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Arbitration & Commercial LawSupreme Court of India

ONGC Petro Additions Limited v. Daelim Industrial Company Limited, Korea

Arbitration Petition · Neutral citation not assigned (Arbitration Petition No. 22 of 2013)Decided 7 Apr 2015
Arbitration Petition No. 22 of 2013
Justice J.S. Khehar

Background

ONGC Petro Additions Limited (OPaL) invited tenders for construction of a High Density Poly Ethylene plant at its Dahej Petrochemical Complex, and Daelim Industrial Company Limited of Korea submitted a bid. OPaL accepted the bid and issued a "Notification of Award" dated 6.1.2011, which under the tender conditions constituted a binding contract between the parties, and Daelim acknowledged this notification. A dispute subsequently arose between the parties, and since the arbitration clause required a three-member tribunal with each side nominating one arbitrator, the two party-nominated arbitrators (Justice V.N. Khare and Peter Leaver Q.C.) could not agree on a presiding arbitrator, prompting OPaL to approach the Supreme Court for appointment of the presiding arbitrator.

Decision Breakdown

The Supreme Court held that the Notification of Award, read with the tender clauses, had concluded a binding contract between OPaL and Daelim, and that the parties were governed by the Arbitration and Conciliation Act, 1996. Since the two nominated arbitrators had not reached consensus on a presiding arbitrator, the Court exercised its statutory power to make the appointment itself, naming Mr. Justice R.V. Raveendran (a retired Supreme Court judge) as the presiding arbitrator. The Court directed that the presiding arbitrator could fix his own terms of engagement, that the arbitral tribunal should commence proceedings after consultation among all three arbitrators, and recorded the parties' agreement that the arbitration venue would be Singapore.

Lesson Learnt

When arbitrators nominated by each side to a contract cannot agree on a presiding arbitrator, either party can approach the Supreme Court (for an arbitration with an international element) to have the presiding arbitrator appointed, keeping the arbitration process moving rather than letting a stalemate block it indefinitely.

ONGC Petro Additions Limited v. Daelim Industrial Company Limited, Korea – Legal Case Shots | LegalAware