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2014 (4) TMI 581 - SC - Companies LawAppointment of arbitrator - Reference to arbitration was sought on behalf of the three partners to the PSC - matter was left to the two arbitrators to nominate the third arbitrator who shall be the Chairman of the Arbitral Tribunal - However two arbitrators have not been able to agree on the third arbitrator - Held that:- PSC recognizes that the operator would act on behalf of the contractor. All investments are funded by not just the Petitioner No.1 but also by the other parties, and they are equally entitled to the costs recovered and the profits earned. For the sake of operational efficiency, the Operator acts for and on behalf of the other parties. During the course of his submissions, Mr. Anil Divan had, in fact, submitted that Niko and BP will be affected by the arbitral award and it would be binding upon them too. Therefore, if the Petitioner No.1 was to succeed in the arbitration, the award would enure not only to the benefit of Petitioner No.1 but to all the parties to the PSC. Conversely, if the Government of India were to succeed before the tribunal, again the award would have to be enforced against all the parties. In other words, each of the Contractors would have to perform the obligations cast upon them - arbitration in the present case is an international arbitration. A perusal of some of the provisions of PSC would make it clear that all three entities are parties to the PSC. All three entities have rights and obligations under the PSC [see Article 28.1(a)], including with respect to the Cost Petroleum, Profit Petroleum and Contract Costs (see Article 2.2), all of which are fundamental issues in the underlying dispute. Where RIL acts under the PSC, including by commencing arbitration, it does so not only on behalf of itself, but also “on behalf of all constituents of the contractors” including Niko and BP - In any event, the neutrality of an arbitrator is assured by Section 11(1) of the Arbitration Act, 1996, which provides that a person of any nationality may be an arbitrator, unless otherwise agreed by the parties. There is no agreement between the parties in this case that even a third arbitrator must necessarily be an Indian national. In fact, Section 11(9) of the Arbitration Act, 1996 specifically empowers the CJI to appoint an arbitrator of a nationality other than the nationality of the parties involved in the litigation. Merely because the two arbitrators nominated by the parties are Indian would not ipso facto lead to the conclusion that the parties had ruled out the appointment of the third arbitrator from a neutral nationality. In this case, both the arbitrators had been appointed by the parties, therefore, the condition precedent for appointing an arbitrator, from amongst persons, who are not nationals of the country of any of the parties to the arbitration proceedings, had not even arisen - matter ought to be remitted back to the two arbitrators appointed by the parties to choose the third arbitrator on the basis of the observations made in the judgment. However, given the sharp difference of opinion between the two arbitrators, I deem it appropriate to perform the task of appointing the third arbitrator in this Court itself - Therefore, Honourable James Spigelman AC QC, former Chief Justice and Lieutenant Governor of New South Wales, Australia as the third Arbitrator who shall act as the Chairman of the Arbitral Tribunal - Decided in favour of Appellant.
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