C.M.C. LTD. versus UNIT TRUST OF INDIA & ORS.

Citation: [2007] 3 S.C.R. 467 · Decided: 01-03-2007 · Supreme Court of India · Bench: P.K. BALASUBRAMANYAN · Disposal: Dismissed

Judgment (excerpt)

• )r 
.... 
C.M.C. LTD. 
A 
v. 
UNIT TRUST OF INDIA & ORS. 
MARCH I, 2007 
[P.K. BALASUBRAMANYAN ANDV.S. SIRPURKAR,JJ.] 
B 
Arbitration and Conciliation Act, 1996-Section 11 (6)-Appointment 
of arbitrator-Application under-Case of other party to the dispute that 
appointment to be as per the Rules of Indian Council of Arbitration- C 
Designated Judge interpreting the arbitration agreement and holding that 
parties retained the right to nominate respective arbitrators and no obligation 
to choose arbitrators as per the Rules-Correctness of-Held: There is no 
infirmity in the order since the power to appoint an arbitrator not ceded to 
the Council-On appointment of arbitrator and constitution of Arbitral 
Tribunals, the parties agreed that the proceedings would be conducted as D 
per the Rules-Power retained by the parties to appoint arbitrator did not 
militate against the Act or the Rules-Indian Council of Arbitration Rules. 
Appellant and respondent no. 1 entered into an agreement Dispute arose 
between the parties. In terms of the arbitration agreement, respondent invoked 
arbitration clause. It called upon the appellant to refer the dispute to be settled E 
through arbitrator. Respondent No. 1 named an arbitrator as sole arbitrator 
and if appellant was not willing to accept the arbitrator named, the appellant 
could appoint its arbitrator and the said two arbitrators would then appoint a 
Presiding Arbitrator. Appellant did not appoint arbitrator in terms of the 
arbitration agreement since the parties had agreed to follow Rules prescribed F 
by Indian Council of Arbitration. Respondent no. 1 filed application before 
the Chief Justice of the High Court under section 11(6) of the Arbitration 
and Conciliation Act, 1996 for appointment of an arbitrator since the appellant 
had failed to act in terms of the procedure. Designated Judge of the High 
Court held that the arbitration agreement did not contemplate the appointment 
of the arbitrator to be as per the Rules of the Indian Council of Arbitration G 
but only provided regarding the following of the procedure of the Rules of the 
Indian Council of Arbitration. It noticed that the appellant had also named an 
arbitrator without prejudice to its contentions and that the two arbitrators 
had nominated a Presiding Arbitrator and that Tribunal had come into 
467 
H 
' 
468 
SUPREME COURT REPORTS 
[2007) 3 S.C.R. 
A existence and as such allowed the application. Appellant filed a petition under 
Article 226 challenging the decision of the designated Judge. Division Bench 
., .. 
dismissed the petition. Hence the present appeal challenging the decision of 
Designated Judge interpreting the arbitration clause. 
j 
B 
Dismissing the appeal, the Court 
HELD: 1.1. There was no failure on the part of the appellant to follow 
the procedure agreed to between the parties for appointment of an arbitrator 
resulting in conferment of jurisdiction on the Chief Justice to appoint an 
arbitrator in terms of Section 11(6) of the Act. In this context, the appellant 
,. 
c 
agreed that the arbitration was governed by the Arbitration and Conciliation 
Act, 1996. Respondent No. I had, of course, invoked that very Act. [Para 6) 
(473-A-BJ 
1.2. It is clear from the comparison of the arbitration agreement 
suggested by the council and the arbitration agreement between the parties, 
D that the arbitration agreement between the parties substantially differs from 
the one suggested by the Indian Council of Arbitration. Secondly, Rule 4(c) 
is specific that in case the parties had provided a different procedure for 
appointment of an arbitrator, the Council was not bound to process the case 
unless both the parties agreed to follow the entire procedure or Arbitration 
1 
Rules of the Council. Obviously, a different procedure for appointment of an 
E arbitrator or arbitrators had been agreed to by the parties and respondent 
No.I had obviously not agreed to follow the entire procedure or have arbitration 
under the Rules of the Council. Therefore, even if one were to apply the Rules, 
it is difficult to accept the argument that respondent No.1 was bound to invoke 
the Rules of the Council to put in motion an effective machinery for arbitration. 
F 
[Para 7) [473-G-H; 474-AJ 
1.3. The argument that there is an incorporation of the Rules of the 
Council in the arbitration agreement and hence those Rules must be given 
')' 
effect to fully, does not take the appellant far in this case. On a true 

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