TMI Blog2023 (4) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... the violations of the provisions of Section 12(5) of the Act under Section 34 of the Act. Any violation of provisions of the Act, is amount to against the public policy of India. In the present case, apart from appointing the Arbitrator unilaterally by the respondent, the Arbitrator had also failed to send any notice about the hearing to the petitioners and the respondent had also failed to furnish the claim statement to the petitioners. Therefore, the petitioners did not have any opportunity to file the counter and contest the matter. Even if the petitioners have filed the counter and considered, the present award is liable to be set aside for the violations of the provisions of Section 12(5) of the Act. The present award is liable to be set aside on the ground of unilateral appointment of arbitrator. Further in the present case, it appears that the award has been passed without giving any opportunity to the petitioners and therefore, the award is suffered with the violation of Principles of Natural Justice also. This Court is of the view that the present award is not sustainable under law and the same is liable to be set aside and it is against the public policy of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appointment is non-est in law. In terms of the proviso of Section 12(5) of the Act, in the event of unilateral appointment, the appointed Arbitrator can proceed with, when the other party waives the applicability of this Section by way of an express agreement in writing. In the present case, no such express agreement has been made between the parties. Therefore, he would contend that in the absence of any such express agreement, the unilateral appointment of the Arbitrator is null and void and consequently any award passed by the said Arbitrator, is liable to be set aside. 5. The learned counsel for the petitioners would also contend that since the unilateral appointment is contrary to proviso to sub-section (5) of Section 12 of the Act, the same would fall under Explanation (2) of Section 34(2)(b) of the Act, and it is in contravention with the fundamental policy of Indian law as held by the Hon'ble Apex Court. Further, he would contend that the award is also liable to be set aside, since the learned Arbitrator has not given any opportunity to the petitioners to file a counter and contest the matter. Hence, he prayed to set aside the award. 6. On the other hand, the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as Arbitrator, those persons are ineligible to act as an arbitrator in terms of Section 12(5) of the Act. In the same way, the above persons are also not eligible to nominate any person as Arbitrator to act on behalf of them or the concern. 13. In the present case, the respondent appointed the arbitrator unilaterally without consent of the petitioners. Section 12(5) of the Act states as follows: 12. Ground for challenge.- (1)....................... (2)....................... (3)....................... (4)....................... (5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator: Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing. A mere perusal of the above makes it clear that the persons mentioned in Schedule VII of the Act would be ineligible to be appointed as Arbitrator and the persons mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conducted in English language. (e) The award of the Tribunal shall be final and binding on both, buyer and seller. 17 . In TRF Limited4 , the Agreement was entered into before the provisions of the Amending Act (Act No.3 of 2016) came into force. It was submitted by the appellant that by virtue of the provisions of the Amending Act and insertion of the Fifth and Seventh Schedules in the Act, the Managing Director of the respondent would be a person having direct interest in the dispute and as such could not act as an arbitrator. The extension of the submission was that a person who himself was disqualified and disentitled could also not nominate any other person to act Arbitration Application No.32 of 2019 Perkins Eastman Architects DPC Anr. v. HSCC (India) Ltd. 18 as an arbitrator. The submission countered by the respondent therein was as under: - 7.1. The submission to the effect that since the Managing Director of the respondent has become ineligible to act as an arbitrator subsequent to the amendment in the Act, he could also not have nominated any other person as arbitrator is absolutely unsustainable, for the Fifth and the Seventh Schedules fundamen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttention has been drawn to a two-Judge Bench decision in State of Orissa v. Commr. of Land Records Settlement7 . In the said case, the question arose, can the Board of Revenue revise the order passed by its delegate. Dwelling upon the said proposition, the Court held: (SCC p. 173, para 25) 25. We have to note that the Commissioner when he exercises power of the Board delegated to him under Section 33 of the Settlement Act, 1958, the order passed by him is to be treated as an order of the Board of Revenue and not as that of the Commissioner in his capacity as Commissioner. This position is clear from two rulings of this Court to which we shall presently refer. The first of the said rulings is the one decided by the Constitution Bench of this Court in Roop Chand v. State of Punjab8 . In that case, it was held by the majority that where the State Government had, under Section 41(1) of the East Punjab Holdings (Consolidation and Prevention of Fragmentation) Act, 1948, delegated its appellate powers vested in it under Section 21(4) to an officer , an order passed by such an officer was an order passed by the State Government itself and not an order passed by any officer under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. 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. 19.......................... 20........................... 21. But, in our view that has to be the logical deduction from TRF Limited4 . Paragraph 50 of the decision shows that this Court was concerned with the issue, whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an Arbitrator The ineligibility referred to therein, was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny participation by the petitioners in the arbitral proceedings, the petitioners still have the right to challenge about the violations of the provisions of Section 12(5) of the Act under Section 34 of the Act. Any violation of provisions of the Act, is amount to against the public policy of India. The Hon'ble Supreme Court has also held at paragraph No.27 in the case of Associate Builders vs. Delhi Development Authorities reported in 2015 3 SCC 49, which reads as follows: Fundamental Policy of Indian Law 27. Coming to each of the heads contained in the Saw Pipes judgement, we will first deal with the head fundamental policy of Indian Law . It has already been seen from the Renusagar judgement that violation of the Foreign Exchange Act and disregarding orders of superior courts in India would be regarded as being contrary to the fundamental policy of Indian law. To this it could be added that the binding effect of the judgement of a superior court being disregarded would be equally violative of the fundamental policy of Indian law. A perusal of the above judgment makes it clear that if any award passed in violation of the provisions of the Act, the same wo ..... 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