Madras High Court Sets Aside Arbitral Award in International Commercial Dispute

Court Declares Arbitrator's Appointment Invalid, Citing Lack of Jurisdiction in International Arbitration

The Madras High Court, in a significant ruling, has set aside an arbitral award issued in an international commercial arbitration involving M/s. China Datang Technologies and Engineering Company Limited and M/s. NLC India Limited. The court determined that the appointment of the arbitrator by the High Court was invalid, as the jurisdiction to appoint arbitrators in international commercial arbitration rests exclusively with the Supreme Court of India.

Justice N. Anand Venkatesh, presiding over the case, emphasized that the jurisdiction for appointing arbitrators in cases involving international commercial arbitration is a statutory power vested solely with the Supreme Court. The court highlighted that any arbitral award issued by a tribunal established through an appointment by the High Court in such matters is deemed coram-non-judice, thus null and void.

The case stemmed from a contractual dispute between the Chinese entity, China Datang Technologies, and NLC India Limited over a lignite-based thermal power project in Neyveli. The arbitration proceedings, initiated after the respondent allegedly terminated the contract and encashed a performance guarantee, resulted in a partial award favoring China Datang Technologies.

However, when the petitions challenging the arbitral award were brought before the Madras High Court, the court took suo moto notice of the jurisdictional issue. Despite the fact that both parties had initially consented to the arbitrator's appointment by the High Court, the court ruled that such consent cannot confer jurisdiction where none exists.

The ruling underscores the importance of adhering to statutory mandates concerning international arbitration proceedings. By setting aside the award, the High Court has reiterated the principle that jurisdictional boundaries cannot be altered by agreement or acquiescence of the parties involved.

The decision will likely prompt M/s. NLC India Limited to approach the Supreme Court to seek a valid appointment of an arbitrator, as suggested by the High Court. This case serves as a pertinent reminder to legal practitioners and contracting parties about the non-derogable nature of jurisdictional provisions under the Arbitration and Conciliation Act, 1996, especially in the context of international commercial disputes.

Bottom Line:

Arbitration - High Court has no jurisdiction to appoint an arbitrator in an international commercial arbitration as the power to appoint arbitrators in such cases exclusively lies with the Hon'ble Supreme Court under Section 11(6) read with Section 11(12)(a) of the Arbitration and Conciliation Act, 1996. Any arbitral award passed by a tribunal constituted through such an appointment is coram-non-judice and a nullity in law.

Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 11(6), 11(12)(a), 34(2)(b)(ii), 4

M/s.China Datang Technologies and Engineering Company Limited v. M/s.NLC India Limited, (Madras) : Law Finder Doc Id # 2820808