May 21, 2024

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“Arbitration – Party Without Notice Of Section 11(6) Petition filed By Other Party Free To Appoint Arbitrator: SC”

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The Supreme Court heard an appeal against an order passed by the High Court of Orissa in July 2019, dismissed the petition or granted leave for the same. Present appeal revolves around the appointment of the arbitrator and the consequences of the delayed appointment. The validity of the same is challenged in this appeal.

The background facts of the case include a contract between 2 parties being between the appellant and the respondent(s), the contract included arbitration clauses and the appointment of an arbitrator on behalf of both the parties. The respondents did not take any action on the appointment of an arbitrator. The appellant filed an Arbitration Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 in the High Court of Orissa on 23 October 2009, and no notice was served to the respondents i.e., they did not know about the Petition as they did not receive any kind of Notice.

The respondents thereafter asked the appellant to select 2 members from 4 numbered panels and finalize them to constitute an Arbitration Tribunal. The appellant chose two members from the said four members and the Tribunal was constituted. After the Tribunal was formed, the appellant appearing in the tribunal stated that the tribunal was not formed within the stipulated time. He also stated that the constitution of the tribunal is invalid, thereby should not proceed with the arbitration proceedings. Thereafter, it continued to hear the matters saying that it was formed with the consent of the appellant. The appellant did not participate in the arbitration proceedings and the Tribunal passed an ex-parte dated June 21, 2013. The respondents hereunder received the notices of appointment of Arbitrator in the year 2016, and the Court dismissed the arbitration petition by an Order dated July 26, 2019.

The honourable High Court citing the case Datar Switchgears Ltd. Vs. Tata Finance Ltd. & Anr” stated that once a petition is filed under section 11(6) of the Act, the respondents here forfeited their right of appointment of the arbitrator, and the High Court alone holds the right of appointment of the arbitrator.

But the facts of the case led to the conclusion, the appellant did not act upon it after filing the petition under Section 11(6). The respondents never knew this until they received notices in the year 2016. In that period, the respondents even gave the appellant a chance to elect or choose two arbitrators from their proposed panel of 4 members. The Apex Court finds that the action of the High Court is valid and dismissed the appeal stating the same.

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