appellant, after serving notice and not receiving a response from the respondent regarding arbitrator appointment, approached the Chief Justice of the High Court under section 11(6) of the Arbitration and Conciliation Act, 1996. The designated Judge of the High Court refused to appoint an arbitrator, stating that the appellant should follow the procedure outlined in the arbitration clause. The appellant then filed a petition under Article 226 of the Constitution, which was also dismissed. The Supreme Court, after considering the arguments, allowed the appeal, citing a previous case law that emphasized the right to appoint an arbitrator not being automatically forfeited after 30 days, but the appointment must be made before the other party moves the court under Section 11.Decision:The Supreme Court set aside the orders of the designated Judge and the Division Bench, directing the application under Section 11(6) to be restored before the Chief Justice of the High Court for consideration and appointment of an arbitrator in accordance with the law. No costs were awarded in the matter.