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TMI Blog2013 (5) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Held that:- The law is well settled that where an Arbitrator had already been appointed and intimation thereof had been conveyed to the other party, a separate application for appointment of an Arbitrator is not maintainable. Once the power has been exercised under the Arbitration Agreement, there is no power left to, once again, refer the same disputes to arbitration under Section 11 of the 1996 Act, unless the order closing the proceedings is subsequently set aside. In view of the language of Article 20 of the Arbitration Agreement which provided that the arbitration proceedings would be held in accordance with the rules and procedures of the International Chamber of Commerce or UNCITRAL, Devas (respondent) was entitled to invoke the Rules of Arbitration of the ICC for the conduct of the arbitration proceedings. Article 19 of the Agreement provided that the rights and responsibilities of the parties thereunder would be subject to and construed in accordance with the laws of India. There is, therefore, a clear distinction between the law which was to operate as the governing law of the Agreement and the law which was to govern the arbitration proceedings. Parties had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Delhi in India. It was also provided that the arbitration proceedings would be held in accordance with the rules and procedures of the International Chamber of Commerce (ICC) or UNCITRAL. 4. On 25th February, 2011, the Petitioner Company terminated the Agreement with immediate effect in terms of Article 7(c) read with Article 11(b) of the Agreement in keeping with the directives of the Government, which it was bound to follow under Article 103 of its Articles of Association. By its letter dated 28th February, 2011, the Respondent objected to the termination. On 15th April, 2011, the Petitioner Company sent to the Respondent Company a cheque for ₹ 58.37 crores refunding the Upfront Capacity Reservation Fee received from Devas. The said cheque was, however, returned by Devas on 18th April, 2011, insisting that the Agreement was still subsisting. 5. In keeping with the provisions of Article 20 of the Arbitration Agreement, the Petitioner wrote to the Respondent Company on 15th June, 2011, nominating its senior management to discuss the matter and to try and resolve the dispute between the parties. However, without exhausting the mediation process, as contemplated under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed its Arbitrator, in accordance with the Agreement between the parties, asserting that in view of Article 20 of the Agreement, the arbitral proceedings would be governed by the Indian law, viz., the Arbitration and Conciliation Act, 1996. 9. The Respondent did not reply to the Petitioner's letter dated 30th July, 2011. However, the International Chamber of Commerce, by its letter dated 3rd August, 2011, responded to the Petitioner's letter dated 30th July, 2011, and indicated as follows :- We refer to our letter dated 18 July, 2011, and remind the parties that the issues raised regarding the arbitration clause would shortly be submitted to the Court for consideration. All comments submitted by the parties will be brought to the Court's attention. In this regard, any final comments from the parties may be submitted to us by 5 August, 2011. Should the Court decide that this arbitration shall proceed pursuant to Article 6(2) of the Rules, any decision as to the jurisdiction of the Arbitral Tribunal shall be taken by the Arbitral Tribunal itself. 10. It is in such circumstances that the application under Section 11(4) read with Section 11(10) of the 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11 of the Act are satisfied or not? 12. While the matter was pending, most of the seven questions raised were resolved. However, the most important issue as to whether Section 11 of the 1996 Act could be invoked when the ICC Rules had already been invoked by one of the parties, remains to be decided. 13. On behalf of the Petitioner, reliance was sought to be placed on the decision of this Court in Sumitomo Heavy Industries Ltd. Vs. ONGC Ltd. Ors. [(1998) 1 SCC 305], wherein different laws that could apply to an arbitral relationship had been explained, namely : (i) The proper law of the underlying contract is the law governing the contract which creates the substantive rights and obligations of the parties with regard to the contract. (ii) The proper law of the arbitration agreement is the law governing the rights and obligations of the parties arising from the arbitration agreement. (iii) The proper law of the reference is the law governing the contract which regulates the individual reference to arbitration. (iv) The curial law is the law governing the arbitration proceedings and the manner in which the reference has to be conducted. It governs the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Chief Justice to constitute a Tribunal in supersession of the Tribunal already in the stage of constitution under the ICC Rules, notwithstanding the fact that one of the parties had proceeded unilaterally in the matter. Learned counsel for the Petitioner urged that since the Arbitration Agreement contemplates the constitution of an Arbitral Tribunal without any reference to the ICC Rules or the ICC Court, the recourse taken by Devas to approach the ICC Court was without any basis and was contrary to the express agreement between the parties. Learned counsel also referred to the decision of this Court in SBP Co. vs. Patel Engineering Ltd. Anr. [(2005) 8 SCC 618], in this regard. 17. Learned counsel further urged that the issue as to whether once an Arbitral Tribunal has been constituted, the Chief Justice has jurisdiction under Section 11 of the 1996 Act to constitute another Tribunal, presupposes that an Arbitral Tribunal has been validly constituted and is not a Tribunal constituted by one party acting entirely in contravention of the Arbitration Agreement between the parties. It was contended that till such time as the question of jurisdiction was considered by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors.[(2007) 5 SCC 38], wherein the aforesaid principle contained in Section 16 of the 1996 Act had been referred to. Learned counsel submitted that in arriving at the aforesaid decision, this Court had fully considered its decision in SBP Co. (supra). It was submitted that the question regarding the validity of the constitution of the Arbitral Tribunal, upon a proper construction of Article 20 of the Agreement would, therefore, have to be left for decision to the said Tribunal. 22. On the question as to whether the Chief Justice or his Designate would be entitled in exercise of their jurisdiction under Section 11 of the 1996 Act, to question the validity of the appointment of an Arbitral Tribunal, both the parties were ad idem that they could not. It was urged that the decision in SBP Co. (supra) does not contemplate such a course of action. In this regard, reference was also made by learned counsel for the Respondent to the decision of this Court in Sudarsan Trading Co. vs. Government of Kerala Anr. [(1989) 2 SCC 38], wherein it was held that once there is no dispute as to the contract, the interpretation thereof is for the Arbitrator and not the Courts, and the Court c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 of the Agreement specifically deals with arbitration and provides that disputes between the parties regarding the provisions of the Agreement or the interpretation thereof, would be referred to the Senior Management of both the parties for resolution within three weeks, failing which the dispute would be referred to an Arbitral Tribunal comprising of three Arbitrators. It was also provided that the seat of arbitration would be New Delhi in India and the arbitration would be conducted in accordance with the rules and procedures of the International Chamber of Commerce or UNCITRAL. 26. The Respondent has invoked the provisions of Article 20 of the Agreement and has approached the ICC for the appointment of an Arbitral Tribunal in accordance with the rules of arbitration and, pursuant thereto, the Respondent appointed its nominee Arbitrator. In fact, after the Respondent had invoked the arbitration clause, the Petitioner came to know of the same from the Respondent's request for arbitration which was forwarded by the ICC to the Petitioner on 5th July, 2011. By the said letter, the Petitioner was also invited by the ICC to nominate its nominee Arbitrator, but, as mentioned h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equest by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (6) Where, under an appointment procedure agreed upon by the parties,- (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. (7) A decision on a matter entrusted by sub-section (4) or sub- section (5) or sub- section (6) to the Chief Justice or the person or institution designated by him is final. 28. As will be evident from the aforesaid provisions, when any of the parties to an Arbitration Agreement fails to act in terms thereof, on the application of the other party, the Chief Justice of the High Courts and the Supreme Court, in diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appoint an Arbitrator under Section 11(6) of the 1996 Act, such appointment can be questioned under Section 13 thereof. In a proceeding under Section 11 of the 1996 Act, the Chief Justice cannot replace one Arbitrator already appointed in exercise of the Arbitration Agreement. It may be noted that in case of Gesellschaft Fur Biotechnologische Forschun GMBH Vs. Kopran Laboratories Ltd. Anr. [(2004) 13 SCC 630], a learned Single Judge of the Bombay High Court, while hearing an appeal under Section 8 of the 1996 Act, directed the claims/disputes of the parties to be referred to the sole arbitration of a retired Chief Justice with the venue at Bombay, despite the fact that under the Arbitration Agreement it had been indicated that any disputes, controversy or claim arising out of or in relation to the Agreement, would be settled by arbitration in accordance with the Rules of Reconciliation of the International Chamber of Commerce, Paris, with the venue of arbitration in Bombay, Maharashtra, India. This Court held that when there was a deviation from the methodology for appointment of an Arbitrator, it was incumbent on the part of the Chief Justice to assign reasons for such depar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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