TaxTMI 
TaxTMI 
2020 (2) TMI 1716
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....en. O.P. No. 446 of 2019: 2. The claimant who is the petitioner before this Court had invoked the Arbitration clause under the agreement entered into between them and the respondent for recovery of a sum of Rs. 3,26,470/- which the petitioner claims is due to them towards price escalation. The petitioner was awarded the contract for the construction of the control room for Traction Sub-Station including earth filling and retaining wall in the Kumbla-Uppala in Palghat Division of Southern Railway. Although the work was supposed to have been completed within a period of 15 months, the same had been delayed and nearly 5 extensions had been granted. The petitioner would contend that these delays were on account of certain procedural delays on the part of the respondent. For 4 of the extensions, the respondent had granted the extension with PVC by entering into Rider Agreements. However with regard to the disputed claim, the respondent did not allow the escalation and therefore left with no other alternative the claimant had to invoke the Arbitral proceedings. The petitioner had himself represented the case before the Arbitral Tribunal. O.P. No. 447 of 2019: 3. The claimant who is t....
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....ner claims is due to them under the price escalation. The petitioner was awarded the construction of the control room for Traction Sub-Station including earth filling and retaining wall at Kannur South, Elathur and Tirur in Palghat Division of Southern Railway. Although the work was supposed to have been completed within a period of 15 months, the same had been delayed and nearly 5 extension had been granted. The petitioner would contend that these delays were on account of certain procedural delays on the part of the respondent. For 4 of the extensions, the respondent had granted the extension with PVC by entering into Rider Agreements. However with regard to the disputed claim, the respondent did not allow the escalation and therefore left with no other alternative the claimant had to invoke the Arbitral proceedings. The petitioner had himself represented the case before the Arbitral Tribunal. 6. The respondent had defended the above claims by inter alia contending that with reference to the earlier extensions, the respondent had provided the price variation calculation but however with reference to the claims subject matter of the arbitral proceedings, such a calculation was no....
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....port of his arguments the counsel had submitted the following judgments: 1. Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Limited (2017) 3 MLJ 153 : LNIND 2017 SC 63 (2017) 4 SCC 665 : AIR 2017 SC 939 2. HRD Corporation v. GAIL (INDIA) Limited (2018) 12 SCC page 471 3. TRF LTD v. Energo Engg. Projects Ltd. (2017) 6 MLJ 81 : LNIND 2017 SC 296 : (2017) 8 SCC 377 : AIR 2017 SC 3889 4. Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2019) 8 MLJ 623 : LNIND 2019 SC 936 : AIR 2020 SC 59 8. Per contra Mr. P.T. Ramkumar, learned counsel appearing on behalf of the respondent railways would contend that the petitioner cannot raise the plea of neutrality of the Arbitrator, at this stage of the challenge to the award of the Arbitral Tribunal since he has not taken steps to file an application under Section 13 (2) as contemplated under the 1996 Act. He would submit that on the contrary the petitioner had accepted the constitution of the Arbitral Tribunal and had proceeded to participate in the proceedings. On the merits, he would argue that the petitioner had been paid much more than the accepted value in each of the contract and therefore the demand was wrong. He woul....
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.... 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 justifiable doubts as to his independence or impartiality; and (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 posse....
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..../- (Rupees twenty five lakhs only), the Arbitral tribunal shall consist of a sole arbitrator who shall be a gazetted officer of Railway not below JA grade, nominated by the General Manager. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by GM." 13. The Judgment of the Honorable Supreme Court post the amendment in "Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Limited (supra)" was a case where an arbitration agreement had contained. a clause which prescribed the procedure for the constitution of the Arbitral Tribunal. The matter related to the agreement which the applicant had with the Delhi Metro Rail Corporation Limited (DMRC). As per the said arbitration clause since the claimant therein had requested the dispute to be referred to Arbitration, names of five persons were forwarded to the party requesting the reference from out of the panel which was maintained by the respondent and out of this the petitioner had to choose one Arbitrator. In the said case since the request was post the amendment, the claimant therein had refused to accept the Arbitral Tribunal nominated by the respondent. T....
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....der him ineligible to conduct the arbitration. The genesis behind this rational is that even when an arbitrator is appointed in terms of contract and by the parties to the contract, he is independent of the parties. Functions and duties require him to rise above the partisan interest of the parties and not to act in, or so as to further, the particular interest of either parties. After all, the arbitrator has adjudicatory role to perform and, therefore, he must be independent of parties as well as impartial. The United Kingdom Supreme Court has beautifully highlighted this aspect in Hashwani v. Jivraj Hashwani v. Jivraj, 2011 1 WLR 1872 in the following words: (WLR p. 1889, para 45)" "45. ... the dominant purpose of appointing an arbitrator or arbitrators is the impartial resolution of the dispute between the parties in accordance with the terms of the agreement and, although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not personal services under the direction of the parties."" They finally held that the amended provisions places an embargo on a person who is an employee of the party to the dispute to....
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....6) of the Arbitration and Conciliation Act, 1996 (for brevity, "the Act"), is justified to repel the submissions of the appellants that once the person who was required to arbitrate upon the disputes arisen under the terms and conditions of the contract becomes ineligible by operation of law, he would not be eligible to nominate a person as an arbitrator, and second, a plea that pertains to statutory disqualification of the nominated arbitrator can be raised before the court in application preferred. under Section 11(6) of the Act, for such an application is not incompetent. For the sake of clarity, convenience and apposite appreciation, we shall state the facts from Civil Appeal No. 5306 of 2017." 17. The learned Judges went further ahead and held that if the person nominating the Arbitrator himself is ineligible on account of him being an employee of the party in dispute then the Arbitrator appointed by him squarely came within the mischief of Schedule VII (1) of the 1996 Act. 18. The learned Judges in paragraph 12 had also discussed the question of ineligibility of an Arbitrator and the existence of a justifiable doubt as follows: "12. After the 2016 Amendment Act, a dichoto....
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....ns Eastman Architects DPC v. HSCC (India) Ltd. (supra), the Supreme Court once again held that if the appointing authority is himself ineligible by operation of the law to a Arbitrator he cannot nominate an Arbitrator. The Bench had held as follows in Paragraph 15 extracted hereinbelow "15. It was thus held that as the Managing Director became ineligible by operation of law to act as an arbitrator, he could not nominate another person to act as an arbitrator and that once the identity of the Managing Director as the sole arbitrator was lost, the power to nominate someone else as an arbitrator was also obliterated. The relevant Clause in said case had nominated the Managing Director himself to be the sole arbitrator and also. empowered said Managing Director to nominate another person to act Arbitration Application No. 32 of 2019 Perkins Eastman Architects DPC and Another v. HSCC (India) Ltd. as an arbitrator. The Managing Director thus had two capacities under said Clause, the first as an arbitrator and the second as an appointing authority. In the present case we are concerned with only one capacity of the Chairman and Managing Director and that is as an appointing authority. We....
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....son nominating the arbitrator. 21. The learned Judges, in the above Judgement, have raised the following issue based on the contentions of the parties "General Manager himself becoming ineligible by operation of law to be appointed as an arbitrator is not eligible to nominate the arbitrator". Answering this contention the Bench referring to the Judgements in TRF LTD v. Energo Engg. Projects Ltd. (supra) and Perkins Eastman Architects DPC v. HSCC (India) Ltd., had observed that the decision in TRF LTD v. Energo Engg. Projects Ltd. (supra) was not applicable to the case before them. This view stems from the fact that the GCC rules of the Railways had undergone modification in the light of Section 12 (5) being inserted to the 1996 Act. The Bench went on to hold that the power of the General Manager to nominate the arbitrator was counter balanced by the power of the respondent to select their nominees in view of the modified clauses, namely, 64 (3) (a) (ii) and 64 (3) (b) of the GCC which also contemplates a waiver of the applicability of Section 12 (5) with the execution of Annexure XII to the conditions. The learned Judges went on to hold that the General Manager had not become i....
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.... 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 contained in the Fifth Schedule may make an application for setting aside the arbitral award in accordance with Section 34 on the aforesaid grounds. It is clear, therefore, that any challenge contained in the Fifth Schedule against the appointment of Justice Doabia and ....