2013 (1) TMI 951 - HC - Companies Law

Summary

Issues Involved:
1. Substitution of the sole arbitrator u/s 11 and 15(2) of the Arbitration & Conciliation Act, 1996.
2. Validity of unilateral appointment of arbitrator by respondent under clause 21 of the agreement.
3. Applicability of section 15(2) of the Arbitration Act, 1996 for the appointment of a substitute arbitrator.

Summary:

1. Substitution of the sole arbitrator u/s 11 and 15(2) of the Arbitration & Conciliation Act, 1996:
The applicants sought an order to substitute the sole arbitrator, Dr. Birendra Saraf, who had withdrawn from his office. The court noted that the appointment of Dr. Birendra Saraf was made by consent of both parties in a Company Petition and not u/s 11 of the Arbitration Act. The court held that the appointment of a substitute arbitrator must be done according to the rules applicable to the original arbitrator's appointment, as per section 15(2) of the Act.

2. Validity of unilateral appointment of arbitrator by respondent under clause 21 of the agreement:
The respondent argued that clause 21 of the agreement gave them the exclusive right to appoint a sole arbitrator. The court agreed, stating that the right to appoint an arbitrator under clause 21 was not waived or given up merely because Dr. Birendra Saraf was appointed by consent in the Company Petition. The respondent's appointment of Justice A.D. Mane as the substitute arbitrator was therefore valid.

3. Applicability of section 15(2) of the Arbitration Act, 1996 for the appointment of a substitute arbitrator:
The court emphasized that section 15(2) requires the appointment of a substitute arbitrator to be done according to the original agreement or applicable provisions. The court found that the respondent had not failed to perform their function under the agreed procedure, and thus, the application u/s 11(6) was not maintainable. The court concluded that no cause of action had arisen to seek the appointment of an arbitrator from the court under section 11(6).

Conclusion:
The court rejected the application for the appointment of a substitute arbitrator u/s 11(6) of the Arbitration & Conciliation Act, 1996, and upheld the respondent's right to appoint the arbitrator as per the agreement.