Parties to an arbitration agreement must comply with institutional rules regarding the selection of arbitrators, necessitating appointments from the designated panel to maintain procedural integrity.

JUDGMENT :

JASMEET SINGH, J.

1. The present petition has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“the Act”), seeking directions for the appointment of the petitioner’s nominee Arbitrator, Mr. Subhas I. Patel, outside the panel of Arbitrators maintained by the Society for Affordable Redressal of Disputes (“SAROD”).

FACTUAL BACKGROUND

2. The respondent, National Highways Authority of India (“NHAI”), invited bids for the work of six-laning of NH-140 from Chittoor (Design Km 0.000/Existing Km 158.000 of NH-4) to Mallavaram (Design Km 61.128/Existing Km 41.800 of NH-140), having a total design length of 61.128 kms in the State of Andhra Pradesh, under the Bharatmala Pariyojana on Hybrid Annuity Mode. The petitioner, M/s KNR Tirumala Infra Pvt. Ltd., a company incorporated under the Companies Act, 2013, emerged as the successful bidder and was issued a Letter of Acceptance. Pursuant to this, on 09.05.2018, the parties entered into a Hybrid Annuity Mode Agreement (“Agreement”).

3. The arbitration clause is Clause 38.3 of the Agreement, and the same reads as under:

“38.3 Arbitration

38.3.1 Any Dispute which is not resolved amicably by conciliation, as provided in Clause 38.2, shall be finally decided by reference to arbitration by an arbitral tribunal constituted in accordance with Clause 38.3.2. Such arbitration shall be held in accordance with the Rules of Society for Affordable Redressal of Disputes ("SAROD''), New Delhi (the "Rules''), or such other rules as may be mutually agreed by the Parties, and shall be subject to the provisions of the Arbitration and Conciliation Act, 1996. The place of such arbitration shall be the Delhi and the language of arbitration proceedings shall be English.

38.3.2 There shall be an arbitral tribunal comprising three arbitrators, of whom each Party shall select one, and the third arbitrator shall be appointed by the two arbitrators so selected and in the event of disagreement between the two arbitrators, the appointment shall be made in accordance with the Rules.”

4. Disputes arose between the parties in relation to hindrances in execution of the project and the clearance of certain bills. The petitioner, by its letter dated 20.09.2023, invoked the conciliation mechanism under Clause 38.2 of the Agreement and raised claims amounting to approximately Rs. 202 crores. As the respondent did not respond to the said request, the petitioner, by its notice dated 03.05.2024, invoked arbitration under Clause 38.3 of the Agreement and nominated Mr. Subhas I. Patel, Former Secretary to the Government of Gujarat, as its nominee Arbitrator.

5. The respondent, in its reply dated 15.05.2024, objected to the said nomination. It contended that arbitration under the Agreement was required to be conducted in accordance with the Rules of SAROD, and that Rule 11.4 of the SAROD Arbitration Rules mandated that nominee arbitrators must be chosen from the SAROD panel. The respondent accordingly instructed the petitioner to invoke arbitration by issuing a notice to SAROD in terms of Rule 4 of the SAROD Arbitration Rules.

6. The petitioner, vide its letter dated 24.05.2024, disputed the contention of the respondent stated in the letter dated 15.05.2024 and a