2000 (9) TMI 926 - HC - Companies Law

Summary

Issues Involved:
1. Whether the arbitration clause between the parties stands exhausted and ineffectual due to the refusal of the named Arbitrator to act.
2. The applicability of Section 8 read with Section 11 of the Arbitration and Conciliation Act, 1996.
3. The interpretation of the arbitration clause in the agreement.
4. The role of the Court in appointing a new arbitrator when the named arbitrator refuses to act.

Detailed Analysis:

1. Exhaustion and Ineffectuality of Arbitration Clause:
The primary issue is whether the arbitration clause becomes exhausted and ineffectual following the refusal of the named arbitrator to act. The contract between the parties included a clause stating that disputes would be referred to Mr. S.K. Sen or his nominee. However, Mr. S.K. Sen resigned and expressed disinterest in acting as an arbitrator. The Respondent contended that this refusal rendered the arbitration clause exhausted, leaving the only remedy as a civil action.

2. Applicability of Section 8 and Section 11 of the Arbitration and Conciliation Act, 1996:
The petition was filed under Section 8 read with Section 11 of the Arbitration and Conciliation Act, 1996. The Court examined whether these sections allowed the appointment of a new arbitrator when the named arbitrator refused to act. The Court referred to precedents, including the Supreme Court's decision in State of West Bengal v. National Builders, which emphasized that if an arbitrator refuses to act, the Court has the jurisdiction to appoint another arbitrator unless the agreement explicitly prohibits it.

3. Interpretation of the Arbitration Clause:
The arbitration clause in the agreement specified that disputes would be referred to Mr. S.K. Sen or his nominee. The Court analyzed whether the clause intended to prohibit further arbitration if the named arbitrator refused to act. The Court concluded that the clause did not explicitly prohibit arbitration by another arbitrator if the named arbitrator or his nominee refused to act. The Court emphasized that the language of the statute, which uses a double negative, indicates that the exhaustion of the arbitration clause is an exception rather than the rule.

4. Role of the Court in Appointing a New Arbitrator:
The Court reaffirmed its power to appoint a new arbitrator under Section 8(1)(b) of the Act if the arbitration clause does not explicitly prohibit it. The Court referred to several precedents, including Nandyal Coop. Spg. Mills Ltd. v. K.V. Mohan Rao and Union of India v. Raghunath Singh & Co., which supported the view that the Court could appoint a new arbitrator if the named arbitrator refused to act. The Court concluded that the arbitration clause in the present case did not prohibit the appointment of a new arbitrator and appointed Mr. Shashivansh Bahadur as the arbitrator, with specified fees and instructions for the arbitration process.

Conclusion:
The Court allowed the petition, appointed a new arbitrator, and ordered the respondent to pay costs for the proceedings. The judgment emphasized the Court's jurisdiction to appoint an arbitrator when the named arbitrator refuses to act, provided the arbitration clause does not explicitly prohibit it.