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2012 Supreme(Cal) 295
High Court of Judicature at Calcutta
DIPANKAR DATTA
Himadri Chemicals & Industries Ltd
Versus
Steel Authority Of India Ltd. & Another
C.O. 3371 OF 2011
Decided On : 11-04-2012
For the petitioner:Jishnu Saha, Samrat Sen, Reetobroto Mitra, Ashis Mukherjee, Sandip Agarwal, Advocates.
For the opposite party :OP1 - Utpal Bose, Saumya Ghosh, Amitabha Ray, Advocates.
The pendency of an application under Sections 12 and 13 of the Arbitration and Conciliation Act, 1996 does not ipso facto bar an application under Section 14 of the Act, but the grounds of challenge in both applications must be examined, and the decision on maintainability must be made accordingly.
Headnote:
ARBITRATION - Challenge to Arbitrator - Maintainability of Application under Section 14 of the Arbitration and Conciliation Act, 1996 - Pendency of Application under Sections 12 and 13 of the Act - De Jure and De Facto Inability of Arbitrator.
Fact of the Case:
The petitioner, a claimant in an arbitral dispute, filed an application under Sections 12 and 13 of the Arbitration and Conciliation Act, 1996 (the Act), challenging the arbitrator's independence and impartiality. The petitioner also filed two further applications seeking changes to the arbitration venue and cost-sharing. The second application was dismissed, while the first application remained pending. Subsequently, the petitioner filed an application under Section 14 of the Act, seeking termination of the arbitrator's mandate due to de jure and de facto inability. The District Judge dismissed the application on the ground of maintainability, holding that the challenge application was still pending before the arbitrator. The petitioner challenged this order in revision.
Finding of the Court:
The High Court held that the pendency of an application under Sections 12 and 13 of the Act does not ipso facto bar an application under Section 14 of the Act. Section 14 is an independent provision that may be invoked in rare cases where the arbitrator is unable to give a decision on the application under Sections 12 and 13. However, the Court found that in the present case, the petitioner had not established de jure inability of the arbitrator, as the challenge application was still pending and the arbitrator had not demonstrated any apparent disability to decide it. The Court also found that the materials on record were insufficient to uphold the petitioner's claim of de facto inability.
Issues: 1. Whether an application under Section 14 of the Arbitration and Conciliation Act, 1996 is maintainable despite the pendency of an application under Sections 12 and 13 of the Act. 2. Whether the petitioner had established de jure and/or de facto inability of the arbitrator.
Ratio Decidendi: 1. The Court held that the pendency of an application under Sections 12 and 13 of the Act does not operate as a bar to approach the Court under Section 14 on valid and tenable grounds. However, the Court emphasized that the grounds of challenge in both applications must be examined, and the decision on maintainability must be made accordingly. 2. On the issue of de jure inability, the Court held that the petitioner had not established that the arbitrator was unable to give a decision on the challenge application or that he had incurred de jure inability of a nature different from the one alleged in the challenge application. 3. On the issue of de facto inability, the Court found that the materials on record were insufficient to uphold the petitioner's claim. The Court noted that the arbitrator had not been served with a copy of the revisional application and, therefore, did not have the opportunity to deal with the allegations levelled against him.
Final Decision: The Court dismissed the revisional application, holding that interference was not called for at that stage and that the ends of justice would be best served by issuing suitable directions. The Court directed the arbitrator to proceed with utmost expedition to decide the challenge application and other pending applications without granting unnecessary adjournments. The Court also directed that the arbitrator should dictate daily orders in the presence of the parties and that no officer or staff of the opposite party should interfere in the decision-making process of the arbitrator.
1. The petitioner is the claimant in an arbitral dispute between it and the opposite party no.1. The opposite party no.2 is in seisin of such dispute as the sole arbitrator. According to the petitioner, the opposite party no.2 after being appointed as an arbitrator did not in terms of the legislative mandate contained in Section 12(1) of the Arbitration and Conciliation Act, 1996 (hereafter the Act) disclose to the parties the circumstances likely to give rise to justifiable doubts as to his independence and impartiality. This was despite the fact that the opposite party no.2 had been an officer attached to the Durgapur Steel Plant of the opposite party no.1 for a substantially long period of time. Once called upon by the petitioner, the arbitrator responded. From the response it transpired that the opposite party no.2 had been appointed arbitrator by the Durgapur Steel Plant in as many as seven arbitrations after his retirement, of which three were still continuing. Enquiry made by the petitioner revealed that
i) That the opposite party no.2 is being unusually favoured by the opposite party no.1 with a large number of arbitrations as their nominee arbitrator in references to arbitration. The pending references are obviously expected by the opposite party no.1 to conclude with the awards being passed in its favour.
ii) It has become widely known in business and trade circles particularly organizations that transact business with the opposite party no.1 that the opposite party no.2 is pliable to the dictates of the opposite party no.1 and after cursorily concluding the references made to him makes and publishes awards which result in substantial benefits to the opposite party no.1.
iii) The opposite party no. 2 is earning a substantial amount of remuneration as arbitrator in the references made to him by the opposite party no. 1. Between 2000 and 2009 he has been appointed as arbitrator in 7 arbitrations each of which have and/or had a huge stake involved therein. The substantial remuneration earned and/or being earned by the opposite party no.2 from these references made to him by the opposite party no.1 makes it difficult for the opposite party no.2 to give any award against the opposite party no.1. The large number of references made to the opposite party no.2 operates as an inducement rendering it difficult for him to make any award against the opposite party no.1.
iv) Doubt regarding lack of integrity of the opposite party no.2 is manifest because during the currency of the arbitration with Balaji Industrial Products Ltd., the opposite party no.2 had accepted financial inducement/rewards masquerading as consultancy services and had ultimately been left with no alternative but to resign.
2. In such circumstances, the petitioner on or about July 2, 2009 filed an application under Sections 12 and 13 of the Act (hereafter the challenge application) before the opposite party no.2 challenging his authority to continue as arbitrator. It was claimed that during proceedings before the opposite party no.2, it became manifest that he did not have the capacity or faculty to conduct the same. He appeared to be wholly incapable of comprehending the legal issues that arose out of the matter and when, in course of argument such legal issues were adverted to, he was completely flummoxed.
The opposite party no.2, surprisingly, was also found incapable of dictating the minutes of the meetings. Despite protest of the petitioner, the representative of the opposite party no.1 dictated the minutes and the opposite party no.2 merely signed the same. In fine, the petitioner could sense that fair and proper proceedings could not be conducted by the opposite party no.2. In such circumstances, the petitioner filed two further applications before the opposite party no.2.
3. In the first of the two applications, dated July 30, 2009, the following relief was claimed:
“a. An order be made to the effect that all minutes of the arbitral proce
