Court Appoints Sole Arbitrator Under Section 11(6) Where Parties Fail to Reach Consensus Under Valid Agreement

The Petitioner, a distribution licensee under the Electricity Act, 2003, entered into a Rate Contract dated 16.02.2021 (amended on 03.01.2023) with the Respondent for the repair and reconditioning of distribution transformers.

Disputes arose regarding the Respondent’s alleged failure to return repaired equipment within stipulated timelines, leading to claims for liquidated damages of approximately Rs. 5 crores.

The Petitioner invoked the arbitration clause (Clause 23 of the General Conditions of Contract) via notice on 04.05.2026, nominating an arbitrator.

The Respondent replied on 02.06.2026, declining the specific nomination but agreeing to a mutual appointment; however, no consensus was reached, prompting this petition under Section 11(6) of the Arbitration and Conciliation Act, 1996.

1. Whether a Sole Arbitrator should be appointed under Section 11(6) of the Act given the lack of consensus between the parties despite the existence of an arbitration agreement.

2. Whether the court’s scope of inquiry under Section 11 is limited to the prima facie existence of the arbitration agreement.

Section 11(6) of the Arbitration and Conciliation Act, 1996, which empowers the High Court to appoint an arbitrator when parties fail to reach an agreement on the appointment.

The principle established in SBI General Insurance Co. Ltd. v. Krish Spinning (2024), which clarifies that the judicial scope under Section 11 is confined solely to examining the prima facie existence of a valid arbitration agreement.

The Court observed that Clause 23 of the GCC serves as a valid arbitration agreement between the parties.

Since the Respondent did not dispute the existence of the arbitration clause and expressed "no objection" to the appointment of an arbitrator to resolve the underlying claims, the parties were considered ad idem regarding the reference to arbitration.

The Court found that the failure of the parties to mutually agree on a name after the Section 21 notice was issued necessitated judicial intervention.

Following the restrictive mandate of Section 11, the Court declined to delve into the merits of the claims, instead focusing on the undisputed contractual framework and the need for an independent neutral.

The Court directed that the arbitration be conducted under the aegis and rules of the Delhi International Arbitration Centre (DIAC).

The Arbitrator is required to file a disclosure under Section 12(2) within two weeks of entering the reference.

All pleas regarding arbitrability and jurisdiction remain open for the Arbitrator to decide independently.