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2020 (1) TMI 1670 - HC - Indian LawsSeeking a declaration that the mandate of the Arbitrator appointed by the respondent be terminated and an Arbitrator be appointed by this Court in accordance with the provisions of the Act - eligibility of the "Company" referred to in the Arbitration Clause between the parties, to unilaterally appoint a Sole Arbitrator to adjudicate the disputes between the parties. The principle contention of the petitioner is that in view of the recent judgment of the Supreme Court in the case of Perkins [2019 (11) TMI 1154 - SUPREME COURT], the 'Company' as provided in the Arbitration Clause between the parties herein cannot unilaterally appoint an Arbitrator. HELD THAT:- This Court finds merit in the contention of the petitioner. Supreme court in the case of Perkins [2019 (11) TMI 1154 - SUPREME COURT] was concerned with an Arbitration Clause wherein the CMD of the respondent was designated to appoint a Sole Arbitrator. Supreme Court after examining the said clause held that there could be two categories of cases, one where the Managing Director himself is made as an Arbitrator with an additional power to appoint any other person as an Arbitrator and the second where the Managing Director is not to act as an Arbitrator himself but is empowered to appoint any other person of his choice or discretion as an Arbitrator. The Supreme Court in the case of Perkins [2019 (11) TMI 1154 - SUPREME COURT] thus relying on the rationale of the decision in TRF Limited [2017 (7) TMI 1288 - SUPREME COURT] observed that if the test is the interest of the Appointing Authority in the outcome of the dispute then similar ineligibility would always arise even in the second category of cases. It was observed that if the interest that the authority has in the outcome of the dispute is taken to be the basis for possibility of bias, it will always be present irrespective of whether the matter stands under the first or the second category of cases. The Supreme Court also significantly noted that they were conscious that if such a deduction was drawn from the decision in TRF Limited, in all cases with similar clauses, a party to the agreement would be disentitled to make a unilateral appointment. Following the ratio of the judgment in the case of Perkins, it is clear that a unilateral appointment by an authority which is interested in the outcome or decision of the dispute is impermissible in law. The Arbitration Clause in the present case empowers the company to appoint a Sole Arbitrator. It can hardly be disputed that the 'Company' acting through its Board of Directors will have an interest in the outcome of the dispute. In the opinion of this Court, the clause is directly hit by the law laid down in the case of Perkins and the petition deserves to be allowed. The Arbitration Clause empowering the 'Company' to appoint the Sole Arbitrator in the present case would be vitiated in the light of the law laid down by the Supreme Court in the case of Perkins. As a corollary to that, the ineligibility of the Company would translate and percolate to the Arbitrator appointed by the Company and thus the Arbitrator presently conducting the arbitration proceedings is declared to be ineligible to act as an Arbitrator - Since the present Arbitrator has become de jure unable to perform her functions as an Arbitrator, the mandate of the present Arbitrator is terminated, substituting by another Arbitrator. Petition allowed.
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