REPORTABLE

                            IN THE SUPREME COURT OF INDIA        CIVIL ORIGINAL JURISDICTION

    ARBITRATION PETITION NO.7 OF 2006

Balli Petrochemicals Limited.                 …Petitioner   

Versus

National Aluminium Company Ltd.               …Respondent

J U D G M E N T   

TARUN CHATTERJEE, J.      

1. The  petitioner  is  a  company  incorporated  in

London.  The  respondent  is  a  Government  of

India undertaking having its corporate office at

NALCO Bhawan, P-1 Nayapalli,  Bhubaneswar,

Orissa. The petitioner filed an application under

Section 11(6) of the Arbitration and Conciliation

Act,  1996 (hereinafter  referred to as the ‘Act’)

for  appointment  of  a  Sole  Arbitrator  to

adjudicate  the  disputes,  which arose  between

the parties in respect of the global tender and

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the  purchase  order  dated  29th of  September,

2000 issued by the respondent pursuant to the

tender. Clause 16.0 of the tender contained the

Arbitration Clause which reads thus :-

“All  disputes or  differences  arising  under the  contract  whether  during  or  after completion of the contract or whether before or after determination, for closure or breach of the contract (other than those in respect of  which the decision of  any person is by the  contract  expressed  to  be  final  and binding) shall after written notice by either party to the contract to  the other of  them and to the appointing authority herein after mentioned be referred to adjudication to a sole  arbitrator  to  be  appointed  as hereinafter provided.

For  the  purpose  of  appointing  the  sole Arbitrator  referred  to  above,  the  CMD NALCO who shall  be Appointing Authority will send within thirty days of receipt of the notice to the seller a panel of three names of persons.

The contractor shall on receipt of the names as referred  select  any  one  of  the person name to be appointed as a sole arbitrator and  communicate  his  name  to  the Appointing  Authority  shall  thereupon appoint  the  said  person  as  the  sole Arbitrator.

If  the  seller  fails  to  communicate  such selection  as  provided  above  within  the period  specified,  the  Appointing  Authority

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shall  make the  selection  and  appoint  the selected person as the sole Arbitrator.  

If the Arbitrator so appointed is unable to/ unwilling to act or resign his appointment or vacates  his  office  due  to  any  reason whatsoever  sole  arbitrator  shall  be appointed  as  aforesaid.  The  work  under the contract shall not be stopped during the arbitration proceedings.

The  Arbitrator  shall  be  deemed  to  have entered  on  the  reference  on  the  date he issues notices to both the parties fixing the date of the first hearing.

The Arbitrator may, from time to time, with the consent of the parties, enlarge the time for making and publishing the award.

The Arbitrator shall give a separate award in respect of each dispute of difference and shall  give  a  reasoned  and  speaking award/awards.

The  venue  of  arbitration  shall  be  at Bhubaneswar. However, if the situation so warrants, it may as and when required, be held at the place where the site of work is situated.

The fees, if  any, of  the Arbitrator shall, if required  to  be  paid  before  the  award  is made and published, be paid half and half by  each  of  the  parties.  The  cost  of  the reference  and of  the award  including  the fees, if any, of the Arbitrator shall be in the discretion of the Arbitrator who may direct to and by whom and in what manner, such costs or any part thereof shall be paid and

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may fix or settle the amount of costs to be paid. The award of the Arbitrator shall be final and binding on both the parties.

Subject  to  aforesaid  provisions  of  the Arbitration  and  Conciliation  Act,  1996  or any statutory modification or re-enactment thereof  and  the  rules  made  thereunder, and for the time being in force, shall apply to  the  arbitration  proceedings  under  this clause.”                      

2. On account of breach between the parties, disputes and

differences had arisen which were referred to the arbitration of

Hon.Mr.Justice  R.S.Pathak,  (since  deceased)   Former  Chief

Justice of India and Former Judge of the International Court of

Justice (as His Lordship then was). The learned Arbitrator, so

appointed, entered appearance and the arbitration proceedings

went on till 25th of November, 2005 when the learned Arbitrator

by an order dated 25th of  November,  2005 resigned and had

withdrawn as Arbitrator from the arbitration stating that as the

issues  involved  in  the  arbitration  were  similar  to  the  issues

involved in an earlier award passed by him and, therefore, it

was thought fit that he should withdraw from the arbitration.

At this juncture, we may examine the arbitration clause which

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is  enumerated  in  clause  16  of  the  tender,  as  noted  herein

before.  From a  plain  reading  of  the  arbitration  clause,  it  is

evident that for the purpose of appointing the sole Arbitrator,

the Chief Managing Director of the respondent, i.e. NALCO who

shall  be the appointing authority will  send within 30 days of

receipt  of  the  notice  of  the  seller  a  panel  of  three  names  of

persons. It will also be evident from the said arbitration clause

that the contractor shall on receipt of the names, as referred,

select any one of the persons’ named to be appointed as a sole

Arbitrator  and  communicate  his  name  to  the  appointing

authority who shall thereupon appoint the said person as sole

Arbitrator. This clause further provides that if the seller fails to

communicate such selection, as noted above, within the period

specified, the appointing authority shall make the selection and

appoint the selected person as the sole Arbitrator. An over all

look of the aforesaid provision of the arbitration clause makes it

clear  that  the  appointing  authority  for  appointment  of  an

Arbitrator under the arbitration clause is the Chief Managing

Director  of  the  respondent  who  shall  send  a  notice  to  the

petitioner within 30 days of receipt of a panel of three names. It

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would be obligatory on the part of the petitioner to select any

one of the persons’  named by the appointing authority to be

appointed as the sole Arbitrator and communicate his name to

the  appointing  authority  and  thereupon  the  appointing

authority shall appoint the said person as the sole Arbitrator. If

the  seller  fails  to  communicate  such  selection  as  provided

above within the period specified, the appointing authority shall

make the selection and appoint the selected person as the sole

Arbitrator.  On the resignation of  the sole  Arbitrator,  namely,

Hon.Mr.Justice  R.S.Pathak,  (since  deceased)  in  terms  of  the

aforesaid clause, a list of three names were admittedly served

upon the petitioner  out  of  which one was to be  selected  for

appointment  in  replacement  of  Hon.Mr.Justice  R.S.  Pathak,

(since deceased). It is not in dispute that the said notice was

duly served on the petitioner, but in spite of such service of

notice, the petitioner had failed to appoint or select any one of

the persons named in the panel of three persons from the list

sent by the respondent within the time specified therein. Since

the arbitration clause clearly provides for selection of one of the

persons  named  in  the  panel  to  be  appointed  as  the  sole

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Arbitrator by the respondents, it was open for the respondent

to select one persons’ named from the panel and appoint as the

sole  Arbitrator.  In  this  case  admittedly  the  respondent  has

already  appointed  and  selected  a  retired  Judge  of  the  Delhi

High Court as the sole Arbitrator to replace Justice R.S.Pathak

(since deceased).  After  such appointment  having been made,

the petitioner has filed this application saying that since the

former  Chief  Justice  of  India  was  appointed  as  the  sole

Arbitrator, it would not be possible for the petitioner to accept a

retired Judge of the Delhi High Court for being appointed as

the sole Arbitrator. As noted herein above, it is not in dispute

that a panel of three persons in compliance with the arbitration

clause was sent by the respondent which was duly received by

the petitioner. In spite of receipt of the said notice to select any

one  of  the  persons  named  in  the  panel  and  the  petitioner

having  failed  to  select  or  choose  any  one  of  them and  had

started  saying  that  as  a  former  Chief  Justice  of  India  was

appointed  to  arbitrate  the  disputes  between  the  parties,  the

question of accepting a retired Judge of the High Court as the

sole Arbitrator in replacement of a former Chief Justice of India

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was not acceptable to the petitioner. We are unable to accept

the submissions made by Mr.Ganguly, learned senior counsel

appearing on behalf of the petitioner and after going through

the arbitration clause in depth and in detail, in my view, it was

open to the respondent to select any one from the panel sent by

the  respondent  after  the  expiry  of  the  period  for  selecting  a

person by the petitioner. In this case, since the respondent has

already exercised the arbitration clause and already replaced

and selected a sole  arbitrator  in place  of  Justice  R.S.Pathak

(since deceased) who has already entered appearance, I do not

find any reason to replace the appointed arbitrator at this stage

when admittedly no allegations have been put forward by the

petitioner  against  such  appointment  excepting  that  since  a

former  Chief  Justice  of  India  was  appointed  to  arbitrate  the

disputes  between  the  parties,  this  time  also  a  former  Chief

Justice  of  India  ought  to  have  been  appointed.    As  noted

herein earlier, a plain reading of the arbitration clause would

clearly show that it was solely on the respondent to select the

person  from  the  panel  of  three  persons  in  the  event  the

petitioner had failed to select any one of the persons named by

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the respondent. In view of the aforesaid admitted fact and in

view of the fact that the arbitration clause was very clear,  it

would not be necessary for me to go into the details  in this

matter as I find that the appointment was already made and it

is only a case of replacement of earlier sole arbitrator on the

ground of his resignation. Therefore, the objections raised by

Mr.Ganguly, learned senior counsel appearing for the petitioner

cannot  be  sustained  at  this  stage  particularly  when  the

petitioner has not raised any objection on the creditability of

the sole arbitrator now appointed by the respondent.  

3. It  is  to  be  kept  on record that although comprehensive

submissions were filed by both the parties before me, but in

view of the admitted fact, as stated hereinabove and on a plain

reading  of  the  arbitration  clause  itself  I  do  not  find  any

justification to deal with the submissions put forward by the

parties. I, however, request the sole arbitrator to start with the

arbitration at an early date and it is expected that he will pass

the award in accordance with law within six months from the

date of supply of a copy of this order to him.  

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4. For  the  reasons  aforesaid,  I  do  not  find any ground to

allow  this  application  and  accordingly  the  application  is

rejected. There will be no order as to costs.  

                   ……………… …..J.

[Tarun Chatterjee]                                                                                       

New Delhi; January 20, 2009.        

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