Section 11 of the Arbitration Act [“the Act”] confers power upon the High Court or the Supreme Court, as the case may be, to appoint arbitrator(s) on an application moved by the parties. Section 11(12)(a) & (b) clarifies that in cases pertaining to international arbitration, the arbitrator shall be appointed by the Supreme Court and in cases pertaining to other arbitrations i.e. domestic arbitration, the High Court shall appoint the arbitrator.
Section 11(2) stipulates that the parties are at liberty to devise their own procedure for appointing an arbitrator. However, if the parties fail to appoint an arbitrator as per the procedure agreed between them as per Section 11(2), then parties must take a recourse to Section 11(5), in which case the appointment shall be made by the High Court or the Supreme Court as the case may be upon a request of the party. Section 11(2) therefore, empowers party to refer the dispute to arbitration by a mutual consent and there need not be a contract between the parties containing the arbitration agreement to refer the dispute to arbitration. Section 11(6) on the other hand applies to a fact situation in which there is a contract containing an arbitration clause and the appointment procedure is agreed upon by the parties. If the parties fail to appoint an arbitrator or arbitrators as per the agreed procedure between the parties referred to in the arbitration agreement, then Section11(6) would be attracted, and appointment shall be made by the Supreme Court or the High Court as the case may be. Succinctly put, Section 11(5) will be attracted when parties have mutually referred the dispute to arbitration in the absence of a written contract. However, when there is a written contract between the parties containing an arbitration agreement and parties fail to appoint an arbitrator in accordance with the procedure laid down, then Section 11(6) would be attracted.
Case Law- Swadesh Kumar Agarwal vs Dinesh Kumar Agarwal & Ors.1(2022) 10 SCC 235
Facts
The parties, by a mutual consent, referred their dispute to the arbitration. The Respondent No. 1 to 3 filed application u/s 14 of the Act for termination of the mandate of the arbitrator on the ground of delay in concluding the arbitration proceedings. The Appellant sought rejection of the said application under Order 7 Rule 11 which was dismissed by the Trial Court. The Appellant impugned the order of dismissal in a Writ before the High Court. In the meanwhile, one of the Respondents filed an Application u/s 11(6) of the Act before the High Court for termination of the mandate of arbitrator notwithstanding the application filed u/s 14 of the Act remained pending before the Trial Court. The High Court not only dismissed the Writ filed by the Appellant challenging the order of dismissal of Application under Order VII Rule 11 but also allowed the Application filed by one of the Respondents u/s 11(6) and terminated the mandate of the arbitrator on the ground of unreasonable delay, thereby appointing a fresh arbitrator.
Whether Application u/s 11(6) is maintainable when parties appoint arbitrator by their mutual consent?
In Appeal, the Supreme Court observed that Section 11(5) would be attracted in case the parties appoint an arbitrator by their mutual consent and in absence of a written contract containing an arbitration agreement. However, when the parties appoint an arbitrator under an established procedure laid down in a written contract, then Section 11(6) would be attracted. In the above case, the sole arbitrator was appointed by the parties themselves by mutual consent and in absence of any written contract containing the arbitration agreement. Therefore, Application u/s 11(6) of the Act, in the absence of any written agreement containing an arbitration agreement would not be maintainable.
Whether the High Court u/s 11(6) can terminate the mandate of arbitrator and substitute the arbitrator in view of Section 14(1)(a) of the Act.
The Court referred to procedure laid down in Section 13 to 15 of the Act for challenging the appointment of arbitrator and his termination. Section 13 provides the procedure for challenging the arbitrator on the grounds mentioned in fifth schedule, in which case the Arbitral Tribunal itself will hear the challenge and decided upon it. Section 14 on the other hand stipulates termination of the mandate of the arbitrator on the grounds mentioned in the seventh schedule for which the parties must approach the court defined in Section 2(e) of the Act as per Section 14(2). For detailed functionality of Section 12,13 & 14 refer here. The court observed that since in the present case, the parties have appointed an arbitrator by their mutual consent, Section 11(6) becomes inapplicable and therefore application filed u/s 11(6) would not be maintainable at all. Insofar, termination is concerned, the Court observed that once the arbitrator has been appointed, the dispute regarding whether his mandate has been terminated on the grounds envisaged in Section 14(1)(a) cannot be decided u/s 11(6) and the aggrieved party has to approach the concerned “court” as per Section 14(2) of the Act.
Observing in the above terms, the Court set aside the order of the High Court allowing Section 11(6) application for termination of the mandate of the arbitrator and directed the district court to revive the applications filed by the Respondent u/s 14(2) which came be withdrawn by the Respondents pursuant to the decision of the High Court u/s 11(6) and directed the Court to decide the application filed u/s 14(2) on merits.
Conclusion
Power of High Court/Supreme Court u/s 11(5) and 11(6) are separate and distinct and applicable in different facts and circumstances. Section 11(5) can only be invoked by the parties for appointment of an arbitrator when there is no written contract containing an arbitration agreement and the parties have mutually agreed upon a procedure to appoint an arbitrator. If parties fail to appoint an arbitrator as per the mutually agreed procedure, then recourse to appointment of arbitrator can only be made u/s 11(5). On the other hand Section 11(6) can only be invoked when the dispute is covered by a written contract containing a procedure for appointment of an arbitrator and the parties fail to adhere to the same.
