Holding

The Supreme Court held that the right to appoint an arbitrator under Section 11(6) is not forfeited after 30 days and that any appointment must comply with the qualifications and independence requirements of Section 11(8), rendering the High Court’s appointment invalid.

Summary

Bharat Sanchar Nigam Ltd. entered into a construction contract containing an arbitration clause that named the Chief Engineer or, in his absence, the Administrative Head as the sole arbitrator. The respondent repeatedly requested the Chief Engineer to appoint an arbitrator, but the appellant failed to respond, prompting the respondent to file a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996. The appellant claimed that the Chief Engineer had already appointed a Principal Chief Engineer as arbitrator on 9 March 2005. The High Court, ignoring the contractual qualifications and the requirements of Section 11(8), appointed a senior advocate as arbitrator, superseding the departmental nominee. On appeal, the Supreme Court held that the right to appoint an arbitrator under Section 11(6) does not automatically forfeit after the 30‑day period and that any appointment must satisfy the qualifications and independence criteria of Section 11(8). Consequently, the High Court’s appointment was set aside and the matter remanded for a fresh appointment in compliance with Section 11(8).

Issues considered

The effect of the 30‑day period on the right to appoint an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Whether the High Court was required to consider the qualifications and independence of the arbitrator as mandated by Section 11(8).
The validity of the arbitrator appointed by the High Court in view of the contractual arbitration clause.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(5), s. 11(6), s. 11(8), s. 5, s. 6, s. 8

Subjects

ArbitrationAppointment of arbitratorSection 11Arbitration and Conciliation Act 1996Independent and impartial arbitratorConstruction contractHigh Court appointment

Judgment

[2009] 16 (ADDL.) S.C.R. 398

A BHARAT SANCHAR NIGAM LTD. AND ANR.
v.
DHANURDHAR CHAMPATIRAY
(Civil Appeal No. 8230 of 2009)
DECEMBER 11, 2009
B
[TARUN CHATIERJEE AND AFTAB ALAM, JJ.]

Arbitration and Conciliation Act, 1996:
•
c s. 11 (6) - Appointment of arbitrator - Arbitrator not
appointed within 30 days of demand - Right to make
appointment of arbitrator would not be forfeited but would
continue, but such right should be exercised before the other
party files application under s. 11 before High Court - On facts,
0 High Court did not focus on the agreement or conditions
necessary to secure appointment of independent and
impartial arbitrator - Since requirement of sub-section (8) of I •

s. 11 was not dealt with by High Court, appointment of arbitrator
became vulnerable - Matter remanded to High Court for
E decision afresh.
Parties entered into a contract for work construction.
The contract contained arbitration clause in terms
whereof the Chief Engineer in charge of work at the time
of dispute and in absence of Chief Engineer,
F Administrative head of the department was to be
appointed as a sole arbitrator. The said provision
.
envisaged that in terms thereof no person other than the
one appointed by such Chief Engineer or Administrative
Head should act as arbitrator to decide the disputes
G referred to him. Dispute arose between the parties.
Respondent sent letters to the Chief Engineer of the
appellant no.1 on different dates requesting for
appointment of an arbitrator to adjudicate the disputes.
The appellants did not give response to the letters of
H 398
BHARAT SANCHAR NIGAM LTD. v. DHANURDHAR 399
CHAMPATIRAY
respondent. Thereaftar respondent filed petitions under A
Section 11 (6) of the Arbitration and Conciliation Act, 1996.
However, according to the case made out by the
appellants appointment of Principal Chief Engineer as an
arbitrator was already made on 9.3.2005. By impugned
order, High Court allowed the application under Section 8
11 (6) and appointed arbitrator in place of the
departmental nominee who was appointed by the Chief
Engineer of the appellants. Hence the appeals.
Partly allowing the appeals and remitting the matter
to High Court, the Court C
HELD: 1. A plain reading of Section 11(5) of the
Arbitration and Conciliation Act, 1996 would show that if
one party demands appointment of an arbitrator and the
other party does not appoint any arbitrator within thirty 0
days of such demand, the right to appointment at the
.. I instance of one of the parties does not get automatically
forfeited. If the appellant makes an appointment even after
thirty days of demand but the first party has not moved
the Court under Section 11, that action on the part of the E
appellant would be sufficient. In the instant case, High
Court did not focus on requirements required by the
agreement or other conditions necessary to secure the
appointment of independent and impartial arbitrator.
Since the requirement of sub-section (8) of Section 11 F
was not at all dealt with by High Court, appointment of
arbitrator without dealing with the said sub-section
became vulnerable. [Para 8 and 11] [403-E-G; 406-G-H;
407-A-H]
Northern Railway Administration, Ministry of Railway v. G
Patel Engineering Company Ltd. (2008) 10 SCC 240, relied
on.
Punj Lioyd Ltd. v. Petronet MHB Uc. (2006) 2 SCC 638;
Datar Switchgears Ltd. v. Tata Finance Ltd. And Another H
400 SUPREME COURT REPORTS [2009] 16 (ADDL.) S.C.R.

A (2000) 8SCC 151; Ace Pipeline Contracts Private Limited v. +
Bharat Petroleum Corporation Limited (2007) 5 SCC 304;
Union of India v. Bharat Battery Manufacturing Co. Pvt. Ltd.
(2007) 7 sec 684, referred to.

Case Law Refernce:
B
(2006) 2 sec 638 referred to Para 8
(2000) 8SCC 151 referred to Para 9
(2001) s sec 304 referred to Para 10
c (2007) 1 sec 684 referred to Para 10
(2008) 10 sec 240 relied on Para 10
CIVIL APPELLATE JURISDICTION : Civii Appeal No.
8230 of 2009.
D
From the Judgment & Order dated 5.1.2007 of the High I •
Court of Orissa at Cuttack Arbitration Petition No. 11 of 2005.
WITH
E C.A. Nos. 8231, 8232, 8233, 8234 of 2009.

Debasish Moitra, Ajit Kumar Pande for the Appellants.
Parmanand Gaur (N.P.) for the Respondent.
>- •
F The Judgment of the Court was deliverd by

TARUN CHATTERJEE, J. 1. Leave granted.

2. These appeals by special leave have been filed against -
,.,
the orders dated 5th of January 2005 in A.R.B.P. Nos. 11, 12,
G 17, 18 and 28 of 2005 passed by the High Court of Orissa
whereby the High Court had appointed Sh. Bibhudhendra
Mishra, a Senior Advocate of the Orissa High Court as the sole t "'
arbitrator on the application of the respondent filed under
Section 11 (6) of the Arbitration and Conciliation Act 2006
H (hereinafter ,referred to as "the Act"). Since the parties and the
BHARAT SANCHAR NIGAM LTD. v. DHANURDHAR 401
CHAMPATIRAY [TARUN CHATTERJEE, J.]
.. ._ subject matter of the dispute are the same, we have clubbed A
all these appeals and the same are being decided analogously
by this common judgment to avoid any confusion.

3. The relevant facts leading to the filing of these appeals
as emerging from the records may be briefly stated as follows: B
The parties herein entered into a contract pursuant to
,, distinct notices inviting tender by BSNL [in short 'the appellant']
,..'"' for the work of construction of 4 Nos. of Type-II, 2 Nos. Type-Ill
and 1 No. of Type-IV Staff Quarters at Bhanjanagar of vertical
extension to combined building at Aska of 3 Nos. of Type Ill, 3 c
Nos. of Type II and 4 K type T.E. building at Jankia and of
vertical extension to 8 Nos. of Type II and 6 Nos. of Type IV
staff quarters at CTTC compound Vanivihar, Bhubaneshwar.

4. The said contract contained an arbitration clause in D
> I terms whereof the Chief Engineer, Telecommunication/ Postal
Department in charge of the work at the time of dispute, or if
there be no Chief Engineer, the Administrative Head of the said
Telecommunication/ Postal Department was to be appointed
as a sole arbitrator. The said provision envisaged that in terms E
thereof no person other than the one appointed by such Chief
Engineer or Administrative Head of the Telecommunication/
Postal as aforesaid should act as arbitrator to decide the
disputes referred to him.
---i '
5. The Respondent by letters, requested the Chief F

-
Engineer (Civil) for appointment of an arbitrator to adjudicate
the disputes between the parties in terms of clause 25 of the
respective agreements. According to the respondent, letters
were received by the Chief Engineer of the appellant no.1 on
different dates. The Appellants having failed to respond to the G
letters of respondent requiring them to appoint an arbitrator and
., y to appoint an arbitrator in response to such letters within the
stipulated period in accordance with Clause 25 of the
respective Agreements, the respondent was constrained to file
petitions under Section 11 (6) of the Act for appointment of an H
402 SUPREME COURT REPORTS [2009] 16 (ADDL.) S.C.R.

A Arbitrator. However, according to the case made out by the
~ ..
appellants, on 9th of March, 2005, Chief Engineer (Civil), BSNL
had already appointed Sri. Gurbaux Singh, Principal Chief
Engineer (Arbitration) BSNL vide its office letter No. 69- 41 (05)/
CE(c)/BBSR/205. By the impugned order, the High Court
B allowed application under S. 11 (6) of the Act, and appointed
r
one Sri. Bibhudhendra Mishra in place of departmental nominee
Sri. Gurbaux Singh who was appointed by Chief Engineer .,
(Civil) BSNL of appellant No.1.
"
c 6. Feeling aggrieved by the said order of the High Court,
the appellant has filed these special leave Opetitions which on
grant of leave, were heard in the presence of learned counsel
_ for the parties.

7. Before we consider the arguments raised by the
D
learned counsel for the parties before us, it would be necessary
to refer to Section 11 of the Act, which reads as under:
. "

"Section 11. Appointment of arbitrators. (1) A person of
any nationality may be an arbitrator, unless otherwise
E agreed by the parties.

(2) Subject to sub-section (6), the parties are free to agree
on a procedure for appointing the arbitrator or arbitrators.
(3) & (4) .............. omitted because these are not necessary I- -

F. for our purpose

(5) Failing any agreement referred to in sub- section (2),
in an arbitration with a sole arbitrator, if the parties fail to
agree on the arbitrator within thirty days from receipt of a
G 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 y '

by him.

(6) Where, under an appointment procedure agreed upon
H ~>
BHARAT SANCHAR NIGAM LTD. v. DHANURDHAR 403
CHAMPATIRAY [TARUN CHATIERJEE, J.]
~
..
by the parties,- (a) a party fails to act as required under A
that procedure; or (b) the parties, or the two appointed
arbitrators, fail to reach an agreement expected of them
under that procedure; or (c) a person, including an
institution, fails to perform any function entrusted to him or
it under that procedure, a party may request the Chief B
Justice or any person or institution designated by him to
, . take the necessary measure, unless the agreement on the
appointment procedure provides other means for securing
the appointment.

(7) A decision on a matter entrusted by sub- section (4)
c
or sub-section (5) or sub-section (6) to the Chief Justice
or the person or institution designated by him is final.

(8) The Chief Justice or the person or institution designated
D
,, I by him, in appointing an arbitrator, shall have due regard
to- (a) any qualifications required of the arbitrator by the
agreement of the parties; and (b) other considerations as
are likely to secure the appointment of an independent and
impartial arbitrator... "
E
8. A plain reading of Section 11 [5) of the Act would show
that if one party demands appointment of an arbitrator and the
other party does not appoint any Arbitrator within thirty days of
such demand, the right to appointment at the instance of one
-' of the parties does not get a\Jtomatically forfeited. If the F
appellant makes an appointment even after thirty days of
demand but the first party has not moved the Court under
-----;< Section 11, that action on the part of the appellant would be
sufficient. In other words, in cases arising under Section 11 [6],
if the respondent has not made an appointment within thirty
G
days of demand, right to make an appointment of an arbitrator
is not forfeited but continues, but such appointment shall be
"' ~ made before the other party files the application under Section
11 seeking appointment of an arbitrator before the High Court.
It is only then the right of the respondent ceases. In this
connection, a three-Judge Bench decision of this Court in Punj H
404 SUPREME COURT REPORTS (2009) 16 (ADDL.) S.C.R.

A Lloyd Ltd. v. Petronet MHB Ltd., (2006) 2 SCC 638, may be
. ...
referred to. In this case, this Court considered the applicability
of Section 11 [6] of the Act and after considering the scope and
object of the Act held that once notice period of thirty days has
expired and the party has moved the Hon. Chief Justice of the
B High Court under Section 11 [6] of the Act, the other party loses
his right to appoint an arbitrator on the basis of arbitral
agreement. While taking this view, this Court in the Punj Lloyd's
case [supra] had relied on the judgment referred in Datar
Switchgears Ltd. v. Tata Finance Ltd. and Another, (2000) 8
SCC 151, wherein in paragraph 19 at page 158 this Court
c observed as follows:

"So far as cases falling under Section 11 (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
D been prescribed under Section 11 (4) and Section 11 (5)
of the Act. In our view, therefore, so far as Section 11 (6) • •
is concerned, if one party demands the opposite party to
appoint an Arbitrator and the opposite party do not make
an appointment within 30 days of the demand, the right to
E 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, which
would be sufficient. In other words, in cases arising under ••
F 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
G Arbitrator. Only then the right of the opposite party ceases."

9. Similarly in the case of Ace Pipeline Contracts Private
Limited v. Bharat Petroleum Corporation Limited, (2007) 5 ' "
SCC 304, this Court went to observe that:
'[
H "But in sub-section (6), where, the procedure has already
BHARAT SANCHAR NIGAM LTD. v. DHANURDHAR 405
CHAMPATIRAY [TARUN CHATTERJEE, J.]

been agreed upon by the parties, as in the present case, A
and in that event, if a party fails to act as 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 ariy function entrusted to him or it under B
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 c
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 11 of the Act."
D
• i
10. On a perusal of the above quoted observations of this
Court made in Ace Pipeline Contracts Private Limited (supra),
the reasons advanced in the orders passed by the High Court
must be found to be a correct interpretation of the aforesaid
provision and so far as the period of 30 days with regard to E
Section 11(6) is concerned, there is no doubt at all that thirty
days limitation cannot be invoked as mandatory period under
Section 11 [6] of the Act. But a somewhat different view was
-~ expressed in a latter decision of this Court in the case of Union
of India vs. Bharat Battery Manufacturing Co. Pvt.Ltd. [2007 F
(7) SCC 684]. In view of the difference of opinion of the two
coordinate benches of this Court, the matter was referred to a
three-Judge Bench in the case of Northern Railway
Administration, Ministry of Railway vs. Patel Engineering
Company Ltd. [2008 (10) SCC 240] in which the decision in G
Ace Pipeline Contracts Pvt. Ltd. (supra) was also referred to.
1' Arijit Pasayat, J. (as His Lordship then was), heading the three-
Judge Bench of this Court, after considering the scope and
object of the Act particularly Section 11 of the Act, concluded
the following : H
406 SUPREME COURT REPORTS [2009] 16 (ADDL.) S.C.R.

A "A bare reading of the scheme of Section 11 shows that ..
the emphasis is on the terms of the agreement being
adhered to and/or given effect as closely as possible. In
other words, the Court may ask to do what has not been
done. The court must first ensure that the remedies
B provided for are exhausted. It is true as contended by Mr.
Desai, that it is not mandatory for the Chief Justice or any
person or institution designated by him to appoint the
named arbitrator or arbitrators. But at the same time, due
regard has to be given to the qualifications required by the
agreement and other considerations. •
-
c
)()()()()()()()

In all these cases at hand the High Court does not
appear to have focused on the requirement to have due
0 regard to the qualifications required by the agreement or
other considerations necessary to secure the appointment
of an independent and impartial arbitrator. It needs no
reiteration that appointment of the arbitrator or arbitrators
•
-
named in the arbitration agreement is not a must, but while
E making the appointment the twin requirements of Sub-
section (8) of Section 11 have to be kept in view,
considered and taken into account. If it is not done, ii":e
appointment becomes vulnerable. In the circumstances, we
set aside the appointment made in each case, remit the
F matters to the High Court to make fresh appointments ~ -
keeping in view the parameters indicated above."

11. In the aforesaid decision in the case of Northern
Railway Administration (Supra), Arijit Pasayat: J. (as His
Lordship then was}, found that the High Court in the said case
G did not appear to have focused on the requirement to have due
regard to the qualifications required by the agreement or other
conditions necessary to secure the appointment of an
independent and impartial arbitrator. In the aforesaid decision,
this Court also concluded that since the requirement of sub-
H section (8) of Section 11 was not at all dealt with by the High
BHARAT SANCHAR NIGAM LTD. v. DHANURDHAR 407
CHAMPATIRAY [TARUN CHATIERJEE, J.]
Court in its order, the appointment of an arbitrator without A
dealing with Sub-Section 8 of Section 11 of the Act became
vulnerable and accordingly, such appointment was set aside.
Similar is the position in this case. In this case also, before
appointing an arbitrator under Section 11 (6) of the Act, the High
Court had failed to take into consideration the effect of Section B
11 (8) of the Act as was done in Northern Railway
Administration (supra).
12. In view of the discussions made hereinabove and
particularly, in view of the principles laid down by this Court in C
Northern Railway Administration (supra), we set aside the
impugned order and remand the case back to the High Court
for fresh decision of the application under Section 11 (6) of the
Act and while considering the applicaticn afresh, the High Court
is directed to take into consideration the aforesaid decision of
this Court. D

13, The appeals are allowed to the extent indicate above.
There will be no order as to costs.
D.G. Appeals partly allowed.
E

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