The Delhi High Court has affirmed that courts possess the authority to appoint a sole arbitrator even if the arbitration clause provides for a three-member tribunal.
Background
Twenty-Four Secure Services Pvt Ltd (TFFS) and Competent Automobiles Company Ltd (Competent Automobiles) entered into a Services Agreement in November 2020. This was terminated by Competent Automobiles in December 2022 with the assurance that all pending payments till 31 December 2022 would be paid to TFFS.
Clause 7 of the agreement was the arbitration clause, and it envisaged a sole arbitrator unless there was disagreement over the identity of a sole arbitrator, in which case three arbitrators would be appointed, one each by the parties, and the two nominees would then appoint the third arbitrator.
Disputes arose between the parties and TFFS invoked arbitration on 3 June 2023. Competent Automobiles denied the existence of any disputes, but nominated its arbitrator. TFFS then suggested that the two party nominated arbitrators should appoint a third/presiding arbitrator. Competent Automobiles failed to respond to this request, so TFFS made an application under §11(6) of the Arbitration and Conciliation Act, 1996 for the Court to appoint a presiding arbitrator.
Arguments
Competent Automobiles contested the petition on the grounds that: (i) it was against the procedure laid down in the arbitration clause, which stipulated that each party was required to nominate its arbitrator and the two nominated arbitrators would then appoint the presiding arbitrator, and (ii) it was premature as it could only have been invoked when either of the parties failed to nominate an arbitrator, or when the two nominated arbitrators failed to appoint the third arbitrator.
TFFS contended that since the nominees failed to appoint the presiding arbitrator, the Court ought to appoint the presiding arbitrator.
Court's Reasoning and Decision
The Court relied on the Supreme Court's decision in Union of India v Singh Builders Syndicate 2, wherein the Court held that it had the power to appoint a sole arbitrator despite the clause in that case providing for a three member tribunal, and proceeded to appoint a sole arbitrator.
Conclusion
The Court before which a petition for appointment of arbitrator lies is vested with the power to appoint a sole arbitrator even if the arbitration clause contemplates a three-member Tribunal.
Footnotes
1 Decision dated 22 May 2024 passed by the Delhi High Court in Arbitration Petition 24 of 2024
2 (2009) 4 SCC 523
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