Case Note & Summary
The applicant, Oaks Management Consultancy Pvt. Ltd., and respondent, Worldwide Media Pvt. Ltd., were parties to a company petition for winding up under Sections 433 and 434 of the Companies Act, 1956. By a consent order dated 23 November 2009, the petition was disposed of on agreed terms that all claims and counterclaims would be referred to a sole arbitrator, Mr. Zal Andhyarujina, Advocate, who was to endeavour to pass an award within six months of his acceptance. After the arbitrator's appointment, he issued directions for pleadings and fixed a hearing. The applicant filed its statement of claim on 24 September 2010, after the deadline set by the arbitrator. The six-month period for making the award expired on 7 September 2010, without an award being made. The applicant then sought extension of time from the company court but withdrew that application on 20 January 2011. A subsequent arbitration application was also withdrawn on 7 February 2012 with liberty to take appropriate steps. The applicant then issued a letter of invocation on 8 February 2012, but the respondent refused to consent to further arbitration, contending that the arbitration proceedings had ended. The core legal issue was whether, upon the termination of the sole arbitrator's mandate due to lapse of the agreed time, the arbitration agreement survived so as to permit appointment of a fresh arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. The applicant argued that the consent minutes clearly separated the agreement to arbitrate (clause 2) from the appointment of a particular arbitrator with a time limit (clause 3); once the mandate terminated under Section 15(1)(b), the underlying agreement remained, and a fresh appointment could be made. The respondent contended that since the time expired without an award, the entire arbitration reference came to an end and there could be no further proceedings, also blaming the applicant for the delay. The court examined the consent minutes and found two distinct parts: an agreement to refer disputes to arbitration and an agreement to appoint a specific arbitrator with a time limit. The mandate of the arbitrator terminated by operation of Section 15(1)(b) read with the parties' agreement when the six months expired without an award and the respondent did not consent to extension, as required by the Supreme Court in NBCC Ltd. v. J.G. Engineering Pvt. Ltd. However, that termination did not extinguish the arbitration agreement. The court emphasized that there was no indication that parties intended arbitration only before the named arbitrator or not at all. Allowing the respondent's argument would defeat the purpose of the Arbitration and Conciliation Act. The court allowed the arbitration application and appointed Mr. Naushad Engineer, Counsel, as sole arbitrator. No costs were ordered. The Registrar was directed to send a copy of the order to the arbitrator along with parties' addresses.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Termination of Mandate - Arbitration and Conciliation Act, 1996, Sections 11, 15(1)(b) - The consent minutes provided that the sole arbitrator would pass an award within six months; upon expiry of that period, his mandate terminated by operation of Section 15(1)(b) read with the parties' agreement. Extension of time required party consent, which was refused. Held, termination of mandate does not prevent the court from appointing a new arbitrator under Section 11 if the arbitration agreement survives (Paras 2-5). B) Arbitration Law - Survival of Arbitration Agreement - Interpretation of Consent Order - Arbitration and Conciliation Act, 1996, Section 11 - The consent minutes contained distinct clauses: clause 2 for reference of disputes to arbitration and clause 3 for appointment of a named arbitrator with a time limit. Termination of the specific appointment did not invalidate the underlying arbitration agreement. Unless parties intended arbitration only before the named individual or not at all, a fresh appointment could be made (Paras 5). C) Arbitration Law - Principle in NBCC Ltd. v. J.G. Engineering Pvt. Ltd. - Extension of Time for Award - Arbitration and Conciliation Act, 1996, Section 11(6) - Following the Supreme Court's decision in NBCC Ltd., where parties have fixed a time for making the award, extension of that time requires mutual consent. In default, the mandate terminates, but the arbitration agreement remains enforceable, and the court may exercise power under Section 11(6) to appoint a substitute arbitrator (Paras 3, 5, 6).
Issue of Consideration
Whether, after the mandate of the sole arbitrator terminated by reason of the expiry of the six-month period agreed upon for passing the award, a fresh arbitrator could be appointed under Section 11 of the Arbitration and Conciliation Act, 1996.
Final Decision
Arbitration Application allowed. Mr. Naushad Engineer, Counsel, appointed as sole arbitrator under the Arbitration and Conciliation Act, 1996. No order as to costs. Registrar directed to send copy of order to sole arbitrator with parties' addresses.
Law Points
- Upon termination of an arbitrator's mandate due to expiry of the agreed time for making the award
- the arbitration agreement may still survive if the parties have not limited arbitration to that specific arbitrator
- consent minutes must be interpreted by separating the agreement to arbitrate from the appointment
- under Section 15(1)(b) of the Arbitration and Conciliation Act
- 1996
- the mandate terminates by agreement of parties
- the court has power under Section 11(6) to appoint a fresh arbitrator in such circumstances.
