Validation of an arbitrator selected by the defaulting party after an application under Section 11(6) by the courts: Who gets what?
Malu Sleepers Pvt. Ltd v. The Union of India & Another
(High Court Of Karnataka)
Civil Miscellaneous Petition No. 132 Of 2007 | 01-04-2008
The Respondent cannot exercise his power to appoint a nominee arbitrator beyond 30 days. In such situations, nominating an arbitrator by the respondent is not available under the Arbitration and Conciliation Act, 1996, after the petition has been filed under section 11 (6). I want to help you in getting the answer to this question with the help of this article?
The current position of law
Datar Switchgears Limited v. Tata Finance Limited and another(2000), there was a question in this case: whether the respondent still has the chance to appoint a nominee arbitrator if the 30 days have been passed. The court held that there isn't any prescribed time for appointing a nominee arbitrator. It's just that the nominee arbitrator has to be appointed before the application, which has to be filed under section 11 (6), and it was held valid.
Union of India v. Bharat battery manufacturing company private limited (2007), further the supreme court got the opportunity to develop the law from this case. In this case, the court should have confirmed the recalcitrant party's late nomination and allowed Bharat battery's right (due to the statute established in the Datar switchgear) to expire.
The court held that after filing a petition under section 11 (6), the nomination of arbitrator took place by the Union of India, which is not permissible under law. It was given that once we file a petition for the appointment of an arbitrator, then the power to appoint an arbitrator ends according to the arbitration clause of the agreement. Hence nominating an arbitrator by the union of India was without jurisdiction, and the court dismissed the appeal.
The same happened in Zion Promoters and Developers Private Limited v. Ferrous Infrastructure Private Limited (2016). An arbitrator was appointed by Ferrous infrastructure after the issuing of notice by the High Court under section 11 (6). The opposite party, the Zion Promoters challenged the same and requested for an appointment of an independent arbitrator. The court held that the right of appointing an arbitrator of Ferrous infrastructure had to end after applying section 11 (6), and the appointment of nominee arbitrator by it was not valid.
Problem and solution
The Supreme Court has given it a decision many times the defaulting party loses its right of appointing an arbitrator by its own the moment the aggrieved party applies to § 11 of the Arbitration and Conciliation Act 1996.
Rapti contractor v. Executive Engineer and others, the High Court of Uttarakhand appointed the same person who the respondent nominated despite the appointment made after applying Section 11.
The same went with the case of Malu Sleepers Private Limited versus Union of India. The high court of Karnataka uh appointed the same arbitrator which the defaulting party suggested.
In general, the decisions of the high court of Uttarakhand and Karnataka have contributed to the emergence of an uncommon profession with unusual implications.
The court will not be able to restore such a squandered right. In other words, the defaulting party's arbitrator cannot be confirmed by the court. This frequently occurs when the court believes that an independent arbitrator should be appointed.
This right of the applicant to have another arbitrator than the one which the defaulting party had selected, on the other hand, is a special entitlement. This is relevant in the kinds of disputes which involve the public-sector entities.
The difference is significant between the court appointing an arbitrator and just approving the appointed person who the defaulting party has selected. If the applicant's right to nominate an arbitrator is not exercised, then we will have a defiant party getting away with the appointment of an arbitrator appointed afterward.
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