| The Appellant and Respondent 1 were
parties to a lease agreement. When the Appellant defaulted
in making payments, Respondent 1, the lessor, sent a notice
to the Appellant, the lessee, invoking arbitration clause
of the lease agreement. Respondent 1 appointed Respondent
2 as the Arbitrator in terms of the arbitration clause of
the lease agreement which stated that the disputes would be
“referred to an Arbitrator to be nominated by the lessor”
and that the award by such an Arbitrator was to be “final
and binding”. The Appellant contended, inter alia, that
Respondent 1 had no authority to appoint the Arbitrator after
the lapse of notice period of 30 days and they should have
obtained the consent of the Appellant before appointing the
Arbitrator.
The Supreme Court dismissed the application on merits and
held that as far as Section 11(6) of the said Act of 1996
is concerned, if one party demands the opposite party to appoint
an Arbitrator and the opposite party does not make an appointment
within 30 days of the demand the right to appointment does
not get automatically forfeited after expiry of 30 days. If
the opposite party makes an appointment even after 30 days
of the demand, but before the first party has moved the court
under Section 11 of the Act of 1996, that would be sufficient.
Only then the right of the opposite party ceases.
In the present case the Respondent made the appointment of
the Arbitrator before the Appellant filed the application
under Section 11(6) though it was beyond 30 days from the
date of demand. Appointment of Arbitrator by the Respondent
is valid and it cannot be said that the right was forfeited
after expiry of 30 days from the date of demand.
Since the Appellant did not dispute the arbitration clause,
it is bound by it and obliged to comply with the procedure
laid down under the said clause. Therefore, the Supreme Court
held that it cannot be said that Respondent 1, in appointing
Respondent 2 as Arbitrator, failed to follow the procedure
contemplated under the agreement or acted in contravention
of the arbitration clause. Nomination virtually amounts to
appointment for a specific purpose. Since the concurrence
or ratification by the Appellant is not stated in the arbitration
clause, the nomination by the Respondent amounts to selection
of the Arbitrator.
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