REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.   5067          OF 2008 (Arising out of SLP (C) NO. 16196 of 2006)

Northern Railway Administration, Ministry of Railway, New Delhi …Appellant

Versus

Patel Engineering Company Ltd. …Respondent

With

(Civil Appeal No.  5068 /2008 @ SLP (C) No.10409/2007) (Civil Appeal No.   5072 /2008 @ SLP (C) No.11550/2007) (Civil Appeal No.  5073 /2008 @ SLP (C) No.11552/2007) (Civil Appeal No. 5074 /2008 @ SLP (C) No.11554/2007) (Civil Appeal No. 5075 /2008 @ SLP (C) No.11556/2007) (Civil Appeal No.  5076 /2008 @ SLP (C) No.11557/2007) (Civil Appeal No.  5078 /2008 @ SLP (C) No.11559/2007) (Civil Appeal No.   5079 /2008 @ SLP (C) No.11560/2007) (Civil Appeal No.  5080 /2008 @ SLP (C) No.11561/2007) (Civil Appeal No. 5081 /2008 @ SLP (C) No.11562/2007) (Civil Appeal No. 5082 /2008 @ SLP (C) No.11563/2007) (Civil Appeal No.  5083/2008 @ SLP (C) No.11564/2007) (Civil Appeal No.   5084/2008 @ SLP (C) No.11565/2007) (Civil Appeal No.   5071/2008 @ SLP (C) No. 8248/2007) (Civil Appeal No.  5069/2008 @ SLP (C) No. 8744/2007) (Civil Appeal No.   5085/2008 @ SLP (C) No. 4687/2008)

J U D G M E N T  

Dr. ARIJIT PASAYAT, J.

1. Leave granted in all the Special Leave Petitions

2. Noticing two different views in two decisions of this Court

in Ace Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corpn.

Ltd. (2007 (5) SCC 304) and Union of India v. Bharat  Battery

Mfg.  Co.  (P)  Ltd.  (2007 (7)  SCC 684)   the  matter  has been

referred to a larger Bench and that is  how these  cases  are

before us.

3. In both the decisions the question related to appointment

of  arbitrator  under  Section  11(6)  of  the  Arbitration  and

Conciliation Act, 1996 (in short the ‘Act’). In Bharat Battery’s

case (supra) the earlier decision in Ace Pipeline’s case (supra)

was apparently not brought before the Bench as a result of

which there appears to be some confusion. As noted above,

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the  scope  and ambit  of  Section  11(6)  of  the Act  relating to

appointment  of  arbitrator  falls  for  consideration  in  these

cases.       

4. The stand of Mr. Harish N Salve appearing for some of the

parties in these appeals and Mr. B. Dutta, Additional Solicitor

General is that the true scope and ambit of Section 11(6) has to

be considered in the background of Section 28(3) and Section

34 of the Act. According to them, the agreed procedure referred

to  in sub-section (2)  of  Section 11 has an exception  in sub-

section (6) i.e. where the agreed procedure fails. Where there is

no agreed procedure, sub-sections (3), (4) and (5) of Section 11

apply.  It  is pointed out that there are three clauses in sub-

section (6) of Section 11. Clause (c) relates to failure to perform

function entrusted to a person including an institution and also

failure to act under the procedure agreed upon by the parties.

In other words, Clause (a) refers to parties to the agreement.

Clause  (c)  relates  to  a  person  who may not  be  party  to  the

agreement but has given consent to the agreement. It  is also

pointed out that there is a statutory mandate to take necessary

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measures, unless the agreement on the appointment procedure

provided  other  means  for  securing  the  appointment.  It  is,

therefore,  submitted that before  the alternative  is resorted to

agreed procedure has to be exhausted. The agreement has to be

given effect and the contract has to be adhered to as closely as

possible.  Corrective  measures  have  to be  taken first  and the

Court  is  the  last  resort.  It  is  also  pointed  out  that  while

appointing an Arbitrator in terms of sub-section (8) of Section

11,  the  Court  has  to  give  due  regard   to  any  qualification

required for the Arbitrator by the agreement of the parties and

other considerations  as are likely to secure the appointment of

an independent and impartial arbitrator. It is pointed out that

both these conditions are cumulative in nature. Therefore, the

Court  should  not  directly  make  an  appointment.  It  has  to

ensure  first  that  the  provided  remedy  is  exhausted  and  the

Court may ask to do what has not been done.  

5. In  response,  Mr.  Ashok  Desai,  learned  senior  counsel

appearing  for  some  of  the  parties  who  have  sought  for

appointment of Arbitrator submitted that the expression ‘due

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regard’  relates  to  some  of  the  factors  which  have  to  be

considered and it is not mandatory that the qualifications and

the considerations as referred to in sub-section (8) of Section

11 perforce have to be applied.  It is a question of degree of

the parameters of consideration.  

6. With  reference  to  the  earlier  scheme  under  the

Arbitration Act, 1940 (in short the ‘Old Act’) it is stated that

the party is  forced to move  the Court   because  of   request

being refused to appoint named Arbitrator and, therefore, the

Court  in  terms  of  sub-section  (8)  of  Section  11  is  not

constrained to appoint any arbitrator.   

7. Section 11 reads as follows:

"Appointment of arbitrators-

(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.

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(3) Failing any agreement referred to in sub-section (2),  in  an  arbitration  with  three  arbitrators,  each party  shall  appoint  one  arbitrator,  and  the  two appointed  arbitrators  shall  appoint  the  third arbitrator who shall act as the presiding arbitrator.

(4) If the appointment procedure in sub-section (3) applies and— (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or

   (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment,

   the appointment shall be made, upon request of a party,  by  the  Chief  Justice  or  any  person  or institution designated by him.

(5) Failing any agreement referred to in sub-section (2),  in an arbitration with a sole  arbitrator,  if  the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other  party  to  so  agree  the  appointment  shall  be made, upon request of a party, by the Chief Justice or any person or institution designated by him.

(6) Where, under an appointment procedure agreed upon by the parties,— (a)  a  party  fails  to  act  as  required  under  that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

(c)  a  person,  including  an  institution,  fails  to

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perform any function entrusted to him or it under that procedure,

a party may request the Chief Justice or any person or  institution  designated  by  him  to  take  the necessary  measure,  unless  the  agreement  on  the appointment  procedure  provides  other  means  for securing the appointment.

(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or subsection (6) to the Chief Justice  or the person or institution designated by him is final.

(8)  The  Chief  Justice  or  the  person  or  institution designated  by  him,  in  appointing  an  arbitrator, shall have due regard to—

(a) any qualifications required of the arbitrator by the agreement of the parties; and

(b) other considerations as are likely to secure the appointment  of  an  independent  and  impartial arbitrator.

(9)  In  the  case  of  appointment  of  sole  or  third arbitrator  in  an  international  commercial arbitration, the Chief Justice of India or the person or  institution  designated  by  him may  appoint  an arbitrator  of  a  nationality  other  than  the nationalities of the parties where the parties belong to different nationalities.

(10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted  by sub-section (4)  or  sub-section  (5)  or

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sub-section (6) to him.

(11) Where more than one request has been made under  sub-section  (4)  or  sub-section  (5)  or  sub- section  (6)  to  the  Chief  Justices  of  different  High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under  the  relevant  sub-section  shall  alone  be competent to decide on the request.

(12)  (a)  Where  the  matters  referred  to  in  sub- sections  (4),  (5),  (6),  (7),  (8)  and  (10)  arise  in  an international  commercial  arbitration  the  reference to  "Chief  Justice  in  those  sub-sections  shall  be construed  as  a  reference  to  the  "Chief  Justice  of India".

(b) Where the matters referred to in sub-sections (4), (5),  (6),  (7),  (8)  and  (10)  arise  in  any  other arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to, the  Chief  Justice  of the High Court within whose local limits the principal Civil  Court referred to in clause (e) of sub-section (1) of section 2 is situate and,  where  the  High  Court  itself  is  the  court referred  to in that clause,  to  the  Chief  Justice  of that High Court.”

8. The crucial sub-sections are sub-sections (2), (3), (4), (5)

and (6).

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9. Sub-sections (3) to (5) refer to cases where there is no

agreed  procedure.  Sub-section  (2)  provides  that  subject  to

sub-section (6) the parties are free to agree on a procedure for

appointing the arbitrator  or arbitrators.  Sub-section (6)  sets

out  the  contingencies  when  party  may  request  the  Chief

Justice or any person or institution designated by him to take

necessary measures unless the agreement on the appointment

procedure provides other means for securing the appointment.

The contingencies contemplated in sub-section (6) statutorily

are (i) a party fails to act as required under agreed procedure

or (ii) the parties or the two appointed arbitrators fail to reach

an agreement expected of them under that procedure or (iii) a

person including an institution fails to perform any function

entrusted to him or it under the procedure. In other words,

the  third  contingency  does  not  relate  to  the  parties  to  the

agreement  or the appointed arbitrators.   

10. The crucial expression in sub-section (6) is “a party may

request  the  Chief  Justice  or  any  person  or  institution

designated  by  him  to  take  the  necessary  measures”

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(underlined  for  emphasis).  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  relating  to  qualifications  and  other

considerations as are likely to secure the appointment of an

independent and impartial arbitrator.  

11. 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 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.  

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12. The expression ‘due regard’ means that proper attention

to several circumstances have been focussed. 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  accomplishment  of  the  intended  act.

Necessary measures can be stated to be the reasonable steps

required to be taken.  

13. In  all  these  cases  at  hand  the  High  Court  does  not

appear  to  have  focussed  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

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Court  to  make  fresh  appointments  keeping  in  view  the

parameters indicated above.  

14. The appeals are disposed of accordingly.  

…………………………….J. (Dr. ARIJIT PASAYAT)

……………………………J. (P. SATHASIVAM)

……………………………J. (AFTAB ALAM)

New Delhi, August 18, 2008      

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