Case Note & Summary
The applicant, Mohan Balkrishna Lulla, filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator to adjudicate disputes arising from a Development Agreement dated 27/12/2004. The applicant had earlier filed a suit (1927 of 2007) against the respondent, Shailesh Dhairyavan, proprietor of Dhairyawan Developers. The parties filed consent terms on 3rd October 2008, which were taken on record by the court on 8th October 2008. Clause 8 of the consent terms referred the dispute regarding deficient carpet area and valuation to the arbitration of Mrs. Justice Sujata Manohar (Retd.), a former Supreme Court judge. The suit was disposed of accordingly. The parties appeared before the learned arbitrator, but the matter was adjourned on several occasions to allow the applicant to file an affidavit of evidence. The applicant claimed that due to unavoidable circumstances, he could not file the affidavit. The learned arbitrator did not enter upon the reference. The applicant then filed the present application for appointment of a substitute arbitrator. The respondent opposed the application, arguing that the consent terms constituted a concluded arbitration agreement and the court could not appoint a different arbitrator. The court held that the consent terms created a valid arbitration agreement. Since the named arbitrator did not enter upon the reference, the court had jurisdiction under Section 11 to appoint a substitute arbitrator. The court noted that the applicant could not be blamed for the delay and that the respondent had not raised any objection to the appointment of a substitute arbitrator. The court allowed the application and appointed a sole arbitrator to adjudicate the disputes in accordance with the consent terms and the Arbitration and Conciliation Act, 1996.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11 of the Arbitration and Conciliation Act, 1996 - Consent Terms as Arbitration Agreement - The parties entered into consent terms in a pending suit agreeing to refer disputes to a named arbitrator. The named arbitrator did not enter upon reference. The court held that the consent terms constitute a valid arbitration agreement and the court can appoint a substitute arbitrator under Section 11 when the named arbitrator is unable or unwilling to act. (Paras 1-8) B) Arbitration Law - Substitution of Arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - Failure of Named Arbitrator to Act - The named arbitrator, a former Supreme Court judge, did not enter upon reference due to the applicant's failure to file evidence. The court held that the applicant cannot be blamed for the delay and the court has power to appoint a substitute arbitrator to ensure the dispute is resolved. (Paras 4-8)
Issue of Consideration
Whether the court can appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 when the parties had earlier agreed to refer disputes to a named arbitrator who did not enter upon reference, and whether the consent terms constitute a valid arbitration agreement.
Final Decision
The court allowed the application and appointed a sole arbitrator to adjudicate the disputes between the parties in accordance with the consent terms and the Arbitration and Conciliation Act, 1996.
Law Points
- Arbitration agreement can be created by consent terms in a suit
- Section 11 application maintainable even if earlier arbitrator was named but not appointed
- Court can appoint substitute arbitrator if named arbitrator is unable or unwilling to act
