Case: N.B.C.C. Ltd Vs. J.G. Engineering Pvt. Ltd

jurisdiction to decide accordingly. 13. However, the contention of the Appellant that the High Court had erred in not allowing the appellant to decide upon the appointment of an arbitrator pursuant to sub-section (2) of Section 15 of the Act must be accepted. Section 15 (2) of the Act provides that where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator replaced. In this connection, it would be appropriate to refer to the relevant portion of the impugned judgment of the High Court, which gives an elaborate observation on the above-mentioned issue raised by the appellant: "The question therefore is, whether in view of section 15 (2) of the 1996 Act, an independent arbitrator can be appointed by this Court as prayed for by the appellant or whether the appellant should once again invoke the Arbitration Clause, call upon the Chairman-cum-Managing Director of the respondent to appoint an arbitrator, wait for a further period of 30 days, to see whether the Chairman-cum-Managing Director acts or not and then make a request to the Honble Chief Justice or his designate under Section 11(6) of the 1996 Act to appoint an arbitrator. Arbitration is an informal, quick and easy alternative mode of adjudication of disputes by agreement of the parties. This Court cannot but take judicial notice of the fact that the Arbitration Clause was invoked way back in May 1996 and almost 10 years have expired since then. The appointment of successive Arbitrator by the Chairman-cum-Managing Director of the respondent has only resulted in delay. When the mandate of an arbitrator is terminated on the ground of delay, the rules applicable to the appointment of the arbitrator are to apply to the appointment of a new arbitrator. It would, however, be a mockery of justice, if every time the mandate of an arbitrator was terminated or the arbitrator resigned or otherwise became unable to proceed, the parties were to start from scratch, by invoking the Arbitration Clause. Once the mandate of the arbitrator terminates, the person required to appoint arbitrator is required to fill up the vacancy with utmost expedition, failing which the provisions of section 11 (6) of the 1996 Act would be attracted. In the instant case, as per the Arbitration agreement the Chairman-cum-Managing Director was required to appoint a new arbitrator in case the arbitrator became unable to continue, whatever be the reason. Even thought the time limit for conclusion of arbitration expired on 30th September, 2005, the Chairman-cum- Managing Director of the respondent did not appoint another arbitrator." 14. We have carefully examined the aforesaid observations of the impugned judgment of the High Court. We are of the view that in view of a three-Judge Bench decision of this Court in the case of Northern Railway Administration, Ministry of Railway vs. Patel Engineering Company Ltd. [2008 (10) SCC 240 ] in which a decision of this Court in Ace Pipeline Contracts Private Limited vs. Bharat Petroleum Corporation Limited [(2007) 5 SCC 304] was also referred to, the application for appointment of an Arbitrator under Section 11 of the Act should be referred back to the High Court for fresh decision. Arijit Pasayat, (as His Lordship then was), heading a three-Judge Bench of this Court after considering the scope and object of the Act particularly Section 11 of the Act concluded the following :- "A bare reading of the scheme of Section 11 shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. The court must first ensure that the remedies provided for are exhausted. It is true as contended by Mr. Desai, that it is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations. Xxxxxxxxxxxxxx In all these cases at hand the High Court does not appear to have focused on the requirement to have due regard to the qualifications required by the agreement or other considerations necessary to secure the appointment of an independent and impartial arbitrator. It needs no reiteration that appointment of the arbitrator or arbitrators named in the arbitration agreement is not a must, but while making the appointment the twin requirements of Sub-section (8) of Section 11 have to be kept in view, considered and taken into account. If it is not done, the appointment becomes vulnerable. In the circumstances, we set aside the appointment made in each case, remit the matters to the High Court to make fresh appointments keeping in view the parameters indicated above." In the aforesaid decision in the case of Northern Railway Administration (Supra), Arijit Pasayat, J. (as His Lordship then was), held that the High Court in the said case did not appear to have focused on the requirement to have due regard to the qualifications required by the agreement or other conditions necessary to secure the appointment of an independent and impartial arbitrator. In the aforesaid decision, this Court also concluded that since the requirement of sub-section (8) of Section 11 was not at all dealt with by the High Court in its order, the appointment of an arbitrator without dealing with Sub-Section 8 of Section 11 of the Act became vulnerable and accordingly, such appointment must be set aside. Similar is the position in this case. In this case also, before appointing an arbitrator under Section 11(6) of the Act, the High Court had failed to take into consideration the effect of Section 11(8) of the Act as was done in Northern Railway Administration (supra). 15. In view of the discussions made hereinabove and particularly, in view of the principles laid down by this Court in Northern Railway Administration (supra),

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]14. We have carefully examined the aforesaid observations of the impugned judgment of the High Court. We are of the view that in view of a three-Judge Bench decision of this Court in the case of Northern Railway Administration, Ministry of Railway vs. Patel Engineering Company Ltd. [2008 (10) SCC 240 ] in which a decision of this Court in Ace Pipeline Contracts Private Limited vs. Bharat Petroleum Corporation Limited [(2007) 5 SCC 304]  was also referred to, the application for appointment of an Arbitrator under Section 11 of the Act should be referred back to the High Court for fresh decision. Arijit Pasayat, (as His Lordship then was), heading a three-Judge Bench of this Court after considering the scope and object of the Act particularly Section 11 of the Act concluded the following :-In all these cases at hand the High Court does not appear to have focused on the requirement to have due regard to the qualifications required by the agreement or other considerations necessary to secure the appointment of an independent and impartial arbitrator. It needs no reiteration that appointment of the arbitrator or arbitrators named in the arbitration agreement is not a must, but while making the appointment the twin requirements of Sub-section (8) of Section 11 have to be kept in view, considered and taken into account. If it is not done, the appointment becomes vulnerable. In the circumstances, we set aside the appointment made in each case, remit the matters to the High Court to make fresh appointments keeping in view the parameters indicated above."In the aforesaid decision in the case of Northern Railway Administration (Supra), Arijit Pasayat, J. (as His Lordship then was), held that the High Court in the said case did not appear to have focused on the requirement to have due regard to the qualifications required by the agreement or other conditions necessary to secure the appointment of an independent and impartial arbitrator. In the aforesaid decision, this Court also concluded that since the requirement of sub-section (8) of Section 11 was not at all dealt with by the High Court in its order, the appointment of an arbitrator without dealing with Sub-Section 8 of Section 11 of the Act became vulnerable and accordingly, such appointment must be set aside. Similar is the position in this case. In this case also, before appointing an arbitrator under Section 11(6) of the Act, the High Court had failed to take into consideration the effect of Section 11(8) of the Act as was done in Northern Railway Administration (supra)15. In view of the discussions made hereinabove and particularly, in view of the principles laid down by this Court in Northern Railway Administration (supra),