2009 (4) TMI 841 - SC - Companies Law

Whether it would be for this Court to appoint the arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996? Held that - The application must succeed. Accordingly, appoint Hon ble Mr. Justice R.C.Lahoti (Ex.CJI) as the sole Arbitrator to arbitrate upon the disputes which have arisen between the parties hereto as set out in the present application. The sole Arbitrator would be entitled to decide upon the procedure to be followed in the arbitration proceedings, sittings of the proceedings as also to settle his fees in respect thereof. However, the law governing the contract would be the Californian Law.

Issues Involved:
1. Jurisdiction of the Supreme Court of India to appoint an arbitrator.
2. Applicability of Part I of the Arbitration and Conciliation Act, 1996 to international commercial arbitration.
3. Interpretation of the arbitration clause in the agreement.
4. Governing law of the contract and arbitration procedure.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Supreme Court of India to Appoint an Arbitrator:
The court examined whether it had the jurisdiction to appoint an arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996, given that the governing law of the contract was specified as Californian law. The court noted that there was no dispute that this was an international arbitration, and under the Arbitration Act, the Chief Justice or his nominee alone would have the jurisdiction to appoint the arbitrator.

2. Applicability of Part I of the Arbitration and Conciliation Act, 1996 to International Commercial Arbitration:
The court referred to previous judgments, particularly Bhatia International Vs. Bulk Trading S.A. and Indtel Technical Services Private Ltd. Vs. W.S. Atkins Rail Limited, which held that Part I of the Arbitration and Conciliation Act, 1996 would apply to international commercial arbitrations held outside India unless expressly excluded by the agreement. The court concluded that there was no express or implied exclusion of Part I in the present agreement, thereby making it applicable.

3. Interpretation of the Arbitration Clause in the Agreement:
The court analyzed Clause 10.1 of the agreement, which stated that the governing law would be the laws of California, USA, and any disputes would be referred to a mutually agreed arbitrator. The applicant argued that this did not exclude the application of the Arbitration and Conciliation Act, 1996, while the respondent contended that the clause implied that the arbitration procedure should also be governed by Californian law. The court found that the clause did not specifically exclude the application of Part I of the Arbitration Act and thus could not be interpreted to imply such exclusion.

4. Governing Law of the Contract and Arbitration Procedure:
The court acknowledged that while the governing law of the contract was Californian law, there was no agreement on the law governing the arbitration procedure. The court held that the substantive law governing the contract would be Californian law, but the procedural aspects of arbitration would be governed by the Arbitration and Conciliation Act, 1996, as there was no clear exclusion of its provisions.

Conclusion:
The application was allowed, and the court appointed Hon'ble Mr. Justice R.C. Lahoti (Ex. CJI) as the sole arbitrator to arbitrate the disputes between the parties. The arbitrator was given the authority to decide the procedure to be followed and the sittings of the arbitration proceedings, while the law governing the contract would remain Californian law.

← Previous Next →