Arbitration and Conciliation Act, 1996:
ss. 11(6), 21 and 25 (a) – Appointment of arbitrator – Contract between appellant-contractor and respondent-State – Dispute between the parties – Contractor requested appointment of arbitrator – State appointed “Superintendent Engineer, Arbitration Circle” as the arbitrator in terms of arbitration clause (clause 65 of General Conditions of Contract) – Contractor did not participate in arbitration proceedings – The proceedings terminated u/s. 25(a) – Contractor being aggrieved by appointment of the arbitrator, filed petition u/s. 11(6) before High Court seeking appointment of independent arbitrator – High Court dismissed the petition holding that grievance against appointment of arbitrator in terms of agreement, can be by way of petition u/s. 13 and while challenging the award u/s. 34 and s. 11(6) was not invokable – On appeal, held: The appointment of the arbitrator was as per the arbitration clause of the contract – Arbitration clauses in government contracts providing that an employee of the Department will be the sole arbitrator are neither void nor unenforceable – Appointment of the Superintendent Engineer in the present case was not in deviation of the arbitration clause of the contract – Any challenge to appointment of arbitrator ought to have been raised before the arbitrator himself in the first instance – Bar u/s. 12(5) of the Amendment Act of 2015, to appointment of arbitrator by post, would not be applicable to the present case because the Amendment Act itself would not be applicable to the case as the arbitration proceedings commenced much prior to coming into force of Amendment Act – When the parties have specifically agreed for appointment of sole arbitrator, it was not proper for the contractor to approach High Court for seeking appointment of independent arbitrator – However, the termination of arbitration proceedings was not correct as no warning was given by the arbitrator to the contractor before terminating the proceedings – State directed to appoint an arbitrator in terms of arbitration clause – Appellant directed to file his claim before the arbitrator – Arbitration and Conciliation (Amendment) Act, 2015 – ss.12(5) and 26. Disposing the appeals, the Court
HELD : 1. A perusal of clause (65) makes it apparently clear that it was permissible to appoint a person by designation and this will be evident from clause (65), in particular the sentence “the arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason the Chief Engineer is to appoint another person….”. If appointments were only to be made by name and not by designation there could be no question of further appointment on the Arbitrator vacating his office. It is only when an Arbitrator is appointed by designation that the question of a vacancy upon the incumbent vacating office could arise thereby enabling the Chief Engineer to appoint another person to act as arbitrator. The Superintendent Engineer, Arbitration Circle appointed as the Arbitrator is from the very arbitration circle, HPPWD and such appointment is only as per clause (65) of the contract and there is no merit in the objection raised by the appellant. [Para 10][1013-G-H; 1014-A-C]
2. It is not correct to say that the appointed arbitrator is an employee in service of the HPPWD which the provision of Section 12(5) of the 1996 Act (as amended w.e.f. 23.10.2015) bars at the threshold itself. Arbitration clauses in government contracts providing that an employee of the department will be the sole arbitrator are neither void nor unenforceable. The fact that a named arbitrator is an employee of one of the parties is not ipso facto a ground to raise a presumption of bias or lack of independence on his part. The arbitration agreements in government contracts providing that an employee of the department or a higher official unconnected with the work or the contract will be the arbitrator are neither void nor unenforceable. [Para 11][1014-C-F]
Indian Oil Corporation Limited and others v. Raja Transport Private Limited (2009) 8 SCC 520 : [2009]
13 SCR 510 ; Ace Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corporation Limited (2007) 5 SCC 304 : [2007] 4 SCR 777 ; Union of India and another v. M.P. Gupta (2004) 10 SCC 504 – relied on.
3. In government contracts before appointing arbitrators, the appointing authority should be more vigilant and more responsible in choosing arbitrators who are in a position to conduct arbitral proceedings in an efficient manner without comprising with the other duties. In the present case, the Superintendent Engineer, Arbitration Circle, HPPWD was appointed as the sole Arbitrator who, by virtue of his designation, regularly does the arbitration, devoting time to the arbitration proceedings and such appointment of Superintendent Engineer cannot be said to be a deviation from clause (65) of the agreement. [Para 12] [1014-F-G; 1015-D-G]
Union of India v. Uttar Pradesh State Bridge
Corporation Limited (2015) 2 SCC 52 – relied on.
4. Any challenge regarding the appointment of an arbitrator as per the terms of the agreement between the parties must be viewed in the context of the agreement between the parties. The parties have mutually agreed that there will be sole Arbitration by the person appointed by the Engineer-in-Chief and that the appellant shall have no objection to any such appointment that the Arbitrator so appointed is a Government Servant. If the appellant has any grievance that the appointment of the arbitrator is by ‘post’ and not by ‘person’, the appellant ought to have raised the challenge before the arbitrator in the first instance. In the petition filed before the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996, the appellant has only prayed for quashing the appointment of the Superintendent Engineer, Arbitration Circle, HPPWD, as the sole arbitrator as unconstitutional and sought for appointment of an independent and impartial sole arbitrator to adjudicate the dispute between the parties. It is fairly well settled that any challenge to the arbitrator appointed ought to have been raised before the arbitrator himself in the first instance. [Para 13][1015-F-H; 1016-A-B]
5. As per Section 26 of the Amendment 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 the Amendment Act unless the parties otherwise agree. In the facts and circumstances of the present case, the proviso in clause (65) of the general conditions of the contract cannot be taken to be the agreement between the parties so as to apply the provisions of the amended Act. In the present case, arbitration proceedings commenced way back in 2013, much prior to coming into force of the amended Act and therefore, provisions of the amended Act cannot be invoked. [Para 15][1017-A-D]
Board of Control for Cricket in India v. Kochi Cricket Private Limited and others (2018) 6 SCC 287: [2018]
2 SCR 829 – relied on.
Ratna Infrastructure Projects Pvt. Ltd. v. Meja Urja Nigam Private Limited (2017) SCC Online Del 7808 – referred to.
6. In the present case, the Arbitrator has been appointed as per clause (65) of the agreement and as per the provisions of law. Once, the appointment of an arbitrator is made at the instance of the government, the arbitration agreement could not have been invoked for the second time. [Para 19][1019-C-D] Antrix Corporation Limited v. Devas Multimedia Private Limited (2014) 11 SCC 560 : [2013] 6 SCR 453 – relied on.
7. Section 25 of the Arbitration Act, 1996 deals with the situation where the parties commit default without showing sufficient cause and consequent termination of the proceedings. Section 25 provides three situations where on account of the default of a party, the arbitral tribunal shall terminate the proceedings. Section 25(a) provides that the Arbitral Tribunal shall terminate the proceedings where the claimants failed to communicate his claim in accordance with sub-section (1) of Section 23 of the Act. In the present case, the appellant has failed to file his statement of claim; and only sent the communication to the arbitrator seeking adjournment on the ground that the appellant has approached the High Court by filing petition under Section 11(6) of the Act. When the parties have specifically agreed for appointment of sole Arbitrator of the person appointed by the Engineer-in-Chief/Chief Engineer, HPPWD, the appellant was not right in approaching the High Court seeking appointment of an independent Arbitrator. [Para 21][1020-A-F]
8. Inspite of extension of time, since the appellantcontractor had not filed statement of claim, the arbitrator terminated the proceedings under Section 25(a) of the 1996 Act. The appellant had been writing letters to the arbitrator before the hearing seeking adjournment. However, on the fourth occasion, proceedings were simply terminated since no hearings were held on earlier occasions, he expected that his request might be accepted. The arbitrator could have issued a notice warning the appellant that no adjournment would be granted under any circumstances. Since, no such warning was given, it would be appropriate to set aside the order of termination. In the interest of justice, an opportunity is to be afforded to the appellant to go before the departmental arbitrator (as agreed by the parties in clause (65) of the general conditions of contract. [Para 22] [1020-F-H; 1021-A-B]
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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