This petition under Section 11 of the Arbitration & Conciliation Act of 1996 (the “A&C Act”) was submitted in an effort to have an arbitrator appointed to resolve disagreements with the respondent that were allegedly brought on by a Letter of Award regarding the creation of a township for the respondent’s Super Thermal Power Project. The parties’ execution of a Contract Agreement (the “contract”) followed the issuance of the Letter of Award.
Petitioner: It was argued that because section 12(5) of the A&C Act was retroactively added and governs the letter of award, clause 56 of the General Conditions of Contract (or “GCCs”) is unlawful and ineffective. As a result, since they have admittedly had disagreements about the letter of award and the contract, those disagreements must be submitted to an arbitrator who will be chosen by this court for arbitration.
Respondent: It was argued that it is extremely clear that only the GM, NTPC, or another person chosen by the CMD of NTPC can act as an arbitrator under clause 56 of the GCCs, which contains the arbitration agreement between the petitioner and the respondent. The arbitration clause becomes inoperative and impossible for the respondent to perform as a result of the addition of section 12(5) and the Supreme Court’s rulings in numerous cases making the GM or another appointee of the CMD, NTPC, ineligible to be appointed as an arbitrator, vitiating the arbitration agreement itself. Additionally, it argued that the claims were inherently time-barred. Additionally, both parties had to agree before arbitration could be mentioned.
In response, the petitioner argued that the Amendment Act-2015 would be applicable to the current proceedings because the notice of arbitration was filed on September 29, 2020, which was much after the date the amendment took effect on October 23, 2015.
Comments of the Court
The Bench inferred that the respondent does not contest the existence of the arbitration agreement between the parties, other than to assert that because the arbitration clause contained a specific procedure for the appointment of an arbitrator, which procedure has since been rendered illegal and unenforceable, the entire arbitration agreement also expires with it.
Based on T.K. Engineering Consortium Pvt Ltd vs. Director (Project) Rites Ltd & Anr., ARSS Infrastructure Pvt Ltd vs. Ircon International Ltd. & Anr., and NIIT Technologies Ltd vs. Directorate General, Border Security Force, it claimed that the appointment of an arbitrator procedure had been rendered invalid or unenforceable as a result of the A&C Act’s amendment, the addition of section 12(5), and subsequent Supreme.
It further stated that in order to fully describe the arbitral process and to make the arbitration agreement more thorough, a “arbitration agreement” may describe and incorporate a number of other elements related to arbitration. These features are separate and distinct from the arbitration agreement’s basic terms, even though they are included in the same arbitration clause:
Even though they are both mentioned in the same arbitration clause, the process for choosing an arbitrator is obviously separate and apart from the agreement to refer issues to arbitration. Therefore, the procedure for appointment of the arbitrator at the hands of one of the parties becoming legally invalid, void, and unenforceable does not imply that the core agreement between the parties to refer their inter-se disputes to arbitration itself perishes. Rather, it only means that the law has been amended, re-stated, or reinterpreted, as it has in the present case.
As a result, it stated that the parties had a legitimate and active arbitration agreement, even though the process for choosing the arbitrator by the CMD of NTPC was no longer in effect and needed to be separated from the remaining arbitration clause.
Regarding the assertion that the claims were limited by time, it was noted that this court would nevertheless appoint an arbitrator notwithstanding the time-barring allegation, leaving it up to the arbitrator to resolve the question of limitation as it may be raised as a mixed question of fact and law.
The Bench nominated the learned Sole Arbitrator to decide the disagreements between the parties as Hon. Mr. Justice Aftab Alam, a former Supreme Court of India judge. The parties were instructed to speak with the appointed knowledgeable arbitrator within 10 days