Arbitration Agreement cannot be invoked for Second Time

The Supreme Court of India in Antrix Corp. Ltd. v. Devas Multimedia P. Ltd. dismissed the arbitration petition of the Antrix Corp. (Petitioner) filed under Section 11 of the Indian Arbitration Act, 1996 challenging the constitution of Arbitration Tribunal by International Chamber of Commerce (ICC). Antrix Corp had sought constitution of another Arbitral tribunal in accordance to Indian law of arbitration on the ground that Devas had invoked the ICC Rules unilaterally without allowing it to exercise its choice. Antrix sought Devas to appoint Arbitrator in accordance to UNCITRAL Rules.

Antrix submitted that arbitration proceedings shall be governed by the Indian arbitration act, 1996 in view of the agreement entered between the parties wherein it had been specifically provided that Indian laws shall be the governing law of the agreement. In this matter, an agreement was entered between Antrix and Devas in regard to lease of some items to Devas. This agreement had Article 20 that provided that any disputes or any issue in relation to rights and obligation of the parties under the agreement would be resolved by senior management and thereafter shall be resolved by the conduct of arbitration proceedings either under ICC Rules or UNCITRAL Rules.

Devas Multimedia, the respondents in this case following termination of the agreement by Antrix invoked Article 20 of the agreement and made request for arbitration to ICC and nominated its nominee arbitrator under the ICC Rules. Thereafter, Devas called upon Antrix to appoint their nominee Arbitrator. Antrix disputed this appointment and subsequently nominated its arbitrator in accordance to UNCITRAL Rules. The Indian Arbitration Act, 1996 has been modelled on UNCITRAL Rules. Antrix in view of these circumstances filed arbitration petition under section 11 of the Indian arbitration act seeking direction from the Apex Court to direct Devas to nominate its Arbitrator in accordance to the agreement and UNCITRAL Rules so as to adjudicate the disputes that had arisen between the parties and to constitute the Arbitral Tribunal and proceed with arbitration.

It is important to note that an Arbitration Tribunal was already in the stage of constitution under the ICC Rules on account of Devas request for arbitration to ICC. The question therefore before the Apex Court was whether Antrix was entitled to proceed in terms of section 11 of the Indian Arbitration Act when Devas had already invoked the jurisdiction of ICC and in pursuant thereto had already appointed an Arbitrator.

The Apex Court observed that once arbitration agreement is invoked by Devas and a nominee arbitrator has been nominated there under then the arbitration agreement cannot be invoked for a second time by Antrix seeking appointment of another arbitrator under the Indian arbitration act after being fully aware of the appointment made Devas (Respondent). The Apex Court said that anomalous situation shall arise in case the appointment of the already appointed arbitrator is questioned in subsequent proceedings that had been initiated by the other party seeking appointment of another arbitrator. 

The court further observed that where an arbitration clause has already been invoked in terms of the agreement by one of the parties under ICC Rules then the provision of section 11 (6) cannot be invoked again in case the other party is dissatisfied or aggrieved from the appointment of the arbitrator. The court said that other party is entitled to challenge the appointment but not by way of independent proceedings under section 11 but by way of petition under section 13 and thereafter by virtue of section 34 of the Indian arbitration act.

The court further observed that it is well settled principle of law that a separate application for appointment of arbitrator is not maintainable in case where an arbitrator is already appointed and intimation is conveyed to other party. The court said that once power under the agreement has been exercised then there is no power left to once again refer the same disputes to arbitration under section 11 of the act unless the order closing the proceedings is subsequently set aside. The court further said that when an arbitral tribunal is already seized of the disputes between the parties to the arbitration agreement, the constitution of another arbitral tribunal in respect of the same disputes that are pending before the first tribunal shall be without jurisdiction.

The court also said that section 11 of the act categorically provides that the said section can be invoked by the parties in case where any of the parties fails to act in terms of agreed procedure by them or as provided thereunder the said section. The court said that in this situation, the High Court or Supreme Court may on the application by one of the parties appoint Arbitrator.

The Apex Court in the said matter also noted the fact Devas had unilaterally invoked the ICC rules and the senior management had failed to resolve the dispute between the parties subsequent to the appointment of arbitrator by Devas. The Court also noted the fact that agreement provided centre of Arbitration as New Delhi. The Court observed that whether rightly or wrongly Devas had made request for arbitration to the ICC international court of arbitration in accordance to the agreement and had appointed its nominee arbitrator. The court also observed that in the proceedings under Section 11, the Chief Justice cannot replace one arbitrator that is already appointed in the exercise of arbitration agreement.

The Apex Court thus held that Devas was entitled to invoke the Rules of arbitration of ICC for the conduct of arbitration proceedings in terms of the provision 20 of the agreement that provided that arbitration proceedings could be conducted either in accordance to rules and procedure of ICC or UNCITRAL. The court held that once the provisions of ICC Rules of Arbitration had been invoked by Devas, then the proceedings thereunder cannot be interfered with in the proceedings under section 11 of the arbitration act.

The Court further said that there is clear distinction between the law which was to operate as the governing law of the agreement and the law that was to govern the arbitration proceedings. The Court further held that invocation of ICC Rules shall be open to challenge by appropriate proceedings but not under section 11 of the act. The Court said that where the parties have agreed that the procedure for arbitration would be governed by ICC Rules, then, the same would necessarily include the appointment of arbitral Tribunal in terms of the arbitration agreement and the said Rules.

Thus, the Apex Court dismissed the arbitration petition of the petitioner, Antrix but at the same time held that Antrix was open to challenge the appointment of arbitrator by Devas under any other provisions under Indian arbitration act.

Law Senate Comment:The Apex Court held in this case once the arbitration clause is invoked and arbitral tribunal is constituted in pursuance to it then the other party cannot subsequently seek appointment of another arbitral tribunal under section 11 of the Indian Arbitration Act though in case the other party feels aggrieved from the said appointment then it may pursue appropriate proceedings under other provisions of Indian arbitration Act. The Court also held this shall be notwithstanding the fact that the first party appointed arbitral tribunal unilaterally.