2017 (4) TMI 1617 - HC - Indian Laws

Arbitrator Appointments Invalidated, Venue Shifted to Delhi

The Court appointed Justice G.S. Singhvi as the sole Arbitrator to adjudicate disputes between the parties under Section 11(6) of the Arbitration & ... Seeking the appointment of an Arbitrator to adjudicate the disputes - case of the Petitioner is that the CEO of the Respondent was required under the contract to appoint an Arbitrator to replace Mr. Narsingh within 30 days from 1st June 2016 the date from which the latter ceased to be the Project Incharge - whether the Act as amended with effect from 23 rd October 2015 would apply to the present proceedings? - Section 26 of the Amendment Act - HELD THAT:- In ARDEE INFRASTRUCTURE PVT. LTD VERSUS MS. ANURADHA BHATIA AND ARDEE INFRASTRUCTURE PVT. LTD VERSUS YASHPAL & SONS [2017 (1) TMI 1810 - DELHI HIGH COURT] a Division Bench of this Court analysed the effect of the slight difference in the wording in the two sections. It referred to the decision in Thyssen Stahlunion Gmbh v. Steel Authority of India Limited [1999 (10) TMI 636 - SUPREME COURT] where the expression 'in relation to' was examined. There the Supreme Court was examining the applicability of the Arbitration Act, 1940 which had been repealed in relation to arbitration proceedings that had commenced prior to the enactment of the said Act (i.e. the 1996 Act). In the present case, what is, however, significant is the explanation of the law and in particular the expression 'arbitral proceedings' occurring in Section 26 of the Amendment Act. In terms of Section 26 of the Amendment Act, the Act as amended would apply as long as parties 'otherwise agree' that the Amendment Act 'shall apply in relation to arbitration proceedings commenced on or after the date of amendment of this Act.' - The Court is unable to accept the submission on behalf of the Respondent that in terms of the wordings of Clause 56 of the GCC as amended the parties have to hereafter again agree that the Act as amended with effect from 23rd October 2015 would apply to them. The words 'any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration.' satisfies the requirement of Section 26 of there being an agreement between the parties that the Act as amended with effect from 23rd October 2015 will apply. The net result is that Section 12(5) as amended with effect from 23 rd October 2015 would apply. Section 12 (5) clearly prohibits the employee of one of the parties from being an Arbitrator. This would straightway disqualify Mr. Kher who happens to be a serving GM of the Respondent. Therefore it is to no avail that the Respondent has by its letter dated 21st August 2016 appointed Mr. Kher as an Arbitrator to adjudicate the Arbitration Case Nos. 1 of 2013 and 1 of 2014. His mandate stands terminated. The arbitration clause does specify that the venue of the arbitration should be in Allahabad. It is plain that the Respondent themselves have no problem in arbitration taking place in Delhi. In fact Mr. Narsingh gave the new address of correspondence as the Delhi address and the Respondent has its office in Delhi and the witness examination has already concluded. For the mere completion of the arbitration from the stage where it was, the arbitration could well take place in Delhi particularly since there is no contrary intention appearing anywhere in the contract. The office of the Respondent is in fact located in Delhi. The Court appoints Justice G.S. Singhvi, a former judge of the Supreme Court of India, as sole Arbitrator to adjudicate the disputes between the parties, including their claims and counterclaims. Justice Singhvi will fix his own terms and communicate them to the parties - petition disposed off. Issues Involved:1. Appointment of Arbitrator under Section 11(6) of the Arbitration & Conciliation Act, 1996.2. Validity of the appointment of Mr. Narsingh as Arbitrator after ceasing to be Project Incharge.3. Applicability of the Arbitration and Conciliation (Amendment) Act, 2015.4. Validity of the appointment of Mr. Ramesh Kher as Arbitrator.5. Venue of arbitration proceedings.Issue-wise Detailed Analysis:1. Appointment of Arbitrator under Section 11(6) of the Arbitration & Conciliation Act, 1996:The Petitioner, Ratna Infrastructure Projects Pvt. Ltd., sought the appointment of an Arbitrator to adjudicate disputes with the Respondent, Meja Urja Nigam Private Limited, under Section 11(6) of the Arbitration & Conciliation Act, 1996. The contract between the parties included a dispute resolution mechanism through arbitration as per Clause 56 of the General Conditions of Contract (GCC).2. Validity of the appointment of Mr. Narsingh as Arbitrator after ceasing to be Project Incharge:The Petitioner argued that Mr. Narsingh, who was initially appointed as the sole Arbitrator, ceased to be the Project Incharge from 1st June 2016 and thus could no longer continue as the Arbitrator. The Arbitrator's continuation was challenged under Sections 12 and 13 of the Act, but these applications were dismissed by the Arbitrator on 19th February 2016.3. Applicability of the Arbitration and Conciliation (Amendment) Act, 2015:The Petitioner contended that the Respondent was required to appoint a fresh Arbitrator within 30 days from 1st June 2016, failing which the Respondent waived its right to appoint an Arbitrator. The Court examined whether the Arbitration and Conciliation (Amendment) Act, 2015, applied to the proceedings. The Court concluded that the amended Act applied as the contract clause stated that 'any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration.'4. Validity of the appointment of Mr. Ramesh Kher as Arbitrator:The Respondent appointed Mr. Ramesh Kher as a new sole Arbitrator on 21st August 2016 to avoid disputes. However, the Court found that Section 12(5) of the amended Act prohibits the appointment of an employee of one of the parties as an Arbitrator. Since Mr. Kher was a serving General Manager of the Respondent, his appointment was invalid, and his mandate stood terminated.5. Venue of arbitration proceedings:The arbitration clause specified Allahabad as the venue, but the Respondent had no objection to the arbitration taking place in Delhi. The Court noted that the Respondent's office is in Delhi, and witness examination had already concluded there. Therefore, the Court decided that the arbitration could continue in Delhi for the sake of convenience.Conclusion:The Court appointed Justice G.S. Singhvi, a former judge of the Supreme Court of India, as the sole Arbitrator to adjudicate the disputes between the parties. Justice Singhvi was authorized to fix his own terms and communicate them to the parties. The amended Act would apply to the proceedings, which would continue from the stage they were at on 1st June 2016. The Respondent was directed to collect the entire arbitral record and place it before Justice Singhvi within four weeks. The parties were instructed to appear before Justice Singhvi on 8th May 2017 or another convenient date. The petition was disposed of with no order as to costs, and a certified copy of the order was to be delivered to Justice Singhvi.