Punjab and Haryana High Court

Punjab and Haryana High Court: In a petition filed under Section 11(6) of Arbitration and Conciliation Act, 1996 (‘Arbitration Act’) seeking appointment of an Arbitrator, Suvir Sehgal, J. deprecated the State instrumentalities’ general and strong approach to contest over appointment of arbitrators.

The petitioner – Knight Frank, was an International Property Consultant company which entered into agreement on 29-08-2018 with Punjab Heritage and Tourism Promotion Board as a Transaction Advisor to provide its services for optimal utilization of unutilized properties under the control of Tourism Department and their development, operation and maintenance on public private partnership mode. Since the work was divided into three stages, the petitioner completed first two stages and submitted detailed reports.

Vide letter dated 7-10-2019, the respondent decided to curtail the scope of work to first stage and terminated the agreement. The petitioner’s request to release the payment due was declined beyond the first stage, which led to the dispute. After receiving a legal notice from the petitioner to invoke arbitration clause, the respondent appointed a sole arbitrator. The Court vide order dated 1-04-2022 directed adjournment of the proceedings before the Arbitrator beyond the date fixed by the Court.

The Court rejected the respondent’s objection regarding respondent being impleaded through the Chief Executive Officer. They further objected to the appointment of arbitrator on the ground that the Principal Secretary, Tourism had appointed an arbitrator in terms of arbitration clause and highlighted the official being ineligible for appointment as arbitrator following the decision in Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760. The Court referred to Glock Asia-Pacific Ltd. v. Union of India, (2023) 8 SCC 226 in this regard.

On the respondent’s objection that an arbitrator has to be appointed under Section 55 of the Punjab Cooperative Societies Act of 1961, the Court found the same frivolous in the absence of any material on record to show that the respondent was a registered co-operative society under 1961 Act. The Court pointed towards the Punjab Heritage and Tourism Promotion Board Byelaws, 2008 to reflect that the respondent was set up by Punjab Govt and subsequently registered as a Public Charitable Trust on 5-12-2002. It further highlighted that in case of Kisan Workers Cooperative Labour and Construction Society Ltd. v. Amritsar Cooperative Labour and Construction, wherein the Court held that Section 55 of 1961 Act for reference to arbitration applies to disputes surrounding constitution, management or business of a Cooperative Society. The Court clarified that it was not a situation in the instant matter since neither the respondent was a society under 1961 Act, nor the dispute fell within the ambit of Section 55.

The Court said that all the objections raised by the respondent were overruled. It further expressed its disapproval of petitions for appointment of the Arbitrator being strongly contested by the respondents on a general basis, while being State instrumentalities or authorities, sometimes raising frivolous objections. The Court commented that “Such an approach would defeat the intent and objective behind the incorporation of the Act of 1996, which provides for a speedy and efficacious resolution of disputes.”

The Court negated the authority of the arbitrator appointed by the Additional Chief Secretary due to ineligibility arising out of Section 12 (5) of Arbitration Act, statutorily incapacitated to nominate any person as an arbitrator. The Court allowed the instant petition and appointed a former Judge of the same Court to act as the sole Arbitrator to adjudicate the dispute, subject to declaration to be made under Section 12 regarding independence and impartiality to adjudicate the dispute.

[Knight Frank (India) Pvt. Ltd. v. Punjab Heritage and Tourism Promotion Board, 2024 SCC OnLine P&H 528, decided on 6-02-2024]

Judgment by: Justice Suvir Sehgal

Advocates who appeared in this case :

For Petitioner: Advocate Abhinav Sood, Advocate Anmol Gupta

For Respondent: Senior Advocate Dharam Vir Sharma, Advocate Pooja Yadav

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