Case Note & Summary
The Applicant, Voltas Limited, filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of a sole arbitrator to adjudicate disputes arising from two Work Orders dated 2nd August 2007 issued by the Respondent, M.P. Entertainment & Developers Pvt. Ltd. The Work Orders contained an arbitration clause stating: 'In case of any dispute during the execution of the work and if the matter is referred to Arbitration then it will be resolved by dual Arbitrator, one by client and another by contractor.' Disputes arose, and the Applicant terminated the contract by legal notice dated 25th January 2010, demanding payment of outstanding dues. After part payment, the Applicant raised a final invoice for Rs. 73,08,826.41 on 10th August 2011. Since payment was not received, the Applicant invoked the arbitration clause by letter dated 12th July 2014, calling upon the Respondent to appoint a sole arbitrator. The Respondent replied on 6th August 2014, denying the existence of a concluded contract and asserting that the arbitration clause was invalid. The Applicant then filed the present application. The court examined the arbitration clause and found it defective as it provided for a 'dual arbitrator' without a mechanism for appointing a third arbitrator in case of disagreement, rendering the clause invalid. However, the court held that under Section 11(6) of the Act, it has the power to appoint a sole arbitrator to cure the defect and ensure the dispute is resolved. The court rejected the Respondent's contention that no concluded contract existed, noting that the Work Orders were signed and contained an arbitration clause. The court appointed a sole arbitrator to adjudicate the disputes between the parties.
Headnote
A) Arbitration Law - Validity of Arbitration Clause - Defective Arbitration Agreement - The arbitration clause provided for 'dual arbitrator, one by client and another by contractor' without providing for appointment of a third arbitrator in case of disagreement - Held that such clause is invalid as it does not constitute a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996 - The court can cure the defect by appointing a sole arbitrator under Section 11(6) of the Act (Paras 1-10). B) Arbitration Law - Appointment of Arbitrator - Section 11(6) of Arbitration and Conciliation Act, 1996 - When the arbitration agreement is defective and parties fail to agree on appointment, the court may appoint a sole arbitrator - Held that the court has power to appoint a sole arbitrator to fill the void and ensure the dispute is resolved (Paras 10-12).
Issue of Consideration
Whether the arbitration clause providing for 'dual arbitrator' is valid and enforceable, and whether the court can appoint a sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 when the arbitration agreement is defective.
Final Decision
The court allowed the application and appointed a sole arbitrator to adjudicate the disputes between the parties.
Law Points
- Arbitration clause providing for 'dual arbitrator' is invalid as it does not provide for appointment of third arbitrator
- Section 11(6) of Arbitration and Conciliation Act
- 1996
- Court can appoint sole arbitrator when arbitration agreement is defective
- Existence of arbitration agreement is a jurisdictional fact to be decided by court under Section 11
