Case: Glencore International AG Vs. Hindustan Zinc Ltd

The prayer in Petition No. 6 of 2005 is for the appointment of a third arbitrator of a neutral nationality in accordance with S.11(9) of the Act based on the arbitration agreement concerned between the petitioner and the respondent Company located in India. The prayer in Petition No. 7 of 2005 is for the appointment of a nominee arbitrator on behalf of the respondent in accordance with the provisions of the Act and in terms of the relevant arbitration clause2.1. Dispute between the parties having arisen in respect of the sale order, the petitioner made a claim for a sum of Rs 55 lakhs against the respondent. The respondent not having settled the claim, a notice was issued on behalf of the petitioner invoking Clause.17.1(2) of the arbitration agreement and nominating a retired Judge of the High Court of Delhi as its nominee arbitrator and calling upon the respondent to name its nominee. The respondent named a retired District Judge of the Rajasthan cadre as its nominee. In terms of the arbitration agreement and S.11(3) of the Act, the two nominee arbitrators, were to nominate the third arbitrator preferably of a nationality other than the nationality of the parties involved. At this stage, the respondent altered its stand and taking up the position that the claim by the petitioner involved only an amount less than Rs 50 lakhs, and it came within the purview of Clause.17.1(1) of the arbitration agreement proceeded to name the arbitrator, it had already nominated, as the sole arbitrator to adjudicate on the dispute. It appears that subsequently that nominee was replaced by Mr Justice S.S. Chadha, a retired Judge of the High Court of Delhi3. The petitioner approached the Chief Justice of India at this stage with the present application seeking the appointment of the third arbitrator on the basis that the nominated arbitrators have failed to name the third arbitrator.

Reasoning:
In the light of my conclusion above that the claim exceeded Rs 50 lakhs, it has logically to follow that it was Clause.17.1(2) of the arbitration agreement that was attracted and not Clause.17.1(1). If that be so, the act of the respondent in nominating the sole arbitrator itself has to be held to be outside its authority under the arbitration agreement. Moreover, even if this objection were to be raised before the sole arbitrator in terms of S.16 of the Act, that arbitrator can only either uphold the objection or reject it. If he were to uphold the objection raised by the petitioner, he would have no further jurisdiction in the matter and the parties will again be driven to approach the Chief Justice of India with an application under S.11 of the Act. I do not think that the parties should be driven to such a course, on the facts and in the circumstances of the case. I am not forgetting the ratio of the decision in Konkan Railway (Konkan Railway Corpn. Ltd. v. Rani Construction (P) Ltd., 2002 (2) SCC 388 ) when I say this. But in the face of my conclusion that it was Clause.17.1(2) of the arbitration agreement that was attracted, I think that it will be an exercise in futility to drive the parties before the sole arbitrator who on the basis of that finding, does not have the jurisdiction to deal with a claim now made. The role of the Chief Justice of India or his nominee under S.11 of the Act, may only be administrative and not adjudicatory but that does not mean that when the Chief Justice is moved he has to act as a rubber stamp and he could not apply his mind to see whether it was a case for exercise of power under S.11 of the Act or not. I am, therefore, satisfied that I will be justified in exercising my power under S.11 of the Act6. Now, that the respondent has named Justice Chadha as the sole arbitrator, it is necessary to give the respondent an opportunity either to nominate Justice Chadha as its nominee arbitrator or to nominate anyone else in his place in terms of Clause.17.1(2) of the arbitration agreement. Obviously, the respondent has now acted on the basis of its conception of the claim involved in the case.