Power Grid Corporation Of India Ltd vs Mirador Commercial Pvt Ltd on 9 July, 2025

July 12, 2025

Delhi High Court

Power Grid Corporation Of India Ltd vs Mirador Commercial Pvt Ltd on 9 July, 2025

1. These petitions are filed on behalf of the Petitioner under Sections
14(1) and 14(2) of the Arbitration and Conciliation Act, 1996 (‘1996 Act’)
seeking termination of mandate of the Sole Arbitrator appointed in terms of
letter dated 26.07.2024. The three petitions were heard together and are
being decided by this common judgment as the learned Arbitrator was
appointed by the Respondent, on a composite reference.

O.M.P. (T) (COMM.) 88/2024

2. This petition concerns Contract Agreements dated 25.02.2010 relating
to: (a) Ex-works Supply Contract Agreement for Tower Package-A8 for
765kV S/C for construction of 765kV S/C Meerut-Bhiwani Transmission
Line (175kms) & LILO of 400kV D/C Bawana/Bahadurgarh-Hissar

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Transmission Line at Bhiwani (15kms) associated with 765kV system for
Central Part of Northern Grid-Part-III, (Supply Contract); and (b) Services
Contract Agreement for construction of 765kV S/C Meerut-Bhiwani
Transmission Line (175kms) & LILO of 400kV D/C Bawana/Bahadurgarh-
Hissar Transmission Line at Bhiwani (15kms) associated with 765kV
system for Central Part of Northern Grid-Part-III, (Services Contract),
entered into between the Petitioner and SPIC-SMO, now a Division of the
Respondent, along with Aster Teleservices Pvt. Ltd. (‘Aster’).

3. It is averred that 765kV S/C Meerut-Bhiwani Transmission Line was
completed and commissioned on 31.01.2014. However, before the defect
liability period ended, disputes arose between the parties and CWP
No.8421/2014 was filed before the Punjab and Haryana High Court, wherein
certain directions were passed by the Court in relation to foundation work of
specific towers. Due to sub-standard quality of the tested tower, Petitioner
also tested 35 other towers, of which 23 failed to meet the acceptable
concrete strength limits. The Contractor, a Joint Venture of Aster and the
Respondent was directed to rectify the defects but it failed to do so and
rectification was carried out by third parties at its risk and cost and thus no
money is outstanding towards the Respondent.

4. It is further averred by the Petitioner that the contract included a
mechanism for resolving the disputes mutually and when they could not be
resolved, reference was made to arbitration. Respondent claimed
Rs.3,33,00,000/- plus interest under the contract agreement. This claim was
flawed as the letters and minutes of meeting dated 22/23.03.2017, relied
upon by the Respondent, were later contested by Aster, which also agreed to
undertake rectification if Petitioner recovered this cost from Respondent’s

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fund. Aster, being a Joint Venture partner of the Respondent provided Bank
Guarantees under the contract, which were encashed to cover the amount
payable for rectification works. On 13.05.2024, Respondent issued notice
invoking arbitration under Clause 39 of General Conditions of Contract
(‘GCC’) claiming Rs.3,33,00,000/- plus interest as also nominating Mr.
Justice Iqbal Ahmed Ansari (Retd.) as its nominee Arbitrator.

5. It is averred that 28.06.2024, Petitioner wrote to the Respondent
objecting to the premature arbitration notice and requesting the Respondent
to adhere to the mandatory pre-arbitral step of approaching the Project
Manager for dispute resolution, prior to initiating arbitration. Objection was
also raised against composite reference in respect of three different
packages/contracts. There was no response to the objections and instead
Respondent sent another letter dated 26.07.2024 reiterating the appointment
of its nominee Arbitrator as the Sole Arbitrator under Clause 39.2 of GCC,
to which Petitioner objected vide letter dated 05.08.2024 reiterating the
issues highlighted in its letter dated 28.06.2024. On 11.08.2024, Petitioner
received a letter from the Sole Arbitrator confirming his appointment and
scheduling the first meeting on 31.08.2024, constraining the Petitioner to file
the present petition.

O.M.P. (T) (COMM.) 89/2024

6. Two Contract Agreements, both dated 21.05.2010, being Supply and
Service Contracts were entered into between the Petitioner and SPIC-SMO,
now a Division of the Respondent, along with Aster in respect of Tower
Package A-1 for construction of Package A-3 i.e., 400kV D/C
Makhu-Muktasar and 400kV D/C Makhu-Amritsar Transmission Line. It is
stated that Respondent acquired SPIC-SMO through a Business Transfer

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Agreement on 05.08.2011 and Aster, a Joint Venture Partner of the
Respondent furnished Bank Guarantees under the Contract, which were
released on 09.08.2016. Several disputes arose out of the said Agreements
relating to non-payment to third parties/vendors, inter se disputes between
the JV partners and failure of the Respondent to furnish a clear due, drawn
and liability statement. As per the Petitioner, financial reconciliation could
not be achieved by the Petitioner and the payment could not be released.

7. It is further averred that on 13.05.2024, Respondent issued notice
invoking arbitration under Clause 39 of GCC demanding Rs.3,33,00,000/-
plus interest and nominating Mr. Justice Iqbal Ahmed Ansari (Retd.) as its
nominee Arbitrator. Petitioner responded to the invocation notice vide letter
dated 11.07.2024 and requested the Respondent to revoke the notice being
premature and adhere to the pre-arbitral step of approaching the Project
Manager for dispute resolution before initiating arbitration. Petitioner also
objected to Respondent’s attempt to make a composite reference for three
distinct packages/contracts. Copy of the reply was also sent to the office of
the nominated Arbitrator. There was no response by the Respondent to the
reply of the Petitioner and it did not even take recourse to Clause 38 of GCC
for pre-arbitral disputes resolution. Instead, Respondent sent another letter
dated 26.07.2024 appointing the nominated Arbitrator as the Sole Arbitrator
purportedly acting under Clause 39.2 of GCC and requested the Petitioner to
fix the first meeting date of the Arbitral Tribunal. Through letter dated
05.08.2024, Petitioner reiterated its objections but to no avail and
subsequently Petitioner received a letter on 11.08.2024 from the Sole
Arbitrator confirming his appointment and scheduling the first meeting on
31.08.2024, whereafter Petitioner filed the present petition.

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O.M.P. (T) (COMM.) 90/2024

8. This petition has its genesis in a contract dated 21.05.2010 entered
into between the Petitioner and SPIC-SMO, now a Division of the
Respondent along with Aster regarding Tower Package-A1 400kV D/C
Talwandi Sabo-Nakodar T/L along with LILO of one circuit at Moga.
Disputes having arisen in relation to the contract, Respondent invoked
arbitration on 13.05.2024 claiming Rs.3,33,00,000/- along with interest and
appointing Mr. Justice Iqbal Ahmed Ansari (Retd.) as its nominee
Arbitrator, to which objections were raised by the Petitioner vide letter dated
11.07.2024. However, Respondent did not revoke its notice and upon
alleged failure of the Petitioner to nominate its Arbitrator under Clause 39.2
of GCC, appointed its nominee Arbitrator as the Sole Arbitrator, who
scheduled the first meeting of the parties on 31.08.2024.

9. Mr. Jayant Mehta, learned Senior Counsel appearing for the Petitioner
initially argued that the mandate of the Sole Arbitrator deserves to be
terminated being a unilateral appointment in the teeth of Section 12 of 1996
Act and judgments of the Supreme Court in Perkins Eastman Architects
DPC and Another v. HSCC (India) Limited, (2020) 20 SCC 760; Bharat
Broadband Network Limited v. United Telecoms Limited, (2019) 5 SCC
755 and Central Organisation for Railway Electrification (CORE) v. ECI
SPIC SMO MCML (JV) A Joint Venture Company, 2024 SCC OnLine SC
3219. It was urged that Respondent appointed the Sole Arbitrator without
consent of the Petitioner and the appointment is thus non-est in law being
violative of the principle of party autonomy, which is well recognized and
accepted in arbitration regime and is to be followed and adhered to even at
the stage of appointment of the Arbitrator. Post the decision of the Supreme

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Court in Perkins (supra), law recognises only two permissible modes of
appointing an Arbitrator: first, by mutual consent of the parties; and second,
by an order of the Court. There is no third option or path available to a party
to an arbitration agreement of taking recourse to unilateral appointment
without the consent of the other party, since there ought to be neutrality in
the dispute resolution process. In CORE (supra), the Supreme Court
emphasised that basis of any arbitration is the freedom of the parties to agree
to submit their disputes to an individual whose judgment they are prepared
to trust and obey. Therefore, when only one party consents to the
appointment of an Arbitrator, it raises doubts about the Arbitrator’s
independence and impartiality and this breaches multiple foundational layers
i.e., Constitution of India, Arbitration and Conciliation Act and the
Arbitration Agreement between the parties. Reference in this regard was
made to the judgment of the Supreme Court in Lombardi Engineering
Limited v. Uttarakhand Jal Vidyut Nigam Limited, (2024) 4 SCC 341.
Reliance was also placed on the judgment of the Calcutta High Court in
Yashovardhan Sinha Huf and Another v. Satyatej Vyapaar Pvt. Ltd., 2022
SCC OnLine Cal 2386.

10. Elaborating the argument, Mr. Mehta contended that the Arbitration
Clause 39.2, in the instant case provides for constitution of three-member
Arbitral Tribunal, of which Petitioner and Respondent are to appoint their
respective nominee Arbitrators and the two nominated Arbitrators are to
appoint the third Presiding Arbitrator and to this extent, party autonomy is
completely preserved. However, the Arbitration Clause in the second part
provides that if either party fails to appoint its Arbitrator within 60 days after
receipt of notice from the other party, the Arbitrator nominated by the party

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invoking arbitration, shall become the Sole Arbitrator to conduct arbitration
and permits unilateral appointment, falling foul of the Perkins (supra) line
of judgments, taking away the party autonomy and breaching the ethos of
independence and impartiality of an Arbitrator.

11. It was further argued that no doubt, parties are empowered to agree
upon the procedure for appointing Arbitrators but in situations where the
agreed procedure fails, only the Courts are vested with the authority to
appoint an Arbitrator upon the request of the party, which means that where
one party to the Arbitration Agreement invokes arbitration and the other
party does not respond, the only course of action is to approach the Court
under Section 11 of 1996 Act. No party can take unto itself appointment of
the Arbitrator unilaterally only because the other party has failed to respond
and/or act in furtherance of the invocation notice. In this context, reliance
was placed on the judgments in Oyo Hotels and Homes Private Limited v.
Rajan Tewari and Another, 2021 SCC OnLine Del 446; Dr. S.P. Gupta v.
Kirori Mal College and Others, 2024 SCC OnLine Del 6663; and M.K.
Jain v. Angle Infrastructure Pvt. Ltd., 2021 SCC OnLine Del 3504. It was
pointed out by Mr. Mehta that in Oyo Hotels (supra), Respondent invoked
the arbitration clause which stipulated that a Sole Arbitrator will be mutually
appointed by the parties and also nominated its Arbitrator. Petitioner did not
respond to the notice, leading to the Respondent unilaterally appointing the
nominated Arbitrator, which was challenged by the Petitioner before this
Court. Allowing the petition, Court ruled that since the appointment of the
Arbitrator was non-est, being violative of the agreed procedure, Petitioner
was within its right to approach the Court for appointment of an Arbitrator
under Section 11 of 1996 Act. Relying on this judgment, it was further

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argued that any clause that grants undue advantage to the party invoking
arbitration cannot be allowed to operate. If the Petitioner allegedly failed to
appoint its Arbitrator within 60 days from the receipt of the invocation
notice from the Respondent, the only course of action open to the
Respondent was to approach the Court for appointment. Appointment of
Respondent’s nominee Arbitrator as the Sole Arbitrator to conduct
arbitration between the parties, not only undermines principle of equality in
arbitration but also gives rise to justifiable doubts on the impartiality of the
Arbitrator. In fact, this is a reason why first part of Clause 39.2 precludes
unilateral appointment by the parties to the Arbitration Agreement and
empowers each party to nominate its respective Arbitrators and any risk of
bias is counter balanced by the appointment of the Presiding Arbitrator by
the nominated Arbitrators. Mr. Mehta also relied on the judgment of this
Court in Dr. S.P. Gupta (supra), holding that unilateral appointment of
Arbitral Tribunal is strictly prohibited and if one party invoking arbitration
finds the other unresponsive, it must approach the Court under Section 11(5)
or (6) for appointment of the Arbitrator.

12. On the issue of whether the legitimacy of the appointment of the
Arbitrator can be questioned and challenged in a petition under Section
14(1)A read with 14(2) of 1996 Act, Mr. Mehta urged that legislatively this
position has been recognised by 2015 Amendment incorporating the words
‘shall be substituted by another Arbitrator’ to overcome the procedural
lacuna of appointment of a substitute Arbitrator upon termination of the
mandate of the Arbitrator. Reliance was placed on the judgment of this
Court in Proddatur Cable TV Digi Services v. Siti Cable Network Limited,
2020 SCC OnLine Del 350, where the Court relying on and following the

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judgment of the Supreme Court in Bharat Broadband (supra), terminated
the mandate of the Arbitrator under Section 14 of 1996 Act on the ground
that the Arbitrator had become de jure incapable of adjudicating the disputes
between the parties.

13. Without prejudice to the aforesaid contentions, it was next argued that
invocation of arbitration agreement by the Respondent was wholly flawed
inasmuch as composite reference is impermissible where contracts are
separate, distinct and have independent arbitration clauses in light of the
judgment of the Supreme Court in Chloro Controls India Private Limited v.
Severn Trent Water Purification Inc. and Others, (2013) 1 SCC 641. In the
present case, the three contracts/packages in respect of which composite
invocation was made by the Respondent pertain to different works, have
different scope, obligations and deliverables and therefore, each contract has
to be treated as an independent agreement. In this context, Mr. Mehta also
relied on the judgment of this Court in Libra Automotives Private Limited v.
BMW India Private Limited and Another, 2019 SCC OnLine Del 9073,
wherein the Court held that directing parties to go for a composite
arbitration under a Sole Arbitrator would amount to re-writing the terms of
the Dealership Agreement between the parties. Overlapping of certain issues
in different and distinct agreements does not mean that arbitration
proceedings under two respective contracts cannot commence and continue
independently. In Huawei Telecommunications (India) Co. Pvt. Ltd. v.
Bharat Sanchar Nigam Limited (BSNL) and Another, 2020 SCC OnLine
Del 2700, this Court held that arbitration agreement in one contract cannot
automatically be incorporated into another unless parties clearly express
such an intention when entering into subsequent agreements.

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14. Reliance was also placed on the judgment of the Supreme Court in
Duro Felguera, S.A. v. Gangavaram Port Limited, (2017) 9 SCC 729,
wherein the Supreme Court was dealing with Respondent’s request for
single Arbitral Tribunal through composite reference of disputes arising
from five separate contracts and a Corporate Guarantee. Respondent argued
that given the overlapping nature of the disputes, a composite reference
would align with parties’ intent and public policy while Duro argued that
contracts were distinct and independent, necessitating separate Arbitral
Tribunals for efficient dispute resolution though potentially with the same
Arbitrators. The Supreme Court held that each of the five package contracts
along with the Corporate Guarantee contained its own independent
arbitration clause, which were not reliant on the terms of the original
Package No. 4 or the MOU and a composite reference was unjustified as this
would also violate the principle of severability of arbitration clauses. In light
of these submissions, Mr. Mehta submitted that the mandate of the Sole
Arbitrator be terminated and this Court may appoint a substitute Arbitrator.

15. Per contra, Ms. Beenashaw Soni, at the outset, points out that a
detailed order was passed by this Court on 06.09.2024, issuing notice
limited to examining the vulnerability of Clause 39.2 of GCC in light of
Perkins (supra) and its sequel judgments. All other issues raised by the
Petitioner with regard to composite reference, claims being time barred,
non-impleadment of necessary and proper parties and non-resort to
pre-arbitral conciliation procedure, were held to be within the domain of the
Arbitrator under Section 16 of 1996 Act. Petitioner challenged the order
before the Supreme Court in SLPs No. 26889-26890/2024, which were
dismissed on 28.03.2025 and the order dated 06.09.2024 has thus attained

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finality. It is thus not open to the Petitioner to reagitate these issues and
enlarge the scope of arguments at this stage.

16. On the aspect of the alleged unilateral appointment of the Sole
Arbitrator, Ms. Soni argues that Arbitration Clause 39.2 is significantly
different from the Arbitration Clauses under consideration before the
Supreme Court in Perkins (supra) and CORE (supra). Clause 39.2,
according to her, does not clothe any one party with the absolute power to
unilaterally appoint the Arbitrator so as to violate Section 12(5) of 1996 Act
or the law laid down by the Supreme Court in this regard. The clause
envisages one party to the Arbitration Agreement nominating/appointing its
Arbitrator and writing to the other party to nominate its Arbitrator and on the
second party failing to do so within the time specified in the clause,
providing that the Arbitrator appointed by the first party will be the Sole
Arbitrator. Parties consciously agreed that in the event of default by one
party, the Arbitrator nominated by the other will be Sole Arbitrator and
therefore appointment in the present case is not a unilateral appointment and
is pursuant to a procedure agreed between the parties. The argument is that
parties not only agreed to the procedure of constituting the Arbitral Tribunal
but also agreed to the mechanism to be followed in case one party defaulted.

17. It was further argued that reliance of the Petitioner on the judgments
in Perkins (supra) and CORE (supra) is misplaced. In Perkins (supra), the
Supreme Court was examining Clause 24, which contemplated appointment
of a Sole Arbitrator by the CMD of the Respondent. Referring to the
judgment of the Supreme Court in TRF Limited v. Energo Engineering
Projects Limited, (2017) 8 SCC 377, wherein the appointment of the
Arbitrator was to be made by the Managing Director of the Respondent, the

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Supreme Court held that the Managing Director of the party to the dispute
will be incompetent to act as an Arbitrator because of the interest that he
would have in the outcome or result of the dispute. The ineligibility would
also apply to the second category of cases where the Managing Director
does not himself act as an Arbitrator but is empowered or authorized to
appoint any other person of his choice or discretion. However, Clause 39.2
in the present case is peculiar and completely different, wherein parties
themselves agreed to the consequences of default by either party.

18. Pertinently, while at the initial stage, the argument on behalf of the
Petitioner was that the Arbitration Clause 39.2, to the extent it contemplated
and recognised appointment of the nominee Arbitrator of the party invoking
arbitration as the Sole Arbitrator to conduct the arbitral proceedings, was hit
by Perkins (supra) line of judgments being unilateral appointment, in
rejoinder, stance of the Petitioner changed to arguing that no occasion had
arisen for the Respondent to appoint its nominee Arbitrator as the Sole
Arbitrator as Petitioner had not ‘failed’ to appoint the Arbitrator in terms of
Clause 39.2. It was urged that the expression ‘failure’ cannot be restricted to
failure to ‘appoint’ simplicitor and if the party receiving the invocation
notice raises legitimate objections in response to the notice, which go to the
very root of appointment of the Arbitrator and commencement of arbitration,
there is no failure to appoint and the second part of Clause 39.2 will not
come into play. It was submitted that on receipt of the invocation notice
from the Respondent, Petitioner immediately sent a detailed response
enumerating multiple objections to the invocation notice viz., (a) there can
be no composite reference in respect of three packages having distinct
scopes of works, awarded through separate contracts relating to setting up of

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separate transmission lines, with no connection with each other and with
separate NoAs, LoAs, Special Conditions of Contract, General Conditions
of Contract as also the regional offices of the Petitioner dealing with the 3
packages being separate and distinct; (b) claims being time barred since
projects were completed in 2014 and Bank Guarantees were released in
August, 2016; (c) non-joinder of necessary and proper parties inasmuch as
contract was awarded to a JV of two entities comprising of SPIC-SMO (now
a division of the Respondent) and Aster, but Aster was not impleaded
though a necessary and proper party; and (d) premature invocation without
resorting to resolution of the dispute through negotiations before the Project
Manager of the Petitioner as a Conciliator. There was no response to these
objections by the Respondent. In the absence of ‘failure’ on the part of the
Petitioner under Clause 39.2, the default clause did not trigger and
Respondent could not have appointed its nominee Arbitrator as a Sole
Arbitrator.

19. Counsel for the Respondent strongly objecting to the change in stance
of the Petitioner and urged that this contention of the Petitioner, raised at the
stage of rejoinder arguments, was beyond its pleaded case as also in the
teeth of order dated 06.09.2024, whereby notice was issued limited to the
grievance of the Petitioner that arbitration clause 39.2, envisaging unilateral
appointment, was hit by the judgments in Perkins (supra), Bharat
Broadband (supra), and Haryana Space Application Centre (HARSAC)
and Another v. Pan India Consultants Private Limited, (2021) 3 SCC 103.
It was argued that the contention must be rejected at the outset, as no party
can be or should be permitted to argue contrary to the pleadings and/or
change its stance, during the course of hearing, to set up altogether a new

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case, especially when the opposite party has had no chance to meet the
same. Without prejudice, it was argued that even on merit this contention
only deserves rejection. The expression ‘failure’ only means failure to
appoint and is open to no other interpretation, least of all to mean that the
party receiving invocation notice is entitled to raise objections to the
invocation notice and then sit back. If this plea is accepted, the agreement
between the parties to provide for the consequences of one party defaulting
in appointing its Arbitrator in Clause 39.2, will be defeated and by merely
raising objections, which are in the domain of the Arbitrator, the non-
claimant will succeed in stalling the arbitration process.

20. Heard learned Senior Counsel for the Petitioner and counsel for the
Respondent.

21. From a plain reading of the grounds set out in the three petitions, it is
palpably clear that Petitioner seeks termination of the mandate of the Sole
Arbitrator on multiple grounds: (a) composite reference in case of three
contracts which pertain to separate transmission line projects with distinct
and different scopes of work etc., contrary to the judgment of the Supreme
Court in Chloro Controls (supra); (b) failure to take recourse to pre-arbitral
procedure to attempt reconciliation and amicable resolution of disputes by
Project Manager under Clause 38 of the contracts; (c) claims of the
Respondent being time barred; (d) non-impleadment of Aster, which
is a necessary and property party on account of the fact that the
contract was awarded to a Joint Venture of two entities comprising of SPIC-
SMO, now a division of the Respondent and Aster; and (e) unilateral
appointment of the Arbitrator without the consent of the Petitioner in
violation of Section 12(5) of 1996 Act and principle of party autonomy,

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emphasised by the Supreme Court in Perkins (supra) and its sequel
judgments.

22. It is relevant to mention that vide order dated 06.09.2024, Court had
confined the adjudication of these petitions to examining whether Clause
39.2 of GCC contemplates unilateral appointment and is thus vulnerable in
light of the judgements in Perkins (supra), Bharat Broadband (supra), and
Haryana Space Application Centre (supra). Relevant part of the order is as
under:

“4. One of the issues that has arisen for consideration in this case is
whether the arbitration clause in the agreement between the parties is hit
by the judgment of the Supreme Court in Perkins Eastman Architects DPC
v HSCC (India) Ltd , Bharat Broadband Network Ltd v United Telecoms
Ltd and Haryana Space Application Centre (HARSAC) v Pan India
Consultants Pvt Ltd.

xxx xxx xxx

23. Mr. Sudhir Nandrajog, learned Senior Counsel has advanced the
following submissions, to support the prayer:

………..

(v) The appointment of the arbitrator was unilateral and was,
therefore, in the teeth of the law laid down by the Supreme Court in
Perkins Eastman Architects, Bharat Broadband Network and Haryana
Space Application Centre, among others.

xxx xxx xxx

26. Having heard learned counsel for both sides, I am of the opinion that
the submission of Ms. Soni, regarding the vulnerability of Clause 39.2 of
the GCC to evisceration as being violative of Perkins line of decisions
merits serious consideration.

27. While I am not inclined to take a final view in that regard at this point,
without calling for a response from the respondent, there is clearly a
difference between the structure of the arbitration agreement as contained
in Clause 39.2 with the clauses which formed subject matter of
consideration in the Perkins line of decisions.

28. In this case, the clause, which was voluntarily executed by both
parties, gave liberty to either party to write to the other, suggesting the
name of an arbitrator. No party has been unilaterally given the right to

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appoint an arbitrator, without the consent of the other. On one party
writing to other, naming the arbitrator, the other party has, under the
arbitration clause, to respond, naming its own arbitrator.

29. It is only if the second party defaults in doing so that the arbitrator
appointed by the first party functions as the sole arbitrator arbitrating on
the disputes. As such, by defaulting in suggesting the name of its
arbitrator, in response to the Section 21 notice issued by the respondent, it
could be argued that the petitioner impliedly acquiesced to the arbitrator
appointed by the respondent functioning as the sole arbitrator to arbitrate
on the disputes. To that extent, the question of whether the appointment of
the arbitrator was unilateral becomes highly debatable.”

23. Having so observed, Court passed an interim order that all further
proceedings in the arbitration would remain subject to outcome of these
petitions. Insofar as other issues raised by the Petitioner pertaining to the
disputes being time barred, composite reference etc., are concerned, it was
ruled that none of these issues make out a case of the Arbitrator being
de jure incapable of functioning under Section 14(1) of 1996 Act, which
envisages termination of the mandate of the Arbitrator in circumstances
where Arbitrator becomes de jure or de facto incapable of functioning as an
Arbitrator or withdraws from office. It was held that these issues are in the
domain of the Arbitrator and would be decided by the Arbitrator in exercise
of jurisdiction vested in him by Section 16 of 1996 Act. This order was
challenged by the Petitioner before the Supreme Court and SLP Nos.26889-
26890/2024 were dismissed on 28.03.2025. Relevant passages from the
order dated 06.09.2024 are as follows:

“23. Mr. Sudhir Nandrajog, learned Senior Counsel has advanced the
following submissions, to support the prayer:

(i) A composite arbitration, for all the three GCCs, was not
permissible in law. The specifics and even the dates of entering into
the contracts were different. As such, the disputes would have to be
individually raised in respect of each of the GCCs.

(ii) Necessary parties had not been impleaded in the matter, as the

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GCCs had been executed not with the individuals but with the JV.

(iii) The claims of the parties were grossly barred by time.

(iv) The Section 21 notice had been issued by the respondent without
complying with pre-arbitral protocol prescribed in Clause 38 of the
GCC. There was no recourse to the arbitral remedy before the Project
Manager in the event of failure of conciliation. In respect of the two
GCCs dated 21 May 2010, there was not even an attempt at
conciliation in the first place.

(v) The appointment of the arbitrator was unilateral and was,
therefore, in the teeth of the law laid down by the Supreme Court in
Perkins Eastman Architects, Bharat Broadband Network and Haryana
Space Application Centre, among others.

xxx xxx xxx

30. Insofar as the other arguments raised by Mr. Nandrajog are
concerned, prima facie, these are arguments which are available to be
raised before the arbitrator under Section 16 of the 1996 Act. The question
of whether the disputes are time barred, or whether the respondent is
entitled to raise the dispute covering all the three GCCs when the initial
notice covered only one contract agreement, or whether the respondent
was properly represented as the agreement was with the JV, and other
such issues which have been raised by Mr. Nandrajog are issues which
clearly fall within the remit of the arbitrator, as contemplated by Section
16(1) of the 1996 Act.

31. In its recent decision in SBI General Insurance Co Ltd v Krish
Spinning, the Supreme Court has revisited nearly all earlier authorities on
this aspect. The Supreme Court has, in no uncertain terms, held, in the
interests of fostering arbitral autonomy, that the court should not extend
its consideration to those issues which are available to the Arbitral
Tribunal under Section 16 of the 1996 Act. As such, even while exercising
jurisdiction under Section 11(6) of the 1996 Act, the Supreme Court has
now held that the Court could examine only two aspects; the first being
whether there exists an arbitration agreement between the parties and the
second being whether the Section 11(6) petition has been filed within three
years of the Section 21 notice issued by the party.

32. The issue of whether the dispute is arbitrable, whether it is discharged
by accord and satisfaction or whether the claims are barred by time, have
specifically been held by the Supreme Court to be issues which have to be
relegated for decision to the arbitral tribunal. Even the aspects of whether
there exists an arbitration agreement between the parties, or whether the
Section 11(6) petition was filed within three years of issuance of Section
21 notice, can only be examined by the Section 11 referral court prima
facie. If, to arrive at a conclusion on these issues, anything more than a

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prima facie examination is required, even these issues have to be relegated
for decision by the arbitral tribunal.

33. As such, in the scenario as it exists today, issues which can be decided
by the arbitral tribunal under Section 16 of the 1996 Act have to be
decided by the arbitral tribunal alone, and it is only once the arbitral
tribunal returns a finding on such issues that a court can exercise judicial
review and take corrective steps, if necessary.

34. The present petitions, moreover, have been filed under Section 14 of
the 1996 Act. Section 14(1) envisages the termination of the mandate of
the arbitrator only in two circumstances. The arbitrator must either
become de jure or de facto incapable of functioning as an arbitrator, or
must withdraw from office.

35. In the present case, except for the arguments based on the Perkins line
of decisions, none of the other submissions advanced by Mr. Nandrajog
make out a case of the arbitrator being de jure incapable of so functioning.
They are all issues which the arbitrator, in exercise of the jurisdiction
vested in him by Section 16 of the 1996 Act, can very well decide.

36. The only issue which may survive for consideration is whether the
Clause 39.2 of the GCCs is hit by the Perkins line of decisions.”

24. Therefore, as rightly flagged by counsel for the Respondent, the issues
of composite reference, claims being allegedly time barred, non-
impleadment of necessary party etc. cannot be re-agitated by the Petitioner
at this stage. Even otherwise, from the judgments of the Supreme Court in
Cox and Kings Limited v. SAP India Private Limited and Another, (2024)
4 SCC 1; Arif Azim Company Limited v. Aptech Limited, 2024 SCC
OnLine SC 215; SBI General Insurance Co. Ltd. v. Krish Spinning, 2024
SCC OnLine SC 1754; and Adavya Projects Pvt. Ltd. v. Vishal Structurals
Pvt. Ltd. and Others, 2025 SCC OnLine SC 806, it is clear that it is the
domain of the Arbitrator to decide issues with respect to: disputes being
arbitrable/time barred; non-impleadment of necessary and proper parties to
arbitral proceedings etc.

25. Coming now to the question whether Clause 39.2 of GCC is hit by

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Perkins (supra) line of decisions. Pleaded case of the Petitioner is that
Clause 39.2 is hit by Perkins (supra) line of decisions and this was argued at
length at the start of the hearing. Judgment in CORE (supra) was read in
extenso to bring home the point that the mandate of the Sole Arbitrator
deserves to be terminated being unilateral and in violation of principles of
party autonomy, impartiality and independence of the appointed Arbitrator,
the foundation pillars of an arbitration regime. However, in rejoinder, there
was a shift in stand of the Petitioner, which was strongly opposed by the
Respondent, and it was canvassed that under Clause 39.2, the nominee
Arbitrator of the party invoking arbitration could be the Sole Arbitrator only
in the event there was ‘failure’ of the party receiving the invocation notice
but where the recipient raises genuine and legitimate objection(s) to the
invocation and commencement of arbitration, as in this case, the default
clause will not trigger.

26. It was submitted that in the present cases, there was no ‘failure’ in
terms of Clause 39.2 since on receipt of the notice from the Respondent
invoking arbitration, Petitioner objected to invocation and commencement
of arbitration on multiple grounds, as being premature without resorting to
pre-arbitral procedure; seeking composite reference; non-joinder of
necessary parties; and claims being time barred. In absence of failure, the
default mechanism of appointment of Respondent’s nominee Arbitrator as
Sole Arbitrator did not come into play.

27. Relevant it is to note at this stage that since the Petitioner has given up
the argument that the arbitration Clause 39.2 is hit by Perkins (supra) line
of judgments, I am not delving into the aspect of the vulnerability of the said
clause, which in the prima facie view of the Court was open to interpretation

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and debatable, in light of the contention of the Respondent that the clause is
different from the arbitration clauses in Perkins (supra) line of decisions.
This issue is thus left open.

28. The only issue that survives for consideration is construction of the
phrase ‘If either of the parties fails to appoint its arbitrator ‘ in Clause 39.2,
which is extracted hereunder, for ready reference:-

“39. Arbitration
…

39.2 The arbitration shall be conducted by three arbitrators, one each to
be nominated by the Contractor and the Employer and the third to be
appointed by both the arbitrators in accordance with the Indian
Arbitration Act. If either of the parties fails to appoint its arbitrator
within sixty (60) days after receipt of a notice from the other party
invoking the Arbitration clause, the arbitrator appointed by the party
invoking the arbitration clause shall become the sole arbitrator to conduct
the arbitration.”

29. Having given my thoughtful consideration, the argument of
Mr. Mehta, learned Senior counsel albeit ingenious, cannot be accepted. A
plain reading of Clause 39.2, in my view, leaves no doubt that the
construction placed on the clause by the Petitioner is erroneous. The clause
is unequivocal and unambiguous and must be given its plain meaning.
Expression ‘failure’ means and connotes failure to appoint the Arbitrator
simplicitor within the stipulated time, with no shades of grey. Accepting the
argument of the Petitioner that if the party receiving invocation notice
responds by raising objections to the appointment, which are otherwise in
the domain of the Arbitrator, there will no ‘failure’ contemplated under
Clause 39.2, will lead to an incongruous situation. There will be no
appointment by mutual consent since Petitioner will not nominate its
Arbitrator having raised objections in response to invocation notice. There

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will be no ‘failure’ since objections are raised and the default clause will not
trigger. The nature of objections raised by the Petitioners are such that they
can only be decided by the Arbitrator. There will thus be an impasse as in
the absence of failure of a party to appoint the Arbitrator when called upon
by the other party to do so, Court’s jurisdiction will also not come into play.
Surely, the parties while agreeing to incorporate Clause 39.2 would have
never intended a dead lock and this is fortified by the fact that parties
consciously provided that if one party fails to appoint its nominee, the
nominee of the other party invoking arbitration will be the Sole Arbitrator,
In my considered view, ‘failure’ in Clause 39.2 can only be construed as
failure to appoint an Arbitrator within the time stipulated therein. In the
present cases, admittedly, after receipt of the notice under Section 21 of
1996 Act for appointment of the Arbitrator from the Respondent, Petitioner
failed to appoint its nominee Arbitrator in 60 days and accordingly, the
default clause triggered and the Arbitrator appointed by the Respondent
became the Sole Arbitrator to adjudicate the disputes. Court finds no reason
to terminate the mandate of the Sole Arbitrator appointed by the Respondent
in terms of Clause 39.2.

30. For all the aforesaid reasons, this Court finds no merit in the petitions
and the same are dismissed. Pending applications also stand disposed of.

JYOTI SINGH, J
JULY 09 , 2025/ Shivam/S.Sharma

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Author: Jyoti Singh

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