Bombay High Court
Hindustan Construction Company Ltd vs Maharashtra State Road Development ... on 26 November, 2018
Equivalent citations: AIRONLINE 2018 BOM 1366
Author: G.S.Kulkarni
Bench: G.S. Kulkarni
pvr 1 6carap34-17.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION APPLICATION NO.34 OF 2017
Hindustan Construction Company Ltd. .. Applicant
Vs.
Maharashtra State Road Development Corpn.Ltd. ... Respondent
-----
Mr.Rohan Cama with Vikash Kumar, Kaustav Talukdar, for the Applicant.
Mr.Aliabbas Delhiwala with Jayendra Kapadia, Fozan Lakhdawala &
Ms.Vishakha Phatanani I/b. Little & Co., for the Respondent.
-----
CORAM : G.S. KULKARNI, J.
DATE: 26th November, 2018.
---
P.C.:
1. This application under Section 11(6) of the Arbitration and
Conciliation Act,1996 (for short 'the Act') seeks an appointment of a sole
arbitrator to adjudicate the disputes and differences between the parties
stated to have arisen under the agreement dated 29 September 2000
being a contract 'for the work of construction of Cable Stayed Bridge
Approach Bridges & Toll Plaza (Package IV - Option-1) of Bandra-Worli Sea
Link Project' awarded by the respondent-Maharashtra State Road
Development Corporation Ltd.
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 2 6carap34-17.doc
2. There is no dispute on the contract entered between the parties and
the arbitration clause as contained therein being clause 67.3. The
arbitration clause reads thus:-
"67.3. If the decision of the Employer reached on consideration of
the advice of the Technical Advisory Committee is not agreeable to
the Contractor, the Contractor shall notify the Employer within 14
days of the receipt of the said decision, failing which the Employer's
decision shall be final and binding on the Contractor. The Employer
shall then nominate any person, who shall be a retired Chief
Secretary of the Government of Maharashtra - such person to be
selected by the Managing Director Maharashtra State Road
Development Corporation Limited - as a sole arbitrator within 28
days of the receipt of the Contractor's notice for non-acceptance of
the Employer's decision. The arbitrator so nominated shall carry
out the arbitration proceedings in accordance with the Arbitration
and Conciliation Act 1996, or any modification thereof, and give
his decision in the case within 4 months from the date of reference
of the dispute to him. The decision of the above said arbitrator
shall be final and binding on the Employer and the Contractor."
3. The case of the applicant is of delays faced by the applicant in
execution of the contractual work, which was solely attributable to the
respondent. According to the applicant, this resulted in a delay in
completion of the project, which under the contract was required to be
completed within thirty months, that is on or before 31 March 2003.
However, the project was finally completed in March,2010. The reasons
of such delay are set out in paragraph 6 of the application. The applicant
contends that the delay being not attributable to the applicant, is also
acknowledged by the respondent as the contract period was extended
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 3 6carap34-17.doc
from time to time.
4. The applicant has asserted that various clauses of the contract
provide for payment of additional cost in case the project was delayed on
account of defaults of the respondent. The applicant invoking the said
clauses, submitted its claim for the additional costs to the Engineer with a
copy to the respondent vide letter bearing No.4497 dated 20 May 2011
making a claim of Rs.648 crores. This claim of the applicant was rejected
by the Engineer/Project Management Consultant by its letter dated 27
May 2011. The applicant being aggrieved by the decision of the Engineer
by the letter dated 28 June 2011 approached the Technical Advisory
Committee, Bandra-Worli Sea Link Project (for short 'the Committee'),
making a claim for compensation in terms of clause 67.2 of the said
agreement, which provided for 'Settlement of Disputes'. This statement of
claim was submitted to the said Committee vide letter dated 22 August
2011. The said committee considered the claim of the applicant and it is
stated by the applicant that the Committee advised the respondent that
the claim of the applicant shall be considered and determined in terms of
the contract conditions and taking into consideration the provisions of the
Indian Contract Act,1872. This recommendation of the Committee
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 4 6carap34-17.doc
interalia also referred to an amount of Rs.157 crores proposed to be paid
by the respondent and certified by Engineer to say that it only included
value of variations pertaining to three items and did not include any other
claim. This recommendation of the Committee was under a letter dated
29 June 2012 as submitted to the respondent.
5. The applicant states that despite the advice of the Committee in its
letter dated 29 June 2012, no decision was taken on the claim for
compensation raised by the applicant. The applicant therefore addressed
letters dated 15 September 2012, 5 October 2012, 22 October 2012, 22
November 2018, 8 January 2013 and 2 May 2013. However, there was no
reply to these letters from the respondent. In paragraph 12 of the
application, the applicant has averred that the applicant was given to
understand by the respondent that the respondent has already made
assessment of the claim amount payable to the applicant and further the
proposal to that effect was forwarded to the Government for approval.
This was confirmed by the respondent by its letter dated 8 May 2015.
This letter of the respondent referred to Compensation for Delays since
inception of the Project of the amount of Rs.6,48,00,00,000/-. It recorded
that the matter is under consideration of the State Government, as per the
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 5 6carap34-17.doc
respondent's proposal submitted to State Government, regarding the
applicant's claim on delay.
6. The applicant thereafter submitted to the respondent a final
statement as per clause 60.6 of the contract and requested the Engineer
for issuance of a final payment certificate for the due amount. In the said
final statement, the applicant included the claim for compensation for sum
of Rs.648 crores. By another letter dated 23 August 2016 the applicant
requested the respondent to amicably settle the dispute without inviting
litigation. However, as there was no response either to make final
payment or to take steps to resolve the dispute, the applicant by its letter
dated 27 December 2016 addressed to the respondent invoked the
arbitration clause. This letter invoking the arbitration agreement was
received by the respondent on 28 December 2016. However, despite lapse
of 28 days from the date of receipt of the said letter/notice, the
respondent failed to appoint an arbitrator in terms of clause 67.3 of the
said agreement. The respondent however by letter dated 27 January 2017
informed the applicant that the respondent is pursuing the subject matter
for early necessary action. In the above circumstances, the present
application has been filed.
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 6 6carap34-17.doc
7. The respondent has appeared and has filed a reply affidavit of
Mr.Pramod K.Patil, Executive Engineer. The respondent interalia contends
that the claim of the applicant is not maintainable. It is also the case of
the respondent that the matter was under consideration of the State
Government and the same was informed to the applicant by letter dated 8
May 2015 which was in the spirit of a settlement. In the reply affidavit,
there is no substantive plea on facts which would dissuade the Court to
exercise jurisdiction under Section 11(6) of the Act.
8. Mr.Cama, learned Counsel for the applicant has argued in support
of the application. He has pointed out various documents on record of the
dispute having been arisen between the parties as also the clauses of the
arbitration agreement which according to Mr.Cama would entitle the
applicant for reference of the dispute to arbitrator.
9. On the other hand the only contention as urged by Mr.Delhiwala,
learned Counsel for the respondent is that the arbitrator who is required
to be appointed by the Court ought to be in terms of the arbitration clause
namely a retired Chief Secretary of Government of Maharashtra to be
selected by the Managing Director of the respondent. Mr.Delhiwala
submits that in the facts of the case and considering the law on the issue,
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 7 6carap34-17.doc
there is no impediment in the appointment of such named arbitrator as
provided in the arbitration clause. In support of his submission,
Mr.Delhiwala has relied on the decisions in (i) Indian Oil Corporation
Ltd. & Ors. Vs. Raja Transport Pvt.Ltd. 1; (ii) Aravali Power Company
Pvt.Ltd. Vs. M/s.Era Infra Engineering Ltd.2; (iii) Voestalpine Schienen
GMBH Vs. Delhi Metro Rail Corporation Ltd.3; (iv) Era Infra
Engineering Ltd. Vs. Airports Authority of India4
10. Mr.Cama, learned Counsel for the applicant, however, would
oppose the submissions as made on behalf of the respondent. Mr.Cama
referring to the decision of the Supreme Court in Deep Trading Company
Vs. Indian Oil Corporation5 would submit that the respondent in not
taking any steps to appoint an arbitrator in response to the applicant's
notice dated 27 December 2016 invoking arbitration, the respondent has
forfeited its right to appoint an arbitrator. Mr.Cama submits that the facts
clearly indicate that till filing of this application under Section 11(6) of
the Act, an appointment of arbitrator was not made by the respondent and
hence, as per the clear mandate of Section 11(6) of the Act, the Court has
1 (2009)8 SCC 520
2 AIR 2017 SC 4450
3 (2017)4 SCC 665
4 2018(5) Arb.LR 39 (Delhi)
5 (2013)4 SCC 35
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 8 6carap34-17.doc
now the jurisdiction to appoint an arbitrator. Mr.Cama submits that even
otherwise in the facts of the case and considering the nature of the
contract, it would not be appropriate to accept the submission as urged on
behalf of the respondent and appoint the named arbitrator.
11. I have heard the learned Counsel for the parties, also I have
perused the record. The arbitration agreement between he parties is not
in dispute wherein the parties in clause 67 of the contract have agreed for
a mechanism for settlement of dispute which is firstly consideration of
dispute by the Engineer and thereafter against the decision of the
Engineer a reference can be made to Technical Advisory Committee (TAC)
and a decision to be taken by the employer (respondent) on the basis of
the advice of the TAC. If the dispute further remains unresolved, it is
agreed between the parties that the contractor shall notify the employer
within fourteen days of the decision of the employer for appointment of
an arbitrator. Thereupon the employer shall nominate any person who
shall be a retired Chief Secretary of the Government of Maharashtra to be
selected by the Managing Director of the respondent, as sole arbitrator
within twenty eight days of the receipt of the contractor's notice, for non-
acceptance of the employer's decision. The arbitration clause provides that
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 9 6carap34-17.doc
the arbitrator so nominated shall carry out arbitration proceedings in
accordance with the 'Arbitration and Conciliation Act,1996, or any
modification thereof', and give his decision within four months from the
date of reference of the dispute .
12. As noted above the applicant in terms of clause 67.3 being not
agreeable to the decision of the TAC, has invoked the arbitration clause by
its letter dated 27 December 2016 which was received by the respondent
on 28 December 2016. In terms of the arbitration clause, within twenty
eight days of the receipt of the said letter, the respondent was required to
make an appointment of the arbitrator. However such appointment was
not made by the respondent within the agreed stipulated time. Moreover,
by a letter dated 27 January 2017 which was received by the applicant on
2 February 2017 the respondent informed the applicant that the subject
matter is being pursued for early necessary action. The present
application was ultimately filed on 9 March 2017 and till the filing of this
application, admittedly no appointment of a sole arbitrator as per the
agreement between the parties is made by the respondent. It is thus clear
that the applicant has appropriately invoked the jurisdiction of this Court
under Section 11(6) of the Act for appointment of an arbitrator.
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 10 6carap34-17.doc
13. The scope of Section 11 of the Act which contains the scheme for
appointment of an arbitral tribunal is clear. Sub-Section (1) provides that
a person of any nationality may be an arbitrator, unless otherwise agreed
by the parties. Sub-section (2) provides that subject to sub-section (6), the
parties are free to agree on a procedure for appointing the arbitrator or
arbitrators. Sub-section (3) provides that failing any agreement referred to
in sub-section (2), in an arbitration with three arbitrators, each party shall
appoint one arbitrator, and the two appointed arbitrators shall appoint the
third arbitrator who shall act as the presiding arbitrator. Sub-section (4)
provides that if the appointment procedure in sub-section (3) applies and
a party fails to appoint an arbitrator within thirty days from the receipt of
a request to do so from the other party; or the two appointed arbitrators
fail to agree on the third arbitrator within thirty days from the date of
their appointment, the appointment shall be made, upon request of a
party, by the Supreme Court or, as the case may be, the High Court or any
person or institution designated by such Court. Sub-section (5) provides
that failing any agreement referred to in sub-section (2), in an arbitration
with a sole arbitrator, if the parties fail to agree on the arbitrator within
thirty days from receipt of a request by one party from the other party to
so agree the appointment shall be made, upon request of a party, by the
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 11 6carap34-17.doc
Supreme Court or, as the case may be, the High Court or any person or
institution designated by such Court. Sub-section (6) of Section 11
provides that where the arbitration agreement specifies appointment
procedure and a party fails to act as required under that procedure or the
parties, or the two appointed arbitrators, fail to reach an agreement
expected of them under that procedure, or a person, including an
institution, fails to perform any function entrusted to him or it under that
procedure, a party may request the Supreme Court or, as the case may be,
the High Court or any person or institution designated by such Court to
take the necessary measure, unless the agreement on the appointment
procedure provides other means for securing the appointment. Sub-
section (6A) has been incorporated by the Act 3 of 2016 with effect from
23 October 2015 to provide that the Supreme Court or, as the case may
be, the High Court, while considering any application under sub-section
(4) or sub-section (5) or sub-section (6), shall, notwithstanding any
judgment, decree or order of any Court, confine to the examination of the
existence of an arbitration agreement. Sub-section (8) as amended by the
Act 3 of 2016 (with effect from 23 October 2015) provides that the
Supreme Court or, as the case may be, the High Court or the person or
institution designated by such Court, before appointing an arbitrator, shall
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 12 6carap34-17.doc
seek a disclosure in writing from the prospective arbitrator in terms of
sub-section (1) of section 12, and have due regard interalia to any
qualifications required for the arbitrator by the agreement of the parties.
Thus it can be seen that Section 11 is a Code by itself for appointment of
an arbitral tribunal.
14. At the outset, it may be observed that the parties in the arbitration
clause have agreed for applicability of the Arbitration and Conciliation
Act,1996 "with any modification thereof" to the arbitration proceedings.
Section 21 of the Act provides for commencement of arbitral proceedings
to stipulate that unless the parties otherwise agree, the arbitral
proceedings in respect of a particular dispute would commence on the
date on which the request for that dispute to be referred to arbitration is
received by the respondent. Admittedly, the notice invoking the
arbitration is dated 27 December 2016 received by the respondent on 28
December 2016. Thus clearly the mandate of the amended provisions of
the Act namely Section 6A becomes applicable and the endeavour of the
Court is to confine the inquiry to the examination of arbitration
agreement. In the context of the above clear statutory mandate, it is quite
clear that the facts of the present case would warrant appointment of an
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 13 6carap34-17.doc
arbitrator by the Court.
15. However, the only question is whether the court is required to
appoint a person named in the arbitration clause as insisted on behalf of
the respondent. The issue would be required to be answered considering
the statutory mandate and the law in this regard.
16. In so far as the facts of the present case are concerned, on a default
being committed by the respondent in not appointing arbitrator within a
prescribed time, as called upon to do so by the applicant, it can be very
well said that the respondent has forfeited its right to appoint the
arbitrator in terms of the clause. It would not be open for the respondent
to contend, after the applicant had approached this Court by the present
application under Section 11(6) of the Act, that it should be put in the
same position as it stood prior to the filing of this application and that a
right to appoint an arbitrator of its choice as provided in the arbitration
clause would nonetheless be available to the respondent. This right which
was available to the respondent certainly stood forfeited by the
respondent's inaction to make an appointment within a prescribed time as
provided under the arbitration clause or within thirty days from the
receipt of the request as provided by sub-section (4) of Section 11. The
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 14 6carap34-17.doc
law in this regard is well settled.
17. In Datar Switchgears Ltd. Vs. Tata Finance Ltd. & Anr.6 in
interpreting sub-section 6 of Section 11, the Supreme Court considered in
what circumstances the right of a party to make an appointment stands
forfeited. In Paragraph 19 the Court observed thus:-
"19. So far as cases falling under Section 11(6) are concerned -
such as the one before us - no time limit has been prescribed under
the Act, whereas a period of 30 days has been prescribed under
Section 11(4) and Section 11(5) of the Act. In our view, therefore,
so far as Section 11(6) is concerned, if one party demands the
opposite party to appoint an arbitrator and the opposite party does
not make an appointment within 30 days of the demand, the right
to appointment does not get automatically forfeited after expiry of
30 days. If the opposite party makes an appointment even after 30
days of the demand, but before the first party has moved the court
under Secton11, that would be sufficient. In other words, in cases
arising under Section 11(6), if the opposite party has not made an
appointment within 30 days of demand, the right to make
appointment is not forfeited but continues, but an appointment has
to be made before the former files application under Section 11
seeking appointment of an arbitrator. Only then the right of the
opposite party cease. We do not, therefore, agree with the
observation in the above judgments that if the appointment is not
made within 30 days of demand, the right to appoint an arbitrator
under Section 11(6) is forfeited."
18. In "Denal (Proprietary Limited) Vs. Govt. of India, Ministry of
Defenc"7 the Supreme Court again applied the law as laid down in the
decision in Datar Switchgears Ltd.(supra) and also followed the decision
in Punj Lloyd Ltd. Vs. Petronet MHB Ltd.8
6 (2000)8 SCC 151
7 AIR 2012 SC 817
8 2006(2) SCC 638
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 15 6carap34-17.doc
19. In Deep Trading Company Vs. Indian Oil Corporation & Ors.
(supra) a three Judge Bench of the Supreme Court applying the law as
laid down in Datar Switchgears Ltd.(supra) held as under:-
"19. If we apply the legal position exposited by this Court in Datar
Switchgears to the admitted facts, it will be seen that the
Corporation has forfeited its right to appoint the arbitrator. It is so
for the reason that on 9-8-2004, the dealer called upon the
Corporation to appoint the arbitrator in accordance with the terms
of Clause 29 of the agreement but that was not done till the dealer
had made application under Section 11(6) to the Chief Justice of
the Allahabad High Court for appointment of the arbitrator. The
appointment was made by the Corporation only during the
pendency of the proceedings under Section 11(6). Such
appointment by the Corporation after forfeiture of its right is of no
consequence and has not dis-entitled the dealer to seek
appointment of the arbitrator by the Chief Justice under Section
11(6). We answer the above questions accordingly."
20. In a recent decision in TRF Ltd. Vs. Energo Engineering Projects
Ltd.9 a three Judge Bench of the Supreme Court referring to the decision
in Deep Trading Company Vs. Indian Oil Corporation & Ors.(supra), in
the context of right of the parties to appoint an arbitrator, in paragraphs
27 and 28 it was observed thus:-
"27. ... ... .... In Deep Trading Co. arbitration clause, as is
noticeable, laid down that the dispute or difference of any nature
whatsoever or regarding any right, liability, act, omission on
account of any of the parties thereto or in relation to the agreement
shall be referred to the sole arbitration of the Director (Marketing)
of the Corporation or of some officer the Corporation who may be
nominated by the Director (Marketing).
9 (2017)8 SCC 377
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 16 6carap34-17.doc
28. As the factual matrix of the said case would show, the
appointing authority had not appointed arbitrator till the dealer
moved the Court and it did appoint during the pendency of the
proceeding. Be it noted that dealer had called upon the
Corporation to appoint arbitrator on 9-8-2004 and as no
appointment was made by the Corporation, he had moved the
application on 6-12-2004. The Corporation appointed the sole
arbitrator on 28-12-2004 after the application under Section 11(6)
was made. Taking note of the factual account, the Court opined
that there was a forfeiture of the right of appointment of arbitrator
under the agreement and, therefore, the appointment of the
arbitrator by the Corporation during the pendency of the
proceeding under Section 11(6) of the Act was of no consequence
and remanded the matter to the High Court. ... ... ..."
21. In Aravali Power Company Pvt.Ltd. Vs. M/s.Era Infra
Engineering Ltd.(supra) the Supreme Court referring to the decision in
Denal (Proprietary Limited) Vs. Govt. of India, Ministry of Defence
(supra) observed thus:-
"20.5. Similarly, in Denel (Proprietary) Ltd. Vs. Ministry of Defence
[(2012)2 SCC 759; (2012)2 SCC (Civ)37], the relevant clause
provided for sole arbitration of the Director General, Ordinance
Factory, Government of India or a government servant appointed
by him. It was observed that since no arbitrator was appointed in
terms of the governing clause within the stipulated period the
respondent had forfeited the right to make an appointment of an
arbitrator. .. ... .."
22. Adverting to the principles of law as laid down in the above
decisions, it is clear that the respondent in the present case has forfeited
its right to appoint the arbitrator and thus the respondent cannot insist as
a matter of legal right that at this stage a person designated in the
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 17 6carap34-17.doc
arbitration clause be appointed as an arbitrator.
23. To support the contention, reliance placed on behalf of the
respondent on the decision in Indian Oil Corporation Ltd. & Ors. Vs.
Raja Transport Pvt.Ltd.(supra) is not well founded. Firstly this was a case
prior to the amendment to Section 11(8) and Section 12 as brought about
to the Act by Act 3 of 2016, and the dispute between the parties initially
arose in the proceedings filed before the Civil Court by the respondent
therein, where in an objection under Section 8 read with Order VII Rule
11 of the Code of Civil Procedure was taken to the jurisdiction of the
Court in view of the arbitration agreement between the parties. The
objection was upheld and the learned Civil Judge directed the parties to
refer the matter to arbitration. An appeal against the said order was also
dismissed. During the pendency of the appeal, respondent therein had
issued a notice dated 4 January 2006 through its Counsel to the appellant
(Indian Oil Corporation) referring to the appellant's insistence that only its
Director(Marketing) be nominated by him to act as arbitrator as referred
in the order passed by the civil Court. The respondent alleged that they
did not expect a fair trial if the Director (Marketing) or any other
employee of the appellant was appointed as an arbitrator and such
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 18 6carap34-17.doc
appointment should be prejudicial to its interest. It is on this background,
the respondent filed an application under Section 11(6) of the Arbitration
Act before the High Court. The High Court appointed a retired High Court
Judge as sole arbitrator to decide the dispute between the parties. It is in
this context and not in the context of refusal of the appellant therein to
appoint an arbitrator, the issue was considered by the Supreme court. The
Supreme Court held that the appellant had not failed in making an
appointment as agreed between the parties. This is surely not a situation
in the present case. Moreover the Supreme Court considering the
divergent views expressed in Ace Pipeline Contract Pvt. Ltd. v. Bharat
Petroleum Corporation Ltd.10 and Union of India v. Bharat Battery
Manufacturing Company Pvt. Ltd. 11 in the case Northern Railway
Administration v. Patel Engineering Co. Ltd. 12, in paragraph 12 held that
it is not mandatory for the Chief Justice or any person or institution
designated by him to appoint the named arbitrator or arbitrators. But at
the same time, due regard has to be given to the qualifications required by
the agreement and other considerations. The arbitration clause in the
present case surely also not prescribe any special qualification. The
10 2007 (5) SCC 304
11[2007 (7) SCC 684]
12 (2008)10 SCC 240
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 19 6carap34-17.doc
dispute between the parties is on a construction contract. Thus the said
decision would not assist the respondent.
24. On the above conspectus, the contention of the respondent that the
Court shall have due regard to the arbitration clause and the person
named in the arbitration clause to be appointed as an arbitrator, cannot be
accepted.
25. The Court also cannot overlook that by the amendment Act 3 of
2016 (with effect from 23 October 2016) significant amendments are
made to sub-section (8) of Section 11 of the Act requiring the Supreme
Court or, as the case may be, the High Court or the person or institution
designated by such Court, before appointing an arbitrator, to seek a
disclosure in writing from the prospective arbitrator in terms of sub-
section (1) of section 12, and have due regard to any qualifications
required for the arbitrator by the agreement of the parties and the
contents of the disclosure and other considerations as are likely to secure
the appointment of an independent and impartial arbitrator. Section 12
which was also amended by the said Amending Act provides for a
disclosure in writing by the arbitrator when approached for appointment
of an arbitrator. The disclosure as contemplated is quite extensive which
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 20 6carap34-17.doc
would include any circumstances of the arbitrator having any direct or
indirect, or 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 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. 'Explanation 1' below Section 12 provides that 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. Sub-section (5) provides
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" shall be ineligible to be appointed as an arbitrator. These are
the specific rigours now contemplated by virtue of the amendment.
26. Thus the Act has undergone a radical change in terms of the
amendment as brought out by Act 3 of 2016 with effect from 23 October
2015. Considering the provisions of Section 11(8) read with Section 12(1)
::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::
pvr 21 6carap34-17.doc
and the contents of the Fifth Schedule and the Seventh Schedule, in the
facts of the case it would not be appropriate for the court to appoint a
person named in the arbitration clause. This for the reason that the
respondent as a corporation is fully under the control of the State
Government and is concerned with various development activities in the
urban areas. The present dispute has arisen under the contract 'for the
work of construction of Cable Stayed Bridge Approach Bridges & Toll
Plaza (Package IV - Option-1) of Bandra-Worli Sea Link Project' which
was a major project in the heart of Mumbai city. It cannot be conceived
that any retired person who held the office of the Chief Secretary would
not be concerned with the affairs of urban development department or
was not connected even remotely with matters pertaining to any decision
in regard to such project. Thus in my opinion the contention as urged on
behalf of the appellant to appoint a retired Chief Secretary cannot be
accepted.
27. In the above circumstances, the application is required to be
allowed. Accordingly the following order is passed:-
ORDER
(I) The Court appoints Mrs.Justice Vasanti A. Naik (Retd), having her ::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 ::: pvr 22 6carap34-17.doc address at 322, Verma Chambers, 11, Homji Street, Horniman Circle, Fort, Mumbai, as an arbitrator.
(II) The learned arbitrator, fifteen days before entering the arbitration reference, shall forward a statement of disclosure as per the requirement of Section 11(8) read with Section 12(1) of the Arbitration and Conciliation Act,1996, to the Prothonotary and Senior Master of this Court, to be placed on record of this application with a copy to be forwarded to both the parties.
(III) Office to forward a copy of this order to Mrs.Justice Vasanti Naik (Retd) (IV) The Arbitration Application is disposed of in the above terms. No costs.
(G.S.Kulkarni, J.) ::: Uploaded on - 26/11/2018 ::: Downloaded on - 27/11/2018 01:50:55 :::