ARBITRATION - Appointment of substitute arbitrator - Procedure for appointment of arbitrator as per the agreement between the parties - Applicability of Section 11(6) of the Arbitration and Conciliation Act, 1996 - Whether the right of the respondent to appoint a substitute arbitrator stood extinguished on the date when the petitioner filed the petition before the Court under Section 11(6) of the Act - Held, no.

Fact of the Case:

The petitioner and respondent entered into a Concession Agreement, dated 8th May, 2003, whereunder the respondent was to convert an existing 2-lane highway, (NH-6) in the Raipur-Durg stretch in the state of Chhattisgarh, into a 4-lane highway. Disputes arose. Clause 19.2 (a) of the Concession Agreement provided for reference of disputes to a three member arbitral tribunal, if efforts at resolution, by amicable settlement, were to fail. The Clause reads thus: "19.2 Arbitration: (a) Arbitrators: Any Dispute that is not solved amicably as provided in Article 19.1 (a) shall be finally settled by binding arbitration under the Arbitration and Conciliation Act, 1996. The arbitration shall be by a panel of three arbitrators, one to be appointed by each Party and the third to be appointed by the two arbitrators appointed by the Parties. A Party requiring arbitration shall appoint an arbitrator in writing, informs the other Party about such appointment and call upon the other Party the other to appoint its arbitrator. If the other Party fails to appoint its arbitrator, the Party appointing arbitrator shall take steps in accordance with Arbitration and Conciliation Act 1996." Attempts, at amicable settlement of the disputes between the petitioner and respondent, failed. On 23rd March, 2007, the petitioner appointed its nominee arbitrator and, on 18th April, 2007, the respondent did likewise. The disputes were, somehow, referred, even thereafter, to the Steering Group of the respondent, for exploring settlement, but the effort resulted in failure, as reported by the Steering Group on 3rd May, 2010. The petitioner, thereupon, appointed Mr. B.P. Bhattacharya, as its arbitrator, on 18th May, 2010, and the respondent, likewise, appointed Mr. S.C. Sharma as its arbitrator on 22nd April, 2014. The two arbitrators appointed Mr. G. Sharan as the presiding arbitrator on 30th May, 2014. The learned arbitral tribunal, in terms of Clause 19.2 (a) of the Concession Agreement, thus, stood constituted. The learned arbitral tribunal, so constituted, commenced hearing on 30th June, 2014. Statement of claim was filed, by the petitioner, before the learned arbitral tribunal on 25th August, 2014, statement of defence was filed, by the respondent, on 14th January, 2015 and rejoinder was filed, by the petitioner, on 3rd June, 2015. Thereafter, the petitioner filed an amended statement of claim on 10th March, 2016, in response to which an amended statement of defence was filed, by the respondent, on 25th July, 2016 and an amended rejoinder was filed, by the petitioner, on 27th October, 2016. Recording of evidence commenced, thereafter. Examination, and cross-examination of the petitioner''s witnesses, as well as examination of the respondent''s witnesses, was concluded. While the cross-examination of the respondent''s witnesses was in progress, Mr B.P. Bhattacharya, the petitioner''s arbitrator, resigned, on 23rd January, 2018, citing health reasons. The petitioner, thereupon, appointed N.K. Mody, J, a retired Judge of the High Court of Madhya Pradesh, as its substitute nominee arbitrator. The petitioner and respondent agreed, between themselves, that the proceedings could continue, from the stage at which they were, when Mr. B.P. Bhattacharya resigned on 23rd January, 2018. Cross examination of the respondent''s witnesses continued, and was concluded on 2nd April, 2018. Thereafter, the learned arbitral tribunal heard arguments, of both the parties, which were concluded on 12th April, 2019. The petitioner and respondent were directed to file written submissions, setting out their respective points of argument, and award was reserved, by the learned arbitral tribunal on 31st July, 2019. On 24th February, 2020, before the award was announced, unfortunately, Mr. S.C. Sharma, the learned arbitrator appointed by the respondent, expired. From this unfortunate occurrence, emanates the present dispute.

Finding of the Court:

The Court held that the appointment of the substitute arbitrator, by the respondent, on 8th June, 2020 has, therefore, to be regarded as eminently in accordance with the procedure contained in Clause 19.2 (a) of the Concession Agreement and, consequently, in keeping with Section 15 (2) of the 1996 Act, as well. No occasion, therefore, arises, for this Court, to step in, and appoint a substitute arbitrator in place of Mr. S.C. Sharma - invalidating, in the process, the appointment of Mr Manoj Kumar, by the respondent, on 8th June, 2020. There is, therefore, substance, in the contention of Ms. Kaul, that the present petition is premature - in which context one may also refer to para 30 of the report in NHAI10, extracted hereinabove. The appointment of Mr Manoj Kumar as the substitute arbitrator of the respondent, on 8th June, 2020, it is reiterated, is perfectly in order, and is in accordance with Section 15 (2) of the 1996 Act.

Issues: Whether the right of the respondent to appoint a substitute arbitrator stood extinguished on the date when the petitioner filed the petition before the Court under Section 11(6) of the Act.

Ratio Decidendi: The Court held that the arbitration clause, in the Concession Agreement between the petitioner and respondent (Clause 19.2(a)) specifically required issuance of a notice, by one party to the other, for appointment of an arbitrator. This procedure would, therefore, apply, equally, to the appointment of a substitute arbitrator, on the mandate of the arbitrator, of any one of the parties, standing terminated, on any of the grounds contemplated in Section 14 of the 1996 Act. Admittedly, no such notice was ever issued, by the petitioner, to the respondent, to appoint a substitute arbitrator, consequent on the demise of Mr. S.C. Sharma. In the absence of any such notice, the petitioner is not entitled to plead confinement of the right, of the respondent, to appoint a substitute arbitrator, to any specific period of time, least of all to a period of 30 days from the date when the respondent came to know of the demise of Mr. S.C. Sharma, and of the requirement of appointing a substitute arbitrator. It cannot, therefore, be said that the right of the respondent, to appoint a substitute arbitrator, stood extinguished, on the date when the petitioner filed the present petition, before this Court, under Section 11 (6) of the 1996 Act.

Final Decision: The petition is, accordingly, dismissed, with no orders as to costs.