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Authored By: Juhi (LL.B), Law Centre 2, Faculty of Law, Delhi University, India, Research Writer at Law Audience®,

Edited By: Mr. Varun Kumar, Advocate, Himachal, Punjab & Haryana and Founder at Law Audience.

The present case M/S HDR Corporation vs. Gail (India) Ltd, primarily deals with the provisions of Arbitration and Conciliation Act, 1996. It Lays down the jurisdictional limits of the High in the background of International Commercial Arbitration and the appointment of substitute arbitrator.

CASE CORAM:

CITATIONS: ARB. P. No. 113 of 2011

COURT: Delhi High Court

BENCH: Justice Manmohan Singh

DATE OF JUDGEMENT: 03.11.2011

RELEVANT PROVISIONS:

Section 2(1)(f), 11 (6), 11(12) ,14 and 15 of Arbitration and Conciliation Act,1966

Section 2(1)(f) of International Commercial Arbitration

Section 11(6)- Appointment of Arbitrator

Section 11(12) – Juridical Distinction

Section 14 and 15- Termination and Substitution of Arbitrator

I. FACTS OF THE CASE:

• The petitioner, a company registered under law of the state of Texas, USA engaged in refining and dealing in HDPE wax, entered into an agreement with the respondent, a company registered under Companies Act, 1956 operating a complex at Pata, Uttar Pradesh, for sale and supply of HDPE wax on 01.04.1999.
• Certain disputes arose between the parties on price fixation leading to arbitration proceedings, Petition No. 33/2007 for the period 13 July 2007 to 12 July 2010. During this period, supplies were made at interim prices determined by arbitral tribunals.
• For the subsequent period 13 July 2010 to 12 July 2013, a fresh tribunal was constituted under the ICADR Rules consisting of Justice Avadh Behari Rohatgi (Retd.) as presiding arbitrator, Justice J K Mehra (Retd.) as nominee arbitrator of the petitioner and Justice N Goswamy (Retd.) as nominee arbitrator of the respondent.
• Among three-member arbitral tribunal, Justice N N Goswamy (Retd.) passed away during the pendency of the arbitration proceedings, thereafter, the ICADR informed petitioner that both the parties are required to appoint their respective arbitrators and that newly appointed arbitrators would then appoint presiding arbitrator.
• Petitioner by objecting to this approach, in his letter to the ICADR, mentioned that appointment of only the substituted arbitrator is warranted in place of the deceased arbitrator and not the appointment of fresh tribunal.
• ICADR, however, rejected this contention and insisted on the reconstitution of a fresh tribunal.
• The petitioner aggrieved by adoption procedure, filed the present petition before the Delhi High Court under section 11(6) of Arbitration and Conciliation Act,1996 for appointment of substitute arbitrator as per rule 11(12) read with rule 10 of ICADR rules.

II. LEGAL ISSUES RAISED IN THE CASE:

• Whether the present dispute between the parties qualifies as an International Commercial Arbitration under section 2(1)(f) of Arbitration and Conciliation Act,1996?
• Whether a fresh tribunal must be appointed or substitution in place of deceased arbitrator alone is required?
• Whether failure of ICADR attracts the jurisdiction of the Delhi High Court to appoint a substitute arbitrator under section 11(6) of Arbitration and Conciliation Act?

II. CONTENTIONS OF THE PARTIES:

II.I CONTENTIONS OF THE PETITIONER:

• The petitioner argued that the death of an arbitrator falls under termination of mandate which falls under the section 15(1)(a) of the Arbitration and Conciliation Act. Further as per section 15(2) a substitute arbitrator must be appointed in the same manner as the original arbitrator.
• The petitioner mentioned that neither did the presiding officer nor petitioner’s nominee vacate their office.
• Reconstitution of the fresh tribunal may lead to delay, expanse and other inconvenience to the petitioner.
• Section 11(6) attracts jurisdiction of the court for appointment of the substitute arbitrator without requiring parties to approach Supreme Court.
• Learned Senior Council for petitioner, in order to substantiate his submissions, relied on the judgment passed by the Apex Court in the case of National Highways Authority of India & Anr. vs. Bumhiway DDB Ltd. (JV) (2006) SCC 763 wherein Court observed that the resignation and death of an arbitrator mandates application of section 15(1) and 15(2) of the Arbitration Act.
• Likewise Learned Senior Council for petitioner also relied on the judgment passed by the Apex Court in Yash with Constructions (P) Ltd. vs. Simplex Concrete Piles India Ltd., (2006) 6 SCC 204.

II.II CONTENTIONS OF THE RESPONDENT:

• The Respondent contented that the present case relates to International Commercial Arbitration according to provisions of section 2(1)(f),11(6),11(11),11(2) ,14 and 15 of the Act.
• It was argued that Section 11 enables the Supreme Court to appoint arbitrator thus Delhi High Court cannot entertain the present petition.
• It was argued by the respondent that there was nothing in the agreement that would suggest that the term of the tribunal is interlinked or dependent upon clause 6.4 of the said agreement.
• It was further argued by the respondent that a new tribunal is to be reconstructed with Justice Anil Dev Singh (Retd.), as the nominee Arbitrator of the respondent.

III. RATIO DECIDENDI:

• Conjoint reading to the provisions under section 2(f) read with section 11(6) and section 11(12) makes it abundantly clear that the legislature has intentionally carved out a fine distinction between a matter relating to the “any other Arbitration” and “International Commercial Arbitration” when it comes to the process of the appointment of the arbitrator.
• Matters refer to subsection 4,5 and 6 of section 11(12) are arising in an international commercial arbitration.
• Reference to the term “Chief Justice” shall be construed as reference to Chief Justice of India under section 11(6).
• In case of ICA, Supreme Court will exercise power served vested under section 11(6) by virtue of section 11(12) sub clause (a) read with section 11(6).

“Where words of statutes are clear and unambiguous, the provision should be given its plain and normal meaning without adding or rejecting any words. Departure from literal rule, by guise of interpretation will pose a great risk as the changes may not be what the legislature intended or desired”.

IV. JUDGEMENT OF THE CASE:

• Arbitration clearly qualifies as an International Commercial Arbitration under section 2(1)(f).
• It was held that section 15(2) expressly requires that a substitute arbitrator be appointed according to same rules applicable to the original appointment.
• The court repudiated to cogitate on legislative intent and relied on the literal rule of interpretation.
• It was further held that the Delhi High Court lacked jurisdiction to entertain the petition and dismissed it as not maintainable.
• Accordingly, objections raised by the respondent are sustainable and accepted.

V. CONCLUSION:

The Judgement in M/S HDR CORPORATION vs. GAIL (INDIA) LTD, clearly emphasized Judicial Distinction by establishing uniform and trusted framework for resolving International Commercial disputes in more efficient way through Arbitration. The petition before Delhi High Court was dismissed. And it was observed that the appointment of substitute arbitrator can only be sought before Supreme Court of India.