REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO .8  OF 2010  (Arising Out of SLP© No. 19471 of 2007)

N.B.C.C. Ltd.           …. Appellant

Versus

J.G. Engineering Pvt. Ltd.                   ….    Respondent

            WITH

CIVIL APPEAL NO.9 OF 2010 (Arising out of SLP©No.22243 of 2008)

J U D G M E N T

TARUN CHATTERJEE, J.  

1. Leave granted.   

2. These appeals are directed against the final Judgments and  

orders  dated  23rd of  March,  2006,  and  21st of  September,  

2007 passed by the High Court at Calcutta in G.A. No.235 of  

2006 arising out of A.P. No. 361 of 2005, whereby the High  

Court had allowed the petition of the respondent and thereby  

terminated the mandate of the arbitrator and thus appointed a  

new Arbitrator for deciding the dispute between the parties.  

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3. In order to appreciate the controversy existing between the  

parties, it may be important to narrate the facts as emerging  

from the case made by the appellant, which are as follows :-

In  the  month  of  December  1992,  the  appellant  had  issued  

notice  inviting  tender  for  construction  of  terminal  buildings  and  

various ancillary jobs at the Bhubaneshwar Airport at Bhubaneshwar,  

Orissa.  The respondent submitted its offer, which was accepted by  

the appellant.

On 30th of March, 1993, the appellant entered into a contract  

with  the  respondent  for  construction  of  the  aforesaid  work  at  the  

Bhubaneshwar  Airport  for  a  total  consideration  of  Rs.  

5,71,13,541.33/-. The date of commencement of the work was fixed  

on 1st of March, 1993 and the stipulated date of completion was 31st  

of October, 1994.  However, on 20th of March, 1996, the appellant  

terminated  the  contract  of  the  respondent  alleging  that  the  

respondent  had  failed  to  fulfill  its  part  of  the  obligations  required  

under the contract.  On 20th of May, 1996, the respondent invoked the  

arbitration clause and sought for an appointment of an arbitrator for  

adjudication of the disputes between the parties. On 9th of August,  

1996,  the  Chairman-cum-Managing  Director  of  the  appellant  

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appointed a sole arbitrator to adjudicate upon the claims and counter  

claims of the parties.  The appellant filed its counter claim on 30th of  

April, 1997 before the sole arbitrator. The respondent submitted its  

rejoinder and objections to the counter claims on 12th of May, 2001,  

after about 4 years from the date of reply by the appellant. During this  

period, the appellant had virtually closed its regional office in Calcutta  

as most of the work done in its office was completed. This, according  

to  the  appellant,  caused  in  several  transfers  of  the  arbitrators  

appointed  by the  appointing  authority.   Meanwhile,  the  appointing  

authority had appointed three arbitrators due to the above-mentioned  

reason and the arbitration process had come to a stand still due to  

the inaction of the respondent and its failure to participate.

Thereafter,  on  20th of  May,  2004,  the  respondent  filed  an  

application before  the Calcutta  High Court  seeking removal  of  the  

then incumbent arbitrator and the arbitral proceedings were stayed by  

the Court. On 20th of September, 2004, the High Court directed the  

Chairman-cum-Managing  Director  of  the  appellant  company  to  

appoint  a new arbitrator  in terms of  the arbitration clause within  a  

period of four weeks from the date of communication of its order. The  

High Court further directed the arbitrator so appointed to conclude the  

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arbitration proceedings within a period of six months from the date of  

his  appointment.  Pursuant  to  the  order  of  the  High  Court,  the  

Chairman-cum-Managing  Director  of  the  appellant  company  

appointed Shri A.K. Gupta, Deputy General Manager of the appellant  

as  the  sole  arbitrator.  The  said  arbitrator  finally  concluded  the  

proceedings after hearing on 18th of June, 2005.  It  is an admitted  

position that the time to conclude the arbitration proceeding in terms  

of  the order  of  the High Court  before Shri  A.  K.  Gupta,  who was  

appointed  as  the  sole  arbitrator  by  the  Chairman-cum-Managing  

Director of the company had by then already expired.   

However, both the parties extended the time to conclude the  

arbitration proceeding and to pass an award accordingly,  the time  

was enlarged for conclusion of the arbitration to  30  th   of September,    

2005.   

It  is also an admitted position that the time limit so fixed i.e.  

arbitration must be concluded and award must be passed within 30th  

of September, 2005, could not be adhered to by the arbitrator and he  

failed to publish the award within this period.  About three months  

after  the  expiry  of  the  period  of  concluding  the  proceeding  and  

passing  of  the  award,  it  was  the  respondent  who  moved  an  

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application before the High Court for a declaration that the mandate  

of the arbitrator had already stood terminated.  We may keep it on  

record that the appellant had not filed any application for enlargement  

of time for the conclusion of the arbitration proceeding or to pass the  

award after the expiry of the period.   

On 22nd of  December,  2005,  the High Court,  vide an interim  

order,  restrained  the  arbitrator  from  making  an  award  and  at  the  

same  time,  had  refused  to  accept  the  award  produced  by  the  

arbitrator before it  which were well  beyond the period fixed by the  

High Court.   On 23rd of March, 2006, the High Court, by its impugned  

order, terminated the mandate of the arbitrator on the ground of delay  

in  making  the  award.  The  appellant  then  challenged  the  above  

mentioned order of  the Calcutta High Court  before this Court  vide  

SLP No.19471 of 2007 on 12th of  September, 2007.  At  the same  

time, the High Court by the impugned order dated 21st of September,  

2007 passed in AP No. 361/2005 appointed Mr. Justice Chittatosh  

Mookherji  (As  His  Lordship  then  was)  as  the  sole  arbitrator  to  

adjudicate the disputes between the parties.  The appellant, feeling  

aggrieved by this order as well has filed a special leave petition which  

came to be registered as SLP No. 22243 of 2008, which after hearing  

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the learned counsel for the parties and on grant of leave, was heard  

in presence of the learned counsel for the parties.   

4. We have heard the learned counsel appearing on behalf of  

the parties and examined the impugned orders of the High  

Court  and  also  other  materials  on  record  in  depth  and  in  

detail.  As noted herein earlier, the respondent had made an  

application before the Calcutta High Court under Section 14  

of  the  Arbitration  and  Conciliation  Act,  1996  (in  short  the  

“Act”) for a declaration that the mandate of the arbitrator Shri  

A.K. Gupta had already stood terminated.  As had already  

been  mentioned  above,  the  appointing  authority  had  

appointed three arbitrators prior to the appointment of Shri  

Gupta  who  were  all  unable  to  conduct  the  arbitral  

proceedings for some reason or the other.  It may be kept on  

record  that  the  respondent  filed  an  application  before  the  

High  Court  for  a  declaration  that  the  appointment  of  the  

arbitrator namely, Shri Amitava Basu, who was appointed as  

the sole arbitrator prior to the appointment of Shri A. K. Gupta  

had stood terminated by an order dated 20th of September,  

2004,  by  which  the  High  Court  had  terminated  the  

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appointment  and  ordered  the  appointing  authority  of  the  

appellant to appoint a new arbitrator who will  conclude the  

proceeding and pass an award within six months from the  

date of his appointment.  Subsequent to this order of the High  

Court,  the  appellant  appointed  Mr.  AK  Gupta  as  the  new  

arbitrator  who was  to  complete  his  proceedings  by  27th of  

March, 2005 i.e. six months from the date of his appointment.  

It  is pertinent to mention that the appellant did not file any  

appeal against the above-mentioned order of the High Court.  

Therefore, it may be taken that the appellant had accepted  

the aforesaid order of the High Court and thereby accepted  

its decision to fix the time of the arbitration proceedings to be  

mandatorily  concluded  within  six  months  from the  date  of  

appointment  of  the  arbitrator.  The  order,  thus  having  

assumed finality, a time limit was imposed for the conclusion  

of  the  arbitration  proceedings.  Thus,  the  appellant  is  

estopped from raising any objection against the imposition of  

the time limit as had been done by the Court in this respect.  

From the records before us, we have noticed that inspite of  

conducting  a  number  of  proceedings,  the  arbitrator  was  

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unable to conclude the proceedings within the time fixed by  

the High Court. The arbitration clause in the contract enables  

the arbitrator to extend the time for making and publishing the  

award  by mutual consent of the parties.  From a perusal of  

the documents before us, we notice that the parties mutually  

agreed to extend the time till  31st August, 2005 for making  

and publishing the award, which were further extended by the  

parties  till  30th of  September,  2005  on  account  of  the  

arbitrator having failed to conclude the proceedings within the  

previous date fixed by the parties. But the arbitrator having  

failed to do so by 30th of September, 2005, the respondent  

moved  the  High  Court  to  terminate  the  mandate  of  the  

arbitrator as he had failed to conclude the proceedings within  

the time limit fixed by the parties. The High Court accordingly  

terminated the mandate of  the arbitrator  on account  of  his  

failure  to  publish  the  award  within  the  time  fixed  by  the  

parties.  We  are  of  the  opinion  that  the  High  Court  was  

perfectly justified in doing so on an application filed by the  

respondent before it. Quite interestingly, it has come to our  

notice that the arbitrator in question had appeared before the  

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High Court and submitted that the award was ready but the  

same could not be published on account of the interim order  

passed by the same restraining him from publishing it. There  

was, however, no order of the Court restraining the arbitrator  

from publishing the award till  almost three months after the  

expiry of the time fixed by the mutual consent of the parties to  

make and publish the award prior to the interim order passed  

by the High Court.  

5. A perusal of the arbitration agreement quite clearly reveals  

that the arbitrator has the power to enlarge the time to make  

and  publish  the  award  by  mutual  consent  of  the  parties.  

Therefore, it  is obvious that the arbitrator  has no power to  

further extend the time beyond that which is fixed without the  

consent of both the parties to the dispute.  It is an admitted  

position  that  the  respondent  did  not  give  any  consent  for  

extension of time of the arbitrator.  Thus given the situation,  

the  arbitrator  had  no  power  to  further  enlarge  the  time  to  

make and publish the award and therefore his mandate had  

automatically terminated after the expiry of the time fixed by  

the parties to conclude the proceedings. The learned counsel  

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contended that the arbitration proceedings involved questions  

of highly technical and complex issues which would require  

sufficient amount of time to be decided in a just and proper  

way. However the records clearly illustrate that even after a  

passage  of  over  nine  years,  the  matter  which  was  to  be  

decided between the parties by way of arbitration, could not  

be resolved and the process lingered on.  Arbitration is  an  

efficacious and alternative way of dispute resolution between  

the parties. There is no denying the fact that the method of  

arbitration has evolved over the period of  time to help the  

parties to speedily resolve their disputes through this process  

and in fact the Act recognizes this aspect and has elaborate  

provisions  to  cater  to  the  needs  of  speedy  disposal  of  

disputes. The present case illustrates that inspite of adopting  

this  efficacious way  of  resolving the disputes  between the  

parties through the arbitration process, there was no outcome  

and the arbitration process had lingered on for a considerable  

length of time which defeats the notion of the whole process  

of resolving the disputes through arbitration. The contention  

of the appellant therefore cannot be justified that since the  

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dispute was highly technical in nature, it had to be dealt with  

elaborately  by  the  arbitrator  and  thus,  he  was  justified  in  

being late. The High Court had thus correctly fixed the time  

for  the  arbitration  to  be  concluded  within  a  period  of  six  

months from the appointment of the fourth arbitrator Shri A.K.  

Gupta  considering  the  time  that  had  been  spent  for  the  

arbitration process prior to Mr.  Gupta’s appointment.   That  

apart,  even  assuming  that  the  arbitration  process  involved  

highly  technical  and  complex  issues,  which  was  time  

consuming, even then, it was open for the arbitrator or for the  

parties  to  approach  the  Court  for  extension  of  time  to  

conclude the arbitration proceeding which was not done by  

either by the arbitrator or by any of the parties.  As had been  

correctly noted by the High Court in its impugned judgment,  

there  was  no  cogent  reason  for  the  delay  in  making  and  

publishing the award by the arbitrator.  He already had the  

relevant materials at his disposal and could base his findings  

on the observations made by the three arbitrators who were  

appointed prior to him.  The Arbitrator was bound to make  

and publish his award, within the time mutually agreed to by  

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the  parties,  unless  the  parties  consented  to  further  

enlargement of time. Therefore, the condition precedent for  

enlargement of time would depend only on the consent of the  

parties, that is to say, that if the parties agree for enlargement  

of  time.   If  consent  is  not  given  by  the  parties,  then  the  

authority of the arbitrator would automatically cease to exist  

after the expiry of the time limit fixed. In the present case, the  

arbitrator had failed to publish the award within the time limit  

fixed by the parties, and hence, the High Court was justified  

in terminating the mandate of the arbitrator. We therefore do  

not find any fault with the impugned order of the High Court in  

this regard.  From a perusal of the records, we can see that  

the  respondent  had  filed  an  application  to  terminate  the  

mandate of the arbitrator before the High Court almost after  

three months from the date of expiry of the time to publish the  

award  although  the  appellant  did  not  choose  to  file  any  

application  for  enlargement  of  time  for  conclusion  of  the  

arbitration  proceeding.   It  is  obvious  that  the  respondent  

could  not  have  possibly  known about  the  outcome of  the  

award. Even after the expiry of the time as mentioned above,  

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the arbitrator did not make any effort to publish the award nor  

was  anything  conveyed  on  behalf  of  the  appellant  to  the  

respondent for extending the time of the arbitrator to publish  

his  award.   It  was  a  clear  lapse  on  the  part  of  both  the  

arbitrators  and the appellant  who was well  aware that  the  

mandate of  the arbitrator  had already expired and it  could  

only  be  extended  by  a  mutual  consent  of  the  parties  

according to the arbitration agreement.

It has been correctly observed by the High Court that the arbitrator  

had  become  functus  officio  in  the  absence  of  extension  of  time  

beyond 30th of September, 2005 to make and publish the award. After  

the  said  date,  the  arbitrator  had no authority  to  continue with  the  

arbitration proceedings. The learned counsel appearing on behalf of  

the  appellant  argued  that  in  the  absence  of  any  statutory  period  

prescribed under the Act for rendering an award, the direction of the  

Court  to  conclude  the  arbitration  proceedings  within  the  time  

prescribed by it, would not make an award passed beyond the time  

so prescribed, null and void. He further argued that the High Court  

was wrong in not extending the time fixed by it in the order dated 20th  

of  September,  2004,  for  early  conclusion  of  the  arbitration  

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proceedings  and  terminating  the  mandate  of  the  arbitrator  when  

neither the Act nor the arbitration agreement prescribed any time for  

making and publishing the award.  

6. The learned counsel appearing on behalf of the appellant had  

drawn our attention to a decision of this Court in Jatinder Nath Vs.  

M/s Chopra Land Developers Pvt. Ltd. & Anr. [AIR 2007 SC 1401]  

to satisfy us that the award which was passed after four months of  

entering upon reference does not ipso facto become nonest and the  

Court has power to extend time and give life to the vitiated award.  So  

far as this decision is concerned, we may keep it on record that this  

decision  was  rendered  under  the  Arbitration  Act  of  1940  and  not  

under the present act with which we are only concerned.  In view of  

our reasonings given hereinafter and in view of the facts involved in  

this case, we do not find any ground to rely on this decision of this  

Court for the purpose of this case.  The other decision cited by the  

learned counsel for the appellant is the decision reported in General  

Manager,  Department  of  Telecommunications,  

Thiruvananthapuram Vs. Jacob S/o Kochuvarkey Kalliath (Dead)  

by LRs.  And  Others  [2003 (9)  SCC 662].   The learned counsel  

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particularly relied on para 8 of the said decision.  We have carefully  

gone through para 8 of the decision relied on by the learned counsel  

for the appellants.  We may not forget that we are concerned in this  

case with the Arbitration and Conciliation Act, 1996 and not under the  

Land Acquisition Act,  1894.   Without  going into  the details  of  this  

decision,  we  may  simply  say  that  this  decision  cannot  have  any  

manner of application and the principles laid down to the facts and  

circumstances of  the present  case.   The last  decision,  which was  

cited by the learned counsel for the appellant is the decision reported  

in  National Aluminum Co. Ltd. Vs. Pressteel & Fabrications (P)  

Ltd. and Another [2004 (1) SCC 540].  In our view, this decision also  

is of no help to the appellant.  The principles laid down in the said  

decision cannot have any application in the present case although the  

decision rendered in this case is the decision under the Arbitration  

and Conciliation Act, 1996.       

7. Taking into consideration the arguments of the appellant, it is  

necessary to mention here that the Court does not have any power to  

extend the time under the Act unlike Section 28 of the 1940 Act which  

had such a provision. The Court has therefore been denuded of the  

power to enlarge time for making and publishing an award. It is true  

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that apparently there is no provision under the Act for the Court to fix  

a time limit for the conclusion of an arbitration proceeding, but the  

Court can opt to do so in the exercise of its inherent power on the  

application of either party. Where however the Arbitration agreement  

itself provides the procedure for enlargement of time and the parties  

have taken recourse to it, and consented to the enlargement of time  

by  the  arbitrator,  the  Court  cannot  exercise  its  inherent  power  in  

extending the time fixed by the parties in the absence of the consent  

of either of them.

8. The counsel for the appellant further contended that the High  

Court could not have terminated the mandate of the arbitrator on the  

ground that the award was passed beyond the time limit fixed by it. It  

is clear from an apparent perusal of the judgment of the High Court  

and the records before us that the High Court had not terminated the  

mandate of the arbitrator on the ground that the arbitrator could not  

pass the award within the time fixed by it vide its order dated 20th of  

September, 2004.  In fact,  the arbitrator had continued to proceed  

with the arbitration procedure after the time fixed by the Court had  

expired on account of the mutual consent of the parties to extend the  

time limit. Such an action was clearly warranted under the arbitration  

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agreement  in  force  between  the  parties.  On  the  contrary,  the  

arbitrator had ceased to have any authority only after the time limit  

fixed  by  the  parties  had  expired  and  the  respondent  did  not  give  

consent to the extension of the time for publishing the award. Thus,  

such a contention of the appellant cannot be accepted.  The High  

Court had merely asserted this fact that the mandate of the arbitrator  

had automatically expired after the time fixed by the parties to the  

effect that it had lapsed.   

9. The Appellant further argued that the High Court had failed to  

appreciate that the parties had undergone the process of arbitration  

for a long time and it was not wise to terminate the mandate of the  

arbitrator  when  the  award  was  ready  and  fit  to  be  published,  

considering the fact that a huge sum of money had been spent during  

the proceedings. Therefore, the High Court should not have ordered  

the appointment of a new arbitrator.  It is to be noted that the High  

Court in its impugned judgment had ordered Shri A.K. Gupta to hand  

over the relevant materials relating to the proceedings to the newly  

appointed arbitrator. Thus, such an action would inherently make it  

clear for the newly appointed arbitrator to conduct the proceedings  

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and it is not required from him to start the proceedings from scratch  

all  over  again.  Further,  if  the  award  was  ready  as  had  been  

contended by the appellant, it is baffling that even after three months  

from the expiry of the period fixed by the parties for publication of the  

award, the arbitrator had not come out with the award or had notified  

the respondent that the award was ready. It was only when the High  

Court restrained the arbitrator from coming out with any award in the  

dispute that the arbitrator submitted before the Court that the award  

was ready to be published. At the risk of repetition,  we may once  

again note, that the Court has no inherent power to enlarge the time  

for publication of the award once it  has not been extended by the  

parties to that effect.

10. The  appellant  further  argued  that  the  arbitrator  having  

concluded the proceedings couldn’t be said to have failed to act so as  

to  attract  the  provisions  of  Section  14  of  the  Act  and  call  for  

termination of the mandate of the arbitration. He had also contended  

that under Section 15 (2) of the Act, substitute arbitrator should be  

appointed  according  to  the  rules  that  were  applicable  to  the  

appointment of the arbitrator. Accordingly, his contention was that the  

High Court had erred in holding that the appointing authority had not  

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appointed an arbitrator while terminating the mandate of the arbitrator  

in the same proceedings.

It is necessary to mention here Section 14 and Section 15 of the Act  

for the sake of convenience.

“Section 14: Failure or impossibility to act –

(1) The mandate of an arbitrator shall terminate if-

(a)    He becomes de jure or de facto unable to perform his  

functions or for other reasons fails to act without undue delay;  

and  

(b)   He withdraws from his office or the parties agree to the  

termination of his mandate.

(2)   If  a controversy remains concerning any of  the grounds   

referred to in clause (a) of subsection (1), a party may, unless   

otherwise agreed by the parties, apply to the court to decide on  

the termination of the mandate.

(3)If,  under  this  section  or  sub-section  (3)  of  section  13,  an  

arbitrator withdraws from his office or a party agrees to the  

termination of the mandate of an arbitrator, it shall not imply   

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acceptance of the validity of any ground referred to in this   

section or sub-section (3) of section 12.”

“Section 15:  Termination of  mandate and substitution of  

arbitrator-

(1) In addition to the circumstances referred to in section 13 or   

section 14, the mandate of an arbitrator shall terminate-

(a) Where he withdraws from office for any reason; or

(b) By or pursuant to agreement of the parties

(2) Where the mandate of an arbitrator terminates, a substitute  

arbitrator shall  be appointed according to the rules that were  

applicable to the appointment of the arbitrator being replaced.

(3)Unless otherwise agreed by the parties, where an arbitrator  

is replaced under subsection (2), any hearings previously held  

may be repeated at the discretion of the arbitral tribunal.

(4)Unless otherwise agreed by the parties, an order or ruling of   

the  arbitral  tribunal  made  prior  to  the  replacement  of  an  

arbitrator under this section shall not be invalid solely because  

there  has  been  a  change  in  the  composition  of  the  arbitral   

tribunal.”

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11. With reference to the contention made by the appellant that the  

arbitrator having concluded the proceedings couldn’t be said to have  

failed to act so as to attract the provisions of Section 14 of the Act,  

which  will  call  for  termination  of  the  arbitration  proceeding.   It  is  

pertinent to mention here that the arbitrator had not concluded the  

proceedings as had been agreed to by the parties within  the time  

fixed for doing so. The mandate of the arbitrator was terminated only  

because of the fact that the arbitrator having failed to conclude his  

proceedings  within  time  did  not  warrant  to  be  continued  as  an  

arbitrator in the absence of the consent of both the parties.  It is clear  

from a bare reading of sub section 1 (a) of section 14 of the Act, the  

mandate  of  an  arbitrator  shall  terminate  if  he  fails  to  act  without  

undue delay. In the present case, it  is clear that the arbitrator had  

extended  the  time  provided  to  it  without  any  concrete  reasons  

whatsoever and thus his mandate was liable to be terminated. Sub  

section 1(b) further states that the mandate of an arbitrator shall also  

stand to be terminated if he withdraws from his office or the parties  

agree to  the termination  of  his  mandate.  From the  perusal  of  the  

records  and  the  submissions  of  the  parties,  we  observe  that  the  

mandate of the arbitrator was extended by an agreement between  

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the parties, which was not extended beyond 30th September, 2005.  

Thus  it  can  be  construed  that  the  parties  had  not  agreed  to  the  

extension of the mandate of the arbitrator failing which, the mandate  

was automatically terminated.

12. Further, Subsection (2) of Section 14 of the Act stipulates that if  

a  controversy  remains  concerning  any  of  the  grounds  referred  to  

under  clause  (a)  of  subsection  1,  a  party  may,  unless  otherwise  

agreed  to  by  the  parties,  apply  to  the  Court  to  decide  on  the  

termination of the mandate. Thus the respondent rightly applied to the  

Court for the termination of the mandate of the arbitrator pursuant to  

the provisions of this section, and the Court was within its jurisdiction  

to decide accordingly.

13. However, the contention of the Appellant that the High Court  

had  erred  in  not  allowing  the  appellant  to  decide  upon  the  

appointment of an arbitrator pursuant to sub-section (2) of Section 15  

of the Act must be accepted.  Section 15 (2) of the Act provides that  

where the mandate of an arbitrator terminates, a substitute arbitrator  

shall be appointed according to the rules that were applicable to the  

appointment of the arbitrator replaced. In this connection, it would be  

appropriate to refer to the relevant portion of the impugned judgment  

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of  the  High  Court,  which  gives  an  elaborate  observation  on  the  

above-mentioned issue raised by the appellant:

“The question therefore is, whether in view of section 15  (2)  of  the  1996  Act,  an  independent  arbitrator  can  be  appointed by this Court as prayed for by the appellant or   whether  the  appellant  should  once  again  invoke  the  Arbitration  Clause,  call  upon  the  Chairman-cum- Managing  Director  of  the  respondent  to  appoint  an  arbitrator,  wait  for  a  further  period  of  30  days,  to  see  whether the Chairman-cum-Managing Director acts or not   and then make a request to the Hon’ble Chief Justice or   his  designate  under  Section  11(6)  of  the  1996  Act  to   appoint an arbitrator.       Arbitration  is  an  informal,  quick  and  easy  alternative  mode  of  adjudication  of  disputes  by  agreement  of  the  parties. This Court cannot but take judicial notice of the   fact that the Arbitration Clause was invoked way back in   May 1996 and almost 10 years have expired since then.  The  appointment  of  successive  Arbitrator  by  the  Chairman-cum-Managing Director of the respondent has  only resulted in delay.  

When the mandate of an arbitrator is terminated on the  ground of delay, the rules applicable to the appointment  of the arbitrator are to apply to the appointment of a new  arbitrator. It would, however, be a mockery of justice, if   every time the mandate of an arbitrator was terminated or   the  arbitrator  resigned  or  otherwise  became  unable  to   proceed,  the  parties  were  to  start  from  scratch,  by  invoking the Arbitration Clause.

Once the mandate of the arbitrator terminates, the person  required  to  appoint  arbitrator  is  required  to  fill  up  the  vacancy  with  utmost  expedition,  failing  which  the  provisions  of  section  11 (6)  of  the  1996 Act  would  be  attracted.  In  the  instant  case,  as  per  the  Arbitration   agreement  the  Chairman-cum-Managing  Director  was  

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required to appoint a new arbitrator in case the arbitrator   became  unable  to  continue,  whatever  be  the  reason.   Even thought the time limit  for  conclusion of arbitration  expired  on  30th September,  2005,  the  Chairman-cum- Managing  Director  of  the  respondent  did  not  appoint   another arbitrator.”

14. We have carefully examined the aforesaid observations of the  

impugned judgment of the High Court. We are of the view that in view  

of a three-Judge Bench decision of this Court in the case of Northern  

Railway  Administration,  Ministry  of  Railway  vs.  Patel  

Engineering Company Ltd. [2008 (10) SCC 240] in which a decision  

of this Court in Ace Pipeline Contracts Private Limited vs. Bharat   

Petroleum  Corporation  Limited [(2007)  5  SCC  304]  was  also  

referred  to,  the  application  for  appointment  of  an  Arbitrator  under  

Section 11 of the Act should be referred back to the High Court for  

fresh decision. Arijit Pasayat, (as His Lordship then was), heading a  

three-Judge  Bench  of  this  Court  after  considering  the  scope  and  

object  of  the  Act  particularly  Section  11 of  the  Act  concluded the  

following :-

“A bare reading of the scheme of Section 11 shows  that the emphasis is on the terms of the agreement being  adhered to and/or given effect as closely as possible. In  other words, the Court may ask to do what has not been   

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done.  The  court  must  first  ensure  that  the  remedies  provided for are exhausted. It is true as contended by Mr.   Desai, that it is not mandatory for the Chief Justice or any   person  or  institution  designated  by  him  to  appoint  the  named arbitrator or arbitrators. But at the same time, due  regard has to be given to the qualifications required by  the agreement and other considerations. xxxxxxxxxxxxxx

In all these cases at hand the High Court does not  appear to have focused on the requirement to have due  regard to the qualifications required by the agreement or   other  considerations  necessary  to  secure  the  appointment of an independent and impartial arbitrator. It   needs no reiteration that appointment of the arbitrator or   arbitrators  named in the arbitration agreement  is  not  a   must,  but  while  making  the  appointment  the  twin  requirements of Sub-section (8) of Section 11 have to be  kept in view, considered and taken into account. If it is not   done,  the  appointment  becomes  vulnerable.  In  the  circumstances,  we  set  aside  the  appointment  made  in  each case, remit the matters to the High Court to make  fresh  appointments  keeping  in  view  the  parameters  indicated above.”

In  the  aforesaid  decision  in  the  case  of  Northern Railway  

Administration (Supra), Arijit Pasayat, J. (as His Lordship then was),  

held that  the High Court  in  the said case did not  appear  to  have  

focused on the requirement to have due regard to the qualifications  

required by the agreement or other conditions necessary to secure  

the  appointment  of  an independent  and impartial  arbitrator.  In  the  

aforesaid  decision,  this  Court  also  concluded  that  since  the  

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requirement of sub-section (8) of Section 11 was not at all dealt with  

by the High Court in its order, the appointment of an arbitrator without  

dealing  with  Sub-Section  8  of  Section  11  of  the  Act  became  

vulnerable  and  accordingly,  such  appointment  must  be  set  aside.  

Similar  is  the  position  in  this  case.   In  this  case  also,  before  

appointing an arbitrator under Section 11(6) of the Act, the High Court  

had failed to take into consideration the effect of Section 11(8) of the  

Act as was done in Northern Railway Administration (supra).   

15. In view of the discussions made hereinabove and particularly,  

in view of the principles laid down by this Court in Northern Railway  

Administration (supra),  we  set  aside  the  impugned  order  and  

remand the case back to  the High Court  for  fresh decision of  the  

application under Section 11(6) of the Act and while considering the  

application  afresh,  the  High  Court  is  directed  to  take  into  

consideration the aforesaid decision of this Court.   

16. The  appeals  are  thus  allowed  to  the  extent  indicate  above.  

There will be no order as to costs.

…………………...J.  [Tarun Chatterjee]

New Delhi;                             …………………….J. January 05, 2010.                                    [Aftab Alam]  

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