advocatemmmohan

My photo

ADVOCATEMMMOHAN -  Practicing both IN CIVIL, CRIMINAL AND FAMILY LAWS,Etc.,

WELCOME TO LEGAL WORLD

WELCOME TO MY LEGAL WORLD - FOR KNOWLEDGE IN LAW & FOR LEGAL OPINIONS - SHARE THIS

Tuesday, September 15, 2015

Under Section 15(2) of the Act in a situation where the mandate of an arbitrator terminates, a substitute arbitrator is required to be appointed according to the rules that were applicable to the appointment of the arbitrator who is replaced. In Yashwith Constructions (P) Ltd. Versus Simplex concrete Piles India Ltd. and another [(2006) 6 SCC 204], the term 'rules' appearing in Section 15(2) of the Act has been understood to be referring to the provisions for appointment contained in the arbitration agreement or any rules of any institution under which the disputes are to be referred to arbitration. In the present case, admittedly, there are no institutional rules under which the disputes between the parties are to be referred to arbitration and, therefore, the expression “rules” appearing in Section 15(2) of the Act will have to be understood with reference to the provisions for appointment contained in the Supply Contract. Clause 22.3 of the Supply Contract which deals with the matter may be extracted at this stage: “22.3 All disputes, controversies or claims arising out of or in connection with or in relation to this Contract of its negotiation, performance, breach, existence or validity, whether contractual or tortuous, shall be referred to arbitration in accordance with the Indian Conciliation and Arbitration Act, 1996 and conducted by a single arbitrator to be appointed by the Parties by mutual consent. The cost of arbitration shall be shared by the Parties. The place of the arbitration shall be India and the applicable law in relation to the procedure of the arbitration shall be determined by reference to the law of the place of the arbitration is to be held. The arbitration proceedings shall be conducted in English language. The award of the arbitration shall be final and binding against the Parties hereto.” 6. Clause 22.3 of the Supply Contract contemplates appointment of a sole arbitrator by the parties by mutual consent. In a situation where the original arbitrator i.e. Shri Justice S.K. Dubey had recused himself the substitute or new arbitrator is required to be appointed according to the rules that were applicable to the appointment of the original arbitrator. This is the mandate of Section 15(2) of the Act. It was, therefore, incumbent on the petitioner to give notice and explore the possibility of naming an arbitrator by mutual consent and only on failure thereof the present application under Section 11(6) of the Act could/should have been filed. The above recourse is required to be followed by virtue of the provisions of Section 15(2) of the Act and the decision of this Court in Yashwith Constructions (P) Ltd. (supra). Admittedly, the same had not been followed. In these circumstances, the Court will understand the present application/arbitration petition to be premature. It is accordingly not entertained leaving it open for the petitioner to act appropriately, if so advised, in terms of the present order and thereafter seek its remedies as provided by law. The Arbitration Petition is disposed of in the above terms.

                                                              NON-REPORTABLE


                        IN THE SUPREME COURT OF INDIA

                         CIVIL ORIGINAL JURISDICTION

                   ARBITRATION CASE (CIVIL) NO.27 OF 2015


HUAWEI TECHNOLOGIES CO. LTD.             ...PETITIONER

                            VERSUS

STERLITE TECHNOLOGIES LTD.                 ...RESPONDENT


                               J U D G M E N T


1.          This application under Section  11(6)  of  the  Arbitration  and
Conciliation Act, 1996 (hereinafter referred  to  as  “the  Act”)  has  been
filed seeking appointment of a Sole Arbitrator in terms of  clause  22.3  of
the Supply Contract between the  parties  which  was  entered  into  in  the
following circumstances:

            In March 2006, MTNL issued a tender  for  supply,  installation,
testing, commissioning of Broadband Access  Network.   Both  the  petitioner
and  the  respondent  together  bid  against  the  tender  floated  and  the
respondent acted as the lead bidder.  The contract was awarded in favour  of
the respondent by the MTNL.  On 9th April, 2007, the parties entered into  a
Supply Contract for the aforesaid  project.  According  to  the  petitioner,
though it had complied with all the terms and conditions of the said  supply
contract and had shipped/delivered all equipments on  time,  the  respondent
had failed to make full payment of the amounts due and an amount  quantified
at USD 13,390,000 is due and payable.  The petitioner sent  a  legal  notice
dated 28th November, 2014 calling upon the respondent  to  make  payment  of
the outstanding dues along with interest thereon within seven  days  failing
which it was stated in the notice that  the  petitioner  would  be  invoking
clause 22 of the Supply Contract which provided  for  arbitration  and  will
proceed to appoint Mr. Justice S.K. Dubey, a former judge of the High  Court
of Madhya Pradesh as the sole Arbitrator.

            As no  response  was  received  to  the  aforesaid  notice,  the
petitioner by letter dated 29th December, 2014 appointed Shri  Justice  S.K.
Dubey which appointment was accepted.  Thereafter the  respondent  raised  a
dispute with regard to the reference to the  arbitration  and  rejected  the
appointment of Shri Justice S.K. Dubey as the sole Arbitrator.

            In these facts the learned sole  Arbitrator  Shri  Justice  S.K.
Dubey  by  order  dated  21st  January,  2015  recused  himself   from   the
proceedings.   It  is  in  the  aforesaid  circumstances  that  the  present
application/arbitration petition has been filed under Section 11(6)  of  the
Act for appointment of a sole Arbitrator.

2.          A counter affidavit has been filed on behalf of  the  respondent
wherein it has been, inter  alia,  stated  that  upon  appointment  of  Shri
Justice  S.K.  Dubey  as  the  sole  Arbitrator  the  notice  invoking   the
arbitration clause had spent its  force;  Shri  Justice  S.K.  Dubey  having
recused himself from the proceedings the  fresh  appointment  of  a  learned
sole Arbitrator has to be made by, once again, resorting to  the  provisions
of clause  22  of  the  Supply  Contract  and  by  following  the  procedure
prescribed therein.  Certain other objections have also been raised  on  the
merits of the dispute contending that the petitioner had not  fulfilled  its
obligations under the Supply Contract so as to be entitled  to  the  amounts
as claimed.

3.          The Court has heard the learned counsels for the parties.

4.          Under Section 15(2) of the Act in a situation where the  mandate
of an arbitrator terminates, a  substitute  arbitrator  is  required  to  be
appointed according to the rules that were applicable to the appointment  of
the arbitrator who is replaced. In Yashwith Constructions  (P)  Ltd.  Versus
Simplex concrete Piles India Ltd. and another [(2006) 6 SCC 204],  the  term
'rules' appearing in Section 15(2) of the Act  has  been  understood  to  be
referring to the provisions for appointment  contained  in  the  arbitration
agreement or any rules of any institution under which the  disputes  are  to
be referred to arbitration.  In the present case, admittedly, there  are  no
institutional rules under which the disputes between the parties are  to  be
referred to arbitration and, therefore, the expression “rules” appearing  in
Section 15(2) of the Act will have to be understood with  reference  to  the
provisions for appointment contained in the Supply Contract.
5.          Clause 22.3 of the Supply Contract which deals with  the  matter
may be extracted at this stage:

“22.3   All  disputes,  controversies  or  claims  arising  out  of  or   in
connection with  or  in  relation  to  this  Contract  of  its  negotiation,
performance,  breach,  existence  or  validity,   whether   contractual   or
tortuous, shall be referred to arbitration in  accordance  with  the  Indian
Conciliation and Arbitration Act, 1996 and conducted by a single  arbitrator
to be appointed by the Parties by mutual consent.  The cost  of  arbitration
shall be shared by the Parties.  The  place  of  the  arbitration  shall  be
India  and  the  applicable  law  in  relation  to  the  procedure  of   the
arbitration shall be determined by reference to the law of the place of  the
arbitration is to be held. The arbitration proceedings  shall  be  conducted
in English language. The  award  of  the  arbitration  shall  be  final  and
binding against the Parties hereto.”


6.          Clause 22.3 of the Supply Contract contemplates  appointment  of
a sole arbitrator by the parties by mutual consent.  In  a  situation  where
the original arbitrator i.e. Shri Justice S.K.  Dubey  had  recused  himself
the substitute or new arbitrator is required to be  appointed  according  to
the  rules  that  were  applicable  to  the  appointment  of  the   original
arbitrator.  This is the mandate of Section  15(2)  of  the  Act.   It  was,
therefore, incumbent on the  petitioner  to  give  notice  and  explore  the
possibility of naming an arbitrator by mutual consent and  only  on  failure
thereof the present application under Section 11(6) of the Act  could/should
have been filed.  The above recourse is required to be  followed  by  virtue
of the provisions of Section 15(2) of the  Act  and  the  decision  of  this
Court in Yashwith Constructions (P) Ltd. (supra).  Admittedly, the same  had
not been followed.  In these circumstances, the Court  will  understand  the
present  application/arbitration  petition   to   be   premature.    It   is
accordingly not entertained leaving  it  open  for  the  petitioner  to  act
appropriately, if so advised, in terms of the present order  and  thereafter
seek its remedies as provided by law.

7.          The Arbitration Petition is disposed of in the above terms.



                                                  ……………………...............,J.
                            (RANJAN GOGOI)

NEW DELHI
SEPTEMBER 04, 2015

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.