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2015 (2) TMI 484 - HC - Indian LawsAppointment of Arbitrator - Non consensus between parties - Interpretation of clause 39.2 which governs the arbitration agreement between the parties - Held that - From the bare reading of subject clause, it is apparent that the clause itself prescribes a mode of appointment of an Arbitrator in case of default of either of the parties to nominate its Arbitrator for constitution of the Arbitral Tribunal, within 60 days - Admitted facts clearly show that the respondent invoked the arbitration clause and nominated its Arbitrator and the petitioner did not nominate his Arbitrator within 60 days, the period prescribed in the clause. The contention of the petitioner is that on receiving a letter from the respondent invoking the arbitration clause, they wrote a letter dated 20.05.2014 and asked the respondent to give them time up to 01.08.2014 for appointment of the Arbitrator. It is pertinent to mention here that the petitioner did not appoint their Arbitrator even by 01.08.2014, the time they sought from respondent for appointment of the Arbitrator. Their contention that they did so is contrary to their own documents placed on record. Their letter dated 31.07.2014 clearly shows that till 31.07.2014, they had not nominated any Arbitrator. The letter dated 13.08.2014 of the petitioner clearly shows that a letter for appointment of the Arbitrator dated 02.08.2014 was signed by their Director only on 07.08.2014. Vide letter dated 02.08.2014 the petitioner had informed the respondent that they had appointed Justice K.S. Gupta (Retd.) as the nominee Arbitrator. Since the letter dated 02.08.2014, appointing the Arbitrator by the petitioner, was executed only on 07.08.2014, it cannot be said that the petitioner had nominated his Arbitrator before 07.08.2014. Even if we presume that the respondent by remaining silent on the letter of the petitioner for seeking time till 01.08.2014 to appoint an Arbitrator amounts to consent or acquiescing to the request, still the petitioners were bound to nominate their Arbitrator atleast by 01.08.2014. It is also apparent from the letter of the respondent dated 06.08.2014 that they turned down the request of the petitioner in its letter dated 31.07.2014 for grant of further time for nomination of the Arbitrator and pursuant to second part of the arbitration clause appointed their nominated Arbitrator as the sole Arbitrator. The respondent had done so before the petitioner appointed its arbitrator. From these facts, it is apparent that while the respondent had acted as per the procedure prescribed under the arbitration clause binding the parties, it was the petitioner, who had failed to comply the procedure under the arbitration clause. This clearly shows that the petitioner is a defaulting party. An arbitration agreement is an independent agreement and is binding on both the parties. It is a settled law that neither of the parties can unilaterally change the terms and conditions of any agreement. The petitioner under this agreement was bound to nominate its Arbitrator within 60 days, but admittedly, he did not do so for some reason given by him in his letter dated 20.05.2014 and requested the respondent to give him the time to nominate his Arbitrator till 01.08.2014. Even if I say that the silence on the part of the respondent to this request of the petitioner amounts to consent and grant of time to petitioner for nominating the Arbitrator till 01.08.2014, still, admittedly, the petitioner did not appoint the Arbitrator within that extended period. There is therefore a complete violation of procedure of Arbitration clause by the petitioner. - it was the petitioner who had failed to follow the procedure of appointment of Arbitrator and thus is a defaulting party. Since the petitioner had failed to appoint its nominee Arbitrator in terms of Arbitration agreement, it cannot be said that the appointment of nominee Arbitrator by him is as per the agreed procedure. Part II of Clause 39(2) clearly stipulates that if either of the parties fails to appoint their Arbitrator, the nominated Arbitrator appointed by one party shall act as a sole Arbitrator. In the present case since the respondent had invoked the arbitration clause, and petitioner had failed to nominate his Arbitrator in terms of agreement, the respondent has rightly vide letter dated 06.08.2014 nominated its Arbitrator as a sole Arbitrator. This Court under Section 11(6) of the Act therefore has no jurisdiction to appoint any other person as an Arbitrator. - it is apparent that the petition has no merit and the same is liable to be dismissed. - Decided against Petitioner.
Issues Involved:
1. Validity of the appointment of the petitioner's nominee Arbitrator. 2. Request for the Court to appoint a Presiding Arbitrator. 3. Validity of the respondent's notice appointing a sole Arbitrator. 4. Interpretation and adherence to the arbitration clause 39.2. 5. Application of Section 11(6) of the Arbitration and Conciliation Act, 1996. Detailed Analysis: 1. Validity of the appointment of the petitioner's nominee Arbitrator: The petitioner contended that they had nominated Justice K.S. Gupta (Retd.) as their Arbitrator within the extended time agreed upon by the respondent. However, the court found that the petitioner had failed to nominate their Arbitrator within the 60-day period stipulated by clause 39.2 of the arbitration agreement. The petitioner's request for an extension until 01.08.2014 was not formally agreed upon by the respondent, and even then, the petitioner did not appoint their Arbitrator by that date. The letter dated 02.08.2014, appointing the Arbitrator, was executed only on 07.08.2014, after the respondent had already appointed their Arbitrator as the sole Arbitrator on 06.08.2014. Therefore, the court concluded that the petitioner was in default and their nomination was invalid. 2. Request for the Court to appoint a Presiding Arbitrator: The petitioner requested the court to appoint a Presiding Arbitrator since the two nominated Arbitrators could not reach a consensus. The court dismissed this request, stating that the petitioner, being the defaulting party, could not invoke Section 11(6) of the Act to appoint a Presiding Arbitrator. The court emphasized that the provisions under Section 11(6) can only be invoked against a defaulting party and not by one. 3. Validity of the respondent's notice appointing a sole Arbitrator: The respondent invoked the arbitration clause and appointed Justice S.N. Aggarwal (Retd.) as their Arbitrator. When the petitioner failed to nominate their Arbitrator within the stipulated 60 days, the respondent appointed their nominee as the sole Arbitrator as per the second part of clause 39.2. The court upheld the respondent's action, stating that the respondent had acted in accordance with the agreed procedure under the arbitration clause. 4. Interpretation and adherence to the arbitration clause 39.2: Clause 39.2 of the arbitration agreement required each party to nominate an Arbitrator within 60 days of receiving a notice invoking the arbitration clause. If a party failed to do so, the Arbitrator appointed by the other party would become the sole Arbitrator. The court found that the petitioner did not adhere to this procedure, as they failed to nominate their Arbitrator within the prescribed time frame. The court emphasized that the arbitration clause's procedure was binding and that the petitioner could not unilaterally alter the terms. 5. Application of Section 11(6) of the Arbitration and Conciliation Act, 1996: The petitioner argued that their right to appoint an Arbitrator continued until an application under Section 11(6) was made. The court rejected this argument, distinguishing the present case from the precedent cited by the petitioner (Bharat Sanchar Nigam Limited vs. Dhanurdhar Champatiray). The court noted that in the cited case, the aggrieved party was not the defaulting party, unlike in the present case where the petitioner was in default. Therefore, the petitioner could not take advantage of their own default to invoke Section 11(6). Conclusion: The court dismissed the petition, holding that the petitioner was the defaulting party for failing to nominate their Arbitrator within the agreed time frame. Consequently, the respondent's appointment of their nominee as the sole Arbitrator was upheld, and the court declined to appoint a Presiding Arbitrator or any other Arbitrator under Section 11(6) of the Act.
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