Can the party in dispute be allowed to appoint an arbitrator?

Why in the news?

The Petitioner ‘Tulsi Developers India Pvt. Ltd.,’which is stated to be a private limited Company, incorporated under the provisions of the Companies Act, 1956 approached the Kerala High Court under Section 11(6) of the Arbitration and Conciliation Act,1996 (hereinafter the "Act" for brevity) and prayed that the court appoint a sole arbitrator to adjudicate and settle certain disputes whose resolution was necessary only through the mechanism of arbitration.


This Arbitration Request - which has been seriously contested - has thrown up certain novel, but interpretationally germane legal aspects appertaining Sections 11(2), 11(5) and 11(6) of the Arbitration and Conciliation Act,1996 (hereinafter the "Act" for brevity).

The focus in this case was on the inter-play of Sections 11(5) and 11(6) of the Act, since both of them deal with appointment of a sole Arbitrator, albeit, in two subtly distinct scenarios.

What is The Arbitration and Conciliation act, 1996?

The Arbitration and Conciliation Act, 1996 is an Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto.


Before moving forward, it must be remembered that Section 11 of the Act has been proposed to be amended substantially through the Arbitration and Conciliation (Amendment) Act, 2019. However, Section 3 of the said Amendment Act, which proposes amendments to Section 11 of the Act, is yet to be notified and hence, said Section continues as it was prior.


Section 11(2) of the Act

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


Section 11(5) of the Act

Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree 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].


Illustration

According to this section, in case of failure to make any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, the parties are required to agree on the arbitrator within thirty days from the receipt of a request by one party to the other party to agree so. If the parties fail to agree on an arbitration within thirty days, the arbitrator shall be appointed by [the Supreme Court, the High Court or any person or institution designated by such court] at the request of one of the parties.


Section 11(6) of the Act

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 Supreme Court 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.


[the appointment shall be made, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be] to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.


Illustration -

As per section 11(6), if a party fails to perform the necessary functions under the appointment procedure agreed upon by the parties or the two arbitrators fail to reach an agreement required of them under that process or a person, including an institution fails to perform its functions, and if there is no other means for securing the appointment, then a party may request the [Supreme Court, High Court or any person or institution designated by such Court] to take necessary measures.


What did the court conclude?

Whether the respondent/lessor can now be allowed to appoint an Arbitrator?



The answer to this is now pretty obvious because, subsequent to the amendments to the Act in the year 2016 - through which sub-section (5) was inserted into Section 12 - notwithstanding any agreement to the contrary, any person whose relationship with the parties falls under any of the categories in the seventh Schedule of the Act, is rendered ineligible to be appointed as an Arbitrator. The Hon’ble Supreme Court considered the effect of Section 12(5) of the Act in TRF limited v. Engineering projects Ltd. [(2017) 8 SCC 377] and has unreservedly declared that neither a party to the disputes nor a person nominated by it can be appointed as an Arbitrator.

Recent Posts

See All

Introduction Section 262 defines one person company as meaning a corporation which has only one person as a member section 3(1)(c) provides for incorporating such a company by saying that a company ma

“Where there is a right, there is a remedy” In order to provide relief in cases relating to breach of contracts and in the cases relating to law of torts Specific Relief Act, 1877 was enacted which wa