2013 (4) TMI 279 - HC - Companies Law

Appointment of arbitrator U/s 11(6) - Whether period of 30 days is mandatory or not - The respondent made the appointment before the appellant filed the application U/s 11 but the said appointment was made beyond 30 days - Held that - The Hon ble Chief Justice or his designate cannot decide under section 11(6) of the Arbitration & Conciliation Act, 1996 as to whether the appointment of the arbitrator already made by the respondents in terms of the arbitration agreement is valid or illegal - The fact remains that the respondents have already appointed arbitrator, may be after expiry of thirty days of receipt of notice invoking arbitration clause by the applicants - The question as to whether such appointment is in terms of the agreed procedure prescribed in the arbitration clause or not. In my view touches the jurisdiction of the arbitrator which cannot be decided by the Hon ble Chief Justice or his designate under section 11(6) of the Arbitration Act, 1996 - Such issue of jurisdiction in respect of the arbitrator appointed by the respondents can be raised before the arbitrator himself by making application U/s 16 of the Arbitration & Conciliation Act, 1996 - It is made clear that this court has not expressed any views as to whether the arbitrator appointed by the respondents is validly appointed or not and the said issue is kept open. No order for appointment of the arbitrator can be passed in this proceedings - The application is disposed of in the aforesaid terms - It is made clear that other issues which touches the jurisdiction of the arbitrator already appointed by the respondents are also to be decided by the learned arbitrator under section 16 of the Act.

Issues Involved:
1. Whether the respondents lost their right to appoint an arbitrator after the expiry of thirty days from the receipt of the notice invoking arbitration.
2. Whether the Hon'ble Chief Justice or his designate can appoint an arbitrator under section 11(6) of the Arbitration & Conciliation Act, 1996 after the respondents have appointed an arbitrator beyond the stipulated thirty days.
3. Whether the validity of the arbitrator's appointment by the respondents can be decided under section 11(6) or should be addressed under section 16 of the Arbitration & Conciliation Act, 1996.

Issue-wise Detailed Analysis:

1. Loss of Right to Appoint Arbitrator After Thirty Days:
The applicant argued that the respondents failed to appoint an arbitrator within thirty days from the receipt of the notice invoking arbitration on 9th July 2012. The respondents appointed an arbitrator on 5th November 2012, which the applicant contends was beyond the stipulated period, thus forfeiting their right to make such an appointment. The applicant relied on the Supreme Court judgment in Datar Switchgears Ltd. Vs. Tata Finance Limited, which discusses the implications of not appointing an arbitrator within thirty days and the resultant forfeiture of the right to appoint an arbitrator. The applicant also cited the Rajasthan High Court judgment in Chetan Construction Co. Vs. State and Ors, which supports the view that failure to appoint an arbitrator within the agreed period allows the Chief Justice or his designate to make the appointment.

2. Appointment of Arbitrator by Hon'ble Chief Justice or Designate Under Section 11(6):
The applicant contended that since the respondents did not appoint an arbitrator within the thirty-day period, only the Chief Justice or his designate could appoint an arbitrator under section 11(6) of the Arbitration & Conciliation Act, 1996. The applicant argued that the appointment made by the respondents after the stipulated period was invalid and should be superseded by an appointment made by the Chief Justice or his designate. The respondents, however, argued that the right to appoint an arbitrator is not forfeited even if the appointment is made after thirty days, as per the Datar Switchgear judgment. The respondents further distinguished the Rajasthan High Court judgment on the grounds that in the present case, an arbitrator had already been appointed and had entered upon the reference.

3. Validity of Arbitrator's Appointment and Jurisdiction:
The court noted that the arbitrator appointed by the respondents had already entered upon the reference and scheduled hearings. The court referred to its previous judgment in Shane Duff Vs. Essel Sports Pvt. Ltd., which held that an application under section 11(6) is not maintainable if there is no vacancy for the arbitrator's position. The court concluded that the Chief Justice or his designate cannot decide the validity of the arbitrator's appointment under section 11(6). Instead, such issues touch upon the jurisdiction of the arbitrator and should be addressed under section 16 of the Arbitration & Conciliation Act, 1996. The court emphasized that it had not expressed any views on the validity of the arbitrator's appointment by the respondents, leaving the issue open for the arbitrator to decide.

Conclusion:
The application for the appointment of an arbitrator by the Chief Justice or his designate was dismissed. The court held that the issues regarding the validity of the arbitrator's appointment by the respondents should be raised before the arbitrator under section 16 of the Arbitration & Conciliation Act, 1996. No order as to costs was made.

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