Delhi High Court | Appointment of Arbitrators Post-2015 Amendment must adhere to eligibility criteria regardless of contract execution and arbitration commencement dates

Delhi High Court

Delhi High Court: A petition was filed under Section 14 read with Section 15 of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’) seeking substitution of the Sole Arbitrator as the Sole Arbitrator adjudicating the disputes between the parties was unilaterally appointed by the Respondent. Prathiba M Singh, J., held that notwithstanding the date of execution of the contract and the commencement of the arbitral proceedings, the appointment of an arbitrator by reasons of resignation/ withdrawal/ any other reason, after coming into force of the 2015 Amendment shall have to meet the test of eligibility in terms of Section 12 r/w Seventh Schedule of the Arbitration Act.

The arbitration proceedings commenced in 2008 but have yet to culminate in a final award due to repeated changes of Arbitrators and the conduct of the parties. The Respondent had awarded three packages for the construction and/or upgradation of Rural Roads under the Pradhan Mantri Gram Sadak (MPPRDA contract) to the petitioner. These packages numbered MP-0735, MP-0737, and MP-0739, were awarded to the Petitioner on 28-11-2007. Subsequently, disputes arose regarding the performance of the MPPRDA Contract, leading to the appointment of A.K. Duggal as the Sole Arbitrator in 2008, in accordance with Clause 12 of the Terms and Conditions annexed with the MPPRDA Contract.

Clause 12 of the MPPRDA Contract stipulates that in the event of any dispute or difference arising between the Telecommunications Consultants India Limited (TCIL) and the tenderer, the matter shall be referred to the Chairman & Managing Director, TCIL, within 90-days of the dispute. The Chairman & Managing Director may act as the Sole Arbitrator or appoint an officer of TCIL as the Sole Arbitrator. The Clause also specifies that the arbitration proceedings shall be held in New Delhi and that only courts in Delhi shall have jurisdiction if the tenderer wants to challenge the arbitration award.

The parties filed their statement of claims and counterclaims, but the Arbitrator, A.K. Duggal, resigned on 05-02-2012. The Respondent then unilaterally appointed a new Sole Arbitrator, Ms. Shalini Sinha, who served from 2014 until her resignation on 14-12-2023. Following her resignation, the Respondent again unilaterally appointed Mr. Karnal Singh as the Sole Arbitrator on 02-01-2024.

The Petitioner seeks the termination of the mandate of Mr. Karnal Singh and the appointment of an independent Arbitrator. The Petitioner argues that the unilateral appointment by the Respondent, made after the commencement of the 2015 Amendment to the Arbitration and Conciliation Act, is not permissible. The Petitioner relies on the Supreme Court and High Court decisions in Ellora Paper Mills Limited v. State of Madhya Pradesh, (2022) 3 SCC 1; Progressive Infotech Private Limited v. Ircon International Ltd., (2023) SCC OnLine Del 550 and KRR Infra Projects Pvt. Ltd. v. Union of India, (2018) SCC OnLine Del 12418.

In contrast, the Respondent contended that the decision in Ellora Paper Mills Limited (supra) is not applicable and that the Supreme Court’s decision in Union of India v. Parmar Construction Company, (2019) 15 SCC 682 governs the situation. The Respondent argued that since the arbitration was invoked prior to the 2015 Amendment, the appointment by the Respondent should be governed by the pre-2015 Act and the contractual clause citing Shree Vishnu Constructions v. Engineer in Chief Military Engineering Service, (2023) 8 SCC 329 in support of its position.

The Court has considered the matter extensively, noting that the clear ineligibility for any unilateral appointment is outlined in Section 12 of the Arbitration Act, read with the Seventh Schedule. Post-2015 Amendment, any unilateral appointment is contrary to the law. The central question is whether the appointment by the Respondent should be seen as a new appointment or a continuation of the earlier invocation.

The Petitioner references the Supreme Court decision in Ellora Paper Mills Limited (supra), where the Court addressed a similar issue involving the appointment of an arbitral tribunal by the Stationary Purchase Committee after the 2015 Amendments. The Supreme Court held that such an appointment would be contrary to law and appointed an independent Arbitrator instead. Similarly, in Progressive Infotech Private Limited (supra), the Court invalidated the appointment of the MD or his nominee as Arbitrator, emphasizing the need for impartiality post-2015 Amendment.

Furthermore, in KRR Infra Projects Pvt. Ltd. (supra), the Court held that an Arbitrator appointed after the 2015 Amendment must comply with the new eligibility criteria, even if the arbitration agreement was invoked prior to the Amendment. The Respondent’s reliance on Parmar Construction Company (supra), and Shree Vishnu Constructions (supra), is distinguished based on the timing of the appointments and the applicability of the amended Act.

Considering these considerations and to uphold impartiality, the Court deemed it appropriate to appoint Dr. Amit George, Advocate, as the Sole Arbitrator to adjudicate the disputes. The arbitration will proceed under the aegis of the Delhi International Arbitration Centre (DIAC) and follow DIAC Rules. The Arbitrator’s fee will be as per the Fourth Schedule of the 1996 Act, as amended by the DIAC Rules, 2023. The Arbitrator is to expedite the proceedings, considering the dispute dates to 2008. The previous Arbitrator’s pleadings and records will be transmitted to the DIAC, and the new Arbitrator is to endeavor to conclude the proceedings by 31-12-2024. The Court disposed of the petitions and any pending applications accordingly.

[Radhika Engineering Co v. Telecommunication Consultants India Limited, 2024 SCC OnLine Del 4264, decided on 28-05-2024]

Advocates who appeared in this case :

Mr. Ankit Gupta, Mr. Sahil Sonkusale, Mr. Shoeb H. Khan, Mr. Anmol Gupta, Mr. Mithil Malhotra & Mr. Pranjal Agrawal Advocates before petitioner

Mr. Nikhilesh Krishnan, Mr. Abhishek Bhushan Singh & Ms. Ritika Priya, Advocates before respondents

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