Himachal Pradesh High Court
M/S Kdn Infrastructure vs Hscc (India) Ltd on 14 October, 2022
Author: A.A. Sayed
Bench: A.A. Sayed
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
ON THE 14th DAY OF OCTOBER, 2022
BEFORE
.
HON'BLE MR. JUSTICE A.A. SAYED,
CHIEF JUSTICE
ARBITRATION CASE No. 54 of 2022
Between:-
M/S KDN INFRASTRUCTURE
PVT. LTD. THROUGH SH.
KAMAL VERMA, AUTHOIRSED
REPRESENTATIVE R/O GOPAL
CHOWK
r DHANOTU,
SUNDERNAGAR, DISTT. MANDI,
H.P.
.....PETITIONER
(BY MR. TARUNJEET SINGH
BHOGAL, ADVOCATE )
AND
1. STATE OF HIMACHAL
PRADESH THROUGH THE
SECRETARY (I&PH),
GOVERNMENT OF H.P, H.P
SECRETARIAT, SHIMLA-
171002.
2. THE EXECUTIVE ENGINEER,
IPH DIVISION NO.1 (JAL
SHAKTI VIBHAAG) SHIMLA,
HIAMCHAL PRADESH.
.....RESPONDENTS
(BY MR. VIKAS RATHORE, ADDL.A.G)
_____________________________________________________
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2
This case coming on for orders this day, the Court
delivered the following:
.
JUDGMENT
This is an application filed by the petitioner under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short 'the Act'), for appointment of an Arbitrator to adjudicate the disputes and differences between the parties.
2. Pursuant to a tender process, the petitioner was awarded the work of "C/o Engineer-in Chief building (IPH Department) on Khasra No. 629/1 at Mohal Panjri (Tutikandi) Tehsil & District Shimla, H.P. and Agreement No. 83 of 2014-15 was executed between the parties. The work was required to be completed on 08.12.2016. It was completed on 31.12.2017. Disputes and differences arose between the parties.
3. There is no dispute that clause 25 of the Agrement provides for settlement of disputes by arbitration. The said clause 25 provides that the disputes shall be referred to sole arbitration of a person appointed by the Engineer-in-charge/Chief Engineer, Himachal Pradesh Irrigation & Public Health Department.
4. On 09.08.2021, the petitioner issued a notice invoking arbitration under Clause 25 of the Agreement. Pursuant thereto, ::: Downloaded on - 24/12/2022 09:51:05 :::CIS 3 Arbitrator-cum-Superintending Engineer (Arbitration) HPPWD, Solan was appointed as a sole Arbitrator who entered upon a reference. However, as the appointment of the said arbitrator was not .
acceptable to the petitioner, on 05.10.2021, the petitioner raised objections to the appointment of the said Arbitrator relying upon the judgment of the Supreme Court in Perkins Eastman Architects DPC vs. HSCC (India) Ltd, (2020) 20 SCC 760 and suggested appointments of any one of the three arbitrators, namely (i) Mr. Kranti Gupta, former General Manager, SJVN Ltd. (ii) Shri Subhash Gupta, Retd. Chief Engineer, H.P Government and (iii) Sh. Kushal Chand Thakur, Retd. Chief Engineer, vide letters dated 05.11.2021 and 01.01.2022. However there was no response to the said letters for appointment of another arbitrator.
5. Reply-affidavit has been filed on behalf of the respondents pointing out that pursuant to letter dated 07.09.2021, the Chief Engineer (SZ) appointed Superintending Engineer (Arbitration) HPPWD, Solan as an arbitrator to adjudicate the disputes raised by the petitioner and the sole arbitrator had entered upon the reference on 05.10.2021 and preliminary meeting/hearing of the case was fixed on 03.12.2021.
6. On 28.12.2021, a letter was addressed by the Arbitrator- cum-Superintending Engineer, Arbitration Circle, HPPWD, Solan, is ::: Downloaded on - 24/12/2022 09:51:05 :::CIS 4 placed on record, relevant portion whereof reads as under:-
".............In this context it is to inform you that your good office had appointed the Superintending Engineer, Arbitration .
Circle, HP PWD Solan as sole Arbitrator to decide the subject cited arbitration case vide your letter quoted under reference. Thereafter, the reference was entered by this Tribunal on 05-10-2021 vide letter No. 614-18 dated 22-10- 2021 and the first hearing was fixed on 03-12-2021 (Copy enclosed) However, now the contractor has raised an objection vide his letter dated 05-11 2021 addressed to your office and copy endorsed to this office that the appointment of SE Arbitration Circle HPPWD Solan is not acceptable to him. Hence, in this regard the necessary action may kindly be taken. The case is hereby returned to your good office for doing the needful please..........."
7. In Perkins Eastman's case (supra) the Supreme Court in paragraphs 20 and 21 has held as follows:-
"20. We thus have two categories of cases. The first, similar to the one dealt with in TRF Limited, 2017 8 SCC 377 where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself but is empowered or authorised to appoint any other person of his choice or discretion as an arbitrator. If, in the first category of cases, the Managing Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or result of the dispute. The element of invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be the test, similar invalidity would always arise and spring even in the second category of cases. If the interest that he has in ::: Downloaded on - 24/12/2022 09:51:05 :::CIS 5 the outcome of the dispute, is taken to be the basis for the possibility of bias, it will always be present irrespective of whether the matter stands under the first or second category of cases. We are conscious that if such deduction is drawn from the decision of .
this Court in TRF Limited, 2017 8 SCC 377 , all cases having clauses similar to that with which we are presently concerned, a party to the agreement would be disentitled to make any appointment of an Arbitrator on its own and it would always be available to argue that a party or an official or an authority having interest in the dispute would be disentitled to make appointment of an Arbitrator.
21. But, in our view that has to be the logical deduction from TRF Limited, 2017 8 SCC 377 . Paragraph 50 of the decision shows that this Court was concerned with the issue, "whether the Managing 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 arbitrators 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 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."::: Downloaded on - 24/12/2022 09:51:05 :::CIS 6
8. In view of clause 12(5) of the Act and the enunciation of law by the Supreme Court in the aforesaid case, since the arbitrator appointed is a person who would have an interest in the outcome of .
the dispute, the learned counsel for the petitioner is right in contending that the appointment of the said arbitrator, who is in employment of the respondent-State would raise justifiable doubts as to the independence and impartiality of the person nominated as arbitrator. Thus, it would only be appropriate that an independent arbitrator is appointed to adjudicate the disputes and differences between the parties.
9. In the circumstances, a case has been made out by the petitioner for this Court to exercise jurisdiction under Section 11(6) of the Act. Hence, with the consent of the learned counsel for the parties, the following order is passed:-
ORDER
(i) Mr. Naresh Sharma, Chief Engineer (Retd.) HPPWD is appointed as a sole Arbitrator to adjudicate the disputes and differences between the parties.
(ii) The learned Arbitrator, before entering the arbitration reference, shall forward a statement of disclosure as per the requirement of Section 11(8) read with Section12(1) of the Act to the Registrar (Judicial) of this ::: Downloaded on - 24/12/2022 09:51:05 :::CIS 7 Court (to be placed on record of this application) and copies thereof be forwarded to the parties.
(iii) The parties shall appear before the prospective .
Arbitrator on a date which may be fixed by the learned Arbitrator, which shall not be later than four weeks from the date of receipt of this order by him.
(iv) The fees payable to the Arbitral Tribunal shall be as prescribed in the Fourth Schedule appended to the Act.
(v) Office to forward a copy of this order to the learned Arbitrator on the following address:-
"Mr. Naresh Sharma, Chief Engineer (Retd.), HPPWD, R/O Pursharthi Basti, Ram Bazar, Shimla-171001"
10. The application is allowed in the above terms.
( A.A. Sayed ) Chief Justice 14th October, 2022 (priti) ::: Downloaded on - 24/12/2022 09:51:05 :::CIS