Catherine Green
Executive Director
ReSolution | Nov 2017 24
SC: Employee of a party allowed as ‘arbitrator’ in proceedings initiated prior to 2015 amendment to the Arbitration and Conciliation Act CONT...
Background
The matter involved an interesting proposition of law in dealing with a challenge raised by Era Infra before the Delhi High Court in two separate petitions filed against Aravali Power under Section 14 and 11(6) of the 1996 Act, inter alia, on the grounds of apprehension of bias and justifiable doubts as to the independence and impartiality of the nominated arbitrator appointed as per the arbitration agreement between the parties. The Delhi High Court allowed both petitions holding that Section 12 of the 1996 Act even prior to the amendment in 2015, maintained the neutrality of arbitrators and emphasised appointment of independent and impartial arbitrators so that the arbitration procedure is fair and unbiased.
In the present case, Aravali Power awarded a contract to Era Infra for construction work of permanent township for Indira Gandhi Super Thermal Power Project at Jhajjar. The relevant portion of the arbitration agreement contained in the contract stipulated as under:
“56. Arbitration:-
… shall be referred to the Sole Arbitration of the Project In-charge of the Project concerned of the owner, and if the Project In-charge is unable or unwilling to act, to the sole arbitration of some other persons appointed by the Chairman and Managing Director, NTPC limited (Formerly National Thermal Power Corporation Ltd) willing to act as such Arbitrator. There will be no objections, if the Arbitrator so appointed is an employee of NTPC Limited (Formerly National Thermal Power Corporation Ltd), and that he had to deal with the matters to which the contract relates and that in the course of his duties as such he had expressed views on all or any of the matters in disputes or difference. The Arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason as aforesaid at the time of such transfer, vacations of office or inability to act, Chairman and Managing Directors, NTPC limited (Formerly National Thermal Power Corporation Ltd.), shall appoint another person to act as Arbitrator in accordance with the terms of the contract...”
Era Infra vide letter dated 29 July 2015 sought appointment of an arbitrator, being a retired judge of the High Court, for adjudication of disputes which had arisen between the parties on account of delay in completion of the contract by disputing the arbitration agreement, inter alia, on the ground that “nobody can be a judge in his own cause” and sought reference to an independent tribunal. Aravali Power, while refuting the contentions raised by Era Infra, proceeded to appoint its chief executive officer as the sole arbitrator on 19 August 2015. Accordingly, the parties appeared before the sole arbitrator on 7 October, 2015 and thereafter Era Infra on 4 December, 2015 sought extension of time to file its statement of claim. However, Era Infra did not raise any dispute regarding the appointment or continuation of the arbitration proceedings. According to the record, the sole arbitrator granted one month’s time, as prayed for.
On 12 January, 2016, Era Infra sought to challenge the appointment of the arbitrator and raised an objection regarding constitution of the arbitral tribunal. The sole arbitrator ruled on his jurisdiction and rejected Era Infra’s contention on the ground that it had participated in the arbitral proceedings on 7 October, 2015 without raising any protest. Era Infra was then intimated to attend proceedings in the arbitration scheduled to be held on 16 February 2016. Era Infra however, approached the Delhi High Court by filing petitions as aforesaid, seeking termination of the mandate of the arbitrator and for appointing an independent arbitrator.
On 12 September 2017, the Supreme Court of India, in the matter of Aravali Power Company Private Limited Vs. M/s Era Infra Engineering Limited[1] set-aside the common judgment and order dated 29 July 2016 passed by the Delhi High Court in OMP (T) No. 13/2016 filed under Section 14 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the 1996 Act”) seeking termination of mandate of the arbitrator and Arbitration Petition No. 136/2016 filed under Section 11 (6) of the 1996 Act for appointing an independent arbitrator for adjudicating disputes between the parties.
SC: Employee of a party allowed as ‘arbitrator’ in proceedings initiated prior to 2015 amendment to the Arbitration and Conciliation Act
- India -
A. Bhargava - J. B. Panda - S. S. Prasad