Case Note & Summary
The applicant, Essar Steel India Limited, filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator on behalf of the respondent, The New India Assurance Co. Ltd., to enable the constitution of an arbitral tribunal to adjudicate disputes arising under a Terrorism Insurance Policy. The applicant had obtained a Megarisk Insurance Policy from the respondent for the period 1 September 2008 to 31 August 2009, covering property damage and business interruption. In May 2009, an unknown person punctured a pipeline, and the surveyors appointed by the respondent reported that the puncture was due to terrorism activity. Consequently, the applicant applied for a separate Terrorism and Sabotage Policy, which was issued on 20 November 2009 for the period from 20 November 2009 to 19 November 2010. The applicant paid a premium of Rs.1,87,50,000. The applicant submitted a claim under the terrorism policy, but the respondent repudiated the claim. The applicant invoked the arbitration clause in the policy and appointed its arbitrator, but the respondent failed to appoint its arbitrator despite a notice dated 14 December 2012. The applicant then filed the present application. The respondent opposed the application, arguing that the arbitration clause was not applicable because the claim was under the Megarisk policy, not the terrorism policy. The court examined the arbitration clause in the terrorism policy, which provided for a three-member arbitral tribunal with each party appointing one arbitrator and the two arbitrators appointing the presiding arbitrator. The court noted that the respondent had not appointed its arbitrator despite the applicant's notice, and the respondent's contention that the arbitration clause was not applicable was a matter for the arbitral tribunal to decide. The court held that the respondent's failure to appoint an arbitrator entitled the applicant to seek appointment by the court under Section 11. The court appointed a former judge of the Bombay High Court as the arbitrator on behalf of the respondent and directed the two arbitrators to appoint the presiding arbitrator. The application was allowed.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11 of the Arbitration and Conciliation Act, 1996 - Failure to Appoint - The applicant invoked the arbitration clause in the terrorism insurance policy and appointed its arbitrator, but the respondent failed to appoint its arbitrator despite notice. The court held that the respondent's failure to appoint an arbitrator entitled the applicant to seek appointment by the court under Section 11. The court appointed a former judge as the arbitrator on behalf of the respondent to constitute the arbitral tribunal. (Paras 1-10)
Issue of Consideration
Whether the court should appoint an arbitrator on behalf of the respondent under Section 11 of the Arbitration and Conciliation Act, 1996, when the respondent failed to appoint its arbitrator as per the arbitration clause in the terrorism insurance policy.
Final Decision
The court allowed the application and appointed a former judge of the Bombay High Court as the arbitrator on behalf of the respondent. The two arbitrators were directed to appoint the presiding arbitrator.
Law Points
- Section 11 of the Arbitration and Conciliation Act
- 1996
- appointment of arbitrator
- failure to appoint
- arbitration clause
- insurance policy
- terrorism cover
