SC Sets Aside Allahabad HC Order In Application Under Section 11(6), Appoints Justice (Retd.) Banumathi As Arbitrator

The Supreme Court, on July 27, allowed a challenge to an order of the Allahabad High Court whereby in an application under Section 11(6) of the Arbitration and Conciliation Act 1996, the High Court directed the constitution of a panel of retired officers after which the appellant in the instant case was supposed to select two out of the four. Thereafter, the respondent was supposed to constitute an Arbitral Tribunal in terms of Clause 64(3)(b) of the General Conditions of Contract.

Facts

The appellant and respondent had entered into an agreement which contained an arbitration clause. According to clause 32 of the Act, in the event of any question, dispute or difference arising under or in connection with agreement, the same shall be referred to the sole arbitration of a person appointed to be the arbitrator, by the General Manager of the Railway. 

The appellant raised dispute but the respondent did not appoint an arbitrator.

Thereupon, the appellant proceeded under Section 11(6) of the Act to have an appointment made by the High Court.

However, the High Court passed directions to the effect of divesting itself of the jurisdiction that the Act conferred upon it.

Contentions

Senior Advocate Ramesh Singh argued that GCC was not signed between the parties and therefore no occasion arose for the High Court to have directed the constitution of panel of retired persons in terms of Clause 64(3)(b) of the General Conditions of Contract.

Additional Solicitor General KM Nataraj appeared on behalf of the respondent but could not agree with the position of the High Court.

Decision

Justices MR Shah and BV Nagarathna held that once the dispute arose between the parties and despite invocation of the arbitration clause in terms of the agreement, noo arbitrator was appointed, it could be said that the authority had forfeited its right to appoint the arbitrator in terms of the arbitration agreement and thereafter the arbitrator had to be appointed under Section 11(6) of the Act.

“The parties are not governed by the GCC at all. Therefore, the High Court has committed a serious error in directing to constitute an Arbitral Tribunal in terms of the provisions of the GCC, which are not binding to the parties,” the Court observed.

Instead of remanding the matter to the High Court and to avoid any further delay, the Court appointed Justice R. Banumathi, former judge, as a sole arbitrator to adjudicate and resolve the dispute between the parties.