Second Application For Appointment Of Arbitrator Is Maintainable, Even Though No Liberty Has Been Granted By Court While Setting Aside The Award: Jharkhand High Court

The Single Bench of Justice Sujit Narayan Prasad held that if the second application filed by a party for appointment of an arbitrator afresh is held to be not maintainable then the dispute which is the subject matter of the contract between the parties, would remain undecided.

The petitioner, M/s Modern Construction Company, entered into an agreement with the State of Jharkhand for construction of a property. After a dispute arose between the parties relating to disbursement of amount, the petitioner filed an application under Section 11(6)(c) of the A&C Act before the Jharkhand High Court for appointment of an arbitrator, which was allowed. The Sole Arbitrator passed an award in favour of the petitioner. Against the award passed by the Sole Arbitrator, the State of Jharkhand filed an application under Section 34 of the A&C Act, which was dismissed by the Court. Against this order, the State of Jharkhand filed an appeal under Section 37 of the A&C Act before the Jharkhand High Court. The High Court set aside the arbitral award and the order of the lower court in the application filed under Section 34, on the ground that the mandate of Section 24 (1) of the A&C Act regarding oral hearings by the Arbitral Tribunal was not followed.

Against the order of the High Court, the petitioner filed a Special Leave Petition before the Supreme Court which was dismissed on the ground of delay and merits.

After the quashing and setting aside of the arbitral award, the petitioner filed an application under Section 11(6)(c) of the A&C Act before the Jharkhand High Court for appointment of arbitrator.

The respondent State of Jharkhand submitted before the High Court that since no liberty had been granted by the Court while passing the order under Section 37 of the A&C Act, appointment of an arbitrator afresh could not be made for resolution of the dispute.

The petitioner M/s Modern Construction Company submitted that since the dispute relating the agreement had not been resolved, therefore, the petitioner had made a request before the concerned competent authority of the State of Jharkhand for appointment of arbitrator. The petitioner averred that the State authority had refused to appoint an arbitrator since no such liberty had been granted by the High Court while passing the order under Section 37 of the A&C Act. Therefore, the petitioner filed an application before the High Court under Section 11(6) (c) for appointment of the arbitrator.

The High Court noted that the petitioner had filed a second application under Section 11(6) (c) of the A&C Act, since the dispute raised by the petitioner was not resolved due to the quashing and setting aside of the arbitral award.

The High Court ruled that there is no dispute about the position of law that a second application for appointment of an arbitrator is not maintainable in the absence of any leave by the competent court. However, the Court held that the position of law is settled that a man cannot be allowed to be remediless and if there is any dispute, the same is required to be decided. The Court added that the A&C Act has been enacted for resolution of dispute, depending upon the terms and conditions of the agreement.

The High Court noted that the order passed under Section 37 of the A&C Act had attained its finality by the Supreme Court. However, the Court added, the High Court while passing the order under Section 37 had noticed that the mandate as provided under Section 24(1) of the A&C Act regarding oral hearings by the Arbitral Tribunal had not been followed by the sole arbitrator. Thus, the High Court had set aside the arbitral award on the ground of failure to observe the principles of natural justice and on the ground of technicality.

The High Court thus noticed that the dispute between the parties remained unconclusive.

The Court ruled that the contentions advanced by the State of Jharkhand against the maintainability of a fresh application under Section 11(6)(c) of the A&C Act could not be sustained in law. The Court held that if the second application filed by the petitioner is held to be not maintainable then the dispute which is the subject matter of the contract between the parties, would remain undecided.

The High Court observed that as per the law laid down by the Supreme Court in the case of McDermott International Inc. versus Burn Standard Co. Ltd. & Ors. (2006), in a case where the dispute has not been resolved between the parties and the arbitral award has been quashed, it is open to the parties to raise the dispute again, since a dispute if not resolved cannot be allowed to remain unconclusive.

The High Court thus ruled that even though the arbitral award had been set aside and quashed by the Court in exercise of its powers under Section 37 of the A&C Act, which was also affirmed by the Supreme Court, but since the dispute between the parties remained unresolved, therefore, if an application is filed under Section 11(6)(c) of the A&C Act by the petitioner for appointment of an arbitrator afresh, the same cannot be held to be not maintainable.

The Court thus held that a fresh arbitrator was required to be appointed, so that the claims of the petitioner could be resolved. The Court thus allowed the application of the petitioner and appointed a sole arbitrator.

Case Title: M/s Modern Construction Company versus State of Jharkhand

Citation: 2022 LiveLaw (Jha) 44

Dated: 02.03.2022 (Jharkhand High Court)

Counsel for the Petitioner: Mr. Hemant Jain, Advocate

Counsel for the Respondent: Mr. Salona Mittal, Advocate

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