APHC010592712025 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI Arbitration Application No.39 of 2025 along with Arbitration Application No.40 of 2025 Bench [3441] Arbitration Application No.39 of 2025:- M/s. Goodearth Maritime Private Limited ...Applicant Vs. M/s. Hindustan Shipyard Limited ...Respondent ********** Advocate for Applicant : Mr. Anirudh Krishnan representing Mr. Venkat Challa Advocate for Respondent : Mr. J. Prabhakar, learned Senior Counsel representing Mr. Sai Sanjay Suraneni CORAM: THE CHIEF JUSTICE DHIRAJ SINGH THAKUR DATE : 6th March, 2026 P C: The two arbitration applications have been filed by the applicant M/s. Goodearth Maritime Private Limited under Section 11(6) r/w Section 15(2) of the Arbitration and Conciliation Act, 1996, (for short, the Act of 1996). With a view to understand the backdrop in the light of which the present applications stand filed, it is necessary to give the material facts in brief as under: p. 2 HCJ ARBAPPL_39_2025 & another 2. The parties entered into four shipbuilding contracts for construction of bulk carriers. Four supplementary agreements in respect of the contracts came to be also executed specifying in detail the agreed terms. Each of the contracts is stated to be identifiable by an individual Identification Hull No. The details of the Hull No., the contract date, date of the supplementary agreement and the contractual date for delivery as also the actual date of delivery and the delay in the delivery have been specified by the applicant, which is also reproduced herein below: Hull No. Contract Date Supplementary Agreement Contractual Delivery Actual Delivery Delay (Days) 11115 21.05.2004 01.09.2004 20.08.2006 31.05.2007 283 11116 21.05.2004 01.09.2004 20.02.2007 03.01.2008 336 11117 03.01.2005 15.02.2006 20.10.2007 07.05.2008 321 11118 03.01.2005 14.03.2006 20.10.2007 10.08.2009 659 On account of the alleged delay in the delivery of the vessels, it is stated that four arbitration proceedings were initiated for Hull Nos.11115, 11116, 11117 and 11118. Arbitration proceedings involving Hull No. 11115, 11116 and 11117 were consolidated into a common arbitration. Thus, Arbitration Application bearing No.39 of 2025 concerns Hull No. 11118 and Arbitration Application bearing No.40 of 2025 concerns Hull No. 11115, 11116 and 11117. 3. The present applications have been filed primarily seeking appointment of the Presiding Arbitrator. Page 3 of 11 HCJ ARBAPPL_39_2025 & another 4. According to the agreed terms, in the event of a dispute between the parties, it was agreed that the same would be resolved through the mechanism of arbitration in terms of Article XIII of the agreement. The disputes having arisen between the parties, the stated case of the applicant is that a notice was issued invoking the arbitration clause in which the applicant nominated Justice B. P. Jeevan Reddy (retired) as its nominee Arbitrator. The respondent - M/s. Hindustan Shipyard Limited also responded and appointed Justice T. Ch. Surya Rao (retired) as its nominee Arbitrator. Both the Arbitrators then appointed Justice M. Jagannadha Rao (retired) as the Presiding Arbitrator. 5. It appears that the arbitration proceedings continued until Justice T. Ch. Surya Rao (retired), the Arbitrator nominated by the respondents, passed away on 01.02.2016 and the respondent thereafter nominated its substitute Arbitrator Justice N.R.L. Nageswara Rao on 12.03.2016. The reconstituted Tribunal is stated to have continued the proceedings for a period of 8.5 years till 25.11.2024 when the Presiding Arbitrator Justice M. Jagannadha Rao passed away. On 26.12.2024, the applicant’s Arbitrator Justice B. P. Jeevan Reddy (retired) recused himself from the proceedings. The applicant then nominated Justice Challa Kodanda Ram (retired) as a substitute Arbitrator on 03.06.2025 who conveyed his consent on 06.06.2025. The appointment of the substitute Arbitrator was also stated to have been brought to the notice of the nominee p. 4 HCJ ARBAPPL_39_2025 & another Arbitrator of the respondent and the counsel acting on behalf of the said respondent. 6. It appears from the record that a communication dated 26.10.2025, was addressed by the nominee Arbitrator of the applicant, Justice Challa Kodanda Ram (retired), informing the respondent about his entering the reference in the pending arbitration relating to the contracts concerning Hull Nos.11115 to 11117 and 11118 and for taking necessary action at their end. It also appears from the record that a communication, dated 17.10.2025, was addressed by the General Manager of the respondent Company to the learned counsel for the applicant informing that in terms of clauses 1.1 and 1.2 of Article XIII of the Ship Building Contract, the applicant had to appoint the substitute Arbitrator in place of Justice B. P. Jeevan Reddy (retired) within 30 days of the communication of his resignation as Arbitrator and since the applicant had failed to make the appointment within the stipulated time, Justice N.R.L. Nageswara Rao (retired) had become the sole Arbitrator to adjudicate upon the claims as per the agreed terms. 7. It was, in those circumstances, stated that the appointment of Justice Challa Kodanda Ram (retired) as substitute Arbitrator was not valid. At this stage, it would be apt to reproduce the arbitration clause, which reads thus: “1.1. In the event of any dispute between the parties hereto as to any matter arising out of or relating to this Contract or any stipulation herein or with respect thereto which cannot be settled by the parties themselves, such dispute shall be resolved by arbitration in Visakhapatnam, India, in accordance with the rules of the Indian Arbitration and Conciliation Act, 1996. Either party may demand p. 5 HCJ ARBAPPL_39_2025 & another arbitration of any such disputes by giving written notice to the other party. Any demand for arbitration by either party hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration. Within thirty (30) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator. The two arbitrators thus appointed shall thereupon select a third arbitrator and the three arbitrators so named shall constitute the board of arbitration (hereinafter called the "Arbitration Board") for the settlement of such dispute. 1.2. In the event however, that said other party should fail to appoint a second arbitrator as aforesaid within thirty (30) days following receipt of notice of demand of arbitration, it is agreed that such party shall thereby be deemed to have accepted and appointed as its own arbitrator the one already appointed by the party demanding arbitration, and the arbitration shall proceed forthwith before this sole arbitrator, who alone, in such event, shall constitute the Arbitration Board. And in the further event that the two arbitrators appointed respectively by the parties hereto as aforesaid should be unable to reach agreement on the appointment of the third arbitrator within thirty (30) days from the date on which the second arbitrator is appointed, either party of the said two arbitrators may apply to any court in India or other official organization in India having jurisdiction in such matter to appoint the third arbitrator. The award of the arbitration, made by the sole arbitrator or by the majority of the three arbitrators as the case may be, unless appealed by either parties, shall be final, conclusive and binding upon the parties hereto.” 8. Notwithstanding the fact that learned counsel for the respondent has laid a lot of emphasis on the arbitration clause reproduced hereinabove to bring home the point that failure on the part of the applicant to appoint the Arbitrator within 30 days would preclude the applicant from nominating a substitute Arbitrator and further that the Arbitrator already appointed by the respondent would have to be accepted as its own Arbitrator, in our opinion, the said argument is legally unsustainable. On a perusal of the arbitration clause, it can be said that clause 1.2 would kick in only at the initial stage when one of the parties invokes the Arbitration agreement by nominating its Arbitrator and calls upon either to p. 6 HCJ ARBAPPL_39_2025 & another accept the Arbitrator nominated by him as a sole Arbitrator, if the Agreement warrants the dispute to be resolved by a sole Arbitrator, or fails to respond to nominate its Arbitrator in a three member Arbitral Tribunal. 9. It is only in those cases where a party fails to nominate its Arbitrator within a period of 30 days from the date of receipt of notice of demand for Arbitration that clause 1.2 would be invoked. In the instant case, however, that stage has since been crossed as not only did the applicant initially invoke the arbitration clause by nominating its Arbitrator but also called upon the respondent to nominate theirs, and the respondent nominated Justice T.Ch. Surya Rao (retired) as their Arbitrator. The two Arbitrators so nominated then appointed Justice M. Jagannadha Rao (retired) as the Presiding Arbitrator. 10. The present case has to be seen in the context of Section 15(2) of the Act of 1996, which inter alia envisages that when the Arbitrator withdraws from office for any reason, a substitute Arbitrator shall be appointed according to the rules that were applicable to the “appointment of the Arbitrator being replaced”. In Yashwith Constructions (P) Ltd v. Simplex Concrete Piles India Ltd1, it was held: “The term "rules" in Section 15(2) obviously referred to the provision for appointment, contained in the arbitration agreement or any Rules of any Institution under which the disputes were referred to arbitration. .. .When Section 15(2) says that a substitute arbitrator can be appointed according to the rules that were applicable for the appointment of the arbitrator originally, it is not confined to an appointment under any statutory rule or rule framed under the Act or under the Scheme. It only means that the appointment of the substitute arbitrator must be done according to the original agreement p. 7 HCJ ARBAPPL_39_2025 & another or provision applicable to the appointment of the arbitrator at the initial stage.” If the applicant had been remiss in appointing a substitute Arbitrator, it was incumbent upon the respondent to call upon the applicant by serving upon it a 30 day notice for nominating the substitute Arbitrator, failing which the mechanism as prescribed in clause 1.1 had to be followed. In the instant case, the said procedure has certainly not been followed by the respondent as no notice in terms of clause 1.2 was served. 11. 1 (2006) 6 SCC 204 Having held so, we are not in the least approving the mechanism prescribed under clause 1.2, which enables Arbitrator nominated by one of the parties to act as a sole Arbitrator, as even that would go against the settled legal principle in Perkins Eastman Architects DPC vs. HSCC (India) Limited2, which was followed in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) A Joint Venture Co3. 12. What was held by the Apex Court in Perkins Eastman Architects DPC vs. HSCC (India) Limited was thus: “21. But, in our view that has to be the logical deduction from TRF Ltd. Para 50 of the decision shows that this Court was concerned with the issue, “whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an arbitrator” The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator. The next sentences in the paragraph, p. 8 HCJ ARBAPPL_39_2025 & another further show that cases where both the parties could nominate respective arbitrators of their choice were found to be completely a different situation. The reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter-balanced by equal power with the other party. But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. 2 (2020) 20 SCC 760 3 2024 SCC OnLine SC 3219 That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) and recognised by the decision of this Court in TRF Ltd.” Subsequently, the Constitution Bench of the Apex Court in Central Organisation for Railway Electrification (supra), the Apex Court reiterated that a clause that allowed one party to unilaterally appoint a sole Arbitrator would give rise to justifiable doubts as to the independence and impartiality of the Arbitrator and further that such a unilateral clause would hinder equal participation of the other party in the appointment of Arbitrators. 13. After arguing for some time, learned counsel for the respondent would submit that they would have no objection if the Court nominated an Arbitrator on behalf of the applicant in place of the Arbitrator nominated by the applicant, who then along with the Arbitrator nominated by the non-applicant would proceed to appoint a Presiding Arbitrator. 14. I, however, see no good basis or justification so made by learned counsel for the respondent, as the Arbitrator nominated by the applicant is highly respected and distinguished former Judge of the High Court of Andhra Pradesh with impeccable integrity and competence. Page 9 of 11 HCJ ARBAPPL_39_2025 & another Besides this, the applicant was within its right to nominate a substitute Arbitrator, as that right is protected, as the nomination was made, though with some delay, but before the right could be lost in terms of the ratio of the judgment laid down in Datar Switchgears Ltd. v. Tata Finance Ltd4, wherein it was held: “So far as cases falling under Section 11(6) are concerned -- such as the one before us -- no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11(4) and Section 11(5) of the Act. In our view, therefore, so far as Section 11(6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the Court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an arbitrator under Section 11(6) is forfeited.” 15. Be that as it may, it is held that the nomination of Justice Challa Kodanda Ram (retired) as the Arbitrator for the applicant is legally valid and since the arbitration clause does envisage that this Court can appoint a Presiding Arbitrator in the event the Arbitrators do not reach a consensus on appointing a Presiding Arbitrator, this Court appoints Justice Ramesh D. Dhanuka, former Chief Justice, High Court of Bombay, as a Presiding p. 10 HCJ ARBAPPL_39_2025 & another Arbitrator, who shall enter upon the reference forthwith. The learned Presiding Arbitrator shall be entitled to claim the fee in consultation with the parties. Accordingly, the arbitration application is disposed of. No costs. Consequently, pending miscellaneous applications, if any, in this application, shall stand closed. 4 2000 (7) Supreme 145 A copy of this order be communicated to the learned Arbitrator on the address mentioned herein below: Justice Ramesh D. Dhanuka, 13, Mittal Tower, C-Wing, Barrister Rajini Patel Marg, Nariman Point, Mumbai – 400 021. Ph:98211 34074. DHIRAJ SINGH THAKUR, CJ. AKN p. 11 HCJ ARBAPPL_39_2025 & another HON’BLE MR. JUSTICE DHIRAJ SINGH THAKUR, CHIEF JUSTICE Arb. Application Nos.39 & 40 of 2025 Dt:06.03.2026 akn 225