Delhi High Court: A petition under Section 34 of the Arbitration and Conciliation Act, 1996, (‘the Act’) was filed by Union of India (‘UoI’), the petitioner, for setting aside an award passed by the sole arbitrator on the ground that the arbitrator was appointed unilaterally by UoI. Jasmeet Singh, J., while allowing the petition, held that an award passed by an arbitrator who is appointed unilaterally is a nullity and is liable to be set aside.
Background
In 2015, UoI issued an open tender for construction work at Dwarka, New Delhi. The project included various components such as institutional and hostel blocks with a basement, auditorium, boundary wall, and comprehensive infrastructure systems. The respondent participated in the tender and was awarded the contract through. The work was to be completed within 15 months, however, due to disputes, the respondent invoked arbitration per the arbitration clause under the General Conditions of Contract (‘GCC’). When UoI failed to appoint an arbitrator, the respondent filed a Section 11 petition before the Court, leading to an order to appoint an arbitrator. Consequently, the Addl. Director General appointed a Sole Arbitrator, who conducted the arbitration, and passed an award, partially favouring the respondent.
Contention of UoI
UoI contended that the appointment of the sole arbitrator was invalid under Section 12(5) of the Act, and that Addl. Director General was ineligible to appoint the arbitrator, thereby rendering the arbitration proceedings null and void.
Contention of Respondent
The respondent contended that the appointment was made pursuant to the Court order in passed by the Court in the Section 11 petition, and therefore, was not unilaterally done by UoI.
Decision and Analysis
Upon hearing the submissions made by the parties, the Court noted that it was a well-established principle that a unilateral appointment of an arbitrator was not legally permissible. The Court relied on Bharat Broadband Network Ltd. v. United Telecoms Ltd. (2019) 5 SCC 755 wherein it was observed that Section 12(5) of the Act invalidated any prior agreement if the arbitrator falls under any category listed in the Seventh Schedule, unless waived by an express written agreement after the disputes have arisen. The Court further relied on its recent decision in Telecommunication Consultants India Ltd. v. Shivaa Trading 2024 SCC OnLine Del 2937, reiterating that any arbitration proceedings by an ineligible arbitrator under Section 12(5) are void ab initio.
Thus, the Court held that the appointment by UoI violated Section 12(5) and also the law laid down on the subject vide several Supreme Court judgments.
The Court, therefore, allowed the petition and set aside the award.
[Union Of India v. M. V. Omni Projects (India) Ltd., O.M.P. (Comm) 355 of 2023, Order dated 08-05-2024]
Advocates who appeared in this case :
Advocates for Union of India: Ankur Mahindro, Rohan Taneja
Advocate for Respondent: Subodh Kr. Pathak
Buy Arbitration and Conciliation Act, 1996 HERE
