The Court cannot appoint an independent arbitrator unless it first resorts to the mechanism of appointment of arbitrator as mutually decided by the parties

[Case Brief] Union of India v/s Parmar Construction Company

Case name Union of India v/s Parmar Construction Company
Case number Civil Appeal Number 3303 of 2019
Court Supreme Court of India
Bench Justice Ajay Rastogi and Justice A.M. Khanwilkar
Author of the judgment Justice Ajay Rastogi
Decided on March 29, 2019
Relevant Act/Section Arbitration and Conciliation Act, 1996- Section 11 and Section 21
Author of the case summary Lavanya Gupta ([email protected])

Brief Facts and Procedural History:

The Appellant and Respondent had entered into a contract for construction work and the contract contained a dispute resolution clause. The Appellant failed to appoint an arbitrator as per the terms of the arbitration clause, and so an application was filed by the Respondent before the High Court for appointment of an independent arbitrator. The High Court appointed an independent arbitrator but the same was appealed against by the Appellant in the present case.

Issues before the Court of Law:

1) Whether or not the present case was covered by the Arbitration and Conciliation (Amendment Act), 2015?

2) Whether or not the High Court was right in appointing a third party independent arbitrator when the agreed procedure between the parties was different?

Ratio of the Court:

No, the 2015 Amendment does not apply to the present case because the proceedings commenced in accordance with Section 21 of the Arbitration and Conciliation Act, 1996 (“Act”) before the coming into force of the 2015 Amendment.

No. Under Section 11(6) of the original Act, the Chief Justice or his designate may resort to alternative arrangement to give effect to appointment of an independent arbitrator when the arbitral tribunal appointed by the parties, fails. However, in the present case, the High Court never resorted to the mechanism of appointment of arbitrator as mutually decided by the parties in the agreement.

Decision Held:

The Court cannot appoint an independent arbitrator unless it first resorts to the mechanism of appointment of arbitrator as mutually decided by the parties. The agreement between the parties was of paramount importance and thus the High Court’s order was set aside.

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