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SUPREME COURT OF INDIA
L. NAGESWARA RAO, INDU MALHOTRA, AJAY RASTOGI, JJ.
HARYANA SPACE APPLICATION CENTRE (HARSAC) & ANR. – APPELLANTS
VERSUS
M/S PAN INDIA CONSULTANTS PVT. LTD. – RESPONDENT
CIVIL APPEAL NO. 131 OF 2021 (ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 13503 of 2020)
Decided on : 20-01-2021
Arbitration and Conciliation Act, 1996 – Sections 12(5) and 29A(6) – Arbitration proceeding – Extension of time – Even though a period of over 4 years has elapsed since constitution of Tribunal, Award has not been pronounced so far, even though Tribunal had on two occasions addressed by Arbitrators, recorded that Tribunal was ready to pronounce Award forthwith – Appointment of Principal Secretary, Government of Haryana as nominee Arbitrator of HARSAC which is a Nodal Agency of Government of Haryana, would be invalid under Section 12(5) of Arbitration and Conciliation Act, 1996 read with Seventh Schedule – Section 12(5) read with Seventh Schedule is a mandatory and non-derogable provision of the Act – In facts of present case, Principal Secretary to Government of Haryana would be ineligible to be appointed as an Arbitrator, since he would have a controlling influence on Appellant Company being a nodal agency of State – Former Judge of Supreme Court appointed as Substitute Arbitrator, who will conduct proceedings in continuation from stage arrived at, and pass Award within a period of 6 months from date of receipt of this Order – Appointment of Sole Arbitrator is subject to declarations being made under Section 12 of Arbitration and Conciliation Act, 1996 with respect to independence and impartiality and ability to devote sufficient time to complete arbitration within period of 6 months. (Paras 16, 17 and 18)
Facts of the Case:
Appellant herein filed Civil Revision Petition under Article 227 of Constitution before the Punjab and Haryana High Court for setting aside Order dated 08.11.2019 passed by the Additional District Judge, whereby an extension of time had been granted for passing the Award. It was submitted that the extension of time had been mutually agreed by both parties upto 15.08.2018. However, the tribunal failed to pronounce the Award even within this extended period, and did not show any inclination of doing so even on 07.01.2019, when the letter terminating the mandate of the tribunal was sent. The tribunal failed to pronounce the Award in a period of over 28 months from the date of constitution of the tribunal. High Court, in light of the current Pandemic, granted an extension of 4 months to enable parties to conclude their arguments within 3 months, and a period of 1 month for the tribunal to pass the Award.
Findings of Court:
In exercise of our power under Section 29A(6) of the Arbitration and Conciliation Act, 1996 (as amended), we hereby appoint Justice Kurian Joseph (Retd.), former judge of this Court, as the substitute arbitrator, who will conduct proceedings in continuation from the stage arrived at, and pass the Award within a period of 6 months from the date of receipt of this Order. The Arbitrator may direct the parties to address final arguments and take him through entire record of the case.
Result : Matter disposed of with directions.
ORDER :
INDU MALHOTRA, J.
1. The Appellant No. 1/HARSAC, Department of Science & Technology, Government of Haryana is the nodal agency for Geographic Information System (“GIS”) Application and Remote Sensing for the Government of Haryana. The Ministry of Rural Development, Department of Land Resources designated HARSAC as the nodal agency for the State of Haryana. HARSAC invited Request for Proposal in September 2010 from qualified vendors for the modernisation of Land Record (including digitisation of cadastral Maps, Integration with records and management of old revenue documents). HARSAC vide Letter dated 28.02.2011 awarded the contract to the Respondent – Pan India Consultants Pvt. Ltd, and three other vendors for works specified in the allotment letter. In pursuance thereof, Service Level Agreements were executed between the parties.
Clause 6.11 of the Service Level Agreement dated 29.03.2011 in the present case contains an arbitration clause, which reads as under :
“6.11 Resolution of Dispute
HARSAC, Haryana and the Vendor shall make every effort to resolve amicably, by direct informal negotiation, any disagreement or dispute arising between them under or in connection with the contract. If after, thirty days from the commencement of such informal negotiations, HARSAC, Haryana and the Vendor are unable to resolve amicably a contract dispute; either party may require that the dispute be referred for resolution by formal arbitration.
All question, disputes or differences arising under and out of or in connection with the contract, shall be referred to two Arbitrators one arbitrator to be nominated by HARSAC, Haryana and the other two to be nominated by the Vendor. In the case of the said Arbitrators not agreeing, then the matter will be referred to an umpire to be appointed by the Arbitrators in writing before proceeding with the reference. The award of the arbitrators, and in the event of their not agreeing, the award of the Umpire appointed by them shall be final and binding on the parties. The arbitration and reconciliation act 1996 shall apply to the arbitration proceedings and the venue & jurisdiction of the arbitration shall be in the State of Haryana.”
2. As per HARSAC, the Respondent failed to complete the work assigned within the period specified i.e. 31.12.2011, and was delaying the entire project. Even though two extensions were granted till 31.07.2012, and later extended upto 31.12.2013, the Respondent failed to complete the work. This led to the invocation of the Performance Bank Guarantee by HARSAC vide letter dated 18.03.2014.
3. The Respondent challenged this action by filing Civil Suit bearing CS (OS) No. 886 of 2014 before the Delhi High Court. The High Court disposed of the Suit, directing the Respondent–Contractor to keep the bank guarantees alive, and HARSAC was directed not to encash the bank guarantees, pending resolution of the disputes amicably or by an arbitral tribunal constituted by the parties.
4. HARSAC invoked the arbitration clause contained in the Service Level Agreement, and appointed Shri. Anurag Rastogi, IAS, Principal Secretary to Government of Haryana as their nominee arbitrator.
The Respondent appointed Justice Rajive Bhalla (Retd.) as their nominee arbitrator on 14.09.2016. On 14.09.2016, the arbitral tribunal stood constituted.
5. The Respondent/Pan India Consultants filed an Application for appointment of the presiding arbitrator under Section 10(1) of the Arbitration and Conciliation Act, 1996 before the arbitral tribunal. The tribunal vide Order dated 22.05.2017 declined the request for appointment of the third arbitrator at this stage, and reserved its right to nominate the third arbitrator in case of disagreement between the two arbitrators.
6. On 03.08.2018, the arbitral tribunal in its 28th sitting, recorded in the proceedings that the arguments were heard, and the matter was reserved for passing the Award.
7. The Appellant addressed letter dated 07.01.2019 to the arbitral tribunal whe
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