Karnataka High Court: While passing the order in a petition filed under S. 11(5) of the Arbitration and Conciliation Act, 1996 praying to appoint an Arbitral Tribunal, a Single Judge Bench of A.S. Bopanna, J. held that since the process of constitution of Arbitral Tribunal as decided by the parties became unworkable, the Court was empowered to act under S. 11(6) of the Act to constitute the Tribunal.
The petitioner and the respondent entered into a trade agreement which provided for an arbitration clause where under it was agreed that in case of a dispute, the parties will resolve it through arbitration. The clause provided that from the panel of 5 arbitrators enlisted by the respondent, both the parties are to chose 1 arbitrator each who will further choose the third arbitrator. But in the facts of the situation, three out of five arbitrators on the enlisted panel declined to act as an arbitrator. In such circumstances, the petitioner claimed that the arbitration clause became unworkable and this petition was filed.
The respondent opposed the petition contending that the Tribunal had to be re-constituted by the respondent themselves in terms of the general conditions of the contract and the instant petition filed under S. 11 of the Act was not maintainable.
The Court was faced with the question that whether in the facts of the present case, it should decline to entertain the petition and permit the constitution of the Tribunal only from the panel of Arbitrators as re-constituted by the respondent.
The Court perused the arbitration clause and held that it did not provide for the contingency where 3 out of 5 Arbitrators on the panel decline to act. In such a situation the constitution of the Arbitral Tribunal under the contract failed but the arbitration clause subsisted. The situation was such that the parties concerned had to approach the Court by invoking S. 11(5) of the Act and the Court was empowered to constitute an Arbitral Tribunal under S. 11(6) of the Act. Accordingly, the Court appointed three members to constitute the Arbitral Tribunal as prayed for by the petitioner. [JMC Projects (India) Ltd. v. Bangalore Metro Rail Corporation Ltd., C.M.P. No. 97/2016, decided on 06.09.2017]