VERY IMPORTANT POINT
The word may in Section 11(9) of the Arbitration and Conciliation Act, 1996 is not intended to be read as must or shall ; under Section 11(9) of the Act it is not mandatory for the Court to appoint an arbitrator not belonging to the nationality of either of the parties to the dispute.

Headnote:(i) Arbitration and Conciliation Act, 1996-Section 11-Appointment of Arbitrator-Objection by respondent that there was no arbitration clause, person who filed petition had no authority and there was no dispute at all-Preliminary issues could be decided by arbitrator himself in view of Konkan Railway Corporation Ltd. v. Mehul Construction Co., 2000(5) Supreme 657-Arbitrator appointed. (Para 11)
       (ii) Arbitration and Conciliation Act, 1996-Section 11-Appointment of Arbitrator-Word may in sub-section (9) to Section 11-Connotation of-Applicant foreign national-Respondent Indian National-It is not mandatory for Court to appoint an arbitrator belonging to nationality of either of parties to dispute- May in Section 11(9) is not intended to be read as must or shall .
       It is, therefore, clear that in several countries where the UNCITRAL model is adopted, it has been held that it is not impermissible to appoint an arbitrator of a nationality of one of the parties to arbitration. In the light of the above rules in various countries and rulings of Court and also in view of the fact that the 1996 Act is based on UNCITRAL Model law which in Article 6(4) only speaks of "taking into account" the nationality as one of factors, I am of the view that the word may in section 11(9) of the Act is not intended to be read as must or shall . (Paras 24 and 25)
       While nationality of the Arbitration is a matter to be kept in view, it does not follow from Section 11(9) that the proposed arbitrator is necessarily disqualified because he belongs to the nationality of one of the parties. The word may is not used in the sense of shall . The provision is not mandatory. In case the party who belongs to a nationality other than that of the proposed arbitrator, has no objection, the Chief Justice of India (or his nominee) can appoint an arbitrator belonging to a nationality of one of the parties. In case, there is objection by one party to the appointment of an arbitrator belonging to the nationality of the opposite party, the Chief Justice of India (or his nominee) can certainly consider the objection and see if an arbitrator not belonging to the nationality of either parties can be appointed. While taking that decision, the Chief Justice of India (or his nominee) can also keep in mind, in cases where the parties have agreed that the law applicable to the case is the law of a country to which one of the parties belongs, whether there will be an overriding advantage to both parties if an arbitrator having knowledge of the applicable law is appointed. (Para 26)
       Therefore under Section 11(9) of the Act it is not mandatory for the Court to appoint an arbitrator not belonging to the nationality of either of the parties to the dispute. (Para 27)
       (iii) Words and Phrases- May as occurring in Section 11(9).

JUDGMENT

M. Jagannadha Rao, J.-This is an application under Section 11(5) of the Arbitration and Conciliation Act, 1996 and relates to a dispute under an agreement between a foreign company and an Indian company. The application is filed by the foreign company against the Indian company seeking reference of the disputes to an arbitrator. The learned Chief Justice of India has nominated me to deal with the application.

2. The claim of the petitioner is that the respondent company is liable to pay the petitioner a sum of Rs. 96,21,137/- with interest at 24% with quarterly rests w.e.f. 1.5.99 besides other amounts.

3. The facts set out in the petition by the petitioner as follows: The petitioner company has its Principal place of business at Kaulalumpur, Malaysia. It has an office at New Delhi and it is carrying on business of air-transportation, operation of air flights in and from India under a bilateral agreement between Malaysia and India. It is stated that its Senior Vice President, South Asian Region, Mr. Noor Amiruddin holds a general power of attorney to act for and on behalf of the petitioner and that the said person is the Principal Officer of the petitioner company in India. Original power of attorney dated 15.12.97 has been produced and by order dated 3.11.2000, it was impounded for collection of stamp duty and penalty and, after overruling objections by an order dated 21.11.2000, the original power of attorney was treated as evidence under Section 42(1) of the Indian Stamp Act. It is the case of the petitioner that the respondent has been appointed as General Sales Agent (passenger) for various countries and that under agreements dated 15.9.86 and 11.1.89, the respondent has been so appointed, the former agreement relating to passengers and the latter relating to cargo. The agreements were to be performed in India and the cause of action arose in India. The originals of the agreements are with the respondent. It is stated that the aforesaid agreements could be terminated by either side by giving to the other, written notice 60 days in advance as per Article 3 of the agreements. It is stated that the petitioner established its office for North India w.e.f. 1.5.99.

4. It is further stated that the petitioner terminated the aforesaid agreements by notice dated 1.3.99 (delivered to respondent on the same date). This was done on the ground that the respondent failed to remit and pay to the petitioner, all the sums and monies received by it in the course of agency on account of sale of passenger tickets and airway bills. At present, it is said, the respondent has to pay a sum of Rs.96,21,137/- besides such further sums as may be ascertained after rendition of accounts by respondent. Interest at 24% is also claimed with quarterly rests w.e.f. 1.5.99 till payment. According to the petitioner, the respondent had, in its letter dated 15.6.99 admitted liability upto Rs. 83,54,655.79 and failed to pay the same and had fraudulently attempted to "arbitrarily and illegally" adjust the same against false claims with a view to defraud petitioner. All the amounts unilaterally adjusted by respondent were false claims. The petitioner, it was said, had enforced Bank guarantee for 13 lakhs of rupees one day before the expiry of the guarantees. But the American Express Bank, it is said, did not immediately honour the same and contacted the respondent allowing adequate time to the respondent to file a suit (No. 1710/99) for injunction against the Bank. The petitioner filed an application under Section 8 in that suit but has not taken any other step in the said proceedings. The respondent, it is said, is further declining illegally to refund claims of passengers and directing them to the appellants. This was not tenable. The respondent is also not restoring the commissions received. Petitioner gave registered notice on 25.8.99 to respondent to concur in the appointment of a retired Judge of the Supreme Court of India or any other person of equi

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2000 Supreme(SC) 1923

Cases Referred (3)