Holding

The 30‑day period in Sections 11(4) and 11(5) does not apply to Section 11(6); the right to appoint does not lapse after 30 days, and an appointment made before a Section 11(6) application is valid, so challenges to bias must be made under Section 34.

Summary

Ace Pipeline Contracts Private Ltd. entered into a pipeline contract with Bharat Petroleum Corporation Ltd. that contained Clause 91, appointing the Director (Marketing) of BPCL or his nominee as sole arbitrator. When a dispute arose, Ace wrote to the Director requesting arbitration and asked that a retired Supreme Court judge be appointed, fearing bias. The Director appointed Shri P.S. Bhargava, a BPCL executive, on 22 August 2005 and communicated the appointment on 26 August 2005. Ace filed an application under Sections 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of the retired judge, arguing that the 30‑day period for appointment had elapsed and that the appointment was invalid. The Delhi High Court dismissed the petition, holding that the appointment was made within a reasonable time and that any challenge to bias must be made under Section 34. On appeal, the Supreme Court held that the 30‑day limitation in Sections 11(4) and 11(5) does not apply to Section 11(6); the right to appoint does not forfeit after 30 days, and an appointment made before the Section 11(6) application is valid. Consequently, the High Court’s order was affirmed and the appeal dismissed.

Issues considered

The applicability of the 30‑day limitation prescribed in Sections 11(4) and 11(5) of the Arbitration and Conciliation Act, 1996 to appointments under Section 11(6).
Whether the right to appoint an arbitrator under an agreed procedure is forfeited after the lapse of 30 days.
Whether a court may issue mandamus under Section 11(6) to compel appointment of an arbitrator beyond the persons named in the contract.
Whether the High Court was correct in refusing to set aside the appointment and directing that any bias claim be pursued under Section 34.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11, s. 34

Subjects

ArbitrationSection 11Appointment of arbitrator30‑day limitationMandamusBiasSection 34Contractual arbitration clause

Judgment

-f· ACE PIPELINE CONTRACTS PRIVA1E LIMIIBD A
v.
BHARAT PETROLEUM CORPORATION LIMIIBD

APRIL 4, 2007

[AK MATHUR AND TARUN CHATTERJEE, JJ.] B

Arbitration and Conciliation Act, 1996:
•
ss.11 & 34-Appointment ofArbitrator-Courts can issue mandamus to
authorities to appoint arbitrators as per the arbitration clause-But choice c
can go beyond the designated persons or institutions in exceptional cases
for reasons to be recorded or where both parties agree for common name-
Once a party has entered into an agreement with eyes wide open it cannot
plead that if any person nominated in the arbitration clause is appointed as
arbitrator he will not be impartial or objective-However, if a party feels that
D
the arbitrator has not acted independently or impartially, or he has suffered
,.-t from any bias, it can make application under s.34 to set aside the arbitra/
award on the ground that arbitrator acted with bias or malice in law or fact.

s.11 (6)-Application under-Held: Period of limitation of thirty days
cannot be invoked under s.11 (6). E
Appellant and Respondent-Corporation had entered into a contract which
contained an arbitration clause in terms of which disputes between the parties
were to be referred to the sole arbitration of an officer of the Respondent-
Corporation. Some differences arose between the parties on which Appellant
requested Respondent-Corporation to appoint an arbitrator. It is alleged that F
no one was appointed as arbitrator, pursuant to which Appellant filed
application before High Court under Section 11 of the Arbitration and
Conciliation Act, 1996 demanding appointment of some retired Judge of the
Supreme Cpurt as arbitrator on the ground that if any person nominated in
the arbitration clause is appointed, then it may suffer from bias or the
arbitrator may not be impartial or independent in taking decision. High Court
G
dismissed the application. Hence the present appeal

r
Dismissing the appeal, the Court

HELD: 1. A person of any nationality may be appointed as Arbitrator,
777 H
-i
778 SUPREME COURT REPORTS (2007] 4 S.C.R.

A unless otherwise agreed between the parties. Sub-section (2) of Section 11
says that subject to sub-section (6), the parties are free to agree on a procedure
....
for appointing the arbitrator or arbitrators. Sub-section (3) provides that
failing any agreement referred to in sub-section (2), one arbitrator can be
appointed by each party and the two arbitrators so appointed shall appoint the
third arbitrator who shall act as the presiding arbitrator. Sub-section (4) says
B that in case a party fails to make appointment within thirty days from the
date of receipt of the request to do so from the other party, or that the two
appointed arbitrators fail to nominate the third arbitrator within thirty days >-
from the date of their appointment, the appointment shall be made by the Chief
Justice or by any person or institution designated by him. Sub-section (5) •
c says failing any agreement referred to in sub-section (2), in an arbitration
with a sole arbitrator, ifthe parties fail to agree on the arbitrator within thirty
days from receipt of a request by one party from the other party to so agree
the appointment shall be made, upon request of a party, by the Chief Justice
or any person or institution designated by him. Therefore, the concept of thirty
days is there in sub-sections (4) & (5). This is in the event the parties did not
D come to appoint arbitrator or the two nominated arbitrators fail to agree within
thirty days for appointment of third arbitrator, application can be moved under
Section 11(5) of the Act to the Chief Justice for appointment ofarbitrator.
..,
....
But in sub-section (6), where, the procedure has already been agreed upon by
the parties, as in the present case, and in that event, if a party fails to act as
E required under that procedure or the parties, or the two appointed arbitrators,
fail to reach an agreement expected of them under that procedure or a person,
including an institution, fails to perform any function entrusted to him or it
under that procedure, a party may in that event, request the Chief Justice or
a person or an institution designated by him to make necessary measures,
unless the agreement on the appointment procedure provides other means for
F appointment of arbitrator. Therefore, so far as the period of thirty days is
concerned, it is not mentioned in Sub-section (6). The period oflimitation is
-'
only provided under sub-sections ( 4) & (5) of Section 11. As such, as per the
statute, the period of limitation of thirty days cannot be invoked under sub-
section (6) of Section 11 of the Act. (Para 6] (784-D-H; 785-A-C] I-

G Great Eastern Shipping Co. Ltd v. Board of Trustees for the Port of
Calcutta, [2005] 1 Arb. LR 389 and J. V. v. Union ofIndia & Ors., [Full Bench le
decision of the Delhi High Court decided on 31.8.2006, overruled.

Union of India v. Popular Construction Co., [2001] 8 SCC 470 and The ......
State of Uttar Pradesh & Ors. v. Babu Ram Upadhya, [1961] 2 SCR 679,
H
ACE PIPELINE CONTRACTS PRIVATE LTD. v. BHARAT PETROLEUM CORPORATION •,TD. 779
distinguished.

Datar Switchgears Ltd v. Tata Finance Ltd & Anr., (2000) 8 SCC 151,
relied on.

Pun} Lloyd Ltd v. Petronet MHB Ltd, (2006) 2 SCC 638; BSNL & Ors.
v. Subhash Chandra Kanchan & Anr., [2006) 8 SCC 279; Shin Satellite Public B
Co. Ltd. v. Jain Studios Ltd, (2006] 2 SCC 628; Union ofIndia & Anr. v. Ml
s. V. S. Engineering (P) Ltd., [2006) 12 SCALE 144; BSNL & Ors. v. Subhash
Chandra Kanchan & Anr., (2006) 8 SCC 279 and Union of India & Anr v.
MP. Gupta, [2004) 10 SCC 504, referred to.

2.1. This Court is aware of the Departmental lethargy in making C
appointment of arbitrators in terms of the arbitration clause. Therefore,
Mandamus can be issued by the Courts in exercise of powers under Section
11(6) of the Act but the demand should be in the event of failure by the
authorities to appoint arbitrators within the reasonable time. Courts are not
powerless to issue mandamus to the authorities to appoint arbitrators as far
as possible as per the arbitration clause. But in large number of cases if it D
is found that it would not be conducive in the interest of parties or for any
other reasons to be recorded in writing, choice can go beyond the designated
persons or institutions in appropriate cases. But it should normally be adhered
to the terms of arbitration clause and appoint the arbitrator/arbitrators named
therein except in exceptional cases for reasons to be recorded or where both E
parties agree for common name. [Para 13) [789-D-E]

2.2. In the present case, the appellant's demand was to get some retired
Judge of the Supreme Court to be appointed as arbitrator on the ground that
if any person nominated in the arbitration clause is appointed, then it may
suffer from bias or the arbitrator may not be impartial or independent in F
taking decision. Once a party has entered into an agreement with eyes wide
open it cannot wriggle out of the situation that if any person of the respondent-
BPCL is appointed as arbitrator he will not be impartial or objective. However,
if the appellant feels that the arbitrator has not acted independently or
impartially, or he has suffered from any bias, it will always be open to the G
party to make an application under Section 34 of the Act to set aside the award
on the ground that arbitrator acted with bias or malice in law or fact. There
is no reason to interfere with the order passed by the High Court in Arbitration
Petition. The arbitrator has already been appointed. He should proceed in the
matter and decide the dispute expeditiously.
[Paras 14 and 15] (789-F-H; 790-A] H
780 SUPREME COURT REPORTS [2007] 4 S.C.R.

A CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1783 of2007.

From the Final Judgment and Order dated 18.01.2006 of the High Court
of Delhi at New Delhi in Arbitration Petition No. 181 of 2005.

Soli J. Sorabjee, Manish Bhatt, Mukesh Kumar, Mahima Shroff and
B Chirag M. Shroff for the Appellant.
Sudhir Chandra, Parijat Sinha, R. Rea Sinha, Snehsish Mukherjee and
S.C. Ghose for the Respondent.

The Judgment of the Court was delivered by
c A.K. MA THUR, J. 1. Leave granted.

2. This appeal is directed against the order dated 18.1.2006 passed by
learned Single Judge of the High Court of Delhi in Arbitration Petition No.181
of2005 whereby learned Single Judge dismissed the application for appointment
D of Arbitrator. Hence, the present appeal against the aforesaid order.

3. Brief facts which are necessary for disposal of this appeal are that
an application styled under Section 11(5) of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as 'the Act') was moved by the Ace Pipeline
Contracts Private Limited, the appellant herein, for appointing a retired Judge
E of the Supreme Court of India to adjudicate the claims and disputes between
the parties arising out of the contract between the parties dated I0.06.2002.
The said contract pertained to the laying down of a pipeline and associated
facilities for Section-I [Manmad in Maharashtra to M.P. Border near (Shirpur)]
for Mumbai-Manmad Pipeline .Extension Project of the respondent- Bharat
p· Petroleum Corporation Limited (hereinafter referred to as 'BPCL'). The main
issue was with regard to interpretation of Clause 91 of the contract which
pertains to appointment of arbitrator. Clause 91 of the contract reads as under:

"91. ARBITRATION

All disputes or differences whatsoever which shall at any time arise
G between the parties hereto touching or concerning the works or the
execution or maintenance thereof under this Contract or the right
touching or concerning the works or the execution or the maintenance
effect thereof or to the rights or liabilities of the parties or arising out
of or in relation thereto whether during or after completion of the
H contract or whether before or after detennination foreclosure or breach
'

t

ACE PIPELINE CONTRACTS PRIVATE LID. v. BHARAT PETROLEUM CORPORATION LID. [A. K. MATHUR, J.] 78}
--;..

of the Contract (other than those in respect of which the decision of A
any person is by the Contract expressed to be final and binding) shall
after written notice by either party to the Contract to the other of them
and to the Appointing Authority be referred for adjudication, to a sole
Arbitrator to be appointed as hereinafter provided.

a. Any dispute or difference of any nature whatsoever any claim, B
,.. cross-claim, counter-claim or set off of the Corporation against the
,.., Vendor or regarding any right, liability, act, omission or account of
any of the parties hereto arising out of or in relation to this agreement
shall be referred to the Sole Arbitration of the Director (Marketing) of
the Corporation or of some officer of the Corporation who may be
nominated by the Director (Marketing). The Vendor will not be entitled
c
to raise any objection to any such Arbitrator on the ground· that the
Arbitrator is an Officer of the Corporation or that he has dealt with
the matters to which the contract relates or that in the course of his
duties as an Officer of the Corporation he had expressed views on all
or any other matters in dispute or difference. In the event of the D
,,? Arbitrator to whom the matter is originally referred being transferred
or vaca~ing his office or being unable to act for any reason, the
Director (Marketing) as aforesaid at the time of such transfer, vacation
of office or inability to act may in the discretion of the Director
(Marketing) designate another person to act as Arbitrator in
accordance with the terms of the agreement to the end and intent that E

-
the original Arbitrator shall be entitled to continue the arbitration
proceedings notwithstanding his transfer or vacation of office as an
Officer of the Corporation if the Director (Marketing) does not
designate another person to act as arbitrator on such transfer, vacation
of office or inability of original arbitrator. Such persons shall be F
entitled to proceed with the reference from the point at which it was
left by his predecessor. It is also a term of this contract that no person
other than the Director (Marketing) or a person nominated by such
Director (Marketing) of the Corporation as aforesaid shall act as an
Arbitrator hereunder. The award of the Arbitrator so appointed shall
be final conclusive and binding on all parties to the agreement subject G
to the provisions of the Conciliation & Arbitration Act, 1996 or any
r statutory modification or re-enactment thereof and the rules made
thereunder for the time being in force shall apply to the arbitration
proceedings under this clause."
H
782 SUPREME COURT REPORTS (2007] 4 S.C.R.

A Clause 91 provides that any dispute arising between the parties shall be
settled through arbitration and the appointing authority i.e. the Director
(Marketing) himself or he may nominate any other person of the Corporation
to act as an Arbitrator to resolve the disputes and the vendor will not be
entitled to raise any objection to such arbitrator on the ground that the
Arbitrator is an officer of the Corporation or that he has dealt with the matters
B to which the .contract relates or that in the course of his duties as an Officer
of the Corporation he had expressed views on all or any other matters in
dispute or difference. Since some differences arose between the parties with
regard to the claim of the appellant, a letter dated 21.7.2005 was written to the
Director (Marketing) invoking clause 91 of the agreement and requesting him
C to refer the matter to arbitration for resolving the differences. It was also
requested that the Director (Marketing) may accede to the request of the
appellant for adjudication of the dispute by a former Judge of the Supreme
Court of India so as to remove any justifiable doubts to the independence
or impartiality of the said Arbitrator. It was further submitted that on receiving
the communication, the appellant would suggest the name of the retired Judge
D of the Supreme Court of India for the purpose of appointment as Arbitrator.
It was alleged that no one was appointed as Arbitrator, therefore, on 22.8.2005
the appellant filed the present application before the High Court for
appointment of Arbitrator under Section 11(5) & (6) of the Act. It was also
pointed out that after presentation of the application on 22.8.2005, the appellant
E received a letter of the Director (Marketing) nominating Shri P.S. Bhargava,
Executive Director (Quality Control Cell) of the respondent- BPCL to act as
sole arbitrator. It was contended that the letter appointing Shri P.S.Bhargava
as sole Arbitrator was received by the appellant subsequent to the filing of
the petition before the High Court on 26.8.2005. It was also pointed out that
Shri P.S.Bhargava was appointed as Arbitrator on 22.8.2005 and the same was
F communicated and received by the appellant through courier on 26.8.2005.
Therefore, it was submitted before the High Court that since the appointment
of Arbitrator has been made after the filing of the petition by the appellant
before the High Court, the Director (Marketing) ceased to have any right to
appoint any Arbitrator after expiry of thirty days. Therefore, a request was
G made that any retired Judge of the Supreme Court may be appointed as
Arbitrator. This was contested by the respondent by filing a reply. It was
pointed out that the notice dated 21.7.2005 was received by the Director
(Marketing) on 26. 7.2005 and a request was made to the appellant to supply
copy of the arbitration agreement and other corresponding documents as he
was not aware of the procedure for appointment of the Arbitrator. The Director
H (Marketing) received reply to the communication dated 12.8.2005 on 16.8.2005
ACE PIPELINE CONTRACTS PRIVATE Lm. v. BHARAT PETROLEUM CORPORATION Lm. [A. K. MATHUR, J.J 783

which was received in the Office on 17 .8.2005. After receiving the A
communication and all the materials on 17 .8.2005, the appointing authority
appointed Shri P.S.Bhargava as Arbitrator on 22.8.2005 and a communication
was sent to the appellant through courier which was received by him on
26.8.2005. It was also pointed out after receipt of the reply to the communication
dated 12.8.2005 on 16.8.2005, 19th, 20th & 21st August, 2005 Office remained
closed on account of Rakshya Bandhan and weekly holidays. The Director 13
(Marketing) sent reply on 22.8.2005 appointing Shri P.S.Bhargava as Arbitrator.
... It was also pointed out that the whole action was done with urgency and
there was no delay on the part of the Administration.

4. Learned Single Judge after examining the matter came to the conclusion C
that it cannot be said that the appointing authority did not act with due
dispatch. Learned Single Judge also held that as per the terms of the agreement
in question with re~ard to independence and objectivity of the arbitrator can
be examined in view of the agreement and it was observed that this question
can be raised before the arbitrator and even if they fail, it can be agitated
under Section 34 of the Act. However, learned Single Judge concluded that D
the situation had not arisen to invoke the provisions of Section 11 (6) of the
Act at present and consequently, dismissed the petition. Aggrieved against
the impugned order dated 18.1.2006, the present appeal was filed.

5. We have heard Shri Soli J. Sorabjee, learned Senior counsel for the
appellant, and Shri Sudhir Chandra, learned senior counsel for the respondent, E
and perused the records. Though the application moved by the appellant
under Section 11 of the Act was of course very confusing as it also mentioned
Section 11(5) as well as Section 11(6) of the Act, in fact the application under
Section 11(5) of the Act was not maintainable. Be that as it may, learned Single
Judge proceeded on the basis of treating this application under Section 11(6) F
of the Act. This may be bona fide error. Mr. Sorabjee, learned Senior Counsel
for the appellant, strenuously urged that after expiry of period of thirty days,
the respondent has lost the right to appoint Arbitrator under Clause 9 l of the
agreement and in support thereof, invited our· attention to the following
decisions of this Court.
G
(i) [200018 sec 151
[Datar Switchgears Ltd. v. Tata Finance Ltd & Anr.,]
(iI) [2006] 2 sec 638
[Punj Lloyd Ltd. v. Petronet MHB Ltd.,] H
:

1
784 SUPREME COURT REPORTS [2007) 4 S.C.R.

(tit) [20061 s sec 219
,.\--
A
[BSNL & Ors. v. Subash Chandra Kanchari & Anr.,]

(iv) [2006] 2 sec 628
[Shin Satellite Public Co.Ltd v. Jain Studios Ltd.,]
B (v) (2006] 12 SCALE 144
[Union of India & Anr. v. Mis. V.S.Engineering (P) Ltd.,] -"'-.

Our attention was also invited to a Full Bench decision of the Delhi High
....
Court in J. V. v. Union of India & Ors., decided on 31.8.2006 and a decision
c of the Calcutta High Court in Great Eastern Shipping Co. Ltd v. Board of
Trustees/or the Port of Calcutta, (2005) 1 Arb. LR 389.

6. Before we deal with each case cited above, it may be relevant to deal
with scope of Section 11 of the Act. A person of any JJ.ationality may be
appointed as Arbitrator, unless otherwise agreed between the parties. Sub-
D section (2) of Section 11 says that subject to sub-section (6), the parties are
free to agree on a procedure for appointing the arbitrator or arbitrators. Sub- ...
section (3) provides that failing any agreement referred to in sub-section (2), ~
one arbitrator can be appointed by each party and the two arbitrators so
appointed shall appoint the third arbitrator who shall act as the presiding
arbitrator. Sub-section (4) says that in case a party fails to make appointment
E within thirty days from the date of receipt of the request to do so from the
..
other party, or that the two appointed arbitrators fail to nominate the third
arbitrator within thirty days from the date of their appointment, the appointment
shall be made by the Chief Justice or by any person or institution designated
by him. Sub-section (5) says failing any agreement referred to in sub-section
F (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the
arbitrator within thirty days from receipt of a request by one party from the ~
other party to so agree the appointment shall be. made, upon request of a
party, by the Chief Justice or any person or institution designated by him.
Therefore, the concept of thirty days is there in Sub-sections (4) & (5). This
is in the event of the parties did not come to appoint arbitrator or the two
G nominated arbitrators fail to agree within thirty days for appointment of third
arbitrator, application can be moved under Section 11(5) of the Act to the
Chief Justice for appointment of arbitrator. But in sub-section (6), where, the
procedure has already been agreed upon by the parties, as in the present ~
case, and in that event, if a party fails to act as required under that procedure
H or the parties, or the tWo appointed arbitrators, fail to reach an agreement
I

r
ACE PIPELINE CONTRACTS PRIVATE LID. v. BHARAT PETROLEUM CORPORATION LID. [A. K. MATHUR, J.) 785
"""?'
-+.
expected of them under that procedure or a person, including an institution, A
fails to perform any function entrusted to him or it under that procedure, a
;
party may in that event, request the Chief Justice or a person or an institution
designated by him to make necessary measures, unless the agreement on the
appointment procedure provides other means for appointment of arbitrator.
Therefore, so far as the period of thirty days is concerned, it is not mentioned
in Sub-section (6). The period of limitation is only provided under sub- ~
_,,. sections (4) & (5) of Section 11. As such, as per the statute, the period of
limitation of thirty days cannot be invoked under sub-section (6) of Section
•· 1I of the Act. In this context, their Lordships in Datar Switchgears Ltd
(supra) did not permit to count 30 days as such in sub-section (6). We cannot
do any better than to reproduce paragraphs I 9, 20 & 21 of the judgment in a
that case.

"19.So far as cases falling under Section I 1(6) are concerned- such as
the one before us no time limit has been prescribed under the Act,
whereas a period of 30 days has been prescribed under Section 11(4)
and Section I 1(5) of the Act. In our view, therefore, so far as Section D
I I (6) is concerned, if one party demands the opposite party to appoint
...i an arbitrator and the opposite party does not make an appointment
within 30 days of the demand, the right to appointment does not get
automatically forfeited after expiry of 30 days. If the opposite party
makes an appointment even after 30 days of the demand, but before
the frrst party has moved the court under Section 11, that would be E
sufficient. In other words, in cases arising under Section 11(6), if the
opposite party has not made an appointment within 30 days of demand,
the right to make appointment is not forfeited but continues, but an
appointment has to be made before the former files application under
Section 11 seeking appointment of an arbitrator. Only then the right F
of the opposite party ceases. We do not, therefore, agree with the
observation in the above judgments that if the appointment is not
made within 30 days of demand, the right to appoint an arbitrator
under Section 11 (6) is forfeited.

20. In the present case the respondent made the appointment before G
the appellant filed the application under Section 11 (6) though it was
beyond 30 days from the date of demand. In our view, the appointment
r of the arbitrator by the respondent is valid and it cannot be said that
the right was forfeited after expiry of 30 days from the date of demand.

21. We need not decide whether for purposes of sub-sections (4) and H
i
786 SUPREME COURT REPORTS [2007] 4 S.C.R.
+- '
A (5) of Section, which expressly prescribe 30 days, the period of 30
days is mandatory or not."

7. The observations made by their Lordships are very clear and Their
Lordships negatived the contention that 30 days should not be read in sub-
section (6) of Section 11 of the Act if the opposite party has not made an
B appointment within 30 days of demand, the right to make appointment is not
forfeited but continues. Their Lordships in paragraph 20 have also very
--".
categorically held that in the present case the respondent made the
~
appointment before the appellant filed the app 1lication under section 11 (6),
though it was beyond 30 days from the date of demand, the appointment of
"'
the arbitrator by the respondent was valid and it cannot be said that the right
c was forfeited after expiry of 30 days from the date of demand. Their Lordships
were also very clear in their mind in paragraph 21 and observed, "we need
not decide whether for purpose of sub-sections (4) and (5) of Section 11,
which expressly prescribe 30 days, the period of 30 days is mandatory or not.
" We are only concerned with reading of 30 days within sub-section (6) of
D Section 11. So far as the period of 30 days with regard to Section 11(6) is
concerned, there is no manner of doubt that their Lordships had not invoked -i- .
.I.
30 days as mandatory period under Section 11(6) and beyond that it cannot
be invoked by the appointing authority. Therefore, it is totally misnomer to
read 30 days in Section 11 ( 6) of the Act, though Shri Sorabjee, learned senior
counsel appearing for the appellant tried to emphasize that the decision in
E Datar has been affirmed by a three Judge Bench and therefore, 30 days
should be read in Section 11(6) of the Act is also not correct.

8. In the case of Punj Lloyd Ltd. (Supra), Their Lordships only quoted
paragraph 19 in part and not in full. Full paragraph 19 of the judgment in
F Datar (supra) has been reproduced above. In fact subsequent observation of
their Lordships, "We do not, therefore, agree with the observation in the
above judgments that if the appointment is not made within 30 days of
demand, the right to appoint an arbitrator under Section 11(6) is forfeited",
this portion of order was not reproduced. Therefore, it is not a case that the
decision given by two Judge Bench in Datar (supra) has been reaffirmed and
G this is binding on us. We regret to say this is not correct. In the case of Punj
Llyod Ltd Their Lordships only set aside the order and remitted the matter
back to the High Court for appointment of arbitrator by the Chief Justice. But
the ratio laid down in Datar (supra) holds good and it is not negatived, the ~

period of 30 days cannot be read in Section 11(6) of the Act. The relevant
portion of Punj Lloyd's case (supra) reads as under:-
H
ACE PIPELINE CONTRACTS PRl".ATE LTD. v. BHARAT PETROLEUM CORPORATION LTD. [A. K. MATHUR, J.J787
~·

"Having heard the learned counsel for the parties, we are satisfied A
that the appeal deserves to be allowed. The learned counsel for the
appellant has placed reliance on the law laid down by this Court in
the case of Datar Switchgears Ltd v. Tata Finance Ltd. (SCC p.158,
para 19) wherein this Court has held as under :

"So far as Section 11 (6) is concerned, if one party demands the B
opposite party to appoint an arbitrator and the opposite party does
..., not make an appointment within 30 days of the demand, the right to
appointment does not get automatically forfeited after expiry of 30
days. If the opposite party makes an appointment even after 30 days
of the demand, but before the first party has moved the court under
Section 11, that would be sufficient. In other words, in cases arising C
under Section 11(6), ifthe opposite party has not made an appointment
within 30 days of demand, the right to make appointment is not
forfeited but continues, but an appointment has to be made before the
former files application under Section 11 seeking appointment of an
arbitrator. Only then the right of the opposite party ceases." D
9. The aforesaid quotation would clearly reveal that the crucial words
in paragraph 5 were not quoted in the aforesaid case which has been reproduced
above.

10. Our attention was also invited to a decision of this Court in the case E
of Union of India v. Popular Construction Co., [2001) 8 SCC 470, This was
in relation to Section 34(3) of the Act. This is with regard to the period of
limitation for moving the Court under Section 34 of the Act for setting aside
the award i.e. the period of limitation was prescribed in Section 34 itself.
Therefore, Section 5 of the Limitation Act was not made applicable. This is
t not the case before us in the present controversy. F
11. Our attention was also invited to a decision of this Court in the case
of The State of Uttar Pradesh & Ors. v. Babu Ram Upadhya, [f961] 2 SCR
679, In that case, their Lordships have dealt with the interpretation of the
statute and they have referred to "Statute Law" by Craies and "The
Interpretation of Statutes" by Maxwell. Their Lordships have quoted a passage G
from Maxwell which reads as under:
_r
"On the other hand, where the prescriptions of a statute relate to the
performance of a public duty and where the invalidation of acts done
in neglect of them would work serious general inconvenience or H
788 SUPREME COURT REPORTS [2007) 4 S.C.R.
·'r-
A injustice to persons who have no control over those entrusted with
the duty without promoting the essential aims of the legislature, such
prescriptions seem to be generally understood as mere instructions
for the guidance and government of those on whom the duty is
imposed, or, in other words, as directory only. The neglect of them
·may be penal, indeed, but it does not affect the validity of the act
B done in disregard of them."
--"
This observation, so far as this case is concerned, has no relevance as we
have already mentioned above that the period of 30 days cannot be read in ""
Sub-secti<~n (6) of Section 11 of the Act as the statute does not pennit it.
Therefore, this case does not help the case of the appellant in any manner.
c
12. Our attention was invited to a Full Bench decision of the High Court
of Delhi J. V. v. Union of India & Ors., decided on 31.8.2006 and a decision
of the Calcutta High Court in Great Eastern Shipping Co.Ltd (supra). Both
these decisions are in total ignorance of the law laid down by this Court in
D Datar (supra). Therefore, they cannot hold good. We again reemphasize that \..
in paragraphs 19, 20 & 21 Their Lordships have clearly negatived the submission .....
that period of 30 days cannot be read in sub-section (6) of Section 11 of the
Act. Our attention was also invited to a decision of this Court in Shin
Satellite Public Co.Ltd v. Jain Studios Ltd, [2006] 2 SCC 628. This decision
was given by Hon'ble C.K. Thakker, J. in chambers. There also, no such view
E has been taken by learned Judge that the period of 30 days should be read
in sub-section (6) of Section 11 of the 'Acl. Our attention was also invited to
a decision of this Court in BSNL & Ors. v. Subash Chandi-a Kanchan & Anr.,
[2006] 8 sec 279. There also, the· question was whether the appellant was
consenting party to appointment of arbitrator or not. Appointment of arbitrator
F was made by the High Court with the consent of parties which was .....
subsequently sought to be revoked on the ground that no instruction in that
behalf was given. But that contention was negatived by the Court and there
also, the question of appointnient of arbitrator within the period of 30 days
was not decided. In this connection a reference may also be made to a
decision of this Court in the case· of-Union of India & Anr. v. MP.Gupta,
G [2004] 10 SCC 504. In that case, arbitrator was appointed by the High Court
directly a·Judge of the High Court because no arbi_trator was appointed by
the Railway Authorities as per Clause 64 of their agreement. Their Lordships
after considering the matter observed that the appointment of arbitrator by ~-
the High Court under Section 20 of the Arbitration Act, 1940 cannot be
upheld in view of Clause 64 of the agreement because. as per Clause 64 of
H
~
ACE PIPEUNE CONTRACTS PRIVATE LTD. v. BHARAT PETROLEUM CORPORATION LTD. [A. K. MATHUR, J.J789

the agreement, two arbitrators have to be appointed who should be gazetted A
--I· railway officers. Therefore, as per the terms of the agreement their Lordships
held that the appointment of arbitrator by the High Court was not correct and
set aside the order and directed the Railways to appoint arbitrators within 30
days. Similar issue came up before this Court in Union of India & Anr. v. Ml·.
s. V.S. Engineering Pvt. Ltd, [2006] 12 SCALE 144. This Court after considering
the decision in Union of India & Anr. v. MP.Gupta, [2004] 10 SCC 504, and B
Datar Switchgears Ltd (supra) directed that as per Clauses 63 & 64 of the
General Clauses of the Contract, only two gazetted officers of the railways
.>
have to be appointed as arbitrators. However, it was observed that failure on
.>.
the part of the Department to take a decision for appointment of arbitrators
would not defeat the right of the party to approach the High Court for c
appointment of arbitrator. Direction was given to the Department for
appointment of arbitrators within 30 days.
".'
13. It may also not be out of place to mention that we are aware of the
Departmental lethargy in making appointment of arbitrators in terms of the
· arbitration clause. Therefore, mandamus can be issued by the Courts in D
exercise of powers under Section 11 ( 6) of the Act but the demand should be
'f in the event of failure by the authorities to appoint arbitrators within the
,.J
reasonable time. Courts are not powerless to issue mandamus to the authorities
to appoint arbitrators as far as possible as per the arbitration clause. But in
large number of cases if it is found that it would not be conducive in the
interest of parties or for any other reasons to be recorded in writing, choice
E
can go beyond the designated persons or institutions in appropriate cases.
But it should normally be adhered to the terms of arbitration clause & appoint
the arbitratonarbitrators named therein except in exceptional cases for reasons
to be recorded or where both parties agree for common name.
F
14. In the present case, in fact the appellant's demand was to get some
retired Judge of the Supreme Court to be appointed as arbitrator on the
ground that if any person nominated in the arbitration clause is appointed,
then it may suffer from bias or the arbitrator may not be impartial or independent
in taking decision. Once a party has entered into an agreement with eyes wide
open it cannot wriggle out of the situation that if any person of the respondent- G
BPCL is appointed as arbitrator he will not be impartial or objective. However,
if the appellant feels that the arbitrator has not acted independently or
impartially, or he has suffered from any bias, it will always be open to the
/r party to make an application under Section 34 of the Act to set aside the
award on the ground that arbitrator acted with bias or malice in law or fact.
H
790 SUPREME COURT REPORTS [2007] 4 S.C.R.

A 15. In view of our above discussion, we find no reason to interfere with
.........
the order passed by the learned Single Judge of the High Court of'Delhi in
Arbitration Petition No.181 of2005. The arbitrator has already been appointed.
He should proceed in the matter and decide the dispute expeditiously.
Consequently, the appeal is dismissed with no order as to costs. -
I

B B.B.B. Appeal dismissed.