Neither of the party to an arbitration agreement can unilaterally change its terms and conditions for its own advantage

An arbitration agreement is an independent agreement and is binding on both the parties and neither of the parties can unilaterally change the terms and conditions of any agreement.

A petition was filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (Act) for the relief that the appointment of nominee Arbitrator appointed by the Petitioner, be upheld. Another relief sought was that since the Respondent has already nominated his Arbitrator pursuant to the arbitration clause and the Petitioner has also appointed his nominee Arbitrator and since both the nominated arbitrators have failed to reach the consensus to appoint a Presiding Arbitrator, the Court should appoint a Presiding Arbitrator besides quashing of Respondent’s notice appointing his nominated Arbitrator as a sole Arbitrator.

It was the arguments on behalf of Petitioner that the right of a party to appoint an Arbitrator does not automatically cease, but continues till the application under section 11(6) of the Act is made and therefore in view of the facts of present it could not be said that the Petitioner had since nominated its Arbitrator after 60 days, his nomination is invalid. Respondent on other hand submitted that under section 11(6), a petition can be filed against a defaulting party and a defaulting party, without resorting to the terms of the agreement, cannot move the Court under this provision. 

The dispute in the instant case revolved around the interpretation of clause governing the arbitration agreement between the parties which had two parts – one laying down the procedure for appointment of the Arbitrator as per which arbitration had to be conducted by three Arbitrators. Both the parties had to first nominate their Arbitrator and thereafter both the Arbitrators, so appointed, has to appoint a third Arbitrator and both the parties were required to nominate their Arbitrator within 60 days after receipt of a notice from the party invoking the arbitration clause. The second part prescribed the procedure to be followed by the parties in case either of the parties fail to appoint an Arbitrator within 60 days as in such case the Arbitrator appointed by the party invoking the arbitration clause would become the sole Arbitrator to conduct the arbitration. In the present case Respondent had invoked the arbitration clause and nominated its Arbitrator. Petitioner on the other hand did not nominate his Arbitrator within 60 days as was prescribed.

Petitioner raised a contention that he could appoint an Arbitrator at any time before the filing of the present case and since he has done so, his appointment of the Arbitrator is valid and the Court should appoint the third Arbitrator. 

It was held that the Petitioner was the defaulting party, who had failed to appoint/nominate his Arbitrator in terms of the arbitration clause binding both the parties. He could not take advantage of his own wrong. An arbitration agreement is an independent agreement and is binding on both the parties and neither of the parties can unilaterally change the terms and conditions of any agreement. There was a complete violation of procedure of Arbitration clause by the Petitioner. The contention of the Petitioner that the Respondent has waived his right to object in view of Section 4 of the Act and, therefore, even if the Petitioners had appointed an Arbitrator beyond the stipulated date, still the Respondent cannot object to it, was held to be meritless because the Petitioner had failed to appoint the Arbitrator even within the time it asked for. 

The parties are required to act as per procedure agreed upon by them for appointment of an Arbitrator and if a party defaults, the aggrieved party can move to the Court against the defaulting party. In the present case it was the Petitioner who had failed to follow the procedure of appointment of Arbitrator and thus is a defaulting party. 
The Court in the above circumstances declined to appoint any other person as an Arbitrator for want of jurisdiction under section 11(6) of the Act.

[Utkal Galvanizers Limited vs. Power Grid Corporation of India Limited]
(Delhi HC, 13.11.2014)