2016 (12) TMI 688 - SC - Indian Laws

Arbitration proceedings - Held that - Disputes have arisen between the parties, resulting in an exchange of e-mails. The Petitioner has a claim for unpaid dues. The Petitioner invoked arbitration by an e-mail dated 2 November 2015 addressed by its advocate to the respondent. The Petitioner claimed an amount of USD 38,13,723.76 together with interest by its e-mail and suggested the names of two former judges of the Delhi High Court. The Petitioner sought the concurrence of the Respondent to the appointment of one of them as sole arbitrator, in terms of the arbitration agreement. Finding no response, these proceedings were instituted under Section 11(5) of the Arbitration and Conciliation Act, 1996. Notice was issued in these proceedings on 8 March 2016. On 7 October 2016 the Respondent informed this Court that it was willing to negotiate an amicable settlement with the Petitioner and would either finalize a settlement or file its objections to the petition for appointment of an arbitrator within four weeks. Neither has any settlement been arrived at between the parties nor has a reply been filed to the Arbitration Petition. As learned counsel have not disputed the existence of the arbitration agreement. Disputes have evidently arisen between the parties and a mutual settlement has not been possible. We hereby appoint Mr Justice FM Ibrahim Kalifulla, former judge of the Supreme Court of India to act as a sole Arbitrator in terms of the arbitration agreement. The learned arbitrator shall be at liberty to determine the fees payable to him for the arbitration

Summary

Issues:
1. Validity and enforcement of the arbitration agreement.
2. Appointment of a sole arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996.
3. Settlement negotiations between the parties.

Analysis:

Issue 1: Validity and enforcement of the arbitration agreement
The case involved a contract between a US company (Petitioner) and a Turkish company (Respondent) for the construction of a pipeline in Bangladesh. The contract contained an arbitration clause in Clause 24, which mandated arbitration in case of disputes. The Petitioner claimed unpaid dues and invoked arbitration as per the agreement. The Respondent did not respond to the appointment of an arbitrator, leading to the institution of proceedings under Section 11(5) of the Arbitration and Conciliation Act, 1996. The Court found that the arbitration agreement was valid and enforceable, as disputes had arisen between the parties, and a mutual settlement was not possible.

Issue 2: Appointment of a sole arbitrator
After considering the circumstances and the failure of the parties to reach a settlement or respond to the arbitration petition, the Court appointed Mr. Justice FM Ibrahim Kalifulla, a former judge of the Supreme Court of India, as the sole arbitrator in accordance with the arbitration agreement. The arbitrator was given the authority to determine the fees payable for the arbitration process. The Court's decision to appoint a sole arbitrator was based on the necessity to resolve the disputes between the parties effectively and efficiently.

Issue 3: Settlement negotiations
Despite the Respondent expressing willingness to negotiate a settlement, no agreement was reached, and no objections were filed to the petition for the appointment of an arbitrator. The lack of progress in settlement negotiations led the Court to appoint a sole arbitrator to facilitate the resolution of the disputes between the parties. The Court emphasized the importance of adhering to the arbitration agreement and the need for a timely and effective resolution of the issues at hand.

In conclusion, the Supreme Court upheld the validity of the arbitration agreement, appointed a sole arbitrator, and disposed of the Arbitration Petition accordingly, aiming to provide a fair and efficient resolution to the disputes between the contracting parties.