Bau AG, Legal Successor of the Original ContraCtor, Dyckerhoff And Widmann, A.G v. Municip Al Corporation of Greater Mumbai And another (2015) 3 SCC 800 & Ors.

17 S.C.R. 275 275 PERKINS EASTMAN ARCHITECTS DPC & ANR. A v. HSCC (INDIA) LTD. (Arbitration Application No. 32 of 2019) NOVEMBER 26, 2019 [UDAY UMESH LALIT AND INDU MALHOTRA, JJ.] Arbitration and Conciliation Act, 1996 : ss. 2(1)(f), 11(12)(a) and 11(6) – Termination of contract – Appointment of sole Arbitrator – Application u/ss. 11(12)(a) and 11(6) by the contraCtor company on the grounds that sole Arbitrator waS not appointed by Competent Authority; that such appointment was beyond the period prescribed and that an independent and impartial arbitrator was required to be appointed – Objection to maintainability of the application – Held : In the facts of the present case, the arbiration is an International Commercial Arbitration and hence the application is maintainable – However, the delay in appointing the Arbitrator cannot be said to be of such magnitude to attract exercise of power u/s 11 – If there are justifiable doubts as to the independence and impartiality of the sole arbitrator, and if other circumstances warrant appointment of an independent Arbitrator by ignoring the procedure prescribed, such appointment can be made by the Court – In the facts of the present case, the application is entertainable – Retired Judge of Supreme Court appointed as the sole Arbitrator. Arbitration: Appointment of sole Arbitrator – Held : Where only one party has a right to appoint sole Arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution – The person having interest in the outcome or decision of the dispute, must not have the power to appoint sole arbitrator and in such case appointment can be made by the Court. Allowing the arbitration applications, the Court HELD:

It is not disputed by the respondent that it was a requisite condition to declare a lead member of the Consortium 275 B C D E F G H 276 SUPREME COURT REPORTS [2019] 17 S.C.R. A B C D E F G H and the applicant No.1 was shown to be the lead member of the Consortium. Even if the liability of both the applicants was stated in Clause 9 of the Consortium Agapplicant No.1 to be the lead member. The lead member of the Consortium company i.e. applicant No.1 being an Architectural Firm having its registered office in New York, requirements of Section 2(1)(f) of the Arbitration and Conciliation Act, 1996 are satisfied and the arbitration in the present case would be an “International Commercial Arbitration” [Paras 8 and 10] [286-A-B; 289-A-B] Larsen and Toubro Limited SCOMI Engineering BHD v. Mumbai Metropolitan Region Development Authority (2019) 2 SCC 271 : [2018] 14 SCR 22 – relied on.

The communication invoking arbitration in terms of Clause 24 was sent by the Applicants on 28.06.2019 and the period within which the respondent was to make the necessary appointment expired on 28.07.2019. The next day was a working day but the appointment was made on Tuesday, the 30th July, 2019. Technically, the appointment was not within the time stipulated but such delay on part of the respondent could not be said to be an infraction of such magnitude that exercise of power by the Court under Section 11 of the Act merely on that ground is called for. [Para 12] [289-C-E]

3.1. In the present case, Clause 24 of the Agreement empowers the Chairman and Managing Director of the respondent to make the appointment of a sole arbitrator and said Clause also stipulates that no person other than a person appointed by such Chairman and Managing Director of the respondent would act as an arbitrator. In a case where only one party has a right to appoint sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016) and recognised by the decision of this Court in *TRF Limited. [Paras 13 and 16] [289-E-F; 295-B-D] PERKINS EASTMAN ARCHITECTS DPC & ANR. v. HSCC (INDIA) LTD. 277

3.2 If there are justifiable doubts as to the independence and impartiality of the person nominated, and if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, such appointment can be made by the Court. On the issue of necessity and desirability of impartial and independent arbitrators the matter was considered by the Law Commission in its Report No.246 Paragraphs 53 to 60 under the heading “Neutrality of Arbitrators”. The imperatives of creating healthy arbitration environment demand that the instant application deserves acceptance. [Paras 18 and 20] [297-C-E; 300-B-C] *TRF Limited v. Energo Engineering Projects Limited (2017) 8 SCC 377 : [2017] 7 SCR 409 ; Indian Oil Corpn. Ltd. v. Raja Transport (P) Ltd. (2009) 8 SCC 520 : [2009] 13 SCR 510 ; Voestapline Schienen Gmbh v. Delhi Metro Rail Corpn. Ltd. (2017) 4 SCC 665 – relied on. Bharat Broadband Network Limited v. United Telecoms Limited (2019) 5 SCC 755 – referred to.

In the circumstances of the present case, a case is made out to entertain the instant application preferred by the Applicants. Therefore, the application is accepted and the effect of the letter dated 30.07.2019 issued by the respondent and of the appointment of the arbitrator is annulled. In exercise of the power conferred by Section 11(6) of the Act, Dr. Justice A.K. Sikri, former Judge of Supreme Court is appointed as the sole arbitrator to decide all the disputes arising out of the Agreement dated 22.05.2017, between the parties, subject to the mandatory declaration made under the amended Section 12 of the Act with respect to independence and impartiality and the ability to devote sufficient time to complete the arbitration within the period as per Section 29A of the Act. [Para 25] [302-E-G]