Offshore Infrastructures Limited vs. M/s Bharat Petroleum Corporation Limited [2025 INSC 1196]

Merely procedure of appointing arbitrator having become inoperative due to subsequent changes in statutory provisions, would not excuse parties from arbitration

RELEVANT PARAGRAPH

20. We are not persuaded by this submission of the Counsel for Respondent. The very existence of the arbitration clause in the GCC referring to all disputes to arbitrator is the core part of contract. Merely because the procedure to appoint an arbitrator provided in the clause has become inoperative due to subsequent changes in statutory provisions, would not mean that the core of the contract referring the dispute for adjudication to arbitrator would be rendered nugatory. The amendment in the statute has been enacted with the legislative intent to enforce neutrality of the arbitrator and bring impartiality in arbitration proceedings by virtue of Section 12(5) of the 1996 Act. It cannot be justified to literally interpret the clause in the contract in a manner or at the cost of the entire arbitration mechanism itself being abandoned. The arbitration agreement must be interpreted in a purposive manner, but not literally so as to enable the parties to pursue the intended dispute redressal mechanism of contract. Therefore, it cannot be said that non-operation of arbitration clause in GCC will result into forgoing of entire arbitration mechanism and rendering the Appellant disentitled for seeking appointment of arbitrator. The Appellant is, therefore, entitled to file application under section 11(6) of the 1996 Act for appointment of arbitrator and thereby the power is vested with the court to appoint an arbitrator upon filing of such application.

21. The next aspect which merits consideration is whether the application for appointment of arbitrator filed by the Appellant is within the period of limitation. It would be apposite to refer to the decision in Geo Miller and Company Private Limited v. Chairman, Rajasthan Vidyut Utpadan Nigam Limited6, where a three-Judge Bench of this court while dealing with similar issue has held that the cause of action in respect of arbitration application arises when the final bill handed over to the respondent becomes due, and further correspondences between the parties subsequent to the due date of bill would not extend the time of limitation.

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