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Mears Group Inc. v. Fernas Insaat A.S. (Fernas Construction Company Inc)

Arbitration Petition · Neutral citation not assigned (Arbitration Petition No. 13 of 2016)Decided 14 Dec 2016
Arbitration Petition No. 13 of 2016
Chief Justice T.S. Thakur · Dr. Justice D.Y. Chandrachud

Background

Mears Group Inc. (a US company) contracted with Fernas Insaat A.S. (a Turkish company) to carry out horizontal directional drilling work for six river crossings on a gas pipeline project in Bangladesh, under a work order worth about USD 7.225 million containing an arbitration clause. After Mears completed the work, a dispute arose over unpaid dues (claimed at over USD 38 lakh with interest), and Mears invoked arbitration by email in November 2015, proposing two retired Delhi High Court judges as sole arbitrator. Fernas did not respond or agree, and later told the Court it wished to negotiate a settlement but never filed objections or reached one.

Decision Breakdown

Since the parties did not dispute the existence of a valid arbitration agreement, and no settlement or response had materialized despite the Respondent's assurance, the Supreme Court exercised its power under Section 11(5) of the Arbitration and Conciliation Act, 1996 to appoint an arbitrator itself. The Court appointed Mr Justice F.M. Ibrahim Kalifulla, a former judge of the Supreme Court, as the sole arbitrator, leaving him free to fix his own fee. The Arbitration Petition was disposed of in these terms: the appointment itself (the only relief sought) was finally and conclusively granted.

Lesson Learnt

When a counterparty to an arbitration agreement stalls or refuses to cooperate in appointing an arbitrator, a party can approach the Supreme Court (for international commercial arbitration) under Section 11(5) of the Arbitration Act to have the Court appoint one directly, keeping the arbitration process moving.

Official source (sci.gov.in)View Judgment (PDF)

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