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Shailesh Dhairyawan v. Mohan Balkrishna Lulla

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 8731 of 2015)Decided 16 Oct 2015
Civil Appeal No. 8731 of 2015
Justice Rohinton Fali Nariman · Justice A.K. Sikri

Background

A developer and a flat owner had a dispute over a development agreement for five flats in Mumbai. In a 2008 suit in the Bombay High Court, the parties settled most issues by consent and referred the remaining claims about carpet area and compensation to a named arbitrator, a retired Supreme Court judge. That arbitrator resigned in 2011, and the High Court was then asked to appoint a substitute arbitrator. The developer argued that the arbitration clause died with the named arbitrator.

Decision Breakdown

The Supreme Court held that under Section 15(2) of the 1996 Act a substitute arbitrator must be appointed when the mandate of an arbitrator ends, unless the arbitration agreement expressly or by necessary implication bars a replacement. The consent terms contained no such bar, and the agreement did not say that only the named person could decide, so the clause continued to apply. Because the High Court had itself appointed the first arbitrator by a consent order, its appointment of a substitute was made under the rules that applied to the original appointment. The appeal was dismissed, and Sikri, J. added reasons based on the purpose of arbitration and Section 89 of the Code of Civil Procedure.

Lesson Learnt

If a named arbitrator resigns, the arbitration usually does not end; a substitute can be appointed unless the agreement clearly says otherwise. Anyone who wants only one specific person to decide a dispute should say so expressly in the agreement.

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

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