2014 (5) TMI 373 - SC - Companies Law

Supreme Court upholds arbitrator appointment validity under Arbitration Act

DAKSHIN SHELTERS P. LTD. Versus GEETA S. JOHARI

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, ... Appointment of Arbitrator - High Court appointed arbitrator - in the order that the arbitrator nominated by the applicant (present respondent) and the arbitrator appointed by the Designate Judge on behalf of the petitioner (respondent therein) are required to appoint the third arbitrator before entering into reference - Petitioner declined to appoint arbitrator - Held that:- petitioner declined to appoint its arbitrator as according to it there was no question of appointment of arbitrator by either of the parties and there being no arbitral dispute, there was no occasion for resolution of dispute as provided in the Development Agreement. The stance of the petitioner amounted to failure on its part to appoint its arbitrator on receipt of the request to do so from the respondent - The petitioner's right to appoint its arbitrator in terms of clause 25 of the Development Agreement got extinguished once it failed to appoint the arbitrator on receipt of the notice dated December 10, 2010. There is no merit in the submission of the learned senior counsel for the petitioner that the Designate Judge ought to have given an opportunity to the petitioner to nominate its arbitrator - Decided against appellants. Issues:1. Interpretation of arbitration clause in a Development Agreement.2. Nomination of arbitrators under Section 11 of the Arbitration and Conciliation Act, 1996.3. Legal consequences of failing to appoint an arbitrator.4. Applicability of court decisions on arbitration appointment processes.Analysis:Issue 1: The judgment involves the interpretation of an arbitration clause in a Development Agreement, specifying the procedure for resolving disputes through arbitration. The clause mandates a tribunal of three arbitrators, with each party appointing one arbitrator and the third arbitrator being appointed by the two arbitrators.Issue 2: The case revolves around the nomination of arbitrators under Section 11 of the Arbitration and Conciliation Act, 1996. Disputes arose when one party invoked the arbitration clause and nominated an arbitrator, prompting the other party to challenge the appointment process.Issue 3: The legal consequences of failing to appoint an arbitrator as per the arbitration clause are examined. The court held that once a party fails to appoint an arbitrator after being given the opportunity, their right to do so gets extinguished, as per the agreement and relevant legal provisions.Issue 4: The judgment discusses the applicability of previous court decisions on the appointment of arbitrators. It clarifies that the circumstances of this case differ from those in prior judgments, emphasizing the specific facts and legal principles governing the appointment process.In summary, the Supreme Court's judgment addressed the interpretation of the arbitration clause, the nomination of arbitrators under the Arbitration and Conciliation Act, the consequences of failing to appoint an arbitrator, and the relevance of past court decisions on similar matters. The court ruled that the Designate Judge's appointment of an arbitrator was valid, as the petitioner had forfeited their right to appoint an arbitrator by not doing so within the stipulated timeframe. Consequently, the Special Leave Petition was dismissed, and the deposited costs were to be paid to the respondent.