LexNORTHERN RAILWAY ADMINISTRATION, MINISTRY OF RAILWAY, NEW DELHI versus PATEL ENGINEERING COMPANY LTD.
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[2008] 12 S.C.R. 216 A NORTHERN RAILWAY ADMINISTRATION, MINISTRY OF T- RAILWAY, NEW DELHI v. PATEL ENGINEERING COMPANY LTD. (Civil Appeal No. 5067 of 2008) B AUGUST 18, 2008 [DR. ARIJIT PASAYAT, P. SATHASIVA~ AND AFTAB ;__ ALAM, JJ.] Ji c Arbitration and Conciliation Act, 1996 - s. 11 and 11 (6) - Appointment of arbitrators - Scope of - Held: Court has to ensure first that the remedies provided are exhausted - It may ask to do what has not been done - Terms of agreement has to be given efj __ ecJ - Chief Justice or: any person or institution D designated by him is to take necessary measures unless agreement on appointment procedure provides other means for securing appointment - It is not mandatory to appoint the . \ named arbitrator - Due regard is to be given to the qualifica- y tions required for arbitrator by the agreement and other con- E siderations to secure appointment of independent and impar- tial arbitrator, otherwise appointment would be vulnerable - On facts, High Court did not consider the said requirement, hence, the appointment set aside - Matters remitted back to it, to make fresh appointments. F With regard to the appointment of arbitrator under s. 11 (6) of the Arbitration and Conciliation Act, 1996, this t- Court in Ace Pipeline Contracts (P) Ltd v Bharat Petroleum Corpn. Ltd. 2007 (5) SCC 304 and the Union of India v Bharat Battery Mgf. Co. (P) Ltd. 2007 (7) SCC 684, gave different G views. In Bharat Battery's case the earlier decision in Ace Pipeline's case was not brought before the Bench, as such there was some confusion. Thus, the present appeals -+-· . have been referred to the larger bench. Disposing of the appeals, the Court H 216 NORTHERN RAILADMIN., MINISTRY OF RAIL, N. DELHI 217 v. PATEL ENGINEERING COMPANY LTD. + HELD: 1. With regard to the appointment of arbitra- A tor, sub-sections (3) to (5) of section 11 of the Arbitration and Conciliation Act, 1996 refer to cases where there is no agreed procedure. Sub-section (2) provides that sub- ject to sub-section (6) the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. Sub- B section (6) sets out the contingencies when party may ,l request the Chief Justice or any person or institution des- ignated by him to take necessary measures unless the -1 agreement on the appointment procedure provides other means for securing the appointment. The contingencies c contemplated in sub-section (6) statutorily are (i) party fails to act as required under agreed procedure or (ii) par- ties or the two appointed arbitrators fail to reach an agree- ment expected of them under that procedure or (iii) per- son including an institution fails to perform any function D entrusted to him or it under the procedure. The third con- ~ . tingency does not relate to the parties to the agreement 't or the appointed arbitrators. [Para 9] [223,H; 224,A-C] 2. The crucial expression in sub-section (6) is "a party may request the Chief Justice or any person or institu- E tion designated by him to take the necessary measures". This expression has to read alongwith requirement in sub-section (8) that the Chief Justice or the person or an institution designated by him in appointing an arbitrator shall have "due regard" to the two cumulative conditions F -1 relating to qualifications and other considerations as are likely to secure the appointment of an independent and impartial arbitrator. [Para 1 OJ [224,D-E] 3. A bare reading of the scheme of Section 11 shows that the emphasis is on the terms of the agreement being G _,.._ \ adhered to ~nd/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 pro- vided for are exhausted. It is not mandatory for the Chief Justice or any person or institution designated by him to H 218 SUPREME COURT REPORTS [2008] 12 S.C. R. A appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifica- tions required by the agreement and other consider- ations. The expression 'due regard' means that proper attention to several circumstances have been focussed. s The expression .'necessary' as a general rule can be broadly stated to be those things which are reasonably required to be done or legally ancillary to the accomplish- ment of the intended act. Necessary measures can be stated to be the
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