This article provides a detailed analysis of the order passed by the Hon’ble Gauhati High Court (Kohima Bench) in M/S Druckgrafen India Limited v. The State of Nagaland and 2 Ors., case number Arb.P./4/2024. The judgment, delivered on June 13, 2025, addresses a petition filed under Sections 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996 (“the Act”) for the court-assisted appointment of an arbitrator. The case serves as a clear illustration of the judicial mechanism for enforcing arbitration agreements when one party fails to cooperate in constituting the arbitral tribunal.
1. Factual Background and Procedural History
The dispute originates from a contract dated January 1, 1997, between the petitioner, M/S Druckgrafen India Limited, and the Government of Nagaland for the printing of state lottery tickets. The petitioner asserted that it fulfilled its contractual obligations and raised bills for the work executed between February 27, 1997, and March 31, 1997, amounting to ₹47,88,395.
According to the petitioner, the State respondents made a partial payment of ₹6 lakhs but failed to remit the outstanding balance of ₹41,88,395, despite repeated reminders. The contract contained an arbitration clause (Clause 23) to address disputes.
The procedural history of this matter is noteworthy. The petitioner initially sought legal recourse by filing an Arbitration Petition (No. 111/2017) before the Punjab and Haryana High Court, presumably on the basis that a part of the contract was executed in Chandigarh. However, on May 29, 2024, that petition was dismissed on the grounds that the Punjab and Haryana High Court lacked the territorial jurisdiction to entertain the application. Consequently, the petitioner filed the present application before the Gauhati High Court, Kohima Bench, seeking the appointment of an arbitrator. Notice in the current proceedings was issued on October 1, 2024.
2. Identification of Legal Issues
The central legal issue before the Gauhati High Court was:
- Whether the court should exercise its power under Sections 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996, to appoint an arbitrator to adjudicate the dispute arising from the non-payment of bills under the 1997 agreement.
Implicit in this was the preliminary determination of three essential conditions for such an appointment: the existence of a valid arbitration agreement, the existence of a live dispute, and the failure of the agreed-upon appointment procedure.
3. Arguments of the Parties
Petitioner’s Arguments (M/S Druckgrafen India Limited):
- The petitioner’s primary contention was that a clear dispute existed regarding the unpaid sum of ₹41,88,395.
- The State respondents had failed to appoint an arbitrator despite the petitioner’s demand, necessitating judicial intervention under Section 11 of the Act.
- The petitioner relied on the Supreme Court’s decision in Datar Switchgears Ltd. v. Tata Finance Ltd. and Another, (2000) 8 SCC 151. This precedent was cited to support the argument that while a party’s right to appoint an arbitrator is not automatically forfeited after 30 days, that right is lost if the appointment is not made before the aggrieved party approaches the court under Section 11.
- In a conciliatory gesture during the proceedings, the petitioner’s counsel stated their willingness to accept any retired judge from the Gauhati High Court as the arbitrator.
Respondents’ Arguments (The State of Nagaland):
- The judgment indicates that the learned Senior Government Advocate for the State was given time to seek instructions.
- Crucially, the State did not contest the existence of the arbitration agreement or the arbitrability of the dispute.
- Instead of opposing the petition, the counsel for the respondents actively participated in the appointment process. The State proposed the appointment of Shri Khape Koza, a Retired District & Sessions Judge of Nagaland, whose name appeared on the official panel of arbitrators maintained by the Gauhati High Court. This submission effectively amounted to a concession to the petition’s primary prayer.
4. Court’s Analysis and Reasoning
The Court’s analysis was direct and pragmatic, focusing on the core requirements for an appointment under Section 11 of the Act.
- Existence of Dispute and Arbitration Agreement: The Court first established, upon hearing the parties, that “there is a dispute between the parties” and, significantly, that “such dispute is arbitrable in nature”. It verified that the contractual foundation for arbitration was present, noting that “The contract entered into between the parties provides for arbitration at Clause 23 of the agreement”. This finding is the cornerstone of any Section 11 application, as the court’s jurisdiction is predicated on a valid arbitration clause.
- Consensual Approach: The Court’s reasoning was heavily influenced by the cooperative stance of the parties during the hearing. The petitioner had agreed to the appointment of a retired judge, and the State had proactively suggested a specific name from the High Court’s approved panel. This consensus obviated the need for a more contentious analysis or a deep dive into the precedent cited by the petitioner. The Court’s decision reflects a pro-arbitration approach, aimed at giving effect to the parties’ intent to resolve their dispute outside of traditional court litigation.
- Limited Scope of Inquiry: The judgment exemplifies the principle that a court’s role under Section 11 is narrow. The Court did not examine the merits of the petitioner’s claim for ₹41,88,395. Its inquiry was confined to determining whether the conditions for appointing an arbitrator were met. Having found an arbitration clause, an existing dispute, and a failure in the appointment procedure (which was later cured by consensus before the court), its task was simply to facilitate the constitution of the tribunal.
Taking an “overall view of the matter,” the Court concluded that referring the parties to arbitration was the appropriate course of action.
5. Final Conclusion and Holding
The Gauhati High Court allowed the petition. The Court laid down the following holding:
- Appointment of Arbitrator: The Court appointed Mr. Khape Koza, a Retired District and Sessions Judge of Nagaland, as the sole arbitrator to adjudicate the dispute between the parties.
- Conditional Appointment: The appointment was made subject to the arbitrator providing his consent and the necessary disclosures as required by the Act.
- Place of Arbitration: The place of arbitration was determined to be Kohima, Nagaland.
The judgment reinforces the established legal principle that where a valid arbitration agreement exists and a dispute has arisen, courts will act decisively to ensure the arbitral mechanism is not frustrated by a party’s inaction. The expeditious disposal, aided by the consensus between the parties, underscores the efficiency of the Section 11 procedure.
FAQs:
1. What happens if a contract has an arbitration clause but the other party ignores my request to appoint an arbitrator?
If your contract includes an arbitration clause and the other party does not respond to your formal request to begin the arbitration process (usually within 30 days), you can petition the High Court under Section 11 of the Arbitration and Conciliation Act, 1996. The court can then step in and appoint an arbitrator on your behalf to resolve the dispute, as demonstrated in this case.
2. Can a party still appoint an arbitrator after the 30-day notice period has passed?
Yes, a party can appoint an arbitrator even after the 30-day notice period has expired. However, according to established legal precedent, this right is lost once the other party has filed an application with the court seeking the appointment of an arbitrator. Timing is crucial.
3. What does a court consider before appointing an arbitrator?
When asked to appoint an arbitrator under Section 11, the court’s inquiry is very limited. It primarily focuses on ensuring two things: first, that a valid arbitration agreement exists between the parties (like a specific clause in a contract), and second, that there is a live, arbitrable dispute. The court does not decide the merits of the dispute itself.
4. Why is the “place of arbitration” or “seat” important?
The “place” or “seat” of arbitration is legally significant because it determines which courts have jurisdiction over the proceedings. For instance, it dictates which court you would approach for interim measures or to challenge the final arbitral award. In the analyzed case, the matter had to be moved from the Punjab and Haryana High Court to the Gauhati High Court because the latter had the correct territorial jurisdiction.
5. Does the court decide who is right or wrong when appointing an arbitrator?
No. The court’s role under Section 11 is strictly procedural. It does not evaluate the claims or defenses of either party to determine who is at fault. Its only job is to kick-start the arbitration process by appointing an arbitrator when the parties are unable to do so themselves. The actual decision on the merits of the case is left to the appointed arbitrator.
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