Supreme Court upholds arbitrator appointment validity under Arbitration Act

The Supreme Court ruled that the Designate Judge's appointment of an arbitrator was valid in a case involving the interpretation of an arbitration clause, nomination of arbitrators under the Arbitration and Conciliation Act, consequences of failing to appoint an arbitrator, and relevance of past court decisions. The court held that the petitioner forfeited their right to appoint an arbitrator by not doing so within the specified timeframe, leading to the dismissal of the Special Leave Petition and ordering the deposited costs to be paid to the respondent.

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Issues: Whether the petitioner lost its contractual right to appoint an arbitrator after receiving notice invoking the arbitration clause and failing to nominate one, and whether the Designate Judge was justified in appointing an arbitrator on behalf of the petitioner under Section 11 of the Arbitration and Conciliation Act, 1996.

Analysis: The notice issued by the respondent clearly invoked the arbitration clause and called upon the petitioner to nominate its arbitrator. In reply, the petitioner did not nominate an arbitrator but took the stand that no arbitral dispute existed and that there was no question of appointment of an arbitrator by either side. That response amounted to a refusal to act in accordance with the contractual appointment mechanism. Once the petitioner failed to appoint its arbitrator after being called upon to do so, its right to make the appointment stood exhausted. The Designate Judge, therefore, acted consistently with the governing law in making an appointment on behalf of the petitioner. The Court also held that the petitioner's reliance on the cited precedent did not assist it on the facts of the case.

Conclusion: The petitioner had no surviving right to appoint its arbitrator, and the appointment made by the Designate Judge was valid and justified.

Final Conclusion: The challenge to the arbitral appointment failed, and the order appointing the arbitrator was sustained.

Ratio Decidendi: Once a party, after being called upon to nominate its arbitrator under the agreed procedure, declines to do so and contests the very existence of arbitrable disputes, its contractual right to appoint an arbitrator is extinguished and the court may validly appoint an arbitrator under Section 11.

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