Rajasthan High Court - Jaipur
Disha Education Society vs Rajasthan Skills And Livelihoods ... on 4 November, 2022
Author: Pankaj Bhandari
Bench: Pankaj Bhandari
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Arbitration Application No. 29/2021
1. Disha Education Society, Having Office At Disha Crown
Building, Katchana Road, Shankar Nagar, Raipur 492007,
Chhattisgarh Through Its Chairman Shri S.K. Jain.
2. Surya Wires Private Limited, Having Office At Disha
Crown Building, Katchana Road, Shankar Nagar, Raipur
492007, Chhattisgarh Through Its Chairman Shri S.K.
Jain.
----Applicants
Versus
Rajasthan Skills And Livelihoods Development Corporation,
Office At EMI Campus, J-8-A, Jhalana Institutional Area, Jaipur
302004, Rajasthan, Through The Managing Director.
----Respondent
For Applicant(s) : Mr. Udit Purohit
For Respondent(s) : Mr. Ajay Singh
HON'BLE MR. JUSTICE PANKAJ BHANDARI
Order
RESERVED ON :: 13/10/2022
PRONOUNCED ON :: 04/11/2022
1. The applicants have filed this Arbitration Application under Section 11 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as "the Act of 1996") for appointment of an Arbitrator.
2. It is pleaded in the Arbitration Application that the non- applicant/respondent approved the Project Application of the applicants under Deen Dayal Upadhyaya Grameen Kaushalya Yojana (hereinafter referred to as "the DDUGKY") to act as Project Implementation Agency for training a target of 3000 rural poor youth on 08.09.2016. A sanction letter was issued by the (Downloaded on 25/12/2022 at 12:47:03 PM) (2 of 7) [ARBAP-29/2021] respondent sanctioning the Skilled Development Project for a duration of 36 months for a total approved cost of Rs.18,99,15,425/- on 25.10.2016. A Memorandum of Understanding (MoU) was executed between the parties on 11.11.2016. The respondent released the first installment of 25% and the applicants started the execution of this flagship programme and complied with the norms and guidelines of the SOP as per the mandate issued under the DDUGKY Scheme. The respondent released the second installment of 50% of the Project. Thereafter, on 23.04.2019 the respondent - Rajasthan Skills And Livelihoods Development Corporation (RSLDC) issued a show cause notice to the applicants for purported non-adherence to the timeline prescribed under the Scheme. The applicants replied to the notice explaining their stand. The respondent, however, imposed a minor penalty of Rs.25,000/- vide letter dated 14.06.2019. Thereafter, another show cause notice was received on 17.07.2019. The applicants replied to the said show cause notice on 05.09.2019. However, the respondent wrongfully and arbitrarily terminated the Project allotted to the applicants on 08.11.2019. The applicant filed an appeal against the penalty of termination before the Higher Official, however, the respondent dismissed the applicant's appeal and invoked the bank guarantee. The respondent also blacklisted the applicants for three years and issued a letter dated 21.01.2021 demanding a sum of Rs.14,05,82,724/- from the applicants without considering the fact that the applicants have already utilized the said sum in training 1600 candidates under the Project. The applicants issued a notice to the respondent on 04.02.2021 invoking the Arbitration Clause (Downloaded on 25/12/2022 at 12:47:03 PM) (3 of 7) [ARBAP-29/2021] against the respondent in terms of Clause 9.1 of the MoU and sent a notice under Section 21 of the Act of 1996 to the respondent.
3. It is contended by the counsel for the applicants that a dispute has arisen between the parties and the same can be referred as per the Arbitration Clause.
4. Counsel for the respondent has vehemently opposed the Arbitration Application. It is contended that the applicants have already availed of the remedy of appeal and no dispute subsists between the parties. It is also contended that this Court had dismissed Arbitration Application of the present applicant - Surya Wires Private Limited in S.B. Arbitration Application No.66/2020 on the ground that the dispute was not referred to the Empowered Committee of Ministry of Rural Development.
5. I have considered the contentions and have carefully gone through the material on record.
6. The provisions of Clause 9 of the Agreement is relevant and the same is reproduced hereunder:
"9. Arbitration and Applicable Laws:
9.1. The parties hereby agree that any controversy, claim or dispute arising in connection with this MoU, and which cannot be resolved amicably shall be referred to the Board of Directors of Rajasthan Skill and Livelihoods Development Corporation in the State and later to the Empowered Committee of Ministry of Rural Development, Government of India, whose decision shall be final and binding on all parties.
9.2 All disputes shall be resolved as per the Government of India policies and applicable Indian Laws.
9.3 If case is filed for judicial remedy, where the Ministry of Rural Development is the First Deponent, the case shall be filed in New Delhi. In case for judicial (Downloaded on 25/12/2022 at 12:47:03 PM) (4 of 7) [ARBAP-29/2021] remedy, where the First Deponent is Rajasthan Skill and Livelihoods Development Corporation, the case shall be filed in the respective court in the State Headquarters."
7. In the rejoinder of the reply, the applicants have placed before this Court an Office Memorandum dated 28.02.2019 whereby the Empowered Committee has been constituted. As per the Constitution of the Empowered Committee, it consists of 10 Members, 3 of which are the Employees of RSLDC and the Managing Director of RSLDC is also a Member of the Empowered Committee. It is contended by counsel for the applicant that since the Managing Director is debarred from being an Arbitrator, the Empowered Committee, which consists of 3 Officers of RSLDC i.e. Managing Director, COO and Manager, the matter cannot be adjudicated by the Empowered Committee and is required to be referred to an Independent Arbitrator as the Managing Director and the Empowered Committee both are having the disqualification as provided under Section 12(5) of the Act of 1996. Under Section 12(5), which is a new provision and relates to dejure inability of an arbitrator to act as such. Under this provision, any prior agreement to the contrary is wiped out by the non-obstante clause in Section 12(5) of the Act of 1996, the moment any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under the Seventh Schedule, the sub-section then declares that such person shall be ineligible to be appointed as an arbitrator.
8. In the present case in hand, by way of rejoinder, the applicants have brought before the Court the Constitution of the Empowered Committee of NRLM under the Chairmanship of (Downloaded on 25/12/2022 at 12:47:03 PM) (5 of 7) [ARBAP-29/2021] Secretary, Ministry of Rural Development wherein the participants include the Managing Director, COO and Manager of respondent - RSLDC. Thus, when the Managing Director himself is ineligible to be appointed as an Arbitrator as well as for nomination of any Arbitrator, any Committee in which he and the other employees of RSLDC are Members would certainly fall under the purview of Section 12(5) of the Act of 1996. Further, in Perkins Eastman Architects DPC & Anr. Versus HSCC (India) Ltd.: AIR 2020 SC 59, it has been held by the Apex Court that if the Managing Director has any interest in the outcome of dispute, it is taken to be a possibility of bias and he would become dis-entitled to not only act as an Arbitrator but also make an appointment of anyone else as an Arbitraor.
9. Order of this Court passed in S.B. Arbitration Application No.66/2020 dated 15.09.2022 would not apply to the facts of the present case as in that case the fact that the Empowered Committee consists of 3 Members, who are the employees of RSLDC, was not brought to the notice of the Court even in the rejoinder filed by the applicant. Thus, the judgment would fall in the category of 'per-in-curiam'.
10. On factual aspects, the applicants had agreed to train 3000 youth, however, they had reduced the number of youth from 3000 to 1600 for which a notice was issued by the respondent. A show cause notice was also issued and thereafter a penalty was imposed and finally the Project was terminated. It is a case of the applicants that a 30 days notice was not given to the applicants and the payment, which has been given by the respondent, is not in excess of the amount spent by the applicants for training 1600 (Downloaded on 25/12/2022 at 12:47:03 PM) (6 of 7) [ARBAP-29/2021] youth. Be that as it may, there exists a dispute between the parties and as per the Arbitration Clause, the Managing Director and the Empowered Committee cannot adjudicate the matter for the very reason that they are barred by the provisions of Section 12(5) of the Act of 1996 to act as an Arbitrator.
11. Thus, this Court deems it proper to appoint Mr. Justice Alok Sharma (Retired), K-29, Income Tax Colony, Tonk Road, Jaipur, as a Sole Arbitrator. It is made clear that the respondent would be free to raise all the objections and counter-claims and the Arbitrator would be free to adjudicate the matter without being influenced by the order passed by this Court as the same pertains only to the extent of appointment of an Arbitrator.
11. The appointment of the sole arbitrator is subject to the declarations being made under Section 12 of the Arbitration and Conciliation Act, 1996 with respect to the independence and impartiality, and the ability to devote sufficient time to complete the arbitration within prescribed period.
12. Accordingly, arbitration application stands allowed. The arbitrator shall be entitled to lay down fees as provided under Manual of Procedure for Alternative Disputes Resolution, 2009 as amended from time to time.
13. Registry is directed to intimate Mr. Justice Alok Sharma (Retired) and obtain his formal consent.
14. The observations made herein-above are only for the purpose of deciding the present application and the same will not disentitle the parties to raise all valid objections before the learned Arbitrator and the Arbitrator will be free to dispose of the said (Downloaded on 25/12/2022 at 12:47:03 PM) (7 of 7) [ARBAP-29/2021] objection without being influenced by the observations made by this Court.
(PANKAJ BHANDARI),J SUNIL SOLANKI /PS (Downloaded on 25/12/2022 at 12:47:03 PM) Powered by TCPDF (www.tcpdf.org)