Supreme Court - Daily Orders
Union Of India vs M/S. Mohan Aggarwal Construction Co. on 22 January, 2015
Bench: J. Chelameswar, Rohinton Fali Nariman
1
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(s). 1167 OF 2015
(Arising out of SLP(Civil) No(s). 6626 of 2012)
UNION OF INDIA AND ANR. Appellant(s)
VERSUS
M/S. MOHAN AGGARWAL CONSTRUCTION CO. Respondent(s)
O R D E R
Leave granted.
The Union of India is before us in an appeal against an order dated 25th June, 2010 appointing Mr. Justice R.B. Dixit, a retired Judge of the High Court of Madhya Pradesh, as the sole arbitrator. We have been informed that Mr. Justice R.B. Dixit has entered upon the reference and four inconsequential hearings have taken place after which stay of further proceedings has been granted by this Court.
Clause 25 of the agreement between the parties has been set out in detail in the judgment under appeal:-
“(ii) Except where the decision has become final, binding and conclusive in terms of Sub Para (I) above Signature Not Verified disputes or differences shall be referred for Digitally signed by Deepak Mansukhani Date: 2015.02.28 adjudication through arbitration by a sole arbitrator 12:07:39 IST Reason:
appointed by the Chief Engineer, CPWD, in charge of the work or if there be no Chief Engineer, the administrative head of the said CPWD. If the 2 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 by 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 alongwith the notice for appointment of arbitrator and given 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 the administrative head of the CPWD, as aforesaid should act as arbitrator and if for any reason that is not possible, the matter should not be referred to arbitration at all.” It will be noticed that this clause is not like the usual arbitration clause that is contained in many other agreements. Not only is the matter to be referred for adjudication by a sole arbitrator appointed by the Chief Engineer, CPWD, in charge of the work of if there be no Chief Engineer, the administrative head of the CPWD, but it is also a term of the contract that no person other than a person appointed by the Chief Engineer CPWD or the administrative head of the CPWD, should be appointed as Arbitrator and if for any reason that is not possible, the matter should not be referred to arbitration at all.3
It has also been pointed out to us that the same clause requires that such application for appointment of Arbitrator should be made within 120 days of the date of intimation of the final bill.
By a letter dated 19th January, 2007 written by the respondent to the appellant, items 13 and 14 make it clear that the date of intimation of the final bill in this case was 12th August, 2006. It is an admitted position that the Section 11 application was filed only in February 2009, and in between, no request was made under Clause 25 to the Chief Engineer for appointment of an Arbitrator. The High Court in the judgment under appeal having set out the aforesaid clause, has committed two errors.
First and foremost, it gave no importance to that portion of clause 25 which says that no person other than the person appointed by the Chief Engineer should act as an Arbitrator and if for any reason that is not possible, the matter should not be referred to Arbitration at all. Secondly, it is clear that the invocation of arbitration was never made under the said clause within 120 days of the date of intimation of the final bill.
Mr. Neeraj Kaul, Learned Additional Solicitor General cited two judgments before us.4
In Northern Railway Admn. v. Patel Engg. Co. Ltd., (2008) 10 SCC 240, it was held:
“12. A bare reading of the scheme of Section 11 shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. The Court must first ensure that the remedies provided for are exhausted. It is true as contended by Mr. Desai, that it is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations.
13. The expression “due regard” means that proper attention to several circumstances have been focused. The expression “necessary” as a general rule can be broadly stated to be those things which are reasonably required to be done or legally ancillary to the accomplishment of the intended act. Necessary measures can be stated to be the reasonable steps required to be taken.
14. In all these cases at hand the High Court does not appear to have focused on the requirement to have due regard to the qualifications required by the agreement or other considerations necessary to secure the appointment of an independent and impartial arbitrator. It needs no reiteration that appointment of the arbitrator or arbitrators named in the arbitration agreement is not a must, but while making the appointment the twin requirements of sub-section (8) of Section 11 have to be kept in view, considered and taken into account. If it is not done, the appointment becomes vulnerable. In the circumstances, we set aside the appointment made in each case, remit the matters to the High Court to make fresh appointments keeping in view the parameters indicated above.” 5 Equally, in Indian Oil Corporation. Ltd. v. Raja Transport (P) Ltd., (2009) 8 SCC 520, it was held:
“30. We find no bar under the new Act, for an arbitration agreement providing for an employee of a Government/statutory corporation/public sector undertaking (which is a party to the contract), acting as an arbitrator. Section 11(8) of the Act requires the Chief Justice or his designate, in appointing an arbitrator, to have due regard to:
“11. (8) (a) any qualifications required of the arbitrator by the agreement of the parties; and
(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator.”
31. Section 12(1) requires an arbitrator, when approached in connection with his possible appointment, to disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. Section 12(3) enables the arbitrator being challenged if
(i) the circumstances give rise to justifiable doubts as to his independence or impartiality, or
(ii) he does not possess the qualifications agreed to by the parties.
32. Section 18 requires the arbitrator to treat the parties with equality (that is to say without bias) and give each party full opportunity to present his case. Nothing in Sections 11, 12, 18 or other provisions of the Act suggests that any provision in an arbitration agreement, naming the arbitrator will be invalid if such named arbitrator is an employee of one of the parties to the arbitration agreement.
33. Sub-section (2) of Section 11 provides that parties are free to agree upon a procedure for appointment of arbitrator(s).
Sub-section (6) provides that where a party fails to act, as required under the procedure prescribed, the Chief Justice or his designate 6 can take necessary measures. Sub-section (8) gives the discretion to the Chief Justice/his designate to choose an arbitrator suited to meet the requirements of a particular case. The said power is in no way intended to nullify a specific term of arbitration agreement naming a particular person as arbitrator. The power under sub-section (8) is intended to be used keeping in view the terms of the arbitration agreement.
34. The fact that the named arbitrator is an employee of one of the parties is not ipso facto a ground to raise a presumption of bias or partiality or lack of independence on his part. There can however be a justifiable apprehension about the independence or impartiality of an employee arbitrator, if such person was the controlling or dealing authority in regard to the subject contract or if he is a direct subordinate (as contrasted from an officer of an inferior rank in some other Department) to the officer whose decision is the subject-matter of the dispute.” Having regard to these facts and the judgments set out hereinabove, we set aside the judgment under appeal. The appeal is allowed. There shall be no order as to costs.
….......................J. (J. CHELAMESWAR) ….......................J. (ROHINTON FALI NARIMAN) NEW DELHI JANUARY 22, 2015.
7
ITEM NO.209 COURT NO.7 SECTION IVA
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (C) No(s). 6626/2012
(Arising out of impugned final judgment and order dated 25/06/2010 in AC No. 03/2008 passed by the High Court Of M.p At Gwalior) UNION OF INDIA AND ANR. Petitioner(s) VERSUS M/S. MOHAN AGGARWAL CONSTRUCTION CO. Respondent(s) (with appln. (s) for exemption from filing O.T. and interim relief and office report) (For Final Disposal) Date : 22/01/2015 This petition was called on for hearing today.
CORAM :
HON'BLE MR. JUSTICE J. CHELAMESWAR HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN For Petitioner(s) Mr. Neeraj Kishan Kaul, ASG Mr. Gaurav Sharma, Adv.
Mr. Samar S. Kachwaha, Adv.
Mr. Raghavendra M. Bajaj, Adv. Ms. Sunita Sharma, Adv.
Ms. Sushma Suri,Adv.
For Respondent(s) Mr. P.C. Agarwal, Adv.
Mr. Ambuj Agarwal, Adv.
Dr. (Mrs. ) Vipin Gupta,Adv.
UPON hearing the counsel the Court made the following O R D E R Leave granted.
The appeal is allowed in terms of the signed order. No order as to costs.
(DEEPAK MANSUKHANI) (INDU BALA KAPUR) COURT MASTER COURT MASTER
(Signed order is placed on the file)