Arbitration and Conciliation Act, 1996 – ss.11 and 15 – Appointment of arbitrator – Terms of contract provided for arbitration by the Managing Director of the appellant-Corporation or his nominee – Respondent participated in the arbitral proceedings – Arbitration petition by respondent seeking appointment of independent arbitrator – Held: 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 arbitrator – Having participated in the entire arbitration proceedings and acquiesced in the proceedings, the respondent is estopped from challenging the competence of the arbitrator.
Arbitration and Conciliation Act, 1996 – Whether by virtue of s.12 of the Amendment Act, the Managing Director of the appellant-Corporation became ineligible to act – Held: After the amendment to the Arbitration and Conciliation Act, 2015, s.12(5) prohibited the employee of one of the parties from being an arbitrator – In the instant 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 s.12(5) of the Amendment Act, 2015 – As per s.26 of the Act, the provisions of the amended Act 2015 shall not apply to the arbitral proceedings commenced in accordance with the provisions of s.21 of the principal Act, before the commencement of this Act unless the parties otherwise agree – There was nothing to suggest that the parties had agreed that the provisions of the new Act shall apply in relation to the arbitral proceedings – 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 – Therefore, Managing Director was not ineligible to act as sole arbitrator – Arbitration and Conciliation (Amendment) Act, 2015 – s.12. Arbitration and Conciliation Act, 1996 – s.15 – Delay in passing award – Termination of mandate and substitution of an 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 – s.15 dealt with termination of the mandate and substitution of an arbitrator – As per sub-section (1) of s.15, in addition to the circumstances referred to in ss.13 and 14 of the Act, the mandate of an arbitrator shall terminate where he withdraws from office for any reason or by or 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 would be in accordance with the rules applicable to the appointment of an arbitrator who is being replaced – s.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 instant case, the High Court 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 was not sustainable. Arbitration and Conciliation Act, 1996 – s.15 – Remedy to the Respondent-Contractor
– Arbitral Tribunal did not make
progress in the arbitration matter – As per the arbitral proceedings, the chronological events were required to be ascertained and reconstruction was required – Respondent filed application for appointment of independent arbitrator – The fact of arbitration application was brought to the notice of Arbitral Tribunal – Respondent prayed for keeping the arbitration proceedings in abeyance – On the basis of available materials, the Arbitral Tribunal passed the final award on 21.01.2016 – Whether the award was sustainable – Held: Since the High Court was in seisin of the matter, the Arbitral Tribunal could have given further opportunity to the respondent to put forth his case – The proceedings of the Arbitral Tribunal was pending for quite some time from 2009 till 2015 and after the respondent approached the High Court in May, 2015, the arbitrator hurriedly passed the award – Respondent was repeatedly praying for adjournment and was not present on the date of passing of the final award – It was noted in the proceedings dated 17.08.2011 that the chronological events needed to be ascertained and reconstruction was required – It is not known whether the same was ascertained or not and whether reconstruction was done before passing the final award on 21.01.2016 – Respondent made number of claims under various heads – Respondent ought to have been given an opportunity to substantiate its claim under various heads – Therefore, in order to do complete justice between the parties and in exercise of powers under Art.142 of the Constitution of India, award dated 21.01.2016 is to be set aside – The present Managing Director of the appellant would 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 parties to adduce further evidence and to make oral submissions and pass the final award within a period of four months – Constitution of India – Art.142.
Constitution of India – Art.142 – Scope of – In exercise of power under Art.142, 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 – The phrase “complete justice” engrafted in Art.142(1) is the word of width couched with elasticity to meet myriad situations created by human ingenuity or cause or result of operation of Statute law or law declared under Arts.32, 136 and 141 of the Constitution – Arbitration and Conciliation Act, 1996.
Allowing the appeal, the Court
HELD: 1. 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 arbitrator. The respondent having participated in the proceedings before the arbitral tribunal for quite some time and also having expressed faith in the sole arbitrator, is not justified in challenging the appointment of the Managing Director of the appellantCorporation as the sole arbitrator. The respondent has not placed any material to show that it has reason to believe that the arbitrator had not acted independently or impartially. The respondent has not brought on record any material to entertain an apprehension that the Managing Director of the appellantCorporation is not likely to act independently or impartially. On the other hand, as per the proceeding of the arbitral tribunal dated 21.10.2010, the respondent had expressed its full faith in the sole arbitrator and had also given a letter dated 21.10.2010 to that effect. 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. [Paras 20, 21, 22][574-F-H; 575-A, F-G]
Indian Oil Corporation Limited and Others v. Raja Transport Private Limited (2009) 8 SCC 520 : [2009]
13 SCR 510 – relied on.
2. Whether by virtue of Section 12 of the Amendment Act, the Managing Director has become ineligible to act: 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 instant 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 Amendment Act, 2015. As per Section 26 of the Act, the provisions of the amended Act 2015 shall not apply to the arbitral proceedings commenced in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree. [Para 23][576-B-D]
Board of Control for Cricket in India v. Kochi Cricket Private Limited and others (2018) 6 SCC 287 : [2018]
2 SCR 829; Aravali Power Company Private Limited v. Era Infra Engineering Limited (2017) 15 SCC 32 : [2017] SCR 497 – relied on.
TRF Limited v. Energo Engineering Projects Limited (2017) 8 SCC 377 : [2017] 7 SCR 409 – distinguished.
3. Whether the High Court was right in terminating the mandate of the arbitrator appointed as per the agreement:
3.1 The proceedings of the arbitral tribunal continued till 17.08.2011. The proceeding of the arbitral tribunal dated 17.08.2011 showed that the “arbitrator observed that the file regarding arbitration appears tampered/missing papers are incomplete and therefore, the chronological events need to be ascertained and reconstitution will be required.” In this background, the award was not passed till 2013. It is true that there was some delay in passing the award. However, between 2011 and 2013, the respondent has not filed any application to expedite the proceedings and for passing of the award. The respondent neither filed the Request Case for passing of the award at an early date nor filed the petition under Section 14 for termination of the mandate of the arbitrator that the arbitrator has ‘failed to act without undue delay’. [Para 30][579-E-G] Union of India and Others v. Uttar Pradesh State Bridge Corporation Limited (2015) 2 SCC 52; Union of India v. Singh Builders Syndicate (2009) 4 SCC 523 : [2009]
3 SCR 563 – referred to.
3.2 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. Section 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. 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 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. [Paras 31, 32, 34][579-G-H; 580-C-D; 581-H; 582-A-B]
S.B.P. and Company v. Patel Engineering Limited and Another (2009) 10 SCC 293 : [2009] 15 SCR 340; Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. and Another (2006) 6 SCC 204: [2006]
3 Suppl. SCR 96 – relied on.
Russell On Arbitration, 20th Edition, Pg. 136 quoted in Law relating to Arbitration and Conciliation, 9th Edition, by Dr. P.C. Markanda at Pg. 620 – referred to.
4. Whether the award passed by the arbitrator dated 21.01.2016 sustainable.
4.1 Since the High Court was in seisin of the matter, the Arbitral Tribunal could have given further opportunity to the respondent to put forth his case. The proceedings of the Arbitral Tribunal was pending for quite some time from 2009 till 2015 and after the respondent approached the High Court in May, 2015, the arbitrator appears to have hurriedly passed the award. The respondent was repeatedly praying for adjournment on 05.01.2016, 13.01.2016 and was not present on the date of passing of the final award dated 21.01.2016. The respondent has to be given an opportunity 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 set aside. 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. [Paras 36, 37][582-G-H; 583-A-B]
Raj Kumar and others v. Union of India and another (2006) 1 SCC 737 : [2006] 1 SCR 169 – relied on
4.2 The phrase “complete justice” engrafted in Article 142(1) is the word of width couched with elasticity to meet myriad situations created by human ingenuity or cause or result of operation of Statute law or law declared under Articles 32, 136 and 141 of the Constitution. In the case in hand, to relegate the respondent to challenge the award under Section 34 of the Act, it would further prolong the litigation between the parties. Considering the facts of the case and in order to do complete justice between the parties, in exercise of power under Article
142 of the Constitution, award dated 21.01.2016 is set aside. The present Managing Director of the appellant Corporation 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 parties to adduce further evidence and to make oral submissions and pass the final award within a period of four months. [Paras 38, 39][583-E-H; 584-A]
Ashok Kumar Gupta and another v. State of U.P. and others (1997) 5 SCC 201 : [1997] 3 SCR 269 – relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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