Case Note & Summary
The petitioner, M/s. Siddhi Real Estate Developers, owned land at Village Dhokali, Thane, and entered into a Memorandum of Understanding (MOU) dated 26 November 2007 with Respondent No. 1, Metro Cash And Carry India Pvt. Ltd., for sale of development rights for Rs. 101.50 crores. An Escrow Agreement dated 27 November 2007 was executed appointing Respondent No. 2 as escrow agent to hold Rs. 25.37 crores. Both agreements contained arbitration clauses: the MOU provided for a three-member tribunal (each party appoints one arbitrator, and the two appoint the third), while the Escrow Agreement provided for a five-member tribunal (each of the three parties appoints one arbitrator, and the three appoint two additional arbitrators). Disputes arose regarding performance of the MOU and payment of the escrow amount. The petitioner invoked arbitration; both petitioner and Respondent No. 1 appointed their arbitrators, but Respondent No. 2 failed to appoint any arbitrator. The two appointed arbitrators opined they could not proceed without Respondent No. 2. The petitioner then approached the High Court under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of a third arbitrator for the MOU disputes and, alternatively, constitution of a five-member tribunal for both agreements. The court considered whether it could appoint an arbitrator when a party fails to do so, and whether disputes under both agreements could be referred to a single tribunal. The court held that under Section 11, the court has power to appoint an arbitrator to fill the vacancy caused by a party's failure, and that a composite reference of disputes under related agreements is permissible to avoid multiplicity. The court appointed a sole arbitrator to decide all disputes between the parties under both agreements.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11 of Arbitration and Conciliation Act, 1996 - Failure to Appoint - Where a party fails to appoint its arbitrator in a multi-party arbitration agreement, the court may appoint an arbitrator to fill the vacancy to ensure the arbitral tribunal is constituted. (Paras 1-15) B) Arbitration Law - Composite Reference - Multiple Agreements - Where disputes arise under two related agreements (MOU and Escrow Agreement) involving common parties and subject matter, a single arbitral tribunal may be constituted to avoid multiplicity of proceedings. (Paras 2-10)
Issue of Consideration
Whether the court can appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 when one party fails to appoint its arbitrator in a multi-party arbitration agreement, and whether disputes under two related agreements can be referred to a single arbitral tribunal.
Final Decision
The court appointed a sole arbitrator to decide all disputes between the parties under both the MOU and the Escrow Agreement.
Law Points
- Appointment of arbitrator under Section 11 of Arbitration and Conciliation Act
- 1996
- Failure of party to appoint arbitrator
- Multi-party arbitration
- Composite reference of disputes under multiple agreements
