Holding

The arbitration clause unambiguously vests the power to appoint the Presiding Arbitrator in the Council of Indian Road Congress when the two party‑appointed arbitrators cannot agree, rendering the petition for appointment by the Chief Justice of India non‑maintainable.

Summary

The petitioners, a joint‑venture of You One Engineering & Construction Co. Ltd., entered into a contract with the National Highways Authority of India (NHAI) that contained an arbitration clause providing for a three‑member tribunal. Each party would appoint one arbitrator and the two party‑appointed arbitrators would select a third arbitrator who would act as the Presiding Arbitrator; if they failed to agree within 30 days, the Council of Indian Road Congress (IRC) was to appoint the Presiding Arbitrator. The parties could not agree on the third arbitrator, and the petitioners sought a Supreme Court order under Sections 11(6) and 11(12) of the Arbitration and Conciliation Act, 1996, asking the Chief Justice of India to appoint a retired Supreme Court judge or a retired Chief Justice of a High Court as Presiding Arbitrator. NHAI contended that the arbitration clause expressly gave the IRC the power to appoint in such a situation. The Court examined the clause, found its language unambiguous, and relied on its earlier decision in You One Engineering & Construction Co. Ltd. v. NHAI (2006) 4 SCC 372, holding that the IRC’s appointment right prevails. Consequently, the petition was dismissed as non‑maintainable.

Issues considered

Whether a petition under Sections 11(6) and 11(12) of the Arbitration and Conciliation Act, 1996 for appointment of a Presiding Arbitrator is maintainable when the arbitration agreement provides that the Council of Indian Road Congress shall appoint the Presiding Arbitrator upon failure of the party‑appointed arbitrators to agree.
Whether the parties can compel the appointment of a specific retired judge as Presiding Arbitrator notwithstanding the contractual provision.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(12), s. 11(6)

Subjects

ArbitrationArbitration clausePresiding arbitratorSection 11Council of Indian Road CongressAppointment of arbitratorSupreme CourtNHAIContract dispute

Judgment

YOU ONE MAHARIA -N THROUGH YOU ONE ENGINEERING AND A
CONSTRUCTION COMPANY LTD. AND ANR.
v.
NATIONAL HIGHWAYS AUTHORITY OF INDIA

AUGUST 21, 2007
B
[C.K. THAKKER, J.]

Arbitration and Conciliation Act, 1996-s.11(6) & 11(12)-Arbitration
clause contained in agreement between the parties provided that each party C
would appoint its arbitrator and two arbitrators so appointed would appoint
third arbitrator who shall act as the Presiding Arbitrator-Arbitrators
appointed by the parties failed to reach .upon a consensus on appointment
of the Third/Presiding Arbitrator-Arbitration petition filed by one party
before Supreme Court praying for appointment of a retired Judge of Supreme
C,ourt or a retired Chief Justice ofa High Court as the Presiding Arbitrator- D
Maintainability of-Held, not maintainable since the arbitration clause
explicitly empowered the 'Council of1ndian Road Congress' to appoint the
Presiding Arbitrator in case arbitrators appointed by the parties failed to
appoint Presiding Arbitrator-Appointment ofArbitrators by the ChiefJustice
of India Scheme, 1996-Para 2.
E
The Petitioners had entered into an agreement with Respondent for
execution of a project for 4-laning of portions of the National Highway 7 in
the State of Andhra Pradesh. The agreement contained an arbitration clause
providing for settlement of disputes between the parties by an arbitral tribunal
consisting of three arbitrators. Each party was required to appoint one F
arbitrator and the two arbitrators so appointed by the parties were to appoint
the third Arbitrator who was to act as the Presiding Arbitrator.

Disputes having arisen between the parties, both parties appointed one
arbitrator each. However, the arbitrators so appointed could not agree on
appointment of the Presiding arbitrator. G .
In the present petition under Section 11(6) and 11(2) of the Arbitration
and Conciliation Act, 1996 read with Puagraph 2 of the Appointment of
Arbitrators by the Chief Justice of India Scheme, 1996 the Petitioners
contended that since they had chosen a. retired Chief Justice of High Court
177 H
178 SUPREME COURT REPORTS {2007) 9 S.C.R.

A as their Arbita:ator, a Judge Senior in ,rank to hi~ viz. a retired J11dg~ of
Su pre.me Court or _a r~tir:ed Chief Justice of a High. Court should be appointed
as the Presiding Arbitrator.

Dismissing· the petition, the Court

B HELD: The prayer of the petitioners cannot be granted. A bare reading
of the arbitration clause leaves no room for doubt that in case of failure of the
two Arbitrators appointed by the' parties to reach upon a consensus, the
Presiding Arbitrator shall be appointed by the Council of IRC (Indian Road
Congress). The clause is explicitly clear and there is ~o ambiguity. Apart
from clear language of Arbitration Clause, the point is also covered.by an
C earlier <t.ecision between the ~ame parties wher~ almost in iden~ical
circumstances, this Court was called upon to consider the provisions of the.
Act and the right to appoint Presiding Arbitrator und'er the Agreement. The
Court held that "i°t i~ the right of IRC tO appoint Presiding· Arbitrator i.n case, ·
the parties are not ad idein in appointment of Third/Presiding Arbitrator..
D Therefore, the petitioners cannot compel the respondentto agree fo~ ~ retired
Judge of this Court or retired Chief Justice of a High Court, senior to the
arbitrator appointed by the Pe~itioners as Presiding Arbitrator.
(Paras_9, 10, 12 and IS( (181-E; 182-A, D; 1~3-F)

You one Engineering & Construction Co. Ltd. & Anr. v. NatiOnal
E Highways Authority of India, (2006) 4 SCC 372, referred to. , .

CIVIL ORIGINAL JURISDICTION :·Arbitration Petition No. 12 of2007.

Under Section 11(6) read with Section I I(l2) of the Arbitration and;•
Conciliation Act, 1996. :'·
F
R.P. Bhatt, Ravikesh K. Sinha and Abhijat P. Medh for the Petitioners:

MukuI Rohtagi and V.B. Joshi for the Respondent.

The Judgment of the Court was delivered by
G.
C.K. THAKKER, J. I. This petition is filed by tile' petitioner5 under
Section 11(6) and Section 11(12) of the Arbitration and C~nciliation Ac!, 1996
(hereinafter referred to as 'the Act') read with paragraph 2 of the Appointment -+
of Arbitrators by the Chief Justice of India Scheme, 1996 for appointment of
Third/Presiding Arbitrator in accordance with the Agreement/Contract Package.
H No. NS-23/AP dated May 31, 200 I entered into between the petitioners and
ENGINEERING AND CONSTRUCTION COMPANY LID. •. NATIONAL HIGHWAYS AUTHORITY OF INDIA (C.K. THAKKER. I.I
179
.,
the respondent. A
2. The petitioners are a 'Joint Venture' who came together by virtue of
Joint Venture Agreement dated May l 0, 200 l for execution of certain contracts
for National Highways Authority of India ('NHAI' for short). Petitioner No. l
is a Company registered under the Laws of the Republic of Korea having its
registered office at 75-95, Seosomoon Dong, Chung Ku, Seoul, Korea l 00 110. B
Originally it was known as YOU ONE Engineering and Construction Co. Ltd.
at the time of Joint Venture Agreement and also at the time of contract dated
May 31, 2001 with NHAI. The Company has since merged with and known
as Ultra Construction and Engineering Co. Ltd., Seoul, Korea; i.~. in a country
other than India within the meaning of Section 2(t)(ii) of the Act. Petitioner
No.2 is a Private Limited Company incorporated and registered under the
c
Companies Act, 1956 having its registered office at A-10, Panchvati, Azadpur,
Delhi 110 033.

3. According to the petitioners, they entered into an Agreement on May
31, 200 I with the res~ndent for execution of Contract Package No. NS-23/ D
AP being a project for 4-Laning of KM. 464.000 to KM. 474.000 of Nagpur-
Hyderabad section and KM. 9.400 and KM. 22.300 of Hyderabad-Bangalore
section of National Highway 7 in the State of Andhra Pradesh at a contract
price of Rs. 74,88, 79,544.69. The Agreement contains an arbitration clause
which I will refer to at an appropriate stage.
E
4. According to the petitioners, in September, 2004, i.e. after more than
three years of Contract-Agreement, it was alleged by the respondent that the
petitioners had furnished forged Bank Guarantees for availing mobilization
and other advances under the Contract Agreement. The respondent, in view
of the Arbitration Clause, filed OMP No. 342 of 2004 in the High Court of
Delhi against the petitioners under Section 9 of the Act for interim relief. The
F
High Court passed interim directions restraining the petitioners from removing
and/or transferring machinery and stock placed by them at the site for execution
of work. On December 13, 2004, the respondent invoked Clause 59 of the
Agreement and terminated the contract. There was exchange of letters and
notices between the parties. Ultimately, by a communication dated April 7, G
2005, the petitioners intimated the respondent that in accordance with the
.... Arbitration Clause, they had appointed Hon'ble Mr. Justice A.K. Srivastava,
a retired Judge of the High Court of Delhi as their nominee Arbitrator.
According to the petitioners, in the second half of June, the respondent
addressed a letter to Mr. C.S. Balaramamurthi, purported to have been written
H
180 SUPREME COURT REPORTS (2007) 9 S.C.R..

A on April 7, 2005 appointing him as the nominee Arbitrator ofNHAI. From the
record, it appears that the two Arbitrators could not agree to an appointment
of Third Arbitrator. The respondent intended to appoint a 'technical' man as
the Third Arbitrator as the matter was of a 'highly technical nature', but the
arbitrator appointed by the petitioners insisted that the Presiding Arbitrator
should be a retired Chief Justice or a Judge of a High Court, who should be
B senior to him (Justice Srivastava). It is also on record that the respondent
appointed Mr. K.P. Mohanty as the Presiding Arbitrator. Subsequently,
however, his appointment was not continued. In February, 2006, Justice
Srivastava had shown his unwillingness to continue as Arbitrator and the
petitioners nominated Hon'ble Mr. Justice V.A. Mohta, retired Chief Justice of
C High Court ofOrissa as their nominee Arbitrator in place of Justice Srivastava.
Since the parties could not agree as to appointment of Third/Presiding
Arbitrator, the petitioners have filed the present petition praying therein that
the Chief Justice of India may be pleased to appoint a retired Judge of the
Supreme Court of India or a retired Chief Justice of a High Court as Presiding
Arbitrator. The Hon'ble Chief Justice of India designated me to deal with the
D matter and to pass an appropriate order on the application. Accordingly the
petition was placed before me.

5. On January 24, 2007 notice was issued. Affidavits and further affidavits
had been filed by the parties.

E 6. I have heard learned counsel on both the sides.

7. The learned counsel for the petitioners submitted that the respondent-
NHAI ought to have agreed to appoint a retired Judge of the Supreme Court
or a retired Chief Justice of a High Court as Presiding/Third Arbitrator. It was
F submitted that when the petitioners have nominated a retired Chief Justice of
a High Court as their Arbitrator, the respondent ought to have considered the
said fact and ought to have agreed to nominate a Judge, senior in rank to the
Arbitrator appointed by the petitioners. It was also submitted that the dispute
relates to interpretation of terms and conditions of the contract and there is
no 'technical' element which requires appointment of a 'technical' man. It was
G also stated that in similar circumstances, between the same parties, a dispute
had arisen earlier, arbitration petitions were filed before the Chief Justice of
High Court of Delhi and the nominee of the Chief Justice had appointed _j
Hon'ble Mr. Justice Arun Kumar, retired Judge of this Court as the Presiding
Arbitrator. In the instant case also, such a course ought to have been adopted
H by the respondent. Since it was not done, the petitioners are constrained to
ENGINEERING AND CONSTRUCTION COMPANY LTD. v. NATIONAL HIGHWAYS AUlHORITY OF INDJA IC.K. 1HIJCIC£R. I.I 181

approach this Court. A
8. The learned counsel for the respondent, on the other hand, submitted
that the relevant clause empowers the Council of Indian Road Congress ('IRC'
for short) to appoint Presiding Arbitrator in case of failure of the two Arbitrators
to appoint Third Arbitrator. Since two Arbitrators appointed by the parties
(the petitioners on the one hand and the respondent on the other hand) could B
not arrive at a consensus, it is the power of IRC to appoint a Third Arbitrator
and the petition is liable to be dismissed. It was also submitted that a similar
question came up for consideration before this Court between the same
parties in YOU ONE Engineering & Construction Co. Ltd. & Anr. v. National
Highways Authority of India, [2006] 4 SCC 372 and this Court has held that
it is the right of IRC to appoint Third Arbitrator and the petitioners could not C
insist for a particular Arbitrator. Regarding the order passed by the Nominee
of the Chief Justice of High Court of Delhi, it was submitted that it was an
agreed order and the respondent had consented to in appointing Hon'ble Mr.
Justice Arun Kumar, retired Judge of this Court as the Third Arbitrator. The
said decision, therefore, does not help the petitioner. It was also urged that D
the question is of 'highly technical' nature and hence IRC is insisting to
appoint a 'technical' man as the Third/Presiding Arbitrator. It was, therefore,
prayed that the petition be dismissed.

9. Having considered rival contentions of the parties and having gone
through the Agreement and Arbitration Clause, I am of the view that the E
prayer of the petitioners cannot be granted. It is not in dispute that the
Agreement, dated May 31, 2001 contains an Arbitration Clause (Clause 3).
The relevant part of the said Clause reads thus:

.... "In case of dispute or difference arising between the employer and a
domestic contractor relating to any matter arising out of or connected F
with this Agreement, such dispute or difference shall be settled in
accordance with the Arbitration and Conciliation Act, 1996. The Arbitral
Tribunal shall consist of 3 Arbitrators, one each to be appointed by
the employer and the contractor. The third arbitrator shall be chosen
by the two arbitrators so appointed by the parties and shall act as
Presiding Arbitrator. In case of the failure qf the two arbitrators G
appointed by the parties to reach upon a consensus within a period
of 30 days from the appointment of the arbitrator appointed
. subsequently, the Presiding Arbitrator shall be appointed by the
Council of Indian Road Congress".
(emphasis supplied) H
182 . SUPREME COURT REPORTS· [2007) 9 S.C.R.

A 10. A bare reading of the above clause leaves no room for doubt .that
in case of failure of the two Arbitrators appointed by the parties to reach
upon a consensus, the Presiding Arbitrator 'shall be appointed by the Council
of/RC'.

11. It may be stated at this stage that when the matter was placed before
B me on April 24, 2007, the parties invited my attention to the aforesaid clause
and it was sut»mitted that no consensus could be arrived at by the parties.
Considering the.fact situation and the Agreement, I thought it proper that the
parties should undertake fresh exercise in the direction. I accordingly passed
an·order to make one more attempt. Unfortunately, however, the effort could
C not succeect and both the counsel stated that the matter will have "to be
dec.ided on merits. Accordingly, the matter was heard.

12. In my opinion, the learned counsel for the respondent is right that
apart fro,m clear language of Arbitr~tion Clause, the point is also covered by
D YOU ONE Engineering. Almost in identical circumstances, this Court was
· called µpon to consider the provisions of the Act and the right of the
respondent to appoint Presiding Arbitrator under the Agreement. The Court
held that it is the right of IRC to appoint Presiding Arbitrator in case the
parties are not ad idem in appointment of Third/Presiding Arbitrator.

E 13. This Court stated:

"The arbitration agreement clearly envisages the appointment of the
presiding arbitrator by IRC. There is no qualification that the arbitrator
has to be a different person depending on the nature of the dispute.
If the parties have entered into such an agreement with open eyes,
F it is not open to ignore it and invoke exercise of powers in Section
I I (6)".

(emphasis supplied)

14. It is, no doubt, true that the High Court of Delhi has appointed
G Hon'ble Mr. Justice Arun Kumar, retired Judge of this Court as Presiding
Arbitrator in OMP No. 342 of2004 vide its order dated May 22, 2006. The said
order is on record of this case. Three paragraphs of the said order are
important and they read as under:

"3. Learned counsel for the parties jointly state that whole issue can
H
ENGINEERING AND CONSTRUCTION COMPANY LTD. "· NATIONAL HIGHWAYS AUTHORITY OF INDIA IC.K. THAKKER. I.I 183

. be sortedout by having a panel of three arbitrators, with one ar~itrator A
. as nominated by each of the parties and the presiding arbitrator to be
appointed by this Court with the joint. consent of the learned counsel
. for the part_ies. It may be noticed that as on date the petitioner has
nol!linate~ Mr.LR.Gupta, Director General Works, CPWD (Retd.) while
respondent has nominated Justice S.B.Wad (Retd.). Justice S.B.Wad B
~as"nominated in place of Justice A.K.Srivastava (Retd.), who
expressed his inapility to act as an arbitrator.

4. Learned couns'el for the parties propose that Justice Arun Kumar
(Retd Judge.of ihe Sup~eme Court), JO, Krishna Me~on Marg, New
Delhi - l JO 001 (Phone: 2301-2175) be appointed as the presiding C
:·,. arbitrat9r anfi qrbitral tribunal be constituted accordingly. ·

5. ·The bonstitution of the presiding arbitrator and arbitral tribunal"
as proposed by learned counsel for the parties is accepted by this
Court and the said tribunal shall proceed to enter upon reference .and
.. determine the dispute between the parties. Ordered accordingly. The D
constitution of the tribunal be Justice Arun Kumar (Retd.) as the
presiding arbitrator, Mr.L.R. Gupta and Justice S.B. Wad (Retd.) as the
two other members of the arbitral tribunal. The fee shall be fixed by
the tribunal itself'.

(emphasis supplied) E
15. The learned counsel for the respondent was right when he submitted
that the order was based on 'consent' of the parties. As in the present case,
there is no such consent, the Court has to consider the matter by interpreting
an Arbitration Clause. Clause 3, as observed earlier, is explicitly clear and
there is no ambiguity. Again, the controversy is decided by this Court in YOU F
ONE Engineering. In my view, therefore, the petitioners cannot compel the
respondent to agree for a retired Judge of this Court or retired Chief Justice
of a High Court, senior to Hon'ble Mr. Justice Mohta as Presiding Arbitrator.

16. It was finally submitted that even if this Court is of the view that
' no such direction can be issued or order can be passed, it may be appreciated G
that the petitioners have chosen a retired Chief Justice of a High Court as
+ their Arbitrator and appropriate observations may be made so that IRC may
appoint retired Judge of this Court or a retired Chief Justice of a High Court
to be the Presiding Arbitrator. That would enable the petitioners to avail
services of an Arbitrator appointed by them. H
184 SUPREME COURT REPORTS (2007) 9 S.C.R.

A 17. I appreciate the anxiety of the petitioners. In my view, however,
when the Arbitration Clause is clear and the point is concluded by a decision
of this Court, it would not be proper on my part to make any such observation.
It is, however, open to the respondent to take an appropriate decision in the
matter keeping in view the facts in their entirety. I may only state that. this
B decision will not inhibit the· respondent in taking any decision as it thinks fit.

18. In view of the above legal position, I express no opinion on the
contention of the parties as to whether the controversy raised is or is not of ~
a 'technical' nature. Since it is not necessary for me to enter into that question,
I leave the matter there.
c ie·
19. For the foregoing re'asons, the application deserves to be dismissed
and is accordingly dismissed, however, leaving the parties to bear their own
costs.

8.8.B. Petition dismissed.