Appointment of Arbitrator under Section 11 (6) of the Arbitration & Conciliation Act, 1996 - Failure to appoint within 30 days - Effect

Justice S. Muralidhar

The Delhi High Court in Intuitive Tech Solutions Pvt. Ltd. v. DLF Ltd. has recapitulated the legal position in cases where a party fails to appoint an arbitrator despite a request to do so by the other party, within the statutory period as prescribed in the Arbitration & Conciliation Act, 1996. While following the dicta laid down by the Hon'ble Supreme Court in Datar Switchgears Limited v. Tata Finance Limited, the Delhi High Court held as under;

11. The question whether the Respondent has forfeited its right to appoint an Arbitrator can be answered on an analysis of the facts of the present case. The documents placed on record show that the Petitioner's legal notice dated 14th September 2011 invoking the arbitration clause was received by the Respondent on 16th September 2011. However, the said notice was not in conformity with the arbitration clause since the Petitioner proposed that the appointment of an Arbitrator be done by the Respondent 'in consultation' with the Petitioner. This was contrary to the express wording of Clause 32 (b) of the Agreement. Even assuming that the notice invoking the arbitration clause was received by the Respondent on 16th September 2011, the date of appointment of the Arbitrator by the Respondent is significant. Although the letter of counsel for the Respondent informing the Petitioner of the Arbitrator is dated 17th October 2011, and dispatched on 20th October 2011, the actual decision to appoint the Arbitrator must have been taken some time prior to the said letter dated 17th October 2011.

12. In Datar Switchgears Limited v. Tata Finance Limited in para 19 it was observed as under:

"19. So far as cases falling under Section 11(6) are conceded such as the one before us no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed Under Section 11(4) and Section11(5) of the Act. In our view, therefore, so far as Section 11(6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the Court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an arbitrator under Section 11(6) is forfeited." (emphasis supplied)

13. The above decision was reiterated in Punj Lloyd Limited v. Petronet MHB Limited and in a recent decision dated 9th January 2012 of the Supreme Court in Arbitration Petition No. 11 of 2011 [Denel (Proprietary Limited) v. Government of India, Ministry of Defence]. Consequently, for the purposes of Section 11, it requires to be seen is whether the appointment of the Arbitrator by the Respondent has taken place prior to the filing of the present petition on 19th October 2011.

14. It was contended by learned counsel for the Petitioner that since the notice dated 17th October 2011 was dispatched only on 20th October 2011 the appointment of the Arbitrator took place after the filing of the present petition on 19th October 2011. The above submission fails to appreciate that the actual date of appointment of the Arbitrator by the Respondent had to be prior to the notice dated 17th October 2011. The date of dispatch of the letter intimating the appointment cannot `postpone' the date of appointment. It is not possible, on the basis of the documents placed on record, to hold that the appointment of the Arbitrator by the Respondent took place after the filing of the present petition. In accordance with the law explained by the Supreme Court in Datar Switchgears Limited v. Tata Finance Limited, it is held that the Respondent did not forfeit its right to appoint an Arbitrator in terms of Clause 32 (b) of the Agreement.