2023 Supreme(Del) 4876

IN THE HIGH COURT OF DELHI AT NEW DELHI
Sachin Datta, J.
Margo Networks Pvt. Ltd. & Anr. – Appellants
Versus
Railtel Corporation of India Ltd. – Respondent
Arb.P.400 of 2022
Decided On : 10-07-2023

The appointment procedure prescribed in clause 3.37 of the RFP was found to be restrictive and not broad-based, impinging upon the validity of the appointment procedure. The 'counter balancing' as contemplated in Perkins (supra) was not achieved in a situation where one of the parties had a right to choose an arbitrator from a panel and where the remaining (2 out of 3) arbitrators were appointed by the other party.

Headnote:

Arbitration Agreement - Appointment Procedure - Voestalpine Schienen Gmbh Vs. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665, Central Organization for Railway Electrification Vs. ECI-SPIC-SMO-MCML (JV) a Joint Venture Company, (2020) 14 SCC 712 - Section 11 of the Arbitration and Conciliation Act, 1996 - Clause 3.37 - The appointment procedure prescribed in clause 3.37 of the RFP was found to be restrictive and not broad-based, impinging upon the validity of the appointment procedure. The 'counter balancing' as contemplated in Perkins (supra) was not achieved in a situation where one of the parties had a right to choose an arbitrator from a panel and where the remaining (2 out of 3) arbitrators were appointed by the other party.

Fact of the Case:

The petitioner sought constitution of an independent Arbitral Tribunal consisting of three arbitrators to adjudicate the disputes that have arisen between the parties. The disputes arose in the context of a Request for Proposal (RFP) issued by the respondent for 'Selection of Digital Entertainment Service Provider (DESP) for delivering Content on Demand (COD) services on Build Own Operate (BOO) model for Indian Railways'. The respondent purportedly terminated the LOA and invoked the BG. The petitioner raised certain claims upon the respondent and assailed the procedure for appointment as contemplated in the arbitration agreement.

Finding of the Court:

The appointment procedure prescribed in clause 3.37 of the RFP was found to be restrictive and not broad-based, impinging upon the validity of the appointment procedure. The 'counter balancing' as contemplated in Perkins (supra) was not achieved in a situation where one of the parties had a right to choose an arbitrator from a panel and where the remaining (2 out of 3) arbitrators were appointed by the other party.

Issues: The issues involved in the case included the validity of the appointment procedure prescribed in clause 3.37 of the RFP and whether 'counter balancing' was achieved in the appointment of arbitrators.

Ratio Decidendi: The appointment procedure prescribed in clause 3.37 of the RFP was found to be restrictive and not broad-based, impinging upon the validity of the appointment procedure. The 'counter balancing' as contemplated in Perkins (supra) was not achieved in a situation where one of the parties had a right to choose an arbitrator from a panel and where the remaining (2 out of 3) arbitrators were appointed by the other party.

Final Decision: The prayer of the Petitioner seeking appointment of an independent, impartial Arbitral Tribunal to adjudicate the disputes between the petitioner no.1 and the respondent was allowed. Justice (Retd.) Dr. A. K. Sikri, Former Judge, Supreme Court of India, was appointed as the Petitioner's nominee Arbitrator; Mr. Justice (Retd.) M.R. Shah, Former Judge, Supreme Court of India, was appointed as the nominee Arbitrator of the Respondent. The two arbitrators were directed to concur to appoint the third Arbitrator/presiding Arbitrator within 30 days of the date of service of the order. In the event, the Arbitrators were unable to concur on the name of the third/presiding Arbitrator, the parties were directed to be at liberty to approach the Court. The parties were directed to appear before the Arbitral Tribunal as and when constituted. The Arbitrators were directed to make the necessary disclosure(s) as required under Section 12 of the Act and to fix their fees in consultation with the parties. It was clarified that the Court had not examined any of the claims/contentions of the parties on the merits of the substantive disputes/s; and all rights and contentions in this regard were left open. Both the parties were left free to raise their claims/counter claims before the Arbitral Tribunal in accordance with law.