TMI Blog2019 (1) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant-Corporation is not likely to act independently or impartially - The fact that the sole arbitrator is the Managing Director of the appellant-Corporation is not a ground to raise a presumption of bias or lack of independence on his part. The arbitration Clause 4.20.1 of Schedule-4 (General Conditions) stipulates a high official i.e. - Managing Director of the Corporation not connected with the contract or the work executed by the respondent. Having participated in the entire arbitration proceedings and acquiesced in the proceedings, the respondent is estopped from challenging the competence of the arbitrator. The respondent was not justified in filing the arbitration petition seeking appointment of an independent arbitrator. Mere neglect of an arbitrator to act or delay in passing the award by itself cannot be the ground to appoint another arbitrator in deviation from the terms agreed to by the parties. The present Managing Director of the appellant-Rajasthan Small Industries Corporation Limited shall be the sole arbitrator and the Managing Director is directed to take up the matter and continue the proceedings and afford sufficient opportunity to both the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be concluded. According to the appellant, the matter was adjourned repeatedly vide orders of the Arbitral Tribunal dated 10.02.2010, 11.02.2010, 15.02.2010, 18.02.2010 and 10.03.2010 as no one appeared on behalf of the respondent-Contractor. On 16.03.2010, the respondent raised its doubts regarding impartiality of the newly appointed sole arbitrator. The sole arbitrator passed the order dated 06.04.2010 stating that the agreement Clause 4.20.1 of Schedule-4 (General Conditions) provides for arbitration by the Chairman-cum- Managing Director of the Corporation or his nominee and that only at the joint request of both the parties, the Chairman-cum-Managing Director has taken up the arbitration to resolve the dispute between the parties. The proceedings further continued fixing date of hearing on various dates till 17.08.2011. 5. On 07.02.2013, the respondent-Contractor sent a legal notice to the appellant stating that even after so many requests, the sole arbitrator has not passed the award and called upon the appellant to pay the amount of ₹ 3,90,81,602/- said to have been settled, along with the statutory interest within one month. The appellant sent a reply dated 19.03.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or was ready to proceed with the matter, the arbitrator could not make progress since the respondent was either not present or continually taking adjournments and when the arbitrator was proceeding with the matter in right earnest, the respondent could not have approached the High Court seeking appointment of an arbitrator. It was urged that in the light of the fact that a final arbitral award has been passed by the arbitral tribunal, the respondent could only challenge the same by way of an appeal under Section 34 of the Arbitration and Conciliation Act, 1996 and the impugned order of the High Court is liable to be set aside. 9. Ms. Mishra, learned counsel for the respondent-Contractor submitted that in view of Section 12 of the Arbitration and Conciliation (Amendment) Act, 2015, if the arbitrator is an employee/advisor or has any past or present business relation or being the Manager/Director then he cannot be appointed as an arbitrator and not qualified to decide the dispute and therefore, the High Court has rightly appointed the fresh independent arbitrator. It was submitted that the disqualification of the person to hold the post of an arbitrator as enumerated in Seventh Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitrator whom the parties have agreed and appointing substitute arbitrator on the ground that there was delay in passing the award? 11. In deviation from the terms of the agreement, whether the respondent was right in filing arbitration petition under Section 11 of the Arbitration Act:- Admittedly, the parties entered into an agreement dated 28.01.2000 for handling on road transportation of ISO containers and cargo between the Inland Container Depot at Jaipur, Jodhpur and Ports. The agreement was to remain in force for a period of three years starting from 10.04.2000. The abovementioned agreement was extended for another period of two years starting from 31.01.2003. Clause 4.20.1 of Schedule-4 (General Conditions) provided for arbitration which reads as follows:- 4.20.1 All disputes and difference arising out of or in any way concerning this Contract, shall be referred to the Managing Director himself, herself or his or her nominees for the sole arbitration. There will be no objection to any such appointment on the ground that the person so appointed is an employee of the Corporation, that he has dealt with the matters to which the contract relates and that in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02.2010, 18.02.2010 and 10.03.2010, there was no representation for the respondent-claimant and the matter was adjourned to 17.03.2010. Respondent-Contractor vide its letter dated 16.03.2010 addressed to the Chairman and Managing Director of the appellant-Corporation raised doubts on impartiality of the arbitrator expressing his desire to withdraw the arbitration from the present sole arbitrator and was willing to get the matter adjudicated by the pervious arbitrator, I.C. Shrivastava who was already removed at the joint request of the parties. By letter dated 18.03.2010, respondent requested for adjournment of the matter. On the next date of hearing i.e. on 19.03.2010, the respondent- Contractor has not entered appearance and the matter was adjourned to 06.04.2010. On 06.04.2010, the respondent-Contractor was appeared through its representative F.K. Sherwani. As seen from the proceeding of arbitrator dated 06.04.2010, though initially pressed for arbitrator outside appellant-RSIC, finally gave his consent that Chairman-cum-Managing Director may arbitrate. 14. On 29.04.2010, the matter could not be taken up as on 28.04.2010, the arbitral tribunal passed the order stating that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2015, the respondent- Contractor filed an application under Section 11 and Section 15 of the Arbitration and Conciliation Act, 1996 before the High Court for appointment of an independent arbitrator for adjudication of disputes and differences between the appellant-Corporation and the respondent-contractor in respect of agreement dated 28.01.2000. When the said petition was pending before the High Court, the arbitrator vide order dated 18.12.2015 fixed the next date of hearing for 05.01.2016. The respondent-Contractor sent a letter requesting to keep the arbitration proceedings in abeyance. However, the Arbitral Tribunal adjourned the matter to 13.01.2016 and then to 21.01.2016, on which date the final award came to be passed by the Arbitral Tribunal. It was thereafter, by the impugned order dated 22.04.2016 passed by the High Court retired District Judge, Mr. J.P. Bansal was appointed as the sole arbitrator to resolve the dispute between both the parties. 18. As pointed out earlier, on 06.04.2010, though the respondent initially pressed for arbitrator outside RSIC, then finally gave its consent for Managing Director to arbitrate. The said proceeding dated 06.04.2010 reads as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating its demand for payment of ₹ 3,90,81,602/-. To that effect, the appellant- Corporation has sent a detailed reply dated 19.03.2013. 20. It is in this backdrop, the respondent has filed the arbitration petition before the High Court under Section 11 and Section 15 of the Arbitration and Conciliation Act, 1996 on 13.05.2015 seeking appointment of an independent arbitrator. As noted earlier, as per Clause 4.20.1 of Schedule-4 (General Conditions), the parties have agreed that all disputes and differences arising out of or in any way concerning the contract, shall be referred to the Managing Director himself or his nominees for the sole arbitration and that there will be no objection to any such appointment on the ground that the person so appointed is an employee of the Corporation and that he has dealt with the matter to which the contract relates. When the parties have consciously agreed that the disputes or differences shall be referred to the Managing Director himself or his nominee for sole arbitration and having participated in the arbitral proceedings before arbitrator for quite some time, the respondent cannot turn round and seek for appointment of an independent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant-Corporation is not a ground to raise a presumption of bias or lack of independence on his part. The arbitration Clause 4.20.1 of Schedule-4 (General Conditions) stipulates a high official i.e. - Managing Director of the Corporation not connected with the contract or the work executed by the respondent. Having participated in the entire arbitration proceedings and acquiesced in the proceedings, the respondent is estopped from challenging the competence of the arbitrator. The respondent was not justified in filing the arbitration petition seeking appointment of an independent arbitrator. Whether by virtue of Section 12 of the Amendment Act, the Managing Director has become ineligible to act:- 23. After the amendment to the Arbitration and Conciliation Act, 2015, Section 12(5) prohibits the employee of one of the parties from being an arbitrator. In the present case, the agreement between the parties was entered into on 28.01.2000 and the arbitration proceedings commenced way back in 2009 and thus, the respondent cannot invoke Section 12(5) of the Arbitration and Conciliation (Amendment) Act, 2015. As per Section 26 of the Act, the provisions of the amended A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so. [underlining added] 26. The facts of the said case are entirely different from the case in hand. In the said case, when notice invoking arbitration was issued on 28.12.2015, after the Amendment Act, 2015 came into force with effect from 23.10.2015, by virtue of which the person named in the agreement became ineligible to act as the arbitrator. In the case in hand, the arbitration proceedings started way back in 2009 long before 2015 Amendment Act came into force and therefore, 2015 Amendment Act is not applicable to the case in hand. The statutory provisions that would govern the matter are those which were then in force before the Amendment Act. 27. To fortify our view, we can usefully refer to the decision of this Court in Aravali Power Company Private Limited v. Era Infra Engineering Limited (2017) 15 SCC 32. In this case, the invocation of arbitration was on 29.07.2015 and the arbitrator was appointed on 19.08.2015 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court took note of the various dates and hearings that are fixed by the Tribunal between 25.03.2011 and 25.06.2011 and came to the conclusion that the delay caused in the arbitral proceedings was intentional. After referring to Union of India v. Singh Builders Syndicate (2009) 4 SCC 523 and other judgments, this Court observed that the delays and frequent changes in the Arbitral Tribunal defeat the process of arbitration and therefore, the appointment of the arbitrator by the court of its own choice departing from the arbitration clause has become an acceptable proposition of law which can be termed as a legal principle which has come to be established by a series of judgments of this Court. Having regard to the facts of the said case, observing that the delay in arbitral proceedings was intentional, in para (6) of Uttar Pradesh State Bridge Corporation Limited, it was held as under:- 6. The High Court took note of the various dates of hearings that are fixed by the Tribunal between 25-3-2011 and 25-6-2011 and came to the conclusion that delay caused in the arbitral proceedings was intentional. So much so, the members of the Arbitral Tribunal were continuing their dilatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 deals with termination of the mandate and substitution of an arbitrator. Sub-section (1) of Section 15 states that in addition to the circumstances referred to in Sections 13 and 14 of the Act, the mandate of an arbitrator shall terminate where he withdraws from office for any reason or by pursuant to the agreement of the parties. In terms of sub-section (2), after termination of arbitrator s mandate, the appointment of the substitute arbitrator shall be in accordance with the rules applicable to the appointment of an arbitrator who is being replaced. 33. After analysis of the scheme of Sections 11, 14 and 15, in S.B.P. and Company v. Patel Engineering Limited and Another (2009) 10 SCC 293, this Court held that the legislature has repeatedly laid emphasis on the necessity of adherence to the terms of agreement between the parties in the matter of appointment of arbitrators and procedure to be followed for such appointment. In para (31), it was held as under:- 31. ..Even Section 15(2), which regulates appointment of a substitute arbitrator, requires that such an appointment shall be made according to the rules which were applicable to the appointment of an original ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement. 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 or provision applicable to the appointment of the arbitrator at the initial stage . [underlining added] As held in Yashwith Constructions, Section 11(6) of the Act would come into play only when there was failure on the part of the party concerned to appoint an arbitrator in terms of the arbitration agreement. In the case in hand, the High Court, in our view, was not right in appointing an independent arbitrator without keeping in view the terms of the agreement between the parties and therefore, the impugned order appointing an independent arbitrator/retired District Judge is not sustainable. 35. Remedy to the Respondent-Contractor:- The award passed by the arbitrator dated 21.01.2016, whether sustainable, is the next question falling for consideration. As discussed earlier, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtunity to substantiate its claim under various heads. In order to do complete justice between the parties and in exercise of power under Article 142 of the Constitution of India, the award dated 21.01.2016 is to be set aside. 37. In exercise of power under Article 142 of the Constitution of India, it is open to the court to mould the relief by safeguarding the interest of parties. The paramount consideration in such cases should be to ensure that there is no injustice caused. In Raj Kumar and others v. Union of India and another (2006) 1 SCC 737, this Court held as under:- 19. .in exercise of our powers under Article 142 of the Constitution in order to do complete justice to a section of the personnel who would otherwise be placed in an inequitable situation for which the authorities are also partly to blame. It is open to this Court to mould the relief by safeguarding the interest of the parties even while declaring the law. The paramount consideration in such cases should be to ensure that there is no injustice caused . 38. The phrase complete justice engrafted in Article 142(1) is the word of width couched with elasticity to meet myriad situations created by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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