The right to appoint an arbitrator does not automatically forfeit after 30 days of demand, and the opposite party can still make an appointment before the other party moves the court under Section 11 seeking appointment of an arbitrator.

ORDER :

Leave granted.

2. The agreement entered into between the parties contains an arbitration Clause us which reads as under:

"(14.1) Disputes or differences arising out of or in relation to agreement/contract shall be referred to the Functional Director of the owner who may either act himself as sole Arbitrator or nominate some officer of the owner to act as an Arbitrator to adjudicate the disputes and differences between the parties (except those in respect of which the decision of any person is by the contract expressed to be final and binding).

(14.2) The contractor shall not be entitled to raise any objection to the appointment of such officer of the owner as the sole Arbitrator on the ground that the said officer is an officer of the owner or that he/she has to deal or dealt with the matter to which the contract relates or that in the course of duties as an officer of the owner he/she has/had expressed views on all or any of the matters in dispute or difference.

(14.3) In the event of the Arbitrator to whom the matter is originally referred to is transferred or vacates office, the Functional Director, aforesaid, shall nominate another officer of the owner to act as Arbitrator.

(14.4) Such officer nominated as sole Arbitrator shall be entitled to proceed with the arbitration from the stage at which it was left by the predecessor. It is the term of this contract that no person other than the Functional Director or a person nominated by Functional Director of the owner shall act as Arbitrator."

3. Disputes and differences arose between the parties. The appellant served a 30 days notice on the respondent demanding appointment of an Arbitrator and reference of disputes to him. The respondent failed to act. On expiry of 30 days, the appellant moved the Chief Justice of the High Court for appointment of an Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. Admittedly, even till the date of the moving an application, the respondent had not made appointment consistently with the arbitration Clause. The learned Judge designated by the Chief Justice of the High Court refused to appoint the Arbitrator holding that the only remedy available to the appellant was to move in accordance with Clause 141 above said, whereupon the Functional Director would adjudicate upon the disputes as sole Arbitrator.

4. Feeling aggrieved by the above said order, the appellant filed a petition under Article 226 of the Constitution which has also been dismissed. The appellant is before us by way of special leave to appeal.

5. Having heard the learned counsel for the parties, we are satisfied that the appeal deserves to be allowed. The learned Counsel for the appellant has placed reliance on the law laid down by this Court in the case of Datar Swithchgear Ltd. v. Tata Finance Ltd. and another, (2000)8 S.C.C. 151 (para 19) wherein this Court has held as under :

"So far as Section 11(6) concerned, if one party demands the opposite party to appoint an Arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right of appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand but before the first party has moved the Court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an Arbitrator. Only then the right of the opposite party ceases."

6. The case at hand is squarely covered by the abovesaid view of the law taken by this Court. The learned designated Judge of the High Court, as also the Division Bench were not right in taking a contrary view.

7. The appeal is allowed. The order of the learned designated Judge dated 2.4.2004