Case: M/s. Grid Corporation of Orissa Ltd Vs. M/s AES Corporation &amp; Others

third arbitrator cannot be said to be a judicial act. In the Constitution Bench decision of this Court in Konkan Railway (supra) the principles laid down in Jaswant Sugar Mills Ltd. (supra) have been reiterated and it has been held that the appointment of an arbitrator by the Chief Justice under Section 11(6) of the Act is not an adjudicatory order and cannot be said to be discharging of a judicial function. That being so, the appointment of the third arbitrator by two arbitrators can certainly not be a judicial act. Shri P. Chidambarm, the learned senior counsel further referred to the provisions contained in Section 7(3), 7(4)(a), 12(1), 12(2), 31(1) of the Act and submitted that the Legislature has taken care to use the word writing or in writing wherever it intended any act or function to be performed in writing but the Legislature has not chosen to engraft the requirement of writing into Section 11(3), and therefore, by process of interpretation or by attributing an intention to Legislature which the legislative drafting does not, the requirement of the appointment of third arbitrator by the two arbitrators being necessarily in writing cannot be spelled out. There is substance in the submission so made.23. In my opinion, it is not necessary within the meaning of Section 11(3) that the presiding arbitrator must be appointed by the two appointed arbitrators in writing nor it is necessary that the two appointed arbitrators must necessarily sit at one place, deliberate jointly and take a decision the presence of each other in regard to the appointment of the presiding arbitrator. It it enough if they have actually consulted or conferred with each other and if both or any of them communicates to the parties the appointment of the presiding arbitrator as having taken place by the joint deliberation of the two. It is clearly spelled out from the correspondence between the two arbitrators reproduced hereinabove that the two arbitrator had agreed on principle that the third arbitrator shall be of a nationality different from the one to which either of the parties belongs. They had also agreed upon the appointment of Mr. Williams. the communication of such appointment though made by Mr. donovan is on behalf of himself and Mr. Verma. The correctness of such consultation having preceded the appointment is not doubted in the correspondence and has also no been disputed by the learned senior counsel for the petitioners during the course of hearing. Mr. Vermas protest to appointment of Mr. Williams was based on re-consideration of the issue, that is, on second thoughts. The practice adopted by the two arbitrators is consistent with the practice of International Commercial Arbitration and conducive to the convenience of the parties and also saves them from avoidable expenditure. When an effective consultation can be achieved by resort to electronic media and remote conferencing it is not necessary that the two persons required to act in consultation with each other must necessarily sit together at one place unless it is the requirement of law or of the ruling contract between the parties. The appointment need not necessarily be by a writing signed by the two arbitrators; it satisfies the requirement of law if the appointment (i) has been actually made, (ii) is preceded by such consultation as to amount to appointment by the two, and (iii) is communicated. It is not essential to the validity of the appointment that the parties should be consulted, or involved in the process of appointment or given a previous notice of the proposed appointment. 24. The next question is : whether it can be said that Mr. K.B. Verma while agreeing for appointment of Mr. Williams as third arbitrator was under a mistake as to Indian law, and if so, ten it effect? Shri G.L. Sanghi, the learned senior counsel, referred to the order passed by M. Jagannadha Rao, J. acting as designate of the Chief Justice deciding an application under Section 11(5) of the Act in Malaysian Airlines Systems BHD (II) Vs. M/s Stic Travels (P) Ltd. 2000 (7) SCALE 724 . Vide paras 26 and 28, His Lordship has held that Section 11(9) of the Act is not mandatory and the word may therein cannot be read as shall and to appoint an arbitrator not belonging to the nationality of either of the parties is not mandatory. T here is no quarrel with the abovesaid proposition. Yet, there is noting wrong in the two arbitrators having formed an opinion in consultation with each other that a person of third nationality would be preferable as presiding arbitrator. The submission based on "mistake of law" doctrine is unwarranted and besides the point. 25. In Konkan Railway Corporation Ltd. and Ors. (supra) it has been held (vide para 21)that in spite of an appointment having been made by the Chief Justice or his designate an objection as to the constitution of the arbitral tribunal being improper or without jurisdiction is capable of being raised before the arbitral tribunal itself under Section 16 of the Act, for an objection not only as to the width of jurisdiction but also one going to the very root of its jurisdiction is entertained by the arbitral tribunal under Section 16. That being so assuming without holding that there is any substance in the plea of the petitioners it is open for them to raise the same before the arbitral tribunal. Once the arbitral tribunal has come into existence, as it has - in my opinion in the facts and circumstances of the case, a petition under Section 11 (6) of the Act is not an appropriate remedy which the petitioners have chosen. None of the grounds contemplated by clauses (a), (b) and (c) of sub-section (6) of Section 11 exists. There is no deficiency in the constitution of the arbitral tribunal attributable to any of the parties or the arbitrators. There is no occasion for filing a request petition under Section 11(6) of the Act. 26.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Primarily it is for the parties to agree upon a procedure for appointing the arbitrator or arbitrators. Failing such agreement,(3) of the Section 11 of the Act provides that in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. The law nowhere contemplates such appointment being necessarily in writing. The requirement of the law is that there should be an appointment and the appointment should be by the two appointedbeing so, the appointment of the third arbitrator by two arbitrators can certainly not be a judicial act. Shri P. Chidambarm, the learned senior counsel further referred to the provisions contained in Section 7(3), 7(4)(a), 12(1), 12(2), 31(1) of the Act and submitted that the Legislature has taken care to use the word writing or in writing wherever it intended any act or function to be performed in writing but the Legislature has not chosen to engraft the requirement of writing into Section 11(3), and therefore, by process of interpretation or by attributing an intention to Legislature which the legislative drafting does not, the requirement of the appointment of third arbitrator by the two arbitrators being necessarily in writing cannot be spelled out. There is substance in the submission so made.23. In my opinion, it is not necessary within the meaning of Section 11(3) that the presiding arbitrator must be appointed by the two appointed arbitrators in writing nor it is necessary that the two appointed arbitrators must necessarily sit at one place, deliberate jointly and take a decision the presence of each other in regard to the appointment of the presiding arbitrator. It it enough if they have actually consulted or conferred with each other and if both or any of them communicates to the parties the appointment of the presiding arbitrator as having taken place by the joint deliberation of the two. It is clearly spelled out from the correspondence between the two arbitrators reproduced hereinabove that the two arbitrator had agreed on principle that the third arbitrator shall be of a nationality different from the one to which either of the parties belongs. They had also agreed upon the appointment of Mr. Williams. the communication of such appointment though made by Mr. donovan is on behalf of himself and Mr. Verma. The correctness of such consultation having preceded the appointment is not doubted in the correspondence and has also no been disputed by the learned senior counsel for the petitioners during the course of hearing. Mr. Vermas protest to appointment of Mr. Williams was based onof the issue, that is, on second thoughts. The practice adopted by the two arbitrators is consistent with the practice of International Commercial Arbitration and conducive to the convenience of the parties and also saves them from avoidable expenditure. When an effective consultation can be achieved by resort to electronic media and remote conferencing it is not necessary that the two persons required to act in consultation with each other must necessarily sit together at one place unless it is the requirement of law or of the ruling contract between the parties. The appointment need not necessarily be by a writing signed by the two arbitrators; it satisfies the requirement of law if the appointment (i) has been actually made, (ii) is preceded by such consultation as to amount to appointment by the two, and (iii) is communicated. It is not essential to the validity of the appointment that the parties should be consulted, or involved in the process of appointment or given a previous notice of the proposedG.L. Sanghi, the learned senior counsel, referred to the order passed by M. Jagannadha Rao, J. acting as designate of the Chief Justice deciding an application under Section 11(5) of the Act in Malaysian Airlines Systems BHD (II) Vs. M/s Stic Travels (P) Ltd. 2000 (7) SCALE 724 . Vide paras 26 and 28, His Lordship has held that Section 11(9) of the Act is not mandatory and the word may therein cannot be read as shall and to appoint an arbitrator not belonging to the nationality of either of the parties is not mandatory. T here is no quarrel with the abovesaid proposition. Yet, there is noting wrong in the two arbitrators having formed an opinion in consultation with each other that a person of third nationality would be preferable as presiding arbitrator. The submission based on "mistake of law" doctrine is unwarranted and besides thebeing so assuming without holding that there is any substance in the plea of the petitioners it is open for them to raise the same before the arbitral tribunal. Once the arbitral tribunal has come into existence, as it hasin my opinion in the facts and circumstances of the case, a petition under Section 11 (6) of the Act is not an appropriate remedy which the petitioners have chosen. None of the grounds contemplated by clauses (a), (b) and (c) of(6) of Section 11 exists. There is no deficiency in the constitution of the arbitral tribunal attributable to any of the parties or the arbitrators. There is no occasion for filing a request petition under Section 11(6) of the Act.