Madhya Pradesh High Court: In an application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (‘the Act’) for the appointment of an Arbitrator to resolve the dispute between the parties arising out of work order/agreement between the parties, the Single Judge Bench of Deepak Khot, J., allowed the application noting that the applicant had disagreed with the arbitration clause whereby the obligation to appoint an arbitrator had been bestowed on the respondent. “A party to an agreement alone cannot decide to have an Arbitrator of their choice when the second party is not consenting to the said proposal”.
Background
A work order/agreement was executed between the parties in 2022. Thereafter, disputes arose regarding non-payment of dues arising out of the agreement. The applicant, Sanghvi Movers Limited (‘SML’), communicated the same and issued the notice invoking arbitration under Section 21 of the Act.
The respondent, Dilip Buildcom Limited (‘DBL’), in its reply categorically denied the appointment of the Arbitrator nominated by SML, stating that, as per Clause 13 of the arbitration clause of the agreement, SML did not have the right to appoint the sole Arbitrator; rather, the Director of DBL had the right.
Thus, the present application was filed.
Analysis
At the outset, the Court stated that the proviso to Section 12(5) gives a discretion to the parties to waive the applicability of the appointment of an Arbitrator by one party, but the word ‘may’ has been used. Thus, the discretion has to be exercised by the parties, and it is also applicable in cases where a dispute arises subsequently between them. In the present case, the dispute was about the bills and non-payment of the bills arising out of the original contract, and no agreement was executed subsequent to the arising of the dispute.
While placing reliance on Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2020) 20 SCC 760, the Court reiterated that Section 12(5) was inserted with an object to curtail one-sided contracts based on bias. The only exception is the waiver of the applicability with the consent of both parties.
In the present case, the Court noted that SML disagreed with Clause 13, whereby the obligation to appoint an Arbitrator was bestowed on the Director of DBL. Therefore, the Court rejected DBL’s misplaced contention that the Supreme Court in TRF Ltd. v. Energo Engg. Projects Ltd. (2017) 8 SCC 377 and Perkins (supra), held that the party or authority of the party cannot himself be an Arbitrator. This was because whether it was the party itself or any person appointed by the party, the same shall be treated as the same thing as when the Arbitrator is appointed without the choice of the other party.
The Court stated that the autonomy of the parties, as contended by DBL, did not supersede the provision of law which was specifically inserted to deal with such a situation where the parties appoint an Arbitrator of their choice from their own department or the authority of the same party.
Furthermore, the Court referred to SBI General Insurance Co. Ltd. v. Krish Spinning 2024 SCC OnLine SC 1754, wherein the Supreme Court held that all the other contentious issues are not to be decided under the scheme of Section 11(6) and they are to be left to be decided by the Arbitrator at an appropriate stage.
Thus, the Court held that SML made out a case for allowing the present application under Section 11(6) of the Act. Accordingly, the application was allowed, and Sushma Khosla, Retired District and Sessions Judge, was appointed as the Sole Arbitrator.
[Sanghvi Movers Limited v. Dilip Buildcom Limited, Arbitration Case No. 82 of 2024, decided on 25-06-2025]
Advocates who appeared in this case:
For the applicant: Jubin Prasad
For the respondent: Shreyas Dubey
Buy Arbitration and Conciliation Act, 1996 HERE
