Arbitrator appointment delay and evidence-based arbitral findings did not justify interference with the award.

Appointment of the presiding arbitrator was not invalid merely because it occurred after thirty days; the statutory bar under the Arbitration and Conciliation Act, 1996 applies only where the two party-appointed arbitrators actually fail to agree on the third arbitrator. The tribunal's constitution was therefore valid. On merits, the arbitral award was sustained because the findings on defective work, wrongful stoppage, retention money, bank guarantee, site engineer expenses, detention of tools and tackle, and loss of profit were supported by evidence and reasonable assessment. No perversity, misdirection, or legal error was shown, so interference under Section 34 was not warranted and the award was affirmed with costs.

---

---

Issues: (i) Whether the appointment of the presiding arbitrator was invalid because it was made after thirty days from the appointment of the party-appointed arbitrators; (ii) Whether the award suffered from any legal infirmity warranting interference on merits, including the findings on defective work, wrongful stoppage, retention money, bank guarantee, site engineer expenses, detention of tools and tackle, and loss of profit.

Issue (i): Whether the appointment of the presiding arbitrator was invalid because it was made after thirty days from the appointment of the party-appointed arbitrators?

Analysis: The arbitration clause fell within the scheme of Section 11(3) of the Arbitration and Conciliation Act, 1996, under which the two appointed arbitrators are to appoint the third arbitrator. Section 11(4)(b) is attracted only when the two appointed arbitrators fail to agree on the third arbitrator. The expression used is "fail to agree", which contemplates an actual disagreement on a proposed name, not a mere delay in making the appointment. Where no disagreement exists, the statutory thirty-day consequence does not arise, and the arbitrators are not rendered functus officio merely because the appointment was made later. The court also noted that the alternative remedy of approaching the Chief Justice under Section 11(4) is triggered only when the statutory condition of failure to agree is met.

Conclusion: The constitution of the arbitral tribunal was held to be valid, and the challenge on this ground failed.

Issue (ii): Whether the award suffered from any legal infirmity warranting interference on merits, including the findings on defective work, wrongful stoppage, retention money, bank guarantee, site engineer expenses, detention of tools and tackle, and loss of profit?

Analysis: The award was examined claim-wise on the basis of the arbitral tribunal's appreciation of evidence. The finding that the respondents' work was not unsatisfactory was supported by the continued engagement of the respondents, the absence of termination until the work was stopped, the lack of a set-off or counterclaim for defects, and the overall evidentiary record. Once breach was not established, the awards for refund of retention money and wrongful invocation of the bank guarantee followed. The award on the engineer's expenses was supported by evidence of the engineer's presence at site and the contractual terms regarding remuneration. The partial allowance of the claim for detained tools and tackle was upheld as a reasonable assessment on the material value proved. The loss of profit claim was also sustained because the respondents had pleaded and proved a 15% profit margin, and the tribunal was entitled to estimate damages on a reasonable basis. No perversity, misdirection, or failure to consider material evidence was shown so as to justify interference under Section 34.

Conclusion: The award on merits was upheld and no ground for interference was made out.

Final Conclusion: The appeal failed in entirety and the arbitral award, as modified, was affirmed with costs.

Ratio Decidendi: Under Section 11 of the Arbitration and Conciliation Act, 1996, the power of the two appointed arbitrators to appoint the presiding arbitrator is not lost merely because the appointment is made after thirty days, unless there has been an actual failure to agree on the third arbitrator; and arbitral findings based on plausible appreciation of evidence will not be interfered with in proceedings under Section 34 absent perversity or legal error.

---