2007 (8) TMI 652 - SC - Companies Law

High Court appointed an arbitrator on a petition filed by the respondent under Section 11(6) of the Arbitration and Conciliation Act, 1996 Held that - The order of appointment of Dr. Gita Rawat by the appellant as a sole arbitrator dated 15.5.2006 was passed without jurisdiction. Once Section 11(6) petition is filed by one party seeking appointment of an arbitrator, the other party cannot resurrect the clause of the agreement dealing with the appointment of the arbitrator, in this case Clause 24 of the agreement.Appeal dismissed.

Summary

Issues:
Appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Interpretation of the arbitration clause in the agreement.
Validity of the appointment of arbitrator by the High Court.

Analysis:
The case involved an appeal by the Union of India against the appointment of an arbitrator by the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996. The dispute arose from a rate contract for the supply of batteries, which included a price variation clause. The respondent requested amendments related to the price variation clause, but the appellant allegedly did not comply. The respondent sent notices invoking arbitration under the agreement. The High Court appointed an arbitrator, Justice K.S. Gupta, while the appellant later appointed Dr. Gita Rawat. The appellant argued that the High Court did not follow the procedure under Section 11(8) and that the appointment of Justice K.S. Gupta was not in line with the arbitration clause in the agreement.

The Supreme Court held that once a Section 11(6) petition seeking appointment of an arbitrator is filed, the power to appoint an arbitrator under the agreement ceases. The Court referred to previous judgments to support this principle. It distinguished a case where an arbitrator was appointed after the filing of the Section 11(6) petition, emphasizing that the right to appoint an arbitrator under the agreement is extinguished once such a petition is filed. The Court also cited a case where it was held that if an agreement specifies an arbitrator, the Court cannot appoint a different arbitrator not specified in the agreement.

In light of these principles, the Court found that the appointment of Dr. Gita Rawat by the appellant after the Section 11(6) petition was filed was without jurisdiction. The Court emphasized that the right to appoint an arbitrator under the agreement ceases once a Section 11(6) petition is filed, and the other party cannot rely on the agreement's arbitration clause for such appointment. Consequently, the appeal was dismissed, and no costs were awarded.

This judgment clarifies the procedure for appointing arbitrators under Section 11(6) of the Act and emphasizes that once such a petition is filed, the right to appoint an arbitrator under the agreement is extinguished. It underscores the importance of following the statutory provisions and the terms of the agreement in arbitration proceedings to ensure fairness and adherence to legal principles.