Del HC | On invocation of arbitration clause, if a party appoints arbitrator on its own and does not receive confirmation from another party, should former approach Court under S. 11 of Arbitration Act? HC discusses

Delhi High Court: Kameswar Rao, J., decided a petition wherein on the invocation of the arbitration clause, one of the parties appointed the sole arbitrator on its own.

The instant petition was filed under Section 11(6) of the Arbitration and Conciliation Act, 1996. Petitioner and the respondents entered into a lease deed in respect of the premises.

It has been stated that pursuant to the execution of the lease deed, petitioner started fulfilling the obligations on the assumption that the respondents will also do the same and disbursed an amount of Rs 3,32,000 to the respondents in order to expedite the refurbishment and up-gradation of the premises to make it at par with the petitioner’s benchmark.

Due to the pandemic, petitioner sought to invoke the force majeure clause in the Lease Deed.

Even after repeated communications and grant of time as sought by the respondents, the respondents failed to furnish the complete set of documents as mandated under Clause 11.2.1 of the Lease Deed.

While the above-stated breach was being cured, respondents suddenly and to complete shock and dismay of the petitioner issued a letter demanding a sum of money by misrepresenting the clauses of the Lease Deed.

Respondents invoked arbitration clause citing the existence of disputes under the lease deed and nominated a Retired Judge of this Court as the Sole Arbitrator.

 Issue for consideration:

Whether the appointment of the arbitrator was at variance with the stipulation in the contract and as such non-est for this Court to grant the relief to the petitioner by appointing a new arbitrator?

Decision

  1. DISPUTE RESOLUTION- Any dispute or controversy arising out of or in connection with the Deed or its performance, including the validity, interpretation or application hereof, shall to the extent possible be settled amicably by negotiation and discussion among the Parties within 30 (thirty) days as of the date requested by either Party. Failing which, either Party shall be at liberty to refer the matter to arbitration in accordance with the Indian Arbitration and Conciliation Act, 1996. The arbitral panel shall consist of a sole arbitrator appointed mutually by the Parties. Any arbitral award issued by such sole arbitrator shall be final and binding on the Parties. The language of the arbitration shall be English and seat of arbitration shall be Delhi.”

(Emphasis supplied )

As per the arbitration clause contained in the deed, the arbitrator has to be appointed mutually by both the parties. In the present case, sole arbitrator was appointed by the respondent but was not confirmed by the petitioner.

Respondents should have approached the Court under Section 11 of the Act seeking an appointment of an Arbitrator when the same has not been confirmed.

Hence, the appointment is declared to be non-est.

Bench relied upon the Supreme Court decision in Walter Bau Ag. v. MCGM (2015) 3 SCC 800 and Naveen Kandhai v. Jai Mahal Hotels (P) Ltd., Arb. P. 53 of 2017.

With regard to the significance of adherence to the procedure agreed upon by the parties to an arbitration agreement with regard mutual/common consent in appointing an arbitrator, Court relied upon the decision of Manish Chibber

 While allowing the petition, Justice S.P. Garg, a retired Judge of this Court was appointed as the sole arbitrator to adjudicate the disputes and differences between the parties arising out of the lease deed. [Oyo Hotels and Homes (P) Ltd. v. Rajan Tewari,  2021 SCC OnLine Del 446, decided on 09-02-2021]


Advocates for the parties:

Petitioner: Jeevan Ballav Panda, Adv. with Satakshi Sood & Satish Padhi, Advs.

Respondents: Bobby Anand, Advocate

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