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INDEPENDENT ARBITRATOR CAN BE APPOINTED ONLY AFTER THE COURT HAS RESORTED TO THE PROCEDURE MENTIONED IN TEH ARBITRATION AGREEMENT: Supreme Court

Team SoOLEGAL 1 Apr 2019 11:41am

INDEPENDENT ARBITRATOR CAN BE APPOINTED ONLY AFTER THE COURT HAS RESORTED TO THE PROCEDURE MENTIONED IN TEH ARBITRATION AGREEMENT: Supreme Court

In the case of Parmar Construction Company (Union Of India V. Parmar Construction Company), the Supreme Court bench was to determine whether the High Court was permitted under Section 11(6) of the Arbitration and Conciliation Act, 1996 to appoint a third party or an independent Arbitrator when the parties have already mutually agreed for the procedure the authority to appoint the designated arbitrator.
The bench said that the Amendment Act, 2015 which came into force on 23rd October, 2015 will not apply to the arbitral proceedings which has commenced in accordance with the provisions of Section 21 of the Principal Act, 1996 before the coming into force of Amendment Act, 2015, unless the parties otherwise agree. For this case, two Gazetted railway officers shall act as arbitrators.

The bench comprising of Justices A.M. Khanwilkar and Ajay Rastogi opined that the High Court was wrong on its part for appointing an independent arbitrator without resorting to the procedure for appointment of an arbitrator which has been prescribed under clause 64(3) of the contract under the inbuilt mechanism as agreed by the parties.

Supreme Court has thus observed that the High Court should first resort to the mechanism in appointment of an arbitrator as per the terms of contract as agreed by the parties in order to deal with an application under Section 11(6) of the Arbitration and Conciliation Act. The aim of High Courts must be to seek appointment of an 'independent Arbitrator'.

While disposing of the matter, the bench stated:

"The orders passed by the High Court are quashed and set aside. The appellants are directed to appoint the arbitrator in terms of clause 64(3) of the agreement within a period of one month from today under intimation to each of the respondents/contractors and since sufficient time has been consumed,  the first stage itself, in the appointment of an arbitrator and majority of the respondents being the petty contractors, the statement of claim be furnished by each of the respondents within four weeks thereafter and the arbitrator may decide the claim after affording opportunity of hearing to the parties expeditiously without being influenced/inhibited by the observations made independently in accordance with law."

Tagged: SupremeCourt   Arbitration   Arbitrator   HighCourt  
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