Supreme Court holds right to arbitration survives even if clause becomes inoperable by law

Supreme Court holds right to arbitration survives even if clause becomes inoperable by law

In Offshore Infrastructures Ltd. v. Bharat Petroleum Corp. Ltd., the Supreme Court addressed whether the right to arbitration is lost if the designated arbitrator becomes ineligible due to statutory amendments. Offshore Infrastructures completed construction work for BPCL and raised its final bill in March 2018. Disputes arose over outstanding payments, and arbitration was sought in June 2021. The Court held that even if the arbitration clause designates a person who becomes ineligible under Section 12(5) of the Arbitration Act, 1996 (as amended in 2015), the arbitration agreement itself remains valid. Courts have the power to appoint an independent arbitrator to preserve the parties’ right to arbitration. Regarding limitation, the COVID-19 extension was applied to exclude the period from March 15, 2020, to February 28, 2022, rendering the arbitration application timely. The Supreme Court allowed the appeal and directed the Delhi International Arbitration Centre to appoint an arbitrator.