The main legal point established is that the named arbitrator's refusal to act does not exhaust the arbitration clause, and the court has the authority to appoint a substitute arbitrator.

JUDGMENT :

P.P. Naolekar, J.

These applications have been filed by the applicant under Section 11(6)(c) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") to seek appointment of an arbitrator in view of the inability expressed by Mr. Manabu Nonoguchi to act as an arbitrator.

2. The prayer made in the applications is to appoint a suitable person to act as the sole arbitrator in place of the nominated arbitrator under Clause 6 of the Deed of Reserve and Charge of Property dated 22nd February, 2002 (for short "the Deed") and to refer the disputes between the parties to him. The arbitration applications have been filed in the following facts and circumstances. As alleged in the applications, on 7th June, 2001, the applicant entered into a hire purchase agreement titled "Contract of Sale" No. QAC-3372(R) for sale/purchase of 5 sets in 2 lots of Murata No. 7-V Mach-cone automatic cone winder magazine type 60 drums on deferred payment terms.

3. The applicant exported the machinery in two lots. The first shipment (2 sets) was made on 10th July, 2001 under Invoice No. 6321 and the second shipment (2 sets) was made on 5th October, 2001 under Invoice No. 6364. The dispute is in regard to these shipments. In pursuance of the agreement, the physical custody of the machines was handed over to the respondent which was accepted by it. However, the title did not pass, as it was due to pass only on payment of the last hire purchase instalment as envisaged under the agreement.

4. The agreement was approved by the Reserve Bank of India vide approval No. FCB/CO/2001/747.

5. The respondent after paying the first two instalments towards the shipments, did not pay the next two instalments and, therefore, as envisaged in the agreement the respondent became liable to return the custody and possession of the machinery to the applicant. Clause 6 of the Deed provides as under:

"In case of any dispute, difference or issues arising under or in any manner concerning or in connection with this Deed, the same shall be resolved by arbitration by Mr. Manabu Nonoguchi, Area Manager, Sales Department, Murata Machinery Ltd., Textile Machinery Department, 3rd Floor, Osaka Green Building, 2-6-26, Kitahama, Chuo-ku, Osaka 5410041, Japan, on principles of equity and good conscience (ex equo et bono), whose award shall be final and binding."

6. Vide letter dated 19th June, 2003, the nominated arbitrator Mr. Manabu Nonoguchi has expressed his inability to discharge his role as arbitrator and left it for the parties to take steps to fill up the vacancy as and when the need arises. On 20th June, 2003, the applicant served a notice of demand under Section 434(1)(a) of the Companies Act for winding up on the respondent. In reply to the said notice of demand, the respondent informed on 10th July, 2003 that it had made a reference to the Board for Industrial and Financial Reconstruction (BIFR) and had also taken the stand that the machines were defective.

7. Thereafter, the applicant filed an application dated 4th August, 2003 before the BIFR for recovery of its unpaid dues and sought impleadment and interim receivership.

8. The applicant sent a notice of demand and arbitration dated 10th December, 2004 to the respondent for return of physical custody and possession of the machines which has not been complied with. As per the applicant, the dispute between the parties is arbitrable and since the title in the hire purchased machines has always been and is with the applicant the machines are not the assets or property of the company so as to be under the purview of the BIFR.

9. The applicant submitted that no other petition under Section 11(6) of the Act in respect of the arbitration clause has been filed or is pending in any other court and since the present applications relate to an international commercial arbitration, the applicant being a body corporate incorporated outside India, the applicant is moving the applications under Section 11(6)(c) of the