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Browse Law School Education ADR: Arbitration Important Arbitration Cases

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Here, i’ll discuss the case of SP Singla Constructions Pvt. Ltd. v. State of Himachal Pradesh & Anr., (2018) SCC Online SC 2673.

BRIEF FACTS:

An agreement was entered into between appellant and respondent with respect to construction work. General Conditions of Contract contained an arbitration clause for the parties. As per the said arbitral clause, in the event of disputes, the arbitrator to settle the same would be appointed by the Chief Engineer of the Himachal Pradesh Public Works Department (“HPPWD”). A dispute arose between the parties regarding payment for execution of work and the appellant requested for the appointment of arbitrator. Pursuant to the request of the appellant, the Chief Engineer, HPPWD appointed the “Superintendent Engineer, Arbitration Circle, HPPWD, Solan” as the arbitrator and the appointment was made in terms of the clause contained in the agreement.

Aggrieved by the appointment of the Superintendent Engineer as the arbitrator, the appellant filed a petition before the High Court under Section 11(6) of the 1996 Act, praying for appointment of independent arbitrator. The High Court placed reliance on the judgment of the Supreme Court in Antrix Corporation Limited v. Devas Multimedia Private Limited, (2014) 11 SCC 560, wherein it was held that in case, if any party is dissatisfied or aggrieved by the appointment of arbitrator in terms of the agreement by the other party/parties, his remedy would be by way of petition under Section 13 of the Arbitration & Conciliation Act (1996 Act), and, thereafter while challenging the award under Section 34 of the 1996 Act. The High Court held that the appointment of arbitrator in the present case could not be challenged under Section 11(6) of the Act. Therefore, this appeal was filed.

ISSUE:

The issue that was raised in this particular case was—Whether parties can approach the court under Section 11(6) of the Arbitration & Conciliation Act for appointment of another arbitrator when one arbitrator has already been appointed and has assumed his role?

HELD:

On perusal of the arbitration clause in the agreement, the Supreme Court held that it was permissible to appoint a person by designation also. Relying on some of the previous judgements like Indian Oil Corporation Limited and others v. Raja Transport Private Limited, (2009) 8 SCC 520—a 2009 case, Ace Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corporation Limited, (2007) 5 SCC 304—a 2007 case, the Court was of the view that arbitration clauses in government contracts provided that an employee of the department will be a sole arbitrator, is neither void nor unenforceable. The fact that a named arbitrator is an employee of one of the parties is not ipso facto a ground to raise a presumption of bias or lack of independence on his part.

The Court further held that “if the appellant has any grievance that the appointment of the arbitrator is by ‘post/designation’ and not by ‘person’, the appellant ought to have raised the challenge before the arbitrator in the first instance itself.”

Though Section 12(5) of the Arbitration and Conciliation (Amendment) Act, 2015 clearly prohibits the employee of one of the parties from being an arbitrator, the provision would not apply to the present case, since the agreement was entered into in 2006.

The Chief Engineer, Himachal Pradesh Public Works Department was directed to appoint an arbitrator in terms of the arbitration clause of the agreement, which both the parties were aware of.

RATIO:

Now let’s derive the ratio from this. If an employee arbitrator has been appointed pursuant to the terms of an arbitration agreement prior to the enactment of Arbitration and Conciliation (Amendment) Act, 2015, a party cannot approach the Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 to seek appointment of an independent arbitrator. 

If the appellant has any grievance that the appointment of the arbitrator is by “post/designation” and not by “person”, the appellant ought to have raised the challenge before the arbitrator in the first instance itself.

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