Allahabad High Court
M/S Sips Tbea Joint Venture vs Central Organisation Of Railway on 28 July, 2025
Author: Piyush Agrawal
Bench: Piyush Agrawal
HIGH COURT OF JUDICATURE AT ALLAHABAD Neutral Citation No. - 2025:AHC:123429 Court No. - 7 Case :- MATTERS UNDER ARTICLE 227 No. - 11664 of 2024 Petitioner :- M/S Sips Tbea Joint Venture Respondent :- Central Organisation Of Railway Counsel for Petitioner :- Kartikeya Saran,Ujjawal Satsangi Counsel for Respondent :- A.S.G.I.,Manoj Kumar Singh HON'BLE PIYUSH AGRAWAL,J.
1. Heard Sri Kartikeya Saran along with Sri Ujjawal Satsangi and Sri Vinam Gupta,learned counsel for the petitioner and Sri Manoj Kumar Singh, learned counsel for the respondent no.1.
2. The present petition under Article 227 of the Constitution No.- 11664 of 2024 has been filed against the order dated 03.09.2024 passed by Presiding Officer, Commercial Court, Prayagraj in Arbitration Case No. 16/2024.
3. Brief facts as stated in the petition are that a tender dated 16.07.2018 was floated by the respondent for design, supply, erection, testing and commissioning of 25kV, 50Hz, single Phase, AC, Electrification etc. in single and double line track in Ahemdabad Division of the western railway. The petitioner being the successful bidder for the said project, entered into a contract agreement no. ELCORE/TOHE/Group-213/292/01 dated 05.12.2018 of the value INR 193,28,31,150.56/- with the respondent. During the execution of the said contract agreement, certain dispute arose between the parties after which the respondent issued a termination letter. The party proceeded for arbitration before the arbitral tribunal comprising of three arbitrators. The arbitral tribunal passed it first order on 16.02.2024 in which it was undertaken that "necessary certification as per 12(1) of the Act shall be submitted before start of the proceedings". The two out of three arbitrators namely Mr. Goutam Banerjee and Ms. Aradhna Chak gave their declarations on 16.02.2024 and 19.02.2024 respectively, but the third arbitrator namely Mr. Y.P. Singh failed to do so. On 05.04.2024 the petitioner filed its statement of claim as directed by the arbitral tribunal and subsequently on 25.04.2024 the respondent filed its statement of defence. While the declaration of the third arbitrator was still awaited, the first hearing of arbitration was held on 24.05.2024 without the compliance of the first order dated 16.02.2024 of the arbitral tribunal. The petitioner further preferred application under sec. 14 and 15 of the Arbitration and Conciliation Act, 1996 (hereinafter referred as Act) before commercial court, Prayagraj, Uttar Pradesh on 27.05.2024. On 28.05.2024 the commercial court passed an order issuing notice to the respondent and posted the matter for consideration of injunction application on 04.06.2024. On 05.06.2024 the third arbitrator, at this stage came up with his declaration, the day before the scheduled date of further hearing of arbitral proceeding. On 03.09.2024, the commercial court passed an order dismissing the petitioner's application under sec. 14 on the ground of maintainability while holding that the same is premised on procedural aspects. Hence, the present writ petition.
4. Learned counsel for the petitioner submits that the all the three arbitrators were failed to make proper declaration as per the law and the declaration made by them are fall short of declaring whether any of their arbitrations involved the Railways/CORE as a party. Further, the third arbitrator, Mr. Y.P Singh, submitted a highly belated and false declaration dated 05.06.2024 , only after the petitioner filed an application before the commercial court. The above made false and delayed declarations are against the provision under sec 12(1) read with fifth schedule of the Act.
5. He further submits that the impugned order passed on 03.09.2024 by the learned commercial court wherein the commercial court dismissed the Petitioner's application under sec 14 on the ground of maintainability and held that the petitioner has not preferred an application under sec 13 within 15 days despite noting the submission of the applicant/petitioner that sec 13 is not applicable to a case of false declaration or non-declaration, which is in fact a ground for sec 14 of the Act. He further submits that the Commercial court failed even to discuss the violation of Sec 12 of the Act by the third arbitrator and simply adopted as its reasoning that the application has been preferred only on account of procedural aspect.
6. In support of his submission, learned counsel for the petitioner has relied upon the following judgements:
i) Dream Valley Farms Private Limited & Anr vs Religare Finvest Limited & Ors, 2016:DHC:7050;
ii) Alcove Industries Ltd. vs Oriental Structural Engineers Ltd. ILR(2008)1DELHI 1113;
iii ) Imaging Solutions Pvt. Ltd. vs Hughes Communications India Ltd. & Ors, 2013 (1)ARBLR433(P&H);
iv) Ram Kumar and Anr v. Shriram Transport Finance Co. Ltd. 2022 SCC online Del4268;
v) M/S Aargee Engineers & Co. And Another vs Era Infra Engineering Ltd. And 2 Ors. Manu/UP/0466/2017.
7. Per Contra, Mr. Manoj Kumar Singh, learned counsel for the respondent supports the impugned order.
8. After hearing learned counsel for the parties, the court has perused the records.
9. The record shows that the petitioner, being the successful bidder for the railway project floated by the respondent, entered into a contract agreement no. ELCORE/TOHE/Group-213/292/01 of the value INR 193,28,31,150.56/- with the respondent. During the execution of contract, certain dispute arose between the parties owing to which parties proceeded for arbitration before the arbitral tribunal comprises of three arbitrators. The arbitral tribunal passed its first order being Arbitration Notification No.1 on 16.02.2024 categorically undertaking that "necessary certification as per 12(1) of the Act shall be submitted before start of the proceedings". The first arbitrator, Mr. Goutam Banerjee gave his declaration on the same day that is 16.02.2024 and subsequently the second arbitrator, Ms. Aradhna Chak also gave her declaration on 19.02.2024, however, the third arbitrator, Mr Y.P Singh, failed to furnish the mandatory declaration. Further, during the course of proceeding, it has come on record that the initial hearing was held on 24.05.2024 and further hearing was scheduled on 06.06.2024, whereas the declaration by the third arbitrator, Mr Y.P Singh was made on 05.06.2024 i.e. just one day prior to the scheduled date of the next hearing of the arbitration proceeding and subsequent to the filing of application by the petitioner before learned commercial court. This delayed disclosure is in non-compliance of the first order of the tribunal as well as violative of the Sec. 12(1) of the Act which is not discretionary rather mandatory. It is pertinent to note that, as per sec 12 read with fifth schedule of the Act, every person when approached to be appointed as arbitrator is mandatorily required to make a full and prompt disclosure regarding any past or present relationships or interest which may not raise any justifiable doubts as to their independence or impartiality.
10. The section 12(1) of the Arbitration and Conciliation Act, 1996, reads as under:
"12. Grounds for challenge.-- (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances,--
(a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and
(b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months. Explanation1.--The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.
Explanation 2.--The disclosure shall be made by such person in the form specified in the Sixth Schedule."
11. Bare perusal of the aforesaid section clearly demonstrates that person appointed as an Arbitrator must disclose in writing its previous affiliation to the parties, in any way, just to wipe off the slightest doubt of non-independence or partial.
12. The credibility of arbitrations depends entirely on independence and impartiality of the arbitration panel. The herein-above referred sec 12(1) select pre-requisites exist to enforce arbitrator disclosure of possible bias and preserve complete impartiality during arbitration proceeding but in the present case one of the three arbitrators failed to comply with the provision of sec 12(1) of the Act as the disclosure made by the third arbitrator namely Mr. Y.P Singh was unreasonably delayed. The said disclosure was also in non-compliance of the order dated 16.02.2024 which required the submission of disclosure before the start of the proceedings.
13. It may noted that the constitutional bench of Hon'ble Supreme Court in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) A JOINT VENTURE COMPANY (2025) 4 SCC 641 held that it is mandatory for the persons who has been approached to be appointed as the arbitrator to disclose in writing the circumstances that are likely to give rise to justifiable doubts as to his independence and impartiality before their appointment. The relevant paragraphs of the said judgement is quoted hereunder:
"iv. Independence and impartiality of arbitrators:
42. Section 12 provides the grounds to challenge the appointment of arbitrators.75 Section 12(1) mandates that a person who has been approached to be appointed as an arbitrator must disclose in writing any circumstances that are likely to give rise to "justifiable doubts as to his independence or impartiality." The Fifth Schedule to the Arbitration Act specifies circumstances that give rise to justifiable doubts as to the independence or impartiality of arbitrators. Section 12(1) also mandates an arbitrator to disclose in writing any circumstances that are likely to affect the ability to devote sufficient time to the arbitration and in particular the ability to complete the entire arbitration within twelve months. The duty of disclosure is a continuing duty. Section 12(3) provides that an arbitrator may be challenged only if: (i) circumstances exist that give rise to justifiable doubts as to independence or impartiality; or (ii) the arbitrator does not possess the qualifications agreed to by the parties.
43. ...
44. The 2015 amendment mandates arbitrators to make disclosures before their appointment in terms of the categories specified under the Fifth Schedule. The Fifth Schedule prescribes thirty-four categories that give rise to justifiable doubts as to the independence or impartiality of arbitrators. These categories are classified as follows: (i) the relationship of the arbitrator with the parties or counsel; (ii) the relationship of the arbitrator to the dispute; (iii) the arbitrator's direct or indirect interest in the dispute; (iv) previous services rendered by the arbitrator to one of the parties or other involvement in the case; (v) relationship between an arbitrator and another arbitrator or counsel; (vi) relationship between arbitrator and party and others involved in the arbitration, and (vii) and other circumstances.
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(v) Bias and doctrine of necessity in the context of the Arbitration Act:-
110. In comparison to other jurisdictions, the Arbitration Act has adopted a different approach to deal with the issue of arbitrator bias. Through the 2015 amendment, the Arbitration Act provides an extensive list of circumstances which may give rise to justifiable doubts as to an arbitrator's independence or impartiality. The enumeration of categories under the Fifth and Seventh Schedules is inspired by the Orange and Red List of the IBA Guidelines on Conflicts of Interest in International Arbitration.215 In HRD Corporation (supra) this Court observed that the categories listed under the Fifth and Seventh Schedules must be construed by taking a "broad commonsensical approach" without restricting or enlarging the words.
111. Section 12 of the Arbitration Act places a duty on a person who is approached for appointment as an arbitrator to disclose in writing any direct or indirect circumstances such as: (i) the existence of any direct or indirect past or present relationship with any of the parties; (ii) interest in any of the parties; or (iii) interest in relation to the subject-matter in dispute, whether financial, business, professional, or other kind. The disclosure of circumstances made by an arbitrator is a procedural safeguard which allows the parties to assess whether disqualification of the arbitrator is required for a case. Disclosure allows an arbitrator to overcome an appearance of bias. The parties may challenge the appointment of an arbitrator if the circumstances give rise to "justifiable doubts" as to their independence or impartiality.
113. The fundamental premise of arbitration is the impartial resolution of disputes between parties according to the arbitration agreement. Unlike a judge, an arbitrator is generally engaged in occupations and professions before, during, and after the arbitral proceedings. The arbitrators may also have had prior commercial or professional contacts and relationships with either of the parties to the dispute. In such circumstances, arbitration law has evolved safeguards and mechanisms to ensure the independence and impartiality of the arbitral procedure. The independence of an arbitrator is generally considered with respect to the relationships or links between the arbitrator and one of the parties, whether financial, professional, employment or personal.218 The independence of an arbitrator can be deduced objectively because the dependence arises from the relationship between an arbitrator and one of the parties, or somebody closely connected with one of the parties.219 In comparison, the existence of impartiality is inferred from facts and circumstances surrounding an arbitrator's exercise of quasi-judicial functions.
114. An arbitrator will not be automatically disqualified in situations where the relationship of an arbitrator with parties does not fall under the categories mentioned under the Seventh Schedule. Yet, either of the parties may have "justifiable doubts" about the independence or impartiality of the arbitrator. The party challenging the appointment of an arbitrator does not need to demonstrate that the arbitrator lacks independence or impartiality. It only needs to show that there are possible "doubts" as to an arbitrator's independence or impartiality. The purpose behind incorporating the word "justifiable" under Section 12 was to establish an objective standard for impartiality and independence. Resultantly, the possibility of "doubts" must be "real" in the sense that they should be derived from the objective circumstances disclosed by an arbitrator."
14. Keeping in view the judgment quoted above and the interpretation of sec 12(1) of the Act, this court is of the considered view that the arbitrator namely Mr. Y.P Singh failed to adhere the mandatory requirement to give disclosure before the appointment as arbitrator as he not only gave the disclosure after the appointment but also belatedly-after the first hearing had already taken place and the next hearing had been scheduled. Such a lapse defeats the very purpose of the statutory safeguard intended to ensure transparency and fairness in arbitral proceedings, and therefore, cannot be condoned.
15. Accordingly, the order dated 03.09.2024, passed by the Commercial Court, Prayagraj, Uttar Pradesh stands set aside and the matter is remanded back to the said court to be considered afresh on the merits and in accordance with the law.
16. The petition stands partly allowed.
Order Date :-28/07/2025 Amit Mishra