Report No. 176
2.8.11 Mandatory or directory nature of sec.11(4), 11(5) and 11(6):
A question has arisen whether the time limits in sec. 11(4) and 11(5) are mandatory and whether in sec. 11(6) time limits have to be prescribed. Section 11(4) provides that if a party fails to appoint an arbitrator within 30 days from the receipt of a request to do so from the other party or where two other appointed arbitrators fail to agree on the third arbitrator within 30 days from the date of their appointment, the Chief Justice or any person or institution designated by him can pass orders regarding appointment of arbitrators.
Again there is a similar time limit in sec.11(5) which states that failing any agreement referred to in sec. 11(2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within 30 days from receipt of a request by one party from the other party to so agree, an appointment shall be made, upon a request from a party, by the Chief Justice or any person or institution designated by him. Question has arisen whether the time limit of 30 days (which we propose to increase to 60 days) in sec. 11(4) and sec. 11(5) is mandatory?
In Naginbai C. Patel vs. U.O.I. (1999 (2) Bom C.R: 1999(2) Arb, L.R.343), B. M.L. Ltd. vs. M.T.N.L. & others (2000(2) Arb. LR 190 (Del), the limit of 30 days prescribed in sec. 11(4) and (5) were held to be mandatory and if the party who received notice did not take action within 30 days of receipt of notice, it would forfeit its right to appoint an arbitrator under the contract. A similar view was taken in Sharma & Co. vs. Eng.-in-Chief, Army Hqrs. New Delhi (2000 (2) Arb LR 31 (AP) under sec.11(6).
However, in Datar Switchgears Ltd. vs. Tata Finance Ltd. (2000(3) Arb. LR 447 (SC) = 200 Suppl.(2) J.T. 226), the Supreme Court dealt with a case under sec. 11(6) which did not prescribe any time limit, unlike sub sections (4) and (5) of section 11. The Court held that it was not necessary to decide whether the time limits under sec.11(4) and (5) were mandatory or not.
It held that under sec. 11(6) in as much as no time limit was fixed in that sub section, the right to appoint an arbitrator vested in the opposite party was not forfeited even after 30 days, provided the appointment was made by the opposite party before the first party, i.e., the party which gave notice for appointment, had filed his application under sec.11. It has been suggested (i) that so far sec. 11(4) and sec. 11(5) are concerned, the view of the High Courts is correct and that the 30 days period which we propose to increase to 60 days must be treated as mandatory (ii) that so far as sec. 11(6) is concerned, some time limit may be prescribed which again shall be mandatory.
On the other hand, it was submitted by some of those who participated in the debate that the power under sec.11(4) and sec. 11(5) should not be treated as mandatory and no period should be prescribed under sec. 11(6). We shall deal first with sections 11 (4) and 11 (5) and then with sec, 11 (6) separately: