2017 (3) TMI 1944 - SC - Indian Laws

Nomination of an Arbitrator - whether the Chief Justice of a High Court or any person or institution designated by him while exercising power under Section 11(6) of The Arbitration and Conciliation Act 1996 is bound to nominate an arbitrator as specified in the agreement for arbitration? - HELD THAT - The issue is no more res integra. Though an arbitrator is specified in the agreement for arbitration if circumstances so warrant the Chief Justice or the designated Judge is free to appoint an independent arbitrator having due regard to the qualification if any and other aspects as required under Section 11(8) of the Act. On the facts of the present case one wonders whether the issue actually arose or not. Clause 2900 of the Standard Conditions of Contract no doubt provides that the sole arbitrator shall be a Gazetted Railway Officer but in Clause 19.0 of the agreement dated 16.01.2012 executed between the parties it is clearly stipulated that the contract shall be governed by the General Conditions and Special Conditions of Contract. Thus it is clear that there is no stipulation for appointment of a Railway Officer. It can be any person. The designated Judge of the High Court has only exercised his powers in terms of the agreement by nominating an independent arbitrator. There are no merit in this appeal and the same is accordingly dismissed.

Summary

Issues:
1. Interpretation of Section 11(6) of The Arbitration and Conciliation Act, 1996 regarding the appointment of arbitrators.
2. Whether the Chief Justice or designated Judge is bound to nominate an arbitrator as specified in the agreement for arbitration.

Analysis:
1. The Supreme Court considered the interpretation of Section 11(6) of The Arbitration and Conciliation Act, 1996 in a case where the designated Judge of the High Court nominated an independent arbitrator as the appellant failed to appoint an arbitrator within the permitted time. The appellant contended that the designated Judge should have nominated an arbitrator as specified in the agreement for arbitration.

2. The appellant relied on previous judgments like Union of India v. M.P. Gupta and Union of India v. Master Construction Company, emphasizing that the designated Judge must nominate an arbitrator as stipulated in the agreement. However, the respondent argued that once a party forfeits the right to appoint an arbitrator, the Chief Justice or designated Judge is free to nominate any qualified person as an arbitrator, not bound by the agreement's specification.

3. The Court examined precedents such as Northern Railway Administration v. Patel Engineering Company Limited and North Eastern Railway v. Tripple Engineering Works, which allowed the Chief Justice or designated Judge to deviate from the arbitration clause and nominate an independent arbitrator while considering the qualifications prescribed in the agreement, as required under Section 11(8) of the Act.

4. Referring to Patel Engineering Company Limited and Tripple Engineering Works cases, the Court reiterated that the Chief Justice or designated Judge has the discretion to nominate an independent arbitrator, deviating from the arbitration clause, while ensuring due regard to the qualifications prescribed in the agreement for arbitration.

5. The Court emphasized that the Chief Justice or designated Judge should strive to adhere to the appointment procedure prescribed in the arbitration clause. However, if circumstances exist that raise doubts about the independence or impartiality of the specified arbitrator, or other valid reasons warrant the appointment of an independent arbitrator, the Chief Justice or designated Judge may ignore the designated arbitrator and appoint someone else.

6. In the specific case under consideration, the Court found that the agreement did not mandate the appointment of a Railway Officer as the sole arbitrator. The General Conditions and Special Conditions of Contract allowed for the appointment of any qualified person as an arbitrator. Therefore, the designated Judge acted within the agreement's terms by nominating an independent arbitrator.

7. Ultimately, the Court dismissed the appeal, stating that there was no merit in challenging the appointment of an independent arbitrator by the designated Judge. The Court also dismissed a related petition based on a previous judgment, finding no merit in the petition.

8. The judgment clarified that while an arbitrator may be specified in the agreement for arbitration, the Chief Justice or designated Judge has the discretion to appoint an independent arbitrator if circumstances warrant, ensuring compliance with the qualifications and other aspects as required under Section 11(8) of the Act.