Sap India Pvt.Ltd vs Cox And King Ltd on 30 April, 2019

[Cites 22, Cited by 1]

Bombay High Court

Sap India Pvt.Ltd vs Cox And King Ltd on 30 April, 2019

Equivalent citations: AIRONLINE 2019 BOM 350

Bench: G.S. Kulkarni

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION

COMMERCIAL ARBITRATION PETITION (LODG)NO.351 OF 2019

SAP India Private Limited .. Petitioner

Vs.

Cox & Kings Limited ... Respondent

-----

Mr.Navroz Seervai, Senior Advocate with Mr.Akash Rebello, with Mr.Farhad
Sorabjee, Mr.Pratik Pawar, Ms.Shanaya Cyrus Irani and Mr.Siddhesh S.Pradhan
I/b. J.Sagar Associates, for the Petitioner

Mr.Rampal Singh Kohli with Vikram Chavan, Mr.Jatin Sahai, Ms.Preeti
Limbachiya, Ms.Ayesha Keshorwalla, Prasad Avhad, Dhvani Jain I/b. C.K.Legal
Advocates and Consultants, for the Respondent.

-----
CORAM : G.S. KULKARNI, J.

RESERVED ON: 8 April 2019

PRONOUNCED ON : 30 April 2019
---
Judgment:

1. This is an application under Section 11 read with Section 14 and 15

of the Arbitration and Conciliation Act,1996 (for short 'the Act'), whereby

the petitioner prays for appointment of a substitute arbitrator on behalf of

the respondent, in place of the arbitrator previously appointed by the

Court by an order passed under Section 11(6) of the Act.

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2. The relevant facts are required to be noted:-

An agreement dated 30 October 2015 was entered between the

petitioner and the respondent titled as "Services General Terms and

Conditions Agreement" (for short 'the said agreement'). Clause 15.7 of the

said agreement is the arbitration agreement between the parties

whereunder the parties agreed to refer the disputes for adjudication by a

panel of three arbitrators. The arbitration clause reads thus:-

"15.7. Dispute Resolution. In the event of any dispute of difference
arising out of the subject matter of this Agreement, the parties shall
undertake to resolve such disputes amicably. If disputes and
differences cannot be settled amicably then such disputes shall be
referred to bench of three arbitrators, where each party will
nominate one arbitrator and the two arbitrators shall appoints a
third arbitrator. Arbitration award shall be binding on both parties.
The arbitration shall be held in Mumbai and each party will bear
the expenses of their appointed arbitrator. The expense of the third
arbitrator shall be shared by the parties. The arbitration process
will be government by the Arbitration & Conciliation Act,1996."

3. Disputes and differences had arisen between the parties under the

said agreement. The petitioner hence invoked the arbitration agreement

and nominated Mr.Justice V.C.Daga (Retd) as an arbitrator on behalf of

the petitioner and called upon the respondent to appoint its arbitrator as

per the arbitration agreement. Respondent, however, did not acceed to

this request of the petitioner, interalia for a reason that the petitioner had

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played a fraud on the respondent, in inducing the respondent to enter into

the said agreement. In these circumstances the petitioner approached this

Court by filing an application under Section 11(6) of the Act being

Commercial Arbitration Application No.61 of 2018. The said application

was intensely contested by the respondent. This Court by an order dated

30 November 2018 allowed the said application by appointing Mr.Justice

D.B.Bhosale, former Chief Justice of the Allahabad High Court as a

nominee arbitrator on behalf of the respondent. This order passed by the

Court was challenged by the respondent before the Supreme Court in a

Petition for Special Leave to Appeal (C) no.33555/2018. The Supreme

Court by an order dated 2 January 2019 did not interfere in the order

passed by this Court and disposed the Special Leave Petition in terms of

the following order:-

" ORDER
Heard learned Counsel for the parties and perused the
relevant material.
We are not inclined to interfere with the order impugned in
the Special Leave petition. However, the two Arbitrators in
question, namely, Mr.Justice V.C.Daga, former Judge of the
Bombay High Court and Mr.Justice D.B.Bhosale, former Chief
Justice of the Allahabad High Court, shall now proceed to appoint
the third Arbitrator.
In special leave petition is, accordingly disposed of.

4. As per the above directions of the Supreme Court the two learned

Arbitrators as appointed on behalf of the respective parties appointed

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Mr.Justice Madan B.Lokur, Former Judge of the Supreme Court as the

Presiding Arbitrator and an arbitral tribunal was so constituted, which

entered an arbitral reference.

5. On 25 March 2019 Mr.Justice D.B.Bhosale (Retd), the arbitrator

appointed by this Court for the respondent, addressed two letters, one to

the co-arbitrators and one to the parties and their Advocates, interalia

recording that he has been appointed as a Member Lokpal (Judicial),

under the Lokpal and Lokayuktas Act,2013, effective immediately, and

consequently, was forthwith recusing himself as a member of the arbitral

tribunal in the arbitration proceedings.

6. The Advocates for the respondent on receipt of the said letter from

Mr.Justice D.B.Bhosale (Retd), on the very next day (26 March 2019),

addressed an e-mail to the learned Presiding Arbitrator and the learned

co-arbitrator and the Advocate for the petitioner that as Mr.Justice

D.B.Bhosale (Retd) has recused himself as a co-arbitrator, the respondent

has nominated Dr.Justice Arijit Pasayat, former Judge of Supreme Court of

India as the respondent's nominee arbitrator. The contents of the said e-

mail are required to be noted which reads thus:-

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"From: Surabhi Sharan <[email protected]>
Sent: 26 March 2019 12.40
To:'MadanLokur',[email protected];bhosale.dilip56@gmail.
com
CC: Farhad Sorabjee; Pratik Pawar; Arti Raghavan;Siddhesh
Pradhan; Shanaya Cyrus Irani; 'Hiroo Advani', Yusuf Sheikh,
[email protected]; 'Kanika Arora';
[email protected]

Subject: Re: Arbitration matter between SAP and Cox & Kings -
Nomination of Co-Arbitrator.

Dear Sirs,

We are concerned for our client, the Respondent in the captioned
matter.

This is pursuant to the letters dated 25 March 2019 sent by Hon'ble
Mr.Justice Dilip Bhosale (Retd.) and we confirm receipt of the
same.

In light of Hon'ble Mr.Justice Dilip Bhosale (Retd) recusing himself
as a Co-Arbitrator in the captioned matter, we hereby nominate
Hon'ble Justice Dr.Arijit Pasayat (Retd.), Former Judge of the
Supreme Court of India.

The contact details of Hon'ble Justice Dr.Arijit Pasayat (Retd.) are
mentioned herein below." (emphasis supplied)

7. The advocates for the petitioner replied to the said e-mail of the

Advocates for the respondent by an e-mail dated 26 March 2019 interalia

recording that the respondent was not entitled to make such appointment

and that the procedure followed by the respondent in nominating the

substitute arbitrator, was inappropriate. It was recorded that the

respondent had failed to appoint its nominee arbitrator when called upon

to do so, which had constrained the petitioner to file a Section 11

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application before the High Court praying for an arbitrator to be

appointed for the respondent and that Mr.Justice D.B.Bhosale (Retd) was

appointed by the Court as a nominee arbitrator of the respondent. It was

recorded that this order of the High Court was unsuccessfully challenged

by the respondent before the Supreme Court. The petitioner stated that on

this background the respondent is not entitled to take advantage of the

recusal of the learned Arbitrator Mr.Justice D.B.Bhosale (Retd), to now

suo moto nominate an arbitrator and that a substitute arbitrator will have

to be appointed following the appropriate process by applying to the High

Court.

8. The Advocates for the respondent replied to the said e-mail of the

petitioner's advocate by e-mail dated 27 March 2019 recording that earlier

the respondent had not appointed an arbitrator as it was the respondent's

case that due to a fraud the issue was not arbitrable, and that the High

Court took a contrary view and appointed Mr.Justice D.B.Bhosale (Retd)

as an arbitrator on behalf of the respondent and as Mr.Justice D.B.Bhosale

(Retd) has withdrawn from the arbitration, the respondent had a right to

appoint a substitute arbitrator under Section 15 of the Act. It was also

recorded that having already appointed Mr.Justice Arijit Pasayat as a

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substitute arbitrator, the petitioner had no right to object the same and

confirmed the appointment of Mr.Justice Arijit Pasayat as a nominee

arbitrator on behalf of the respondent. The contents of the respondent's

advocates e-mail dated 27 March 2019 are required to noted which reads

thus:-

"Dear Sirs,

We are in receipt of the email dated 26.03.2019 sent by the
Advocates of the Claimant.

We reiterate that our Clients, Cox & Kings Limited, had not
appointed an Arbitrator as it was our Client's case that due to fraud
the issue was not arbitrable.

The Hon'ble High Court of Bombay took a contrary view and
appointed Justice D.B.Bhosale as Arbitrator on behalf of Cox &
Kings Limited. As Justice D.B.Bhosale has withdrawn from the
arbitration, our clients have a right to appoint a substitute
Arbitrator under Section 15 of the Arbitration & Conciliation
Act,1996.

Having said that, our clients have already appointed Justice Pasayat
as a substitute Arbitrator and the Coaimant has no right to object to
the same.

In view of the above, we reiterate the appointment of Justice
Pasayat as a nominee Arbitrator for the Respondents."
(emphasis supplied)

9. The petitioner being aggrieved by this action on the part of the

respondent in suo moto and/or unilaterally filling up the vacancy of the

respondent's arbitrator as appointed by the Court, has filed this petition

for appointment of a substitute arbitrator on behalf of the respondent to

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replace Mr.Justice D.B.Bhosale (Retd), the court appointed arbitrator,

who has resigned from the arbitral proceedings.

10. Respondent has appeared and has acridly contested this application.

A reply affidavit is placed on record interalia raising an objection to the

maintainability of the petition in regard to applicability of Section 14 of

the Act. The respondent contends that on the vacancy caused due to

recusal of Mr.Justice D.B.Bhosale (Retd.), the respondent exercising its

rights under Section 15(2) of the Act read with clause 15.7 of the

agreement, has appointed Dr.Justice Arijit Pasayat, former Judge of

Supreme Court of India, as its nominee arbitrator on the Arbitral Tribunal.

It is contended that the present petition also filed under Section 14 of the

Act is per se not maintainable, as no circumstance falling under sub-section

(2) of Section 14 of the Act has arisen namely of a controversy concerning

any of the grounds referred to in clause (a) of sub-section (1) of Section

14 of the Act, requiring a party to apply to the Court to decide on the

termination of the mandate of the arbitrator. It is contended that under

Section 14 of the Act there is no power conferred on the Court to appoint

a substitute arbitrator. It is next contended that Dr.Justice Arijit Pasayat

(Retd) has already been appointed as an arbitrator on behalf of the

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respondent who has accepted the appointment, and unless the said

nominated arbitrator withdraws or his appointment is set aside, no

appointment of the arbitrator can be made. In these circumstances, this

petition for appointment of an arbitrator to fill up the vacancy which has

arisen on recusal of Mr.Justice D.B.Bhosale (Retd), would not be

maintainable. It is contended that even otherwise the respondent as per

the provision of Section 15(2) of the Act has appointed a substitute

arbitrator according to the rules which are applicable for such

appointment, namely the arbitration agreement. It is contended that

Section 15(2) does not confer any power on any Court to make an

appointment of a substitute arbitrator, as Section 15(2) merely lays down

that the vacancy on the arbitrator's panel can be filled by appointing a

substitute arbitrator "according to the rules" that were applicable to the

appointment of the arbitrator being replaced. It is contended that the

word "rules" as used in sub-section (2) of Section 15 as held by the

Supreme Court would mean the 'arbitration agreement' between the

parties. It is submitted that thus appointment of Dr.Justice Arijit Pasayat

(Retd) is made by the respondent in accordance with the provisions of

Section 15(2) of the Act and if the petitioner has any objection in relation

to the appointment so made by the respondent, then, the petitioner is

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required to adopt appropriate remedy in law and not by filing the present

proceedings which according to the respondent is filed under Section 14

of the Act.

11. Having noted the ambit of the pleadings, the extensive submissions

of the learned counsel for the parties are required to be set out.

12. Mr.Seervai, learned Senior Counsel for the petitioner supporting

the prayers as made in the petition has made the following submissions:-

(i) The procedure attempted to be adopted by the respondent in suo

moto nominating an arbitrator on recusal of the "Court

appointed/nominated arbitrator", is inappropriate and contrary to the well

settled legal position laid down in catena of the decisions of the Supreme

Court and the High Courts.

(ii) Once an application under Section 11(6) of the Act is filed by one

party seeking appointment of an arbitrator, the other party's right to

appoint an arbitrator under the agreement stands forfeited and/or

extinguished and does not revive.

(iii) The respondent in the present case could not have revived its right

under clause 15.7 (supra) being the arbitration agreement and instantly

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fill up the vacancy of a Court appointed arbitrator. It is for this Court to

appoint the substituted arbitrator to replace the arbitrator originally

appointed by the Court.

(iv) The requirement of law in these circumstances is that once on a

judicial adjudication an arbitrator was appointed for the respondent, then

it is only the Court which can appoint a substitute arbitrator. This also for

the reason that the respondent had willfully failed/neglected to act in

accordance with the arbitration agreement when called upon to do so by

the petitioner and thereafter the law has taken its own course. Thus, the

respondent having foregone and/or waived its right to make an

appointment and consequently the right to appoint an arbitrator in terms

of clause 15.7 of the agreement having stood extinguished, such a right

cannot be resurrected. Thus, the appropriate procedure for the parties that

includes the respondent was only to approach this Court and pray for

appointment of a substitute arbitrator.

(v) The respondent was not entitled to be an opportunist and take

advantage of the recusal of the Court appointed arbitrator and somehow

re-grab and/or revive the rights under the contract which in law clearly

stood forfeited, and as a consequence of which, resulted in this Court

passing an order to appoint a nominee arbitrator for the respondent and

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which order was also approved by the Supreme Court. It is submitted that

in this situation the provisions of Sections 14 and 15 are the only relevant

provisions under which this Court certainly can exercise jurisdiction to

appoint a substitute arbitrator. In support of the submissions that the only

recourse to fill up the vacancy of a Court appointed arbitrator is to

approach this Court, Mr.Seervai would rely on the decisions in (i) "Union

of India & Ors Vs. Uttar Pradesh State Bridge Corporation Ltd."1; (ii)

decision of learned Single Judge of this Court in Ignatius Tony Pereira

Vs. Mr.Pifran Sanjivan Fernandes2 (iii) decision of the learned Single

Judge of Delhi High Court in "Mithlesh Kumar Aggarwal Vs. Athena

Infrastructure Ltd."3; (iv) decision of the learned Single Judge of the

Delhi High Court in "GMR Ambala Chandigarh Expressways Pvt.Ltd. Vs.

National Highway Authority of India & Ors." 4. Mr.Seervai submits that

the decisions of Delhi High Court are judicial recognition of the opinion of

the learned Single Judge of the Calcutta High Court Smt.Justice Indira

Banerjee (as Her Ladyship then was) in "Ramjee Power Construction Ltd.

Vs. Damodar Valley Corporation"5 which was an order passed by Her

Ladyship as a designate of the Chief Justice. It is submitted that the said

1 (2015)2 SCC 52
2 2016 SCC OnLine Bom 5470
3 2017 SCC OnLine Del 7875
4 2018 SCC OnLine Del 7588
5 2009 SCC OnLine Cal 321

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order of the Calcutta High Court being not passed by a Court, as per the

law laid down by the Supreme Court in "State of West Bengal & Ors. Vs.

Associated Contractors"6 by itself would not have a precendential value

which now finds a judicial recognition not only by the Delhi High Court

but even by a learned Single Judge of this Court in Ignatius Tony Pareira

(supra).

(vi) In supporting the contention that the right to nominate its arbitrator

as initially available to the respondent, under Clause 15.7 of the

agreement, stood forfeited when the same was not exercised, and the

Court was required to appoint an arbitrator for the respondent, and to

support the contention that the forfeiture of the respondent's right was not

restricted only to the proceedings under Section 11(6), but also to any

future vacancy which may arise qua the said arbitrator so appointed for

the respondent, Mr.Seervai has placed reliance placed on the decisions of

the Supreme Court in "Datar Switchgears Ltd. Vs. TATA Finance Ltd. &

Anr."7, "Punj Lloyd Ltd. Vs. Petronet MHB Ltd." 8, "Union of India Vs.

Bharat Battery Manufacturing Co.(P) Ltd."9

6 (2015)1 SCC 32
7 (2000)8 SCC 151
8 (2006)2 SCC638
9 (2007)7 SCC 684

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13. Per contra Mr.Kohli, learned Counsel for the respondent in

opposing the petition has made the following submissions:-

(i) The petition is per se not maintainable inasmuch as neither Section

14 nor Section 15 of the Act are applicable. It is submitted that as on date

there is no vacancy in view of the appointment of Dr.Justice Arijit Pasayat

(Retd.) by the respondent as its nominee arbitrator filling up the vacancy

which had arisen on recusal of Mr.Justice D.B.Bhosale (Retd).

(ii) Once, the respondent has filled up the said vacancy which had so

arisen, there is no requirement of a judicial intervention, in view of the

provisions of section 15(2) of the Act read with Section 5 of the Act. In

any case, there is scope for intervention under Section 14 of the Act, in the

situation in hand.

(iii) The Court needs to consider the statement of object and reasons

along with Section 5 of the Act which demonstrates the scheme of the

legislation, which is to minimise the supervisory role of the Court, in the

arbitral process. Thus once the respondent has exercised it's rights under

Section 15(2) of the Act, to fill up the vacancy which arose on the

resignation/recusal of Mr.Justice D.B. Bhosale (Retd), nothing remains for

this Court to exercise any power under Section 15 or 14 or Section 11(6)

of the Act.

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(iv) The petitioner 's contention that the respondent's right to appoint its

nominee arbitrator and to fill up the vacancy which had so arisen, stood

extinguished for the reason of this Court passing an order under Section

11(6) in the earlier round of litigation, cannot have any relevance when

its a question of a vacancy arising on the arbitral tribunal, for the reason

that the order passed by the Court under Section 11(6) would be relevant

only for the purpose of the said provision and not otherwise.

(v) Once there is vacancy which occurs on the resignation of an

arbitrator appointed by the Court, the parties are relegated to the same

position as it stood prior to the party approaching the Court in an

application under Section 11(6) of the Act.

(vi) If there was to be a failure on the part of respondent to fill up

vacancy which had so arisen, only in that event, the petitioner could have

approached this Court to fill up vacancy.

14. In support of his submissions, learned counsel for the

respondent has placed reliance on the decisions in:-(i) Government of

Haryana -vs- G.F. Toll Road Pvt. Ltd. 10
; (ii) S.P. Singla Construction

Pvt. Ltd -vs- Himachal Pradesh and anr 11
(iii) National Highway

10 2019 SCC Online SC 2.
11 2019 2 SCC 488

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Authority of India -vs- Bumihiway DDB Ltd (JV) 12; (iv) Shailesh

Dhairyawan -vs- Mohan Balkrishna Lulla 13; (v) Shane Duff -vs- Essel

Sports Pvt Ltd.14 ; (vi) Gamesa Wind Turbines Pvt.Ltd., Chennai -vs-

Mytrah Energy (I) Ltd. Hyderabad 15; (vii) North Eastern Railways and

ors -vs- Tripple Engineering Works16

Reasons and Conclusions

15. On the above conspectus, the following question would
arise for consideration in this petition:-
Whether it was permissible in law for the respondent to fill up
the vacancy caused on the resignation/recusal of its nominee
arbitrator who was appointed by the Court in exercise of the
powers under Section 11(6) of the Act.

16. To aid the discussion some undisputed facts are required to

be noted. The respondent initially had refused to nominate it's arbitrator

as per arbitration agreement between the parties and consequently the

petitioner was required to approach this Court invoking the provisions of

Section 11(6) to appoint an arbitrator. This Court allowed the said

application filed by the petitioner, by an order dated 30 th November,

12 (2006) 10 Supreme Court Cases 763
13 (2016) 3 SCC 619
14 2013 (3) Mh. LJ.54
15 2017 SCC Online Hyd 466
16 Civil Appeal No.6275 of 2014 arising out of SLP NO.20427 of 2013

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2018. The respondent assailed the said order before the Supreme Court

in a petition for Special Leave to Appeal which was disposed of without

interfering with the orders passed by this Court. In fact the Supreme

Court, in it's order observed that the two arbitrators in question Mr.

Justice V.C. Daga (Retd), (as appointed by the petitioner) and Mr.

Justice D.B. Bhosle, (Retd) (as appointed by the High Court) should

proceed to appoint the third arbitrator. These two arbitrators appointed

Mr. Justice Madan B. Lokur, former Judge of the Supreme Court of India

as the third/presiding arbitrator, and an arbitral tribunal was

accordingly constituted. The tribunal entered reference, however, due to

appointment of the court appointed arbitrator Mr. Justice D.B. Bhosle

(Retd) as a Member - Lokpal (Judicial), by the President of India under

Section 3(4) of the Lokpal and Lokayuka Act, 2013, Mr.Justice D.B.

Bhosle (Retd), recused from the arbitral tribunal with immediate effect

as informed by him to the parties and to the Co-arbitrators by his letter

dated 25th March, 2019. Immediately, on the very next day that is on 26 th

March, 2019 the respondent's advocates informed the co-arbitrators and

the petitioner that in pursuance of Mr.Justice D.B. Bhosle (Retd), having

recused as a co-arbitrator, the respondent has nominated Dr.Justice Arijit

Pasayat, former Judge of the Supreme Court of India, as its nominee

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arbitrator. The petitioner immediately by it's email dated 26 th March,

2019, objected to the process adopted by the respondent in appointing

it's nominee arbitrator to fill up the vacancy which had arisen on the

recusal of Mr.Justice D.B. Bhosale (Retd), on the ground that once the

respondent's nominee arbitrator was so appointed by the Court and as

confirmed by the Supreme Court, the respondent was not entitled to

take advantage of the recusal of the learned arbitrator and suo-motu

nominate an arbitrator and that the arbitrator will have to be appointed

by following proper process by applying to the High Court. This

contention of the petitioner was refuted by the respondent by it's

advocate email dated 27th March, 2019. However, the contents of this

email does not sound to be in a good taste and more particularly in view

of the solemnity of the orders dated 30 th November, 2018 passed by this

Court, which was a full-fledged adjudication of the Section 11

application and the subsequent order of Supreme Court dated

02.01.2019, confirming the said order. The contents of this email are

thus required to be noted, which reads thus:-

"Dear Sirs,

We are in receipt of the email dated 26.03.2019 sent by the
Advocates of the Claimant.

We reiterate that our Clients, Cox & Kings Limited, had not
appointed an Arbitrator as it was our Client's case that due to fraud

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the issue was not arbitrable.

Having said that, our clients have already appointed Justice Pasayat
as a substitute Arbitrator and the Coaimant has no right to object to
the same.

In view of the above, we reiterate the appointment of Justice
Pasayat as a nominee Arbitrator for the Respondents."
(emphasis supplied)

17. Be that at it may, as noted above the question is as to

whether it was permissible in law for the respondent to fill up the

vacancy as arisen on the recusal of the Court appointed nominee

arbitrator. To examine this issue, at the threshold, it would be

imperative to note the provisions of the Act, which would be relevant in

the present context. These provisions are Section 11 (1) to (7), Section

14, Section 15 of the Act. The first provision which needs to be

considered is Section 11, for the reason that this Court had exercised

powers under Section 11(6) and had appointed Mr.Justice D.B.Bhosale

(Retd) as the nominee arbitrator of the respondent. This order passed by

the Court certainly had legal consequences relevant to the rights of the

parties, as also considered by the Supreme Court and the High Courts in

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several decisions. Section 11 with relevant sub-sections in the present

context reads thus :-

11. Appointment of arbitrators -(1) A person of any nationality
may be an arbitrator, unless otherwise agreed by the parties.

(2) Subject to sub-section (6), the parties are free to agree on a
procedure for appointing the arbitrator or arbitrators.

(3) Failing any agreement referred to in sub-section (2), in an
arbitration with three arbitrators, each party shall appoint one
arbitrator, and the two appointed arbitrators shall appoint the
third arbitrator who shall act as the presiding arbitrator.

(4) If the appointment procedure in sub-section (3) applies and--
(a) a party fails to appoint an arbitrator within thirty days
from the receipt of a request to do so from the other party;
or

(b) the two appointed arbitrators fail to agree on the third
arbitrator within thirty days from the date of their
appointment, the appointment shall be made, upon request
of a party, by the Chief Justice or any person or institution
designated by him.

(6) Where, under an appointment procedure agreed upon by the
parties,

(a) a party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to
reach an agreement expected of them under that
procedure; or

(c) a person, including an institution, fails to perform any
function entrusted to him or it under that procedure, a
party may request the the Supreme Court or, or as the case
may be, the High Court or any person or institution
designated by such Court, to take the necessary measure,
unless the agreement on the appointment procedure
provides other means for securing the appointment.

(7) A decision on a matter entrusted by sub-section (4) or sub-
section (5) or sub-section (6) to the to the Supreme Court or, as

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the case may be, the High Court or the person or institution
designated by such Court is final and no appeal including Letters
Patent Appeal shall lie against such decision."

18. On a plain reading of Section 11, it is quite clear that section 11

pertains to 'appointment of arbitrators'. Sub section(3) of this provision

provides that when there is an agreement between the parties to have an

arbitral tribunal constituted comprising three arbitrators, then each party

shall appoint one arbitrator and the two appointed arbitrators shall

appoint the third arbitrator, who shall act as a Presiding Arbitrator. Sub

section (4) provides that if appointment procedure as contemplated in

Sub section (3) applies and a party fails to appoint an arbitral tribunal

within 30 days from the receipt of request to do so from the other party,

(the situation as had arisen in the present case), in that case the

appointment shall be made upon request of a party, by the Supreme

Court or as the case may be the High Court or any person or institution

designated by such Court. Sub Section (6) of Section 11, provides that

under an appointment procedure agreed upon by the parties if a party

fails to act as required under that procedure or the two arbitrators fail to

reach an agreement expected of them under that procedure, or a person

including institution fails to perform any function entrusted to him or it,

under that procedure, in such a situation a party may request the

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Supreme Court as the case may be the High Court to take a necessary

measure for securing the appointment. Sub Section (7) of section 11

provides that a decision on the matter entrusted by sub section (4) sub

section (5) or sub section (6) to the Supreme Court or as the case may

be, High Court is final and no appeal including Letters Patent appeal

shall lie against such decision.

19. The next provision is Section 14 which pertains to failure or

impossibility of the arbitrator to act. Section 14 reads thus:-

"14. Failure or impossibility to act.--

(1) The mandate of an arbitrator shall terminate if--

(a) he becomes de jure or de facto unable to perform his functions
or for other reasons fails to act without undue delay; and

(b) he withdraws from his office or the parties agree to the
termination of his mandate.

(2) If a controversy remains concerning any of the grounds referred
to in clause (a) of sub-section (1), a party may, unless otherwise
agreed by the parties, apply to the Court to decide on the
termination of the mandate.

(3) If, under this section or sub-section (3) of section 13, an
arbitrator withdraws from his office or a party agrees to the
termination of the mandate of an arbitrator, it shall not imply
acceptance of the validity of any ground referred to in this section
or sub-section (3) of section 12."

Section 14 thus provides for the circumstances in which the mandate of

an arbitrator shall stand terminated and the arbitrator so appointed

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shall be substituted by appointing another arbitrator firstly in case the

arbitrator becomes de jure or de facto unable to perform his function or

for other reasons fails to act without undue delay; and secondly if he

withdraws from his office or parties agree to the termination of his

mandate. Sub-section (2) of Section 14 provides that if a controversy

remains, concerning any of the grounds as referred to in clause (a) of

sub-section (1) namely that the arbitrator has become de jure and de

facto unable to perform his function or for any other reason fails to act

without undue delay, a party may unless otherwise agreed by the

parties, apply to the court to decide on the termination of the mandate.

In other words Section 14(1) provides that the mandate of the arbitrator

shall terminate when it becomes de jure or de facto unable to perform his

function or for other reasons he fails to act without undue delay or

withdraws from office or the parties agree to terminate his mandate.

Thus it is clear that the mandate of the arbitrator stands terminated if

the arbitrator withdraws from his office.

20. In the present context the next crucial provision is Section

15 which provides for termination of mandate and substitution of

arbitrator. Sub-section (1) of Section 15 provides that "in addition" to

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the circumstances which are referred in sections 13 or 14, the mandate

of the arbitrator shall terminate (a) where he withdraws from office for

any reason or (b) by or pursuant to the agreement of the parties. Sub-

section (2) of Section 15 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 being replaced. The other sub-sections are not relevant to be

discussed in the facts of the present case. Section 15 reads thus:-

15. Termination of mandate and substitution of arbitrator.--

(1) In addition to the circumstances referred to in section 13 or
section 14, the mandate of an arbitrator shall terminate--

(a) where he withdraws from office for any reason; or

(b) by or pursuant to agreement of the parties.

(2) 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 being replaced.

(3) Unless otherwise agreed by the parties, where an arbitrator is
replaced under sub-section (2), any hearings previously held may
be repeated at the discretion of the arbitral tribunal.

(4) Unless otherwise agreed by the parties, an order or ruling of
the arbitral tribunal made prior to the replacement of an arbitrator
under this section shall not be invalid solely because there has been
a change in the composition of the arbitral tribunal."
(emphasis supplied)

21. Considering the provisions of Section 14 and Section 15, and their

application to the facts of the case, it cannot be disputed that the

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learned Arbitrator Mr.Justice D.B.Bhosale (Retd), appointed by the Court

has withdrawn/resigned from his office and accordingly the mandate of

the said arbitrator stood terminated in terms of Section 14(1)(b) read

with Section 15(1)(a) of the Act. If this be the clear position, then,

Section 15(2) becomes squarely applicable and a substitute arbitrator

shall then be appointed in accordance with Section 15(2) of the Act. Up

to this position there does not appear to be much controversy.

22. The respondent however in the facts and circumstances has

asserted a legal right to fill up the vacancy which has arisen, and in fact

states to have filled up the vacancy. On the other hand the petitioner

opposing this approach of the respondent has filed this petition making

prayers for appointment of a substitute arbitrator to fill up the vacancy

on the arbitral tribunal arising on recusal of Mr.Justice D.B.Bhosale

(Retd). Considering the earlier order dated 4 April 2019 passed on this

petition, the petitioner has pursued this petition under Section 14 and 15

of the Act. In any event there is no other provision which would be

attracted considering the plain prayers for appointment of substitute

arbitrator as made by the petitioner.

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23. Thus it would be required to be examined as to whether the

respondent in the facts of the case had any legal authority under sub-

section (2) of Section 15 to fill up the vacancy which had arisen on

recusal of Mr.Justice D.B.Bhosale (Retd) by appointing its nominee

arbitrator or in other words in the present context what can be the

interpretation and application of Section 15(2) of the Act and as to how

it would operate.

24. In asserting its right to fill up the vacancy, on behalf of the

respondent, it is contended that when sub-section (2) of Section 15

provides that a substitute arbitrator be appointed "according to the rules

that were applicable to the appointment of the arbitrator being replaced" it

would only mean that the respondent is authorised to appoint an

arbitrator as per the arbitration agreement between the parties (Clause

15.7) (Supra) and not by the Court. Whereas the petitioners have

contended that the rules as applicable in terms of Section 15(2) in the

present case would be the statutory procedure which was followed in

appointing the arbitrator being replaced, namely only appointment by

this Court.

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25. As noted above there are two facets as urged on behalf of the

petitioner firstly the right of the respondent to appoint an arbitrator

which includes appointment of substitute arbitrator was already forfeited

and secondly the interpretation of Section 15(2) as made by the parties

in regard to its implications and applicability of this provision in the facts

of the case. The issue is purely a legal issue.

26. The learned Counsel for the parties have referred to several

decisions as noted above to support their respective interpretation of the

provision in question. The exposition of the legal position as discerned

from the various decisions is required to be initially discussed. Firstly, it

would be necessary to consider the legal consequences which would

emerge on the Court exercising jurisdiction in passing an order under

Section 11(6) of the Act, in view of the refusal of a party to appoint an

Arbitrator.

27. In Datar Switchgears Ltd. (supra) interpreting sub-section (6) of

Section 11 the Supreme Court held that 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

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appointment does not get automatically forfeited after expiry of 30 days

but would survive even after 30 days of the demand but before the first

party has moved the Court under Section 11. Once the party so

demanding has approached the Court seeking appointment of an

arbitrator, then right of the opposite party ceases to make appointment

of an arbitrator. The observations of the Court in paragraph 19 of the

decision are required to be noted which reads thus:-

"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 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 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 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)

28. In Punj Lloyd Ltd. Vs. Petronet MHB Ltd. (supra) decided by

a three judge Bench of the Supreme Court, the respondent had failed to

appoint an arbitrator till the appellant had filed an application before the

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High Court under Section 11(6) of the Act. Despite the respondent not

making an appointment, the learned Judge designated by the Chief Justice

of the High Court refused to appoint an arbitrator holding that the remedy

available was to move in accordance with clause 14.1 (arbitration

agreement) where upon the Functional Director was to be appointed as a

sole arbitrator to adjudicate the disputes. The Supreme Court set aside the

decision of the High Court following the decision in Datar Switchgears

Ltd.(supra) and held that the case was squarely covered by the view that

till filing of an application under Section 11(6) of the Act, the respondent

had not appointed an arbitrator and consequently the respondent's right to

appoint an arbitrator as per the arbitration agreement stood extinguished.

29. In Union of India Vs. Bharat Battery Manufacturing

Co.(P) Ltd.(supra) the Supreme Court was considering the challenge

to an order passed by the Delhi High Court passed under Section

11(6) of the Act appointing an arbitrator. The appellant had failed to

appoint an arbitrator within thirty days from the date of receipt of the

request from the respondent, being Notices dated 7 June 2005 and 2

January 2006. On 30 March 2006 the respondent filed a Section

11(6) application before the High Court which was allowed by the

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impugned order dated 26 May 2006 appointing a retired Judge of the

Delhi High Court as an arbitrator. However, after filing of the Section

11(6) application and before an order could be passed, the appellant

appointed a sole arbitrator purportedly in terms of the arbitration

agreement. The order of the Delhi High Court was challenged on the

ground that once the appointment was made as per the arbitration

agreement prior to the High Court passing an order, such an

appointment of the arbitrator by the High Court cannot be held to be

illlegal and in fact such appointment by the High Court would be

contrary to the arbitration agreement clause 24 therein. The Supreme

Court however, rejected the said contention referring to the decision

of the Supreme Court in Datar Switchgears Ltd. (supra) and Punj

Lloyd Ltd. (supra). The Supreme Court held that once a party fails to

make an appointment in response to the notice, before the other

party files an application under Section 11(6), the other party

extinguishes its right to appoint an arbitrator in terms of the clause in

the agreement thereafter. The other party therefore, cannot resurrect

the clause of the agreement dealing with the appointment of the

arbitrator. The Supreme Court in paragraphs 12 and 13 observed

thus:-

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"14. A three-Judge Bench of this Court in Punj Lloyd Ltd. v.
Petronet MHB Ltd. (2006) 2 SCC 638 considered the applicability
of Section 11(6) petition and considered the facts which are similar
to the facts of the present case and held that once notice period of
30 days had lapsed, and the party had moved the Chief Justice
under Section 11(6), the other party having right to appoint
arbitrator under arbitral agreement loses the right to do so. While
taking this view, the Court had referred to the judgment rendered
in Datar Switchgears Ltd. v. Tata Finance Ltd. and Another (2000)
8 SCC 151 wherein at page 158, para 19, this Court held as under:
.. .. .. .. .
As already noticed, the respondent filed Section 11(6) petition on
30.3.2006 seeking appointment of an arbitrator. The appellant,
thereafter, said to have appointed one Dr. Gita Rawat on 15.5.2006
as a sole arbitrator, purportedly in terms of Clause 24 of the
agreement. Once a party files an application under Section 11(6) of
the Act, the other party extinguishes its right to appoint an
arbitrator in terms of the clause of the agreement thereafter. The
right to appoint arbitrator under the clause of agreement ceases
after Section 11(6) petition has been filed by the other party before
the Court seeking appointment of an arbitrator.
13. We are, therefore, of the view that the order of appointment
of Dr. Gita Rawat by the appellant as a sole arbitrator dated
15.5.2006 was passed without jurisdiction. Once Section 11(6)
petition is filed by one party seeking appointment of an arbitrator,
the other party cannot resurrect the clause of the agreement
dealing with the appointment of the arbitrator, in this case Clause
24 of the agreement." (emphasis supplied)

30. In Deep Trading Company Vs. Indian Oil Corporation & Ors.

(supra) again a three Judge Bench of the Supreme Court applying the law

as laid down in Datar Switchgears Ltd.(supra) held as under:-

"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 so
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

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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 11(6). Such
appointment by the Corporation after forfeiture of its right is of no
consequence and has not dis-entitled the dealer to seek
appointment of the arbitrator by the Chief Justice under Section
11(6). We answer the above questions accordingly."

31. In TRF Ltd. Vs. Energo Engineering Projects Ltd.17, the decision in

Deep Trading Company Vs. Indian Oil Corporation & Ors.(supra), was

also followed and referred with approval. In paragraphs 27 and 28 the

Supreme Court observed thus:-

"27. ... ... .... In Deep Trading Co. arbitration clause, as is
noticeable, 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).

28. 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 of the right of appointment of arbitrator
under the agreement and, therefore, the appointment of the
arbitrator by the Corporation during the pendency of the
proceeding under Section 11(6) of the Act was of no consequence
and remanded the matter to the High Court. ... ... ..."

32. In a recent decision of the Supreme Court in Aravali Power

17 (2017)8 SCC 377

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Company Pvt. Ltd. Vs. M/s.Era Infra Engineering Ltd. 18 the Supreme

Court referring to the decision in Denal (Proprietary Limited) vs. Govt. of

India, Ministry of Defence"19 observed thus:-

"20.5. Similarly, in Denel (Proprietary) Ltd. Vs. Ministry of Defence
[(2012)2 SCC 759; (2012)2 SCC (Civ)37], the relevant clause
provided for sole arbitration of the Director General, Ordinance
Factory, Government of India or a government servant appointed
by him. It was observed that since no arbitrator was appointed in
terms of the governing clause within the stipulated period the
respondent had forfeited the right to make an appointment of an
arbitrator. .. ... .."

33. Thus the legal position which emerges from the above decision

is that the respondent not appointing its nominee arbitrator and the

Court having required to appoint an arbitrator under Section 11(6) of

the Act the respondent had certainly forfeited its right to "thereafter"

(See Union of India Vs. Bharat Battery Manufacturing Co.(P) Ltd.

(supra)") appoint its nominee arbitrator in terms of the arbitration

clause. The forfeiture of the right can be said to have attained finality

in terms of Section 11(7) of the Act by the Supreme Court, in

confirming the orders passed by this Court.

34. Now whether such forfeiture can be confined only to the

appointment as made under Section 11(6) of the Act and not

18 AIR 2017 SC 4450
19 AIR 2012 SC 817

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thereafter when there is a vacancy which is required to be filled. In

other words whether the admitted forfeiture of the respondent's right

to appoint an arbitrator is required to be ignored to hold that the

forfeited rights would stand revived after the arbitrator appointed by

the Court has resigned/withdrawn and the respondent is relegated to

the same position as it stood prior to the appointment of the

respondent arbitrator by the Court. It would be required to be

examined whether such an interpretation is possible from a

cumulative reading of the legislative scheme as depicted from

Sections 11, 14(1) and 15(1) and (2) of the Act.

35. The legislative scheme in regard to the appointment of

arbitrators which also would include a consequence of a failure or

impossibility of the arbitrators to function and a consequence of

termination of the mandate of the arbitrator(s), requiring substitution

of arbitrators, is postulated in the combined reading of Section 11,

Section 14 and Section 15 of the Act. Thus, necessarily each of these

provisions are required to be read keeping in mind in a given case,

the effect and applicability of each of these provisions. This for the

reason that there is certainly an inherent and innate influence of a

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consequence taking place under Section 11 on something which is

relevant for the purposes of Section 14 or Section 15 of the Act. A

consequence of a judicial order passed under Section 11(4) or Section

11(6) cannot be said to be disjunctive to the provisions of Section 14

and 15 and/or of no consequence and more particularly when sub-

section (2) of Section 15 recognizes appointment of a substitute

arbitrator to be appointed "according to the rules" that were

applicable to the appointment of the arbitrator being replaced. The

phrase "according to the rules" as incorporated in Sub-section (2) of

Section 15 would certainly take within its ambit the procedure

followed by a party in approaching the Court under Section 11,

culminating into the Court passing an order to appoint an arbitrator.

Thus the words "according to rules" as used in Section 15(2) are of

wide import when it comes to appointment of a substitute arbitrator

and cannot be given a narrow restrictive meaning and it would

depend in the facts of each case as to what rules were followed in the

appointment of the original arbitrator being replaced. Thus

considering the plain language of sub-section (2) of Section 15, on

first principles it cannot be accepted by a judicial mind that an order

passed by the Court under Section 11(4) and (6) appointing an

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arbitrator, is of no consequence and/or is alien to sub-section (2) of

Section 15.

This apart, as noted above the Supreme Court in several

decisions has categorically held that once a party fails to appoint an

arbitrator as per the arbitration agreement, and the other party

approaches the Court under Section 11 after 30 days (See Section

11(4)) and before the party makes an appointment of an arbitrator,

the right of such party to appoint the arbitrator as per the arbitration

agreement "thereafter" stands forfeited. The sanctity of an order of

the Court appointing an arbitrator under this provision has been

raised to a higher pedestal by virtue of the mandate under sub-

section (7) of Section 11 which confers a finality to such a

decision/order. The order passed by the Court under Section 11(4) or

11(6) is undoubtedly a judicial order which adjudicates the rights of

the parties on the arbitration agreement concerning an appointment

of an arbitrator. Thus when the Court appoints an arbitrator

exercising such powers and jurisdiction, a plain consequence would

be that such orders would be required to be disturbed, substituted

and/or modified or set aside only in a manner known to law. This

more particularly when the Supreme Court has held that such an

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order brings about a legal consequence of the right of one of the

parties to the arbitration agreement being forfeited to appoint an

arbitrator. A consequence of a vacancy arising of a court appointed

arbitrator thus becomes integral to the order passed by the Court

under Section 11(6) of the Act and is required to be factored as an

essential ingredient of the requirement of sub-section (2) of Section

15 which postulates a statutory recognition to the manner and

method of appointment of the original arbitrator when it says that a

substitute arbitrator be appointed "according to the rules that were

applicable to the appointment of the arbitrator being replaced." This

not only substantively but as a matter of procedural jurisprudence is

required to be judicially recognized to be intrinsic to the statutory

scheme underlying these provisions.

36 Having so observed the decisions cited at the bar in which

Sections 14 and 15(2) of the Act were subject matter of

consideration, need to be discussed.

37. In Yashwith Constructions (P) Ltd -vs- Simplex Concrete Piles

India Ltd and anr20, an issue falling under Section 15(2) of the Act fell
20 (2206) 6 SCC 204

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for consideration of the Supreme Court. The issue was whether the

Managing Director of the respondent company would have any authority

as per the arbitration agreement between the parties, to appoint a

substitute arbitrator in view of the resignation of the arbitrator earlier

appointed by him. The High Court had upheld such appointment of the

substitute arbitrator by the Managing Director. In a challenge to the

decision of the High Court, the Supreme Court interpreting Section 15(2)

of the Act, upheld the decision of the High Court observing that Section

15(2) would cover not only the case of appointments under the statutory

rules framed under the Act, but it would also take within its ambit, the

terms of the agreement between the parties for appointment of an

arbitrator. In the facts of the case, it was held that although under the

arbitration agreement there was no specific provision authorizing the

Managing Director to appoint a substitute arbitrator, if the original

appointment terminated or the appointed arbitrator withdrew from the

arbitration, it was observed that this omission in the arbitration agreement

was made up by the specific provision contained in Section 15(2) of the

Act. It was held that withdrawal of the an arbitrator from the office for

any reason was within the purview of Section 15(1) (a) of the Act and,

thus, Section 15(2) of the Act would be attracted and a substitute

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arbitrator could be appointed according to rules that are applicable for the

appointment of arbitrator to be replaced. The Supreme Court recognized

that when Section 15(2) of the Act says that a substituted arbitrator shall

be appointed according to rules that were originally applicable for the

appointment of the arbitrator being replaced, does not confine to an

appointment under any statutory rule or rule frames under the Act or

under the Scheme, but it only means that the "appointment of the

substitute arbitrator must be done according to original agreement or the

provision applicable to the appointment of the arbitrator at the initial stage."

The observations of the Supreme Court, in paragraph No.4 of the decision,

are required to be noted and reads thus

"4. ... ... ... ... The term "rules" in Section 15(2)
obviously referred to the provision for appointment, contained in
the arbitration agreement or any Rules of any Institution under
which the disputes were referred to arbitration. There was no
failure on the part of the party concerned as per the arbitration
agreement, to fulfill his obligation in terms of Section 11 of the
Act so as to attract the jurisdiction of the Chief Justice under
Section 11(6) of the Act for appointing a substitute arbitrator.
Obviously, Section 11(6) of the Act has application only when a
party or the concerned person had failed to act in terms of the
arbitration agreement. When Section 15(2) says that a substitute
arbitrator can be appointed according to the rules that were
applicable for the appointment of the arbitrator originally, it is not
confined to an appointment under any statutory rule or rule
framed under the Act or under the Scheme. It only means that
the appointment of the substitute arbitrator must be done
according to the original agreement or provision applicable to
the appointment of the arbitrator at the initial stage. We are
not in a position to agree with the contrary view taken by
some of the High Courts. (emphasis
supplied)

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Although this was not a case where the initial appointment was

made under Section 11(6) of the Act, the Supreme Court upheld the

appointment of a substitute arbitrator as made in the facts of the

case which was according to the original agreement or "provision

applicable" to the appointment of the arbitrator at the initial stage.

The Supreme Court has consciously observed that it would not agree

with a contrary view taken by some High Courts.

38. In National Highway Authority of India -vs- Bumihiway DDB Ltd

(JV) (supra) the Supreme Court was considering a case wherein the

respondent contrary to an arbitration agreement as entered with the

appellant had approached the High Court under Section 11(6) of the Act

praying for an appointment of a presiding arbitrator. The High Court in its

order, impugned before the Supreme Court had appointed a retired Judge

of the High Court as a presiding arbitrator. In the said case the arbitration

agreement between the parties contemplated that if the two arbitrators

appointed by the parties do not reach to a consensus to appoint the

presiding arbitrator, then the presiding arbitrator shall be appointed by

the President, Indian Roads Congress (IRC). It is in this context the

Supreme Court examined the scope of jurisdiction of the Court on

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resignation of an arbitrator considering the specific mandate and

mechanism under Section 15(2) of the Act vis a vis the contractual clause

between the parties. The Supreme Court referring to its decision in

Yashwith Constructions (P) Ltd. (supra) held that under Section 11(6) of

the Act the Court has jurisdiction to make appointment only when a

person including an institution fails to perform any function entrusted to it

under that procedure. It was held that in the facts of the said case, the

jurisdiction of the Court under Section 11(6) could not have been invoked

as it was necessary for the respondent to approach the IRC as per the

agreement between the parties. Accordingly, the Supreme Court held that

the High Court had failed to appreciate that according to Section 15(2) of

the Act on the termination of the mandate of the Presiding Officer, the

two nominated arbitrator are required to reach a consensus and on failure

to arrive at the consensus, only then the IRC was authorised to make the

appointment and unless IRC fails to exercise its jurisdiction, the High

Court could not have assumed its jurisdiction under Section 11(6) of the

Act. Thus the order of the High Court making appointment of the

presiding arbitrator under Section 11(6) was held to be bad. Thus in

substance, it was held that power to appoint a substitute arbitrator is

required to be read in Section 15(2) of the Act considering the nature of

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the agreement between the parties. Again this was not a case where

initially the arbitrator was appointed by the Court and any vacancy arising

of such an appointed arbitrator.

39. In Shailesh Dhairyawan vs. Mohan Balkrishna Lulla 21 the

respondent had filed a suit in the Bombay High Court against the

appellant and some others, seeking a declaration that the development

agreement dated 27 December 2004 together with a power of attorney of

even date had stood terminated and for certain other reliefs. On 3 October

2008 the parties to the suit entered into consent terms largely settling the

disputes between them. However, with regard to two specific differences,

the plaintiff and defendant no.1 agreed to refer the said differences to an

arbitration of a retired Judge of the Supreme Court. Several meetings

were held by the named arbitrator, the arbitration proceedings continued

to drag until by a letter dated 22 January 2011, the arbitrator resigned.

Respondent/plaintiff therefore filed an application in the disposed of suit

for appointment of a substitute arbitrator. This application was dismissed

by the Court observing that an appointment can only be made under

Section 11(5) of the Act. Pursuant to the dismissal of the said application,

the plaintiff filed an application under Section 15(2) of the Act for
21 (2016)3 SCC 619

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appointment of a substitute arbitrator. The High Court appointed a retired

judge of the High Court as a substitute arbitrator. In challenging the

decision of the High Court, a contention was raised that by an agreement

between the parties a named arbitrator was appointed as recorded in the

consent terms. It was contended that under Section 15(2) of the Act when

the mandate of the named arbitrator terminates, there being no rules that

would apply to the appointment of an arbitrator being replaced, Section

15(2) would not have any application, and this vital fact was missed by

the High Court. The Supreme Court taking a review of the law and

considering the decisions in SBP & Co. Vs. Patel Engineering Ltd. 22,

Yashwith Construction (P) Ltd. (supra), in ACC Ltd. Vs. Global Cements

Ltd.23 , held that the High Court was the original appointing authority and

the said appointing authority having been approached by the respondent

for appointment of a substitute arbitrator, the appointment of a substitute

arbitrator so made by the High Court would be required to be held as an

appointment according to the rules. The relevant observations in that

regard are required to be noted which reads thus:-

"21. On the facts of the present case, it is clear that Bombay
High Court applied its mind to the consent terms as a whole and
appointed Mrs.Justice Sujata Manohar as arbitrator for the disputes
that were left to be resolved by the parties. The said appointing

22 2005(8) SCC 618
23 (2012) 7 SCC 71

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authority has been approached by the respondent for appointment
of a substitute arbitrator, which was then done by the impugned
judgment. This would therefore be "according to the rules that
were applicable to the appointment of the arbitrator being
replaced" in accordance with Section 15(2) of the Act. We,
therefore, find that the High Court correctly appointed another
independent retired Judge as substitute arbitrator in terms of
Section 15(2) of the Arbitration Act,1996. The appeal is, therefore,
dismissed."
(emphasis supplied)

40. In Mithlesh Kumar Aggarwal Vs. Athena Infrastructure Ltd.

(supra) a learned Single Judge of Delhi High Court was considering

proceedings under Section 15(2) of the Act for appointment of a

substitute arbitrator to replace the arbitrator who was appointed by the

High Court by an order dated 30 April 2014 under Section 11 of the Act,

and who expired in the midst of the arbitral proceedings on 23 September

2016. The respondent objected and contended that as per the agreement

between the parties, the respondent must be given an opportunity to

reappoint the arbitrator in place of the arbitrator so appointed by the

Court. This contention of the respondent was rejected by the learned

Single Judge referring to the decision of the Supreme Court in "Yashwith

Constructions (P) Ltd." (supra). It was held that the arbitrator who

expired, was appointed by the High Court in a petition under Section 11

of the Act since the respondent has forfeited its right to appoint an

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arbitrator. The Court also referred to the decision of the Supreme Court in

Datar Switchgears Ltd. (supra) to conclude that it was not permissible for

the respondent to appoint an arbitrator as initially the appointment itself

was made by the Court under Section 11 of the Act. The court also

referred to an order passed by the learned Single Judge of the Calcutta

High Court in the case of Ramjee Power Construction Ltd. (supra) of Her

Ladyship Justice Indira Banerjee (as her Ladyship then was) who had

passed the said order as the designate of the Chief Justice under Section

11 of the Act, (although this would not have a precedential value being

passed by a designate of the Chief Justice as held by the Supreme Court in

State of West Bengal & Ors. Vs. Associated Contractors (supra)).

However, the learned Single Judge of Delhi High Court referring to the

decision of the Supreme Court in Yashwith Constructions (P) Ltd."

(supra), Datar Switchgears Ltd. (supra), and the decision of the Division

Bench of Delhi High Court in "Chhotanagpur Regional Handloom Vs.

Association of Corporation and Apex" allowed the said application

appointing a substitute arbitrator. The Court in paragraph 5, 6, 7, 8 and 9

observed as under:-

"5. Mr. Datta, learned Senior Counsel appearing for the respondent does
not dispute that an arbitrator is be appointed in place of late Justice S.K.
Mahajan (Retired). He, however, submits that as per the agreement, the
respondent must be given an opportunity to re-appoint an arbitrator in

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place of late Justice S.K. Mahajan. This Court is unable to accede to the
aforesaid submission principally for the reason that late Justice S.K.
Mahajan (Retired) was appointed by this Court in a petition under
Section 11 of the Act, since the respondent had forfeited its right to
appoint an arbitrator.

6. The Supreme Court in Yashwith Constructions (P) Ltd v. Simplex
Concrete Piles India Ltd (2006) 6 SCC 204 had interpreted Section 15(2)
of the Act liberally and had explained that the provision applicable for
appointment of the substitute arbitrator would be the same as " at the
initial stage". Thus, the expression, "rules" in Section 15 (2) of the Act,
was read to imply that the same procedure which was applicable for
appointment of an arbitrator, who is sought to be substituted, would be
applicable for appointment of the substitute arbitrator.

7. In The Chhotanagpur Regional Handloom v. Association of Corporation
and Apex", a Coordinate Bench of this Court while considering the
applicability of the provisions of Section 15(2) of the Act in context of
the petition filed under Section 14 of the Act, rejected the contention
that after the mandate of the arbitral tribunal was declared as terminated
under Section 14 of the Act, the parties were to be relegated to start the
process under the original agreement and this Court ought not to
proceed to appoint a substitute arbitrator. The Court referred to the
decision of the Supreme Court in Yashwith Construction (supra) and held
that Section 15(2) of the Act has to be viewed as a part of a broader
effort to strengthen the alternative dispute resolution mechanism rather
than undermine it. Relegating the parties to commence the process once
again may lead to confusion and may in certain circumstances compel
one of the parties to again approach the Court under Section 15(6) of
the Act which could not be the legislative intent. The Court held that
Section 15(2) required the Court to appoint an arbitrator as a logical
sequitur to Section 14 of the Act.

8. In Ramjee Power Construction Ltd v. Damodar Valley Corporation
(2009) 2 Arb LR 625, the Calcutta High Court considered the decision of
the Supreme Court in Yashwith Construction (supra) and observed as
under:-

"As observed above, the expression "rules that were applicable to
appointment of the arbitrator being replaced" in Section 15, have
carefully been chosen. If the arbitrator being replaced was
appointed by the Chief Justice and/or his designatre in accordance
with Section 11 of the 1996 Act read with the applicable rules, the
substitute arbitrator would also have to be appointed by the Chief
Justice and/or his designate in the same manner.".

9. The Calcutta High Court following the decision of the Supreme Court

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in Datar Switchgear Ltd -v. Tata Finance Ltd (2000) 8 SCC 151, held that
once an application under Section 11 was made, the right of either party
to appoint an arbitrator stood extinguished. In view of the aforesaid, the
Court reasoned that if the arbitrator is appointed in accordance with
Section 11 of the Act, the substitute arbitrator would also have to be
appointed in the same manner. This Court respectfully concurs with the
aforesaid view." (emphasis supplied)

41. GMR Ambala Chandigarh Expressways Pvt.Ltd. (supra), was a

case wherein the learned Single Judge of the Delhi High Court was

dealing with a petition under Section 11(6) read with Section 15(2) of the

Arbitration and Conciliation Act. Following the decision of the learned

Single Judge in Mithlesh Kumar Aggarwal (supra) as also referring to

the decision of the Supreme Court in National Highway Authority of

India -vs- Bumihiway DDB Ltd (JV)(supra), appointed a substitute

arbitrator on the ground that the right of the respondent stood forfeited as

the arbitrator was initially appointed by the Court exercising jurisdiction

under Section 11 of the Act. In paragraphs 14 and 15 the Court observed

thus:-

"14. However, in the present case as there was a failure on the part of
respondent no.2 and 3 to appoint to nominate their arbitrator, so the
Court appointed the same under Section 11(6). Per settled law as this
Court had appointed Mr. Justice B.N. Kirpal (Retd.) the nominee
arbitrator for respondent No.2 and 3, hence only this Court can nominate
a substitute arbitrator in place of the said arbitrator.

15. In view of the above Mr. Justice A.S. Anand (Retd.), since has
expired, I hereby nominate Mr. Justice T.S. Thakur, Chief Justice of India
(Retd.) (Mobile No.8800309969) as nominee arbitrator on behalf of
respondent no.2 and 3." (emphasis supplied)

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42 In "Shri.R.B.Rajesh Vs. The Chief Engineer and others."24, a

learned Single Judge of the Calcutta High Court was adjudicating an

application under Section 15(2) of the Act for appointment of a substitute

arbitrator consequent upon the failure on the part of the arbitrator to act

upon the mandate. Initially the applicant had approached the High Court

in an application under Section 11 of the Act seeking appointment of an

arbitrator which was disposed of by an order dated 13 January 2015

appointing Shri.P.Radhakrishnan as arbitrator. The arbitrator so appointed

refused to discharge his function and consequently the said application

under Section 15(2) came to be filed. The section 15(2) application was

objected by the respondent interalia on the ground that a retired Judge

was already appointed by the respondent as a substitute arbitrator to

adjudicate the disputes between the parties. The learned Single Judge

considered the arbitration agreement between the parties and although

the arbitration agreement provided of a consequence of resignation of one

of the arbitrators, the Court held that the said clause would not be

applicable as in the said case the arbitrator was not initially appointed as

per the arbitration agreement as the arbitrator was appointed by the

Court. The Court made the following observations:-
24 2018 SCC Online Calcutta 8461

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"15. ...... ... But in the instant case, the arbitrator was not initially
appointed by either of the aforesaid persons. The arbitrator was
appointed by the Court.

16. Therefore, in view of the settled principles of law, as
discussed hereinabove, the right of the respondent under
Agreement to appoint substitute arbitrator stood extinguished
after the disposal of the application filed by the petitioner under
the provisions of sub-section (6) of section 11 of the said Act,1996.
Therefore, question of issuing notice prior to filing of this
application and/or appointment of substitute arbitrator by the
respondents does not arise at all." (emphasis supplied)

43. In "Rajesh K.Shah Vs. Kamlesh K.Sahani"25 a learned Single Judge

of this Court (R.D.Dhanuka, J.) was concerned with the appointment of a

substitute arbitrator. Considering the decisions of the Supreme Court in

Yashwith Constructions (P) Ltd (supra) and Shailesh Dhairyawan

(supra), the learned Single Judge held that under Section 15 of the Act

the Court is empowered to appoint a substitute arbitrator if the mandate

of the arbitrator is terminated because of his withdrawal from the office

for any reason or pursuant to the agreement of the parties and in the facts

of the the arbitrator having withdrawn from his office, Section 15(2) of

the Act was attracted and it became applicable. The learned Single Judge

held that as the erstwhile arbitrator as appointed by the Court had

withdrawn, the substitute arbitrator, therefore, will have to be appointed

by the Court under Section 15 of the Act. The learned Single Judge

rejecting such contentions in paragraphs 11,12,13,14,15 and 16 observed
25 2018(4) Mh.L.J. 159

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as under:-

11. Under section 15 of the said Act, a Court is empowered to
substitute the arbitrator if the mandate of the arbitrator is
terminated because of his withdrawal from the office for any
reason or pursuant to the agreement of the parties. In this case Mr.
Ashish Kamat, a counsel of this Court, who was appointed in
substitution of Shri Justice S.S. Parkar, a former Judge of this
Court, withdrew from his office. Section 15(2) of the Arbitration &
Conciliation Act, 1996 would attract to the facts of this case.

12. Insofar as the issue raised by the learned counsel for the
respondent that this petition is not maintainable under sections 14
and 15 of the said Act and the petition could have been filed under
section 11 of the said Act is concerned, this issue is dealt with by
the Supreme Court in case of Yashwith Constructions (P) Ltd. v.
Simplex Concrete Piles India Ltd. (2006) 6 SCC 204. The said
judgment of the Supreme Court is adverted by the Supreme Court
in the later judgment in case of Shailesh Dhairyawan (supra). The
Supreme Court in the said judgment Yashwith Constructions (P)
Ltd. has construed section 15(3) and also 11(6) of the said Act. It is
held by the Supreme Court that there was no failure on the part of
the party concerned as per the arbitration agreement, to fulfill his
obligation in terms of section 11 of the said Act so as to attract the
jurisdiction of the Chief Justice under section 11(6) of the said Act
for appointing a substitute arbitrator. It is further held that section
11(6) of the said Act has application only when a party or the
person concerned had failed to act in terms of the arbitration
agreement. Section 11(6) of the said Act can be attracted where
under an appointment procedure agreed upon by the parties
contemplated in section 11(2) read with 11(4) of the said Act, a
party fails to act as required under that procedure or the parties or
the two appointed arbitrators, fail to reach an agreement expected
of them under that procedure.

13. In the facts of this case, admittedly the parties had agreed to
refer the disputes and differences to arbitration of Shri Justice A.B.
Palkar, a former Judge of this Court in Summons for Judgment No.
186 of 2005. In the said arbitration agreement, no other procedure
was agreed upon by the parties for appointment of a substitute
arbitrator. The judgment of the Supreme Court in case of Yashwith
Constructions (P) Ltd. (supra) thus would squarely apply to the
facts of this Court and would assist the case of the petitioner and
not the respondent. In my view, the argument of the learned
counsel for the respondent is contrary to the principles of law laid
down by the Supreme Court in the said judgment.

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14. Be that as it may, the earlier applications filed by the petitioner
for substitution of an arbitrator were also under section 15 of the
said Act. These petitions are thus maintainable under section 14
read with 15 of the said Act.

15. The erstwhile arbitrator having withdrawn from the office, the
substitute arbitrator in place of erstwhile arbitrator will have to be
made by this Court in this application under section 15 of the said
Act. There is thus no merit in the submission made by the learned
counsel for the respondent.

16. I therefore, pass the following order :-
"a). Shri A.J. Dholakia, a former Principal District Judge and
a former Charity Commissioner having his address at c/o
Room No. 56, High Court Law Library, 3rd Floor, High
Court, Bombay is appointed in all the seven petitions as a
sole arbitrator in place of erstwhile arbitrator Mr. Ashish
Kamat, a counsel of this Court, who has withdrawn from
the office. The arbitration petitions are disposed of in
aforesaid terms.

b). No order as to costs."

44. In Ignatius Tony Pereira Vs. Mr.Pifran Sanjivan Fernandes

(supra) a learned Single Judge of this Court (Mr.Justice R.M.Reis, as his

Lordship then was) was dealing with a case where a vacancy had arisen in

view of the sole arbitrator Mr.Justice G.D.Kamat (Retd) having expired.

The petitioner/applicant had applied for appointing a substitute arbitrator.

An objection was raised to the application on the ground that once the

arbitrator expires, his mandate gets terminated in terms of Section 14 of

the Act and a new arbitrator would have to be appointed after following

the procedure to appoint an arbitrator in terms of the agreement between

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the parties and the power to appoint an arbitrator under Section 11(6) of

the Act only arises when there is a refusal on the part of the respondent to

appoint an arbitrator in terms of the agreement. On behalf of the

applicant, it was contended that once the arbitrator had expired whose

appointment was made by the Court under Section 11(6) of the Act, it is

the court which can appoint a substitute arbitrator. The learned Single

Judge interalia referring to the decision of the Supreme Court in

Yashwith Constructions (P) Ltd. (supra) accepted the petitioners'

contention that the respondents' right to make appointment of a substitute

arbitrator was forfeited and as the initial appointment was made by an

order passed under Section 11(6) of the Act, only the Court can appoint a

substitute arbitrator.

45. It can be thus clearly seen from the common thread which flows

from decisions of the Supreme Court in Yashwith Constructions (P) Ltd

(supra) and Shailesh Dhairyawan (supra) and the decisions of learned

Single Judge of Delhi High Court in Mithlesh Kumar Aggarwal (supra)

and GMR Ambala Chandigarh Expressways Pvt. Ltd. (supra), and the

decision of learned Single Judge of Calcutta High Court in "R.B.Rajesh Vs.

The Chief Engineer & Ors."(supra), and the decisions of learned Single

Judge of this Court in Rajesh K.Shah Vs. Kamlesh K.Sahani (supra), and

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Ignatius Tony Pereira (supra), that when the initial appointment of an

arbitrator is made by the Court by an order passed under Section 11 of the

Act, an appointment of a substitute arbitrator would be required to be

made in the same manner by the Court, as in terms of Section 15 sub-

section (2) of the Act the initial procedure and the rule so followed, would

be required to be followed in appointing a substitute arbitrator. This also

for the reason that the party whose right to make an appointment of an

arbitrator as per the arbitration agreement stands forfeited, in the Court

making the appointment as per Section 11 of the Act, would not have any

authority to make an appointment of a substitute arbitrator.

46. The following principles of law can be clearly derived from the

aforesaid decisions of the Supreme Court and the High Courts:-

(i) Parties to an arbitration agreement at the threshold would have a

right to appoint an arbitral tribunal as per the arbitration agreement

entered between the parties. In case of non-concurrence, inaction or

disagreement to so appoint, if requested by one party, this right if not

exercised for a period of 30 days would continue to exist till an application

by the other party is filed under Section 11(6) of the Act.

(ii) Once one of the parties to an arbitration agreement approaches the

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Court under Section 11(6) of the Act seeking appointment of an arbitrator

on failure of the other party to appoint an arbitrator, the rights of the

party not appointing an arbitrator stands forfeited and it will be for the

Court to then pass an order under Section 11(6) of the Act to appoint an

arbitrator.

(iii) Once the Court appoints an arbitrator by an order passed on an

application under Section 11 of the Act, and a vacancy arises on the

arbitral tribunal on account of any of the circumstances as set out under

Section 14(1) and/or Section 15(1) of the Act, then necessarily Section

15(2) becomes operational for appointment of a substitute arbitrator and

it would be the Court which would be required to be approached to fill up

the vacancy. The same procedure / rule would be required to be followed

by an application under Section 15(2) of the Act to fill up the vacancy of

the Court appointed arbitrator.

(iv) As a sequel to (iii) above, once the Court appoints an arbitrator

under Section 11(6) of the Act, it is not open for the party against whom

such an order is passed to contend that the right which was so forfeited

would revive for any purpose including to appoint a substitute arbitrator

in case of any vacancy on the arbitral tribunal as postulated by Sections 14

and 15 of the Act.

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(v) In other words a party who suffers an order under Section 11(6) of

the Act of the Court appointing an arbitrator, cannot contend that the

arbitration agreement has become available to such a party after the very

foundation of such right to appoint an arbitrator is taken away by the

Court appointing an arbitrator.

(vi) The above position in law is implicit from the provisions of sub-

section 2 of Section 15 of the Act when the provision says that when the

mandate of an arbitral tribunal terminates, a substitute arbitrator shall be

appointed "according to the rules that were applicable to the

appointment of an arbitrator being replaced".

47. As observed by the Supreme Court in ACC Ltd. Vs. Global Cements

Ltd.(supra) Section 15(2) of the Act has to be given a liberal

interpretation so as to apply to all possible circumstances in which the

mandate of the arbitrator could be terminated. Also considering the clear

position in law which would flow from the decisions as referred above, it

cannot be conceived that Section 15(2) would not recognize rights of a

party being forfeited (to take recourse to the arbitration agreement) to

appoint a substitute arbitrator when such right stood extinguished when

the Court appointed an arbitrator in an order passed under Section 11(6)

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of the Act. Thus, necessarily the rule that would be applicable to the

appointment of a substitute arbitrator would be the rule/procedure which

was applicable for the initial appointment namely the appointment by the

Court and not appointment by a party who had already lost and/or

forfeited its right to make an appointment of an arbitrator. In other words,

once such right to make an appointment of an arbitrator/arbitral tribunal

are given up by one of the parties, then necessarily the only rule and

procedure of an arbitrator being appointed by the Court is required to be

recognized in terms of Section 15(2) and no other procedure. It cannot

be accepted that the forfeiture of the right of a party not appointing an

arbitrator is only a partial or temporary forfeiture limited to Section 11(6)

of the Act and that such a right would resurrect or is reborn when it comes

to appointment of substitute arbitrator. Such an interpretation would

amount to a complete misreading of the legislative scheme of Sections 11,

14 and 15 of the Act.

48. In addition to the above discussion in my opinion, a rebirth of a

right which stood forfeited also cannot be conceived for other two primary

reasons, firstly for the reason that this would amount to a clear waiver of

right as recognised by Section 4 of the Act, and secondly and most

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importantly the law would not permit sanctity of judicial procedure

adopted in the court passing an order under Section 11(6) of the Act to be

obliterated, diluted, taken away or being extinguished, merely because

there is vacancy on the arbitral tribunal. Once the initial appointment

itself is under the orders of the Court, there is no question of waived rights

or forfeited rights being revived or resurrected for the purposes of either

Section 14 and 15 of the Act. In the present case indubitably the

appointment of Mr.Justice D.B.Bhosale (Retd) was made in pursuance of

an order dated 30 November 2018 passed by this Court under Section

11(6) of the Act as a nominee arbitrator of the respondent. This order was

confirmed by the Supreme Court by its order dated 2 January 2019 passed

in a petition of the respondent for Special Leave to Appeal (c) No.33555

of 2018. Thus the rule and the procedure as followed in appointment of

initial arbitrator Mr.Justice D.B.Bhosale (Retd) was the rule and the

procedure under Section 11(6) of the Act and not any other procedure.

This procedure would be required to be recognised as a rule followed in

the appointment of initial arbitrator in terms of Section 15(2) of the Act

for the purpose of appointment of a substitute arbitrator.

49. Thus, the contentions as urged on behalf of the respondent that in

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the facts of the case Section 15(2) of the Act would contemplate a

procedure under the arbitration agreement overlooking the forfeiture of

the respondent's right simply cannot be accepted. This would be contrary

to the law laid down by the Supreme Court in Yashwith Constructions

(P) Ltd -vs- Simplex Concrete Piles India Ltd and anr. (supra) and

Shailesh Dhairyawan (supra) wherein the Supreme Court in clear terms

giving a wider meaning to Section 15(2) has held that when Section 15(2)

postulates that a substitute arbitrator can be appointed "according to the

rules" that were applicable to the appointment of an arbitrator originally,

and it would only mean that appointment of a substitute arbitrator must

be done according to the "original agreement" or "provision applicable

to the appointment of an arbitrator at the initial stage" In the facts of

the case, "the provision applicable to the appointment of an arbitrator at the

initial stage" can only be the High Court appointing an arbitrator under

Section 11(6) of the Act. This also for the reason that it is available to the

parties to waive such a procedure and/or to deviate from the said

procedure, which obviously has a consequence in law taking its course,

permitting the said agreed procedure to be substituted by a legal

procedure as available and provided under Section 11 of the Act.

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50. The learned Counsel for the respondent thus would also not be

correct to contend that in the facts of the case Mr.Justice D.B.Bhosale

(Retd.) having recused, the vacancy could be filled up by the respondent

by appointing a substitute arbitrator. The respondent in doing so

completely overlooked that its right to appoint an arbitrator stood

forfeited and in no manner revived, so that it can appoint an arbitrator as

informed by the respondent to the petitioner immediately on the next day

Mr.Justice D.B.Bhosale (Retd) recused himself from the arbitral tribunal.

The respondent had no such legal right. It is thus not correct for the

respondent to contend that the respondent having immediately appointed

its nominee arbitrator by a communication dated 26 March 2019, there

was no vacancy on the arbitral tribunal. The vacancy which is filled up in

the absence of any legal right can have no sanctity in law and such filling

up of the vacancy by the respondent would be patently illegal. The

respondent would also not be correct in contending that forfeiture of its

right to appoint an arbitrator was restricted to the appointment made by

the Court under Section 11(6) of the Act. As noted above such an

interpretation of the order passed by the Court under Section 11(6) would

not only militate against the object of Section 11(6) read with Section

15(2) of the Act but it would amount to doing a violence to these

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provisions as also to the sanctity of the Court orders. This is also reflected

from the decisions of the Supreme Court as also from the different High

Courts as extensively noted above.

51. The contention of the respondent that Section 14 is in no manner

attracted, also cannot be accepted. Section 14 in sub-section (1)(b) clearly

envisages a vacancy arising on an arbitrator withdrawing from his office.,

and to provide that in any such eventuality the mandate of the arbitrator

shall stand terminated. Section 15 provides for the circumstances in

addition to the circumstances referred to in Sections 13 or 14 when the

arbitrator withdraws from his office for any reason. Sub-section (2) of

Section 15 clearly provides that when the mandate of the arbitrator is

terminated on the eventualities and the circumstances as falling under

Section 14(1)(a) and (b) and Section 15(1)(a) and (b), in such an

eventuality, a substitute arbitrator shall be appointed in accordance with

the rules that are applicable to the appointment of an arbitrator being

replaced. As clearly seen, the rules applicable in the present case that is

the agreement between the parties to appoint an arbitrator, stood

superseded by the procedure as contemplated under Section 11 of the Act

and thus it is this procedure which is required to be held to be a procedure

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or the "rule" applicable to the appointment of an arbitrator being replaced

within the meaning of sub-section (2) of Section 15 of the Act. In these

clear circumstances, the contention as urged on behalf of the respondent

that the Court is entertaining a controversy under sub-section (2) of

Section 14, is completely untenable. The Court is also called upon to pass

an order to appoint a substitute arbitrator under Section 15(2) of the Act,

which is a provision invoked by the petitioner as clear from the prayers as

made in the petition. The contention as urged on behalf of the respondent

that the petitioner is calling upon the Court to entertain a controversy

under Section 14(1), is thus totally untenable. There is no factual

foundation to such contention.

52. I would now discuss some of the decisions as relied on behalf of the

respondents. The respondent's reliance on the decision of the Supreme

Court in "Government of Haryana -vs- G.F. Toll Road Pvt. Ltd." (supra)

is also not well founded inasmuch as in the said case Indian Council of

Arbitration (ICA) which was to be an appointing authority, on the failure

of the appellant therein not appointing a substitute arbitrator within 30

days of the notice as received from the ICA proceeded to make such

appointment before the notice period could expire. It is in this context the

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Court made observations that the procedure as agreed between the parties

for initial appointment would be required to be followed and the ICA not

following the said procedure, the appointment was held to be illegal. The

following observations of the Court are required to be noted:-

"3.3 In the present case, clause 39.2.2. of the agreement
expressly provided that each party shall nominate one arbitrator,
and the third arbitrator shall be appointed in accordance with the
Rules of the ICA.
3.4 The Appellate - State had vide Letter dated 16.11.2015
requested for 30 days' time to appoint another nominee arbitrator,
after objections were raised by the ICA to the first nomination. The
ICA declined to grant the period of 30 days, and instead appointed
the arbitrator on behalf of the Appellant - State. The ICA could
have filled up the vacancy only if the Appellant-State had no
intention of filling up the vacancy. The ICA could not have usurped
the jurisdiction over appointment of the nominee arbitrator on
behalf of the State prior to the expiry of the 30 days' period
requested by the Petitioner.
3.5 The appointment of the nominee arbitrator on behalf of the
Appellant - State by the ICA was unjustified and contrary to the
Rules of the ICA itself."

53. The decision of the Supreme Court in S.P.Singla

Construction Pvt. Ltd. Vs. State of Himachal Pradesh, would also not

help the respondents. The issue which fell for consideration of Supreme

Court is not relevant in the facts of the present case. In para 7 of the

decision the Supreme Court has noted the point for consideration to be

that in the light of the agreement between the parties (clause 65 of the

General Conditions of the Contract), whether the appellant contractor can

challenge the appointment of Superintendent Engineer, Arbitration Circle,

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as an arbitrator to resolve the disputes between the parties. This was not a

case where the initial appointment was made by the High Court under

Section 11 of the Act but the respondent had made an appointment of the

Superintending Engineer as an arbitrator in terms of clause 65 of the

agreement. The appellant before the Supreme Court was aggrieved by

such appointment and had approached the High Court by an application

under section 11(6) of the Act praying for appointment of an independent

arbitrator. It is in this context the High Court referring to the decision of

the Supreme Court in "Antrix Corporation Ltd. Vs. Devas Multimedia

Pvt.Ltd.26" rejected the said application holding that the respondent had

already appointed the Superintendent Engineer as per Clause (65) of the

arbitration clause and therefore, Section 11(6) could not be invoked. The

Supreme Court upheld the decision of the High Court. This decision is

therefore, would not be relevant in the present context.

54. The decision of the learned Single Judge of this Court

(R.D.Dhanuka, J) in Shane Duff -vs- Essel Sports Pvt Ltd. (supra) would

also not assist the respondent as the said decision is prior to the decision

of the Supreme Court in Shailesh Dhairyawan (supra). Moreover, the

learned Single Judge (R.D.Dhanuka, J.) in Rajesh K Shah (supra) has re-
26 2014 (11) SCC 560

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considered the said position in law referring to the decisions of the

Supreme Court in Shailesh Dhairyawan (supra) and also in Yashwith

Constructions Pvt.Ltd.(supra) as noted above in extenso.

55. In so far as the decision of the learned Single Judge of the Andhra

Pradesh and Telangana High Court in "Gamesa Wind Turbines Pvt.Ltd.,

Chennai -vs- Mytrah Energy (I) Ltd. Hyderabad" (supra), I am not

persuaded to concur with the opinion of the learned Single Judge in the

said decision. This for two reasons, firstly that the said decision does not

take into consideration the decision of the Supreme Court in Shailesh

Dhairyawan (supra), secondly I am not in agreement with the

interpretation, the learned Single Judge has placed on the decision of the

Supreme Court in Yashwith Constructions Pvt.Ltd.(supra) when in

paragraph 34 of the decision the learned Single Judge observes that the

reference to rules in sub-section (2) of Section 15 would only mean the

arbitration agreement. With respect, this may not be the correct reading of

the decision in Yashwith Constructions Pvt.Ltd.(supra) inasmuch as the

Supreme Court in Yashwith Constructions Pvt.Ltd.(supra) has also

given due recognition not only to the original agreement between the

parties but also to the "provisions applicable to the appointment of the

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arbitrator at the initial stage" as clearly observed in paragraph 4 in

Yashwith Constructions Pvt.Ltd.(supra). While not agreeing with the

view taken by the Andhra Pradedsh and Telangana High Court in the said

decision, I find myself in complete agreement with the view taken by the

learned Single Judge of the Delhi High Court in Mithlesh Kumar

Aggarwal Vs. Athena Infrastructure Ltd. (supra) and "GMR Ambala

Chandigarh Expressways Pvt.Ltd. Vs. National Highway Authority of

India & Ors. (supra) and the decision of the learned Single Judge of

Calcutta High Court in Shri.R.B.Rajesh Vs. The Chief Engineer and

others (supra), as also in two decisions of the learned Single Judge of this

Court in Rajesh K.Shah Vs. Kamlesh K.Sahani (supra) and Ignatius Tony

Pereira Vs. Mr.Pifran Sanjivan Fernandes (supra).

56. In regard to the submissions as urged on behalf of the respondent

referring to the statement of object and reasons of the Act read with the

provisions of Section 5 of the Act, that party autonomy is required to be

respected in a judicial intervention under Section 15(2), in the facts of the

case, cannot be accepted. The Supreme Court in Union of India & Ors Vs.

Uttar Pradesh State Bridge Corporation Ltd.(supra) has held that the

principles of party autonomy in the choice of procedure would stand

deviated in those cases where one of the parties has committed default by

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not acting in accordance with the procedure prescribed. It was held that

the principle of default procedure would stand extended in the cases

where the question is of appointment of a substitute arbitral tribunal. The

observations of the Supreme Court as made in the said decision are

required to be noted which read thus:-

"16) First and paramount principle of the first pillar is "fair,
speedy and inexpensive trial by an Arbitral Tribunal". Unnecessary
delay or expense would frustrate the very purpose of arbitration.
Interestingly, second principle which is recognised in the Act is the
party autonomy in the choice of procedure. This means that if a
particular procedure is prescribed in the Arbitration Agreement
which the parties have agreed to, that has to be generally resorted
to. It is because of this reason, as a normal practice, the Court will
insist the parties to adhere to the procedure to which they have
agreed upon. This would apply even while making the appointment
of substitute arbitrator and the general rule is that such an
appointment of a substitute arbitrator should also be done in
accordance with the provisions of the original agreement applicable
to the appointment of the arbitrator at the initial stage. (see
Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India
Ltd. and another, (2006) 6 SCC 204. However, this principle of
party autonomy in the choice of procedure has been deviated from
in those cases where one of the parties have committed default by
not acting in accordance with the procedure prescribed. Many such
instances where this course of action is taken and the Court appoint
the arbitrator when the persona designata has failed to act, are
taken note of in para 5 of Tripple Engineering Works (supra). We
are conscious of the fact that these were the cases where
appointment of the independent arbitrator made by the Court in
exercise of powers under Section 11 of account of 'default
procedure'. We are, in the present case, concerned with the
constitution of substitute Arbitral Tribunal where earlier Arbitral
Tribunal has failed to perform. However, the above principle of
default procedure is extended by this Court in such cases as well as
is clear from the judgment in Singh Builders Syndicate (2009)4
SCC 523." (emphasis supplied)

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57. In the above circumstances, I am of the clear opinion that the

petition is required to be allowed by appointing a substitute arbitrator to

fill up the vacancy which has arisen on the recusal/resignation of

Mr.Justice D.B.Bhosale (Retd), the arbitrator appointed for the

respondent. Hence, the following order:-

ORDER

(i) Dr.Justice A.K.Sikri, Former Judge of the Supreme Court of India, is appointed as a substitute Arbitrator on behalf of the respondent.

(ii) The learned substitute arbitrator, fifteen days before entering the arbitration reference, shall forward a statement of disclosure as per the requirement of Section 11(8) read with Section 12(1) of the Arbitration and Conciliation Act, 1996, to the Prothonotary & Senior Master of this Court, to be placed on record of this application with a copy to be forwarded to both the parties.

(iii) The Arbitral proceedings shall commence from the stage the proceedings had reached before the erstwhile arbitral tribunal.

(iv) All contentions of the parties on merits of the disputes are expressly kept open.

(v) The petition is disposed of in the above terms. No costs.


 (vi)     Office to forward a copy of this order to Dr.Justice A.K.Sikri (Retd),




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the learned Substitute Arbitrator by e-mail and by post at the following address:-

144, Sunder Nagar, New Delhi 110003.

email:[email protected] Tel.- 011-41802321 and 011-24356006.

58. At this stage learned Counsel for the respondent seeks a stay of this order for a period of eight weeks.

59. Considering the facts and circumstances of the case, it may not be in the interest of the parties to delay the arbitration proceedings. The request as made on behalf of the respondent therefore cannot be accepted. It is rejected.

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