REPORTABLE    IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION

ARBITRATION PETITION NO.3 OF 2009  

Sime Darby Engineering SDN. BHD. ....Petitioner (s)

- Versus -

Engineers India Ltd. ....Respondent(s)

O R D E R

1. This  petition  has  been  filed  under  Section  11  of  

Arbitration  and  Conciliation  Act  1996  (hereinafter  

referred “the said Act”) by the petitioner praying for  

appointment of the arbitral tribunal to adjudicate the  

claims  and  disputes  between  the  petitioner  and  the  

respondent.   

2. The petitioner is a company incorporated and existing  

under the laws of Malaysia and is engaged in the business  1

of  fabrication  of  all  types  of  offshore  and  onshore  

structures and complexes.  The respondent on the other  

hand  is  the  company  incorporated  under  the  (Indian)  

Companies  Act,  1956  and  is  inter  alia engaged  in  the  

business of providing engineering and related technical  

services  for  petroleum  refineries  and  other  industrial  

projects.

3. The  necessary facts  of the  case are  that Oil  and  

Natural Gas Corporation Limited (ONGC) invited a tender  

vide notification dated November 17, 2003 for carrying  

work  of  Survey,  Design,  Engineering,  Procurement,  

Fabrication, Anticorrosion and Weight coating, Laying of  

submarine pipeline, Installation of SPM, Load out, Tie-

down/Sea-fastening and various other jobs in respect of  

Mumbai High South Field offshore site.

4. In connection with the said tender issued by ONGC,  

respondent  and  petitioner  entered  into  a  Business  

Agreement on 22/01/2004 by which it was agreed that the  

respondent  shall  quote  as  a  bidder  against  the  said  

Tender  with  the  petitioner  as  a  sub-contractor  for  2

identified scope of work.  The tender was awarded by ONGC  

to the respondent by notice dated 10/03/2004 for the said  

fabrication  and  installation  of  D-1  Well-Cum-Water  

Injection Platform at Mumbai High South field Off-shore  

site on a turnkey basis for a sum of US $ 62,3000,000/-  

and thereafter an agreement between the respondent and  

ONGC was entered into. Then, the respondent entered into  

a subcontract with the petitioner which was signed on 29th  

of  October  2004  and  for  Fabrication,  Load  Out  and  

Transportation of Jacket, Piles, Conductors and Deck for  

D-1 Well-Cum-Water Injection Platform Project of ONGC at  

Bombay High South field off-shore site for a lump sum  

subcontract price of US $ 20,162,460/-.  In terms of the  

said subcontract the petitioner carried out its scope of  

work in terms of its contractual obligations.  As it did  

not receive the full payment from the respondent disputes  

and differences between them cropped up.  These disputes  

between  the  parties  remained  unresolved  despite  some  

joint negotiations between them.  

5. The petitioner by its Advocate’s notice on 19/02/2008  

invoked the arbitration clause and referred all disputes  3

and  differences  between  them  and  respondent  to  

arbitration including its claim of US $ 14,244,812.02 and  

claim for loss and damage on account of financing charges  

and foreign exchange and such other damages.  In the said  

letter the petitioner also suggested the names of a few  

arbitrators.   The  respondent  by  its  letter  dated  

26/02/2008 did not accept the stand of the petitioner and  

stated  that  petitioner’s  stand  to  proceed  with  

arbitration is premature and the respondent requested the  

petitioner  to  withdraw  the  Notice  Invoking  Arbitration  

and come out with a viable proposal to create a joint  

settlement mechanism to settle the dispute amicably.   

6. However, the learned counsel for the petitioner tried  

to show before this Court that several meetings were held  

between the parties for settling the dispute amicably but  

the said efforts ultimately did not succeed.  However  

before this Court the learned counsel for the respondent  

fairly  accepted  the  position  but  disputes  between  the  

parties virtually cannot be resolved amicably anymore and  

the matter should be resolved through arbitration.   

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7. Learned counsel for the respondent submitted that he  

does  not  dispute  that  there  are  arbitrable  disputes  

between  the  parties.   Nor  does  he  dispute  that  the  

petitioner has invoked the arbitration clause between the  

parties.  The only point on which the case is argued is  

that in this case the arbitration panel must consist of  

three arbitrators, one is to be nominated by each party  

and the third arbitrator is to be chosen by the nominated  

arbitrators.  Learned counsel for the petitioner on the  

other hand did not accept the said stand of the learned  

counsel for the respondent and submitted that in terms of  

the agreement in this case dispute can be decided by the  

sole arbitrator.  Matter was actually heard before this  

Court on the aforesaid controversy.

8. Learned  counsel  for  the  petitioner  submitted  that  

admittedly the arbitration clauses in the contract which  

govern  the  rights  of  the  parties  in  the  matter  of  

arbitration are as follows:

“12.1 This Subcontract shall be governed by  and construed in accordance with the Laws of  

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India.  The Courts at Delhi shall have sole  jurisdiction.

12.2 The Parties shall endeavour to resolve  any  dispute  or  difference  amicably  through  joint  negotiation  and  when  necessary  by  reference to the Chief Executive of EIL and  SSE.   If  any  dispute  or  difference,  which  cannot be mutually resolved by the parties, the  same  shall  be  referred  to  arbitration  in  accordance  with  the  provisions  contained  in  Indian Arbitration and Conciliation Act, 1996  which is generally in accordance with UNCITRAL  rules.

12.3 The arbitrator(s) shall give reasoned  award in respect of each dispute or difference  referred to him. The award as aforesaid shall  be final, conclusive and binding on all the  Parties of this Subcontract in accordance with  the Law.

12.4 The venue of the arbitration shall be  at New Delhi, India.”  

9. By relying on para 12.2, learned counsel submitted  

that the said clause does not indicate about the number  

of arbitrators to be appointed while reciting that the  

matter be referred to arbitration in accordance with the  

provisions  contained  in  the  Indian  Arbitration  and  

Conciliation, 1996, which is generally in accordance with  

the UNCITRAL rules.

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10. Learned  counsel  also  referred  to  and  relied  on  

Section  10  of  the  said  Act  which  deals  with  the  

composition of Arbitral Tribunals under Chapter III of  

the said Act.  Section 10 (1) and 10 (2) are as under:-

“10.Number of arbitrators. –  (1) The parties  are  free  to  determine  the  number  of  arbitrators,  provided  that  such  number  shall  not be an even number.

(2) Failing the determination referred to in  sub-section  (1),  the  arbitral  tribunal  shall  consist of a sole arbitrator.”

11. Relying  on  Clause  12.2  and  Section  10,  learned  

counsel submits that it is clear that arbitration in this  

case shall be held by a sole or a single arbitrator. He  

particularly emphasised Clause 12.2 of the agreement and  

Section  10(2)  of  the  Act  which  says  that  failing  the  

determination referred to in sub-section 1, the Arbitral  

Tribunal shall consist of a sole arbitrator.

12. Learned  counsel  submits  that  in  the  instant  case  

Clause 12.2 does not indicate the number of arbitrators  

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and in that event Sub-section (2) of Section 10 would  

apply.

13. Learned  counsel  further  submits  that  the  matter  

should not be referred to three arbitrators as that would  

prolong  arbitration  proceedings  as  three  arbitrators  

would have to adjust their timings.  Apart from that the  

same would result in considerable escalation of cost.

14. Learned counsel has referred to a judgment of this  

Court  in  support  of  his  contention  that  it  has  been  

judicially recognized that reference of a dispute to a  

panel of three arbitrators escalates the cost and more so  

it is very time consuming.  

15. Learned counsel for the respondent on the other hand  

submits that reference of the matter to a panel of three  

arbitrators is not ruled out if the arbitration clause is  

properly construed alongwith Section 10 of the said Act.

16. Learned counsel admitted that Clause 12.2 is silent  

about the number of arbitrators but Clause 12.3 refers to  8

an  expression  ‘arbitrator(s)’.  By  relying  on  the  said  

expression in Clause 12.3 learned counsel submits that  

the arbitration clause thus postulates the appointment of  

more  than  one  arbitrator.   As  there  cannot  be  two  

arbitrators which is an even number, the minimum number  

of arbitrators other than one would be three.

17. Learned counsel also submitted that while clause 12.2  

stipulates that the arbitration between the parties would  

be governed under the said Act it also says in clause  

12.2  that  it  shall  generally  be  in  accordance  with  

UNCITRAL rules.  

18. Learned  counsel  also  submitted  that  they  have  a  

policy that in matters involving high stakes above Rupees  

ten crores, it should be referred to a Committee on panel  

of arbitrators. In support of this submission, learned  

counsel  referred  to  a  Standard  Contract  Clauses  which  

have been disclosed in the counter affidavit filed by the  

respondent  and  reliance  was  placed  on  the  following  

clause:-

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“The  Arbitration  shall  be  conducted  in  accordance  with  the  Indian  Arbitration  and  Conciliation Act, 1996.  For Contracts costing  upto Rs.10 Crores, a Sole Arbitrator should be  appointed.  For Contracts costing over Rs.10  Crores, a Committee of Arbitrators should be  appointed  composed  of  one  Arbitrator  to  be  nominated  by  the  Contractor,  one  to  be  nominated  by  the  Owner  and  the  third  Arbitrator, who will act as a Chairman but not  as  umpire,  to  be  chosen  jointly  by  the  two  nominees.   The  decision  of  majority  of  Arbitrators shall be final and binding on both  parties.”

19. Learned counsel also relied on a passage from Redfern  

and Hunter, Law and Practice of International Commercial  

Arbitration, Fourth Edn., 2004, page 185, which is as  

under:-

“In modern practice, despite the advantages of  a sole arbitrator, particularly in arbitrations  involving  heavy  stakes,  preference  is  for  appointment  of  three  arbitrators,  albeit  not  without rationale.  Particularly, in the area  of  “international  commercial  arbitration”  involving complex problems peculiar to special  types  of  disputes,  eg,  engineering,  construction,  maritime  and  international  trading  disputes,  a  sole  arbitrator,  many  a  time may not be suitable for resolution of such  disputes.  In  such  situations,  the  common  practice is to appoint a tribual comprising of  three arbitrators.  Even though it may involve  more expense and delay than a sole arbitrator  arbitration, it is still preferred as it is  more effective.  ‘An arbitral tribunal of three  arbitrators  is  likely  to  prove  more  

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satisfactory to the parties, and the ultimate  award is more likely to be accepted to them.”   

20. The  learned  counsel  argued  if  the  aforesaid  

stipulations in clauses 12.2 and 12.3 of the agreement  

and Sections 10(1) and 10(2) are read harmoniously with  

UNCITRAL model rules, the appointment of a panel of three  

arbitrators in this case cannot be ruled out.

21. These being the rival contentions of the parties, I  

am unable to accept the contentions put-forth by learned  

counsel  for  the  respondent  for  the  reasons  discussed  

hereinbelow.   

22. If one looks at the Clause 12.2 of the agreement it  

should be clear if the disputes and differences are not  

resolved  mutually,  the  same  shall  be  referred  to  

arbitration in accordance with the provisions of the said  

Act. Clause 12.3 stipulates the requirement on the part  

of the arbitrator(s) to give reasons.

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23.  The  Arbitration  Tribunal  as  defined  under  Section  

2(d) of the Act means “a sole arbitrator or a panel of  

arbitrators”.

24. Section 10(2) of the Act is very relevant in order to  

resolve  the  controversy  in  this  case  in  as  much  as  

Section 10(2) makes it very clear where the number of  

arbitrator is not determined, the arbitral tribunal shall  

consist  of  a  sole  arbitrator.   In  this  connection  if  

UNCITRAL rules are referred the position will remain the  

same.   UNCITRAL  model  law  on  International  Commercial  

Arbitration  also  accepts  the  same  definition  of  

Arbitration  Tribunal  in  Article  2(b).   Article  10  of  

those rules is almost identical with Section 10 of the  

said Act.  Article 2(b) and Article 10 of those rules are  

extracted hereinbelow:-

“Article 2. Definition  and  rules  of  interpretation – For the purposes of this Law: (a) xxx xxx (b) “arbitral  tribunal”  means  a  sole  arbitrator or a panel of arbitrators.”

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“Article 10. Number  of  arbitrators  -  (1)  The  parties are free to determine the number of  arbitrators.

(2) Failing such determination, the number of  arbitrators shall be three.”     

25. Therefore,  the  definition  of  Arbitral  Tribunal  in  

Section 2(1)(d) of the said Act is verbatim the same as  

in Article 2(b). Article 10 of the UNCITRAL model law has  

close similarity with Section 10 of the said Act.  

26. Section 10 deviates from Article 10 of the UNCITRAL  

law  only  in  the  sense  that  Section  10(1)  of  the  Act  

provides that despite the freedom given to the parties to  

determine the number of arbitrators such numbers shall  

not be even number. But in default of determination of  

the number, Section 10(2) provides the tribunal is to  

consist  of  a  sole  arbitrator.   Therefore,  scheme  of  

Section 10(2) of the Act is virtually similar to Article  

10.2 of the UNCITRAL model law.   

27. In the instant case Clause 12.2 of the Arbitration  

clause  is  silent  about  the  number  of  arbitrator.  1 3

Therefore,  Section  10(2)  of  the  said  Act  squarely  

applies.

28. The learned counsel for the respondent has referred  

to a passage at page 185 para 4-18 of Redfern and Hunter,  

Law and Practice of International Commercial Arbitration,  

Fourth Edn. But looking at the said book this Court finds  

that the said passage was not been properly quoted.  In  

paragraph 4-15 of the said book it has been provided as  

follows:-

“A sole arbitrator shall be appointed unless  the parties have agreed in writing otherwise,  or unless the LCIA Court determines that in  view of all the circumstances of the case a  three-member tribunal is appropriate.”

29. In the said paragraph it has also been stated that  

there are distinct advantages of referring a dispute to a  

sole arbitrator on grounds of speed and economy. “A sole  

arbitrator  does  not  need  to  ‘deliberate’  with  others,  

without  having  to  spend  time  in  consultation  with  

colleagues  in  an  endeavour  to  arrive  at  an  agreed  or  

majority determination of the matters in dispute.” (Page  

184)

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30. Similar  opinion  has  been  expressed  in  Russell  on  

Arbitration 23rd Edition.  At page 129, paragraph 4-035  

with reference to arbitration it has been said “Where no  

choice is made, the law implied a reference to a tribunal  

consisting of a sole arbitrator.”  In fact Section 15(3)  

of the (English) Arbitration Act, 1996 provides for the  

same.   

31. Mustil and Boyd on Commercial Arbitration, 2nd Edition  

also contains the same statement of law.  At page 174 of  

the said book it has been provided that “an arbitration  

agreement calls for a reference to a single arbitrator,  

either  if  it  contains  an  express  stipulation  to  that  

effect,  or  if  it  is  silent  as  to  the  mode  of  

arbitration.”   

32. In the instant case, the arbitration clause 12.2 is  

silent as to the number of arbitrator.  The said clause  

read with Section 10(2) of the Act makes it very clear  

that  arbitral  tribunal  in  the  instant  case  would  be  

consisting of a sole arbitrator. 1 5

33. The learned counsel for the respondent has referred  

to its policy decision which has been quoted hereinabove.  

Such  policy  decision  cannot  change  the  contractual  

clause. In any event the contract between the parties was  

entered into in 2004.  The said policy decision came into  

effect  in  2005.   Therefore,  the  said  policy  decision  

cannot in any way override contract between the parties.

34. The  parties  autonomy  in  the  arbitration  agreement  

must be given due importance in construing the intention  

of the parties.  In so far as reference to the expression  

‘arbitrator(s)’  in  clause  12.3  is  concerned,  the  same  

does not in any way affect the intention of the parties  

in clause 12.2.

35. It  is  noted  in  this  connection  that  parties  have  

freedom to change the number of arbitrator even after the  

contract  has  been  entered  and  by  mutual  consent  the  

parties may amend the contract.  If that takes place, in  

such  an  eventuality  clause  12.3  provides  that  the  

arbitrator or arbitrators have to give reasoned award in  

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respect of each dispute and difference referred.  Here  

also the expression which has been used is ‘him’ which  

also points to a sole arbitrator.

36. It  is  clearly  provided  in  the  said  Act  that  an  

arbitral tribunal can, if necessary, take the help of  

experts in terms of Section 27 of the said Act.  If the  

sole arbitrator requires the assistance of an expert it  

can always take such assistance.   

37. Mr. Mukul Rohtagi, learned counsel for the respondent  

has fairly submitted that if his argument is not accepted  

by the Court then his client has no objection to the  

appointment of Hon’ble Mr. Justice D.P. Wadhwa, a former  

Judge of this Court, to be the sole arbitrator in this  

case.  The name of Justice Wadhwa also finds place in the  

list of names suggested by the petitioner.  Therefore,  

appointment of Justice Wadhwa is fairly by consensus.

38. Since I am unable to accept the argument of learned  

counsel for the respondent, I accordingly appoint Justice  

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D.P.  Wadhwa,  a  former  Judge  of  this  Court,  the  sole  

arbitrator in this case.   

39. The  Hon’ble  arbitrator  is  requested  to  decide  the  

dispute  as  early  as  possible  and  preferably  within  a  

period of six months from the date of entering upon the  

reference.  The terms of arbitration proceeding are left  

to be decided by learned arbitrator.   

40. The petition is allowed accordingly.  No order as to  

costs.         

...................J. (ASOK KUMAR GANGULY)

New Delhi July 22, 2009

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