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Kadimi International Pvt. Ltd. Vs. Emaar MGF Land Limited - (High Court of Delhi) (29 Aug 2019)

Court will exercise its power under Section 11(6)(a) of Arbitration Act, only where a party fails to act in accordance with appointment procedure agreed between parties

MANU/DE/2828/2019

Arbitration

The present petition under Section 11 of the Arbitration and Conciliation Act, 1996 challenges appointment of Mr. R.S. Baswana, District and Sessions Judge (Retired) as the sole arbitrator and further seeks appointment of an independent Arbitrator, in terms of Clause 35 of the Space Buyer Agreement. It was submitted that, the conduct of the Respondent in unilaterally appointing an Arbitrator despite Petitioner's categorical objections in its letter, raises justifiable doubts over the neutrality, independence and impartiality of the Arbitrator.

The Clause of agreement does not name an arbitrator. It merely confers the right to appoint an Arbitrator to the Respondent . The clause provides that "Sole Arbitrator shall be nominated by anyone of the Directors of the Company". Since, the right of appointment is with Respondent, which is a Company, it would have to vicariously take administrative decisions through its Directors. The Directors of the Company are empowered under the provisions of the Company's Act and/or Articles of Association to conduct the affairs of the Company. In this case, the right to make the appointment of an Arbitrator for and on behalf of the Respondent Company is conferred on its Directors.

After the amendment of the Act, the Court's power and its scope of enquiry, while exercising jurisdiction under Section 11 of the Act, has been limited and restricted. The Court will exercise its power under Section 11(6)(a) of the Act, only where a party fails to act in accordance with the appointment procedure agreed between the parties. Section 11 of the Act does not empower the Court to change the Arbitrator appointed by the parties in accordance with law.

While deciding on an application under the said Section, the Court has to only evaluate and examine the question regarding existence of an Arbitration agreement. It cannot embark upon the question as to whether a clause is unfair or unreasonable. If the invocation of Arbitration Clause is as per the terms of agreement between the parties, it would be the endeavor of Court to first explore whether the arbitration clause contained in the agreement can be implemented, as held by the Supreme Court in the decision of Union of India v. Parmar Construction.

Courts have now consistently proceeded to appoint an independent Arbitrator in situations where the arbitration clause is in conflict with the amended Arbitration Act. However, the unilateral right of party to appoint an Arbitrator has not been done away with. Only, the appointment of a person who is ineligible to be an Arbitrator under Section 12 (5) read with Schedule VII of the Act has been held to be void.

Respondent has appointed a retired District and Sessions Judge as an Arbitrator. If the Petitioner has any grievance regarding the impartiality and independence of the Arbitrator, the Petitioner is free to take recourse to the specific provisions contained in the Act that enable a party to challenge jurisdiction of the Arbitrator. These aspects cannot be examined in a Petition under Section 11 of the Act. Petition dismissed.

Relevant : Union of India v. Parmar Construction, MANU/SC/0445/2019

Tags : APPOINTMENT   ARBITRATOR   LEGALITY  

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