TRF LTD. versus ENERGO ENGINEERING PROJECTS LTD.
[2017] 7 S.C.R. 409, Supreme Court of India, 2017
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
[2017] 7 S.C.R. 409 
TRFLTD. 
v. 
ENERGO ENGINEERING PROJECTS LTD. 
(Civil Appeal No. 5306 of2017) 
JULY 03,2017 
(DIPAK MISRA, A. M. KHANWILKAR AND 
MOHAN M. SHANTANAGOUDAR, JJ.I 
Arbitration and Conciliation Act, 1996-s.12(5)-Appointment 
A 
B 
of arbitrator by nomination - Any person falling under any of 
categories specified in the seventh schedule shall be ineligible to 
C 
be appointed as arbitrator - Such person who is statutorily ineligible 
cannot nominate a person - In the instant case, since the Managing 
Director of the respondent becomes ineligible to act as an arbitrator 
subsequent to the amendment in the Act, he could also not have 
nominated any other person as arbitrator. 
' 
. Allowing the appeals and remitting the matters to the High 
Court, the Court 
HELD: 1. Sub-section (5) of Section 12 categorically lays 
down that if a person whose relationship with the parties or the 
counsel or the subject matter of dispute falls under any of the 
categories specified in the Seventh Schedule shall be ineligible 
to be appointed as an arbitrator. There is a qualifier which 
indicates that parties may, subsequent to the disputes arisen 
between them, waive the applicability by express agreement in 
writing. The qualifier finds place in the proviso appended to sub-
section (5) of Section 12. There are fundamentally three 
components, namely, the parties can waive the applicability of 
the sub-section; the said waiver can only take place subsequent 
D 
E 
F 
to
dispute having arisen between the parties; and such waiver 
must be by an express agreement in writing. The Seventh 
Schedule has three parts, namely, (i) arbitrator's relationship with 
G 
the parties or counsel; (ii) relationship of the arbitrator to the 
dispute; and (iii) arbitrator's direct or indirect interest in the 
dispute. It is not in dispute that the amended provision that has 
introduced sub-section (5) to Section 12, had enumerated the 
disqualification in the Seventh Schedule. The agreement had 
H 
409
410 
A 
B 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
been entered into before the amendment came into force. The 
procedure for appointment was, thus, agreed upon. It was 
observed by the designated Judge that the amending provision 
does not take away the right of a party to nominate a sole arbitrator, 
otherwise the legislature could have amended other provisions. 
He also observed that the grounds including the objections under 
the Fifth and the Seventh Schedules of the amended Act can be 
raised before the Arbitral Tribunal and further when the 
nominated arbitrator has made the disclosure as required under 
the Sixth Schedule to the Act, there was no justification for 
interference. That apart, he also held in his conclusion that besides 
C the stipulation of the agreement governing the parties, the Court 
has decided to appoint the arbitrator as the sole arbitrator to 
decide the dispute between the parties. [Paras 10, 12, 13, 17J(421-
D-G; 423-A-DJ 
2. Clause (c) states that all disputes which cannot be settled 
D by mutual negotiation shall be referred to and determined by 
arbitration as per the Act, as amended. Clause (c) is independent 
of Clause (d). Clause (d) provides that unless otherwise 
provided, any dispute or difference between the parties in 
connection with the agreement shall be referred to the sole 
E 
F 
arbitration of the Managing Director or his nominee. There is 
no quarrel that by virtue of Section 12(5) of the Act, if any person 
who falls under
any of the categories specified in the Seventh 
Schedule shall be ineligible to be appointed as the arbitrator. If 
there is a clause requiring the parties to nominate their respective 
arbitrator, their authority to nominate cannot be questioned. 
What really in that circumstance can be called in question is the 
procedural compliance and the eligibility of their arbitrator 
depending upon the norms provided under the Act and the 
Schedules appended thereto. But, here is a case where the 
Managing Director is the "named sole arbitrator" and he has 
also been conferred with the power to nominate one who can be 
G the arbitrator in his place. Once the arbitrator has become 
ineligible by operation of law, he cannot nominate another as an 
arbitrator. The arbitrator becomes ineligible as per prescription 
contained in Section 12(5) of the Act. It is inconceivable in law 
that person who is statutorily ineligible can nominate a person. 
H
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
411 
[Paras 52, 53, 57][438-E-G; 439-C-D; 441-B) 
A 
3. Another facet needs to be addressed. The Designated 
Judge in a cryptic manner has ruled after noting that the petitioner 
therein had no reservation for nomination of the nominated 
arbitrator and further taking note of the fact that there has been 
a disclosure, that he has exercised the power under Section 11(6) 
B 
of the Act. That is not the right procedure to be adopted. The 
order appointing the arbitrator is set aside. However, as Clause 
(c) is independent of Clause (d), the arbitration clause survives 
and hence, the Court can appoint an arbitrator taking into 
consideration all the aspects. [Para 58)[441-D-EJ 
Arasmeta Captive Power Company Private Limited and 
another v. Lafarge India Private Limited (2013) 15 SCC 
414: [2013] 17 SCR 496; Chiaro Controls India Private 
Limited v. Severn Trent Water Purification Inc. (2013) 1 
SCC 641 : [2012) 13 SCR 402 - relied on. 
Antrix Corporation Limited v. Devas Multimedia Private 
Limited (2014) 11 SCC 560 : [2013) 6 SCR 453 -
distinguished. 
State of West Bengal v. Associated Contractors (2015) 
1 SCC 32 : [2014) 10 SCR 426 - held inapplicable. 
Chairman, Indore Vikas Pradhikaran v. Pure Industrial 
Coke & Chemicals Ltd. & others (2007) 8 SCC 705 : 
[2007) 6 SCR 799; Firm of Pratapchand Nopaji v. Firm 
of Kotrike Venkata Setty & Sons and others (1975) 2 
SCC 208 : [1975) 3 SCR 1; Walter Bau AG, Legal 
Successor, of the
Original Contractor, Dyckerhojf and 
Widmann A.G v. Municipal Corporation of Greater 
Mumbai (2015) 3 SCC 800 : [2015) 2 SCR 37; Northern 
Railway Administration, Ministry of Railways, New 
Delhi v. Patel Engineering Company Limited (2008) 10 
SCC 240: [2008) 12 SCR 216; Datar Switchgears Ltd. 
v. Tata Finance Ltd. and another (2000) 8 SCC 151; 
Naginbhai C. Patel v. Union of India (1999) 2 Born 
CR 189 (Born); B. W.L. Ltd. v. MTNL (2000) 2 Arb LR 
190; Sharma & Sons v. Engineer-in-Chief. Army 
Headquarters, New Delhi (2000) 2 Arb LR 31 (AP); 
c 
D 
E 
F 
G 
H
412 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
Newton Engineering and Chemicals Limited v. Indian 
Oil Corporation Limited and others (2013) 4 SCC 44; 
Deep Trading Company v. Indian Oil Corporation and 
others (2013) 4 SCC 35 : [2013) 2 SCR 470; Pun} 
Lloyd Ltd. v. Petrone! MHB Ltd. (2006) 2 SCC 638; 
Municipal Corpn., Jabalapur and others v. Rajesh 
Construction Co (2007) 5 SCC 344 : [2007) 5 
SCR 137; Pricol Limited v. Johnson Controls 
Enterprise Limited (2015) 4 SCC 177; State of 
Maharashtra v. Atlanta Limited (2014) 11 SCC 619 : 
[2014) 1 SCR 507; SBP & Co. v. Patel Engineering 
Ltd. (2005) 8 sec 618 : [2005) 4 Suppl. SCR 688; 
State of Orissa and others v. Commissioner of Land 
Records & Settlement, Cuttack and others (1998) 7 
SCC 162 : [1998] 1 Suppl. SCR 130; Behari Kun} 
Sahkari Awas Samiti v. State of U.P. (1997) 7 SCC 37 : 
[1997) 3 Suppl. SCR 460; Roop Chand v. State of 
Punjab AIR 1963 SC 1503 : [1963) Suppl. SCR 539 -
referred to. 
Case Law Reference 
[2007) 6 SCR 799 
referred to 
Para6 
[1975) 3 SCR 1 
referred to 
Para 6 
[2015) 2 SCR 37 
referred to 
Para 6 
[2013) 6 SCR 453 
distinguished 
Para 7 
[2014] 10 SCR 426 
held inapplicable Para 7 
[2008) 12 SCR 216 
referred to 
Para 18 
(2000) 8 sec 151 
referred to · 
Para 20 
(1999) 2 Born CR 189 (Born) referred to 
Para 21 
(2000) 2 Arb LR 190 
referred to 
Para 21 
(2000) 2 Arb LR 31 (AP) 
referred to 
Para 21 
(2013) 4 sec 44 
referred to 
Para 23 
[2013) 2 SCR 470 
referred to
Para 25 
(2006) 2 sec 638 
referred to 
Para 25
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
413 
[20071 5 SCR137 
referred to 
Para 30 
A 
(2015) 4 sec 111 
referred to 
Para 33 
[20141 1 SCR 507 
referred to 
Para 37 
[20051 4 Suppl. SCR 688 
referred to 
Para 37 
[20131 17 SCR 496 
relied on 
Para 42 
B 
[20121 13 SCR 402 
relied on 
Para 42 
[19981 1 Suppl. SCR 130 
referred to 
Para 53 
[1997) 3 Suppl. SCR 460 
referred to 
Para 54 
[19631 Suppl. SCR 539 
referred to 
Para 54 
c 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5306 
of2017. 
From the Judgment and Order dated 19.04.2016 of the High Court 
of Delhi at New Delhi in Arbitration Petition No. 89 of2016 
D 
WITH 
C. A. Nos. 5309, 5311, 5308 and 5307 of2017. 
C. A. Sundaram, Sr. Adv., Sumeet Gadodia, Kaushik Poddar, 
Gautam Singh, Advs. for the Appellant. 
Dhruv Dewan, Ms. Reena Choudhary, S. S. Shroff, Advs. for the 
Respondent. 
The Judgment of the Court was delivered by 
E 
DIP AK MISRA, J. 1. In this batch of appeals. by special leave, 
the seminal issues that emanate for consideration are; whether the High 
F 
Court, while dealing with the applications under Section 11 ( 6) of the 
Arbitration and Conciliation Act, 1996 (for brevity, "the Act"), is justified 
to repel the submissions of the appellants that once the person who was 
required to arbitrate upon the disputes arisen under the terms and 
conditions of the contract becomes ineligible by operation of law, he 
G 
would not be eligible to nominate a person as an arbitrator, and second, 
a plea
that pertains to statutory disqualification of the nominated arbitrator 
can be raised before the court in application preferred under Section 
11(6) of the Act, for such an application is not incompetent. For the 
sake of clarity, convenience and apposite appreciation, we shall state 
H
414 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
A 
the facts from Civil Appeal No. 5306 of2017. 
2. The respondent-company is engaged in the business of procuring 
bulk material handling equipment for installation in thermal power plants 
on behalf of its clients like National Thermal Power Corporation (NTPC) 
and Moser Baer, Lanco Projects Ltd., etc. On 1Q1h May, 2014, the 
B 
respondent issued a purchase order to the appellant for the complete 
design, manufacturing, supply, transport to site, unloading, storage, 
erection, testing, commissioning and performance guarantee testing 6f 
various articles including wagon tippler, side arm charger, apron feeder, 
etc. To secure the performance under the purchase order, the appellant 
had submitted an advance bank guarantee and a performance bank 
c guarantee. 
3. As the controversy arose with regard to encashment of bank 
guarantee, the appellant approached the High Court under Section 9 of 
the Act seeking an order of restraint for encashment of the advance 
bank guarantee and the performance bank guarantee. As is reflectible 
D 
from the impugned order, the said petitions were pending consideration 
when the High Court dealt with this matter. Be that as it may, the 
narration of the controversy under Section 9 in the impugned order or 
the consequences thereof is not germane to the adjudication of this case. 
4. As the facts would unveil, the appellant vide letter dated 
E 
28.12.2015 invoked the arbitration in terms of Clause 33
of the General 
Terms and Conditions of the Purchase Order (GTCPO) seeking reference 
of the disputes that had arisen between the parties to an arbitrator. It 
was also asserted before the High Court that the appellant had objected 
to the procedure for appointment of arbitrator provided under the 
F 
purchase order and accordingly communicated that an arbitrator be 
appointed de hors the specific terms of the purchase order. There was 
denial of the same by the respondent on the ground that it was contrary 
to the binding contractual terms and accordingly it rejected the suggestion 
given by the appellant and eventually by letter dated 27.1.2016 nominated 
an arbitrator, a former Judge of this Court, as the sole arbitrator in terms 
G 
of Clause 33( d) of the purchase order. It is apt to note here that in 
certain cases, a former Chief Justice of a High Court was also appointed 
as arbitrator by the Managing Director. 
H 
5. After the appointment was made, the appellant preferred an 
application under Section 11(5) read with Section 11(6) of the Act for
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
415 
[DIPAK MISRA, J.] 
appointment of an arbitrator under Section 11 (2) of the Act. The said 
A 
foundation was structured on the basis that under Section 12(5) of the 
Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) read 
with the Fifth and the Seventh Schedules to the amended Act, the 
Managing Director had become ineligible to act as the arbitrator and as 
a natural corollary, he had no power to nominate. The stand put forth by 
B 
the appellant was controverted by the respondent before the High Court 
on the ground that the Fifth and the Seventh Schedules lay down the 
guidelines and the arbitrator is not covered under the same and even if it 
is so, his power to nominate someone to act as an arbitrator is not fettered 
or abrogated. The High Court analysed the clauses in the agreement 
and opined that the right of one party to a dispute to appoint a sole 
C 
arbitrator prior to the amended Act had been well recognized and the 
amended Act does not take away such a right. According to the learned 
designated Judge, had the intent of the amended Act been to take away 
a party's right to nominate a sole arbitrator, the same would have been 
found in the detailed list of ineligibility criteria enumerated under the 
D 
Seventh Schedule to the Act and, therefore, the submission advanced by 
the appellant, the petitioner before the High Court, was without any 
substance. Additionally, the High Court noted that the
learned counsel 
for the petitioner before it had clearly stated that it had faith in the 
arbitrator but he was raising the issue as a legal one, for a Managing 
Director once disqualified, he cannot nominate. That apart, it took note 
of the fact that the learned arbitrator by letter dated 28.1.2016 has 
furnished the requisite disclosures under the Sixth Schedule and, therefore, 
there were no circumstances which were likely to give rise to justifiable 
doubts as to the independence and impartiality. Finally, the designated 
Judge directed that besides the stipulation in the purchase order governing 
· the parties, the court was inclined to appoint the former Judge as the 
sole arbitrator to decide the disputes between the parties. 
6. Questioning the soundness of the order passed by the High 
Court, Mr. Sundaram, learned senior counsel for the appellant has raised 
the following contentions: 
(i) The relevant clause in the agreement relating to appointment of 
arbitrator has become void in view of Section 12(5) of the amended 
Act, for the Managing Director having statutorily become ineligible, 
cannot act as an arbitrator and that acts as a disqualification and in 
such a situation to sustain the stand that his nominees have been 
E 
F 
G 
H
416 
A 
B 
c 
D 
E 
F 
SUPREME COURT REPORTS 
[2017) 7 S.C.R. 
validly appointed arbitrators would bring in an anomalous situation 
which is not countenanced in law. 
(ii) Once the owner/employer has been declared disqualified in law, 
a nominee by the owner to arbitrate upon is legally unacceptable. In 
support of this proposition, reliance has been placed upon Chairma11, 
Indore Vikas Pradhikaran v. Pure l11dustrial Coke & Chemicals 
Ltd. & others'. 
(iii) The principle embedded in the maxim Qui Facit Per A/ium Facit 
Per Se (What one does through another is done by oneself) is attracted 
in the instant case. Additionally, if such liberty is granted, it will usher 
in the concept that an action that cannot be done or is outside the 
prohibited area can be done illegally by taking means to the 
appointment of a nominee. In this regard, the decision in Firm of 
Pratapcha11d Nopaji v. Firm of Kotrike Ve11kata Setty & Sons 
and others2 has been commended. 
(iv) The status of the nominee does not take away the prohibition of 
ineligibility of nomination as the nominator has become ineligible to 
arbitrate upon. A legal issue of this nature which goes to the very 
root of the appointment of the arbitrator pertaining to his appointment 
which is ex facie invalid, cannot be said to be raised before the arbitral 
tribunal. For this purpose, inspiration has been drawn from the 
authority in Walter Bau A4 Legal Successor, of the Original 
Contractor, Dyckerhoff a11d Widma1111 A.Ci v.
M1micipal 
Corporation of Greater M umbai3. 
7. Mr. Chidambaram, learned senior counsel for the respondent, 
assisted by Mr. S.S. Shroff, resisting the aforesaid submissions, raised 
by the learned senior counsel for the appellant, proponed as follows: 
(a) The submission to the effect that since the Managing Director 
of the respondent has become ineligible to act as an arbitrator subsequent 
to the amendment in the Act, he could also not have nominated any 
other person as arbitrator is absolutely unsustainable, for the Fifth and 
G 
the Seventh Schedules fundamentally guide in determining whether 
circumstances exist which give rise to justifiable doubts as to the 
independence and impartiality of the arbitrator. To elaborate, if any 
H 
1 (2007) 8 sec 105 
2 (1975) 2 sec 208 
' (2015) 3 sec 800
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
417 
[DlPAK MISRA, J.] 
person whose relationship with the parties or the counsel or the subject A 
matter of dispute falls under any of the categories specified in the Seventh 
Schedule, he is ineligible to be appointed as an arbitrator but not otherwise. 
(b) The appellants have not been able to substantiate before the 
High Court how the appointment of the sole arbitrator falls foul of the 
Seventh Schedule and in the absence of that, the appeals, being devoid 
B 
of merit, deserve to be dismissed. As far as language employed in the 
Fifth Schedule is concerned, it is also a guide, which indicates existence 
of circumstances that give rise to justifiable doubts as to the arbitrator's 
independence and impartiality and when such a stand has been abandoned 
before the High Court, the impugned order is totally invulnerable. 
(c) On a careful appreciation of the Fifth and Seventh Schedules 
of the amended Act, it is manifest that grounds provided thereunder 
clearly pertain to the appointed arbitrator and not relating to the appointing 
authority and, therefore, each and every ground/circumstance categorized 
under the Fifth and Seventh Schedules is to be reckoned and decided 
vis-a-vis the appointed arbitrator alone and not as a general principle. 
(d) There is no warrant for the conclusion that an appointed 
arbitrator will automatically stand disqualified merely because the named 
arbitrator has become ineligible to become the
arbitrator, for he always 
has the right to nominate an independent and neutral arbitrator.· 
( e) The language of the purchase order does not stipulate that the 
Managing Director of the respondent will have the right to nominate a 
sole arbitrator as long as he is also qualified to act as an arbitrator. The 
role to act as an arbitrator and to nominate an arbitrator are in two 
independent spheres and hence, the authority to nominate is not curtailed. 
(f) Challenge to an appointment of arbitrator under Section 13 of 
the Act can only be made before the Arbitral Tribunal, for despite 
introducing the Fifth, the Sixth and the Seventh Schedules to the amended 
Act under Section 12, the Legislature has consciously retained the 
challenge procedure under Section 13 of the Act. It is because Sections 
13(2) and Section 13(3) of the Act clearly postulate that a challenge to 
the authority of arbitrator has to be made before the arbitral tribunal and 
the said procedure cannot be bypassed by ventilating the objection under 
Section 11 of the Act. Any objection to be raised under the Fifth Schedule 
c 
D 
E 
F 
G 
or the Seventh Schedule of the amended Act has to be raised before the 
arbitral tribunal. To bolster the said submission, heavy reliance has been 
H
418 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
A 
placed on Antrix Corporation Limited v. Devas Multimedia Private 
Limited4• 
(g) The authority relied on Walter Bau AG (supra) is not a 
precedent for the proposition advanced, as it was dealing with a challenge 
to an order of a judicial authority and not that ofa court and furthermore 
B 
the said decision has been distinguished in State of West Bengal v. 
Associated Contractors5• 
8. To appreciate the contentions raised at the Bar, it is necessary 
to refer to the relevant clauses of the GTCPO that deals with the 
resolution of dispute. Clause 33 that provides resolution of disputes/ 
c arbitration reads as follows: 
D 
E 
F 
G 
H 
"33. Resolution of dispute/arbitration 
a. In case any disagreement or dispute arises between the buyer 
and the seller under or in connection with the PO, both shall 
make every effort to resolve it amicably by direct informal 
negotiation. 
b. lf, even after 30 days from the commencement of such informal 
negotiation, seller and the buyer have not been able to resolve 
the dispute amicably, either party may require that the dispute 
be referred for resolution to the formal mechanism of arbitration. 
c. All disputes which cannot be settled by mutual negotiation shall 
be referred to and determined by arbitration as per the 
Arbitration and Conciliation Act, 1996 as amended. 
d. Unless otherwise provided, any dispute or difference between 
the parties in connection with this agreement shall be
referred 
to sole arbitration of the Managing Director of Buyer or his 
nominee. Venue of arbitration shall be Delhi, and the arbitration 
shall be conducted in English language. 
e. The award of the tribunal shall be final and binding on both; 
buyer and seller." 
9. We have reproduced the entire Clause 33 to appreciate the 
dispute resolution mechanism in its proper perspective. Sub-clause (c) 
of Clause 33 clearly postulates that if the dispute cannot be settled by 
• (2014) 11sec560 
' (2015) 1 sec 32
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
419 
[DlPAK MISRA, J.] 
negotiation, it has to be determined under the Act, as amended. Therefore, 
A 
the amended provisions do apply. Sub-clause (d) stipulates that dispute 
or reference between the parties in connection with the agreement shall 
be referred to sole arbitration of the Managing Director of the buyer or 
his nominee. This is the facet of the clause which is required to be 
interpreted and appositely dwelt upon. Prior to amendment, Section 12 
read as follows: 
"12. Grounds for challenge.-
B 
( l) When a person is approached in connection with his possible 
appointment as an arbitrator, he shall disclose in writing any 
circumstances likely to give rise to justifiable doubts as to his c 
independence or impartiality. 
(2) An arbitrator, from the time of his appointment and throughout 
the arbitral proceedings, shall, without delay, disclose to the parties 
in writing any circumstances referred to in sub-section ( l) unless 
they have already been informed of them by him. 
D 
(3) An arbitrator may be challenged only if-
( a) circumstances exist that give rise to justifiable doubts as to his 
independence or impartiality, or 
(b) he does not possess the qualifications agreed to by the parties. 
(4) A party may challenge an arbitrator appointed by him, or in 
whose appointment he has participated, only for reasons of which 
he becomes aware after the appointment has been made." 
10. Section 13 of the Act dealt with
challenge procedure. After 
E 
the amendment, Section 12 that deals with the grounds of challenge is as 
F 
follows: 
"12. Grounds for challenge.-
(l) When a person is approached in connection with his possible 
appointment as an arbitrator, he shall disclose in writing any 
circumstances,-
(a) such as the existence either direct or indirect, of any past or 
present relationship with or interest in any of the parties or in 
relation to the subject-matter in dispute, which is likely to give 
rise to justifiable doubts as to his independence or impartiality; 
G 
and 
H
420 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
A 
(b) which are likely to affect his ability to devote sufficient time to 
the arbitration and in particular his ability to complete the entire 
arbitration within a period of twelve months. 
Explanation 1.-The grounds stated in the Fifth Schedule shall 
guide in determining whether circumstances exist which give rise 
B 
to justifiable doubts as to the independence or impartiality of an 
arbitrator. 
c 
D 
E 
F 
Explanation 2.-The disclosure shall be made by such person in 
the form specified in the Sixth Schedule. 
(2) An arbitrator, from the time of his appointment and throughout 
the arbitral proceedings, shall, without delay, disclose to the parties 
in writing any circumstances referred to in sub-section ( 1) unless 
they have already been informed of them by him. 
(3) An arbitrator may be challenged only if-
(a) circumstances exist that give rise to justifiable doubts as to his 
independence or impartiality, or 
(b) he does not possess the qualifications agreed to by the parties. 
(4) A party may challenge an arbitrator appointed by him, or in 
whose appointment he has participated, only for reasons of which 
he becomes aware after the appointment has been made. 
(5) Notwithstanding any prior agreement to the contrary, any 
person whose relationship, with the parties or counsel or the 
subject-matter of the dispute, falls under any of the categories 
specified in the Seventh Schedule shall be ineligible to be appointed 
as
an arbitrator: 
Provided that parties may, subsequent to disputes having arisen 
between them, waive the applicability of this sub-section by an 
express agreement in writing." 
11. We have referred to both the provisions to appreciate the 
G 
change in the fundamental concept of grounds for challenge. The 
disclosures to be made by the arbitrator have been made specific and 
the disclosures are required to be made in accordance with the Sixth 
Schedule to the amended Act. The Sixth Schedule stipulates, apart from 
others, the circumstances which are to be disclosed. We think it 
H
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
421 
[DIPAK MISRA, J.] 
appropriate to reproduce the same: 
A 
"CIRCUMSTANCES DISCLOSING ANY PAST OR 
PRESENT RELATIONSHIP WITH OR INTEREST IN ANY 
OF THE PARTIES OR IN RELATION TO THE SUBJECT-
MATTER IN DISPUTE, WHETHER FINANCIAL, 
BUSINESS, PROFESSIONAL OR OTHER KIND, WHICH IS 
B 
LIKELY TO GIVE RISE TO JUSTIFIABLE DOUBTS AS TO 
YOUR INDEPENDENCE OR IMPARTIALITY (LIST OUT): 
CIRCUMSTANCES WHICH ARE LIKELY TO AFFECT 
YOUR ABILITY TO DEVOTE SUFFICIENT TIME TO THE 
ARBITRATION AND IN PARTICULAR YOUR ABILITY TO 
C 
FINISH THE ENTIRE ARBITRATION WITHIN TWELVE 
MONTHS (LIST OUT)" 
12. Sub-section (5) of Section 12, on which immense stress has 
been laid by the learned counsel for the appellant, as has been reproduced 
above, commences with a non-obstante clause. It categorically lays 
D 
down that if a person whose relationship with the parties or the counsel 
or the subject matterof dispute falls under any of the categories specified 
in the Seventh Schedule shall be ineligible to be appointed as an arbitrator. 
There is a qualifier which indicates that parties may, subsequent to the 
disputes arisen between them, waive the applicability by express 
agreement in writing. The qualifier finds place in the proviso appended 
E 
to sub-section (5) of Section 12. On a careful scrutiny of the proviso, it 
is discernible that there are fundamentally three components, namely, 
the parties can waive the applicability of the sub-section; the
said waiver 
can only take place subsequent to dispute having arisen between the 
parties; and such waiver must be by an express agreement in writing. 
F 
13. At this stage, we think it appropriate to refer to the Seventh 
Schedule, which finds mention in Section 12(5). The Seventh Schedule 
has three parts, namely, (i) arbitrator's relationship with the parties or 
counsel; (ii) relationship of the arbitrator to the dispute; and (iii) arbitrator's 
direct or indirect interest in the dispute. 
G 
14. In the present case, we are concerned with the first part of 
the Seventh Schedule. Be it noted, the first part has 14 items. For the 
present controversy, the relevant items are item nos. 1, 5 and 12, which 
read as follows: 
H
422 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
A 
"1. The arbitrator is an employee, consultant, advisor or has any 
other.past or present business relationship with a party. 
B 
xxxx 
xxxx 
5. The arbitrator is a manager, director or part of the management, 
or has a similar controlling influence, in an affiliate of one of the 
parties ifthe affiliate is directly involved in the matters in dispute 
in the arbitration. 
xxxx 
xxxx 
12. The arbitrator is a manager, director or part of the management, 
C 
or has a similar controlling influence in one of the parties." 
15. We will be failing in our duty, if we do not refer to some of the 
aspects which find mention in the Fifth Schedule. Our attention has been 
drawn to item nos. 22 and 24 of the Fifth Schedule. They are as follows: 
"22. The arbitrator has within the past three years been appointed 
D 
as arbitrator on two or more occasions by one of the parties or an 
affiliate of one of the parties. 
E 
xxxxx 
xxxxx 
24. The arbitrator currently serves, or has served within the past 
three years, as arbitrator in another arbitration on a related issue 
involving one of the parties or an affiliate of one of the parties." 
We have noted this for the sake of completion. 
16. What is fundamentally urged, as is noticeable from the 
submissions of Mr. Sundaram, learned senior counsel appearing for the 
F 
appellants, is that the learned arbitrator could not have been nominated 
by the Managing Director as the said authority has been
statutorily 
disqualified. The submission of the respondent, per contra, is that the 
Managing Director may be disqualified to act as an arbitrator, but he is 
not deprived of his right to nominate an arbitrator who has no relationship 
with the respondent. Additionally, it is assiduously urged that if the 
G 
appointment is hit by the Fifth Schedule or the Sixth Schedule or the 
Seventh Schedule, the same has to be raised before the arbitral tribunal 
during the arbitration proceeding but not in an application under 
Section 11 ( 6) of the Act. 
17. First we shall address the issue whether the Court can enter 
H
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
423 
[DIPAK MISRA, J.] 
into the arena of controversy at this stage. It is not in dispute that the 
A 
Managing Director, by virtue of the amended provision that has introduced 
sub-section (5) to Section 12, had enumerated the disqualification in the 
Seventh Schedule. It has to be clarified here that the agreement had 
been entered into before the amendment came into force. The procedure 
for appointment was, thus, agreed upon. It has been observed by the 
B 
designated Judge that the amending provision does not take away the 
right of a party to nominate a sole arbitrator, otherwise the legislature 
could have amended other provisions. He has also observed that the 
grounds including the objections under the Fifth and the Seventh 
Schedules of the amended Act can be raised before the Arbitral Tribunal 
and further when the nominated arbitrator has made the disclosure as 
C 
required under the Sixth Schedule to the Act, there was no justification 
for interference. That apart, he has also held in his conclusion that 
besides the stipulation of the agreement governing the parties, the Court 
has decided to appoint the arbitrator as the sole arbitrator to decide the 
dispute between the parties. 
18. In Nortliem Railway Administration, Ministry of Railways, 
New Delhi v. Patel Engineering Company Limitetf', while dealing 
with the sub-section (6) of Section 11 and sub-section (8) of Section 11 
and appreciating the stipulations
in sub-sections (3) and (5), a three-
Judge Bench opined that: 
"The expression "due regard" means that proper attention to 
several circumstances have been focused. The expression 
"necessary" as a general rule can be broadly stated to be those 
things which are reasonably required to be done or legally ancillary 
to the accomplishment of the intended act. Necessary measures 
can be stated to be the reasonable steps required to be taken." 
19. Being of this view, the Court ruled thatthe High Court had not 
focused on the requirement of having due regard to the qualification 
required by the agreement or other considerations necessary to secure 
appointment of an independent and impartial arbitrator and further ruled 
D 
E 
F 
that it needs no reiteration that appointment of an arbitrator or arbitrators 
G 
named in the arbitration agreement is not a must because while making 
the appointment, the twin responsibilities of sub-section (8) of Section 11 
have to be kept in view, considered and taken into account. The Court 
further observed that ifthe same is not done, the appointment becomes 
' c2oosi 1 o sec 240 
H
424 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
A 
vulnerable. In the said case, the Court set aside the appointment made 
by the High Court and remitted the matter to make fresh appointment 
keeping in, view the parameters indicated therein. 
20. In Datar Switchgears Ltd. v. Tata Finance Ltd. and 
another7, the appellant questioned the authority of the first respondent 
B 
in appointing an arbitrator after a long lapse of notice period of30 days 
on the foundation that the power of appointment should have been 
exercised within a reasonable time. It was further contended that 
unilateral appointment of arbitrator was not envisaged under the lease 
agreement and, therefore, the first respondent should have obtained the 
c 
consent of the appellant and the name of the arbitrator should have been 
proposed to the appellant before the appointment. The Court took note 
of the fact that the arbitration clause in the lease agreement contemplated 
appointment of a sole arbitrator. The Court further took note of the fact 
that the appellant therein had not issued any notice to the first respondent 
seeking appointment of an arbitrator and it explicated that an application 
D 
under Section 11(6) of the Act can be filed when there is a failure of the 
procedure for appointment of arbitrator. Elaborating the said concept, 
the Court held: 
E 
F 
"6 .... This failure of procedure can arise under different 
circumstances. It can be a case where a party who is bound to 
appoint an
arbitrator refuses to appoint the arbitrator or where 
two appointed arbitrators fail to appoint the third arbitrator. If the 
appointment of an arbitrator or any function connected with such 
appointment is entrusted to any person or institution and such 
person or institution fails to discharge such function, the aggrieved 
party can approach the Chief Justice for appointment of an 
arbitrator." 
21. After so st_ating, the Court adverted to the issue whether there 
was any real failure of the mechanism provided under the lease 
agreement. The Court took note of the fact that the respondent had 
made the appointment before the appellant had filed the application under 
G 
Section 11 of the Act though the said appointment was made beyond ~O 
days. It posed the question whether in a case falling under Section 11 ( 6) 
of the Act, the opposite party cannot appoint an arbitrator after the expiry 
of30 days from the date of appointment. Distinguishing the decisions of 
1 (2000) s sec 1s 1 
H
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
425 
[DIPAK MISRA, J.] 
Naginbhai C. Patel v. Union of India", B.W.L. Ltd. v. MTNL9 and A 
Sharma & Sons v. Engineer-in-Chief; Army Headquarters, New 
Delhi10, the Court held: 
"19. 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 
B 
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 
C 
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 
D 
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. We do not, therefore, agree 
with the observation in the above judgments that if the appointment· 
is not made within 30 days of demand, the right to appoint an 
arbitrator under
Section 11 (6) is forfeited. 
[Emphasis supplied] 
20. In the present case the respondent made the appointment 
before the appellant filed the application under Section 11 ( 6) though 
E 
it was beyond 30 days from the date of demand. In our view, the 
F 
appointment of the arbitrator by the respondent is valid and it 
cannot be said that the right was forfeited after expiry of 30 days 
from the date of demand. 
21. We need not decide whether for purposes of sub-sections (4) 
and (5) of Section 11, which expressly prescribe 30 days, the 
G 
period of30 days is mandatory or not." 
And again: 
' (1999) 2 Born CR 189 (Born) 
' (2000) 2 Arb LR 190 
'" (2000) 2 Arb LR 31 (AP) 
H
426 
A 
B 
c 
D 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
"23. When parties have entered into a contract and settled on a 
procedure, due importance has to be given to such procedure. 
Even though rigor of the doctrine of "freedom of contract" has 
been whittled down by various labour and social welfare legislation, 
still the court has to respect the terms of the contract entered into 
by parties and endeavour to give importance and effect to it. When 
the party has not disputed the arbitration clause, normally he is 
bound by it and obliged to comply with the procedure laid down 
under the said clause''. 
22. On the aforesaid basis, the Court opined that the first 
respondent did not fail to follow the procedure contemplated under the 
agreement in appointing the arbitrator nor did it contravene the provisions 
of the arbitration clause. The said conclusion was arrived at as the 
appellant therein had really not sent a notice for appointment of arbitrator 
as contemplated under Clause 20.9 of the agreement which was the 
arbitration clause. 
23. In Newto11 E11gi11eeri11g a11d Chemicals Limited v. /11dia11 
Oil Corporation Limited a11d others 11 , a two-Judge Bench was dealing 
with an arbitration clause in the agreement that provided that all disputes 
and differences between the parties shall be referred by any aggrieved 
party to the contract to the sole arbitration ofE.D. (NR) of the respondent-
E 
Corporation. The arbitration clause further stipulated that if such E.D.
(NR) was unable or unwilling to act as the sole arbitrator, the matter 
shall be referred to the sole arbitration of some other person designated 
by E.D. (NR) in his place who was willing to act as sole arbitrator. It 
also provided that no person other than E.D. (NR) or the person designated 
F 
by the E.D. (NR) should act as an arbitrator. When the disputes arose 
between the parties, the appellant therein wrote to the Corporation for 
appointment of E.D. (NR) as the sole arbitrator, as per the arbitration 
clause. The Corporation informed the contractor that due to internal 
reorganization in the Corporation, the office of the E.D. (NR) had ceased 
to exist and since the intention of the parties was to get the dispute 
G 
settled through the arbitration, the Corporation offered to the contractor 
the arbitration of the substituted arbitrator, that is, the Director 
(Marketing). The Corporation further informed the contractor that ifhe 
agreed to the same, it may send a written confirmation giving its consent 
to the substitution of the named arbitrator. The contractor informed that 
H 
11 c2013) 4 sec 44
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
427 
[DIPAK MISRA, J.] 
he would like to have the arbitration as per the provisions of the Act A 
whereby each of the parties would be appointing one arbitrator each. 
The Corporation did not agree to the suggestion given by the company 
and ultimately appointed Director (Marketing) as the arbitrator. The 
contractor, being aggrieved, moved the High Court of Delhi for 
appointment of arbitrator under Section 11 ( 6)( c) of the Act and the learned B 
Single Judge dismissed the same and observed that the challenge to the 
appointment of the arbitrator may be raised by the contractor before the 
arbitral tribunal itself. Interpreting the agreement, this Court held: 
"7. Having regard to the express, clear and unequivocal arbitration 
clause between the parties that the disputes between them shall 
be referred to the sole arbitration of the ED (NR) of the Corporation 
C 
and, if ED (NR) was unable or unwilling to act as the sole arbitrator, 
the matter shall be referred to the person designated by such ED 
(NR) in his place who was willing to act as sole arbitrator and, if 
none of them is able to act as an arbitrator, no other person should 
act as arbitrator, the appointment of Director (Marketing) or his D 
nominee as a sole arbitrator by the Corporation cannot be 
sustained. If the office of ED (NR) ceased to exist in the 
Corporation and the parties were unable to reach to any agreed 
solution, the arbitration clause did not
survive and has to be treated 
as having worked its course. According to the arbitration clause, 
sole arbitrator would be ED (NR) or his nominee and no one else. 
E 
In the circumstances, it was not open to either of the parties to 
unilaterally appoint any arbitrator for resolution of the disputes. 
Sections 11 (6)( c), 13 and 15 of the 1996 Act have no application 
in the light of the reasons indicated above. 
8. In this view of the matter, the impugned order dated 8-11-2006 
has to be set aside and it is set aside. The appointment of 
. Respondent 3 as sole arbitrator to adjudicate the disputes between 
the parties is also set aside. The proceedings, if any, carried out 
by the arbitrator are declared to be of no legal consequence. It 
F 
will be open to the contractor, the appellant to pursue appropriate 
G 
ordinary civil proceedings for redres·sal of its grievance in 
accordance with law." 
24. The aforesaid decision clearly lays down that it is not open to 
either of the parties to unilaterally appoint an arbitrator for resolution of 
the disputes in a situation that had arisen in the said case. 
H
428 
A 
B 
c 
D 
E 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
25. In Deep Trading Company v. Indian Oil Corporation and 
others", the three-Judge Bench referred to clause 29 of the agreement, 
analysed sub-sections I, 2, 6 and 8 of Section 11 of the Act, referred to 
the authorities in Datar Switclzgears (supra) and Putij Lloyd Ltd. v. 
Petronet J,IHB Ltd." and came to hold that: 
"19. If we apply the legal position exposited by this Court in Datar 
Switchgears to the admitted facts, it will be seen that the 
Corporation has forfeited its right to appoint the arbitrator. It is s<i 
for the reason that on 9-8-2004, the dealer called upon the 
Corporation to appoint the arbitrator in accordance with the terms 
of Clause 29 of the agreement but that was not done till the dealer 
had made application under Section 11(6) to the Chief Justice of 
the Allahabad High Court for appointment of the arbitrator. The 
appointment was made by the Corporation only during the 
pendency of the proceedings under Section II (6). Such appointment 
by the Corporation after forfeiture of its right is of no consequence 
and has not disentitled the dealer to seek appointment of the 
arbitrator by the Chief Justice under Section 11 ( 6); We answer 
the above questions accordingly. 
20. Section 11(8) does not help the Corporation at all in the fact 
situation. Firstly, there is no qualification for the arbitrator prescribed 
in the ai,'Teement. Secondly, to secure the appointment of an 
independent and
impartial arbitrator, it is rather necessary that 
someone other than an officer of the Corporation is appointed as 
arbitrator once the Corporation has forfeited its right to appoint 
the arbitrator under Clause 29 of the agreement." 
F 
26. The Court accepted the legal position laid down in Newton 
Engineering (supra) and referred to Deep Trading Company (supra) 
and opined that as the Corporation had failed to act as required under 
the procedure agreed upon and did not make the appointment until the 
application was made under Section 11 ( 6) of the Act, it had forfeited its 
right of appointment of an arbitrator. In such a circumstance the Chief 
G 
Justice or his designate ought to have exercised his jurisdiction to appoint 
an arbitratorunder Section II ( 6) of the Act. Be it noted, the three-Judge 
Bench also expressly stated its full agreement with the legal position 
that has been laid down in Datar Switchgears Ltd. (supra) 
12 (20!3) 4 sec 35 
H 
"(2006) 2 sec 638
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
429 
[DIPAK MISRA, J.] 
27. In Deep Trading Company (supra), the three-Judge Bench 
A 
noticed as the Corporation did not agree to any of the names proposed 
by the appellant, and accordingly remitted the matter to the High Court 
for an appropriate order on the application made under Section 11 ( 6) of 
the Act. 
28. At this stage, it is necessary to understand the distinction 
between the two authorities, namely, Newton Engineering (supra) and 
Deep Trading Company (supra). In Newton Engineering (supra) 
the arbitration clause provided that no person other than ED (NR) or a 
person designated by the ED (NR) should act as an arbitrator. Though 
B 
the Corporation appointed its Director (Marketing) as the sole arbitrator 
C 
yet the same was not accepted by the c.ontractor. On the contrary, it 
was assailed before the designated Judge. The Court held that since the 
parties were unable to arrive at any agreed solution, the arbitration clause 
did not survive and the dealer was left to pursue appropriate ordinary 
civil proceedings for redressal of its grievance in accordance with law. 
In Deep Trading Company (supra) arbitration clause, as is noticeable, 
D 
laid down that the dispute or difference of any nature whatsoever or 
regarding any right, liability, act, omission on account of any of the parties 
thereto or in relation to the agreement shall be referred to the sole 
arbitration of the Director (Marketing) of the
Corporation or of some 
. officer the Corporation who may be nominated by the Director 
(Marketing). 
29. As the factual matrix of the said case would show, the appointing 
authority had not appointed arbitrator till the dealer moved the Court and 
it did appoint during the pendency of the proceeding. Be it noted that 
dealer had called upon the Corporation to appoint arbitrator on 9.8.2004 
and as no appointment was made by the Corporation, he had moved the 
application on 6.12.2004. The Corporation appointed the sole arbitrator 
on 28.12.2004 after the application under Section 11 (6) was made. Taking 
note of the factual account, the Court opined that there was a forfeiture 
E 
F 
of the right of appointment of arbitrator under the agreement and, 
therefore, the appointment of the arbitrator by the Corporation during 
G 
the pendency of the proceeding under Section 11(6) of the Act was of 
no consequence and remanded the matter to the High Court. The 
arbitration clause in Newton Engineering (supra) clearly provided that 
if the authority concerned is not there and the office ceases to exist and 
parties are unable to reach any agreed solution, the arbitration clause 
H
-------------- -- --· 
430 
A 
B 
c 
D 
E 
F 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
shall cease to exist. Such a stipulation was not there in Deep Trading 
Company (supra). That is the major distinction and we shall delineate 
on the said aspect from a different spectrum at a later stage. 
30. At this juncture, we may also refer to a two-Judge Bench 
decision in Municipal Corpn., Jabalap11r and others v. Rajesh 
Constr11ctio11 Co 14 • In the said case the arbitration clause .specifically 
provided that if the party invoking arbitration is the contractor, no reference 
order shall be maintainable unless the contractor furnishes a security 
deposit of a sum determined as per the table given therein. The said 
condition precedent was not satisfied by the contractor. Appreciating 
the obtaining factual score, the Court held that it has to be kept in mind 
that it is always the duty of the Court to construe the arbitration agreement 
in a manner so as to uphold the same, and, therefore, the High Court 
was not correct in appointing an arbitrator in a manner, which was 
inconsistent with the arbitration agreement. Thus, emphasis was laid on 
the manner of appointment which is consistent with arbitration clause 
that prescribes for appointment. 
31. The purpose of referring to the aforesaid judgments is that 
courts in certain circumstances have exercised the jurisdiction to nullify 
the appointments made by the authorities as there has been failure of 
procedure or exfacie
contravention of the inherent facet of the arbitration 
clause. Submission of the learned counsel for the respondent is that the 
authority of the arbitrator can be raised before the learned Arbitrator 
and for the said purpose, as stated hereinbefore, he has placed heavy 
reliance upon Antrix Corporation Limited (supra). In the said case, 
the two-Judge Bench referred to Article 20 of the agreement which 
specifically dealt with arbitration and provided that in the event any dispute 
or difference arises between the parties as to any clause or provision of 
the agreement, or as to the interpretation thereof, or as to any account 
or valuation, or as to rights and liabilities, acts, omissions of any party, 
such disputes would be referred to the senior management of both the 
parties to resolve the same within three weeks, failing which the matter 
G 
would be referred to an arbitral tribunal comprising of three arbitrators 
and the seat of the arbitration would be New Delhi and further that the 
arbitration proceedings would be held in accordance with the rules and 
procedures of the International Chamber of Commerce (ICC) or 
UNCITRAL. As the agreement was terminated, the petitioner therein 
H 
" (2001) s sec 344
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
431 
[DIPAK MISRA, J.] 
wrote to the respondent company to nominate the senior management 
A 
to discuss the matter and to try and resolve the dispute between the 
parties. However, without exhausting the mediation process, as 
contemplated under Article 20(a) of the agreement, the respondent 
unilaterally and without prior notice addressed a request for arbitration 
to the ICC International Court of Arbitration and one Mr. V.V. Veedar 
was nominated as the arbitrator in accordance with ICC Rules. The 
correspondence between the parties was not fruitful and the petitioner 
filed an application under Section 11 ( 4) read with Section 11 ( 10) of the 
Act for issuance of a direction to the respondent to nominate an arbitrator 
B 
in accordance with an agreement dated 28.1.2005 and the Rules to 
adjudicate upon the disputes which had arisen between the parties and 
C 
to constitute an arbitral tribunal and to proceed with the arbitration. 
32. When the matter was listed before the designate of the Chief 
Justice of this Court, it was referred to a larger Bench and the Division 
Bench, analyzing the various authorities, came to hold thus: 
"35 .... Once the provisions of the ICC Rules of Arbitration had 
D 
been invoked by Devas, the proceedings initiated thereunder could 
not be interfered with in a proceeding under Section 11 of the 
1996 Act. The invocation of the ICC Rules would, of course, be 
subject to challenge in appropriate
proceedings but not by way of 
an application under Section 11(6) of the 1996 Act. Where the 
parties had agreed that the procedure for the arbitration would be 
governed by the ICC Rules, the same would necessarily include 
the appointment of an arbitral tribunal in terms of the arbitration 
a1:,>reement and the said Rules. Arbitration Petition no. 20of2011 
under Section 11 ( 6) of the 1996 Act for the appointment of an 
arbitrator must, therefore, fail and is rejected, but this will not 
prevent the petitioner from taking recourse to other provisions of 
the aforesaid Act for appropriate relief." 
33. The said pronouncement, as we find, is factually distinguishable 
E 
F 
and it cannot be said in absolute terms that the proceeding once initiated 
could not be interfered with the proceeding under Section 11 of the Act. 
G 
As we find, the said case pertained to ICC Rules and, in any case, we 
are disposed to observe that the said case rests upon its own facts. 
34. Mr. Sundaram, learned senior counsel for the appellant has 
also drawn inspiration from the judgment passed by the designated Judge 
H
432 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
A 
of this Court in Walter Bau AG (supra), where the learned Judge, after 
referring to Antrix Corporation Limited (supra), distinguished the same 
and also distinguished the authority inPricol Limited v. Johnson Controls 
Enterprise Limited15 and came to hold that: 
"l 0. Unless the appointment of the arbitrator is ex facie valid and 
B 
such appointment satisfies the Court exercising jurisdiction under 
Section 11 ( 6) of the Arbitration Act, acceptance of such 
appointment as a fait accompli to debar the jurisdiction under 
Section 11(6) cannot be countenanced in law .... " 
35. We may immediately state that the opinion expressed in the 
c aforesaid case is in consonance with the binding authorities we have 
referred to hereinbefore. 
36. Learned counsel for the respondent commenting on the 
authority in Walter Bau AG (supra) would submit that the decision 
rendered therein is not a precedent and for the said purpose, he has 
D 
placed reliance upon Associated Contractors (supra) wherein a three-
Judge Bench was dealing with a reference that gave rise to the following 
issue: 
"Which court will have the jurisdiction to entertain and decide an 
application under Section 34 of the Arbitration and Conciliation 
E 
Act, 1996." 
F 
37. The three-Judge Bench was called upon to lay down the 
meaning of the term "court" under Section 2( 1 )( e) and Section 42 of the 
Act. The Court came to hold that an essential ingredient of Section
42 
of the Act is that an application under Part I must be made to a court. 
The three-Judge Bench adverted to the rlefinition of the court under 
Section 2(1)( e) of the Act and opined that the definition contained in the 
1940 Act spoke of civil court whereas the definition of the 1996 Act 
which says court to be the Principal Civil Court of original jurisdiction in 
a district or the High Court in exercise of original civil jurisdiction. That 
apart, Section 2( 1 )( e) further goes on to say that the court would not 
G 
include any civil court of a grade inferior to such Principal Civil Court, or 
a Small Cause Court. The Court discussed with regard to the concept of 
'court', referred to the meaning of the phrase "means and includes'', 
reverted to the judgment in State of Maharashtra v. Atlanta Limited16 
"(201s) 4 sec 111 
H 
"(2014) 11 sec 619
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
433 
[DIPAK MISRA, J.] 
and also reproduced few passages from the seven-Judge Bench in SBP A 
& Co. v. Patel Engineering Ltd. 11 and eventually ruled: 
"24. If an application were to be preferred to a court which is not 
a Principal Civil Court of original jurisdiction in a district or a High 
Court exercising original jurisdiction to decide questions forming 
the subject matter of an arbitration if the same had been the subject B 
matter of a suit, then obviously such application would be outside 
the four comers of Section 42. If, for example, an application 
were to be filed in a court inferior to a Principal Civil Court, or to 
a High Court which has no original jurisdiction, or if an application 
were to be made to a court which has no subject-matter jurisdiction, 
such application would be outside Section 42 and would not debar 
C 
subsequent applications from being filed in a court other than such 
court." 
38. The Court summed up the conclusions as follows: 
"25 .(a) Section 2( I)( e) contains an exhaustive definition marking D 
out only the Principal Civil Court of Original Jurisdiction in a district 
or a High Court having original civil jurisdiction in the State, and 
no other court as "court" for the purpose of Part I of the Arbitration 
Act, 1996. 
(b) The expression "with respect to an arbitration agreement" 
E 
makes it clear that Section 42 will apply to all applications made 
whether before or during arbitral
proceedings or after an award 
is pronounced under Part I of the 1996 Act. 
(c) However, Section 42 only applies to applications made under 
Part I if they are made to a court as defined. Since applications 
F 
made under Section 8 are made to judicial authorities and since · 
applications under Section 11 are made to the Chief Justice or his 
designate, the judicial authority and the Chief Justice or his 
designate not being court as defined, such applications would be 
outside Section 42. 
G 
(d) Section 9 applications being applications made to a court and 
Section 34 applications to set aside arbitral awards are applications 
which are within Section 42. 
(e) In no circumstances can the Supreme Court be "court" for 
11 (2oos) s sec 618 
H
434 
A 
B 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
the purposes of Section 2(1)(e), and whether the Supreme Court 
does or does not retain seisin after appointing an arbitrator, 
applications will follow the first application made before either a 
High Court having original jurisdiction in the State or a Principal 
Civil Court having original jurisdiction in the district, as thtl.case 
maybe. 
(j) Section 42 will apply to applications made after the arbitral 
proceedings have come to an end provided they are made under 
Part I. 
(g) If a first application is made to a court which is neither a 
c 
Principal Court of Original Jurisdiction in a district or a High Court 
exercising original jurisdiction in a State, such application not being 
to a court as defined would be outside Section 42. Also, an 
application made to a court without subject-matter jurisdiction 
would be outside Section 42". 
D 
39. Relying on the said pronouncement, it is urged by the learned 
senior counsel for the respondent that the authority in Walter Ba11 AG 
(supra) is not a precedent. 
40. We have discussed in detail to understand the context in which 
judgment in Associated Contractors (supra) was delivered. Suffice it 
E 
to mention that in Walter Bau AG (supra), the designated Judge only 
reiterated the principles which have been stated by a two-Judge or three-
Judge Bench decisions that had dealt with Section 11 of the Act. We 
may also hasten to make it clear that the authority in Associated
Contractors (supra) deals with a different situation and it has nothing to 
do with the conundrum that has arisen in the instant case. We have 
F 
devoted some space as the said authority was pressed into service with 
enormous conviction. Be it clearly stated that the said decision is only 
concerned with the "concept of court" in the context of Sections 42, 34, 
9 and 2(l)(e) of the Act. In the present case, we are exclusively 
concerned with the statutory disqualification of the learned arbitrator. 
G 
The principles laid down in Associated Contractors (supra) has no 
applicability to the case at hand and reliance placed upon the same, we 
are obliged to say, is nothing but a sisyphean endeavour. 
41. As we are required to adjudge on the jurisdiction of the 
Designated Judge, we may reproduce the relevant conclusion from the 
H 
majority judgment in SBP & Co. (supra). Conclusion (iv), as has been
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
435 
[DIPAK MISRA, J.] 
summed up in para 47 in SBP's case by the majority, reads as follow: 
A 
"4 7. (iv) The Chief Justice or the Designated Judge will-have the 
right to decide the preliminary aspects as indicated in the earlier 
part of this judgment. These will be his own jurisdiction to entertain 
the request, the existence of a valid arbitration agreement, the 
existence or otherwise of a live claim, the existence of the condition 
B 
for the exercise of his power and on the qualifications of the 
arbitrator or arbitrators. The Chief Justice or the Designated Judge 
would be entitled to seek the opinion of an institution in the matter 
of nominating an arbitrator qualified in terms of Section 11 (8) of 
the Act if the need arises butthe order appointing the arbitrator C 
could only be that of the Chief Justice or the Designated Judge." 
42. In Arasmeta Captive Power Company Private Limited and 
another v. Lafarge India Private Limited18, the two-Judge Bench, 
though was dealing with the pregnability of the order passed by the 
Designated Judge pertaining to excepted matters, dealt with the 
submission advanced by the learned counsel for the appellant that the D 
three-Judge Bench in C/1loro Controls India Private Limited v. Severn 
Trent Water Purification Inc. 19 has not appositely understood the 
principle stated in major part of the decision rendered by the larger Bench 
in SBP's case. In the said case, the Court,
after referring to paragraphs 
39 and47(iv), stated thus: 
E 
"18. On a careful reading of para 39 and Conclusion (iv), as set 
out in para 47 of SBP case, it is limpid that for the purpose of 
setting into motion the arbitral procedure the Chief Justice or his 
designate is required to decide the issues, namely, (i) territorial 
jurisdiction, (ii) existence of an arbitration agreement between 
F 
the parties, (iii) existence or otherwise of a live claim, and (iv) 
existence of the conditions for exercise of power and further 
satisfaction as regards the qualification of the arbitrator. That apart, 
under certain circumstances the Chief Justice or his designate is 
also required to see whether a long-barred claim is sought to be 
restricted and whether the parties had concluded the transaction G 
by recording satisfaction of the mutual rights and obligations or by 
receiving the final payment without objection." 
"(2013) 1s sec 414 
"(2013) 1 sec 641 
H
436 
A 
B 
SUPREME COURT REPORTS 
[2017) 7 S.C.R. 
4 3. It is worthy to note here that in the said case, the Court set 
aside the impugned order as the designated Judge had entered into the 
billing disputes, which he could not have. The purpose of referring to 
these two judgments is that apart from the fact that the Designated 
Judge can, at the initial stage, adjudicate upon his jurisdiction, he is also 
entitled to scrutinize the existence of the condition precedent for the 
exercise of his power and also the disqualification of the arbitrator or 
arbitrators. 
44. Section 11(8) of the Act, which has been introduced in 2015, 
reads as follows: 
c 
"(8) The Supreme Court or, as the case may be, the High Court 
or the person or institution designated by such Court, before 
appointing an arbitrator, shall seek a disclosure in writing from the 
prospective arbitrator in terms of sub-section (1) of section 12, 
and have due regard to-
D 
(a) any qualifications required of the arbitrator by the agreement 
of the parties; and 
(b) the contents of the disclosure and other considerations as are 
likely to secure the appointment of an independent and impartial 
arbitrator." 
E 
45. We are referring to the same as learned counsel for the parties 
have argued at length with regard to the disclosure made by the arbitrator 
and that has also been referred to by the designated Judge. In this 
context, we may profitably refer to sub-section (6A) of Section 11 of the 
Act which reads as
follows: 
F 
"(6A). The Supreme Court or, as the case may be, the High Court, 
while considering any application under sub-section (4) or sub-
section (5) or sub-section (6), shall, notwithstanding any judgment, 
decree or order of any Court, confine to the examination of the 
existence of an arbitration agreement." 
G 
46. The purpose of referring to the said provision is that the 
amended law requires the Court to confine the examination of the 
existence of an arbitration agreement notwithstanding any judgment of 
the Supreme Court or the High Court while considering an application 
under Section 11 ( 6) of the Act. As the impugned order would indicate, 
· the learned Judge has opined that there had been no failure of procedure, 
H
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
437 
[DIPAK MISRA, J.] 
for there was a request for appointment of an arbitrator and an arbitrator A 
has been appointed. It is apt to state here that the present factual score 
projects a different picture altogether and we have to carefully analyse 
the same. 
47. We are required to sit in a time machine and analyse the 
judgments in this regard. In Datar Switclrgears (supra), it has been 
B 
held that the appointment made by the respondent was invalid inasmuch 
as there was no proper notice by the appellant to appoint an arbitrator 
and before an application under Section 11 ( 6) of the Act was filed, the 
arbitrator was appointed. Relevant part of clause 20.9 of the agreement 
in the said case postulates thus: 
"20.9. It is agreed by and between the parties that in case of any 
dispute under this lease the same shall be referred to an arbitrator 
to be nominated by the lessor and the award of the arbitrator shall 
be final and binding on all the parties concerned." 
c 
The aforesaid clause lays down that the lessor shall nominate the 
D 
arbitrator. 
48. In Newton E11gi11eeri11g (supra), though the agreement has 
not been produced in the judgment, the Court has anaylsed in detail the 
purport of the arbitration clause in the agreement and ruled that the 
matter shall be referred to the sole arbitration of ED (NR) of the 
E 
respondent Corporation and ifthe said authority is unable and unwilling 
to act, the matter shall be
referred to the sole arbitration of some other 
person designated by ED (NR) in his place who is willing to act as a sole 
arbitrator. The said post had ceased to exist and as the parties intended 
the matter to go to arbitration, the respondent substituted the arbitrator 
with the Director (Marketing) in the arbitration clause subject to the 
F 
written confirmation giving the consent by the contractor. The contractor 
informed the Corporation that it would like to have the arbitrator appointed 
under the Act whereby each of the parties would be appointing one 
arbitrator each to which the Corporation did not accede. At that juncture 
the contractor moved an application under Section 11 ( 6C) of the Act 
G 
and the High Court appointed a retired Judge. Taking exception to the 
view of the High Court, the two-Judge Bench held, as stated earlier, that 
the arbitration clause postulated sole arbitrator would be ED (NR) or his 
nominee and no one else and, therefore, Section 11 ( 6C) was not 
applicable. The Court ruled that as the parties had not been able to 
H
438 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
A 
reach the agreed decision, the arbitration clause did not survive. 
49. In Deep Trading Company (supra) while approving the view 
expressed in Newton Engineering (supra), the Court observed that in 
the said case the Court was not concerned with the question of forfeiture 
of the right of the Corporation for appointment of an arbitrator and 
B 
accordingly while setting aside the order sent for fresh consideration by 
the Chief Justice or the Designated Judge. 
50. The aforesaid three cases exposit three different situations. 
The first one relates to non-failure of the procedure and the authority of 
the owner to appoint the arbitrator; the second relates to non-survival of 
c the arbitration clause; and the third pertains to forfeiture of the right of 
the Corporation to appoint the sole arbitrator because of the failure to 
act with the procedure agreed upon by the parties in clause 29 which 
was the arbitration clause in the agreement. It is interesting to note that 
clause 29 in Deep Trading Company (supra) does not mention unlike 
Newton Engineering (supra) that no one else shall arbitrate upon. 
D 
51. One aspect needs to be noted. In the first and third case, the 
parties had not stipulated that there will be no one else who can arbitrate 
while in the second case, i.e., Newton Engineering (supra), such a 
stipulation was postulated. 
E 
52. Regard being had to the same, we have to compare and analyse 
the arbitration
clause in the present case. Clause (c), which we have 
reproduced earlier, states that all disputes which cannot be settled by 
mutual negotiation shall be referred to and determined by arbitration as 
per the Act, as amended. Clause ( c) is independent of Clause ( d). Clause 
(d) provides that unless otherwise provided, any dispute or difference 
F 
between the parties in connection with the agreement shall be referred 
to the sole arbitration of the Managing Director or his nominee. 
53. First, we shall d,eal with Clause (d). There is no quarrel that 
by virtue of Section 12(5) of the Act, if any person who falls under any 
of the categories specified in the Seventh Schedule shall be ineligible to 
G 
be appointed as the arbitrator. There is no doubt and cannot be, for the 
language employed in the Seventh Schedule, the Managing Director of 
the Corporation has become ineligible by operation of law. It is the 
stand of the learned senior counsel for the appellant that once the 
Managing Director becomes ineligible, he also becomes ineligible to 
H 
nominate. Refuting the said stand, it is canvassed by the learned senior
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
439 
[DIPAK MISRA, J.] 
counsel for the respondent that the ineligibility cannot extend to a nominee 
A 
ifhe is not from the Corporation and more so when there is apposite and 
requisite disclosure. We think it appropriate to make it clear that in the 
case at hand we are neither concerned with the disclosure nor objectivity 
nor impartiality nor any such other circumstance. We are singularly 
concerned with the issue, whether the Managing Director, after becoming 
B 
ineligible by operation oflaw, is he still eligible to nominate an arbitrator. 
At the cost of repetition, we may state that when there are two parties, 
one may nominate an arbitrator and the other may appoint another. That 
is altogether a different situation. Ifthere is a clause requiring the parties 
to nominate their respective arbitrator, their authority to nominate cannot 
be questioned. What really in that circumstance can be called in question 
C 
is the procedural compliance and the eligibility of their arbitrator depending 
upon the norms provided under the Act and the Schedules appended 
thereto. But, here is a case where the Managing Director is the "named 
sole arbitrator" and he has also been conferred with the power to 
nominate one who can be the arbitrator in his place. Thus, there is 
D 
subtle distinction. In this regard, our attention has been drawn to a two-
Judge Bench decision in State of Orissa and others v. Commissioner 
of Land Records &
Settlement, Cuttack and others20• In the said 
case, the question arose can the Board of Revenue revise the order 
passed by its delegate. Dwelling upon the said proposition, the Court 
~ 
E 
"25. We have to note that the Commissioner when he exercises 
power of the Board delegated to him under Section 33 of the 
Settlement Act, 1958, the order passed by him is to be treated as 
an order of the Board of Revenue and not as that of the 
Commissioner in his capacity as Commissioner. This position is 
F 
clear from two rulings of this Court to which we shall presently 
refer. The first of the said rulings is the one. decided by the 
Constitution Bench of this Court in Roop Chand v. State of 
Punjab. In that case, it was held by the majority that where the 
State Government had, under Section 41(1) of the East Punjab 
Holdings (Consolidation and Prevention of Fragmentation) Act, 
G 
1948, delegated its appellate powers vested in it under Section 
21 ( 4) to an "officer", an order passed by such an officer was an 
order passed by the State Government itself and "not an order 
20 (1998)1 sec 162 
H
440 
A 
B 
c 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
passed by any officer under this Act" within Section 42 and was 
not revisable by the State Government. It was pointed out that for 
the purpose of exercise of powers of revision by the State under 
Section 42 of that Act, the order sought to be revised must be an 
order passed by an officer in his own right and not as a delegate 
of the State. The State Government was, therefore, not entitled 
under Section 42 to call for the records of the case which was 
disposed of by an officer acting as its delegate." 
54. Be it noted in the said case, reference was made to Behari 
K1111j Sahkari Awas Samiti v. State of U.P. 2', which followed the 
decision in Roop Chand v. State of P11njab22• It is seemly to note here 
that said principle has been followed in Chairman, Indore Vikas 
Pradhikaran (supra). 
55. Mr. Sundaram, has strongly relied on Firm of Pratapchand 
Nopaji (supra). In the said case, the three-Judge Bench applied the 
maxim "Qui facit per aliumfacit per se ". We may profitably reproduce 
D 
the passage: 
E 
F 
"9 .... The principle which would apply, if the objects are struck 
by Section 23 of the Contract Act, is embodied in the maxim: 
"Qui facit per alium facit per se" (What one does through another 
is done by oneself). To put it in another form, that which cannot 
be done directly may not be done indirectly by engaging another 
outside the prohibited area to do the illegal act within the prohibited 
area. It is
immaterial whether, for the doing of such an illegal act, 
the agent employed is given the wider powers or authority of the 
"pucca adatia", or, as the High Court had held, he is clothed with 
the powers of an ordinary commission agent only." 
56. The aforesaid authorities have been commended to us to 
establish the proposition that if the nomination of an arbitrator by an 
ineligible arbitrator is allowed, it would tantamount to carrying on the 
proceeding of arbitration by himself. According to learned counsel for 
G 
the appellant, ineligibility strikes at the root of his power to arbitrate or 
get it arbitrated upon by a nominee. 
H 
57. In such a context, the fulcrum of the controversy would be, 
can an ineligible arbitrator, like the Managing Director, nominate an 
21 (I997) 1 sec 37 
22 AIR 1963 SC 1503
TRF LTD. v. ENERGO ENGINEERING PROJECTS LTD. 
441 
[DIPAK MISRA, J.] 
arbitrator, who may be otherwise eligible and a respectable person. As 
A 
stated earlier, we are neither concerned with the objectivity nor the 
individual respectability. We are only concerned with the authority or the 
power of the Managing Director. By our analysis, we are obligated to 
arrive at the conclusion that once the arbitrator has become ineligible by 
operation of law, he cannot nominate another as an arbitrator. The 
B 
arbitrator becomes ineligible as per prescription contained in Section 
12( 5) of the Act. It is inconceivable in law that person who is statutorily 
ineligible can nominate a person. Needless to say, once the infrastructure 
collapses, the superstructure is bound to collapse. One cannot have a 
building without the plinth. Or to put it differently, once the identity of the 
Managing Director as the sole arbitrator is lost, the power to nominate 
C 
someone else as an arbitrator is obliterated. Therefore, the view 
expressed by the High Court is not sustainable and we say so. 
58. Another facet needs to be addressed. The Designated Judge 
in a cryptic manner has ruled after noting that the petitioner therein had 
no reservation for nomination of the nominated arbitrator and further 
D 
taking note of the fact that there has been a disclosure, that he has 
exercised the power under Section 11(6) of the Act. We are impelled to 
think that that is not the right procedure to be
adopted and, therefore, we 
are unable to agree with the High Court on that score also and, accordingly, 
we set aside the order appointing the arbitrator. However, as Clause ( c) 
is independent of Clause ( d), the arbitration clause survives and hence, 
the Court can appoint an arbitrator taking into consideration all the aspects. 
Therefore, we remand the matter to the High Court for fresh consideration 
of the prayer relating to appointment of an arbitrator. 
59. Resultantly, the appeals are allowed, the orders passed by the 
learned Single Judge are set aside and the matters are remitted to the 
High Court for fresh consideration. In the facts and circumstances of 
the case, there shall be no order as to costs. 
Devika Gujral 
Appeals allowed. 
E 
F