2009 (9) TMI 908 - HC - Companies Law

Summary

Issues:
1. Appointment of Sole Independent Arbitrator under Section 8 & 11 of the Arbitration & Conciliation Act, 1996.
2. Dispute regarding theft and recovery of stolen goods in a security services agreement.
3. Validity of arbitration clause naming the Director of the company as the Arbitrator.

Analysis:
1. The petitioner sought the appointment of a Sole Independent Arbitrator under Section 8 & 11 of the Arbitration & Conciliation Act, 1996, to adjudicate disputes arising between the parties related to security services. The petitioner disputed liability for theft and recovery of stolen goods, leading to the termination of the service contract. The petitioner argued that the arbitration clause naming the Director of the company as the Arbitrator was unfair and requested the appointment of an independent Arbitrator instead.

2. The High Court emphasized that parties are bound by the arbitration clause they have agreed upon in a contract. Referring to the arbitration clause in this case, which specified the Director of the Company as the Arbitrator, the Court noted that the petitioner did not raise any objection to this clause initially. The Court highlighted that parties cannot selectively accept parts of an agreement and reject others, especially when entering into contracts with government entities or corporations where arbitration by senior officers is common practice.

3. Citing the Supreme Court's decision in Indian Oil Corporation & Ors. v. Raja Transport (P) Ltd., the High Court reiterated that a party cannot benefit from an arbitration clause in an agreement while disregarding the appointment procedure outlined in the clause. Therefore, the Court concluded that the petitioner's request for the appointment of a Sole Independent Arbitrator different from the one specified in the arbitration clause could not be accepted. The petitioner was directed to raise the dispute before the named Arbitrator as per the agreed arbitration clause.

In light of the above analysis, the High Court disposed of the petition, granting the petitioner the liberty to raise the dispute before the Arbitrator named in the arbitration clause.