Delhi High Court - Orders
Kapoor Tent And Caterers vs Delhi Tourism And Transportation ... on 24 December, 2020
Author: C. Hari Shankar
Bench: C. Hari Shankar
$~14(original side)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (T) (COMM.) 89/2020 & I.A. 12690/2020, I.A.
12691/2020
KAPOOR TENT AND CATERERS ..... Petitioner
Through: Mr. Dhruv Gupta, Mr. Ankur
Katyal, Mr. Harshil Gupta and Ms. Aashi
Jain, Advs.
versus
DELHI TOURISM AND TRANSPORTATION
DEVELOPMENT CORPORATION LTD. ..... Respondent
Through: Ms. Sujata Kashyap, Adv. with
Mr. Ram Niwas, Asstt. Legal Manager of
Respondent
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
ORDER
% 24.12.2020
(video-Conferencing)
I.A. 12691/2020 (Exemption) in O.M.P. (T) (COMM.) 89/2020
1. Exemption allowed, subject to all just exceptions.
2. The application stands disposed of.
O.M.P. (T) (COMM.) 89/2020
1. This is a petition under Section 14(2) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act") seeking termination of the mandate of Mr. G.S. Patnaik, who is presently functioning as sole arbitrator, arbitrating on the disputes between the parties.
Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P. (T) (COMM.) 89/2020 Page 1 of 6 Signing Date:28.12.2020 18:22:422. Issue notice, returnable on 12th April, 2021.
3. Counter affidavit, if any, be filed within four weeks, with advance copy to learned counsel for the petitioner, who may file rejoinder thereto, if any, within two weeks thereof.
I.A. 12690/2020(stay) in O.M.P. (T) (COMM.) 89/2020
1. Mr. Dhruv Gupta, learned counsel appearing for the petitioner, prays for stay of arbitral proceedings and relies on Section 12(5) of the 1996 Act, read with the judgment of the Supreme Court in TRF Ltd. v. Energo Engineering Projects Ltd1 and Perkins Eastman Architects BPC v. HSCC (India) Ltd 2.
2. I agree, prima facie, that this case, is squarely covered by Section 12(5) and the decisions cited by Mr Gupta, as well as the judgment of Supreme Court in Bharat Broadband Network Ltd. v. United Telecoms Ltd. 3, and of this Court in Proddatur Cable TV DG Services v. Siti Cable Network Limited 4 and JMC Projects (India) Ltd. v. Indure Pvt. Ltd. 5
3. Ms. Sujata Kashyap, learned counsel for the respondent, seeks to distinguish these decisions. She submits that Section 12(5), and the above-cited decisions, apply where a person falling within one of the 1 (2017) 8 SCC 377 2 2019 SCC OnLine SC 1517 3 (2019) 5 SCC 755 4 (2020) SCC-OnLine (Del.) 350 5 MANU/DE/1609/2020 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P. (T) (COMM.) 89/2020 Page 2 of 6 Signing Date:28.12.2020 18:22:42 excepted categories in Schedule VII to the 1996 Act was himself authorised to arbitrate on the disputes between the parties to the agreement. In such a situation, she submits, such a person was disabled from so acting, or from appointing another person as arbitrator. Where, however, the arbitration clause did not authorise any person, falling within one of the excepted categories in the VII Schedule to act as arbitrator, and merely empowered him to appoint another, independent, person as arbitrator, Ms Kashyap would seek to submit that the above-cited decisions have no application; neither, equally, in her submission, does Section 12(5) apply to such a case. Inasmuch as the licence agreement dated 1st October, 2004 did not empower the Managing Director (MD)/Chief Executive Officer (CEO) to act as arbitrator, and merely authorized him to appoint another person as arbitrator, Ms Kashyap would submit that the reliance, by Mr Gupta, on Section 12(5) of the 1996 Act, and on the afore-cited decisions, is misplaced.
4. In my view, such a contention does complete violence to the very scheme of the Section 12(5) of the 1996 Act and the law enunciated in the above decisions, and amounts to hairsplitting the proscription, contained therein, on "related" persons acting as arbitrators or appointing others to act as arbitrators, to a vanishing point. To my mind, it is plain that the disability, that visits persons falling within the VII Schedule from appointing arbitrators to arbitrate on the dispute, is not conditional upon such persons also being authorised to act as arbitrators. A reading of Perkins Eastman Architects BPC2 makes it clear that the extension, by the Supreme Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P. (T) (COMM.) 89/2020 Page 3 of 6 Signing Date:28.12.2020 18:22:42 Court, of the disability under Section 12(5), to the appointment of another person as arbitrator, was to maintain the sanctity of the arbitral process, to ensure that the "related" person does not appoint another person, of his choosing, to arbitrate on the dispute, and any possibility of an allegation of "proxy arbitration" was avoided.
5. The arbitration clause in the licence agreement, dated 1st October, 2004, specifically authorizes the MD/CEO of the respondent to appoint the arbitrator to arbitrate on the disputes between the parties. Such conferral of authority, in my opinion, is squarely hit by the law laid down by the Supreme Court in Perkins Eastman Architects BPC2 as well as Section 12(5) of the 1996 Act.
6. Clearly, therefore, the arbitration clause (Clause 53 of the licence agreement) cannot operate, and Mr. G.S. Patnaik, who was appointed as MD/CEO, is, prima facie, de jure incompetent to act as arbitrator.
7. Ms. Sujata Kashyap further contends that Mr. G.S. Patnaik is himself not disabled under any of the clauses of the V Schedule or VII Schedule to the 1996 Act and that he is an independent and impartial arbitrator, who has no relation to either of the parties.
8. This contention stands answered by the judgement of the Supreme Court in HRD Corporation (Marcus Oil & Chemical Division) v. GAIL (India) Ltd. 6 on which Ms. Sujata Kashyap herself relies. The Supreme Court has, in the said judgment, clearly 6 (2018) 12 SCC 471 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P. (T) (COMM.) 89/2020 Page 4 of 6 Signing Date:28.12.2020 18:22:42 distinguished between a case of inability to act as arbitrator because of "relationship" relatable to the VII Schedule, or to the judgements cited hereinabove, and inability relatable to the impartiality of the arbitrator concerned for any other reason. In the former case, the Supreme Court has observed, the authority of the arbitrator to arbitrate on the disputes, stands vitiated ab initio, whereas, in the latter case, the person aggrieved by the continuation of the arbitral proceedings, by the arbitrator concerned, would have to move an application under Section 13 of the 1996 Act, questioning the appointment of arbitrator, so that the Court could form a subjective opinion regarding the independence and impartiality of the arbitrator.
9. In the present case, the authority of Mr. G.S. Patnaik to arbitrate on the disputes between the parties is, prima facie, not imperilled by virtue of any want of independence or impartiality on the part of Mr. Patnaik himself. His authority to have been appointed, or to continue as arbitrator, is jeopardised by Section 12(5) of the 1996 Act and the law laid down by the Supreme Court in Perkins Eastman Architects BPC2. Inasmuch as the appointment of Mr. Patnaik took place after the introduction of Section 12(5) in the 1996 Act, his very appointment as arbitrator is imperilled ab initio.
10. In view thereof, this Court is not required to enter into the aspect of the independence or impartiality of Mr. Patnaik, or, indeed, the fact that he personally was not related to the parties to the disputes, or covered by any of the clauses in the VII Schedule to the 1996 Act.
Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P. (T) (COMM.) 89/2020 Page 5 of 6 Signing Date:28.12.2020 18:22:4211. In view thereof, prima facie, there is merit in the prayer of the petitioner, for stay of the arbitral proceedings presently being conducted by Mr. G.S. Patnaik. Inasmuch as the very authority of Mr. G.S. Patnaik, to have been appointed as arbitrator and to continue his arbitral proceedings, is, prima facie, suspect, allowing the said learned sole arbitrator to continue with the arbitral proceedings may result in irreversible damage. As against this, were the present petition to fail, it would always be open to Mr. Patnaik to continue his arbitral proceedings from that stage. As such the balance of convenience is also in favour of granting interim stay of the arbitral proceedings being conducted by Mr. G.S. Patnaik, for the present.
12. As such, let notice issue on this application, returnable on 12th April, 2021. Response to this application, if any, be filed within four weeks, with advance copy to learned counsel for the petitioner, who may file rejoinder thereto, if any, within two weeks thereof.
13. Till the next date of hearing, there shall be an ad interim stay of the arbitral proceedings being presently conducted by Mr. G.S. Patnaik.
C. HARI SHANKAR, J.
DECEMBER 24, 2020 dsn Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P. (T) (COMM.) 89/2020 Page 6 of 6 Signing Date:28.12.2020 18:22:42