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HC discusses the invocation of arbitration clause if one party appoints arbitrator on 'ex-parte' basis.

  • Date: 2021-02-10 12:27:32
  • Views: 20

Justice Kameswar Rao decided a petition wherein on the invocation of the arbitration clause, one of the parties appointed the sole arbitrator on its own.
The instant petition was filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, where the petitioner and the respondents entered into a lease deed regarding the premises. It has been stated that according to the execution of the lease deed, petitioner started fulfilling the obligations on the assumption that the respondents will also do the same and disbursed an amount of Rs 3,32,000 to the respondents to expedite the refurbishment and up-gradation of the premises to make it at par with the petitioner's benchmark.
 
Due to the pandemic, the petitioner sought to invoke the force majeure clause in the Lease Deed. Even after repeated communications and grant of time as sought by the respondents, the respondents failed to furnish the complete set of documents as mandated under Clause 11.2.1 of the Lease Deed.
 
While the above-stated breach was being cured, respondents suddenly and to complete shock and dismay of the petitioner issued a letter demanding a sum of money by misrepresenting the Lease Deed clauses. Respondents invoked arbitration clause citing the existence of disputes under the lease deed and nominated a Retired Judge of this Court as the Sole Arbitrator.
 
The issue for consideration was whether the arbitrator's appointment was at variance with the stipulation in the contract and as such non-est for this Court to grant the relief to the petitioner by appointing a new arbitrator?
 
The Court's decision: As per the arbitration clause contained in the deed, the arbitrator has to be appointed mutually by both the parties. In the present case, the respondent was appointed sole arbitrator but was not confirmed by the petitioner. Respondents should have approached the Court under Section 11 of the Act seeking an Arbitrator appointment when the same has not been confirmed. Hence, the appointment is declared to be non-est. Bench relied upon the Supreme Court decision in Walter Bau Ag. v. MCGM (2015) and Naveen Kandhai v. Jai Mahal Hotels (P) Ltd., Arb. P. 53 of 2017. Concerning the significance of adherence to the procedure agreed upon by the parties to an arbitration agreement with regard mutual/common consent in appointing an arbitrator, Court relied upon the decision of Manish Chibber. While allowing the petition, Justice S.P. Garg, a retired Judge of this Court was appointed as the sole arbitrator to adjudicate the disputes and differences between the parties arising out of the lease deed. [Oyo Hotels and Homes (P) Ltd. v. Rajan Tewari, Arb. P. 424 of 2020, decided on 09-02-2021]

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