2008 (8) TMI 801 - SC - Companies Law

Appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 - Held that - High Court does not appear to have focussed on the requirement to have due regard to the qualifications required by the agreement or other considerations necessary to secure the appointment of an independent and impartial arbitrator. It needs no reiteration that appointment of the arbitrator or arbitrators named in the arbitration agreement is not a must, but while making the appointment the twin requirements of sub-section (8) of Section 11 have to be kept in view, considered and taken into account. If it is not done, the appointment becomes vulnerable. In the circumstances, we set aside the appointment made in each case, remit the matters to the High Court to make fresh appointments.

Summary

Issues:
Appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 - Scope and ambit of Section 11(6) - Interpretation of sub-sections (2), (3), (4), (5), and (6) of Section 11 - Consideration of qualifications and other factors in appointing an arbitrator.

Analysis:
The judgment addresses the conflicting views in two previous decisions and refers the matter to a larger Bench for clarification. The main issue revolves around the appointment of arbitrators under Section 11(6) of the Arbitration and Conciliation Act, 1996. It is noted that the scope and ambit of Section 11(6) needs consideration due to the differing interpretations in previous cases. The arguments presented by the parties focus on the interpretation of sub-sections (2), (3), (4), (5), and (6) of Section 11, emphasizing the importance of adhering to the agreed procedure and exhausting all remedies before court intervention.

The stand of the parties highlights the significance of the agreed procedure in appointing arbitrators, with specific reference to failure scenarios outlined in sub-section (6) of Section 11. The submission stresses the need to give due regard to qualifications required by the agreement and other considerations to ensure the appointment of an independent and impartial arbitrator. It is argued that the Court should not directly make an appointment but should ensure that the agreed procedure is exhausted before intervening.

On the other hand, opposing counsel argues that the expression "due regard" in sub-section (8) of Section 11 allows for flexibility in considering qualifications and other factors, suggesting a degree of discretion in the appointment process. Reference is made to the previous scheme under the Arbitration Act, 1940, to highlight the evolution in the appointment process and court intervention.

The judgment delves into the detailed provisions of Section 11, emphasizing the contingencies outlined in sub-section (6) and the role of the Chief Justice or designated person in appointing arbitrators. It underscores the importance of adhering to the terms of the agreement and ensuring that qualifications and other considerations are duly considered in the appointment process. The expression "due regard" is explained as requiring proper attention to various circumstances to secure an impartial appointment.

Ultimately, the Court concludes that the High Court failed to consider the qualifications required by the agreement and other essential factors in making the appointments. As a result, the appointments are set aside, and the matters are remitted to the High Court for fresh appointments, emphasizing the need to adhere to the parameters outlined in the judgment. The appeals are disposed of accordingly, highlighting the importance of following the prescribed procedures and considerations in appointing arbitrators under Section 11 of the Act.