Citation: (COMM) 136/2017
Coram: Prathiba M. Singh
Date: 27thAugust, 2018
This judgment considers a situation wherein even though the arbitration agreement envisages the appointment of a sole arbitrator being appointed, an arbitral tribunal consisting of thee arbitrators is formed. The Court considers whether an award which is passed by the tribunal is valid or can be set aside. The Court held that the award could be set aside in this instance as the appointment of a sole arbitrator as contemplated in the arbitration agreement was not followed. Moreover, the Court also held that agreements which modified the original arbitration agreement would have to be in writing since an oral agreement could not supersede the written arbitration clause.
The Petitioner, Mother Boon Foods Pvt Ltd., in the present case was appointed as a contract manufacturer to manufacture and package breads as per requirements and specifications of the Respondent, Mindscape One Marketing Pvt Ltd. When disputes arose, which led to the termination of the agreement and when a meeting was called to explore methods of settlement, no method of settlement could be agreed on. The Respondent set up an arbitral tribunal consisting of three members instead of the sole member which the Petitioner did not agree to and did not participate in the proceedings. The arbitral tribunal later passed an award against the Petitioner for which the Petitioner approached the Court in order to invalidate the award since the composition of the tribunal was not one that was agreed to by the parties.
Can the award passed by the arbitral tribunal be invalidated based on the composition of the tribunal?
The Court looked at the fact that the appointment of a sole arbitrator was contemplated in the arbitration clause which the Respondent did not follow and actually appointed a three-member arbitral tribunal. The court further observed that if the Respondent wanted to appoint the three-member arbitral tribunal that this could only be done with the consent of the Petitioner and this agreement would have to be in writing since an oral agreement by the Petitioner could not supersede the written arbitration clause.
The Court in this instance held that since the arbitration agreement was not followed in the constitution of the tribunal that the award given by the tribunal would not be valid. It therefore allowed the petition.