2015 (1) TMI 1494 - SC - Indian Laws

Appointment of Shri R.G. Kulkarni as Arbitrator - HELD THAT - Unless the appointment of the arbitrator is ex facie valid and such appointment satisfies the Court exercising jurisdiction under Section 11(6) of the Arbitration Act, acceptance of such appointment as a fait accompli to debar the jurisdiction under Section 11(6) cannot be countenanced in law. In the present case, the agreed upon procedure between the parties contemplated the appointment of the arbitrator by second party within 30 days of receipt of a notice from the first party. The option given to the respondent Corporation to go beyond the panel submitted by the ICADR and to appoint any person of its choice was clearly not in the contemplation of the parties. If that be so, obviously, the appointment of Shri Justice A.D. Mane is non-est in law. Such an appointment, therefore, will not inhibit the exercise of jurisdiction by this Court under Section 11(6) of the Arbitration Act. It cannot, therefore, be held that the present proceeding is not maintainable in law. The appointment of Shri Justice A.D. Mane made beyond 30 days of the receipt of notice by the petitioner, though may appear to be in conformity with the law laid down in Datar Switchgears Ltd. 2000 (10) TMI 873 - SUPREME COURT , is clearly contrary to the agreed procedure which required the appointment made by the respondent Corporation to be from the panel submitted by the ICADR. The said appointment, therefore, is clearly invalid in law. Shri Justice S.R. Sathe, a retired judge of the Bombay High Court appointed as the Arbitrator on behalf of the respondent Corporation - petition allowed.

Issues Involved:
1. Invocation of arbitration clause and appointment of arbitrator.
2. Validity of the respondent's arbitrator appointment.
3. Jurisdiction of the court under Section 11(6) of the Arbitration and Conciliation Act, 1996.
4. Compliance with the agreed procedure for appointment of arbitrators.

Detailed Analysis:

1. Invocation of Arbitration Clause and Appointment of Arbitrator:
The petitioner invoked the arbitration clause contained in the works contract with the Municipal Corporation of Greater Mumbai by nominating an arbitrator and calling upon the respondent to appoint its arbitrator within 30 days. The arbitration clause specified a procedure for the appointment of arbitrators, including the involvement of the International Centre for Alternative Dispute Resolution (ICADR) if either party failed to appoint an arbitrator within the stipulated time.

2. Validity of the Respondent's Arbitrator Appointment:
The respondent Corporation did not respond within the 30-day period but later appointed Mr. Justice (Retd.) A.D. Mane as its arbitrator following a communication from the ICADR. The petitioner challenged this appointment, arguing that it was contrary to the agreed procedure, which required the appointment to be made from a panel of names provided by the ICADR. The petitioner also raised concerns about the impartiality and independence of the arbitrator appointed by the respondent.

3. Jurisdiction of the Court under Section 11(6) of the Arbitration and Conciliation Act, 1996:
The respondent argued that the petition under Section 11(6) was not maintainable since an arbitrator had already been appointed, and the petitioner's remedy lay under different provisions of the Arbitration Act. However, the court held that unless the appointment of the arbitrator is ex facie valid and satisfies the court, the jurisdiction under Section 11(6) cannot be ousted. The court emphasized that the agreed procedure between the parties must be followed, and any deviation from this procedure invalidates the appointment.

4. Compliance with the Agreed Procedure for Appointment of Arbitrators:
The court found that the respondent's appointment of Mr. Justice A.D. Mane was not in accordance with the agreed procedure, which required the appointment to be made from a panel of names provided by the ICADR. The court noted that the flexibility introduced by the decision in Datar Switchgears Ltd. vs. Tata Finance Ltd. (extending the time frame for appointment) did not apply in this case, as the appointment was clearly contrary to the agreed procedure. Consequently, the appointment of Mr. Justice A.D. Mane was deemed non-est in law.

Conclusion:
The court allowed the petition and appointed Shri Justice S.R. Sathe, a retired judge of the Bombay High Court, as the arbitrator on behalf of the respondent Corporation. Both arbitrators were directed to name the third arbitrator promptly, and the arbitration proceedings were to be conducted expeditiously. The terms of appointment for Shri Justice S.R. Sathe were to be settled in consultation with the respondent Corporation. The arbitration petition was disposed of accordingly.

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