2023 (5) TMI 886 - SC - Indian Laws

Appointment of a Sole Arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996.

Contracts expressed in the name of the President of India - HELD THAT:- A contract entered into in the name of the President of India, cannot and will not create an immunity against the application of any statutory prescription imposing conditions on parties to an agreement, when the Government chooses to enter into a contract. We are unable to trace any immunity arising out of Article 299, to support the contention that for contracts expressed to be made by the President of India, the ineligibility of appointment as an arbitrator as contemplated under Section 12(5) of the Act, read with Schedule VII, will be inapplicable - there are no hesitation in rejecting the submission of the learned ASG that the contracts entered into by the Union of India in the name of the President of India are immune from provisions that protect against conflict of interest of a party to a contract, under Section 12(5) of the Act.

Conflict of the Arbitration Clause with Section 12(5) read with paragraph 1 of the Seventh Schedule of the Act - HELD THAT:- In Perkins [2019 (11) TMI 1154 - SUPREME COURT], this Court held that any person who has an interest in the outcome of the dispute would be ineligible to be an arbitrator. Naturally, such a person should not have the power to appoint a sole arbitrator.

the arbitration clause which authorises the Secretary, Ministry of Home Affairs, whose relationship with Union of India is that of an employee, to nominate an officer of the Ministry of Law and Justice to act as a Sole Arbitrator, clearly falls within the expressly ineligible category provided in Paragraph 1 of Schedule VII, read with Section 12(5) of the Act. As the grounds of challenge to the appointment of an arbitrator under Section 12(5) of the Act operate notwithstanding any prior agreement to the contrary, we cannot give effect to the appointment of an officer of the Ministry of Law and Justice as an arbitrator. The submission of the learned ASG in favour of such an appointment is therefore rejected.

Reliance on the decision in Central Organisation of Railway Electrifications - HELD THAT:- In Central Organisation of Railway Electrifications this Court has held that As held in Voestalpine Schienen GmbH [Voestalpine Schienen GmbH v. DMRC, [2017 (2) TMI 1239 - SUPREME COURT], the very reason for empanelling the retired railway officers is to ensure that the technical aspects of the dispute are suitably resolved by utilising their expertise when they act as arbitrators. Merely because the panel of the arbitrators are the retired employees who have worked in the Railways, it does not make them ineligible to act as the arbitrators.

In contrast, the arbitration clause in the present case enables a serving employee of the Union of India, a party to the contract, to nominate a serving employee of the Union of India as the Sole Arbitrator. Such an authorisation is clearly distinct from the arbitration clause in Voestalpine Schienen GmbH and Central Organisation of Railway Electrifications, and is in conflict with Section 12(5) of the Act.

Ms. Justice Indu Malhotra, a former judge of this Court appointed as the Sole Arbitrator to adjudicate upon the disputes arising under and in connection with the Conditions of Tender entered into between the parties, subject to the mandatory disclosures under the amended Section 12 of the Arbitration and Conciliation Act, 1996 - the present application under Section 11(6) of the Arbitration and Conciliation Act, 1996 is allowed.