Delhi District Court
Royale Meridian (India) Pvt. Ltd vs M/S Mbl Infrastructure Ltd on 27 November, 2020
THE COURT OF DISTRICT JUDGE
(COMMERCIAL COURT01),
SOUTHEAST, SAKET COURTS, NEW DELHI
Presiding Officer: Sh. Raj Kumar Chauhan DHJS
OMP (T) (Comm) No. 5/2020
In the matter of:
Royale Meridian (India) Pvt. Ltd.
Having its registered address :
810, 8th Floor, Vishwa Sadan Tower,
District Centre, Janak Puri,
New Delhi - 110058. ..........Petitioner.
Vs.
1. M/s MBL Infrastructure Ltd.
Through Its Directors
Baani Corporate One Tower Suite # 308,
3rd Floor, Plot No. 5, Jasola,
New Delhi - 110002.
Email ID - [email protected] .........Respondent No. 1
2. Sh. V.K. Gupta
Sole Arbitrator
E63, Sector39, Noida 201303
Email ID - [email protected] .........Respondent No. 2
Date of institution : 29.09.2020
Date on which argument was concluded : 03.11.2020
Date of pronouncement of the order : 27.11.2020
OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 1 of 48
(RAJ KUMAR CHAUHAN)
District Judge (Commercial Court)
/SE/Saket/ND/27.11.2020
ORDER
1. By this order, I propose to dispose of Petition u/s 14 and 15 of the Arbitration and Conciliation Act, 1996 (herein after referred as the 'Arbitration Act'). The present petition has been filed with the following prayer : "a. Terminate the mandate of the arbitrator appointed by the respondent no. 1; and b. Pass any such order as this Hon'ble Court may deem fit and proper in the facts and circumstances of the present case."
2. It is stated that petitioner is a Contractor and is one of the leading players in the market for firefighting systems and equipments. The respondent no. 1 engaged the petitioner in execution of civil engineering projects. Respondent no. 1 issued work order dated 11.07.2015 in favour of the petitioner to execute and complete the part work of the project as the petitioner was engaged by the main contractor respondent no. 1 for the purpose of installing fire fighting / wet riser system and fire detection system. Duration of the work was within 03 months after handing over full site. The petitioner started installing its resources in order to complete the work within stipulated time period. The respondent did not hand over the site to the petitioner OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 2 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 in time and the work got delayed. The site was ultimately handed over to the petitioner after much delay and the work started with full vigor. The petitioner raised regular RA Bills on admittedly completion of work.
3. First RA Bill dated 04.01.2016 was submitted and respondent no. 1 was intimated vide letter dated 02.04.2016 with a request to make the payment of the same. The respondent no. 1 after having verified the said bill and logs, acknowledged the same by signing on it. The respondent no. 1 did not release the payment against the said RA Bill despite requests of the petitioner. As a result the completion and execution of the work was affected adversely. After various persistent efforts, the respondent no. 1 partly discharged its legal obligation and gave a cheque as part payment of Rs. 30,68,018/ dated 03.05.2016. The said cheque was dishonoured on 04.05.2016. The intimation was given to the respondent no. 1 and CPWD was also informed vide letter dated 20.06.2016 for making payment as per Clause 7 of the General Conditions of the Contract (GCC). CPWD issued show cause notice to the respondent no. 1 asking to make the payment to the petitioner within 07 days. Due to intervention of the CPWD, the respondent released the fund of Rs. 30,68,018/ against the RA Bills.
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4. Second RA Bill dated 31.10.2016 was submitted which was duly accepted without any objection. The payment of the second RA Bill was not made despite repeated requests and reminders. Aggrieved by the act of the respondent, petitioner issued a demand notice u/s 8 of the Insolvency and Bankruptcy Code against the respondent no. 1 to release the balance outstanding amount. The respondent no. 1 vide reply to the demand notice intimated that the respondent company was under CIRP and IPR has been appointed against the respondent no. 1 company and petitioner has failed to submit its claim within stipulated time period. The respondent no. 1 issued a letter dated 01.11.2019 regarding appointment of respondent no. 2 as the Sole Arbitrator to resolve the dispute and claim. The respondent no. 1 has not given any prior notice for appointment of Learned Arbitrator as it has never invoked the Section 21 of the Arbitration Act. The petitioner has not received any invocation notice as per Clause 14 of the agreement.
5. The learned Arbitrator took the reference of the matter and fixed the date and demanded fee from the petitioner. The petitioner has paid the legal arbitration fees demanded by the Learned Arbitrator. The petitioner moved a petition u/s 16 of the Arbitration Act to set aside the arbitration proceedings. Learned Arbitrator in a malafide manner adjourned the matter 3 to 4 time and was pleased to OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 4 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 dismiss the application u/s 16 of the Arbitration Act vide order dated 24.07.2020. The reasoning given by the Learned Arbitrator were against the law and provision of Arbitration Act.
6. The Arbitral proceedings initiated between the parties is against the public policy of India. As per Clause 24 of the 5 th schedule it was mandatory for the Arbitrator to disclose about the other arbitration proceedings pending before the Learned Sole Arbitrator involving one of the party of arbitration. But the Learned Arbitrator failed to disclose in writing about the proceedings bearing Arbitration No. 70/19, titled as Deepak Enterprise vs. M/s MBL Infrastructure Ltd.
7. The issuance of notice u/s 21 of the Arbitration Act was mandatory for initiating to reference of the dispute between the party. It is admitted case that the respondent no. 2 was appointed by Chairman of respondent no. 1 company. The Learned Arbitrator has wrongly observed that the judgment of the Hon'ble High Court of Delhi in the matter of Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Pvt. Ltd. was not applicable in the matter. Learned Arbitrator has been proceeding with the arbitral proceedings unlawfully ; the respondent no. 1 could not have appointed the Sole Arbitrator without intimating to the petitioner; the appointment of OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 5 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 Arbitrator by one party to the dispute will suffer from bias and is against the interest of other party to the dispute. Hence, the present petition has been filed to terminate the mandate of the Learned Arbitrator appointed by respondent no. 1.
8. The respondent has contested the petition by filing the reply and has taken the preliminary objection that the petition is not maintainable; the petitioner had already filed application u/s 12 and 16 of the Arbitration Act before the Learned Sole Arbitrator and after hearing the parties at length the said application has been dismissed vide order dated 24.07.2020; once the petitioner has approached the Learned Arbitrator u/s 12 of the Arbitration Act, the petition u/s 14 and 15 of the Act is not maintainable; after dismissal of the application u/s 12 and 16 of the Arbitration Act, the petitioner has to wait till the pronouncement of the Award for raising the challenge to the Award including on the ground of lack of independence of Arbitrator. Reliance has been placed on the case of Progressive Career Academy Pvt. Ltd. & Ors. vs. FITJEE Ltd. & Ors. 2011 (2) ARBLR 323 (Delhi) stating that it was held by the Hon'ble High Court of Delhi that application u/s 14 and 15 of the Arbitration Act is not maintainable once the challenge of procedure is rejected by the Arbitral Tribunal. It is further alleged that this Court has no jurisdiction to adjudicate the petition u/s 14 and 15 of the Arbitration Act as the said application is OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 6 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 maintainable before the Hon'ble High Court of Delhi. That the petitioner was fully aware of CIRP proceedings and may file its claim before the IRP i.e. Interim Resolution Professional even after the prescribed period, but till the approval of a Resolution Plan by the Committee of Creditors (COC). Admittedly petitioner did not file any claim before the IRP / RP upto 18.04.2018 when the resolution plan was approved by the Hon'ble NCLT, Kolkata. If the creditors has not filed claim before the IRP, petition is barred to raise such claim; petitioner has failed to make any case of bias and lack of independence on the part of the Sole Arbitrator and so as to attract 5 th schedule of the Act. The Learned Arbitrator is not ineligible and he is not connected with the respondent within the meaning of categories details of schedule 7 of the Act.
9. It is alleged that the arbitrator has been lawfully appointed under Clause 14 of the Work order as per prescribed procedure and notice letter no. MBL/2019/1323 dated 01.11.2019 and also email dated 04.11.2019 was sent. The petitioner has also given the acceptance to the appointment of the Arbitrator by attending the proceedings on date fixed and the present petition is therefore barred by principle of waiver, acquiesce and estoppel and is liable to be dismissed.
OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 7 of 48(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020
10. In para wise reply all averments in the petition has been controverted and denied. It is stated that the petitioner's demand notice u/s 8 of the Insolvency and Bankruptcy Code was not tenable and there was pre existing dispute and the said notice was given with an intention to preempt the arbitration proceedings for resolving such disputes which as per Clause 14 of the work order are to be adjudicated by an Arbitrator. It is reiterated that the Learned Arbitrator has been appointed lawfully and he does not suffer from ineligibility and the petition is liable to be dismissed.
11. Both the parties have filed the written submissions and the oral arguments were also heard at length.
12. Written submission on behalf of respondent no. 1 12.1 In the written submissions, the learned counsel for respondent has argued that the present application is not maintainable and is a gross abuse of the process of law as the applicant has not narrated the complete facts before this Court and is misleading the Court.
12.2 It is further argued that the respondent no. 1 had issued work order dated 11.07.2015 to the applicant and applicant was required to carry out at it's end the obligation within 3 months, however, applicant failed to abide by it. The delay resulted in OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 8 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 forfeiture of performance security of respondent no. 1 and the termination of the contract between CPWD and respondent no. 1 which caused huge losses to respondent no. 1. 12.3 It is further argued that applicant without carrying out any work issued a demand notice dated 05.09.2019 under Section 8 of Insolvency and Bankruptcy Code, 2016. The respondent no. 1 replied to the said letter vide letter dated 01.11.2019. The respondent no. 1 appointed Sh. Virender Kumar Gupta (Retired ADJ) as the Learned Sole Arbitrator. The Learned Sole Arbitrator who entered upon reference on 09.11.2019 and made a disclosure in terms of Section 12 in the form prescribed under 6th schedule of the Arbitration and Conciliation Act.
12.4 It is further argued that the appointment of Learned Arbitrator is neutral. The applicant challenged the appointment of Learned Sole Arbitrator under Section 12 (1) and 16 of the Arbitration and Conciliation Act. The said application was dismissed vide order dated 24.07.2020.
12.5 It is further argued that as per Section 13 of the Arbitration Act, once the challenge of the mandate has been determined by the Learned Arbitrator, any grievance against the said order can be raised by way of proceedings under Section 34 of the Arbitration Act. Further, if application u/s 16 of is rejected by the Learned Arbitrator the only remedy available with the petitioner is to OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 9 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 await the award as is provided u/s 12, 13, 16 and 37 of the Arbitration Act.
12.6 Learned counsel for respondent no. 1 relied upon the following case laws :
(a) "Bharat Heavy Electricals Ltd. V.C.N. Garg and Ors. [2000(3)ArbLr674 (Delhi)]", the Hon'ble High Court of Delhi was pleased to hold as under: '15. A possible question in this connection may arise about there being no provision for removal of an arbitrator during the arbitration proceedings by the court. Admittedly the Act does not contain any provision where the court can remove an arbitrator during the pendency of arbitration proceedings...' 'If court interference was permitted during arbitration proceedings, the very object of speedy redressal of disputes would have been frustrated. That is why keeping the peculiar conditions in India, coupled with the need for speedy resolution of disputes, the provision of court interference was avoided...' OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 10 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020
(b) In "Progressive Career Academy & Ors Vs FITJEE Lid & Ors[2011(2)ArbLr323 (Delhi)" it was held as under: "16. On a reading of Section 13(5), the legislative intent becomes amply clear that Parliament did not want to clothe the Courts with the power to annul an Arbitral Tribunal on the ground of bias at an intermediate stage. The Act enjoins the immediate articulation of a challenge to the authority of an arbitrator on the ground of bias before the Tribunal itself, and thereafter ordains that the adjudication of this challenge must be raised as an objection under Section 34 of the Act. Courts have to give full expression and efficacy to the words of the Parliament especially where they are unambiguous and unequivocal."
(c) "MBL Infrastructure Ltd Vs TCIL [2015 II AD (Delhi) 113]" was pleased to hold that : "21. After the decision of the Division Bench of OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 11 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 this Court in Progressive Career Academy Limited (supra) a party which has been unsuccessful in its application before the Arbitrator under Sections 12 and 13 of the Act cannot thereafter approach this Court in an application under Section 14 of the Act seeking termination of his mandate on the same grounds. Such an aggrieved party has to wait for the Award to be pronounced and, if aggrieved by it, challenge it under Section 34 of the Act on the grounds available to be urged in accordance with law.'
25. The result of the above discussion is that it is not possible for this Court to entertain the present petition seeking removal of the learned Arbitrator under Section 14(2) of the Act on the ground that he has become "defacto and de jure" unable to perform his function as an Arbitrator. The Petitioner will have to await the pronouncement of the Award and if aggrieved thereby, seek appropriate remedies under Section 34 of the Act."
12.7 While relying upon the above law, it is submitted that the OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 12 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 present petition u/s 14 and 15 of the Arbitration Act is not maintainable as it is contrary to the provision of Arbitration Act and law referred above.
12.8 It is further submitted that the declaration given by the Sole Arbitrator in terms of Section 2 of the Act has been made lawfully and the Learned Sole Arbitrator is therefore fully independent and impartial. Learned Sole Arbitrator has no direct or indirect relation with either of the party or is not interested in the subject matter of the dispute. It is stated that the Sole Arbitrator has even made its disclosure in terms of schedule 6 and Section 12 of the Arbitration Act specifying that there is no relationship between the Sole Arbitrator and the party.
12.9 It is also reiterated that the appointment having been made by the Director of the company would not make such appointment bad in law. In the present case an independent Arbitrator as Retired ASJ has been appointed Sole Arbitrator and the Arbitrator so appointed by the respondent is not ineligible as having no connection in the present case or with the parties in terms of Schedule 5 and 7. Therefore, there is no dejure ineligibility in the appointment of Sole Arbitrator. Reliance has been placed upon the case of "S.P. Singla Constructions Pvt. Ltd. vs. State of Himachal Pradesh and Ors [2019(2) SCC 488]" wherein it was held that : "11. Likewise, there is no merit in the OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 13 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 contention of the appellant contractor that the appointed arbitrator is an employee in service of the HPPWD which the provision of Section 12(5) of the 1996 Act (as amended w.e.f. 23.10.2015) bars at the threshold itself. In a catena of judgments, the Supreme Court held that arbitration clauses in government contracts providing that an employee of the department will be the sole arbitrator are neither void nor unenforceable. [Indian Oil Corporation Limited and others v. Raja Transport Private Limited (2009) 8 SCC 520, Ace Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corporation Limited (2007) 5 SCC 304, Union of India and another v. M.P. Gupta (2004) 10 SCC 504] The fact that a named arbitrator is an employee of one of the parties is not ipso facto a ground to raise a presumption of bias or lack of independence on his part. The arbitration agreements in government contracts providing that an employee of the department or a higher official unconnected with the work or the contract will OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 14 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 be the arbitrator are neither void nor unenforceable."
12.10 This judgment has been relied to emphasize the fact that the appointment having been made by Director of the respondent would not automatically make such appointment bad in law. 12.11 In "Deep Industries Limited V. Oil and Natural Gas Corporation Limited and Ors., 2019(10) SCJ 429, Hon'ble Supreme Court of India" it is held that : "16. One other feature of this case is of some importance. As stated herein above, on 09.05.2018, a Section 16 application had been dismissed by the learned Arbitrator in which substantially the same contention which found favour with the High Court was taken up. The drill of Section 16 of the Act is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 application being dismissed must await the passing of a final award at which stage it may be raised Under Section 34."
12.12 It is lastly submitted that there has been compliance OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 15 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 regarding issuance of notice invoking arbitration because the petitioner preferred an application under 12, 13 and 16 of the Act before the Sole Arbitrator which has been decided vide order dated 24.07.2020 and in case the petitioner is aggrieved of the order dated 24.07.2020 the petitioner may challenge the same u/s 34 of the Arbitration Act and the present petition is not maintainable.
13. Written submissions on behalf of petitioner. 13.1 In the written arguments the petitioner has submitted that the appointment of Learned Arbitrator in this case is not legal and his mandate needs to be terminated for the following reasons : 13.2 Firstly, there is a unilateral appointment of the Sole Arbitrator against the well settled law and procedure as laid down in Section 12 (5) of the Arbitration Act and also envisaged by the Hon'ble Apex Court in case of "Perkins Eastman Architects DPC & Anr. versus HSCC (India) Ltd. in Arbitration Application. No. 32 of 2019, decided on 26.11.2019" of which para no. 16 is relevant and is reproduced herebelow : "16. But, in our view that has to be the logical deduction from TRF Limited MANU/SC/0755/2017 : (2017) 8 SCC 377.
Paragraph 50 of the decision shows that this Court was concerned with the issue, OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 16 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 "whether the Manging 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 nominate respective arbitrator 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 OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 17 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 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 (Act 3 of 2016) and recognised by the decision of this Court in TRF Limited MANU/SC/0755/2017 : (2017) 8 SCC 377."
13.3 It is further submitted that on the basis of ratio of Perkins Eastman Architects DPC & Anr. versus HSCC (India) Ltd. judgment the Hon'ble High Court of Delhi in the matter of "JMC Projects (India) Ltd. Vs Indure Pvt. Ltd., OMP(T)(COMM.) No. 33/2020, judgment dated 20.08.2020" terminated the mandate of the Ld. Arbitrator and substituted the Arbitrator by observing as under : "54. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 18 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 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 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 OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 19 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 view expressed by the High Court is not sustainable and we say so."
15. Clearly, therefore, the Supreme Court held that, once the managing director of Energo was incapable of functioning as an arbitrator, by virtue of Section 12(5) of the 1996 Act, he was also rendered ineligible to appoint an arbitrator as his nominee."
(Emphasis is mine) 13.4 Secondly, the Learned Arbitrator has made a false declaration under section 12(1)(a) of the Arbitration Act which provides that without any delay Learned Arbitrator has to disclose in writing to both the parties about the circumstances such as existence either direct or indirect, past and present, relationship with any of the parties. The relevant portion of section 12(1)(a) is reproduced herein below : "12(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 OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 20 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 with or interest in any of the parties or in relation to the subjectmatter 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......"
13.5 On the contrary, the Ld. Arbitrator vide its declaration dated 03.11.2019 gave a false declaration and did not disclose that the Ld. Sole Arbitrator was already appointed and adjudicating another matter titled as "Deepak Enterprise vs M/s MBL Infrastructure Ltd.". The appointment of the Arbitrator in this case is thus against Clause 22 and 24 of 5th Schedule. Clause 22 and 24 of 5th Schedule are as under : "22. The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.
24. The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties."
OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 21 of 48(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 13.6 Thus noncompliance of Section 12 of the Arbitration Act and false declaration by the Learned Arbitrator as mentioned above are justifiable doubts upon the eligibility of Learned Arbitrator as envisaged under 5th and 7th schedule of the Act. Reliance has been placed on the case of Hon'ble High Court of Delhi in "Alupro Building Systems Pvt. Ltd. vs Ozone Overseas Pvt. Ltd., OMP No. 03/2015, judgment dated 28.02.2017", the Hon'ble High Court of Delhi was pleased to observe as under : "47. Turning to the case on hand, there is no denial that at the time he entered upon reference, the Arbitrator was adjudicating at least one of the claims of the Respondents in other arbitration proceedings. Admittedly, he did not disclose this fact at any time at the commencement of or during the arbitration proceedings. This fact was discovered later by the Petitioner. The averment on this aspect in the present petition has not been denied by the Respondent. In the circumstances, the Court is of the view that this is yet another ground on which the OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 22 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 impugned Award is liable to be set aside as it is opposed to the fundamental policy of Indian law. It attracts the ground under Section 14 (1) read with Section 15 (1), viz. the Arbitrator being rendered de jure incapable of acting as such. It also attracts Section 34 (2) (b) (ii) of the Act."
13.7 Thus, on account of nondeclaration / false declaration by the Arbitrator about the ongoing proceedings and Section 12 (5) of the Arbitration Act, the justifiable doubts under Schedule 5 and 7 of the Act arises in the present matter and Section 14 and 15 of the act are attracted for terminating the mandate of the Arbitrator. 13.8 Thirdly, there is noncompliance of Section 21 of the Arbitration Act. It is an admitted fact that there is no invocation of Arbitration clause by either of the parties in terms of Section 21 of the Act. Invocation of Arbitration u/s 21 is mandatory requirement for initiating arbitration proceedings. Thus, on account of noninvocation of notice u/s 21 of the Arbitration Act, the Learned Sole Arbitrator does not have any authority to adjudicate any dispute and is as such dejure and dofacto ineligible to hold arbitration proceedings. Again in para 32 of "Alupro Building Systems Pvt. Ltd. vs Ozone Overseas Pvt. Ltd., (supra)," it has been held as under : OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 23 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 "32.1 In Oval Investment Pvt. Ltd & Ors. v. Indiabulls Financial Services Limited & Ors. (supra), the Plaintiffs filed a suit for a declaration and perpetual injunction. The Plaintiffs had borrowed loans from Defendant No. 1. Each of the Agreements under which the loan was borrowed contained an identical clause as regards jurisdiction and arbitration. The disputes between the parties had to be referred to a sole arbitrator in Delhi in accordance with the Act.
32.2 The Plaintiffs stated that they came to know through other parties, who were arrayed as Defendant Nos. 2 to 19 in the suit, that Defendant No. 1 had invoked the arbitration clause and initiated proceedings by appointing a sole Arbitrator. The Plaintiffs claimed to have never themselves received any such notice. Pursuant thereto, the sole Arbitrator issued notice to both the Plaintiffs as well as Defendants.
32.3 Subsequently, the Plaintiffs received a OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 24 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 letter from counsel for Defendant No. 1 informing them that in an application under Section 17 of the Act, the Arbitrator had passed the interim Award against the Plaintiffs.
According to the Plaintiffs, the very invocation of the arbitration clause was fraudulent since no such notice was dispatched to any of the Plaintiffs much less received by them. It was submitted that the mandatory statutory condition precedent to the commencement of the arbitral proceedings in terms of Section 21 of the Act was not fulfilled.
32.4 One of the prayers in the suit was for a declaration that invocation of the arbitration clause by Defendant No. 1 was invalid and liable to be struck down. The suit was resisted by Defendant No. 1 by pointing out that as long as the existence of the arbitration clause was not denied by the Plaintiff, all questions pertaining to the validity of the arbitral proceedings, including noncompliance with the procedure for invocation of the arbitration OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 25 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 clause, ought to be raised before and examined by the sole Arbitrator.
32.5 The Court Oval Investment Pvt. Ltd. & Ors. v. Indiabulls Financial Services Limited & Ors. (supra) referred to the provisions of the 1940 Act and the corresponding provisions of the Act and observed as under:
25. Under Section 33 of the 1940 Act, the Arbitrator could examine the question of the existence or validity of the arbitration agreement. Section 16 of the Act not only preserves this power of the arbitrator but in fact expands it. The wording of Section 16 (1) indicates that the arbitrator could rule on his own jurisdiction including ruling on any objections with respect to the existence or validity of the arbitration agreement. The word including shows that the scope of the examination of the questions concerning the jurisdiction of the arbitral tribunal is not limited to the existence of the arbitration agreement itself. Therefore, it is inconceivable that OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 26 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 where there is a violation of mandatory requirement like Section 21 of the Act, the arbitrator cannot examine that question as well. If the existence of the arbitration agreement is a sine qua non for commencement of arbitration proceedings and if such a question is to be examined only by the arbitrator, it is difficult to accept the proposition that the question whether a valid notice under Section 21 has been received by the Respondent in a claim petition cannot be gone into by the Arbitrator. The question really is not so much whether the requirement under Section 21 of the Act is mandatory or not. This Court is of the view that such a requirement is indeed mandatory for without the notice of invocation being received by the Respondent no arbitral proceedings can commence. The question really, therefore, is whether the arbitrator has the power to OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 27 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 decide whether the procedure under Section 21 of the Act has been complied with. In the considered view of the Court, given the scheme of the Act and the minimal scope of the interference by the civil courts, it must be held that this question can and should be examined by the arbitrator himself.
32.6 It was further observed that the requirement of receipt of notice by the Respondent in terms of Section 21 of the Act is a condition precedent to the commencement of arbitral proceedings. The Court was also of the view that in light of the scheme of the Act as discussed hereinabove, the question whether the mandatory requirement of receipt of the notice by the Respondent in terms of the Section 21 of the Act has been complied with is also to be examined by the Arbitrator under Section 16 of the 1996 Act. 32.7 In that view of the matter, the plaint was rejected under Order VII Rule 11 of the CPC. The above issue was taken in appeal before the Division Bench of OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 28 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 this Court which affirmed the order and in particular the above conclusion of the learned Single Judge."
13.9 Lastly, it is argued that the reliance has been placed by respondent on the case of FITJEE CASE i.e. Progressive Career Academy Pvt. Ltd. v. FIIT JEE Ltd. 2011 (2) Arbitration Law Reporter 323 Delhi, wherein para no. 16 it was held that on reading of Section 13 (5) the legislative intent documents amply clear that parliament did not want to clothe the courts with the power to annul an Arbitral Tribunal on the ground of bias at an intermediate stage. 13.10 It is submitted that the reliance upon FITJEE case is misplaced because the said case and other cases relied by the respondent are prior to the amendment of Arbitration Act wherein Section 12 (5) was inserted. The reliance has been placed on the case of "West Haryana Highways Projects Pvt. Ltd. versus National Highways Authority of India in OMP (T) (COMM.) No. 28/2017, decided on 15.05.2017, Hon'ble High Court of Delhi" while distinguishing the section 13 and 14 of the Act the Court was pleased to terminate the mandate of the Ld. Arbitrator by observing as under : "24. In the light of the said legal position it becomes quite clear that under Section OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 29 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 12(5), if a person's relationship with the parties or counsel or subject matter of dispute falls in any of the categories specified in the Seventh Schedule, the said person is ineligible to be appointed as an arbitrator. If a party persists in nominating any such person as an arbitrator, it would be a completely futile and waste of efforts to permit the Tribunal to continue to adjudicate the matter and permit a challenge after completion of the arbitration, under Section 34 of the Act. If an arbitrator is appointed contrary to Section 12(5) read with the Seventh Schedule, he is de jure ineligible to perform his functions and the mandate of such an arbitrator can be terminated by the court under Section 14(2) of the Act.
Section 13(3) and 13(5) would have no application in such circumstances.
25. Reliance of the learned counsel for the respondent on the judgment of the Division Bench of this court in the case of Progressive Career Academy Pvt. Ltd. v. FIIT JEE Ltd.
OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 30 of 48(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 (supra) is misplaced. That was a decision made prior to coming into force of the Arbitration and Conciliation (Amendment) Act, 2015.
26. The Division Bench of this court in the case of Progressive Career Academy Pvt. Ltd. v. FIIT JEE Ltd. (supra) held as follows: "20. A comparison of the provisions dealing with the challenge to the arbitrator's authority in the A&C Act and the UNCITRAL Model Law discloses that there are unnecessary and cosmetic differences in these provisions, except for one significant and farreaching difference. The UNCITRAL Model Law, in Article 13(3), explicitly enables the party challenging the decision of the Arbitral Tribunal to approach the Court on the subject of bias or impartiality of the Arbitral Tribunal. However, after making provisions for a challenge to the verdict of Arbitral Tribunal on the aspect of bias, the UNCITRAL Model Law prohibits any further Appeal. It seems to us, therefore, that there OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 31 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 is no room for debate that the Indian Parliament did not want curial interference at an interlocutory stage of the arbitral proceedings on perceived grounds of alleged bias. In fact, Section 13(5) of the A&C Act indicates that if a challenge has been made within fifteen days of the concerned party becoming aware of the constitution of the Arbitral Tribunal or within fifteen days from such party becoming aware of any circumstances pointing towards impartiality or independence of the Arbitral Tribunal, a challenge on this score is possible in the form of Objections to the Final Award under Section 34 of the A&C Act. Indeed, this is a significant and sufficient indicator of Parliament's resolve not to brook any interference by the Court till after the publication of the Award. Indian Law is palpably different also to the English, Australia and Canadian Arbitration Law. This difference makes the words of Lord Halsbury in Eastman Photographic Materials Co. all the more pithy and OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 32 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 poignant."
27. Hence, the Division Bench there was considering the remedy provided under Section 13 (3) & 13(5) of the Act. The court held that in case a party challenges the appointment of an arbitrator on grounds as provided therein and the arbitrator does not withdraw then the party aggrieved would have a remedy under Section 13(3) of the Act before the Arbitral Tribunal. In case, it does not succeed before the tribunal, the aggrieved party would have to await the award and then challenge the same. By the present petition we are concerned with the Arbitrator being de jure unable to perform his functions in view of Section 12(5) read with the Seventh Schedule of the Act which are newly inserted provision pursuant to the recent amendments. Hence, the judgment of the Division Bench does not apply to the facts of the present case.
28. In view of the above legal position, where an arbitrator is ineligible to be OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 33 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 appointed as an arbitrator as he suffers from disqualification stipulated under Section 12(5) and the Seventh Schedule of the Act and a party persists in appointing such an arbitrator, this court would have powers under Section 14(2) of the Act to terminate the mandate of such an arbitrator."
14. I have carefully examined the written arguments as well as relevant law referred by the parties.
15. From the discussion made above and on the basis of the written arguments of the parties following points emerges for determination of this Court :
(i) Whether the Arbitrator has been appointed lawfully as per provision of Arbitration Act ?
(ii) Whether the mandatory requirement of issuing notice u/s 21 of the Arbitration Act for invoking arbitration proceedings has been complied with or not ?
(iii) Whether the Learned Arbitrator has made the declaration / disclosure regarding ineligibility, if any, as per Section 12 (5) and Schedule 5 and 7 of the Act ?
(iv) Whether the decision on the application u/s 16 of the OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 34 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 Arbitration by the Learned Arbitrator vide order dated 24.07.2020 is a bar for filing the present petition or not?
16. Point No. 1(i) Whether the Arbitrator has been appointed lawfully as per provision of Arbitration Act ?
16.1 Clause 14 of the work order executed between the parties contain an arbitration clause as under : "Clause 14 : All disputes and differences that may arise between the parties hereto in regard to carrying out of the terms and conditions thereunder and/or the interpretation thereof in any way whatsoever so as to the construction meaning, validity of effect of this agreement of any cause, matter or thing herein contained or the rights and liabilities of the parties hereunder shall be referred to Arbitration and the said arbitration shall be governed by the Arbitration & Conciliation Act, 1996. It is specifically agreed that in case of no amicable settlement, the dispute shall be resolved by Sole Arbitrator to be appointed by the Chairman of M/s MBL Infrastructures Ltd.
OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 35 of 48(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 The award of the Sole Arbitrator shall be final and binding on both the parties. The arbitration shall be conducted at New Delhi. The laws of India shall govern this Agreement including the arbitration. Courts of Delhi shall have exclusive jurisdiction and the proceedings will be conducted in English only."
16.2 The respondent herein issued a letter dated 01.11.2019 to the petitioner placed as document no. 3 alongwith petition regarding appointment of Sole Arbitrator mentioning as under : "Whereas Disputes and differences have arisen between the above noted parties. The Competent Authority by powers vested on him under Clause 14 of the said work order has appointed Shri Virender Kumar Gupta, District & Session Judge, 244 Bank Enclave, Near Laxmi Nagar, Delhi110092 as "Sole Arbitrator" to adjudicate the disputes between the parties and make his award regarding the Claims / Counter Claims / disputes raised or to be raised by the parties, if any, under Clause OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 36 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 14 of the aforesaid work order."
16.3 The said letter has been issued by Sh. D.S. Nayal, AGM (Business Development) & Authorized Signatory of M/s MBL Infrastructure Ltd. As per contents of this letter the Sole Arbitrator has been appointed by competent authority as per Clause 14 of the work order i.e. Chairman of M/s MBL Infrastructure Ltd. The petitioner has contested that unilateral appointment of Sole Arbitrator is contrary to the law laid down by Hon'ble Supreme Court of India in "Perkins Eastman Architects DPC & Anr. versus HSCC (India) Ltd. in Arbitration Application. No. 32 of 2019, decided on 26.11.2019 reported as MANU/SE/1628/2019 also AIR 2020 Supreme Court 59" where it was held 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. It was further held that in a case where only one party has right to appoint 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. In para no. 15 of the judgment it was held OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 37 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 that once the Managing Director was incapable of functioning as an arbitrator, by virtue of Section 12(5) of the 1996 Act, he was also rendered ineligible to appoint an arbitrator as his nominee. 16.4 On behalf of respondent it is argued that a neutral Arbitrator Learned Additional District & Sessions Judge was appointed and whose appointment was challenged by the petitioner before the Sole Arbitrator u/s 12 (1) and 16 of the Arbitration and Conciliation Act and the said application was dismissed vide order dated 24.07.2020. It is further argued that the appointment having been made by Director of Company would not make the appointment bad in law because the Arbitrator is a retired ADJ who has been appointed as Sole Arbitrator and the said Sole Arbitrator is having no connection in the present case or with the parties in terms of Schedule 5 and 7 of the Arbitration Act. It is therefore submitted on behalf of respondent that there is no dejure ineligibility in the appointment of Sole Arbitrator. Learned counsel for respondent has relied upon the case of "S.P. Singla Constructions Pvt. Ltd. vs. State of Himachal Pradesh and Ors (supra)" stating that it was held that the arbitration clause in government contracts providing that an employee of the department will be the sole arbitrator are neither void nor unenforceable. It is further held that the arbitration agreement in government contracts providing that an employee of the department or a higher official unconnected with the work or the contract will be the OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 38 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 arbitrator are neither void nor unenforceable. 16.5 But the present Sole Arbitrator is not appointed on the basis of a clause in a government contract. The petitioner is a sub contractor and respondent is a contractor of CPWD and the arbitration clause is contained in the work order issued by respondent a government contractor to a subcontractor, therefore the reliance upon S.P. Singla Constructions Pvt. Ltd. vs. State of Himachal Pradesh and Ors (supra) seems to be misplaced. Nothing has been submitted on behalf of respondent regarding the ineligibility of chairman of company to appoint arbitrator because of the law laid down in Perkins Eastman Architects DPC & Anr. versus HSCC (India) Ltd. (supra). 16.6 For the above reasons, I find force in the arguments of the petitioner that the Arbitrator has not been appointed lawfully and is dejure and defacto ineligible and the Learned Sole Arbitrator has become dejure unable to perform his functions because of his appointment having been made by Chairman of the company in violation of Section 12 (5) of the Arbitration Act and contrary to the law laid down by Hon'ble Apex Court in Perkins Eastman Architects DPC & Anr. versus HSCC (India) Ltd. (supra). The point no. 1 is accordingly decided in above terms in favour of the petitioner and against the respondent.
17. Point No. 2 OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 39 of 48(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020
(ii) Whether the mandatory requirement of issuing notice u/s 21 of the Arbitration Act for invoking arbitration proceedings has been complied with or not ?
17.1 It has been alleged in the petition that no notice has been issued by the respondent for invoking the arbitration clause and the mandatory requirement of Section 21 of the Arbitration Act has not been complied with. Section 21 of the Arbitration Act provides as under : "21. Commencement of arbitral proceedings - Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent."
17.2 Admittedly, no notice has been issued u/s 21 of the Arbitration Act by the respondent. The Arbitrator has been appointed by issuing a letter dated 01.11.2019. During arguments on behalf of the respondent it was tried to be argued that the reply dated 01.11.2019 to the demand notice dated 05.09.2019 of the petitioner was sufficient notice u/s 21 of the Arbitration Act. However, later on this argument was not pressed by the learned counsel for respondent and it seems that it has been admitted by the respondent that notice u/s OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 40 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 21 of the Arbitration Act was not issued before the appointment of Sole Arbitrator vide letter dated 01.11.2019 placed on record by petitioner as document no. 3.
17.3 It has been argued on behalf of petitioner that invocation of arbitration u/s 21 of the Arbitration Act is mandatory requirement for initiating arbitration proceedings. Learned counsel has relied upon the case of Alupro Building Systems Pvt. Ltd. vs Ozone Overseas Pvt. Ltd. (supra). In para no. 32 of the said judgment it was held that the requirement of the Section 21 of the Arbitration Act is indeed mandatory and without the notice of invocation being received by the Respondent, no arbitral proceedings can commence. It was further held that requirement of receipt of notice by the Respondent in terms of Section 21 of the Act is a condition precedent to the commencement of arbitral proceedings. Since, no notice u/s 21 of the Arbitration Act was issued before the appointment of Learned Sole Arbitrator vide letter dated 01.11.219, the point no. 2 is decided against the respondent and in favour of the petitioner.
18. Point No. 3(iii) Whether the Learned Arbitrator has made the declaration / disclosure regarding ineligibility, if any, as per Section 12 (5) and Schedule 5 and 7 of the Act ?
18.1 It has been argued on behalf of petitioner that Learned OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 41 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 Arbitrator has made a false declaration dated 03.11.2019 u/s 12 (1) (a) of the Arbitration Act as he has not disclosed that he was already been appointed and adjudicating in another matter of the respondent i.e. M/s MBL Infrastructure Ltd. titled as Deepak Enterprise vs. M/s MBL Infrastructure Ltd. The said declaration dated 03.11.2019 has been filed as annexure6 in the documents of the respondent wherein Learned Sole Arbitrator has declared as under : "Kindly refer to your email dated 01.11.2019 on the above subject informing me to elicit my disclosure in terms of Sec 11 (8) read with Sec 12 (1) of Arbitration and Conciliation Act, 1996 I hereby submit as follows :
(1) I hereby give my consent to the
same.
(2) I have no 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 justiciable doubts as to independence or impartiality and which are OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 42 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 likely to affect my ability to devote sufficient time to the arbitration.
(3) I shall complete the entire
arbitration within a period of twelve
months."
18.2 The counsel for petitioner has referred the case of
"Alupro Building Systems Pvt. Ltd. vs Ozone Overseas Pvt. Ltd., (supra)," where Hon'ble High Court was pleased to hold in para no. 47 as under : "47. Turning to the case on hand, there is no denial that at the time he entered upon reference, the Arbitrator was adjudicating at least one of the claims of the Respondents in other arbitration proceedings. Admittedly, he did not disclose this fact at any time at the commencement of or during the arbitration proceedings. This fact was discovered later by the Petitioner. The averment on this aspect in the present petition has not been denied by the Respondent. In the circumstances, the Court is of the view that this is yet another ground on OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 43 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 which the impugned Award is liable to be set aside as it is opposed to the fundamental policy of Indian law. It attracts the ground under Section 14 (1) read with Section 15 (1), viz. the Arbitrator being rendered de jure incapable of acting as such. It also attracts Section 34 (2)
(b) (ii) of the Act."
18.3 It was argued on behalf of respondent by learned counsel that the disability in Clause 22 and 24 of 5th schedule is not attracted in this case because as per Clause 22 of 5 th schedule, if the Arbitrator has within the past 03 years been appointed as Arbitrator on two or more occasions by one of the party or an affiliate of one of the party only would attract the disability. It is argued that the Learned Sole Arbitrator was appointed Arbitrator only in one case of respondent therefore, there is no disability as per Clause 22 and 24 of the 5 th schedule of the Arbitration Act for conducting the arbitration in this case.
18.4 However, as per law laid down by Hon'ble High Court of Delhi in "Alupro Building Systems Pvt. Ltd. vs Ozone Overseas Pvt. Ltd., (supra)," the said disability would be attracted if the arbitration adjudicating one of the claim of the respondent in other arbitration proceedings. The facts and circumstances of the present are squarely OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 44 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 covered by the ratio in para 47 of "Alupro Building Systems Pvt. Ltd. vs Ozone Overseas Pvt. Ltd., (supra),". Therefore, the nondeclaration by the Learned Arbitrator about the ongoing proceeding in another arbitration matter of respondent by him is a justifiable doubt under schedule 5 and 7 of the Act which may attract Section 14 and 15 of the Act for terminating the mandate of the Arbitrator. Point No. 3 is decided against the petitioner and in favour of the respondent.
19. Point No. 4(iv) Whether the decision on the application u/s 16 of the Arbitration by the Learned Arbitrator vide order dated 24.07.2020 is a bar for filing the present petition or not? 19.1 It has been argued on behalf of respondent that after dismissal of application u/s 16 of the Arbitration Act by the Learned Arbitrator the only remedy available is to await for the Award and then challenge the same u/s 34 of the Arbitration Act. It is argued that the Court cannot terminate the mandate of the Arbitrator at the intermediate stage. Reliance has been placed on the case of Progressive Career Academy Pvt. Ltd. & Ors. vs. FITJEE Ltd. & Ors. (supra), wherein in para no. 16 it was held that : "16. On a reading of Section 13(5), the legislative intent becomes amply clear that OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 45 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 Parliament did not want to clothe the Courts with the power to annul an Arbitral Tribunal on the ground of bias at an intermediate stage. The Act enjoins the immediate articulation of a challenge to the authority of an arbitrator on the ground of bias before the Tribunal itself, and thereafter ordains that the adjudication of this challenge must be raised as an objection under Section 34 of the Act. Courts have to give full expression and efficacy to the words of the Parliament especially where they are unambiguous and unequivocal."
19.2 It has been argued on behalf of petitioner that reliance upon FITJEE case is misplaced because the said case relied by the respondent was decided prior to the amendment of Arbitration Act wherein Section 12 (5) was inserted. Reliance has been placed by learned counsel for petitioner on the case of West Haryana Highways Projects Pvt. Ltd. versus National Highways Authority of India (supra), wherein it was held that : " If an arbitrator is appointed contrary to Section 12(5) read with the Seventh Schedule, he is de jure ineligible to perform his OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 46 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 functions and the mandate of such an arbitrator can be terminated by the court under Section 14(2) of the Act. Section 13(3) and 13(5) would have no application in such circumstances.
25. Reliance of the learned counsel for the respondent on the judgment of the Division Bench of this court in the case of Progressive Career Academy Pvt. Ltd. v. FIIT JEE Ltd. (supra) is misplaced. That was a decision made prior to coming into force of the Arbitration and Conciliation (Amendment) Act, 2015."
19.3 Thus the Learned Sole Arbitrator in this case was already been appointed in another case of the respondent and was thus having financial interest with the respondent. Therefore, Section 12 (5) and schedule 7 was attracted in this case and the Arbitrator is therefore, dejure unable to perform its functions. Therefore, the judgment of Hon'ble High Court of Delhi in FITJEE case was not applicable. Since, the appointment of the Learned Sole Arbitrator was in violation of Section 21 of the Arbitration Act and also being in violation of law laid down in Perkins Eastman Architects DPC & Anr. versus HSCC (India) Ltd.(Supra), therefore, decision on Section 16 application of OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 47 of 48 (RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020 the petitioner by the Learned Arbitrator would not be a bar to the present petition and petitioner does not need to await the Award and therefore challenge the same u/s 34 of the Arbitration Act. Point No. 4 is accordingly decided in favour of the petitioner and against the respondent.
20. In view of the decision on all the points enumerated in para no. 15 of the judgment, I am of the considered opinion that it is a fit case for terminating the mandate of the Learned Sole Arbitrator u/s 14 (1) of the Arbitration Act. The mandate of the Learned Sole Arbitrator stands terminated. The petition is disposed of accordingly in above terms.
Parties are left to bear their own cost. File be consigned to Record Room after due compliance.
Digitally signed RAJ by RAJ KUMAR
Announced through Video Conferencing KUMAR CHAUHAN
Date:
on 27.11.2020. CHAUHAN 2020.11.27
16:46:07 +0530
(RAJ KUMAR CHAUHAN)
District Judge (Commercial Court)
South East/Saket Courts
New Delhi.
The judgment contains 48 pages all checked and signed by me.
OMP (T) (Comm) No. 5/20 Royale Meridian (India) Pvt. Ltd. vs. M/s MBL Infrastructure Ltd. Page 48 of 48(RAJ KUMAR CHAUHAN) District Judge (Commercial Court) /SE/Saket/ND/27.11.2020