2022 (5) TMI 1109 - HC - Indian Laws

Fresh Arbitration Application Allowed under Section 11(6)(C) for Unresolved Dispute

The Court found that a fresh application under Section 11(6)(C) of the Arbitration and Conciliation Act, 1996, was maintainable as the dispute remained ... Maintainability of fresh Section 11(6)(C) application after quashing of award - effect of quashing arbitral award and right to commence arbitration afresh - limited supervisory role of courts to ensure fairness in arbitration - violation of natural justice as ground for setting aside an award - appointment of arbitrator pursuant to arbitration clause - obligation of tribunal to comply with mandate of Section 24(1)Maintainability of fresh Section 11(6)(C) application after quashing of award - effect of quashing arbitral award and right to commence arbitration afresh - limited supervisory role of courts to ensure fairness in arbitration - violation of natural justice as ground for setting aside an award - Whether a second application under Section 11(6)(C) is maintainable in the absence of an express liberty granted by the court which quashed the earlier award - HELD THAT: - The Court held that a fresh application under Section 11(6)(C) is maintainable where the earlier award has been quashed and the underlying dispute thus remains unresolved. The reasoning recognises that the supervisory jurisdiction of courts under the Arbitration and Conciliation Act is limited to ensuring fairness and correcting violations such as fraud, bias or breach of natural justice, and that where an award is set aside on such grounds the parties remain entitled to have the dispute adjudicated rather than left undecided. The Court relied on the principle in McDermott International Inc. Vs. Burn Standard Co. Ltd. that quashing an award leaves parties free to begin arbitration afresh, and on subsequent authority reiterating that when an award is set aside the underlying disputes require fresh determination and . Applying those principles to the facts - where the award was quashed for failure to follow the mandate of Section 24(1) (a natural justice defect) and the dispute remains undecided - the Court concluded that technical absence of an express liberty in the earlier order does not preclude maintainability of a new appointment application because otherwise the dispute would remain remediess. [Paras 17, 19]A fresh application under Section 11(6)(C) is maintainable notwithstanding that the earlier order quashing the award did not expressly grant liberty to file a fresh appointment application, when the award has been set aside and the dispute remains unresolved.Appointment of arbitrator pursuant to arbitration clause - obligation of tribunal to comply with mandate of Section 24(1) - Whether a fresh arbitrator should be appointed and, if so, the appointment made by the Court - HELD THAT: - Having held the fresh Section 11(6)(C) application maintainable, the Court exercised its power to appoint a sole arbitrator to ensure the unresolved dispute is adjudicated. The Court noted the parties' suggestion for the arbitrator and, subject to the disqualification provisions in Section 12(5), appointed the person proposed by counsel. The Court directed the arbitrator to decide the dispute expeditiously, to be guided by the statutory ceilings for fees and the timelines mandated by the Act, and to commence and endeavour to conclude proceedings within the period indicated. [Paras 20, 21, 23, 24]A sole arbitrator is appointed as requested by the parties (name specified in the order), subject to Section 12(5), with directions to proceed expeditiously and within the time and fee limits provided by the Act.Final Conclusion: The application under Section 11(6)(C) is allowed: the Court ruled that a fresh appointment application is maintainable after an award is quashed leaving the dispute unresolved, and appointed the sole arbitrator proposed by the parties (subject to statutory disqualification), with directions to proceed expeditiously. Issues Involved:1. Maintainability of a fresh application under Section 11(6)(C) of the Arbitration and Conciliation Act, 1996.2. Appointment of a new Arbitrator after the previous award was quashed.Issue-wise Detailed Analysis:1. Maintainability of a fresh application under Section 11(6)(C) of the Arbitration and Conciliation Act, 1996:The petitioner filed an application under Section 11(6)(C) of the Arbitration and Conciliation Act, 1996, for the appointment of an Arbitrator due to unresolved disputes under an agreement dated 12.03.1987. The respondent State of Jharkhand argued that a fresh application was not maintainable because no liberty was granted by the Court under Section 37 of the Act, 1996, for appointing a new Arbitrator after the previous award was quashed.The Court examined whether the absence of explicit liberty to appoint a new Arbitrator in the order under Section 37 of the Act, 1996, precludes the maintainability of a fresh application under Section 11(6)(C). The Court emphasized that the Arbitration and Conciliation Act, 1996, is enacted for resolving disputes according to the terms of the agreement, and a person cannot be left remediless. The Court referred to the arbitration clause in the contract, which provided a mechanism for dispute resolution.The Court noted that the dispute remained unresolved due to the quashing of the previous award and the order under Section 37 of the Act, 1996. The Court referred to the judgment in McDermott International Inc. Vs. Burn Standard Co. Ltd. & Ors., which stated that if an award is quashed, parties are free to begin arbitration again. This principle was further supported by the Supreme Court in Project Director, National Highways No. 45 E and 220 National Highways Authority of India Vs. M. Hakeem & Anr., and Dakshin Haryana Bijli Vitran Nigam Limited Vrs. Navigant Technologies Private Limited, emphasizing that unresolved disputes should be decided afresh.2. Appointment of a new Arbitrator after the previous award was quashed:The Court found that the dispute remained unresolved despite the quashing of the previous award and subsequent affirmation by the Supreme Court. Therefore, the Court held that a fresh application under Section 11(6)(C) of the Act, 1996, was maintainable. The Court decided that a new Arbitrator should be appointed to resolve the dispute.The Court appointed Mr. Sudhir Kumar Katriar, Former Judge of the Patna High Court, as the sole Arbitrator, subject to the provisions of Section 12(5) of the Arbitration and Conciliation Act, 1996. The Arbitrator was requested to decide the dispute within four months from the commencement of the arbitration proceedings. The Arbitrator was given the liberty to determine fees and expenses, considering the ceiling prescribed under Schedule IV of the Act, 1996, and to expedite the proceedings in accordance with Section 29-A of the Act, 1996.The Registrar General of the Court was directed to send a copy of the arbitration application along with all annexures to the learned Arbitrator.