Union of India v. BESCO Ltd.
Background
A railway contract between the Union of India and BESCO Ltd. contained an arbitration clause requiring disputes to go to a sole arbitrator under the General/Special Conditions of Contract, while a different Standard Condition (Clause 2900) required the arbitrator to be a Gazetted Railway Officer. After the Union of India failed to appoint an arbitrator within the permitted time, the designated Judge of the High Court held that the Union had lost its right to nominate and appointed an independent arbitrator instead. The Union of India appealed, arguing the Judge was bound to appoint only a person matching the agreement's specified qualification.
Decision Breakdown
The Supreme Court held that where a party forfeits its right to nominate an arbitrator (by not doing so in time), the Chief Justice or designated Judge acting under Section 11(6) is free to appoint an independent arbitrator, giving due regard to any qualification required under Section 11(8), but is not rigidly bound to the agreement's named category of arbitrator if circumstances warrant otherwise. On the facts, the Court found that the actual governing clause (Clause 19.0 read with Clause 18.0 of the General/Special Conditions) did not require a Railway Officer at all, it allowed appointment of "any person", so the designated Judge's appointment of an independent arbitrator was proper. Both the civil appeal and the connected Special Leave Petition were dismissed with no order as to costs.
Lesson Learnt
If a party delays or forfeits its contractual right to nominate an arbitrator, courts can appoint an independent one instead; parties should also read all applicable contract clauses together, since a later or more specific clause may override an earlier qualification requirement.