PNP 1 ARBAP164-08=26.8 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. ARBITRATION APPLICATION NO.164 OF 2008 M/s. Veritas Exports ..Applicant. Vs. M/s. Global Trade Finance Limited ..Respondent. .... Mr. Vivek Kantawala with Ms. Sneha Nandudkar for the Applicant. Mr. Abhileen Chaturvedi i/b Paras Kuhad & Associates for the Respondent. ..... CORAM : DR.D.Y.CHANDRACHUD, J. 26 August 2010. P.C. : 1. The Arbitration Application under Section 11(6) of the Arbitration and Conciliation Act 1996 arises out of a factoring agreement dated 16 July 2003. Clause 23.2 of the agreement provides for arbitration. The arbitrator was to be appointed by the Respondent. The Applicant invoked the arbitration agreement by its letter dated 28 August 2007. The Application under Section 11(6) was filed in this Court on 21 July 2008. The Respondent did not respond to the letter dated 28 August 2007 and did not either nominate its PNP 2 ARBAP164-08=26.8 arbitrator or concur in the appointment of an arbitrator as suggested by the Applicant. 2. On behalf of the Respondent it has been urged that the claim is barred by limitation. The Supreme Court has held in National Insurance Company Limited v. Boghara Polyfab Private Limited1 that the question as to whether a claim is barred by limitation or is alive belongs to that category of issues which the Chief Justice or his designate can either decide under Section 11(6) or leave it for the decision of the arbitral tribunal. In the facts of the present case, the issue of limitation would raise a mixed question of law and fact and it is appropriate that the question of limitation is, in terms of the decision of the Supreme Court, left for decision of the arbitral tribunal. The judgment of the Supreme Court in National Insurance, it may be noted, construes the law laid down by the Bench of Seven Learned Judges in SBP & Co. v. Patel Engineering Limited2. The existence of the arbitration clause is not disputed. 1 (2009) 1 SCC 267. 2 (2005) 8 SCC 618. PNP 3 ARBAP164-08=26.8 The Applicant invoked arbitration by its letter dated 28 August 2007. Though no period of time is prescribed by Section 11(6) for the appointment of an arbitrator by the opposite party, it is now well settled that it is open to the party to whom a request is made for the appointment of an arbitrator to do so until an application is lodged under Section 11(6). Once an application is filed under Section 11(6), the entitlement of the opposite party to nominate an arbitrator stands forfeited and thereafter it is for the Chief Justice, or as the case may be, for his designate to make an appointment under Section 11(6). 3. The issue which arises before the Court is not res integra. In Datar Switchgears Limited v. Tata Finance Limited3 the Supreme Court held that no time is prescribed for the appointment of an arbitrator in cases falling under Section 11(6). Consequently, if the opposite party to whom a demand is addressed makes an appointment even after thirty days of the demand, but before the claimant has moved the Court under Section 11(6) that would be sufficient. However, the right of the opposite party would stand 3 (2000) 8 SCC 151. PNP 4 ARBAP164-08=26.8 forfeited once the Court has been moved under Section 11(6) for the appointment of an arbitrator. The Supreme Court observed as follows: So far as cases falling under Section 11(6) are concerned “ – such as the one before us no time limit has been – prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11(4) and Section 11(5) of the Act. In our view, therefore, so far as Section 11(6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases.” 4. The judgment in Datar Switchgears which was of Two Learned Judges was followed by a Bench of Three Learned Judges of the Supreme Court in Punj Lloyd Ltd. v. Petronet MHB Ltd.4. In 4 (2006) 2 SCC 638. PNP 5 ARBAP164-08=26.8 Punj Lloyd, the arbitration agreement provided that disputes and differences between the parties shall be referred to the functional director of the owner who may either act himself as a sole arbitrator or nominate some officer as an arbitrator. A notice was served by the Appellant on the Respondent invoking arbitration and on the expiry of thirty days, the Appellant moved the Chief Justice of the High Court under Section 11(6). The Respondent did not make an appointment consistent with the arbitration clause until the date on which the application was moved under Section 11(6). The Judge designated by the Chief Justice refused to appoint an arbitrator holding that the only remedy available to the Appellant was to move in accordance with the arbitration agreement under which the functional director of the Respondent would adjudicate upon the disputes as sole arbitrator. The Supreme Court held that the issue was governed by the judgment in Dater Switchgears and came to the conclusion that the High Court was not correct in taking a contrary view. Accordingly the application under Section 11(6) was restored before the Chief Justice for a fresh decision. PNP 6 ARBAP164-08=26.8 5. The decision in Datar Switchgears is therefore an authority for the proposition that after a notice is issued by the claimant to the other side for the appointment of an arbitrator, the right of the latter to nominate an arbitrator is not forfeited even after the expiry of thirty days. The other side is entitled to nominate an arbitrator until the claimant moves the Chief Justice or his designate under Section 11(6) of the Arbitration and Conciliation Act 1996. Once an application under Section 11(6) is instituted, the right of the other side stands forfeited. The judgment in Punj Lloyd is authority for the proposition that in such an event the Chief Justice of the High Court is then not fettered by a provision such as the one in the present case under which the Managing Director or some other officer of the Respondent had to act as an arbitrator under the arbitration clause. In fact, in Punj Lloyd that was the ground on which the designate of the Chief Justice had refused to appoint an arbitrator. This approach was held to be erroneous by the Supreme Court. PNP 7 ARBAP164-08=26.8 6. In the circumstances, in exercise of the powers conferred by Section 11(6) of the Arbitration and Conciliation Act, 1996, Mr. Justice S.P. Kurdukar, Former Judge of the Supreme Court of India is appointed as sole arbitrator to arbitrate upon the disputes and differences between the parties. The Arbitration Application is accordingly disposed of. The Prothonotary and Senior Master is directed to forthwith transmit a copy of this order together with a Memorandum of Address of parties to the Learned Arbitrator. There shall be no order as to costs. (Dr. D.Y.Chandrachud, J.)