Holding

Section 11(6) of the Arbitration and Conciliation Act, 1996 empowers the Chief Justice of India to appoint a chairman of the arbitral tribunal, and the appointment must comply with the parties’ contractual requirement that the chairman be of a nationality different from that of either party.

Summary

The petitioner, Delta Mechcons, entered into four sub‑contracts for a power‑plant project with the respondent, Marubeni. The contracts contained an arbitration clause stipulating that each party would appoint one arbitrator and the two would jointly select a third arbitrator as chairman, who must not share the nationality of either party; if they failed, the International Chamber of Commerce (ICC) was to appoint the chairman. The two party‑appointed arbitrators could not agree on a chairman and the ICC declined to appoint one, prompting the petitioner to file an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the Chief Justice of India for appointment of a presiding arbitrator. The Court examined whether the parties’ agreement to follow ICC rules barred the court’s jurisdiction and whether the nationality restriction applied to a court‑appointed chairman. It held that Section 11 jurisdiction was attracted, the court could appoint the chairman, and the restriction on nationality must be respected. Accordingly, the Court directed the parties to submit either a mutually agreed name or two names each for consideration as chairman.

Issues considered

Whether the Chief Justice of India has jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 to appoint a chairman when the arbitration agreement provides for ICC appointment.
Whether the parties’ agreement to conduct arbitration under ICC Rules precludes court intervention for appointment of the chairman.
Whether the contractual restriction that the chairman must not be of the same nationality as either party applies to an appointment made by the court under Section 11.
Whether a single application for appointment of a chairman can cover disputes arising under four separate sub‑contracts.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(6), s. 9

Subjects

ArbitrationSection 11 appointmentInternational Chamber of Commerce rulesChairman nationality restrictionMultiple contractsChief Justice of India jurisdictionArbitration agreement interpretation

Judgment

DELTA MECHCONS (INDIA) LTD. A
v.
MIS MARUBENI CORPORATION

MAY 18, 2007

[P.K. BALASUBRAMANYAN, J.] B

Arbitration and Conciliation Act, 1996:

s. I I-Appointment of Chairman of arbitral tribunal-Arbitration
agreement providing for appointment of one arbitrator by each party and C
Chairman of arbitral tribunal to be nominated by the two arbitrators-
Presiding arbitrator not to be of the nationality of contracting parties-Two
arbitrators so appointed, failed to nominate presiding arbitrator-As per
agreement when the International Chamber of Commerce was approached,
;
it declined to appoint Chairman of arbitration tribunal-Application u/s 11 D
filed before Chief Justice of India for appointment of presiding arbitrator-
Held: Though parties have agreed that arbitration should be conducted in
accordance with Rules of Conciliation and Arbitration of the International
Chamber of Commerce, but agreement to follow Rules of ICC with conduct
of arbitration proceedings is different from the agreement regarding
appointment of arbitral tribunal-There is no obligation on parties to E
undertake before ICC, to have the arbitration in accordance with its
procedure-The procedure agreed upon the parties to constitute arbitral
tribunal having broken down, petitioner is justified in approaching the Chief
Justice of India of appointment of a presiding arbitrator-As per arbitration
agreement, Chairman of orbitral tribunal has to be of a nationality different F
form the nationality of contracting parties-It cannot be said that since
arbitrator was in the circumstances to be appointed by the Chief Justice of
India or his nominee in terms of s. Jl of the Act, the restriction of nationality
would not apply-Chairman ofarbitral to be appointed hos to be a nationality
different from nationality of either parties-Parties would, therefore, submit
an agreed name with consent of that person or in case they are not able to G
agree, they would submit two names each with consent of nominees for being
considered for appointment as Chairman of arbitral tribunal-Rules of
Conciliation and Arbitration of the International Chamber of Commerce.

281 H
282 SUPREME COURT REPORTS [2007) 7 S.C.R.

A CIVIL ORIGINAL JURISDICTION : Arbitration Petition No. 11 of 2006.

(Under Section 11 (6) of the Arbitration and Conciliation Act 1998)

M.C. Dhingra, Dr. V.K. Agrawal, Sunil Goel and Aarti Topu for the
Petitioners.
B
Harish N. Salve, Sr. Adv., Manu Nair and Viplav Shanna (for Suresh A.
Shroff & Co.) for the Respondent.

The Order of the Court was delivered by

ORDER
c
I. The respondent took up the project of construction of a thennal
power plant at Ramagundam in Karimnagar District of the State of Andhra
Pradesh. It entered into four sub-contracts with the petitioner relating to that
work. The general conditions of sub-contracts were to be part of the four
D separate contracts. The sub-contracts were tenninated on 25.7.2001 with effect
from 7.8.2001. It appears that there were subsequent discussions between the
parties and on the basis of ascertainment of the sums due to the petitioner
the same were paid by the respondent and the petitioner i.n return gave in
writing that it had received full and final paym(int from the respondent fu .
tenns of the settlement between the two and also a certificate that all payments
E against the said four sub-contracts have been made by the respondent to the
petitioner and received by the petitioner and that no bills are pending with
the respondent for settlement. After the matters. rested on this basis, the
petitioner made a claim in respect of the four sub-contracts. The petitioner
also named an arbitrator and called upon the respondent to name an arbitrator
in tenns of the arbitration agreement. The respondent disputed ·the claims of
F the petitioner and pleaded that there was no subsisting claim for the petitioner
based on any of the four sub-contracts. Even then without prejudice to its ·
contentions the respondent also named an arbitrator. In terms of the arbitration
agreement, the two nominated.arbitrators had together to name the Chainnan
ofthe Arbitral Tribunal or the presiding arbitrator. The nominated arbitrators
failed to do so. ·
G
2. Meanwhile the petitioner had ·also moved the concerned District
Court under Section 9 of the Arbitration and Conciliation Act seeking what
it called interim protection pending an arbitration. Four separate applications
were filed. The applications were dismissed by the District Court. The petitioner
filed appeals in the High Court of Gujarat. The High Court disposed of the
H appeals recording the following:
DELTAMECHCONS(INDIA)LTD. v. MARUBENI CORPN. [BALASUBRAMANYAN,J.] 283

"After having argued at some length, learned counsel on both sides A
agreed and submitted that the main dispute between the parties is the
subject-matter of separate arbitration proceedings and at this stage it
may not be necessary or advisable to invite observations of this Court
as regards the legality and validity of any of the claims or liability of
any of the parties to satisfy such claims. It was, therefore, jointly B
submitted that all the appeals may be disposed as withdrawn with the
observation that the parties may put forward their case before the
arbitral tribunal, which may decide the dispute referred to it without
being influenced by any observation made in the impugned judgment
as also the fact that these appeals were not pressed for any orders
on merits." c
3. The relevant clauses relating to arbitration, as contained in the
agreement between the parties are as under:

"21. SEITLEMENTOF DISPUTES

If at any time any question, dispute, or difference arise between the D
Contractor and the Subcontractor in connection with or arising out of
-~ the Subcontract or the Subcontract Works, either party shall give to
the other notice in writing specifying the nature of such question,
dispute or difference and the point at issue, and the parties shall
discuss the matter and shall endeavour to reach an amicable settlement. E
In case parties fail to reach an amicable solution within sixty (60) days
after the date of the said notice, the matter shall be referred to an
arbitration in accordance with Clause 22 hereof.

22. ARBITRATION

22.1. Any dispute which could not be resolved between the parties
F
..__,
in accordance with clause 21 hereof shall be settled exclusively by
arbitration conducted in accordance with the Rules of Concitation and
Arbitration of the International Chamber of Commerce. Each arbitral
tribunal shall.consist of three arbitrators. The Contractor and the sub-
contractor shall each appoint one arbitrator and the two arbitrators G
thus appointed shall jointly agree upon the third arbitrator to act as
chairman. If such agreement cannot be reached within thirty (30) days
from the date of appointment of the later member, the third arbitrator
---(
shall be appointed by the International Chamber of Commerce. The
said Chainnan shall not be the same nationality of either party to the
~
H
284 SUPREME COURT REPORTS (2007] 7 S.C.R.

A sub-contract.
~--

22.2. The arbitration shall be conducted in India

22.3. The language to be used on all written documents provided in
each arbitration shall be English.

B 22.4. The decision of the arbitral tribunal shall be considered final and
binding upon both parties and shall not be subject to any appeal
whatsoever.

22.5. The cost and expenses of arbitration shall be borne by the party
based on the award of the arbitral tribunal.
c
22.6. Performance of the sub-contract work shall continue during the
arbitration proceedings notwithstanding the existence of any dispute,
controversy or question."

4. When the named arbitrators failed to nominate a presiding arbitrator,
D the petitioner approached the International Chamber of Commerce (for short
ICC) with a request that the presiding arbitrator may be nominated by the ICC.
There was some correspondence between the ICC and the parties and
ultimately the ICC informed the petitioner that the ICC had decided not to
appoint a Chairman of the arbitral tribunal pursuant to the rules of ICC as
E appointing authority. It was in that context that the petitioner approached this
Court with this application under Section I I of the Arbitration and Conciliation
Act.

5. Learned counsel for the petitioner submitted that going by the
arbitration agreement the petitioner and the respondent have nominated their
p arbitrators but the nominee arbitrators had failed to appoint a presiding
arbitrator in terms thereof and in that context, as per the agreement, the
petitioner had approached the ICC for nominating a presiding arbitrator but
the ICC had refused the request without assigning any reason. In that context
it-was submitted that the jurisdiction of the Chief Justice of India· - being
an international arbitration - under the Act was attracted and it was just and
G necessary to appoint a presiding arbitrator in terms of Section I I of the Act.
This argument is controverted by the respondent, in addition to pleading on
the merits that there was no subsisting claim for the petitioner and that the·
arbitration is barred by limitation, by contending that the petitioner had not
complied with the procedure set down by the ICC before calling upon ICC
H to name the presiding arbitrator and in that context the jurisdiction of the
DELTA MECHCONS (INDIA) LTD. l'. MARUBENI CORPN. [BALASUBRAMANYAN,J.] 285

Chief Justice of India under Section I I of the Act is not attracted. It was also A
contended that there were four sub-contracts and a single application for the
appointment of a presiding arbitrator in respect of the disputes relating to four
different contracts was not maintainable. It was for the petitioner to have
agreed to follow the ICC Rules and to comply with those rules so as to get
an arbitrator appointed by the ICC in terms of their Rules and the petitioner
having failed to do so, the application filed by the petitioner had only to be B
rejected. The arbitration agreement clearly provides that dispute5 between the
parties are to be settled exclusively by an arbitration conducted in accordance
with the Rules of Conciliation and Arbitration of the International Chamber ·
of Commerce. It is hence submitted that the petitioner not having adhered to
the said Rules, ICC was not justified in refusing to act. C
6. It is true that there is a clause that the arbitration is to be conducted
in terms of the Conciliation and Arbitration Rules ofICC. But it also provides
that the arbitral tribunal shall consist of three arbitrators. The contractor and
the sub-contractor had to each appoint one arbitrator and the two arbitrators
thus appointed, should jointly agree upon the third arbitrator as Chairman. If D
such agreement be not reached within the time provided, the third arbitrator
shall be appointed by the ICC. The Chairman was not to be ~f the same
nationality of either party to the sub-contract. The arbitration agreement has
to be read as a whole to know its purport.

7. It is open to the parties while entering into an arbitration agreement E
to provide as to how the arbitral tribunal should be constituted. It is also open
to them to provide for the rules to be followed. As I read the arbitration
agreement, I find that the parties had reserved unto themselves the right to·
nominate an arbitrator each stipulating that the two arbitrators so nominated,
should agree upon the third arbitrator to act as the Chairman. Jn other words, F
the parties by their agreement have left it to the two arbitrators to appoint
a third arbitrator to act as the Chairman. They have also agreed that in case
of failure of the two arbitrators to appoint the third arbitrator, the third
arbitrator was to be appointed by ICC. The parties had also provided that the
arbitration should be conducted in accordance with the Rules of Conciliation
and Arbitration of the International Chamber of Commerce. · G
8. It was the contention of learned senior counsel for the respondent
that once the machinery contemplated by the parties failed, the petitioner
':..._;
could only go by way of the. Rules of Conciliation and Arbitration of the
International Chamber of Commerce and the petitioner not having proceeded H
DELTAMECHCONS(INDIA)LTD.v.MARUBENICORPN.[BALASUBRAMANYAN,J.] 287

appointment of the presiding arbitrators since four sub-contracts were involved. A
Even assuming that the contention has merit, I reject it as being too technical.

10. There was not much argument before me on the merits concerning
non-subsistence of any further claim for the petitioner and the request being
barred by limitation. The parties proceeded on the basis that those were
questions for the arbitral tribunal to decide. This might have been so particularly B·
in the context of the stand adopted by them in the High Court of Gujarat in
the appeals arising from the orders of the District Court in the applications
under Section 9 of the Act. These questions have to be decided by the
arbitral tribunal, in the circumstances of this case.

11. As per the arbitration agreement the Chairman of the arbitral tribunal C
has to be of a nationality different from the nationality of the contracting
parties. Learned counsel for the petitioner contended that since the arbitrator
was being appointed by the Chief Justice of India or his nominee in terms of
Section 11 of the Act, this restriction would not apply and I was free to
appoint anyone as Chairman or the presiding arbitrator. I am not in a position D
to agree. In the light of my reasoning above, it is obvious that this part of
the agreement between the parties must also be given effect to. Therefore, ·
this is a case where I have to appoint a Chairman of the arbitral tribunal who
is of a nationality different from the nationality of either of the parties. Suffice
it to say that for the moment I hold that my jurisdiction to name a Chairman
of the arbitral tribunal has rightly been invoked and that a Chairman of the E
arbitral tribunal has to be appointed by me.

_12. To enable me to name the Chairman, I direct, the parties either to
. submit an agreed name with the consent of that person or in case they are
not able to agree, submit two names each with the consent of the nominees,
for being considered for appointment as the Chairman of the arbitra1 tribunal. F
The parties are, therefore, directed to file either a joint statement-or separate
statements in writing indicating the names as directed above 9n or before the
10th of July, 2007 and the matter will be posted for further orders on 13th July,
2007.
G
RP. May be listed on 13th July 2007 for further orders.