2006 (3) TMI 690 - SC - Companies Law

Application under Section 11(6)r.w.s.11(12) of the Arbitration and Conciliation Act 1996 read with Paragraph 2 of the Appointment of Arbitrators by the Chief Justice of India Scheme 1996 for appointment of a third/Presiding Arbitrator in accordance with an agreement dated 23.5.2001 between the parties Held that - The Arbitration Agreement clearly envisages the appointment of Presiding Arbitrator by the IRC. There is no qualification that the arbitrator has to be a different person depending on the nature of the dispute. If the parties have entered into such an agreement with open eyes it is not open to ignore it and invoke exercise of powers in Section 11(6). On all overall assessment I am satisfied that the appointment of the Presiding Officer by the IRC is perfectly valid and justified as no occasion had arisen for the petitioner to move the Chief Justice of India under Section 11(6) of the Act. Appeal dismissed.

Summary

Issues:
1. Application under Section 11(6) for appointment of a third/Presiding Arbitrator.
2. Disputes arising from construction contracts with NHAI.
3. Appointment of Presiding Arbitrator by the Indian Road Congress (IRC).
4. Competence of the appointed Presiding Arbitrator.

Analysis:

Issue 1:
The application sought appointment of a third/Presiding Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, for disputes arising from construction contracts with NHAI. The contracts contained arbitration clauses for international commercial arbitration. The dispute involved termination of contract by NHAI and subsequent arbitration proceedings.

Issue 2:
After disputes arose between the parties, the respondent terminated the contract, leading to arbitration proceedings. The parties failed to agree on the choice of the Presiding Arbitrator. The Indian Road Congress (IRC) appointed the Presiding Arbitrator as per the contract terms. The legality of the appointment was challenged, citing the need for a legally competent arbitrator.

Issue 3:
The appointment of the Presiding Arbitrator by the IRC was challenged on the grounds of legal competence. The petitioners argued that the appointed arbitrator lacked legal expertise to handle the dispute effectively. However, the agreement clearly outlined the appointment procedure by the IRC, and there was no requirement for legal qualifications.

Issue 4:
The competence of the appointed Presiding Arbitrator was questioned, emphasizing the need for legal expertise. The court dismissed the argument, stating that the agreement did not specify legal qualifications for the arbitrator. The court upheld the validity of the appointment by the IRC, finding no grounds for intervention under Section 11(6) of the Act.

In conclusion, the Supreme Court dismissed the petitions, affirming the appointment of the Presiding Arbitrator by the IRC as valid. The court emphasized the importance of adhering to the terms of the arbitration agreement and rejected the argument for legal expertise as a prerequisite for the arbitrator. The judgment clarified the role of the IRC in appointing the Presiding Arbitrator and upheld the contractual provisions governing the arbitration process.