International commercial arbitration is defined in the Act as a dispute arising out of legal relationships whether contractual or not which is considered commercial under Indian law and in which one of the parties is an individual national of a foreign country, a body corporate incorporated in a foreign country, association or a body of individuals whose central management and control is exercised in any country other than India, the government of a foreign country.
When can a party approach SC for the appointment of the arbitrator?
In case a dispute has arisen between parties to an arbitration agreement one of the parties can invoke an arbitration clause. If the other party has not cooperated, i.e failed to appoint an arbitrator within 30 days from receipt of the request, then the party invoking arbitration can approach the Supreme Court in case of international arbitration to have an arbitrator or arbitral tribunal appointed.[1]
The Court has to follow the appointment procedure decided by the parties or it can choose on its own?
It is noted by the Supreme Court in the case of UOI v. VS Engineerings that in case the railways or public institutions fail to appoint an arbitrator within the time limit then if the other party approached the Supreme Court or High Court, they can appoint the officials as decided by the parties or someone new. However, in a case involving private parties, it is necessary that the procedure agreed to between the parties need to be followed by the Court as noted in Union of India v Parmar Construction Company.
Union Of India and Anr. V. Vs Engineerings (2006 13 SCC 240)
- Facts: General Manager of Railways had requested the respondent to refer the dispute to the arbitral tribunal. It suggested 4 names to the respondent out of which 1 name was accepted by the respondent and a tribunal was constituted. However, some other railway official was made the arbitrator and also some claims were not referred to the tribunal. So, the respondent filed an application before the High Court under Section 11 of the Act seeking the appointment of an HC judge as arbitrator. Court appointed a retd. Judge and referred all 14 claims to the arbitral tribunal. The appellant challenged the order saying that an arbitral tribunal was already constituted between the parties. However, the single judge dismissed the application subsequent to which the appellant approached the Supreme Court by special leave.
- Supreme Court noted that the railways and public institutions are very slow in reacting to the request made by a contractor for the appointment of the arbitrator. The administrative authorities cannot be allowed to sleep over the manner and leave the citizens without any remedy. In this case as the General Manager, Railways failed to appoint the Arbitral Tribunal after the expiry of the notice of 30 days or before the party approached the HC then HC is fully justified in appointing an arbitrator under Section 11 of the Act. The HC has the discretion to appoint any railway officer or to appoint an HC judge.
- However, as the arbitral tribunal was already appointed the SC had set aside the order of the HC while reiterating that in case the railway or public institutions are slow in appointing arbitrators then HC can appoint anyone as an arbitrator.
SBP & Co. v. Patel Engineering Ltd and Anr. (2006)
Noted that the high court can appoint the person designated in the arbitration clause or a person other than the designated person such as an HC judge according to the situation.
Union Of India vs. Parmar Construction Company (2019)
Supreme Court quashed the decision of the High Court of appointing an independent arbitrator in complete disregard of the procedure established and agreed upon by the parties in their Contract. Supreme Court directed the appellant to appoint an arbitrator in terms of the agreement between the parties.
How does Supreme Court help the party approaching it under Section 11?
The Court helps the party by appointing an arbitrator. Further, as per the Act the Court is bound to dispose the application in 60 days hence providing an expedient remedy to the party.
Weatherford Oil Tool Middle East … vs Baker Hughes Singapore Pte
- The Respondent had made a proposal for consolidation of the disputes under the Agreements and for referring the disputes for adjudication by a sole arbitrator, consolidating into a single arbitration. The Respondent however didn’t agree to any of the names provided by the Petitioner.
- Since the Respondent had proposed settlement of all disputes through arbitration, the Court referred the parties to sole arbitrator in a single arbitration for adjudication who shall conduct arbitration as per the agreements between the parties.
What are the basic guiding principles of approaching the Supreme Court to appoint an arbitrator?
It should be noted that the order of the Court under Sec 11 of the Act attains finality hence they cannot be appealed. The party approaching the Court must be cautious of the same. Further, the Act provides that such an application shall be resolved within 60 days. Also, it is not necessary that the Chief Justice of India or the Chief Justice of the High Court will themselves dispose of the application as they can delegate this power to some other judge or institution.
Duro Felguera SA v. Gangavaram Port Limited, 2017
Judges: Kurian Joseph and R. Banumathi
Court Observed:
- It is a judicial power and not merely an administrative function.
- It noted that the power under Section 11(6) of the Act, in its entirety, could be delegated, by the Chief Justice of the High Court only to another Judge of that Court and by the Chief Justice of India to another Judge of the Supreme Court.
- That after the Amendment Act of 2015, the application under Section 11 can be heard by the Chief Justice but also any other judge of the Supreme Court and High Court.
- Further, it is clarified in Sub-section 6-B that the designation of any person or institution by the Supreme Court or High Court would not be construed as a delegation of judicial power. However, the order passed by a designated person or institution would continue to be regarded as a judicial order.
- Subsection (7) provides that the order passed under this section shall not be appealable. So, finality is attached to the order passed under Section 11.
- Sub-section 13 provides that the application shall be expeditiously disposed of within 60 days from the date of service of notice on the opposite party.
In case of an International Commercial Arbitration should the aggrieved party approach the High Court or the Supreme Court?
In International Commercial Arbitration the aggrieved party should approach the Supreme Court for appointment of the arbitrator. This is governed by Section 11(9) of the Act which provides that in case of appointment of a sole or third arbitrator in international commercial arbitration, the supreme court or the person/instituted designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
M/S Comed Chemicals Ltd. v. CN Ramchand
- Petitioner filed the petition under Section 11 of the Arbitration and Conciliation Act, 1996 praying to the Hon’ble Chief Justice of India to appoint third Arbitrator as presiding Arbitrator or to appoint Sole Arbitrator as deemed fit in the facts and circumstances of the case. The Petitioner had sent a notice to appoint an arbitrator in 2005 and also mentioned their preferred Arbitrator.
- The Respondent rejected the Arbitrator appointed by the Petitioner. That the Petitioner had earlier approached the Gujarat High Court Chief Justice to appoint an arbitrator, but the Respondent replied that since it was a foreign national the matter should be referred to the Chief Justice of India and not at High Court.
- Pursuant to this the Petitioner withdrew his petition before the HC and approached the SC in 2007. The Supreme Court held that the case is of International Commercial Arbitration and that a sole arbitrator should be appointed. The Court appointed a retired Judge, City Civil Court, Ahmedabad as the sole arbitrator.
Amway India Enterprises Pvt. Ltd. vs Ravindranath Rao Sindhia,
- The counsel representing the appellant, Amway India said that petition is not maintainable before High Court as the dispute relates to international commercial arbitration which is covered by Section 2(1)(f)(i) of the Arbitration inasmuch as the respondents are husband and wife who are both nationals of and habitually resident in the United States of America. This plea was turned down by the impugned judgment as it was held that the central management and control of this association or body of individuals is exercised only in India.
- The Court held that whatever be the transaction between the parties if any transaction happens between persons where at least one of them is a foreign national or is habitually resident in any country other than India or by a body corporate which is incorporated in any country other than India, or by the Government of a foreign country, the arbitration becomes an international commercial arbitration notwithstanding the fact that the individual, body corporate, or the government of a foreign country referred to in Section 2(1)(f) carry on business in India through a business office in India.
- Hence, Supreme Court decided that the Delhi High Court had no jurisdiction to appoint an arbitrator in the facts of this case.
Whether international arbitration of non-commercial nature be referred to Supreme Court under Section 11(9)?
M/S Comed Chemicals Ltd. v. CN Ramchand
- In this case, it was argued that there is no International Commercial Arbitration as the parties had agreed to provide technical know-how and expertise to the applicant company for which the respondent had to be paid fees. The Counsel had relied on the cases of Kamani Engineering Corporation Ltd. & Ors. v. Societe De Traction Et D’Electricite Societe Anonyme, & Ors., AIR 1965 Bom 114, Josef Meisaner GMBR & Co. v. Kanoria Chemicals & Industries Ltd. & Anr., AIR 1986 Cal 45 and Mukesh H.Mehta & Ors. v. Harendra Mehta, (1998) 92 Comp Cases 402, wherein it was held if the work undertaken by a person if of a professional character and does not involve business or trade, the contract cannot be said to be of `commercial’ nature.
- This Court, however, rejected the contention. It was held that the agreement to render consultancy service by the appellant to the respondent was `commercial’ in nature and there was a commercial relationship between the parties. The word commercial has to be construed in a wide manner.
Conclusion
A party to an international commercial arbitration can approach the Supreme Court for the appointment of an arbitrator under Section 11(9). This is Court’s judicial power and is restricted to interpreting the existence of an arbitration agreement between the parties. Court has to ensure that appointment of an arbitrator is done as per the agreement between the parties. Supreme Court has to dispose of the application in sixty days and hence provides an expedient remedy. The Court has the power to delegate the work to another person or institution. Also, it is crucial to note that in the case of international commercial arbitration the party cannot approach the High Court for the appointment of an arbitrator.
[1] Section 11(5) of the Arbitration and Conciliation Act, 1996.
