- (1.) Leave granted. The appellant and respondent No. 1 entered into an agreement dated 23.10.1992 for a Technology Upgrade Project of the latter. The said agreement contained an arbitration clause. The same read: "20. In the event of any dispute or difference relating to the interpretation or application of any of the provision of this Agreement or as to the performance of any obligation by either party shall be settled by arbitration. Each party shall appoint an arbitrator and the arbitrators so appointed shall appoint an umpire to whom the matter on which the arbitrators disagree will be referred. The decision of the arbitrators and in the event of there being disagreement between the arbitrators, the decision of the umpire shall be final, conclusive and binding on the parties with respect to the matter referred to arbitration. The decision of the arbitrators or the umpire as the case may be shall constitute arbitrators award for the purpose of Indian Arbitration Act, 1940. The arbitration proceedings shall be conducted in accordance with the rules prescribed by the Indian Council of Arbitration."
(2.) Disputes arose between the parties. On 16.5.2002, respondent No. 1 issued a notice invoking the arbitration clause and calling upon the appellant to refer the dispute and differences to be settled through arbitration in terms of the arbitration agreement. Respondent No. 1 named an arbitrator with the suggestion that he may be accepted as the sole arbitrator. But, if the appellant was not willing to treat him as such, it was stated that the arbitrator named by respondent No. 1 may be treated as the one appointed by it in terms of the arbitration agreement and in that event, the appellant was called upon to name its arbitrator and the said two arbitrators can then appoint a Presiding arbitrator. The appellant replied stating that the parties have agreed to follow the Rules prescribed by the Indian Council of Arbitration by incorporating the said Rules by reference in the arbitration clause and since respondent No. 1 had not acted in terms of the said Rules, the appellant regretted its inability to accept the stand of respondent No. 1 or to appoint an arbitrator in terms of the arbitration agreement. The appellant regretted its inability to act on the basis of the notice issued by respondent No.1.
(3.) Respondent No. 1 thereupon moved the Chief Justice of the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996. Respondent No.1 contended that the appellant had failed to act in terms of the procedure for appointment of an arbitrator and hence the Chief Justice or his Judge designate, may appoint an arbitrator to act along with the arbitrator named by respondent No.1 and direct the two arbitrators to appoint the third, a Presiding Arbitrator, within the time fixed and to refer all disputes and differences between respondent No.1 and the appellant arising out of or in connection with the Technology Upgrade Agreement as per the provisions of the Act. The appellant resisted the application essentially pleading that the Rules of the Indian Council of Arbitration and the mandate thereof had not been complied with by the applicant before the Chief Justice and that the arbitration clause had not been properly invoked and there is no failure on the part of the appellant herein to act in accordance with the procedure accepted by the parties. No occasion had therefore arisen for the Chief Justice to appoint an arbitrator in terms of Section 11(6) of the Act. It is said that the appellant as directed by the court had named an arbitrator without prejudice to its contentions and it is common ground before us that the said two arbitrators have also named the Presiding Arbitrator and an Arbitral Tribunal had come into existence, but subject to the decision in this appeal filed by the appellant.;