Court : The Supreme Court of India
Brief : EXHAUSTION OF REMEDIES PER AGREEMENTS - A PRE CONDITION TO
APPROACHING THE COURT
The Supreme Court of India (“Court”) on August 18, 2008 in Northern Railway Administration,
Ministry of Railway, New Delhi Vs. Patel Engineering Company Ltd determined the scope of
Section 11(6) of Arbitration and Conciliation Act, 1996 (“Act”) vis-à-vis the autonomy of procedure of
appointment of arbitrator as agreed between the parties.
Scheme Under Section 11 Of The Act
Section 11 of the Act deals with the procedure for appointment of arbitrator(s). The section provides
for situation where the parties fail to abide by the procedure of arbitration as agreed by them or in
case there is no procedure of arbitration agreed. The relevant clauses under section 11 of the Act are
as follows:
= Clause 2: The parties are free to agree on a procedure for appointing a arbitrator or
arbitrators, subject to Section 11(6)
= Clauses (3): to (5): Procedure for appointment of arbitrator or arbitrators where there is no
agreed procedure between the parties.
o Clause 3: In arbitration with 3 arbitrators each party shall appoint one arbitrator
and the two appointed arbitrator shall appoint a presiding arbitrator.
o Clause 4: In the event of default under clause 3 the party can request the Chief
justice or any person designated by him for appointment of arbitrator or
arbitrators
o Clause 5: In the event of a sole arbitrator, the parties shall agree on an arbitrator.
failing any agreement, a party can approach the Chief justice or any person
designated by him for appointment of arbitrator
= Clause (6): Right of Chief Justice of India or any person so designated to take necessary
measures to appoint arbitrator or arbitrators, unless the agreement provides for the
procedure, namely when.
o a party fails to act as required under agreed procedure in the Agreement.
o the parties or the two appointed arbitrators by the parties fail to reach an
agreement expected of them under that procedure
o a person including an institution fails to perform any function entrusted to him or it
under the procedure.
= Clause 8: Secure the appointment of an independent and impartial arbitrator or arbitrators
Citation : Northern Railway Administration,
Ministry of Railway, New Delhi Vs. Patel Engineering Company Ltd, August 18, 2008
FACTS OF THE CASE
The present case has been brought before a larger bench of the Court since there are two differing
views taken by the Court in its earlier decisions in Ace Pipeline Contracts (P) Ltd. v. Bharat
Petroleum Corporation Ltd and Union of India v. Bharat Battery Mfg. Co. (P) Ltd. The common
questions in the above two cases relates to appointment of arbitrator under Section 11(6) of the Act
where the parties have agreed to a procedure under an agreement. The present judgment seeks to
clarify the conflicting judgments and to detail the scope and ambit of Section 11(6) of the Act relating
to appointment of an arbitrator
SUBMISSIONS
The Counsel appearing for the parties who have opposed the appointment of Arbitrator contended
that:
= The procedure agreed between the parties in the agreement has to be exhausted. The
agreement has to be given effect and adhered to as closely as possible.
= While appointing an Arbitrator under clause (8) of Section 11, the Court has to give due
regard to any qualification required for the Arbitrator by the agreement of the parties and
other considerations as are likely to secure the appointment of an independent and
impartial arbitrator.
The counsel appearing for the parties who have sought for appointment of Arbitrator submitted that
= the expression “due regard” in clause 8 relates to some of the factors which have to be
considered and it is not mandatory that the qualifications and the considerations as
referred to in Clause (8) of Section 11 have to be applied.
JUDGMENT
The Court has held that:
= The scheme under Section 11 shows that the emphasis is on the terms of the agreement
being adhered to and/or given effect as closely as possible. The court must first ensure
that the remedies provided for are exhausted.
= Due regard has to be given to the qualifications required by the agreement and other
considerations.
= It is not a requirement that the appointment of the arbitrator or arbitrators named in the
arbitration agreement be appointed, but while making the appointment the twin
requirements of Sub-section (8) of Section 11 have to be kept in view, considered and
taken into account.
