Court emphasized the appointment of an independent arbitrator when doubts of bias arise under arbitration agreements.

1. This order is in continuation of an earlier order passed in AA no. 7/2013. A copy of that order be added as part of this order. The petitioner had earlier filed AA no. 7/2013 which was decided on 27.07.2013. In those proceedings it was concluded on the basis of various judgments of Hon'ble the Supreme Court, namely, Datar Switchgears Limited v. Tata Finance Ltd. and anr., 2000 (8) SCC 151 , Punj Lloyd Ltd. v. Petronet MHB Ltd., 2006 (2) SCC 638, Union of India v. Bharat Battery Mfg. Co.(P) Ltd., 2007 (7) SCC 684, SBP and Co. v. Patel Engineering Ltd. and anr., 2005 (8) SCC 618, Denel (Proprietary) Limited v. Ministry of Defence, 2012 (2) SCC 759, Northern Railway Admn, Ministry of Railways v. Patel Engg. Co. Ltd., 2008 (10) SCC 240 and Indian Oil Corporation Limited v. Raja Transport (P) Ltd., 2009 (8) SCC 520 that following two principles with regard to appointment of arbitrator by the Court have emerged, which are set out below: -
(A) If one party demands the opposite party to appoint an arbitrator as per the agreed arbitration clause and if the opposite party fails to appoint arbitrator within 30 days of demand made by the other party then the right to appoint arbitrator does not get automatically forfeited after the expiry of 30 days of the demand. However, the right to appoint an arbitrator by such a party stands forfeited after the aggrieved party has moved the Court under S.11 of the Act.
(B) In view of law laid down by a three - Judge Bench of Hon'ble the Supreme Court in Patel Engineering Co. Ltd (supra), the principle which emerges is that according to the scheme of S.11 of the Act emphasis has been laid on upholding the terms of the agreement. The sanctity of contractual terms must be adhered to and given effect as closely as possible. In other words the Court may ask to do what has not been done as per the terms of agreement. The Court must first ensure that remedies provided for are exhausted. It is not mandatory for the Chief Justice or his nominee to appoint the named arbitrators. But at the same time due regard has to be given to the qualifications required by the agreement and other considerations including the one detailed in S.11(8) of the Act.

2. In the aforesaid context this Court has set out the facts and has concluded that in pursuance of Clause 18 of the agreement dated 14.02.2011 the petitioner issued a notice on 15.11.2012 calling upon the respondents to appoint an arbitrator within a period of 30 days. However, the arbitrator could not be appointed as the period of 30 days expired on 15.12.2012. After the expiry of 30 days the respondents were not able to appoint the arbitrator which resulted in filing of AA no. 7/2013 on 15.05.2013. The arbitrator was appointed only after receipt of notice of that petition. Consequently the respondents had lost the right to appoint the arbitrator after filing of that petition on 15.05.2013. This Court then posed a question, 'whether in the facts and circumstances of the case and keeping in view the principle 'B' extracted in the preceding para, an independent arbitrator is required to be appointed or a direction should be issued to the authority named in Clause 18 to appoint the arbitrator or to accept the appointment already made on 10.06.2013'. However, in AA no. 7/2013 the order dated 10.06.2013 appointing an arbitrator in accordance with the arbitration clause was not challenged and this Court has granted liberty to the petitioner to challenge the order dated 10.06.2013 (Annexure - H) by filing a fresh application. The instant petition has been filed in pursuance of liberty granted to the petitioner to challenge the order dated 10.06.2013.

3. According to the impugned order dated 10.06