DENEL (PROPRIETARY LIMITED) versus BHARAT ELECTRONICS LTD. & ANR.

Citation: [2010] 6 S.C.R. 784 · Decided: 10-05-2010 · Supreme Court of India · Bench: H.L. DATTU · Disposal: Case Allowed

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Judgment (excerpt)

A 
B 
[2010] 6 S.C.R. 784 
DENEL (PROPRIETARY LIMITED) 
v. 
BHARAT ELECTRONICS LTD. & ANR. 
(Arbitration Petition No. 16 of 2009) 
MAY 10, 2010 
[H.L. DATIU, J.) 
Arbitration and Conciliation Act, 1996 - s. 11 (6) - Dispute 
between parties regarding payment of certain amounts 
C towards Purchase Orders -
Arbitration clause of the 
agreement specifying 'Managing Director' of respondent-
company to be arbitrator - Petition for appointment of 
arbitrator - Held: Generally court not to interdict appointment 
of an arbitrator, chosen by the parties under the terms of the 
D contract - In the peculiar facts of the case, it is in the interest 
of both the parties to appoint an arbitrator other than the 
Managing Director of the respondent-Company - Retired 
Judge of Supreme Court appointed as sole arbitrator. 
E 
Respondent-Corporation entered into a contract with 
the appellant-Company. The 'general terms and 
conditions of the Purchase Order' contained an 
arbitration clause. As per the clause, 'Managing Director 
or his nominee' of the respondent-Corporation would be 
appointed as arbitrator. 
F 
The petitioner after performing its obligation in terms 
of purchase orders, raised a demand. Respondent 
though admitted their liability, refused to settle the 
amounts on the ground that they were prohibited by the 
G Ministry. Later the respondent denied its liability. Hence 
the petition uls. 11 (6) of Arbitration and Conciliation Act, 
1996. 
Allowing the petition, the Court 
H 
784 
DENEL (PROPRIETARY LIMITED) v. BHARAT 
785 
ELECTRONICS LTD. & ANR. 
HELD: 1. There is a dispute between the parties in 
A 
regard to payment of certain amounts towards Purchase 
Orders/Invoice. Since, there is a failure on the part of the 
respondent in mc.i.king appointment of an arbitrator for. 
resolving the 1ispute in accordance with the 
understanding of the parties which is reflected in the 
B 
Purchase Order, .he prayer of the petitioner requires to 
be granted. [Para 23] [795-B-C] 
2. The court cannot interpose and interdict the · 
appointment of an arbitrator, whom the parties have C 
chosen under the terms of the contract unless legal 
misconduct of the arbitrator, fraud, disqualification etc. is 
pleaded and proved. It is not in the power of the party at 
his own will or pleasure to revo_ke the authority of the 
arbitrator appointed with his consent. There must be just 
and sufficient cause for revocation. The said principle has 
D 
to abtcfe by in the normal course. However, considering 
the peculiar conditions in the present case, whereby the 
arbitrator sought to be appointed under the arbitration 
clause, is the Managing Director of the company against 
whom the dispute is raised. In addition to that, the said 
E 
Managing Director of the Company which is a 
'Government Company' is also bound by the direction/ 
instruction issued by his superior authorities. It is also the 
case of the respondent that though it is liable to pay the 
amount due under the Purchase Orders, it is not in a .F 
position to settle the dues only because of the directions 
issued by Ministry of Defence, Government of India. It 
only shows that the Managing Director may not be in a 
position to independently decide the dispute between the 
parties. [Para 22] [794-D·H; 795-A] 
G 
3. In the light of the peculiar facts and circumstances 
of the instant case, it would be in the interest of both 
parties and to do complete justice, an arbitrator other 
than the Managing Director of the respondent requires to 
H 
' 
786 
SUPREME COURT REPORTS 
[2010] 6 S.C.R. 
A be appointed to settle the dispute. A retired judge of 
Supreme Court is appointed as the sole arbitrator. [Paras 
25 and 26] [795-E-F] 
Indian Oil Corporation Ltd. and Ors. vs. Raja Transport 
B Pvt. Ltd., (2009) 8 SCC 520; You One Engineering and 
Construction Co. Ltd. and Anr. vs. National Highways Authority 
of India (NHAI) (2006) 4 SCC 372; Datar Switchgears Ltd. v. 
Tata Finance Ltd. and Anr. (2000) 8 SCC 151; Bhupinder 
Singh Bindra v. Union of India and Anr. AIR1995 SC 2464, 
referred to. 
c 
Case Law Reforence: 
(2009) s sec 520 
Referred to. 
Para 16 
(2006) 4 sec 372 
Referred to. 
Para 17 
D 
(2000) s sec 151 
Referred to. 
Para 22 
AIR 1995 SC 2464 
Referred to. 
Para 22 
CIVIL APPELLATE JURISDICTION : Arbitration Petition 
E No. 16 of 2009. 
F 
Under Section 11 (6) of the Arbitration and Conciliation Act-
1996. 
V.Giri, Madhu S., K.C. Dua, for the Appellant. 
S.N. Bhat for the Respondents

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