Karnataka High Court
M/S Sri Krishna Shelters Pvt Ltd vs Union Of India on 19 September, 2019
Equivalent citations: AIRONLINE 2019 KAR 2073, 2020 (1) AKR 120 (2020) 1 KANT LJ 339, (2020) 1 KANT LJ 339, 2020 (1) AKR 120
Author: B.Veerappa
Bench: B. Veerappa
1 R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF SEPTEMBER, 2019
BEFORE
THE HON'BLE MR.JUSTICE B. VEERAPPA
CIVIL MISCELLANEOUS PETITION NO.107/2019
c/w.
CIVIL MISCELLANEOUS PETITION NOS.108, 120 AND
121/2019
IN CMP.NO.107/2019
BETWEEN:
M/S.SRI KRISHNA SHELTERS PVT. LTD.,
NO.59, SRI KRISHNA SUDHA,
WEST ANJANEYA TEMPLE STREET,
OPP. TO BASAVANAGUDI MAIN ROAD,
GANDHI BAZAAR,
BENGALURU - 560 004,
BY ITS MANAGING DIRECTOR,
K.A.RAGHAVENDRA. .. PETITIONER
(BY SRI S.M.CHANDRASHEKAR, SENIOR COUNSEL
FOR SRI ANIL KUMAR S., ADVOCATE)
AND:
1. UNION OF INDIA,
CENTRAL PUBLIC WORKS DEPARTMENT,
D-WING, 6TH FLOOR,
KENDRIYA SADANA,
KORAMANGALA,
BENGALURU - 560 034,
REPRESENTED BY ITS CHIEF ENGINEER,
2
SOUTH ZONE - III.
2. GOVERNMENT OF INDIA,
CENTRAL PUBLIC WORKS DEPARTMENT,
NITK, SURATHKAL PROJECT,
DIVISION-II, CPWD.,
NITK CAMPUS,
YOGAKSHEMA BUILDING,
BEECH ROAD, SURATHKAL,
MANGALURU - 574 146,
REPRESENTED BY THE
EXECUTIVE ENGINEER. .. RESPONDENTS
(BY SRI KUMAR M.N., CGC.)
THIS CIVIL MISCELLANEOUS PETITION IS FILED
UNDER SECTIONS 11(6) AND 12 OF THE ARBITRATION
AND CONCILIATION ACT, 1996 PRAYING TO APPOINT AN
INDEPENDENT ARBITRATOR AS SUBSTITUTE ARBITRATOR
TO DECIDE THE DISPUTE BETWEEN THE PETITIONER AND
UNION OF INDIA ARISING OUT OF CONTRACTUAL
AGREEMENT IN NO.10/PM/NITK/SPD-1/2014-15 UNDER
ANNEXURE-A AND IN NO.04/PM/NITK/SPD-1/2014-15
UNDER ANNEXURE-A1 OF THE CLAIM OF THE 2ND
RESPONDENT AND COUNTER CLAIM OF THE PETITIONER
PREFERABLY A RETIRED JUDGE OF THIS COURT OR AN
INDEPENDENT PERSON AS SOLE ARBITRATOR, INSTEAD
OF ARBITRATOR APPOINTED BY THE 1ST RESPONDENT OF
SRI L.P.SRIVASTAV, A RETIRED ADDITIONAL DIRECTOR
GENERAL, CPWD., GANDHI NAGAR, GUJARATH, IN
NO.55/13/CE/(SZ)III/ 7120-23 AND
NO.55/13/CE(SZ)III/7124-27 DATED 20/11/2017 UNDER
ANNEXURES-B & C, WHO IS INELIGIBLE TO ACT AS
ARBITRATOR, WHICH IS NECESSARY IN THE INTEREST OF
JUSTICE AND EQUITY.
3
IN CMP.NO.108/2019
BETWEEN:
M/S.SRI KRISHNA SHELTERS PVT. LTD.,
NO.59, SRI KRISHNA SUDHA,
WEST ANJANEYA TEMPLE STREET,
OPP. TO BASAVANAGUDI MAIN ROAD,
GANDHI BAZAAR, BENGALURU - 560 004,
BY ITS MANAGING DIRECTOR,
K.A.RAGHAVENDRA. .. PETITIONER
(BY SRI S.M.CHANDRASHEKAR, SENIOR COUNSEL
FOR SRI ANIL KUMAR S., ADVOCATE)
AND:
1. UNION OF INDIA,
CENTRAL PUBLIC WORKS DEPARTMENT,
D-WING, 6TH FLOOR,
KENDRIYA SADANA,
KORAMANGALA,
BENGALURU - 560 034,
REPRESENTED BY ITS CHIEF ENGINEER,
SOUTH ZONE - III.
2. GOVERNMENT OF INDIA,
CENTRAL PUBLIC WORKS DEPARTMENT,
NITK, SURATHKAL PROJECT,
DIVISION-II, CPWD.,
NITK CAMPUS,
YOGAKSHEMA BUILDING,
BEECH ROAD, SURATHKAL,
MANGALURU - 574 146,
REPRESENTED BY THE
EXECUTIVE ENGINEER. .. RESPONDENTS
(BY SRI KUMAR M.N., CGC.)
4
THIS CIVIL MISCELLANEOUS PETITION IS FILED
UNDER SECTIONS 11(6) AND 12 OF THE ARBITRATION
AND CONCILIATION ACT, 1996 PRAYING TO APPOINT AN
INDEPENDENT ARBITRATOR AS SUBSTITUTE ARBITRATOR
TO DECIDE THE DISPUTE BETWEEN THE PETITIONER AND
UNION OF INDIA ARISING OUT OF CONTRACTUAL
AGREEMENT IN NO.02/PM/NITK/SPD-2/2014-15 UNDER
ANNEXURE-A AND IN NO.03/PM/NITK/SPD-1/2014-15
UNDER ANNEXURE-A1 OF THE CLAIM OF THE 2ND
RESPONDENT AND COUNTER CLAIM OF THE PETITIONER
PREFERABLY A RETIRED JUDGE OF THIS COURT OR AN
INDEPENDENT PERSON AS SOLE ARBITRATOR, INSTEAD
OF ARBITRATOR APPOINTED BY THE 1ST RESPONDENT OF
SRI JAGMOHAN LAL, A RETIRED ADDITIONAL DIRECTOR
GENERAL, CPWD., NEW DELHI IN
NO.55/4/2017/7/FO/CE(SZ-III)7198-201 AND
NO.55/4/2017/6/FO/CE (SZ-III) 7194-97 DATED
24/11/2017 UNDER ANNEXURES-B & C, WHO IS
INELIGIBLE TO ACT AS ARBITRATOR, WHICH IS
NECESSARY IN THE INTEREST OF JUSTICE AND EQUITY.
IN CMP.NO.120/2019
BETWEEN:
M/S.SRI KRISHNA SHELTERS PVT. LTD.,
NO.59, SRI KRISHNA SUDHA,
WEST ANJANEYA TEMPLE STREET,
OPP. TO BASAVANAGUDI MAIN ROAD,
GANDHI BAZAAR,
BENGALURU - 560 004,
BY ITS MANAGING DIRECTOR,
K.A.RAGHAVENDRA. .. PETITIONER
(BY SRI S.M.CHANDRASHEKAR, SENIOR COUNSEL
FOR SRI ANIL KUMAR S., ADVOCATE)
5
AND:
1. THE CHIEF ENGINEER,
SOUTH ZONE-III,
UNION OF INDIA.
CENTRAL PUBLIC WORKS DEPARTMENT,
DIVISION WING, 6TH FLOOR,
KENDRIYA SADANA,
KORAMANGALA,
BENGALURU - 560 034.
2. THE EXECUTIVE ENGINEER,
GOVERNMENT OF INDIA,
CENTRAL PUBLIC WORKS DEPARTMENT,
NITK, SURATHKAL PROJECT,
DIVISION-I, CPWD.,
NITK CAMPUS,
YOGAKSHEMA BUILDING,
BEECH ROAD, SURATHKAL,
MANGALURU - 574 146. . RESPONDENTS
(BY SRI KUMAR M.N., CGC.)
THIS CIVIL MISCELLANEOUS PETITION IS FILED
UNDER SECTIONS 11(6) AND 12 OF THE ARBITRATION
AND CONCILIATION ACT, 1996 PRAYING TO APPOINT AN
INDEPENDENT ARBITRATOR AS SUBSTITUTE ARBITRATOR
TO DECIDE THE DISPUTE BETWEEN THE PETITIONER AND
UNION OF INDIA OF THE CLAIM OF THE 2ND RESPONDENT
AND COUNTER CLAIM OF THE PETITIONER PREFERABLY A
RETIRED JUDGE OF THIS COURT OR AN INDEPENDENT
PERSON AS SOLE ARBITRATOR, INSTEAD OF ARBITRATOR
APPOINTED BY THE 1ST RESPONDENT OF SRI
K.SRINIVASAN, DIRECTOR GENERAL (RETD.), CPWD.,
CHENNAI, IN NO.55/4/2017/4/CE(SZ-III)262 DATED
11/03/2019 UNDER ANNEXURE-E WHO IS INELIGIBLE TO
ACT AS ARBITRATOR, WHICH IS NECESSARY IN THE
INTEREST OF JUSTICE AND EQUITY.
6
IN CMP.NO.121/2019
BETWEEN:
M/S.SRI KRISHNA SHELTERS PVT. LTD.,
NO.59, SRI KRISHNA SUDHA,
WEST ANJANEYA TEMPLE STREET,
OPP. TO BASAVANAGUDI MAIN ROAD,
GANDHI BAZAAR,
BENGALURU - 560 004,
BY ITS MANAGING DIRECTOR,
K.A.RAGHAVENDRA. .. PETITIONER
(BY SRI S.M.CHANDRASHEKAR, SENIOR COUNSEL
FOR SRI ANIL KUMAR S., ADVOCATE)
AND:
1. THE CHIEF ENGINEER,
SOUTH ZONE-III,
UNION OF INDIA.
CENTRAL PUBLIC WORKS DEPARTMENT,
DIVISION WING, 6TH FLOOR,
KENDRIYA SADANA,
KORAMANGALA,
BENGALURU - 560 034.
2. THE EXECUTIVE ENGINEER,
GOVERNMENT OF INDIA,
CENTRAL PUBLIC WORKS DEPARTMENT,
NITK, SURATHKAL PROJECT,
DIVISION-I, CPWD.,
NITK CAMPUS,
YOGAKSHEMA BUILDING,
BEECH ROAD, SURATHKAL,
MANGALURU - 574 146. .. RESPONDENTS
(BY SRI KUMAR M.N., CGC.)
7
THIS CIVIL MISCELLANEOUS PETITION IS FILED
UNDER SECTIONS 11(6) OF THE ARBITRATION AND
CONCILIATION ACT, 1996 PRAYING TO APPOINT AN
INDEPENDENT ARBITRATOR AS SUBSTITUTE ARBITRATOR
TO DECIDE THE DISPUTE BETWEEN THE PETITIONER AND
UNION OF INDIA OF THE CLAIM OF THE 2ND RESPONDENT
AND COUNTER CLAIM OF THE PETITIONER PREFERABLY A
RETIRED JUDGE OF THIS COURT OR AN INDEPENDENT
PERSON AS SOLE ARBITRATOR, INSTEAD OF ARBITRATOR
APPOINTED BY THE 1ST RESPONDENT OF SRI
K.SRINIVASAN, DIRECTOR GENERAL (RETD.), CPWD.,
CHENNAI, IN NO.55/13/CE(SZ-III)261 DATED 11/03/2019
UNDER ANNEXURE-E WHO IS INELIGIBLE TO ACT AS
ARBITRATOR, WHICH IS NECESSARY IN THE INTEREST OF
JUSTICE AND EQUITY.
THESE CIVIL MISCELLANEOUS PETITIONS COMING
ON FOR ORDERS THIS DAY, THE COURT MADE THE
FOLLOWING:
ORDER
Since common question of law arises in these civil miscellaneous petitions, they are clubbed together, heard and disposed off by this common order.
2. The petitioners filed the present Civil Miscellaneous Petitions under the provisions of Section 11(6) and 12 of the Arbitration and Conciliation Act, 1996 (for short, 'the Act') for appointment of independent arbitrator as substitute arbitrator to decide the dispute 8 between the petitioners and the Union of India arising out of contractual agreements entered into between the parties.
I. Facts of the case :
3. It is the case of the petitioners that the respondent - Union of India invited tenders in the year 2014-15 to execute the following works:
i) Construction of new sports complex at NITK campus, Surathkal, Karnataka Sub-head;
building portion including internal electrical installations, internal water supply, sanitary installations, drainage (balance work) fixing the time period for completion of the work as 18 months (04/03/2015 to 03/09/2015) with estimated cost of Rs.18,97,22,701;
ii) Construction of 56 numbers of non faculty apartment (28 No.Type III and 28 No. Type IV Quarters at NITK Campus, Surathkal, Mangalore, including internal water supply, sanitary installations, internal electrical installations, lifts, fixing the time period for completion of the work as 24 months 9 (18/10/2014 to 17/10/2016 with estimated cost of Rs.17,78,39,056/-;
iii) Construction of vertical extension of Basic Science building at NITK campus, Surathkal, sub-head: Construction of 5th and 6th floor over the existing five storied building including internal water supply, sanitary installations, internal electrical installations, Air conditioning and lift, fixing the time period of 22 months (24/09/2014 to 23/07/2016) with an estimated cost of Rs.6,50,79,559/-);
iv) Additional building for library at NITK campus, Surathkal, Karnataka sub-head: building portion including internal water supply, sanitary installations, drainage, internal electrical installations, Fire Alarm, fire fitting system and lift, fixing the time period for completion of the work as 17 months (18/01/2015 to 17/06/2016) with estimated cost of Rs.7,35,00,327/-;
v) Construction of vertical extension of new mechanical engineering block at NITK Campus, Surathkal, Mangalore. (Construction of 4th, 5th and 6th floors on the existing 4 storied building 10 including civil, electrical, air conditioning, sub- station and lifts, fixing the time period for completion of work as 24 months (24/09/2014 to 23/09/2016) with estimated cost of Rs.15,33,57,833/-;
vi) Construction of multi-storeyed boys hostel building comprising of 3 blocks, Block 1 & 2 (G+7 storeys), Block 3 (G+6 storeys) accommodating 500 single occupancy rooms at National Institute of Technology, Karnataka (NITK) campus Surathkal, Karnataka, sub- head: building portion including internal water supply, sanitary installations, drainage development, bulk services, horticulture development, internal electrical installations, substation equipment, DG set and lifts, fixing the time period for completion of the work as 24 months (06/12/2014 to 05/12/2016) with estimated cost of Rs.40,39,62,130/-.
4. The petitioners have participated in the tender and quoted (i) Rs.17,96,86,370/-, (ii) Rs.17,01,91,976/-, (iii) Rs.6,28,66,854/-, (iv) Rs.6,89,06,557/-, (v) Rs.14,81,43,667/- and (vi) Rs.38,95,00,285/- for the 11 above said works respectively. Accordingly, respondent No.2 awarded the said works to the petitioners under different agreements in the year 2014-15. In terms of the respective agreements, petitioners have submitted performance guarantees for (i) Rs.89,84,319/-, (ii) Rs.85,09,598, (iii) Rs.31,43,343/-, (iv) Rs.34,45,328/-, (v) Rs.74,07,183/- and (vi) Rs.1,94,75,014/- respectively for the respective works.
5. Respondent No.2 issued work commencement letters to all the petitioners with a direction to take possession of respective sites with relevant drawings without any hindrances under acknowledgments pertaining to respective agreements on (i) 04/03/2015, (ii) 13/10/2014,
(iii) 22/09/2014, (iv) 14/01/2015, (v) 22/09/2014 and (vi) 05/12/2014. Petitioners had submitted construction program charts for respective agreement works on (i) 04/03/2015, (ii)17/11/2014, (iii) 22/09/2014 revised on 22/11/2014, (iv) 18/01/2015, (v) 22/09/2014 revised on 21/11/2014 and (vi) 02/01/2015. Respondent No.2 in 12 respect of each work covered under the respective agreements issued notices and instructions to petitioners before determining the respective agreements. Thereafter, respondent No.2 issued show-cause notices to the petitioners for delays and lapses in execution of the works agreed under the respective agreements and demanded compensation under clause 2 of the agreements not exceeding 10% of the contract value amounting to (i) Rs.1,39,82,765/-, (ii) Rs.71,71,751/-, (iii) Rs.35,04,160/-,
(iv) Rs.50,72,179/-, (v) Rs.1,14,70,146/- and (vi) Rs.7,00,04,653/- respectively. Petitioners denied payments of amounts stated supra.
6. When the petitioners denied to pay the said amounts to respondent No.2, in terms of clause 25 of the agreements, respondent No.2 requested respondent No.1 for appointment of arbitrators for recovery of said amounts under respective agreements. Respondent No.1 on receipt of said notice, referred the dispute to the Dispute Resolution Committee intending to appoint Rajesh Banga, 13 Permanent Arbitrator, Ministry of Housing and Urban Affairs, Government of India and notified the petitioners for their consent as required under Section 12(5) of the Act, but the petitioners did not consent for appointment of Rajesh Banga as arbitrator. Therefore, Rajesh Banga expressed his inability to act as arbitrator in all the cases. Thereafter, respondent No.1 issued notices intending to appoint Sri L.P.Srivastava, Additional Director General of C.P.W.D., Sri Jagmohan Lal, Additional Director General of C.P.W.D., Sri S.R.Pandey, Retired Additional Director General of C.P.W.D., Sri K.K.Varma, Retired Additional Director General of C.P.W.D. as arbitrators in respect of six agreements under intimation to the petitioners. All the intended arbitrators appointed disclosed in writing as required under the provisions of Section 12(5) read with Schedule VI of the Act under intimation to all the petitioners and respondents. Accordingly, respondent No.1 appointed arbitrators Sri L.P.Srivastava in respect of two agreements, Sri Jagmohan Lal in respect of two 14 agreements, Sri S.R.Pandey in respect of one agreement, Sri K.K.Varma in respect of one agreement.
7. It is further case of the petitioners that all the arbitrators so appointed entered reference by the respective letters on 06/12/2017, 25/12/2017, 27/12/2017 and 23/12/2017 in respect of the agreements. It is further case of the petitioners that on receipt of the references, notices were issued by the respective arbitrators as stated supra. The petitioners filed their objections contending that they have not consented for their appointments, as it is mandatory under Section 11 of the Act and hence they have approached this court.
8. The learned arbitrators rejected the objections filed by the respective petitioners vide separate orders dated 07/01/2018, 02/01/2018, 22/02/2018 and 03/01/2018 holding that as per Clause -25 of the agreements, consent of the petitioners are not necessary and their appointments are as per the terms/procedure agreed in the agreements. The petitioners were directed to submit 15 the statement of defence and continued the arbitration proceedings. Thereafter, the petitioners were participated in the arbitral proceedings and filed their statement of defence and amended statement of defence, statement of counter claims on different dates respectively and also consented for extra six months time to pass arbitral award in all the six cases. Thereafter, petitioners have preferred W.P.Nos.5383/18 & 55553/2018 before this Court and this Court had granted an interim order staying further proceedings by order dated 18/11/2018 and thereafter matters came to be converted into present Civil Miscellaneous Petitions.
II. Objections filed by the respondents :
9. The respondents contended that the Civil Miscellaneous Petitions under Section 11(6) of the Act to appoint substitute arbitrators are not maintainable and liable to be rejected in limine. It is further contended that under Section 12(5) of the Act and entries in Fifth and Seventh Schedule are not prohibited to appoint former employees 16 as arbitrators. Since the petitioners have participated in the proceedings before the arbitrators by filing objections, the petitioners have waived the provisions of sub-Section (5) of Section 12 of the Act. On that ground alone, Civil Miscellaneous Petitions are liable to be rejected. It is further contended that once the arbitrators are appointed, if the petitioners are aggrieved, they have to challenge the same before the arbitral Tribunal. If challenge is not successful, the arbitral Tribunal shall continue the proceedings and make an award and the petitioners can challenge the same under Section 34 of the Act and sought for dismissal of the Civil Miscellaneous Petitions.
10. I have heard the learned counsel for the parties to the lis.
III. Arguments advanced by the Senior Counsel for petitioners :
11. Sri. Chandrashekar S.M., learned senior counsel appearing for the petitioners contended that all the arbitrators appointed by respondent No.1 under six 17 different agreements are disqualified, in view of the provisions of Section 12(5) read with Seventh Schedule of entries 1, 13 and 14 of the Act. On that ground alone, these Civil Miscellaneous Petitions have to be allowed. He would further contend that even after participation by the petitioners in the proceedings and filing objections, they have not given any consent in writing as contemplated under the provisions of Section 12(5) of the Act. Once petitioners have not given consent, it is impossible for the arbitrators to proceed further in view of the provisions of Section 14 of the Act. He further contended that once Section 12(5) read with Seventh Schedule attracts, the provisions of Section 13 and 14 are not applicable and hence the question of filing the arbitral proceedings by the petitioners after the award passed by the learned arbitrators would not arise.
12. He further contended that the Fifth Schedule and Seventh Schedule read with Section 12(5) of the Act and the entries made thereon attracts, the very appointment of 18 the arbitrators by respondent No.1 is invalid and they cannot proceed further. Therefore, it is a fit case to appoint substitute arbitrators to resolve the dispute in terms of Clause-25 of the agreement entered into between the parties.
13. He would specifically contend that in view of entry 13 and 14 of Seventh Schedule read with Section 12(5) of the Act, the learned arbitrators appointed by respondent No.1 are all former employees of C.P.W.D and naturally they have significant financial interest in any one of the parties and that there is possibility of affiliation of respondent No.2, as they are getting regular pension from respondent No.2. Therefore, there would be bias against the petitioners. Therefore, it is a fit case to appoint substitute in place of the present arbitrators.
14. Learned Senior Counsel for petitioners brought to the notice of this Court the memo dated 19/09/2019 filed before this Court that two arbitrators namely, S.R.Pandey, who appointed as arbitrator has filed declaration that he is 19 having 25 cases out of which, four cases under the amended Act. Sri.K.K.Varma, who appointed as arbitrator has declared that after retirement, he has conducted arbitration in more than 180 matters relating to construction contracts of various Government departments and he is having 17 arbitrary cases, out of which, 10 cases are as per amended Act. Therefore, it would clearly indicate that they are ineligible to appoint as arbitrators under Clause-22 of Fifth Schedule which depicts that an arbitrator within the past three years who has been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.
15. In support of his arguments, the learned Senior Counsel for petitioners relied upon the following judgments:-
1) AIR 1987 SC 2386 (Ranjit Thakur v. Union of India and others) Para - 6 and 7
2) (2013) 5 SCC 427 (Rajasthan State Industrial Development and Investment Corporation) Para 18 20
3) (2019) 2 SCC 2434 (Bharat Broadband Network Limited v. United Telecoms Limited) Para -18.
4) AIR 2019 SC 3538 ( Vinod Bhaiyalal Jain and others v. Wadhwani Parmeshwari Cold Storage Pvt. Ltd. Through its Director and another - paragraphs 8, 9 and 10 with regard to impartiality.
5) (2019) 2 SCC 408 (S.P.Singla Constructions Private Limited v. State of Himachal Pradesh and Another,
16. He also relied upon the definition of 'Financial interest' , as per clause 4 of Oklahoma statutes annotated title 3A Amusements and Sports wherein it is stated that "Financial interest" means an interest that could result in directly or indirectly receiving a pecuniary gain or sustaining a pecuniary loss as a result of ownership or interest in a business entity, or as a result of salary, gratuity, or other compensation or remuneration from any person. Therefore, he sought to allow the Civil Miscellaneous petitions.
IV. Arguments advanced by the learned CGSC :
17. Per contra, Sri. M.N.Kumar, learned Central Government Standing Counsel while reiterating the 21 objections filed to the petitions mainly contended that these Civil Miscellaneous petitions filed under Section 11(6) to appoint substitute arbitrators under different agreements are not maintainable and are liable to be rejected. He would further contend that the provisions of Section 12(5) of the Act, entries in Fifth and Seventh Schedule are not prohibited to appoint former employees as arbitrators. He would further contend that in view of the provisions of Section 14(2) and 13(4) of the Act, the present Civil Miscellaneous Petitions filed by the petitioners for the reliefs sought for are not maintainable.
18. He would further contend that once a party filed objections, defence and participated in the proceedings, there is no need of the petitioners to give consent as contemplated under Section 12(5) of the Act, as the arbitrators are not departmental employees. They are all former employees and there is no prohibition to appoint them. He would further contend that once they participated and filed their objections and the learned 22 arbitrators passed orders on 17/01/2015, 02/01/2018, 22/02/2018 and 03/01/2018 rejecting their objections, the said arbitral awards passed by the learned arbitrators have reached finality.
19. He would further contend that once arbitrators are appointed and if the petitioners are aggrieved, then under the provisions of Section 13(2) of the Act, within fifteen days after becoming aware of the Constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of section 12, send a written statement for the reasons to challenge the order of arbitral tribunal/ arbitrators. In the present case, petitioners have not given such written consent with reasons except to state that they have not consented for appointing them, though consent of the petitioners is not necessary in terms of Clause -25 of the agreement. Unless the order of the arbitrator is challenged under Section 13(2) of the Act withdraws from his office or the other party agrees to the challenge, the arbitral tribunal 23 shall decide under the challenge, the challenge is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an award. If such award is passed by the arbitrator/arbitral tribunal under Section 13(4) of the Act, petitioners can make an application to set aside the order of the arbitrary tribunal in accordance with the provisions of Section 34 of Act.
20. He would further contend that all the arbitrators appointed by respondent No.1 are all retired about 10 -15 years back and that petitioners have not even filed any such written statement with reasons for challenge within 15 days from the date of becoming aware of the arbitration. He would further contend that the main challenge in the present petition is that the arbitrators appointed by respondent No.1 are ineligible under Section 12(5) read with Seventh Schedule of the Act, is untenable.
21. The learned counsel for respondents relied upon the following dictum of the Hon'ble Supreme Court; 24
i) S.P. Singla Constructions Private Limited v. State of Himachal Pradesh and Another, (2019)2 SCC 488, paragraphs -20, 11, 18, 19 and 20 with regard to maintainability of these Civil Miscellaneous Petitions under Section 11(6) of the Act;
ii) HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited ( Formerly Gas Authority of India Limited), (2018) 12 SCC 471, para-12 with regard to the effect after amendment Act, 1996.
iii) Government of Haryana PWD Haryana ( B & R Branch) v M/s. G.F. Toll Road Private Ltd and Others, 2019(3) SCC 505, para-21 to 4, to contend that there is no prohibition to appoint former employees as arbitrators under the Act. Therefore, these petitions are not maintainable and sought to dismiss these petitions.
V. The points for determination :
22. In view of the rival contentions urged by learned senior counsel for petitioners and learned Central Government 25 Standing Counsel for respondents, the points that arise for consideration are;
1) Whether the former employees of respondent No.2 are prohibited to appoint as arbitrators under the provisions of Section 12(5) of the Act read with Fifth Schedule and Seventh Schedule and the entries thereon?
2) Whether the petitioners have made out a case exercising powers under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of independent or impartial substitute arbitrators?
VI. For consideration :
23. I have given my anxious consideration to the arguments of the learned senior counsel appearing for the parties and perused the record and the judgments relied upon by both the parties carefully.
24. It is undisputed fact that respondent No.2/Central Public Works Department, NITK, Surathkal Project 26 Division-II, Mangaluru, has called e-tender for construction of New Sports Complex Building at National Institute of Technology and for other six works and issued different notifications. It is also not in dispute that petitioners were participated in the tender for all the six works and quoted their bids. Respondent No.2 accepting the bids of the petitioners and has awarded contracts by executing six separate agreements on different dates in the year 2014-15. Petitioners have also submitted their respective performances in respect of the works to be carried out. It is also not in dispute that respondent No.2 issued work commencement letters to the petitioners on different dates in terms of the agreements executed.
25. It is also not in dispute that with regard to six agreements executed between the petitioners and respondent No.2 certain disputes are arose between the parties. Therefore, respondent No.2 issued notice to all the petitioners complaining slow progress of the work and demanded balance amount as compensatio from the 27 petitioners. In terms of Clause -25 of the agreements entered into between the parties, there is a settlement of Disputes and Arbitration which reads as under;
"CLAUSE 25 Except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specifications, design, drawings and instructions here-in before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter:
(i) If the contractor considers any work demanded of him to be outside the requirements of the contract, or disputes any drawings, record or decision given in writing by the Engineer-in-
Charge on any matter in connection with or 28 arising out of the contract or carrying out of the work, to be unacceptable, he shall promptly within 15 days request the Superintending Engineer in writing for written instruction or decision. Thereupon, the Superintending Engineer shall give his written instructions or decision within a period of one month from the receipt of the contract's letter.
(ii) If the Superintending Engineer fails to give his instructions or decision in writing within the aforesaid period of if the contract is dissatisfied with the instructions or decision of the Superintending Engineer, the contractor may, within 15 days of the receipt of Superintending Engineer's decision, appeal to the Chief Engineer who shall afford an opportunity to the contractor to be heard, if the latter so desires, and to offer evidence in support of his appeal. The Chief Engineer shall give his decision within 30 days of receipt of contractor's appeal. If the contractor is dissatisfied with the decision of the Chief Engineer, the contractor may within 30 days from the receipt of the Chief Engineer decision, appeal before the Dispute Redressal Committee (DRC) along with a list of disputes with amounts 29 claimed in respect of each such dispute and giving reference to the rejection of his disputes by the Chief Engineer. The Dispute Redressal Committee (DRC) shall give his decision within a period of 90 days from the receipt of Contractor's appeal. The Constitution of Dispute Redressal Committee (DRC) shall be as indicated in Schedule 'F'. If the Dispute Redressal Committee (DRC) fails to give his decision within the aforesaid period or any party is dissatisfied with the decision of Dispute Redressal Committee (DRC), then either party may within a period of 30 days from the receipt of the decision of Dispute Redressal Committee (DRC), give notice to the Chief Engineer for appointment of arbitrator on prescribed proforma as per Appendix XV, failing which the said decision shall be final binding and conclusive and not referable to adjudication by the arbitrator.
It is a term of contract that each party invoking arbitration must exhaust the aforesaid mechanism of settlement of claims/disputes rior to invoking arbitration.
30
(ii) Except where the decision has become final, binding and conclusive in terms of Sub Para(i) above, disputes or difference shall be referred for adjudication through arbitration by a sole arbitrator appointed by the Chief Engineer, CPWD, in charge of the work or if there be no Chief Engineer, the Additional Director General of the concerned region of CPWD or if there be no Additional Director General, the Director General, CPWD, if the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever, another sole arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled to proceed with the reference from the stage at which it was left his predecessor.
It is a term of this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respect of each such dispute along with the notice for appointment or arbitrator and giving reference to the rejection by the Chief Engineer of the appeal.
It is also a term of this contract that no person, other than a person appointed by such Chief Engineer CPWD or Additional Director General or 31 Directo General, CPWD, as aforesaid, should act as arbitrator and if for any reason that is not possible, the matter shall not be referred to arbitration at all.
It is also a term of this contract that if the contractor does not make any demand for appointment of arbitrator in respect of any claims in writing as aforesaid within 120 days of receiving the intimation from the Engineer-in- charge that the final bill is ready for payment, the claim of the contractor shall be deemed to have been waived and absolutely barred and the Government shall be discharged and released of all the liabilities under the contract in respect of these claims.
The arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) or any statutory modifications or re-enactment there of and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause.
It is also a term of this contract that the arbitrator shall adjudicate on only such disputes as are referred to him by the appointing authority and give separate award against each 32 dispute and claim referred to him and in all cases where the total amount of the claims by any party exceeds Rs.1,00,000/-, the arbitrator shall give reasons for the award.
It is also a term of the contract that if any fees are payable t the arbitrator, these shall be paid equally by both the parties.
It is also a term of contract that the arbitrator shall be deemed to have entered n the reference on the date he issues notice to both the parties calling them to submit their statement of claims and counter statement of claims. The venue of the arbitration shall be such place as may be fixed by the arbitrator in his sole discretion. The fees, if any, of the arbitrator shall, if required to be paid before the award is made and published, be paid half and half by each of the parties. The cost of the reference and of the award (including the fees, if any, of the arbitrator) shall be in the discretion of the arbitrator who may direct to any by whom and in what manner, such costs or any part thereof shall be paid and fix or settle the amount of costs to be so paid. "
26. It is also not in dispute that respondent No.1 intends to appoint one Mr. Rajesh Banga, as permanent arbitrator 33 in all the cases and notified the petitioners for their consent as required under sub-section (5) of Section 12 of the Act. Since the petitioners did not agree/consent, the said Rajesh Banga expressed his inability to act as arbitrator in all the cases. Thereafter respondent No.1 appointed following arbitrators ;
1) Sri. L.P.Srivastava, Additional Director General of C.P.W.D, (retired on 31/03/2009)
2) Sri. Jagmohan Lal, Additional Director General of C.P.W.D,(retired on 30/09/2002)
3) Sri.S.R.Pandey, Additional Director General of C.P.W.D (retired on 30/11/2007)
4) Sri.K.K.Varma, Additional Director General of C.P.W.D,( retired on 31/05/2004).
27. It is stated at the Bar that after the proceedings are initiated before this Court, Sri. K.K. Varma vacated his office and in his place Sri. L.P. Srinivasan, Director General of C.P.W.D (retired 31/03/2008) has appointed as sole arbitrator. It is also not in dispute that petitioners have 34 participated in the proceedings and filed their defence. Subsequently, petitioners have also filed objections before the learned Arbitrators separately and the learned Arbitrators by the orders dated 07/01/2018, 02/01/2018, 22/02/2018 and 03/01/2018 rejected their objections. The said orders passed by the Arbitrators have reached finality.
28. In view of the rival contentions urged by the learned counsel for the parties, it is relevant to consider the provisions of Section 12 of the Act, which reads as under;
" 12. Grounds for challenge [(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances -
(a) Such as the existence either direct or indirect, of any past or present relationship with 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 35
(b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months.
Explanation 1: The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.
Explanation 2: The disclosure shall be made by such person in the form specified in the Sixth Schedule.] (2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if -
(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or
(b) he does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose appointment he 36 has participated, only for reasons of which he becomes aware after the appointment has been made.
[(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel 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; PROVIDED that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.]"
Sub-section (5) of Section 12 specifies 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. Proviso stipulates that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-
section by an express agreement in writing.37
29. Sri. Chandrashekar, learned senior counsel appearing for the parties contended that in view of entry 22 of Fifth Schedule, 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 is not eligible to appoint as arbitrator. He would further contend that entry 13 and 14 of Fifth Schedule specifies that the arbitrator has a significant financial interest in one of the parties or the outcome of the case and the arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom is ineligible. With due respect, the said contentions cannot be accepted for the simple reason that the word used in sub- section (5) of Section 12 that any person whose relationship, with the parties or counsel are 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, which clearly depicts that the 38 arbitrator who appointed should not have any relationship with either of the parties to the agreement or he should have acted as counsel or has any significant financial interest in one of the parties to the agreement and the arbitrator should not regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income thereform.
30. Admittedly, in the present case, it is not a case of the petitioners that any of the arbitrators appointed have a direct relationship with any one of the parties or they are represented earlier to any of the parties or any significant financial interest except contending that they are all former employees of respondent No.2 and naturally they would have bias, is without any basis. The Hon'ble Supreme Court in the case of Government of Haryana PWD Haryana (B and R) Branch v M/s. G.F. Toll Road Pvt Ltd. & Ors, (2019) 3 SCC 505, wherein the Hon'ble Supreme Court at paragraphs- 21, 22, 23 and 24-A held as under; 39
21. The 1996 Act does not disqualify a former employee from acting a an arbitrator, provided that there are no justifiable doubts as to his independence and impartiality. The fact that the arbitrator was in the employment of the State of Haryana over 10 years ago, would make the allegation of bias clearly untenable.
22. The present case is governed by the pre-amended 1996 Act. Even as per the 2015 Amendment Act which has inserted the Fifth Schedule to the 1996 Act which contains grounds to determine whether circumstances exist which give rise to justifiable doubts as the independence or impartiality of an arbitrator. The first entry to the Fifth Schedule reads as under:
"Arbitrator's relationship with the parties or counsel
1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party."
(emphasis supplied) Entry 1 of the Fifth Schedule and the Seventh Schedule area identical. The entry indicates 40 that a person, who is related to a party as an employee, consultant or an advisor, is disqualified to act as an arbitrator. The words "is an" indicate that the person so nominated is only disqualified if he/she is a present/current employee, consultant, or advisor of one of the parties.
23. An arbitrator who has "any other"
past r present "business relationship" with the party is also disqualified. The word "other"
used in Entry 1, would indicate a relationship other than an employee, consultant or an advisor. The word " other " cannot be used to widen the scope of the entry to include past/former employees.
24. ICA made only a bald assertion that the nominee arbitrator Mr. M.K.Aggarwal would not be independent and impartial. The objection of reasonable apprehension of bias raised was wholly unjustified and unsubstantiated, particularly since the nominee arbitrator was a former employee of the State over 10 years ago. This would not disqualify him from acting as an arbitrator. Mere allegations of bias are not a ground for 41 removal of an arbitrator. It is also relevant to state that the appointment had been made prior the 2015 Amendment Act when the Fifth Schedule was not inserted. Hence, the objection raised by ICA was untenable on that ground also. "
31. The next contention raised by the learned senior counsel is that once arbitrators have become ineligible, Sections 13 and 14 attracts, cannot be accepted for the simple reason that the entire provisions of Section 12 especially sub-Section (5) of the Act and the entry 5 of Seventh Schedule made thereon do not disqualify a former employee from acting as an arbitrator unless there are any justifiable doubts about the impartiality of the learned arbitrators or their previous involvement in the case.
Admittedly in the present case all the arbitrators are retired about 10 to 15 years back. The amended provisions of the Act and the entries therein clearly depicts that appointment of the arbitrator of any of the employees existing in the department should not be appointed.42
32. The Hon'ble Supreme Court considering the provisions of Section 12(5), 14(1) 14(2) and Schedule VII Item 1, 2, 8 and 14, 16 and 24 in the case of HRD Corporation (Marcus Oil and Chemical Division v. Gail (India) Limited (Formerly Gas Authority of India Limited), reported in (2018) 12 SCC 471 at para -12 held as under:
" 12. After the 2016 Amendment Act, a dichotomy is made by the Act between persons who become "ineligible" to be appointed as arbitrators, and persons about whom justifiable doubts exist as to their independence or impartiality. Since ineligibility goes to the root of the appointment, Section 12(50 read with Seventh Schedule makes it clear that if the arbitrator falls in any one of the categories specified in the Seventh Schedule, he becomes "ineligible" to act as arbitrator. Once he becomes ineligible, it clear that under Section 14(1)(a), he then becomes dejure unable to perform his functions in asmuchas, in law, he is regarded as "ineligible". In order to determine whether an arbitrator is de jure unable to perform his functions. It is not 43 necessary to go to the Arbitral Tribunal under Section 13. Since such a person would lack inherent jurisdiction to proceed any further, an application may be filed under Section 14(2) to the Court to decide on the termination of his/her mandate on this ground. As opposed to this, in a challenge where grounds stated in the Fifth Schedule are disclosed, which give rise to justifiable doubts as to the arbitrator's independence or impartiality, such doubts as to independence or impartiality have to be determined as a matter of fact in the facts of the particular challenge by the Arbitral Tribunal under Section 13. If a challenge is not successful, and the Arbitral Tribunal decides that there are no justifiable doubts as to the independence or impartiality of the arbitrator/arbitrators, the Tribunal must then continue the arbitral proceedings under Section 13(4) and make an award. It is only after such award is made, that the party challenging the arbitrator's appointment on grounds. It is clear, therefore, that any challenge contained in the Fifth Schedule against the appointment of Justice Doabia and Justice Lahoti cannot be gone into at this stage, but will be gone into 44 only after the Arbitral Tribunal has given an award. Therefore, we express no opinion on items contained in the Fifth Schedule under which the appellant may challenge the appointment of either arbitrator. They will be free to do so only after an award is rendered by the Tribunal."
33. The Hon'ble Supreme Court while considering the provisions of Section 11(6) of the Act, about the impermissibility of an arbitrator, when an arbitrator is already appointed by one of the parties to the agreement in terms of arbitration agreement in the case of S.P.Singla Constructions Private Limited v. State of Himachal Pradesh and Another, (2019) 2 SCC 488 at para, 18, 19 and 20 held as under;
18. Immediately after the appointment of the Superintendent Engineer, Arbitration Circle, as the sole arbitrator (30-10-2013), the appellant preferred Arbitration Petition No.4049 of 2013 (28-12-2013) before the High Court under Sections 11(6), 14 and 15 of the Arbitration 45 and Conciliation Act, 1996 for appointment of an independent sole arbitrator.
19. The High Court placed reliance upon the judgment in Antrix Corpn. Ltd. V. Devas Multimedia(P) Ltd, and held that when the Superintendent Engineer, Arbitration Circle was appointed as the arbitrator in terms of the agreement (or Arbitration Circle clause), the provisions of sub-section (6) of Section 11 cannot be invoked again. The High Court further observed that in case, the other party is dissatisfied or aggrieved by the appointment of an arbitrator in terms of the agreement, his remedy would be by way of petition under Section 13 and thereafter while challenging the award under Section 34 of the 1996 Act
20. The High Court in the impugned judgment placed reliance upon the judgment Antrix Corpn. Ltd. V. Devas Multimedia(P) Ltd, wherein the Supreme Court held as under:
"31. The matter is not as complex as it seems and in our view, once the arbitration agreement had been invoked by Devas and a nominee arbitrator had also been appointed by 46 it, the arbitration agreement could not have been invoked for a second time by the petitioner, which was fully aware of the appointment made by the respondent. It would lead to an anomalous state of affairs if the appointment of an arbitrator once made, could be questioned in a subsequent proceeding initiated by the other party also for the appointment of an arbitrator. In our view, while the petitioner was certainly entitled to challenge the appointment of the arbitrator at the instance of Devas, it could not do so by way of an independent proceeding under Section 11(6) of the 1996 Act. While power has been vested in the Chief Justice to appoint an arbitrator under Section 11(6) of the 1996 Act, such appointment can be questioned under Section 13 thereof. In a proceeding under Section 11 of the 1996 Act, the Chief Justice cannot replace one arbitrator already appointed in exercise of the arbitration agreement.
33. Sub-section (6) of Section 11 of the 1996 Act quite categorically provides that where the parties fail to act in terms of a procedure 47 agreed upon by them, the provisions of sub-
section (6) may be invoked by any of the parties. Where in terms of the agreement, the arbitration clause has already been invoked by one of the parties thereto under the ICC Rules, the provisions of sub-section (6) cannot be invoked again, and, in case the other party is dissatisfied or aggrieved by the appointment of an arbitrator in terms of the agreement, his/ its remedy would be by way of a petition under Section 13, and, thereafter under Section 34 of the 1996 Act." In the present case, the Arbitrator has been appointed as per clause (65) of the agreement and as per the provisions of law. Once, the appointment of an arbitrator is made at the instance of the government, the arbitration agreement could not have been invoked for the second time. "
34. Admittedly, in the present case, the arbitrators appointed by respondent No.1 have not been challenged by the petitioners. The act of the petitioners in participating and filing their defence and in fact raised objections, such objections have been considered and 48 negated by the learned Arbitrators. If the petitioners are aggrieved the remedy is to challenge the same under the provisions of Section 13(2) of the Act within 15 days after they are aware of the Constitution of the arbitral tribunal. In the present case, the order passed by the learned Arbitrators exercising powers under clause- 25 of the agreements entered into between the parties have not challenged and they are unsuccessful. Therefore, there is no impediment for the learned arbitrators to continue arbitral proceedings and to make an award. When an arbitral award is made under sub-section (4) of Section 13 of the Act, petitioners have always at liberty to file an application to set aside such arbitral award in accordance with the provisions of Section 34 of the Act, as held by the Hon'ble Supreme Court in the case of HRD Corporation as stated supra.
35. It is also relevant to state at this stage that admittedly the respondents have executed six agreements separately and the petitioners have filed only four Civil 49 Miscellaneous Petitions for substitution of appointment of new arbitrators. How these four Civil Miscellaneous Petitions are maintainable for substitute of arbitrators is not forthcoming and on that ground also, these Civil Miscellaneous Petitions cannot be entertained exercising powers under Section 11(6) of the Act. Under sub-section (2) of Section 15 of the Act, where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules and were applicable to the appointment of the arbitrator being replaced. In the present case, the learned arbitrators have exercised their powers and there is no challenge to the proceedings under Section 13 of the Act. There is no failure or impossibility to act the mandate of the arbitrators, as they become de jure or de facto unable to perform their functions or for other reasons fails to act without undue delay and they withdraw from their office or the parties agree to the termination of their mandate, there is no substitute would arise. Having participated in the proceedings and having adverse order passed by the 50 arbitrators without challenging the order of the arbitrators, the present petitions filed under Section 11(6) is not maintainable.
36. Learned senior counsel for the petitioners stated that the said subsequent orders of rejection of the objections filed by the petitioners were also challenged in writ petitions before this court. The said writ petitions have converted into present Civil Miscellaneous Petitions. Therefore, the challenge would also remain cannot be accepted, while exercising powers under Section 11(6) which stipulates only appointment of arbitrators and this Court exercising powers under the provisions of sub- section (6) of Section 11 and Section 12 of the Act cannot quash or set aside the order passed by the learned arbitrators as held by the Supreme Court in the case of HRD Corporation stated supra. The only remedy for the petitioners is to proceed with the arbitration proceedings and if any adverse order passed by the learned arbitrators, they can approach the Civil Court under the provisions of 51 Section 34 of the Act and on that ground also, these Civil Miscellaneous Petitions are liable to be rejected.
37. In so far as the contention of the learned counsel for the petitioners with regard to the judgment relied upon in the case of Ranjit Thakur v. Union of India and Others, AIR 1987 SC 2386, while considering the provisions of Section 130 of the Army Act, the Hon'ble Supreme Court held as to the tests of the likelihood of bias what is relevant is the reasonableness of the apprehension in that regard in the mind of the party. The proper approach for the Judge is not to look at his own mind and ask himself, however, honestly, " am I biased?". Such an admission was made before the arbitrator by any of the petitioners raising objections, the same is negated. The said judgment has no application to the facts of the case on hand, in view of the fact the petitioners have not shown any ground for disqualification of the former employees who have been appointed as arbitrators. The judgment relied upon with regard to the void in the case of Rajasthan State 52 Industrial Development and Investment Corporation that any order passed in the eye of law is without jurisdiction, invalid and found to be non-est and not required to be set aside in the present case, though an attempt was made under Section 11(6) of the Act, this Court has not acted as stated above. The said judgment has no application to the facts of the present case.
38. In so far as in the case of Bharat Bradband Network Limited v. United Telecoms Limited, AIR 2019 SC 2434, it was a case that the Managing Director of the appellant/corporation could not be appointed as an arbitrator, in view of the amended provisions of Section 12(5) of the Act being rendered ineligible to act as arbitrator under Item 5 of the Seventh Schedule and he cannot appoint another arbitrator. In those circumstances, the Hon'ble Apex Court held at para -18 that whether such ineligible person could himself appoint another arbitrator was only made clear by this Court in AIR 2017 SC 3889 holding that an appointment made by an ineligible person 53 is itself void ab initio. Such appointment reached the root of the matter, it is obvious that he cannot appoint another arbitrator. The said judgment has no application to the facts and circumstances of the present case, as the arbitrators appointed in the present Civil Miscellaneous Petitions are all former employees who retired 10-15 years back and they have no direct or indirect interest. Except the allegation made by the petitioners, they have not produced any material before the Court how they are biased. In the absence of any material allegation, the said contention cannot be accepted.
39. The facts and circumstances of the case relied upon by the learned counsel in the case of Vinod Bhaiyalal Jain and others v. Wadhwani Parmeshwari Cold Storage Pvt Ltd, Through its Director and another, AIR 2019 SC 3538, wherein the Hon'ble Supreme Court while setting aside the arbitral award exercising powers under Sections 12 and 34 of the Act mainly on the ground held that the record depicts an arbitrator as a counsel in another case for one 54 of the parties to the dispute. In the instant case (case present before the Hon'ble Supreme Court) in respect of the objections raised by a party, the learned Arbitrator proceeded without disclosing the same in terms of provisions of Section 12 of the Act. Therefore, the Supreme Court set aside the order passed by the learned Arbitrator who has acted as counsel for one of the parties in another case. Admittedly, in the present case, it is not the case of the petitioners that any of the arbitrators appointed for six agreements have appeared or participated any of the previous proceedings between the parties or acted on behalf of any one of the parties. Therefore, the said judgment has no application to the present case.
40. In so far as the judgment relied upon by the learned senior counsel in the case of S.P. Singla Constructions Private Limited, which is also relied upon by the learned counsel for respondent, this Court also relied that after Amendment Act, 2015 there cannot be any departmental 55 arbitrator. Admittedly in the present case the arbitrators appointed were not departmental arbitrators. As on the date of their appointment they are all retired employees and there is no prohibition in the amended Act to appoint them as held by the Hon'ble Supreme Court in the case of Government of Haryana PWD Haryana (B and R) Branch v. G.F. Toll Road Private Limited and Others, (2019) 3 SCC
505. Therefore, the said judgment is in no way assist the petitioners.
41. The learned senior counsel also relied upon the judgment with regard to financial interest reported in (2002) 6 SCC 269 in the case of Mor Modern Co-operative Transport Society Ltd v. Financial Commissioner & Secretary to Govt. of Haryana and Another at para -14, wherein it was held that under the previous Motor Vehicle Act, it implies direct personal benefit or an economic nature, it may include any interest direct or indirect which a person has in relation to the finances of the undertaking. In the present case, the arbitrators were retired from 56 respondent No.2, 10-15 years back and they have not affiliated merely because they are getting pension is not bound to act partial, the learned arbitrator is expected to act impartially who appointed with trust. Therefore, the said judgment is not applicable to the facts and circumstances of the present case.
VI Conclusion :
42. In view of the aforesaid reasons, the points raised in the present Civil Miscellaneous Petitions are answered in the negative holding that the petitioners have not made out any prima facie case to exercise the powers of Section 11(6) of the Act to appoint substitute arbitrators in place of the arbitrators already appointed by respondent No.1 and there is no prohibition under the provisions of Section 12(5) of the Act for appointment of former employees of 2nd respondent as arbitrators
43. Accordingly all the Civil Miscellaneous Petitions are dismissed.
57
44. In view of the disposal of the main petitions on merits, I.A.2/2019 in all the Civil Miscellaneous Petitions would not arise for consideration and they are disposed off.
Ordered accordingly.
Sd/-
JUDGE PKS/Msu