WALTER BAU AG, LEGAL SUCCESSOR, OF THE ORIGINAL CONTRACTOR, DYCKERHOFF & WIDMANN AGversusMUNICIPAL CORPORATION OF GREATER MUMBAI & ANR.

                      [2015] 2 S.C.R. 37


   WALTER BAU AG, LEGAL SUCCESSOR, OF THE                         A
 ORIGINAL CONTRACTOR, DYCKERHOFF & WIDMANN
                         AG
                           v.
 MUNICIPAL CORPORATION OF GREATER MUMBAI &
                        ANR.                                      B
       (Arbitration Case (Civil) No. 35 Of 2014)
                  JANUARY20, 2015
                    [RANJAN GOGOi, J.]
                                                                  c
     Arbitration and Conciliation Act, 1996- s. 11 (6) - Petition
under- Maintainability of-Arbitration clause -Agreed upon
procedure contemplated appointment of the arbitrator by the
second party within 30 days of receipt of notice from the first
party- Upon failure by second party to appoint arbitrator on      o
its behalf as per the agreement, matter referred to
International Centre for Alternative Disputes Resolution
(ICADR) for appointment ofArbitrator on behalf of the second
party-Appointment of second arbitrator by ICADR- Petition
u/s. 11(6) challenging the appointment made by ICADR on E
the ground that the same was not as per procedure
contemplated uls 5 and 35 of ICADR Rules - Maintainability
of the petition challenged - Held: Unless the appointment of
the arbitrator is ex facie valid and such appointment satisfies
the Court exercising jwisdiction uls. 11 (6), acceptance of such F
appointment as a fait accompli to debar the jurisdiction u/s.
11 (6) cannot be countenanced in law - Appointment of the
second arbitrator being contrary to the Rules, was not valid
and hence non-est in law- Such appointment, therefore, will
not inhibit exercise ofjurisdiction u/s 11 (6) and the petition is G
maintainable -Arbitrator appointed on behalf of the second
party - International Centre for Alternative Disputes
Redressal Rules, 1996 - rr. 5 and 35.

                              37                                  H
38       SUPREME COURT REPORTS                [2015] 2 S.C.R.


A      Disposing of the petition, the Court
       HELD: Unless the appointment of the arbitrator is
  ex facie valid and such appointment satisfies the Court
  exercising jurisdiction under Section 11(6) of the
8 Arbitration Act, 1996 acceptance of such appointment
  as a fait accomplito debar the jurisdiction under Section
  11 (6) cannot be countenanced in law. In the present case,
  the appointment of the arbitrator on behalf of the
  respondent-Corporation is clearly contrary to the
c provisions of the Rules governing the appointment of
  Arbitrators by ICADR, which the parties had agreed to
  abide in the matter of such appointment. The option
  given to the respondent-Corporation to go beyond the
  panel submitted by the ICADR and to appoint any person
D of its choice was clearly not in the contemplation of the
  parties. Thus, the appointment of the arbitrator, by the
  respondent-Corporation, is non-est in law. Such an
  appointment, therefore, will not inhibit the exercise of
  jurisdiction by this Court under Section 11 (6) of the
E Arbitration Act. It cannot, therefore, be held that the
  present proceeding is not maintainable in law.
  Consequently, the present petition is allowed and Shri
  Justice S.R. Sathe, a retired judge of the Bombay High
  Court is appointed as the Arbitrator on behalf of the
F respondent-Corporation. [paras 9 and 10] [49-8-C, E-H;
  50-D]
           Antrix Corporation Limited versus Devas
       Multimedia Private Limited 2013 (6) SCR 453 =
       (2014) 11 SCC 560; Pricol Limited versus Johnson
G
       Controls Enterprise Ltd. & Ors. 2014 (14) SCALE
       74; Deep Trading Company versus Indian Oil
       Corporation and others 2013 (2) SCR 470 = (2013)
       4 sec 35 - distinguished.
H          Datar Switchgears Ltd. Versus Tata Finance
 WALTER BAU AG. v. MUNICIPAL CORP. OF GREATER                      39
                    MUMBAI


    Ltd. and another (2000) 8 sec 151 - referred to.                A
                   Case Law Reference

    2013 (2) SCR 470         distinguished         para 7

    2013 (6) SCR 453         distinguished         para 8           B
    2014 (14) SCALE 74 distinguished               para 8

    (2000)   s sec 151       referred to           para 9

     CIVIL ORIGINAL JURISDICTION :Arbitration Petition              c
(Civil) No. 35 of 2014

     Shamik Sanjanwala, Kailash Pandey, Ranjeet Singh, K.
V. Sreekumar, for the Appellant.
      Mukul Rohatgi,AG, Dhruv Mehta, J. J. Xavier,Ashish Wad,       D
Anshuman Srivastava, Jayashree Wad (For J. S. Wad & Co.),
for the Respondents.

    The Judgment of the Court was delivered by

     RANJAN GOGOi, J. : 1. A works contract No.3AAA E
dated 20 1h December, 2000 was executed by and between
the petitioner and the Municipal Corporation of Greater
Mumbai (respondent No.1 herein) for execution of city tunnel
rehabilitation works for the purposes of transporting the city's
sewage. Disputes and differences having arisen between the F
parties under the said contract, the petitioner invoked the
arbitration clause contained therein and by letter, dated 241h
February, 2014, nominated one Shri R.G. Kulkarni as its
Arbitrator. By the said communication, the petitioner called upon
the respondent No.1 to appoint its Arbitrator within 30 days of G
the receipt of the aforesaid letter/notice.

     2. The arbitration clause in the agreement between the
parties would require to be specifically noticed and, therefore,
is being extracted herein below:                                    H
40    SUPREME COURT REPORTS                   [2015] 2 S.C.R.



A    "Modified Sub-Clause 67.3

           Arbitration

          Sub-clause 67.3 is modified to read as
B    follows:

           Any dispute, in respect of which the
      Recommendation(s), if any, of the Board has not
      become final and binding pursuant to Sub-clause
      67.1, shall be finally settled by arbitration as set
c     forth below. The Arbitral Tribunal shall have full
      power to open-up, review and revise any
      decision, opinion, instruction, determination,
      certificate or valuation of the Engineer and any
D     Recommendation(s) of the Board related to the
      dispute:

      I)    A dispute with and Indian contractor shall
            be finally settled by arbitration in
E           accordance with the Indian Arbitration and
            Conciliation Act, 1996 or any statutory
            amendment thereof. The Arbitral Tribunal
            shall consist of 3 Arbitrators, one each to
            be appointed by the Employer and the
F           Contractor. The third arbitrator shall be
            chosen by two arbitrators so appointed by
            the parties and shall act as Presiding
            Arbitrator. In case of failure of the two
            arbitrators, appointed by the parties to
G
            reach upon a consensus within a period of
            30 days from the appointment of the
            arbitrator appointed subsequently, the
            presiding arbitrator shall be appointed by
 H          the International Centre for Alternative
WALTER BAU AG. v. MUNICIPAL CORP. OF GREATER                41
         MUMBAI [RANJAN GOGOi, J.]


         Dispute Resolution in India. For the purpose        A
         of this Sub-Clause, the term "Indian
         Contractor" means a contractor who is
         registered in India and is a juridical person
         created under Indian Law as well as a Joint
                                                             B
         Venture between such a Contractor and a
         Foreign Contractor.

  II.    In case of a dispute with a foreign Contractor,
         the dispute shall be finally settled in
         accordance with the provisions of UNCITRAL
                                                             c
         Arbitration Rules. The arbitral tribunal shall
         consist of 3 Arbitrators one each to be
         appointed by the Employer and th.e
         Contractor. The third arbitrator shall be chosen    D
         by the two arbitrators so appointed by the
         parties, and shall act as presiding arbitrator.
         In case of the failure of the two arbitrators
         appointed by the parties to reach upon a
         consensus within a period of 30 days from           E
         the appointment of the arbitrator appointed
         subsequently, the presiding arbitrator shall be
         appointed by the International Centre for
         Alternative Dispute Resolution in India. For
         the purposes of this clause 67, the term            F
         "Foreign Contractor" means a contractor who
         is not registered in India and is non juridical
         person created under India Law.

  Ill.   Neither party shall be limited in the               G
         proceedings before such tribunals to the
         evidence nor did arguments already put
         before the Engineer or the Board, as the
         case may be, for the purpose of obtaining
                                                             H
42   SUPREME COURT REPORTS                     [2015] 2 S.C.R.

A
           its/his said Recommendations/ decision.
           No such Recommendations/decision shall
           disqualify the Engineer or any of the
           members of the Board, as the case may be,
B          from being called as a witness and giving
           evidence before the arbitrators or any
           matter whatsoever relevant to the dispute.

     IV)   Arbitration may be commenced prior to or
c          after completion of the works, provided always
           that the obligations of the Employer, the
           Engineer, the contractor and the Board shall
           not be altered by reason of the arbitration
           being conducted during the progress of the
D
           works.

     V)    If one of the parties fails to appoint its
           arbitrator in pursuance of Sub-clause (i) and
E          (ii) above, within 30 days after receipt of the
           notice of the appointment of its arbitrator by
           the other party, then the International Centre
           for Alternative Dispute Resolution in India,
           both in cases of foreign contractors as well
F          as Indian Contractors, shall appoint an
           arbitrator. A certified copy of the order of the
           International Centre for Alternative Dispute
           Resolution in India making such and
           appointment shall be furnished to each of the
G
           parties.

     VI)   Arbitration proceeding s shall be held at
           Mumbai, India, and the language of the
H          arbitration proceedings and that of all
 WALTER BAU AG. v. MUNICIPAL CORP. OF GREATER                 43
          MUMBAI [RANJAN GOGOi, J.]

                                                               A
            documents and communications between the
            parties shall be English.
     \Ill   The decision of the majority of the arbitrators
            shall be final and binding upon both parties.
            The cost and the expenses of arbitration           B
            proceedings will be paid as determined by
            the arbitral tribunal. However, the expenses
            incurred by each party in connection with the
            preparation, presentation, etc. of its case as
            also the fees and expenses paid to the             c
            arbitrator appointed by such party or on its
            behalf shall be borne by each party itself."

      3. A reading of the aforesaid clause of the
agreement would go to show that after one of the parties
                                                               D
thereto invokes the arbitration clause; appoints its
arbitrator and thereafter give notice to the other party
to appoint its arbitrator, if the same is not done within
30 days or if the two arbitrators appointed by both sides      E
fail to nominate a third arbitrator, the matter is to be
referred to the International Centre for Alternative
Dispute Resolution in India (for short "ICADR"). For
appointment of the Arbitrator on behalf of one of the
parties who has failed to so act or for appointment of         F
the third arbitrator, as may be, ICADR is governed by
certain norms contained in Rules 5 and 35 of the ICADR
Rules, 1996 governing the procedure for appointment
of Arbitrators. The same rules may be usefully extracted
herein below:                                                  G

     5.     Appointment of arbitrators.- (1) Unless
            otherwise agreed by the parties, a person
            of any nationality may be an arbitrator.
                                                               H
44   SUPREME COURT REPORTS                     [2015] 2 S.C.R.



A
     (2)   Where the arbitration agreement provides
           that each party shall appoint one arbitrator,
           and the two appointed arbitrators shall
           appoint the presiding arbitrator, and - a) a
B          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 appointed arbitrators fail to agree on the
           presiding arbitrator within thirty days from
c          the date of their appointment, the
           appointment shall be made, upon request
           of a party, by the ICADR.

     (3)   In an arbitration with a sole arbitrator, if the
D          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 ICADR.
E
     (4)   A decision by the ICADR on a matter
           entrusted to it by sub-rule (2) or sub rule (3)
           will be final and binding on the parties.

     (5)   Upon receipt of a request under sub-rule (2)
F
           or sub-rule (3), the ICADR will-

     (a)   make the appointment as promptly as
           possible,

G    (b)   follow the procedure specified in rule 35,

     (c) have regard to-

     (i)   any qualifications required of the arbitrator
           by the agreement of the parties
H
WALTER BAU AG. v. MUNICIPAL CORP. OF GREATER                 45
         MUMBAI [RANJAN GOGOi, J.]

                                                              A
  (ii)     such considerations as are likely to secure
           the appointment of an independent and
           impartial arbitrator; and

  (iii)    in the -case of appointment of a sole or
           presiding arbitrator in an international           B
           commercial arbitration, the advisability of
           appointing a person of a nationality other
           than the nationalities of the parties.

  35. Services as appointing authority.- (1) On               C
       receipt of a request to appoint an arbitrator
       in pursuant of rule 5(2) or 5(3), the ICADR
       will follow the following procedure-

  (i)      the ICADR will communicate to each party           D
           a list containing the names, addresses,
           nationalities and a description of
           qualifications and experience of at least
           three individuals from the panel of
           arbitrators;                                       E

  (ii)     within thirty days following the receipt of the
           list, a party may delete any name to which
           he objects and after re-numbering the
           names in the order of his preference, return       F
           the list to the ICADR;

   (iii)    on receipt of the list returned by the party,
           the ICADR will appoint the arbitrator from
           the list taking into account the order of          G
           preference indicated by the parties;

   (iv)    if for any reason the appointment cannot be
           made according to the procedure specified
           in clauses (i) to (iii), the ICADR may appoint     H
46       SUPREME COURT REPORTS                   [2015] 2 S.C.R.

A
              the arbitrator from the panel of arbitrators.

        (2)   In appointing an arbitrator the ICADR will
              have regard to the matters referred to in rule
              5(5)(c) and will carefully consider the nature
B             of the dispute in order to include in the list,
              persons having appropriate professional or
              businiess experience, language ability and
              nationality.

c       (3)   All appointments on behalf of the ICADR will
              be made by the Secretary-General and in
              his absence by such member of the
              Governing Council as is designated by the
              Chairperson:
D
              Provided that where the Secretary-General
              is to be appointed as the arbitrator, the
              appointment will be made by the
              Chairperson.
E
       4. The respondent Corporation having failed to respond
  to the notice dated 24th February, 2014 of the petitioner, an
  approach was made to the ICADR by the petitioner on 19th
F May, 2014. On the basis thereof, the ICADR by its letter
  dated 3rd June, 2014 called upon the respondent
  Corporation to make appointment of an Arbitrator from a
  panel of three names that was furnished to the respondent
  Corporation or to independently appoint an arbitrator. The
G respondent Corporation pursuant to the said communication
  of the ICADR appointed Mr. Justice (Retd.) A.O. Mane as
  its arbitrator by communication dated 3rd July, 2014.
  Thereafter, this application/petition under Section 11 (6) of
  the Arbitration and Conciliation Act, 1996 (for short "the
H Arbitration Act") was filed on 21st August, 2014.
  WALTERBAUAG. v.MUNICIPALCORP.OFGREATER                         47
          MUMBAI [RANJAN GOGOi, J.]

      5. Mr. Shamik Sanjanwala, learned counsel appearing         A
for the petitioner has submitted that the arbitration clause
in the agreement read with Rules 5 and 35 of the ICADR
Rules embody a procedure that was agreed upon by the
parties with regard to appointment of the arbitrator(s).          B
Clearly and evidently, the appointment of Mr. Justice A.O.
Mane by the respondent Corporation is contrary to the
procedure agreed upon inasmuch as under the relevant
Rules governing the ICADR, the said Body was required
to communicate the respondent Corporation a panel of              C
three names and it is from the said panel that the
respondent Corporation was required to name its
Arbitrator. The Rules do not contemplate an alternative
procedure giving the respondent Corporation liberty to
appoint an Arbitrator of his choice once the respondent           D
Corporation failed to appoint its arbitrator within the agreed
upon period of thirty days from the receipt of the notice
from the petitioner. The appointment of Mr. Justice
A.O. Mane as Arbitrator is, therefore, non-est, leaving it        E
open for this Court to exercise its powers under Section
 11 (6) of the Act to appoint an Arbitrator on behalf of the
 respondent Corporation. It is also pointed out that the
 petitioner has a serious basis to question the impartiality
and independence of the arbitrator purported to be                F
 appointed by the respondent Corporation.

    6. Mr. Mukul Rohatgi, learned Attorney General,
appearing for the the respondent Corporation, on the
other hand, has submitted that the present petition G
would not be maintainable inasmuch as an Arbitrator
has already been appointed and any exercise of power
under Section 11 (6) of the Arbitration Act, at this stage,
would operate as an ouster of the said Arbitrator. It is H
48        SUPREME COURT REPORTS                   [2015] 2 S.C.R.



A submitted that the remedy of the petitioner, if any, lies
  elsewhere and under different provisions of the Arbitration
  Act and not by way of an application under Section 11 (6)
  thereof. Reliance has been placed on the decision of this
  Court in Antrix Corporation Limited versus Devas
8
  Multimedia Private Limited [(2014) 11 SCC 560] and
  another recent pronouncement of this Court dated 16 1h
  December, 2014 in Pricol Limited versus Johnson
                                                 •
  Controls Enterprise Ltd. & Ors. [Arbitration Case (Civil)
C N0.30 of 2014].
       7. Alternatively, it has been urged by Mr.Rohatgi that as the
  appointment of Mr. Justice A.O. Mane was made before the
  present application/petition was filed in this Court, the said
D appointment would be valid in law. It is submitted that the
  requirement of appointment within 30 days of receipt of a notice
  is only in cases covered under Section 11 (4) and 11 (5) of the
  Arbitration Act, whereas in cases falling under Section 11 (2)
  read with Section 11 (6) of the Arbitration Act, so long the
E appointment is made before the concerned aggrieved party
  moves the Court under Section 11 (6), such appointment will not
  be invalidated. In this regard, reliance has been placed on Datar
  Switchgears Ltd. Versus Tata Finance Ltd. and another
F [(2000) 8 sec 151] and Deep Trading Company versus
  Indian Oil Corporation and others [(2013) 4 SCC 35].

      8. While it is correct that in Antrix (supra) and Pricol
  Limited (supra), it was opined by this Court that after
G appointment of an Arbitrator is made, the remedy of the
  aggrieved party is not under Section 11 (6) but such
  remedy lies elsewhere and under different provisions of
  the Arbitration Act (Sections 12 and 13), the context in
  which the aforesaid view was expressed cannot be lost
H sight of. In Antrix (supra), appointment of the Arbitrator,
  WALTER BAU AG. v. MUNICIPAL CORP. OF GREATER                     49
           MUMBAI [RANJAN GOGOi, J.]

as per ICC Rules, was as per the alternative procedure A
agreed upon, whereas in Pricol Limited (supra), the party
which had filed the application under Section 11 (6) of the
Arbitration Act had already submitted to the jurisdiction of
the Arbitrator. In the present case, the situation is otherwise. B

      9. Unless the appointment of the arbitrator is ex facie
valid and such appointment satisfies the Court exercising
jurisdiction under Section 11 (6) of the Arbitration Act,
acceptance of such appointment as a fait accomplito debar           C
the jurisdiction under Section 11 (6) cannot be countenanced
in law. In the present case, the agreed upon procedure
between the parties contemplated the appointment of the
arbitrator by second party within 30 days of receipt of a
notice from the first party. While the decision in Datar            D
Switchgears Ltd. (supra) may have introduced some
flexibility in the time frame agreed upon by the parties by
extending it till a point of time anterior to the filing of the
application under Section 11 (6) of the Arbitration Act, it
cannot be lost sight of that in the present case the                E
appointment of Shri Justice AD. Mane is clearly contrary to
the provisions of the Rules governing the appointment of
Arbitrators by ICADR, which the parties had agreed to abide
in the matter of such appointment. The option given to the          F
 respondent Corporation to go beyond the panel submitted
by the ICADR and to appoint any person of its choice was
 clearly not in the contemplation of the parties. 1f that be so,
 obviously, the appointment of Shri Justice AD. Mane is non-
 est in law. Such an appointment, therefore, will not inhibit       G
 the exercise of jurisdiction by this Court under Section 11 (6)
 of the Arbitration Act. It cannot, therefore, be held that the
 present proceeding is not maintainable in law. The
 appointment of Shri Justice AD. Mane made beyond 30                H
50          SUPREME COURT REPORTS                [2015] 2 S.C.R.



A days of the receipt of notice by the petitioner, though may
  appear to be in conformity with the law laid down in Datar
  Switchgears Ltd. (supra), is clearly contrary to the agreed
  procedure which required the appointment made by the
  respondent Corporation to be from the panel submitted by
8
  the ICADR. The said appointment, therefore, is clearly
  invalid in law.

      10. Consequently, we allow the present petition and
C appoint Shri Justice S.R. Sathe, a retired judge of the
  Bo'mbay High Court as the Arbitrator on behalf of the
  respondent Corporation. Both the Arbitrators shall now name
  the third Arbitrator forthwith whereafter the arbitration
  proceedings will be held and concluded as expeditiously
D as possible. The terms of appointment of Shri Justice S.R.
  Sathe as the Arbitrator on behalf of the respondent
  Corporation will be settled in consultation with the
  respondent Corporation.

E        11. The arbitration petition is disposed of in the above
     terms.

     Kalpana K. Tripathy                        Petition disposed of