IMPORTANT POINT
When the sole arbitrator appointed by one party recuses himself, substitute arbitrator should be appointed following procedure in the arbitration clause.

JUDGMENT :

1. This application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) has been filed seeking appointment of a Sole Arbitrator in terms of clause 22.3 of the Supply Contract between the parties which was entered into in the following circumstances:

In March 2006, MTNL issued a tender for supply, installation, testing, commissioning of Broadband Access Network. Both the petitioner and the respondent together bid against the tender floated and the respondent acted as the lead bidder. The contract was awarded in favour of the respondent by the MTNL. On 9th April, 2007, the parties entered into a Supply Contract for the aforesaid project. According to the petitioner, though it had complied with all the terms and conditions of the said supply contract and had shipped/delivered all equipments on time, the respondent had failed to make full payment of the amounts due and an amount quantified at USD 13,390,000 is due and payable. The petitioner sent a legal notice dated 28th November, 2014 calling upon the respondent to make payment of the outstanding dues along with interest thereon within seven days failing which it was stated in the notice that the petitioner would be invoking clause 22 of the Supply Contract which provided for arbitration and will proceed to appoint Mr. Justice S.K. Dubey, a former judge of the High Court of Madhya Pradesh as the sole Arbitrator.

As no response was received to the aforesaid notice, the petitioner by letter dated 29th December, 2014 appointed Shri Justice S.K. Dubey which appointment was accepted. Thereafter the respondent raised a dispute with regard to the reference to the arbitration and rejected the appointment of Shri Justice S.K. Dubey as the sole Arbitrator.

In these facts the learned sole Arbitrator Shri Justice S.K. Dubey by order dated 21st January, 2015 recused himself from the proceedings. It is in the aforesaid circumstances that the present application/arbitration petition has been filed under Section 11(6) of the Act for appointment of a sole Arbitrator.

2. A counter affidavit has been filed on behalf of the respondent wherein it has been, inter alia, stated that upon appointment of Shri Justice S.K. Dubey as the sole Arbitrator the notice invoking the arbitration clause had spent its force; Shri Justice S.K. Dubey having recused himself from the proceedings the fresh appointment of a learned sole Arbitrator has to be made by, once again, resorting to the provisions of clause 22 of the Supply Contract and by following the procedure prescribed therein. Certain other objections have also been raised on the merits of the dispute contending that the petitioner had not fulfilled its obligations under the Supply Contract so as to be entitled to the amounts as claimed.

3. The Court has heard the learned counsels for the parties.

4. Under Section 15(2) of the Act in a situation where the mandate of an arbitrator terminates, a substitute arbitrator is required to be appointed according to the rules that were applicable to the appointment of the arbitrator who is replaced. In Yashwith Constructions (P) Ltd. Versus Simplex concrete Piles India Ltd. and another [(2006) 6 SCC 204], the term 'rules' appearing in Section 15(2) of the Act has been understood to be referring to the provisions for appointment contained in the arbitration agreement or any rules of any institution under which the disputes are to be referred to arbitration. In the present case, admittedly, there are no institutional rules under which the disputes between the parties are to be referred to arbitration and, therefore, the expression “rules” appearing in Section 15(2) of the Act will have to be understood with reference to the provisions for appointment contained in the Supply Contract.

5. Clause 22.3 of the Supply Contract which deals with the matter may be extracted at this stage:

“22.3 All disputes, controversies or claims arising out of or in connection with