2017 Supreme(SC) 140

SUPREME COURT OF INDIA
A.K. SIKRI AND R.K. AGRAWAL, JJ.
M/S. VOESTALPINE SCHIENEN GMBH – APPELLANTS
VERSUS
DELHI METRO RAIL CORPORATION LTD. – RESPONDENTS
Arbitration Petition (Civil) No. 50 of 2016
Decided On : 10-02-2017

IMPORTANT POINT
Even when an Arbitrator is appointed in terms of contract and by parties to contract, he is independent of parties.

Headnote:(A) Arbitration and Conciliation Act, 1996 – Section 11(6) – Appointment of Arbitrator – Parameters – Independence and impartiality of Arbitrator are hallmarks of any arbitration proceedings – Rule against bias is one of fundamental principles of natural justice which applied to all judicial and quasi judicial proceedings – Notwithstanding fact that relationship between parties to arbitration and arbitrators themselves are contractual in nature and source of an Arbitrator's appointment is deduced from agreement entered into between parties, notwithstanding the same non-independence and non-impartiality of such Arbitrator (though contractually agreed upon) would render him ineligible to conduct arbitration – Even when an Arbitrator is appointed in terms of contract and by parties to contract, he is independent of parties – Functions and duties require him to rise above partisan interest of parties and not to act in, or so as to further, particular interest of either parties – Arbitrator has adjudicatory role to perform and he must be independent of parties as well as impartial. (Para 19)

       (B) Arbitration and Conciliation Act, 1996 – Section 11(6) – Appointment of Arbitrator – Parameters – Independence and impartiality are two different concepts – An Arbitrator may be independent and yet, lack impartiality, or vice versa – Impartiality is a more subjective concept as compared to independence – Independence, which is more an objective concept, may be more straightforwardly ascertained by parties at outset of arbitration proceedings in light of circumstances disclosed by Arbitrator, while partiality will more likely surface during arbitration proceedings. (Para 21)

       (C) Arbitration and Conciliation Act, 1996 – Sections 11(6), 11(8) and 12 – Appointment of sole Arbitrator – There are disputes between parties giving rise to claims and counter claims against each other and these pertain to and arise out of contract – Keeping in view spirit of amended Section 12 and in order to instill confidence in mind of other party, it is imperative that panel should be broad based – Apart from serving or retired engineers of government departments and public sector undertakings, engineers of prominence and high repute from private sector should also be included – Likewise panel should comprise of persons with legal background like Judges and Lawyers of repute as it is not necessary that all disputes that arise, would be of technical nature – There can be disputes involving purely or substantially legal issues, complicated in nature – Likewise, some disputes may have dimension of accountancy – It would also be appropriate to include persons from this field as well – Petitioner given time to nominate its Arbitrator from list of Arbitrators given by respondent. (Paras 28 and 30)

       Facts of Case:

       Arbitration matter. Not satisfied with performance of petitioner, respondent has suspended business dealings with petitioner for period of six months. Petitioner feels aggrieved by all such actions and wants its claims to be adjudicated upon by an Arbitral Tribunal, having regard to arbitration agreement between parties as contained in Clause 9.2 of General Conditions of Contract (GCC) read with Clause 9.2 of Special Conditions of Contract (SCC).

       Findings of Court:

       Time has come to send positive signals to international business community, in order to create healthy arbitration environment and conducive arbitration culture in this country. Duty becomes more onerous in Government contracts, where one of parties to dispute is Government or public sector undertaking itself and authority to appoint Arbitrator rests with it.

       Though choice is given by DMRC to opposite party but it is limited to choose an Arbitrator from panel prepared by DMRC. It becomes imperative to have a much broad based panel so that there is no misapprehension that principle of impartiality and independence would be discarded at any stage of proceedings, specially at stage of constitution of arbitral tribunal. DMRC shall prepare a broad based panel on aforesaid lines within a period of two months from today.

       Result : Arbitration Petition dismissed.