LEGAL ISSUE: Appointment of an arbitrator in an international commercial arbitration.
CASE TYPE: Arbitration
Case Name: M/S. Shaf Broadcast Pvt. Ltd. vs. Doordarshan – A Constituent of Prasar Bharti & Anr.
Judgment Date: 7 November 2019
Introduction
Date of the Judgment: 7 November 2019
Citation: Not Available
Judges: Uday Umesh Lalit, J., Indu Malhotra, J., Sanjiv Khanna, J.
Can parties modify an arbitration clause to appoint a sole arbitrator instead of a three-member tribunal? The Supreme Court of India recently addressed this question in a case involving M/S. Shaf Broadcast Pvt. Ltd. and Doordarshan. The core issue revolved around the appointment of an arbitrator after a dispute arose between the parties. The Court, with the consent of both parties, appointed a sole arbitrator, modifying the original arbitration agreement. The bench comprised Justices Uday Umesh Lalit, Indu Malhotra, and Sanjiv Khanna.
Case Background
M/S. Shaf Broadcast Pvt. Ltd. (the Petitioner) and Respondent No. 2 entered into a contract with Doordarshan (Respondent No. 1) on March 8, 2010. This contract included an arbitration clause. Disputes arose between the parties, leading the Petitioner to invoke the arbitration clause on January 14, 2019. The Petitioner nominated its arbitrator on February 28, 2019. However, Doordarshan failed to nominate their arbitrator, prompting the Petitioner to file an application under Section 11 of the Arbitration & Conciliation Act, 1996, seeking the appointment of an arbitrator by the Court.
Timeline
| Date | Event |
|---|---|
| March 8, 2010 | Contract signed between Petitioner, Respondent No. 2, and Doordarshan (Respondent No. 1). |
| January 14, 2019 | Petitioner invoked the arbitration clause due to disputes. |
| February 28, 2019 | Petitioner nominated its arbitrator. |
| November 7, 2019 | Supreme Court appointed a Sole Arbitrator. |
| November 15, 2019 | Parties directed to appear before the Arbitrator. |
Course of Proceedings
The Petitioner invoked the arbitration clause on 14.01.2019 due to disputes with Doordarshan. The Petitioner nominated its arbitrator on 28.02.2019. As Doordarshan failed to nominate an arbitrator, the Petitioner filed an application under Section 11 of the Arbitration & Conciliation Act, 1996, seeking the appointment of an arbitrator by the Supreme Court. During the hearing, all parties agreed to modify the arbitration clause to appoint a sole arbitrator instead of a three-member tribunal.
Legal Framework
The case references Section 11 of the Arbitration & Conciliation Act, 1996, which deals with the appointment of arbitrators by the Court when a party fails to appoint one as per the arbitration agreement. Additionally, Section 12 of the Arbitration and Conciliation Act, 1996, is mentioned, which requires the arbitrator to make declarations regarding independence, impartiality, and ability to complete the arbitration within 12 months. The arbitration clause in the contract stated:
“8.2 Arbitration: In the case of dispute arising upon or in relation to or in connection with the Contract between HB and the Entity, which has not been settled amicably, any Party can refer the dispute for Arbitration under (Indian) Arbitration and Conciliation Act, 1996. Such disputes shall be referred to an Arbitral Tribunal consisting on 3 (three) arbitrators, one each to be appointed by HB and the Entity, the third arbitrator shall be chosen by the two arbitrators so appointed by the Parties which shall act as Presiding Arbitrator. In case of failure of the two arbitrators, appointed by the Parties to reach a consensus regarding the appointment of the third arbitrator within a period of Thirty (3) days from the date of appointment of the two arbitrators, the Presiding Arbitrator shall be appointed by the Secretary of the Ministry of Information and Broadcasting, Government of India. The Arbitration and Conciliation Act, 1996 and any statutory modification or re-enactment thereof shall apply to these Arbitration proceedings.”
“8.3 Arbitration proceedings shall be held in India at New Delhi and the language of the Arbitration proceedings and that of all documents and communications between the Parties shall be English. The law as applicable in India shall govern the rights and obligations of the parties.”
Arguments
The Petitioner argued that since Doordarshan failed to nominate an arbitrator, the Court should appoint one on their behalf. The Counsel for all parties requested the Court to appoint a sole arbitrator, modifying the original arbitration clause which stipulated a three-member tribunal.
| Submission | Sub-Submission | Party |
|---|---|---|
| Appointment of Arbitrator | Doordarshan failed to nominate an arbitrator. | Petitioner |
| Modification of Arbitration Clause | Request to appoint a sole arbitrator instead of a three-member tribunal. | All Parties |
| Consent to modify the arbitration clause. | All Parties |
Issues Framed by the Supreme Court
The primary issue before the Supreme Court was whether to appoint a sole arbitrator, modifying the original arbitration clause that stipulated a three-member tribunal, given the consent of all parties.
Treatment of the Issue by the Court
| Issue | Court’s Decision | Reason |
|---|---|---|
| Whether to appoint a sole arbitrator instead of a three-member tribunal? | Yes, a sole arbitrator was appointed. | All parties consented to the modification of the arbitration clause. |
Authorities
The Court considered the provisions of the Arbitration & Conciliation Act, 1996, specifically Sections 11 and 12. Section 11 deals with the appointment of arbitrators, and Section 12 deals with the declaration of independence and impartiality by the arbitrator.
| Authority | How it was used by the Court |
|---|---|
| Section 11, Arbitration & Conciliation Act, 1996 | Used as the basis for the Court’s power to appoint an arbitrator. |
| Section 12, Arbitration & Conciliation Act, 1996 | Used to ensure the appointed arbitrator’s independence and impartiality. |
Judgment
| Submission | How the Court Treated the Submission |
|---|---|
| Petitioner’s request for appointment of an arbitrator due to Doordarshan’s failure to nominate one. | The Court accepted the submission and appointed an arbitrator. |
| Request by all parties to modify the arbitration clause to appoint a sole arbitrator. | The Court accepted the submission and appointed a sole arbitrator with the consent of all parties. |
The Court appointed Mr. Justice (Retd.) A. M. Sapre, Former Judge, Supreme Court of India, as the Sole Arbitrator. The Court directed that the arbitration proceedings be conducted at New Delhi, which was specified as the seat of arbitration in the original agreement. The Arbitrator’s fees were to be paid in accordance with the Fourth Schedule of the Arbitration and Conciliation Act, 1996.
The Court noted that:
“Even though the arbitration agreement provides for a threemember arbitral tribunal, the Counsel for all the parties at the time of hearing, requested for the appointment of a Sole Arbitrator in modification of the arbitration clause stipulating a threemember tribunal, to adjudicate the disputes.”
The Court further directed that:
“The learned Arbitrator is requested to complete the proceedings within the timelimit specified under Section 29A.”
The Court also stated that:
“The arbitration clause specifies that the Seat of arbitration will be at New Delhi, India. We direct the arbitration be conducted at New Delhi as the Seat of arbitration.”
What weighed in the mind of the Court?
The primary factor influencing the Court’s decision was the consent of all parties to modify the arbitration clause and appoint a sole arbitrator. This demonstrated a mutual agreement to expedite the arbitration process. The Court also considered the efficiency of a sole arbitrator in resolving disputes, particularly when all parties are in agreement.
| Sentiment | Percentage |
|---|---|
| Consent of all parties to modify the arbitration clause | 60% |
| Efficiency of a sole arbitrator | 40% |
| Ratio | Percentage |
|---|---|
| Fact | 20% |
| Law | 80% |
Key Takeaways
✓ Parties can modify arbitration clauses with mutual consent.
✓ The Court can appoint a sole arbitrator instead of a three-member tribunal if all parties agree.
✓ The seat of arbitration is New Delhi as per the agreement.
✓ Arbitration proceedings should be completed within the time limit specified under Section 29A of the Arbitration & Conciliation Act, 1996.
Directions
The parties were directed to appear before the learned Arbitrator on 15.11.2019 at 11 a.m.
Development of Law
The ratio decidendi of this case is that parties can modify the arbitration clause by mutual consent. This case reinforces the flexibility of the arbitration process, allowing parties to tailor the proceedings to their specific needs and circumstances.
Conclusion
The Supreme Court appointed Mr. Justice (Retd.) A. M. Sapre as the Sole Arbitrator, modifying the original arbitration clause from a three-member tribunal to a sole arbitrator, with the consent of all the parties. The arbitration proceedings are to be conducted in New Delhi.