Holding

The arbitration clause permits the appointing authority to select any person from the panel when the other party fails to make a selection, making the appointment of the retired Delhi High Court judge valid.

Summary

Balli Petrochemicals Ltd, a London‑incorporated company, entered into a global tender with NALCO, a Government of India undertaking, and disputes arose over the tender and a purchase order. Clause 16 of the tender required the appointment of a sole arbitrator, initially a former Chief Justice of India, who later resigned. NALCO served Balli with a panel of three names for a replacement arbitrator; Balli failed to select any within the prescribed time, and NALCO appointed a retired Delhi High Court judge. Balli challenged the appointment, arguing that the replacement must also be a former Chief Justice of India. The Supreme Court examined the arbitration clause and held that it expressly allowed the appointing authority to select any person from the panel if the other party failed to choose, and no objection was raised to the new arbitrator’s credibility. Consequently, the petition under Section 11(6) of the Arbitration and Conciliation Act was dismissed.

Issues considered

Whether the respondent was obligated to appoint a former Chief Justice of India as the replacement sole arbitrator under the arbitration clause.
Whether the petitioner’s failure to select an arbitrator within the stipulated period empowered the respondent to appoint any person from the panel.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(6)

Subjects

ArbitrationAppointment of arbitratorArbitration clauseSection 11(6)Tender disputeReplacement arbitratorFailure to selectSupreme Court

Judgment

iii
• [2009] 1 S.C.R. 423

BALLI PETROCHEMICALS LIMITED A
v.
NATIONAL ALUMINIUM COMPANY LTD.
(Arbitration Petition No. 7 of 2006)

-; ·JANUARY 20, 2009
B
[TARUN CHATIERJEE, J.]
• Arbitration and Conciliation Act, 1996 - s. 11 (6) - Dispute

.. between respondent and petitioner over a global tender -
Arbitration clause in tender provided for appointment of sole
arbitrator - Former Chief Justice of India appointed as sole
arbitrator - He had resigned - For replacement of earlier
c

arbitrator, respondent served upon the petitioner a list/panel
of three names - Petitioner failed to select any one named
.+ in the list/panel within specified time - Respondent appointed D
"1
and selected a retired Judge of Delhi High Court as sole
arbitrator- Petitioner challenged the appointment contending
that since earlier a former Chief Justice of India had been
appointed as the sole arbitrator, only a former Chief Justice
of lridia ought to have been appointed in his place - Held: E
Arbitration clause was very clear - In terms thereof, if was
open to the respondent to select anyone from the panel of
j
·~
three persons in the event the petitioner failed to select any
~ one of the persons named by respondent within the time
specified - Challenge by petitioner cannot be sustained, F
particularly when it did not raise any objection on creditability
ofthe new arbitrator appointed by respondent.
J
The petitioner is a company incorporated in London.
The respondent is a Government of India undertaking.
Disputes arose between the parties in respect of the G
..; .,. global tender and the purchase order issued by the
respondent pursuant to the tender.

The arbitration clause enumerated in clause 16 of the
423 H
424 SUPREME COURT REPORTS [2009) 1 S.C.R.

A tender provided for appointment of a sole Arbitrator. The
petitioner filed an application under s.11 (6) of the
Arbitration and Conciliation Act, 1996 for appointment of
a Sole Arbitrator. A former Chief Justice of India was
appointed as the Sole arbitrator who entered appearance
B in the arbitration proceedings but later resigned
therefrom.

Subsequently, in terms of the said arbitration clause,
respondent served upon the petitioner a listfpanel of
three names, out of which one was to be selected for
c appointment in replacement of the earlier arbitrator, but
the petitioner failed to appoint or select any one of the
persons named in t~e list/panel within the time specified.
Respondent appointed and selected a retired Judge of
the Delhi High· Court as the sole Arbitrator.
D
Before this Court, the Petitioner challenged the '
appointment contending that since earlier a former Chief
Justice of India had been appointed as the sole arbitrator,
only a former Chief Justice of India ought to have been
E appointed in his place.
Dismissing the arbitration petition, the Court

HELD: 1. It was open to the respondent to select any
one from the panel sent by the respondent after the expiry
F of the period for selecting a person by the petitioner. In
this case, since the respondent has already exercised the
arbitration clause and already replaced and selected a
new sole arbitrator who has already entered appearance,
there is no reason to replace the appointed arbitrator at
G this stage when no allegations have been put forward by
the petitioner against such appointment excepting that
since a former Chief Justice of India was appointed to
arbitrate the disputes between the parties, this time also
arlfclm1ler:itlhfefr•J1Jsticenof!lndta 10'Ughtttoiiffavefbeen
i-H appointed. [Para 2) (429-G.,H; 430-A-B]
;. BALLI PETROCHEMICALS LIMITED v. NATIONAL 425
ALUMINIUM COMPANY LTD.

1.2. A plain reading of the arbitration clause would A
clearly show that it was solely on the respondent to
select the person from the panel of three persons in the
event the petitioner had failed to select any one of the
persons named by the respondent. In view of the
aforesaid fact and in view of the fact that the arbitration B
clause was very clear, it would not be necessary to go
into the details in this matter as the appointment was
already made and it is only a case of replacement of
earlier sole arbitrator on the ground of his resignation.
Therefore, the objections raised by the petitioner cannot c
be sustained at this stage particularly yvhen the petitioner
has n~t raised any objection on the creditability of the
sole arbitrator now appointed by the respondent. [Para
2) [430-B-D)

CIVIL ORIGINAL JURISDICTION : Arbitration Petition No. 0
7 of 2006.

A.K. Ganguli and Mamta Tewari (Fox Mandal & Co.) for
the Petitioner.
E
Cicco Mukhopadhaya and Viplav Sharma (for Suresh A.
Shroff & Co.) for the Respondent.

The Judgment of the Court was delivered by

TARUN CHATTERJEE, J. 1. The petitioner is a . F
company incorporated in London .. The respondent is a
Government of India undertaking having its corporate office at
NALCO Bhawan, P-1 Nayapalli, Bhubaneswar, Orissa. The
petitioner filed an application under Section 11 (6) of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to G
as the 'Act') fo1 appointment of a Sole Arbitrator to adjudicate
the disputes, which arose between the parties in respect of the
global tender and the purchase order dated 29th of September,
2000 issued by the respondent pursuant to the tender. Clause
16.0 of the tender contained the Arbitration Clause which reads H

-
426 SUPREME COURT REPORTS (2009] 1 S.C.R.

A thus:- •
"All disputes or differences arising under the contract
whether during or after completion of the contract or
whether before or after determination, for closure or breach
of the contract (other than those in respect of which the
B
decision of any person is by the contract expressed to be
final and binding) shall after written notice by either party I!

to the contract to the other of them and to the appointing .. \liil
I

authority herein after mentioned be referred to adjudication
to a sole arbitrator to be appointed as hereinafter
c provided.

For the purpose of appointing the sole Arbitrator referred
to above, the CMD NALCO who shall be Appointing
Authority will send within thirty days of receipt of the notice
D to the seller a panel of three names of persons. ~

The contractor shall on receipt of the names as referred
select any one of the person name to be appointed as a
sole arbitrator and communicate his name to the
Appointing Authority shall thereupon appoint the said
E
person as the sole Arbitrator.

If the seller fails to communicate such selection as
provided above within the period specified, the Appointing
Authority shall make the selection and appoint the selected
F person as the sole Arbitrator.

If the Arbitrator so appointed is unable to/ unwilling to act
or resign his appointment or vacates his office due to any
reason whatsoever sole arbitrator shall be appointed as
G aforesaid. The work under the contract shall not be stopped
during the arbitration proceedings.

The Arbitrator shall be deemed to have entered on the
reference on the date he issues notices to both the parties
fixing the date of the first hearing.
H
BALLI PETROCHEMICALS LIMITED v. NATIONAL 427
ALUMINIUM COMPANY LTD. [TARUN CHATIERJEE, J.]

The Arbitrator may, from time to time, with the consent of A
the parties, enlarge the time for making and publishing the
award.

The Arbitrator shall give a separate award in respect of
each dispute of difference and shall give a reasoned and
B
speaking award/awards.

The venue of arbitration shall be at Bhubaneswar. However,
if the situation so warrants, it may as and when required,
be held at the lllace where the site of work is situated.
c
The fees, if any, of the Arbitrator shall, ·if required to be
paid before the award is made and published, be paid half
and half by each of the parties. The cost of the reference
and of the award including the fees, if any, of the Arbitrator
shall be in the discretion of the Arbitrator who may direct D
to and by whom and in what manner, such costs or any part
thereof shall be paid and may fix or settle the amount of
costs to be paid. The award of the Arbitrator shall be final
and binding on both the parties.

Subject to aforesaid provisions of the Arbitration and E
Conciliation Act, 1996 or any statutory modification or re-
enactment thereof and the rules made thereunder, and for
the time being in force, shall apply to the arbitration
l/
proceedings under this clause."
F
2. On account of breach between the parties, disputes and
differences had arisen which were referred to the arbitration of
Hon. Mr. Justice R.S. Pathak, (since deceased) Former Chief
Justice of India and Former Judge of the International Court of
Justice (as His Lordship then was). The learned Arbitrator, so G
appointed, entered appearance and the arbitration proceedings
~
" went on till 25th of November, 2005 when the learned Arbitrator
by an order dated 25th of November, 2005 resigned and had
withdrawn as Arbitrator from the arbitration stating that as the
issues involved in the arbitration were similar to the issues
H
428 SUPREME COURT REPORTS [2009] 1 S.C.R.

A involved in an earlier award passed by him and, therefore, it
was thought fit that he should withdraw from the arbitration. At
this juncture, we may examine the arbitration clause which is
enumerated in clause 16 of the tender, as noted herein before.
From a plain reading of the arbitration clause, it is evident that
B for the purpose of appointing the sole Arbitrator, the Chief
Managing Director of the respondent, i.e. NALCO who shall be
the appointing authority will send within 30 days of receipt of
the notice of the seller a panel of three names of persons. It ...
will also be evident from the said arbitration clause that the
c contractor shall on receipt of the names, as referred, select any
one of the persons' named to be appointed as a sole Arbitrator
and communicate his name to the appointing authority who
shall thereupon appoint the said person as sole Arbitrator. This '~
clause further provides that if the seller fails to communicate
such selection, as noted above, within the period specified, the
D
appointing authority shall make the selection and appoint the
selected person as the sole Arbitrator. An over all look of the
aforesaid provision of the arbitration clause makes it clear that
the appointing authority for appointment of an Arbitrator under
the arbitration clause is the Chief Managing Director of the
E respondent who shall send a notice to the petitioner within 30
days of receipt of a panel of three names. It would be obligatory
on the part of the petitioner to select any one of the persons' ./""""

named by the appointing authority to be appointed as the sole
Arbitrator and communicate his name to the appointing authority '"
F and thereupon the appointing authority shall appoint the said
person as the sole Arbitrator. If the seller fails to communicate
such selection as provided above within the period specified,
the appointing authority shall make the selection and appoint
the selected person as the sole Arbitrator. On the resignation
G of the sole Arbitrator, namely, Hon. Mr. Justice R.S. Pathak,
(since deceased) in terms of the aforesaid clause, a list of .'t'I
three names were admittedly served upon the petitioner out of "
which one was to be selected for appointment in replacement
of Hon. Mr. Justice R.S. Pathak, (since deceased). It is not in
H dispute that the said notice was duly served on the petitioner,
BALLI PETROCHEMICALS LIMITED v. NATIONAL 429
ALUMINIUM COMPANY LTD. [TARUN CHATIERJEE, J.]

but in spite of such service of notice, the petitioner had failed A
to appoint or select any one of the persons named in the panel
of three persons from the list sent by the respondent within the
time specified therein. Since the arbitration clause clearly
provides for selection of one of the persons named in the panel
to be appointed as the sole Arbitrator by the respondents, it B
was open for the respondent to select one persons' named
from the panel and appoint as the sole Arbitrator. In this case
admittedly the respondent has already appointed and selected
a retired Judge of the Delhi High Court as the sole Arbitrator
to replace Justice R.S. Pathak (since deceased). After such c
appointment having been made, the petitioner has filed this
application saying that since the former Chief Justice of India
was appointed as the sole Arbitrator, it would not be possible
for the petitioner to accept a retired Judge of the Delhi High
Court for being appointed as the sole Arbitrator. As noted . D
herein above, it is not in dispute that a panel of three persons
in compliance with the arbitration clause was sent by the
respondent which was duly received by the petitioner. In spite
of receipt of the said notice to select any one of the persons
named in the panel and the petitioner having failed to select or E
choose any one of them and had started saying that as a former
Chief Justice of India was appointed to arbitrate the disputes
between the parties, the question of accepting a retired Judge
of the High Court as the sole Arbitrator in replacement of a
former Chief Justice of India was not acceptable to the
petitioner. We are unable to accept the submissions made by F
Mr. Ganguly, learned senior counsel appearing on behalf of the
petitioner and after going through the arbitration clause in depth
and in detail, in my view, it was open to the respondent to select
any one from the panel sent by the respondent after the expiry
of the period for selecting a person by the petitioner. In this G
case, since the respondent has already exercised the
arbitration clause and already replaced and selected a sole
arbitrator in place of Justice R.S. Pathak (since deceased) who
has already entered appearance, I do not find any reason to
replace the appointed arbitrator at this stage when admittedly H
430 SUPREME COURT REPPRTS [2009] 1 S.C.R.

A no allegations have been put forward by the petitioner against
such appointment excepting that since a former Chief Justice
of India was appointed to arbitrate the disputes between the
parties, this time also a former Chief Justice of India ought to
have been appointed. As noted herein earlier, a plain reading
B of the arbitration clause would clearly show that it was solely
on the respondent to select the person from the panel of three
persons in the event the petitioner had failed to select any one
of the persons named by the respondent. In view of the
aforesaid admitted fact and in view of the fact that the
c arbitration clause was very clear, it would not be necessary for
me to go into the details in this matter as I find that the
appointment was already made and it is only a case of
replacement of earlier sole arbitrator on the ground of his
resignation. Therefore, the objections raised by Mr. Ganguly,
learned senior counsel appearing for the petitioner cannot be
0
sustained at this stage particularly when the petifioner has not
raised any objection on the creditability of the sole arbitrator
now appointed by the respondent.
3. It is to be kept on record that although comprehensive
E submissions were filed by both the parties before me, but in
view of the admitted fact, as stated herein above and on a plain
reading of the arbitration clause itself I do not find any
justification to deal with the submissions put forward by the
parties. I, however, request the sole arbitrator to start with the
F arbitration at an early date and it is expected that he will pass
the award in accordance with law within six months from the
date of supply of a copy of this order to him.

4. For the reasons aforesaid, I do not find any ground to
G allow this application and accordingly the application is
rejected. There will be no order as to costs.

B.B.B. Arbitration petition dismissed.