Delhi District Court
M/S S S Builders vs Union Of India And Anr on 2 April, 2025
IN THE COURT OF DR. SHIRISH AGGARWAL
DISTRICT JUDGE - 03, NEW DELHI DISTRICT
PATIALA HOUSE COURT
OMP (Comm.) No.91/19
CNR No.DLND010085882019
M/s S.S. Builders
3/223, Rui Ki Mandi,
Shahganj, Agra-282010 (UP)
...Petitioner
Versus
1. Union of India
Through Chief Engineer (R&D),
Military Engineering Service,
Opposite Jubliee Buss Station Picked,
Secunderabad-900453
2. Shri Narendra Kumar Sehgal
Chief Engineer (QS&C), JT DGTE,
Sole Arbitrator, Engineer-in-Chief,
Kashmir House, Rajaji Marg,
New Delhi-110011.
...Respondent
Date of institution : 20.05.2019
Date on which reserved for judgment : 02.04.2025
Date of decision : 02.04.2025
Decision : Petition allowed.
JUDGMENT
1. The present case is a petition filed under Section 34 of the Arbitration and Conciliation Act for setting aside of the award OMP (Comm) No.91/2019 M/s S.S. Builders Vs. Union of India & Anr. 1/5 dated 11.02.2019 passed by the sole Arbitrator Mr. Narendra Saigal, Chief Engineer (QS & C).
2. It is submitted by the Ld. Counsel for the petitioner that the award has to be set aside solely on the ground that the sole arbitrator was an employee of the respondent no. 1 and therefore, was ineligible to be appointed as an Arbitrator.
3. Despite asking by the Court, no submissions have been made by Ld. Counsel for defendant no. 1 in this regard.
4. Arguments have been heard and record has been perused.
5. It is evident from paragraph no. 2 of the award that the sole Arbitrator was unilaterally appointed by the respondent no. 1 herein on 16.03.2018.
6. The Arbitration and Conciliation (Amendment) Act, 2015 came into force on 23.10.2015. Therefore, the Arbitrator Mr. Narendra Saigal was appointed after the Amendment Act came into force. Section 12(5) was inserted in the Arbitration and Conciliation Act 1996 by way of amendment which came into force prior to the appointment of the Arbitrator in the present case.
7. In the case of S.P. Singla Constructions Pvt. Ltd. Vs. State of Haryana ARB No.337/2017 decided by the Hon'ble High Court of Punjab & Haryana recently on 18.11.2024, the Arbitrator was appointed before the Arbitration and Conciliation (Amendment) Act 2015 came into force.
OMP (Comm) No.91/2019 M/s S.S. Builders Vs. Union of India & Anr. 2/5
8. Relying upon the decision of the Hon'ble Supreme Court in the case of Ellora Paper Mills Ltd. Vs. State of Madhya Pradesh, 2022(3) SCC 1, the Hon'ble High Court held that the provisions of Section 12(5) of the Act will apply to arbitration proceedings which commenced before coming into force of the Amendment Act.
9. In the present case, the contract was entered into before the Amendment Act came into force, but the arbitrator proceedings commenced after the Amendment Act came into force. Therefore, Section 12(5) of the Arbitration and Conciliation Act will apply to the facts of the present case.
10. Section 12(5) provides that notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties of the dispute, falls under the categories specified in the Seventh Schedule shall be ineligible to be appointed as an Arbitrator.
11. The proviso of this Section provides that the parties may, subsequent to disputes having arisen between them, waive the applicability of the Sub-Section by an express agreement in writing.
12. Clause 1 of the Seventh Schedule to the Arbitration and Conciliation Act provides for an employee. Therefore, Section 12(5) r/w Clause 1 of the Seventh Schedule of the Arbitration and Conciliation Act makes the Chief Engineer of the respondent no. 1 ineligible for appointment as an Arbitrator.
OMP (Comm) No.91/2019 M/s S.S. Builders Vs. Union of India & Anr. 3/5
13. There is nothing on record which discloses that subsequent to the disputes having arisen, the respondent no. 1 waived the applicability of Section 12(5) of the Act by an express agreement in writing.
14. Even though the petitioner participated in the arbitration proceedings, in view of the decision of the Division Bench of the Hon'ble High Court of Delhi in the case of Kotak Mahindra Bank Vs. Narendra Kumar Prajapat EFA (Comm.) No.3/2023 dated 17.05.2023, the Court can set aside the award on the ground that the Arbitrator lacked inherent jurisdiction to pass the award and therefore, the award cannot be considered valid and is a nullity.
15. In the said case before the Hon'ble High Court, it is during the stage of execution that the award was set aside since it was passed by an Arbitrator who was ineligible to be appointed by virtue of Section 12(5) of the Arbitration and Conciliation Act.
16. Before the Hon'ble High Court, it was argued that there was no objection to the unilateral appointment of the sole Arbitrator. However, it was held that failure to object to the appointment cannot be construed as waiver of the right provided under Section 12(5) of the Act. It was noted that waiver can be only by fulfillment of the two conditions - by an express agreement in writing and when such an agreement has been entered into after the disputes have arisen.
OMP (Comm) No.91/2019 M/s S.S. Builders Vs. Union of India & Anr. 4/5
17. It was held that unless both these conditions are fulfilled, there cannot be a waiver of the ineligibility of the Arbitrator.
18. Since the Arbitrator Mr. Narendra Saigal was ineligible to be appointed as an Arbitrator, the award dated 11.02.2019 is set aside.
19. With these directions, the petition under consideration is allowed.
20. The parties are left to bear their own costs.
21. File be consigned to record room after necessary compliance.
Digitally signed(Announced in the open court by Shirish Aggarwal Shirish Date:
Aggarwal 2025.04.02 on 02.04.2025) 16:18:55 +0530 (Shirish Aggarwal) District Judge-03 Patiala House Courts, New Delhi 02.04.2025 OMP (Comm) No.91/2019 M/s S.S. Builders Vs. Union of India & Anr. 5/5