Aravali Power Company Pvt. Ltd. v. M/s. Era Infra Engineering Limited, 2017 SCC OnLine SC 1072

ARAVALI POWER COMPANY PVT. LTD. V. M/S. ERA INFRA ENGINEERING LIMITED

Whether challenging the appointment of the arbitrator, appointed pre-2015 Amendment on the strength of the 2015 Amendments valid?

The scheme of Section 11 shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. The Court must first ensure that the remedies provided for are exhausted. It is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations.

Aravalli Power Co. Pvt. Ltd and M/s Era Infra Engineering Limited had disagreements over the terms of the contract for the permanent township that was to be built for the Indra Gandhi Super Thermal Power Project at Jhajjar, Haryana.
The aforementioned contract stipulated that the arbitrator would be the project manager or another individual chosen by the chairman of National Thermal Power Corporation (NTPC).
The Respondent started arbitration proceedings by letter dated July 29, 2015, asking the Appellant to designate an arbitrator. As the only arbiter, the Chief Executive of APCPC was selected.
In 2016, the Respondent first contested the arbitrator’s appointment and subsequently petitioned the Delhi High Court under Section 14 of the Act to have the arbitrator’s appointment terminated. Additionally, the Respondent submitted an application for the appointment of an arbitrator under Section 11(6).
By its ruling, the High Court invalidated the Appellant’s nomination of the arbitrator and ordered them to nominate names of the three-panel arbitrators from various departments so that the Respondent might select one of them. The aforementioned order was eventually challenged before the Indian Supreme Court.

The Court held that because arbitration was invoked before the Amendment Act went into effect, the party cannot use the revised Section 11 of the 1996 Act to contest the arbitrator’s appointment that has already been made.
The 2015 Amendment Act put a stop to the practice of designating the officials of one of the contracting parties.
The Hon’ble Supreme Court further stated that the law established in the Northern Railway Administration must be implemented in pre-amendment instances and that the conditions of the contract should be adhered to and/or given effect to as closely as practicable.
Thus, the Hon’ble Supreme Court has categorically held that insofar as Section 11 of the Act is concerned, the amended provisions will have no applicability if the invocation of arbitration is before October 23 2015.