Supreme Court rules that arbitration clause remains valid even when designated appointing authority becomes ineligible - Court can appoint neutral arbitrator under Section 11(6) to preserve parties' intent to arbitrate.
(i) WHETHER THE HIGH COURT POSSESSED THE JURISDICTION TO REVIEW OR RECALL ITS EARLIER ORDER PASSED UNDER SECTION 11(6) OF THE A&C ACT?
(ii) WHETHER A VALID AND SUBSISTING ARBITRATION AGREEMENT EXISTED BETWEEN THE PARTIES WITHIN THE MEANING OF SECTION 7 OF THE A&C ACT?
(iii) WHETHER THE JOINT APPLICATION FILED BY BOTH PARTIES, SEEKING EXTENSION OF THE ARBITRATOR'S MANDATE UNDER SECTION 29A CONSTITUTES AN EXPRESS OR IMPLIED WAIVER UNDER SECTION 12(5)?
(i) The High Court did not have the jurisdiction to reopen or review its earlier order passed under Section 11(6) of the A&C Act. Once the appointment was made, the court became functus officio and could not sit in judgment over the very issue it had already settled.
(ii) A valid and subsisting arbitration agreement exists between the parties. Clause 25, when read in its entirety and construed in accordance with the doctrine of severability, satisfies the statutory requirements of an arbitration clause under Section 7 of the Act.
(iii) The joint application for extension under Section 29A amounts to a valid waiver under Section 4 (for procedural matters) but note that for Section 12(5) ineligibility, an express written waiver is required. In this case, since no Seventh Schedule disqualification is attracted, the conduct of the parties, especially in jointly invoking Section 29A, constitutes waiver under Section 4.
Contract Awarded: BRPNNL awarded contract to HCC for construction of bridge over River Sone
Claims Raised: HCC raised claims for additional costs before Deputy Chief Engineer
First Arbitration: Patna High Court appointed Justice P.K. Sinha as sole arbitrator
Award Passed: Arbitrator passed award which was accepted and paid by respondents
Second Arbitration: High Court appointed Justice Shivaji Pandey as sole arbitrator
Arbitration Proceedings: Over 70 hearings conducted, multiple Section 29A extensions sought jointly
Review Filed: Respondents filed review petition after 3 years of participation
Supreme Court Ruling: "Arbitration clause survives despite ineligible appointing authority" - set aside High Court order
| Legal Provision | What It Means | Application in This Case |
|---|---|---|
| Section 11(6) Arbitration and Conciliation Act, 1996 |
Court's power to appoint arbitrator when agreed procedure fails | Court can appoint arbitrator when unilateral appointment mechanism becomes inoperative |
| Section 12(5) Arbitration Act |
Mandatory disqualification for certain relationships | Requires express written waiver for Seventh Schedule ineligibility |
| Section 4 Arbitration Act |
Waiver of right to object by participation | Joint applications for extension constitute waiver of procedural objections |
| Section 29A Arbitration Act |
Time limit for arbitral award and extensions | Joint extension applications show consent and confidence in tribunal |
Legal principle that allows invalid portions of a contract to be severed while preserving the valid remainder. Applied to arbitration clauses to separate invalid appointment mechanisms from the core agreement to arbitrate.
Latin term meaning "having performed one's office." Refers to a court or tribunal that has exhausted its authority over a matter and cannot revisit it.
Fundamental principle of arbitration that allows parties to design their dispute resolution process, subject to mandatory provisions of law and public policy.
Appointment mechanism where one party has exclusive power to appoint arbitrator, now largely invalidated as violating principles of neutrality and equality.
"The very existence of the arbitration clause in the GCC referring to all disputes to arbitrator is the core part of contract. Merely because the procedure to appoint an arbitrator provided in the clause has become inoperative due to subsequent changes in statutory provisions, would not mean that the core of the contract referring the dispute for adjudication to arbitrator would be rendered nugatory."
This judgment reinforces that arbitration agreements have independent existence from the appointment mechanism. Even when the designated appointing authority becomes ineligible or the appointment procedure fails, the core agreement to arbitrate survives, and courts can intervene under Section 11(6) to appoint a neutral arbitrator.
This content is for informational purposes only and does not constitute legal advice. Consult a qualified legal professional for specific legal guidance. The information provided is based on judicial interpretation and may be subject to changes in law.
Making Supreme Court judgments accessible and actionable for every Indian citizen navigating legal challenges.
This analysis decodes a complex arbitration judgment to help businesses and individuals understand their rights when facing invalid appointment mechanisms in arbitration clauses.