Calcutta High Court
M/S Utkal Weigh Bridge And Calibration ... vs Container Corporation Of India Limited on 17 September, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD 17
ORDER SHEET
AP-COM/670/2025
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
M/S UTKAL WEIGH BRIDGE AND CALIBRATION CENTRE
VS
CONTAINER CORPORATION OF INDIA LIMITED
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 17th September, 2025.
Appearance:
Mr. Farhan Ghaffar, Adv.
. . .for the petitioner.
Mr. Debashis Sarkar, Adv.
. . .for the respondent.
The Court:
1. This is an application for appointment of a learned Arbitrator, for
settlement of the disputes which arose between the parties, out of the
tender dated June 4, 2016. The contract between the parties was for
installation and operation of a pitless electronic weigh bridge (60 MT) for
weighment at Inland Container Depat. Balasore, Odisha on Built
Operate Transfer Scheme (BOT), for a period of 10 years. During the
subsistence of the contract, disputes arose. The petitioner alleged that
the respondent did not discharge its obligations under the contract. The
respondent refuted such allegation.
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2. A writ petition was filed by the petitioner, which was dismissed for
default. Thereafter, the writ petition was restored. The same was taken
up for hearing. The same was disposed of upon recording that, as the
contract between the parties contained an arbitration clause, the
dispute should be referred to arbitration. Such order was passed on
April 28, 2025. Accordingly, the petitioner issued a notice invoking
arbitration on June 19, 2025.
3. At the time of invocation, the petitioner claimed that it had outstanding
dues of Rs. 2 crores, which was payable by the respondent. The
respondent did not agree to the request for arbitration and denied the
claim.
4. It is further contended that the mechanism provided under Clause 21.1
of the said contract required the petitioner to approach the tender
accepting authority of (CONCOR) and the petitioner could not raise any
objection if the arbitrator so appointed was an empoyee of CONCOR.
5. Admittedly, the tender was floated some time in 2016 and the contract
was entered into between the parties in 2016. By then, the 2015
amendment of the Arbitration and Conciliation Act, 1996 had already
been given effect to. Section 12(5) was incorporated by the amendment
of 2015. The said section operates as a bar. Appointment of an
Arbitrator from the panel of Arbitrators maintained by an interested
party, appointment of an employee of an interested party and unilateral
appointment of an arbitrator, are barred under the said section.
6. In this regard Reference is made to the decisions of Perkins Eastman
Architects DPC and Another vs. HSCC (India) Ltd. reported in 2019
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SCC OnLine SC 1517, Ellora Paper Mills Ltd. v. State of M.P.,
reported in (2022) 3 SCC 1, TRF Ltd. v. Energo Engg. Projects Ltd.,
reported in (2017) 8 SCC 377 and Central Organisation for Railway
Electrification vs. ECI SPIC SMO MCML (JV) A joint Venture
Company reported in 2024 SCC OnLine SC 3219. The person, who
cannot act as an arbitrator, also cannot appoint an arbitration. The
Hon'ble Apex Court in Central Organization for Railway
Electrification (supra), held thus:-
"73. The 2015 amendment has introduced concrete standards of
impartiality and independence of arbitrators. One of the facets of
impartiality is procedural impartiality. Procedural impartiality
implies that the rules constitutive of the decision-making process
must favour neither party to the dispute or favour or inhibit both
parties equally.137 Further, a procedurally impartial adjudication
entails equal participation of parties in all aspects of adjudication for
the process to approach legitimacy.138 Participation in the
adjudicatory process is meaningless for a party against whom the
arbitrator is already prejudiced.139 Equal participation of parties in
the process of appointment of arbitrators ensures that both sides
have an equal say in the establishment of a genuinely independent
and impartial arbitral process.
74. Under Sections 12(1) and 12(5), the Arbitration Act recognises
certain mandatory standards of independent and impartial tribunals.
The parties have to challenge the independence or impartiality of the
arbitrator or arbitrators in terms of Section 12(3) before the same
arbitral tribunal under Section 13.140 If the tribunal rejects the
challenge, it has to continue with the arbitral proceedings and make
an award. Such an award can always be challenged under Section
34. However, considerable time and expenses are incurred by the
parties by the time the award is set aside by the courts. Equal
participation of parties at the stage of the appointment of arbitrators
can thus obviate later challenges to arbitrators.
75. Independence and impartiality of arbitral proceedings and
equality of parties are concomitant principles. The independence and
impartiality of arbitral proceedings can be effectively enforced only if
the parties can participate equally at all stages of an arbitral process.
Therefore, the principle of equal treatment of parties applies at all
stages of arbitral proceedings, including the stage of the appointment
of arbitrators.
***
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124. The doctrine of bias as evolved in English and Indian law emphasizes independence and impartiality in the process of adjudication to inspire the confidence of the public in the adjudicatory processes. Although Section 12 deals with the quality of independence and impartiality inherent in the arbitrators, the provision's emphasis is to ensure an independent and impartial arbitral process."
7. In Perkins Eastman (supra), the Hon'ble Apex Court held thus :-
..."20. We thus have two categories of cases. The first, similar to the one dealt with in TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself but is empowered or authorised to appoint any other person of his choice or discretion as an arbitrator. If, in the first category of cases, the Managing Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or result of the dispute. The element of invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be the test, similar invalidity would always arise and spring even in the second category of cases. If the interest that he has in the outcome of the dispute, is taken to be the basis for the possibility of bias, it will always be present irrespective of whether the matter stands under the first or second category of cases. We are conscious that if such deduction is drawn from the decision of this Court in TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] , all cases having clauses similar to that with which we are presently concerned, a party to the agreement would be disentitled to make any appointment of an arbitrator on its own and it would always be available to argue that a party or an official or an authority having interest in the dispute would be disentitled to make appointment of an arbitrator.
21. But, in our view that has to be the logical deduction from TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 :
(2017) 4 SCC (Civ) 72] Para 50 of the decision shows that this Court was concerned with the issue, "whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an arbitrator" The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator. The next sentences in the paragraph, further show that cases where both the parties could 5 nominate respective arbitrators of their choice were found to be completely a different situation. The reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter-balanced by equal power with the other party.But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution.
Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) and recognised by the decision of this Court in TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] ...
24. In Voestalpine [VoestalpineSchienen GmbH v. DMRC, (2017) 4 SCC 665 : (2017) 2 SCC (Civ) 607] , this Court dealt with independence and impartiality of the arbitrator as under : (SCC pp. 687-88 & 690-91, paras 20 to 22 & 30) "20. Independence and impartiality of the arbitrator are the hallmarks of any arbitration proceedings. Rule against bias is one of the fundamental principles of natural justice which applied to all judicial and quasi-judicial proceedings. It is for this reason that notwithstanding the fact that relationship between the parties to the arbitration and the arbitrators themselves are contractual in nature and the source of an arbitrator's appointment is deduced from the agreement entered into between the parties, notwithstanding the same non-independence and non-impartiality of such arbitrator (though contractually agreed upon) would render him ineligible to conduct the arbitration. The genesis behind this rational is that even when an arbitrator is appointed in terms of contract and by the parties to the contract, he is independent of the parties. Functions and duties require him to rise above the partisan interest of the parties and not to act in, or so as to further, the particular interest of either parties. After all, the arbitrator has adjudicatory role to perform and, therefore, he must be independent of parties as well as impartial. The United Kingdom Supreme Court has beautifully highlighted this aspect in Hashwani v. Jivraj [Hashwani v. Jivraj, (2011) 1 WLR 1872 : 2011 UKSC 40] in the following words : (WLR p. 1889, para 45) '45. ... the dominant purpose of appointing an arbitrator or arbitrators is the impartial resolution of the dispute between the parties in accordance with the terms of the agreement and, although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not personal services under the direction of the parties.'
21. Similarly, Cour de Cassation, France, in a judgment delivered in 1972 in Consorts Ury [Fouchard, Gaillard, Goldman on International Commercial Arbitration, 562 [Emmanuel Gaillard & John Savage 6 (Eds.) 1999] {quoting Cour de cassation [Cass.] [Supreme Court for judicial matters] Consorts Ury v. S.A. des Galeries Lafayette, Cass.2e civ., 13-4-1972, JCP, Pt. II, No. 17189 (1972) (France)}.] , underlined that:
'an independent mind is indispensable in the exercise of judicial power, whatever the source of that power may be, and it is one of the essential qualities of an arbitrator'.
22. Independence and impartiality are two different concepts. An arbitrator may be independent and yet, lack impartiality, or vice versa. Impartiality, as is well accepted, is a more subjective concept as compared to independence. Independence, which is more an objective concept, may, thus, be more straightforwardly ascertained by the parties at the outset of the arbitration proceedings in light of the circumstances disclosed by the arbitrator, while partiality will more likely surface during the arbitration proceedings. ***
30. Time has come to send positive signals to the international business community, in order to create healthy arbitration environment and conducive arbitration culture in this country. Further, as highlighted by the Law Commission also in its report, duty becomes more onerous in government contracts, where one of the parties to the dispute is the Government or public sector undertaking itself and the authority to appoint the arbitrator rests with it. In the instant case also, though choice is given by DMRC to the opposite party but it is limited to choose an arbitrator from the panel prepared by DMRC. It, therefore, becomes imperative to have a much broadbased panel, so that there is no misapprehension that principle of impartiality and independence would be discarded at any stage of the proceedings, specially at the stage of constitution of the Arbitral Tribunal. We, therefore, direct that DMRC shall prepare a broadbased panel on the aforesaid lines, within a period of two months from today..."
8. In the TRF Ltd (supra), the Hon'ble Apex Court held as follows:-
"53. The aforesaid authorities have been commended to us to establish the proposition that if the nomination of an arbitrator by an ineligible arbitrator is allowed, it would tantamount to carrying on the proceeding of arbitration by himself. According to the learned counsel for the appellant, ineligibility strikes at the root of his power to arbitrate or get it arbitrated upon by a nominee.
54. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has 7 become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so."
9. In the decision of Ellora Paper Mills (supra), the Hon'ble Apex Court held as follows:-
"16. As observed hereinabove, the Arbitral Tribunal--Stationery Purchase Committee consisted of officers of the respondent State. Therefore, as per Amendment Act, 2015 -- sub-section (5) of Section 12 read with Seventh Schedule, all of them have become ineligible to become arbitrators and to continue as arbitrators. Section 12 has been amended by the Amendment Act, 2015 based on the recommendations of the Law Commission, which specifically dealt with the issue of "neutrality of arbitrators". To achieve the main purpose for amending the provision, namely, to provide for "neutrality of arbitrators", sub-section (5) of Section 12 lays down that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties or counsel or the subject- matter of the dispute falls under any of the categories specified in the Seventh Schedule, he shall be ineligible to be appointed as an arbitrator. In such an eventuality i.e. when the arbitration clause is found to be foul with the amended provision, the appointment of the arbitrator would be beyond the pale of the arbitration agreement, empowering the Court to appoint such an arbitrator as may be permissible. That would be the effect of the non obstante clause contained in sub-section (5) of Section 12 and the other party cannot insist upon the appointment of the arbitrator in terms of the arbitration agreement.
17. It cannot be disputed that in the present case, the Stationery Purchase Committee--Arbitral Tribunal comprising of officers of the respondent State are all ineligible to become and/or to continue as arbitrators in view of the mandate of sub-section (5) of Section 12 read with Seventh Schedule. Therefore, by operation of law and by amending Section 12 and bringing on statute sub-section (5) of Section 12 read with Seventh Schedule, the earlier Arbitral Tribunal--Stationery Purchase Committee comprising of the Additional Secretary, Department of Revenue as President, and: (i) Deputy Secretary, Department of Revenue, (ii) Deputy Secretary, General Administration Department, (iii) Deputy Secretary, Department of Finance, (iv) Deputy Secretary/Under-8
Secretary, General Administration Department, and (v) Senior Deputy Controller of Head Office, Printing as Members, has lost its mandate and such an Arbitral Tribunal cannot be permitted to continue and therefore a fresh arbitrator has to be appointed as per the Arbitration Act, 1996."
10. It is also a settled position that, mere incorporation of a clause in the agreement that an employee of the respondent could be appointed as an Arbitrator, would not amount to automatic waiver of the applicability of Section 12(5) of the said Act. For a party to waive the said provision, there has to be an agreement in writing.
11. In the instant case, the respondent has not been able to disclose that the petitioner had agreed to waive the applicability of Section 12(5), by a written communication.
12. Under such circumstances, the mechanism agreed to between the parties to the contract has failed in view of the legal bar. The petitioner has rightly approached this Court for appointment of an Arbitrator in accordance with law.
13. The application is disposed of by appointing Justice Siddhartha Roy Chowdhury, [Mob. No. 9434196059] former Judge of this Court, as the Arbitrator, to arbitrate upon the disputes between the parties. This appointment is subject to compliance of Section 12 of the Arbitration and Conciliation Act, 1996. The learned Arbitrator shall fix his own remuneration as per the Schedule of the Act.
14. The application is, accordingly, disposed of.
(SHAMPA SARKAR, J.) SP/