Case Note & Summary
The Supreme Court of India dealt with an arbitration petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, concerning the appointment of a third arbitrator in a dispute arising from a Production Sharing Contract (PSC) between Reliance Industries Ltd. and the Union of India. The petitioners, comprising three companies, sought the appointment after the two arbitrators nominated by the parties failed to agree on a third arbitrator. The dispute originated from differences regarding cost recovery under the PSC, which were exacerbated by media reports suggesting governmental restrictions on cost recovery due to declining production levels. The petitioners invoked arbitration following a series of correspondences with the respondent, which included a notice of arbitration served in November 2011. The respondent contended that no dispute had arisen and sought to dismiss the arbitration notice as premature. The court analyzed the jurisdictional aspects, confirming that it could intervene under Section 11(6) when the appointment procedure agreed upon by the parties was not complied with. The court also recognized the arbitration as international due to the involvement of foreign entities and emphasized the necessity for the third arbitrator to be of neutral nationality to maintain impartiality. Ultimately, the court appointed a third arbitrator, affirming the principles of international arbitration and the need for neutrality in arbitrator appointments.
Headnote
A) Arbitration Law - Appointment of Arbitrators - Jurisdiction of Supreme Court - Arbitration and Conciliation Act, 1996, Section 11(6) - The court held that it has jurisdiction to appoint a third arbitrator when the two appointed arbitrators fail to reach a consensus, as per the provisions of the Arbitration Act. The petition was filed due to the inability of the arbitrators to agree on the appointment of a third arbitrator, necessitating judicial intervention. Held that the court's jurisdiction is affirmed under Section 11(6) (Paras 1-17). B) International Commercial Arbitration - Definition and Applicability - Arbitration and Conciliation Act, 1996, Section 2(1)(f) - The court recognized the arbitration as international due to the involvement of foreign parties, thus affirming the applicability of international arbitration principles. The presence of foreign entities in the arbitration agreement established the international nature of the dispute. Held that the arbitration proceedings are international in character (Paras 19-22). C) Neutrality of Arbitrators - Requirement for Neutral Nationality - Arbitration and Conciliation Act, 1996, Section 11 - The court emphasized the importance of appointing arbitrators of neutral nationality in international arbitration, aligning with established practices. The court directed that the third arbitrator should be of a nationality other than that of the parties involved to ensure impartiality (Paras 26-30).
Issue of Consideration
Whether the Supreme Court has jurisdiction to appoint a third arbitrator under Section 11(6) of the Arbitration Act, 1996.
Final Decision
The Supreme Court appointed a third arbitrator, emphasizing the need for neutrality and confirming its jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996. The court recognized the arbitration as international due to the involvement of foreign parties and directed that the third arbitrator should not share nationality with any of the parties involved.
Law Points
- Arbitration Act
- 1996
- Section 11
- International Commercial Arbitration
- Appointment of Arbitrators
- Production Sharing Contract
- Jurisdiction of Supreme Court
