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2021 Supreme(SC) 204

SUPREME COURT OF INDIA
S.A. BOBDE, CJI., A.S. BOPANNA, V. RAMASUBRAMANIAN, JJ.
EUROBEARINGS INDIA PVT. LTD. - PETITIONER
VERSUS
EUROBEARINGS R.I. - RESPONDENT
Arbitration Petition (Civil) No(s).4 of 2021
Decided On : 01-02-2021

Important Points

IMPORTANT POINT
Petition seeking appointment of Arbitrator is not sustainable in a situation where arbitration clause itself is disputed.

Subject

Arbitration - Appointment of Arbitrator

Act Referred

Headnote

Arbitration and Conciliation Act, 1996 – Section 11(6) – Appointment of Arbitrator – Petitioner has disputed arbitration clause and in alternative contended that pre-arbitration negotiation has not been completed – Since such a stand had been taken by petitioner in reply notice, even if petitioner has any grievance with regard to manner in which Arbitrator has been appointed and has entered reference, contentions could be urged before Arbitrator by way of objection or in such other proceedings – It is not a case where petitioner had invoked arbitration clause and respondent had failed to agree to appointment – Petition under Section 11(6) seeking appointment of Arbitrator in this situation, is not sustainable – Petitions dismissed. (Paras 6 and 7)

Facts of the case:

In both these petitions, petitioner is seeking that the sole arbitrator be appointed to adjudicate dispute and difference between the parties. In both Arbitration Petitions dispute is stated to have arisen under Equipment Purchase Agreement with Deferred Payment Option.

Findings of Court:

Instant petition under Section 11 of the Arbitration and Conciliation Act, 1996 will not be sustainable inasmuch as Arbitrator has already been appointed and has entered reference. Further, the instant petition is not at the instance of party who has invoked the arbitration clause.

Result : Petitions dismissed.

Legal Category Hierarchy

  • practice and procedure
    • arbitration
      • appointment of arbitrator
        • section 11 arbitration and conciliation act (Para 3, 4, 6)

Advocates:
Advocate Appeared:
For the Petitioner: Mr. Ritin Rai, Sr. Adv. Mr. Sameer Abhyankar, AOR Mr. Amish Tandon, Adv, Mr. Ayush Beotra, Adv. Mr. Varun Tandon, Adv. Mr. Dipin Tamang, Adv.
For the Respondent: Mr. Maninder Singh, Sr. Adv. Ms. Reena Jain Malhotra, Adv. Mr. Suvendu Suvasis Dash, Adv. Ms. Swati Vaibhav, Adv. For M/s Vaibhav And Dash Law Associates, AOR

Table of Contents

1. Petitions under Section 11, Arbitration and Conciliation Act, 1996, seeking appointment of a sole arbitrator after the respondent had already appointed one and entered reference. (Para 1 , 2 )

2. Petitioner contends that an invalid appointment of an arbitrator does not bar jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996. (Para 4 )

3. The court observed that the appointment followed the agreed clause and that objections to the agreement or process should be raised before the appointed arbitrator. (Para 3 , 4 , 5 , 6 )

4. A petition under Section 11(6) is unsustainable if an arbitrator is already appointed and the party seeking appointment had previously disputed the arbitration agreement. (Para 3 , 6 )

5. Petitions dismissed. (Para 7 )

6. Can a party seek appointment of an arbitrator under Section 11(6) if an arbitrator has already been appointed and entered reference?

Generally, such a petition is unsustainable. However, if the appointment was made contrary to the specific procedure agreed upon by the parties, the court may still exercise jurisdiction to appoint an arbitrator. (Para 3 , 4 )

7. Where should a party raise objections regarding the validity of an arbitration agreement or the appointment process if an arbitrator has already entered reference?

Such contentions and grievances regarding the manner of appointment or the validity of the arbitration agreement should be urged before the arbitrator by way of an objection or in other related proceedings. (Para 6 )

8. Is a Section 11(6) petition sustainable if the party seeking appointment did not invoke the arbitration clause and disputed the agreement in response to the other party's notice?

No, such a petition is not sustainable. If the party disputed the arbitration clause or the pre-arbitration process in their reply, they must raise those grievances as objections before the arbitrator. (Para 6 )

ORDER :

1. The parties are the same in both these petitions and as such they are taken up together. In both these petitions, the petitioner is seeking that the sole arbitrator be appointed to adjudicate the dispute and difference between the parties. In Arbitration Petition No.04 of 2021, the dispute is stated to have arisen under the Equipment Purchase Agreement with Deferred Payment Option dated 02.12.2015. In Arbitration Petition No. 05 of 2021, the dispute is stated to have arisen under the Equipment Lease Agreement with Purchase Option dated 01.04.2015.

2. In both these petitions, the factual matrix is that the respondent herein had issued notices dated 08.10.2020, invoked the arbitration clause and appointed Justice Indermeet Kaur Kochhar, Former Judge of the Delhi High Court as the Sole Arbitrator. The said notice is stated to have been issued in terms of the respective arbitration clauses in the agreements in question. The petitioner, through their reply dated 20.10.2020 called upon the respondent to unconditionally withdraw the notice and without prejudice to the same, also did not agree to the name of the Arbitrator suggested by the respondent. The learned Arbitrator has already entered reference. In that background, the instant petition is filed by the petitioner seeking appointment of the Arbitrator.

3. At the outset, we are of the opinion that the instant petition under Section 11 of the Arbitration and Conciliation Act, 1996 (‘Act 1996’ in short) will not be sustainable inasmuch as the learned Arbitrator has already been appointed and has entered reference. Further, the instant petition is not at the instance of the party who has invoked the arbitration clause.

4. Mr. Ritin Rai, learned Senior Advocate for the petitioner has, however, placed reliance on the decision in the case of Walter Bau AG Legal Successor, of The Original Contractor, Dyckerhoff and Widmann A.G. vs. Municipal Corporation of Greater Mumbai and Anr. (2015) 3 SCC 800 with specific reference to para 10 to contend that unless the appointment of the arbitrator is ex facie valid and such appointment satisfies the Court exercising jurisdiction under Section 11(6) of the Arbitration Act, the acceptance of such appointment as fait accompli to debar the jurisdiction under Section 11(6) cannot be countenanced in law. Having noted the said contention we find that the said decision is rendered in a different circumstance. In that case the arbitration clause provided a different procedure whereunder the party invoking the arbitration clause had appointed the arbitrator and the arbitrator on behalf of the respondent was to be appointed from the panel of International Centre for Alternative Dispute Resolution (ICADR), as per the specified procedure. However, the appointment had been made contrary to the procedure agreed between the parties. In that circumstance, the appointment of the arbitrator was made by this Court, notwithstanding an arbitrator already appointed.

5. In the instant case, the arbitration clause provides that if the parties fail to resolve the dispute within 60 business days from the time a party has requested for negotiations to settle the dispute, then either party may serve notice on the other party requiring the dispute to be settled solely and finally by a sole arbitrator appointed in accordance with the Arbitration and Conciliation Act, 1996. In that view, the respondent invoking the said clause issued the notice dated 08.10.2020 appointing the learned Arbitrator. The respondent though is now seeking appointment of Arbitrator, in the reply dated 20.10.2020 has in fact contended that there exists no valid arbitration agreement between the parties. Without prejudice, it has been further contended that the said notice is premature inasmuch as due process as provided under the arbitration clause has not been followed. It was stated so since according to the petitioner a genuine/legitimate one-time offer had been made on 06.10.2020 and the matte

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