{"id":245454,"date":"2021-03-12T17:12:23","date_gmt":"2021-03-12T11:42:23","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=245454"},"modified":"2021-03-19T11:05:23","modified_gmt":"2021-03-19T05:35:23","slug":"arbitration-2","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2021\/03\/12\/arbitration-2\/","title":{"rendered":"Del HC | Whether disability of an appointing authority to appoint an arbitrator frustrate the arbitration agreement. HC unravels in light of Arbitration and Conciliation (Amendment) Act, 2015"},"content":{"rendered":"

Delhi High Court: <\/strong>Vibhu Bakhru, J., while addressing the matter in respect to the invocation of an arbitration clause expressed that:<\/p>\n

\n

\u201c\u2026the legislative policy is to encourage arbitration, thus, any interpretation that would nullify an arbitration clause must be avoided.\u201d<\/span><\/p>\n<\/blockquote>\n

What led to the filing of the present petition?<\/strong><\/p>\n

Petitioner (TKE) is a company that has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996, inter alia, <\/em>praying for an arbitral tribunal to be constituted for the purpose of adjudicating the disputes that arose between the parties in relation to the Contract Agreement.<\/p>\n

RITES Ltd. had issued a Notice Inviting Tender for \u201cDevelopment of Integrated Check Post at Dawki (Meghalaya) along Indo-Bangladesh Border\u201d <\/em>for which TKE was awarded the contract.<\/p>\n

Further, TKE submitted that the execution of the work was hampered by RITES due to which TKE suffered losses to the extent of \u20b92,37,23,39,473. The work was stopped by the Border Guards of Bangladesh as it objected to any activity within 40 metres of the International Border. Along with the Border Guards, even the forest department objected to setting up campsites.<\/p>\n

RITES issued a notice calling upon TKE to expedite the work failing which it would terminate the agreement and in response to that TKE stated the reasons for delay.<\/p>\n

Later, RITES terminated the agreement and the same was challenged by TKE before the Meghalaya High Court, which was dismissed and on being aggrieved with the same, TKE filed a Special Leave Petition. Supreme Court had observed that:\u00a0<\/em><\/p>\n

\u201cit would be appropriate for the petitioner to avail of the alternative remedy by filing arbitration petition or civil suit, as it may be advised\u201d.<\/em><\/p>\n

TKE requested the Engineer-In-Charge (EIC) to review the decision of terminating the Agreement and permit it to finish the work or in the alternative, compensate TKE for the damages incurred by it. The EIC rejected the said application, after which TKE invoked the arbitration clause in the agreement.<\/p>\n

Analysis, Law and Decision<\/u><\/strong><\/p>\n

Bench stated that TKE\u2019s contention that it did not invoke the arbitration clause was unmerited since the notice dated 06-03-2020 clearly indicated that the same was a \u201cNotice of Intention to commence Arbitration under Clause 25(1) of the General Conditions of Contract\u201d. <\/em><\/p>\n

TKE sent another notice seeking to correct an error that had crept in the said notice inasmuch as, TKE had wrongly calculated the total amount of its claims as \u20b9237,23,39,473.14\/- instead of \u20b957,11,47,927.91.<\/p>\n

RITES did not respond to TKE\u2019s notice, hence TKE cannot be faulted for preferring the present application under Section 11 of the A&C Act.<\/p>\n

Whether the parties can be referred to arbitration in view of TKE\u2019s stand that the Appointing Authority, cannot appoint an arbitrator?<\/strong>\u00a0<\/strong><\/p>\n

Controversy in the instant matter revolves around the appointment of the arbitrator under Clause 25 of the GCC, which provides that the matters would be referred to a Sole Arbitrator appointed by the Appointing Authority. And, the same would be from a list of three serving officers of RITES of appropriate status, as may be provided by the Appointing Authority and as selected by TKE.<\/strong><\/p>\n

As per Section 12(5) of the A&C Act, the above-said is no longer permissible.<\/p>\n

A serving employee of RITES would be disqualified as RITES is an interested party in the disputes that have arisen and thus, its employee cannot be appointed as an arbitrator.<\/em>\u00a0<\/em><\/p>\n

Whether the disability of the appointing authority to appoint an arbitrator would frustrate the arbitration agreement?<\/strong>\u00a0<\/strong><\/p>\n

After the amendment of A&C Act, 2015 certain persons were declared ineligible to act as arbitrators as per the 7th<\/sup> Schedule of the A&C Act. Although parties can waive the said objection after disputes arise.<\/p>\n

Bench stated that it is not impossible for such persons to act as arbitrators. They can do so if objections to their independence and impartiality are waived in writing, in terms of the proviso to Section 12(5) of the A&C Act.<\/p>\n

In view of the Supreme Court decisions of TRF Ltd.<\/em> v. <\/em>Energo Engineering Projects Ltd.<\/em>: (2017) 8 SCC 377 <\/a><\/span>and Perkins <\/em>Eastman Architects DPC\u00a0 v. HSCC (India) Ltd.<\/em>\u00a0 2019 SCC OnLine SC 1517<\/a><\/span>, <\/em>the appointing authority i.e. the Executive Director of RITES cannot appoint an arbitrator, without the written consent of TKE after disputes arise. However, this would not mean that the arbitration clause stands nullified.<\/span><\/p>\n

Section 12(1) of the A&C Act was substituted and Section 12(5) of the A&C Act was introduced.<\/p>\n

In Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Ltd.<\/em>: (2017) 4 SCC 665<\/a>, the Supreme Court had noted the recommendations made by the Law Commission of India in its 246th Report and had explained the legislative intent of introducing the statutory amendments in Section 12 of the A&C Act. The said decision encapsulates the Court\u2019s view regarding the importance of independence and impartiality of the arbitrators.<\/strong><\/p>\n

In TRF Ltd.<\/em> v. <\/em>Energo Engineering Projects Ltd.<\/em>: (2017) 8 SCC 377<\/a><\/span> Supreme Court had decided that a person who is ineligible by the operation of law to act as an arbitrator would also be ineligible to nominate another person to act as an arbitrator. The said decision was founded on the express language and legislative intent of Section 12(5) of the A&C Act.<\/p>\n

In Perkins Eastman Architects DPC v. HSCC (India) Ltd. <\/span><\/em>2019 SCC OnLine SC 1517<\/a><\/span> Supreme Court interpreted the provisions of Section 12(5) of the A&C Act, in an expansive manner and held that even in cases where the power to appoint an arbitrator was vested with the person who was otherwise ineligible to be appointed as an arbitrator, it would be impermissible for him to exercise the same in view of the ineligibility referred to in TRF Ltd. Thus, a person who is ineligible to act as an arbitrator, would also not be eligible to appoint anyone else as an arbitrator.<\/p>\n

Now, proceeding further in light of the above discussion, Bench while considering that RITES had agreed that the subject disputed are required to be referred to arbitration, could not be heard to contend that the said arbitration would either be conducted in a manner which may compromise the fundamental requirement of an independent and an impartial process or not at all.<\/p>\n

Hence, in the instant matter, by virtue of Section 12(5) of the A&C Act, though appointing authority is ineligible to act as an arbitrator but this would not mean that the entire arbitration agreement would be frustrated.<\/p>\n

In North Eastern Railway v. Tripple Engineering Works<\/em>: (2014) 9 SCC 288<\/a>, the Supreme Court observed that the principle that the court must appoint an arbitrator as per the contract between the parties had seen a significant erosion.<\/p>\n

Power of the Court to appoint Arbitrator<\/strong><\/p>\n

Supreme Court in Indian Oil Corporation Ltd. v. Raja Transport (P) Ltd<\/em>.: (2009) 8 SCC 520<\/a> was also referred wherein the decision was rendered in an appeal against an order passed by the Chief Justice of the Uttaranchal High Court in an application filed under Section 11(6) of the A&C Act appointing a former Judge of that Court as the Sole Arbitrator to adjudicate the disputes between the parties.<\/p>\n

In the above-mentioned decision, Supreme Court held that a Court could appoint an independent arbitrator in cases where it found that the arbitrator named in the agreement or to be appointed as per the procedure as agreed under the agreement, would not be impartial or independent.<\/p>\n

The above principle of the Supreme Court would hold good in the present context as well.<\/p>\n

As held in Indian Oil Corporation Ltd.<\/em> v. Raja Transport (P) Ltd<\/em>.: (2009) 8 SCC 520<\/a> even in cases where the arbitration agreement provides for a procedure for appointment of an arbitrator, a court could appoint an independent arbitrator if there were reasonable grounds to doubt the independence and impartiality of the named arbitrator to be appointed in accordance with the procedure as stipulated under the arbitration agreement.<\/p>\n

Hence no dispute was found as to the existence of the arbitration agreement. As TKE had invoked the arbitration clause but the parties were unable to concur on the appointment of an arbitrator, High Court proposed that Justice (Retd.) Pradeep Nandrajog, former Chief Justice of the High Courts of Rajasthan and Maharashtra be appointed as a Sole Arbitrator.<\/p>\n

Matter to be listed on 19-03-2021.[T.K. Engineering Consortium (P) Ltd. v. Director (Projects) RITES Ltd., 2021 SCC OnLine Del 1188<\/b><\/a>, decided on 08-03-2021]<\/p>\n

\n

Advocates who appeared in this case:<\/strong><\/p>\n

For the Petitioner:<\/p>\n

: Mr Rituraj Biswas, Ms Sujaya<\/p>\n

: Bardhan, Mr Rituraj Choudhary and: Mr Mayan Prasad, Advocates.<\/p>\n

: Mr G. S. Chaturvedi and<\/p>\n

For the Respondents:<\/p>\n

: Mr Shrinkar Chaturvedi, Advocates: for RITES Ltd.<\/p>\n

: Mr Ripu Daman Bhardwaj, CGSC<\/p>\n

: for R-3<\/p>\n","protected":false},"excerpt":{"rendered":"

Delhi High Court: Vibhu Bakhru, J., while addressing the matter in respect to the invocation of an arbitration clause expressed that: \u201c\u2026the <\/p>\n","protected":false},"author":8808,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[23334,17711,3174,2543,29785,31135,45431],"class_list":["post-245454","post","type-post","status-publish","format-standard","hentry","category-casebriefs","category-highcourts","tag-arbitration-conciliation-act","tag-arbitrator","tag-contract","tag-Delhi_High_Court","tag-law","tag-sole-arbitrator","tag-termination-agreement"],"yoast_head":"\nDel HC | Whether disability of an appointing authority to appoint an arbitrator frustrate the arbitration agreement. 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Krishna Kumar, J., allowing the present petition for the appointment of a sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, held that, the decision made is restricted to the peculiar facts of the instant case and shall not be treated as a\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":298424,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/08\/03\/mere-use-of-word-arbitration-or-arbitrator-not-enough-to-construe-an-arbitration-agreement-delhi-hc\/","url_meta":{"origin":245454,"position":1},"title":"Mere use of word \u2018arbitration\u2019 or \u2018arbitrator\u2019 not enough to construe an agreement to be an arbitration agreement: Delhi High Court","author":"Editor","date":"August 3, 2023","format":false,"excerpt":"\u201cIt is palpably clear that the language of the purported arbitration clause must evidence an unambiguous, explicit and unequivocal intention to refer the disputes to arbitration, leaving no room for doubt that parties chose arbitration as their only mode of resolution of disputes.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"delhi high court","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/delhi-high-court.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/delhi-high-court.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/delhi-high-court.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/delhi-high-court.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":242186,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/01\/13\/cal-hc-s-116-arbitration-conciliation-act-1996-reiterating-independence-and-impartiality-of-the-arbitrator-court-appoints-former-justice-of-the-present-court-to-preside-over-as-the-sole-arbi\/","url_meta":{"origin":245454,"position":2},"title":"Cal HC | [S.11(6) Arbitration & Conciliation Act, 1996] Reiterating independence and impartiality of the Arbitrator, Court appoints former justice of the present court to preside over as the sole arbitrator","author":"Editor","date":"January 13, 2021","format":false,"excerpt":"Calcutta High Court: Ashis Kumar Chakraborty, J., while allowing the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 appointed former judge of the present High Court, Sahidullah Munshi as the sole arbitrator in the present matter. In the present application under Section 11(6) of the Arbitration\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":243660,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/02\/10\/del-hc-on-invocation-of-arbitration-clause-if-a-party-appoints-arbitrator-on-its-own-and-does-not-receive-confirmation-from-another-party-should-former-approach-court-under-s-11-of-arbitration-ac\/","url_meta":{"origin":245454,"position":3},"title":"Del HC | On invocation of arbitration clause, if a party appoints arbitrator on its own and does not receive confirmation from another party, should former approach Court under S. 11 of Arbitration Act? HC discusses","author":"Bhumika Indulia","date":"February 10, 2021","format":false,"excerpt":"Delhi High Court: Kameswar Rao, J., decided a petition wherein on the invocation of the arbitration clause, one of the parties appointed the sole arbitrator on its own. The instant petition was filed under Section 11(6) of the Arbitration and Conciliation Act, 1996. Petitioner and the respondents entered into a\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":210176,"url":"https:\/\/www.scconline.com\/blog\/post\/2019\/02\/18\/ker-hc-designation-of-seat-of-arbitration-in-an-agreement-is-akin-to-an-exclusive-jurisdiction-clause\/","url_meta":{"origin":245454,"position":4},"title":"Ker HC | Designation of seat of arbitration in an agreement is akin to an exclusive jurisdiction clause","author":"Bhumika Indulia","date":"February 18, 2019","format":false,"excerpt":"Kerala High Court: The Division Bench of V. Chitambaresh and R. Narayana Pisharadi, JJ. dismissed an appeal filed against the order of District Judge refusing to entertain a petition challenging arbitral award. Appellant was a guarantor to the loan availed of by a company named Anugraha Wood Products Limited from\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":294793,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/06\/16\/delhi-hc-sets-aside-arbitral-award-by-arbitrator-de-jure-inability-legal-updates\/","url_meta":{"origin":245454,"position":5},"title":"Delhi High Court sets aside arbitral award passed by Arbitrator having de jure inability to pass the award","author":"Arunima","date":"June 16, 2023","format":false,"excerpt":"The ineligibility of an Arbitrator goes to the root of his jurisdiction and the Arbitral Award cannot be considered as valid.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"delhi high court","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/delhi-high-court.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/delhi-high-court.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/delhi-high-court.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/delhi-high-court.webp?resize=700%2C400&ssl=1 2x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/245454","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/8808"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=245454"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/245454\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=245454"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=245454"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=245454"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}