India: Arbitration – Appointment Of Arbitrator

Civil Appeal No. 2673 of 2013 (Arising out of SLP(C) No. 24686 of 2007)

Bench of Hon'ble S.C. comprising R.M. Lodha, J. Chelameswar and Madan B. Lokur, JJ.

The Hon'ble Apex Court vide its Judgment dated 22.03.2013 in the matter titled as "Deep Trading Company Vs. Indian Oil Corporation and Others" has held that right to appointment of Arbitrator is forfeited if the same is not exercised in accordance with the procedure agreed upon by the parties.

The questions, which were considered and decided by Hon'ble Supreme Court in present appeal by special leave are:

a. whether respondent No. 1 has forfeited its right to appoint the arbitrator having not done so after the demand was made and till the appellant had moved the court under Section 11(6) (a) of Arbitration & Conciliation Act 1996 and,

b. if the answer is in the affirmative, whether the appointment of the arbitrator by respondent No. 1 in the course of the proceedings under Section 11(6) is of any legal consequence and

c. The Chief Justice of the High Court ought to have exercised the jurisdiction and appointed an arbitrator?

The brief facts, which lead the filing of subject SLP are as under:

On 01.11.1998, an agreement for kerosene/LDO dealership was entered into between the first respondent – Indian Oil Corporation (for short, "the Corporation") and the appellant – Deep Trading Company (for short, "the dealer") for the retail sales supply of kerosene and light diesel oil. In the course of dealership agreement allegedly some violations were committed by the dealer. Following the show-cause notice dated 04.03.2004; the Corporation on 12.03.2004 suspended the sales and supplies of all the products to the dealer with immediate effect. Aggrieved by the action of the Corporation, the dealer filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, "1996 Act") before the District Judge, Etawah seeking an order of injunction against the Corporation from stopping the supply of Kerosene/LDO. On 25.03.2004, the District Judge, Etawah passed a restraint order against the Corporation. The Corporation challenged the order of the District Judge before the Allahabad High Court however the Allahabad High Court refused to grant any interim relief to the Corporation. On 09.08.2004, the dealer made a demand to the Corporation by a written notice to refer the disputes between the parties to the arbitrator under the terms of the agreement. In the demand notice, it was also stated by the dealer that if the Corporation fails to appoint the arbitrator, the dealer may be constrained to approach the court under Section 11 of the 1996 Act. The Corporation challenged the order of the Allahabad High Court in the special leave petition before this Court but that was dismissed on 06.12.2004. On or about 06.12.2004, the dealer moved the Chief Justice of the Allahabad High Court under Section 11(6) for the appointment of an arbitrator as the Corporation had failed to act under the agreement. While the said proceedings were pending, on 28.12.2004, the Corporation appointed Shri B. Parihar, Senior Manager, (LPG Engineering) of its U.P. State Office as the sole arbitrator.

The Allahabad High Court found no reason to appoint the arbitrator, as sought by the dealer, since the arbitrator had already been appointed by the Corporation and vide Order dated.12.2007 dismissed the application of dealer filed under Section 11(6). The Hon'ble Apex Court has duly considered clause 29 of agreement dated 01.11.1998 agreed upon by the parties along with relevant provisions of Statute and precedents. Clause 29 of agreement between the parties reads as under:

"29. Any dispute or difference of any nature whatsoever or regarding any right, liability, act, omission on account of any of the parties here to arising out or in relation to this Agreement shall be referred to the sole arbitration of the Director (Marketing) of the Corporation, or of some Officer of the Corporation who may be nominated by the Director (Marketing). It is known to the parties to the Agreement that the arbitrator so appointed is a share holder and employee of the Corporation. In the event of the arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, the Director (Marketing) as aforesaid at the time of such transfer, vacation of office or inability to act, shall designate another person to act as arbitrator in accordance with the terms of the Agreement. Such person shall be entitled toproceed with the reference from the point at which it was left by his predecessor. It is also a term of this contract that no person other than the Director (Marketing) or a person nominated by such Director (Marketing) of the Corporation as aforesaid shall act as arbitrator hereunder. The award of the arbitrator so appointed shall be final conclusive and binding on all parties, to the Agreement, subject to the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification of or reenactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause. The award shall be made in writing within six months after entering upon the reference or within such extended time not exceeding further four months as the sole arbitrator shall by writing under his own hands appoint." Sub-sections (1), (2), (6) and (8) of Section 11 of Arbitration and Conciliation Act 1996 are relevant and reads as under:

"11. Appointment of arbitrators.—1 A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

2 Subject to sub-section 6, the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.

3 to 5 xxx xxx xxx

6 Where, under an appointment procedure agreed upon by the parties,-

a. a party fails to act as required under that procedure; or

b. the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

c. a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

7 xxx xxx xxx

8 The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to-

a. any qualifications required of the arbitrator by the agreement of the parties; and

b. other considerations as are likely to secure the appointment of an independent and impartial arbitrator.

9 to 12 xxx xxx xxx".

The three basic facts are not in dispute, namely, (i) on 09.08.2004, the dealer called upon the Corporation by a written notice to appoint an arbitrator in accordance with the terms of Clause 29 of the agreement; (ii) the dealer made an application under Section 11(6) for appointment of the arbitrator on 06.12.2004; and (iii) the Corporation appointed the sole arbitrator on 28.12.2004 after the application under Section 11(6) was already made by the dealer.

The Hon'ble Court amongst the various judgments placed before it has relied and agreed upon with legal position settled by Hon'ble Supreme Court in matter of "Datar Switchgears Ltd. v. Tata Finance Ltd. and Another: [(2000) 8 SCC 151]", wherein this Court considered the scheme of Section 11, noted the distinguishing features between Section 11(5) and Section 11(6) and then considered the question whether in a case falling under Section 11(6), the opposite party cannot appoint an arbitrator after the expiry of thirty days from the date of demand. This Court held that in cases arising under Section 11(6), if the opposite party has not made an appointment within thirty days of the demand, the right to make appointment is not forfeited but continues, but such an appointment has to be made before the first party makes application under Section 11 seeking appointment of an arbitrator. If no appointment has been made by the opposite party till application under Section 11(6) has been made, the right of the opposite party to make appointment ceases and is forfeited.

Hon'ble Supreme Court has accordingly held that the Corporation has failed to act as required under the procedure agreed upon by the parties in Clause 29 and despite the demand by the dealer to appoint the arbitrator; the Corporation did not make appointment until the application was made under Section 11(6). Thus, the Corporation has forfeited its right of appointment of an arbitrator. In this view of the matter, the Chief Justice ought to have exercised his jurisdiction under Section 11(6) in the matter for appointment of an arbitrator appropriately. The appointment of the arbitrator by the Corporation during the pendency of proceedings under Section 11(6) was of no consequence. Civil Appeal has been accordingly, allowed and Arbitration Case No. 107 of 2004, M/s. Deep Trading Company v. M/s. Indian Oil Corporation and others, is restored to the file of the High Court of Judicature at Allahabad for fresh consideration by the Chief Justice or the designate Judge, as the case may be, in accordance with law and in light of the observations made above.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions