Case Summary — Datar Switchgears Ltd v. Tata Finance Ltd. & Others
Facts of the case
Appellant (Datar switchgear Limited) got into a lease agreement with the respondent (Tata finance Limited) concerning certain machinery.
Clause 20.9 mentioned in the agreement is about the arbitration clause, which mentions that " in case of any dispute under this lease the same shall be referred to an arbitrator to be nominated by the lessor and the award of the arbitrator shall be final and binding on all the parties concerned ".
When the dispute arose between both the parties then on 5.8.1999, the respondent centre notice to the appellant and demanded payment of rupees 2,84,58,701 within a limit of 14 days and also stated that if there is a case of failure in payment of this amount, then the notice will be treated as the notice which has been issued under clause 20.9 of the lease agreement. After that, there was no payment by the appellant in it, and neither the respondent appointed an arbitrator even when the 30 days time limit lapsed. But the respondent filed an arbitration petition on 26.10.1999 under section 9 of the arbitration act for interim protection. On the 25th of November 1999, the respondent then appointed sole arbitrator by enforcing clause 20.9 of the lease agreement, and in turn, the arbitrator issued notice for the appellant, asking them to appear before him on 13.3.2000.
Before the Bombay High Court, the appellant applied for the appointment of the arbitrator. Still, the petition was rejected by the High Court, stating that the respondent has already appointed the arbitrator petition was not maintainable. After that, the order was challenged before the Supreme Court.
Points of Appellant
The power of appointing an arbitrator should have been exercised within a reasonable period. A unilateral appointment was not a good act and could have been asked to the appellant or could have proposed the name to the appellant before appointing an arbitrator.
Points of Respondent
No period is mentioned or prescribed, and the party can make an appointment even after passing 30 days as per section 11(6), provided that it should be made before the filing of an application to the court under section 11.
The decision of the Supreme Court
There wasn't any agreement's failure, nor the respondent failed to act according to the agreement. There was no cause of action to sustain the same.
Conclusions based on the decision of the Supreme Court
In section 11( 2 ) of the Arbitration and Conciliation Act, 1996, the parties are free and do not have any foundation for appointing the arbitrator; it means that they can follow any procedure for the arbitrator's appointment.
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