Case Title:- OFFSHORE INFRASTRUCTURES LIMITED vs. M/S BHARAT PETROLEUM CORPORATION LIMITED
Citation:- 2025 INSC 1196
Date:- 07.10.2025
Hon’ble Supreme Court Bench:- JUSTICE DIPANKAR DATTA & JUSTICE A.G. MASIH
The Hon’ble Supreme Court held that the invalidity or inoperability of an arbitration clause, such as one naming an ineligible arbitrator under Section 12(5) of the Arbitration and Conciliation Act, 1996, does not nullify the underlying arbitration agreement between the parties. The Hon’ble Court clarified that in such cases, the Court is empowered to step in and appoint a neutral arbitrator under Section 11(6) of the Act to preserve the efficacy of the arbitration mechanism.
- In this case, the agreement said the Managing Director of the respondent company would act as the arbitrator. However, under Section 12(5) read with the Seventh Schedule, a Managing Director is disqualified from being an arbitrator due to conflict of interest.
- The Hon’ble Madhya Pradesh High Court had earlier rejected the request to appoint an arbitrator, but the Hon’ble Supreme Court set aside that decision.
- The Hon’ble Supreme Court clarified that even if the procedure in the clause becomes inoperative, the core agreement to arbitrate disputes remains valid.
- The Hon’ble Court said the purpose of the 2015 amendment to the Arbitration Act was to ensure neutrality and impartiality, not to destroy the arbitration mechanism.
- The Hon’ble Court also explained that the limitation period for filing an arbitration petition under Section 11(6) starts from the date when the final bill becomes due, as held in Geo Miller & Co. Pvt. Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd. It further said that the COVID-19 extension period (March 15, 2020 to February 28, 2022) should be excluded when calculating limitation.
- Finally, the Hon’ble Supreme Court referred the case to the Delhi International Arbitration Centre to appoint a neutral arbitrator, allowing the appeal.
