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NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

ARBITRATION CASE (CIVIL) NO.27 OF 2015

HUAWEI TECHNOLOGIES CO. LTD.             ...PETITIONER

VERSUS

STERLITE TECHNOLOGIES LTD.                 ...RESPONDENT

J U D G M E N T

1. This  application  under  Section  11(6)  of  the

Arbitration and Conciliation Act, 1996 (hereinafter referred to

as  “the  Act”)  has  been  filed  seeking  appointment  of  a  Sole

Arbitrator  in  terms  of  clause  22.3  of  the  Supply  Contract

between the  parties  which  was  entered  into  in  the  following

circumstances:

In  March  2006,  MTNL issued  a  tender  for  supply,

installation,  testing,  commissioning  of  Broadband  Access

Network.  Both the petitioner and the respondent together bid

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against the tender floated and the respondent acted as the lead

bidder.  The contract was awarded in favour of the respondent

by the MTNL.  On 9th April,  2007, the parties entered into a

Supply  Contract  for  the  aforesaid  project.  According  to  the

petitioner,  though  it  had  complied  with  all  the  terms  and

conditions  of  the  said  supply  contract  and  had

shipped/delivered all equipments on time, the respondent had

failed to make full payment of the amounts due and an amount

quantified  at  USD  13,390,000  is  due  and  payable.   The

petitioner sent a legal notice dated 28th November, 2014 calling

upon the respondent to make payment of the outstanding dues

along with interest thereon within seven days failing which it

was stated in the notice that the petitioner would be invoking

clause 22 of the Supply Contract which provided for arbitration

and will proceed to appoint Mr. Justice S.K. Dubey, a former

judge  of  the  High  Court  of  Madhya  Pradesh  as  the  sole

Arbitrator.

As no response was received to the aforesaid notice,

the petitioner by letter  dated 29th December,  2014 appointed

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Shri  Justice  S.K.  Dubey  which  appointment  was  accepted.

Thereafter the respondent raised a dispute with regard to the

reference to the arbitration and rejected the appointment of Shri

Justice S.K. Dubey as the sole Arbitrator.   

In these facts the learned sole Arbitrator Shri Justice

S.K. Dubey by order dated 21st January, 2015 recused himself

from the proceedings.  It is in the aforesaid circumstances that

the  present  application/arbitration  petition  has  been  filed

under  Section  11(6)  of  the  Act  for  appointment  of  a  sole

Arbitrator.  

 2. A counter  affidavit  has  been filed  on behalf  of  the

respondent  wherein it  has  been,  inter  alia,  stated that  upon

appointment of Shri Justice S.K. Dubey as the sole Arbitrator

the notice invoking the arbitration clause had spent its force;

Shri  Justice  S.K.  Dubey  having  recused  himself  from  the

proceedings the fresh appointment of a learned sole Arbitrator

has to be made by, once again, resorting to the provisions of

clause  22  of  the  Supply  Contract  and  by  following  the

procedure  prescribed  therein.   Certain  other  objections  have

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also been raised on the merits of the dispute contending that

the petitioner had not fulfilled its obligations under the Supply

Contract so as to be entitled to the amounts as claimed.  

3. The  Court  has  heard  the  learned  counsels  for  the

parties.

4. Under Section 15(2) of the Act in a situation where

the mandate of an arbitrator terminates, a substitute arbitrator

is  required to be appointed  according to  the  rules that  were

applicable to the appointment of the arbitrator who is replaced.

In Yashwith Constructions (P) Ltd. Versus Simplex concrete Piles

India  Ltd.  and  another  [(2006)  6  SCC  204],  the  term  'rules'

appearing in Section 15(2) of the Act has been understood to be

referring  to  the  provisions  for  appointment  contained  in  the

arbitration  agreement  or  any  rules  of  any  institution  under

which the  disputes  are  to  be  referred to  arbitration.   In  the

present case, admittedly, there are no institutional rules under

which the disputes between the parties are  to be referred to

arbitration and, therefore, the expression “rules” appearing in

Section  15(2)  of  the  Act  will  have  to  be  understood  with

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reference  to  the  provisions  for  appointment  contained  in  the

Supply Contract.  

5. Clause 22.3 of the Supply Contract which deals with

the matter may be extracted at this stage:

“22.3  All  disputes,  controversies  or  claims arising out of or in connection with or in relation to this  Contract  of  its  negotiation,  performance, breach, existence or validity, whether contractual or tortuous,  shall  be  referred  to  arbitration  in accordance  with  the  Indian  Conciliation  and Arbitration  Act,  1996  and  conducted  by  a  single arbitrator to be appointed by the Parties by mutual consent.  The cost of arbitration shall be shared by the Parties.   The place of  the arbitration shall  be India  and  the  applicable  law  in  relation  to  the procedure of the arbitration shall be determined by reference to the law of the place of the arbitration is to  be  held.  The  arbitration  proceedings  shall  be conducted in English language.  The award of  the arbitration shall  be  final  and  binding  against  the Parties hereto.”

6. Clause  22.3  of  the  Supply  Contract  contemplates

appointment  of  a  sole  arbitrator  by  the  parties  by  mutual

consent.  In a situation where the original  arbitrator  i.e.  Shri

Justice S.K. Dubey had recused himself the substitute or new

arbitrator is required to be appointed according to the rules that

were applicable to the appointment of  the original  arbitrator.

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This  is  the  mandate  of  Section  15(2)  of  the  Act.   It  was,

therefore, incumbent on the petitioner to give notice and explore

the possibility of naming an arbitrator by mutual consent and

only  on failure thereof  the  present  application under  Section

11(6)  of  the  Act  could/should  have  been  filed.   The  above

recourse is required to be followed by virtue of the provisions of

Section  15(2)  of  the  Act  and  the  decision  of  this  Court  in

Yashwith Constructions (P) Ltd.  (supra).  Admittedly, the same

had not been followed.  In these circumstances, the Court will

understand the  present  application/arbitration petition  to  be

premature.  It is accordingly not entertained leaving it open for

the petitioner to act appropriately, if so advised, in terms of the

present order and thereafter seek its remedies as provided by

law.   

7. The Arbitration Petition is disposed of in the above

terms.  

……………………...............,J.                       (RANJAN GOGOI)

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NEW DELHI SEPTEMBER 04, 2015