Sick company status does not bar arbitration, and courts may appoint an arbitrator when parties cannot agree.

Pendency of proceedings before the Board for Industrial and Financial Reconstruction and registration as a sick industrial company did not bar arbitration under the Arbitration and Conciliation Act, 1996. Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 was treated as protecting against coercive proceedings of the kind specifically covered by that provision, while arbitration was viewed as adjudication of liability rather than enforcement or recovery. The repeal of SICA did not alter that result. Where the arbitration clause contemplated mutual consent but the parties failed to agree on an arbitrator, the Court could appoint an independent arbitrator under Section 11, and the dispute was directed to proceed before the appointed tribunal.

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Issues: (i) whether pendency of proceedings before the Board for Industrial and Financial Reconstruction and registration as a sick industrial company barred arbitration proceedings under the Arbitration and Conciliation Act, 1996; (ii) whether an arbitrator could be appointed by the Court when the parties failed to agree on a name.

Issue (i): Whether pendency of proceedings before the Board for Industrial and Financial Reconstruction and registration as a sick industrial company barred arbitration proceedings under the Arbitration and Conciliation Act, 1996.

Analysis: Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 was held to protect sick industrial companies against coercive proceedings of the nature specifically contemplated by that provision. Arbitration was treated as a process for adjudication of liability and not as a coercive recovery proceeding or a suit for enforcement within the meaning of the section. The repeal of the Sick Industrial Companies (Special Provisions) Act, 1985 also did not assist the objection raised.

Conclusion: The objection based on BIFR proceedings and SICA protection was rejected and arbitration was held not to be barred.

Issue (ii): Whether an arbitrator could be appointed by the Court when the parties failed to agree on a name.

Analysis: The arbitration clause contemplated appointment by mutual consent, but the respondent did not the proposed name. In such a situation, the Court could exercise its power under Section 11 of the Arbitration and Conciliation Act, 1996 to secure constitution of the arbitral tribunal and appoint an independent arbitrator.

Conclusion: The Court appointed an arbitrator in exercise of its power under Section 11.

Final Conclusion: The application succeeded, the objection to arbitration was repelled, and the dispute was directed to proceed before the appointed arbitrator.

Ratio Decidendi: Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 does not bar arbitration proceedings, and where parties fail to agree on an arbitrator, the Court may appoint one under Section 11 of the Arbitration and Conciliation Act, 1996.

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