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2011 Supreme(Del) 462
IN THE HIGH COURT OF DELHI
Manmohan Singh, J.
Appellants: Delhi Chemical and Pharmaceuticals Works Pvt. Ltd. and Ors.
Vs.
Respondent: Himgiri Realatirs Pvt. Ltd.
OMP 392/2011
Decided On: 04.07.2011
Counsels:
For Appellant/Petitioner/Plaintiff: Kailash Vasudev, Sr. Adv. and Rohit Kumar, Adv.
For Respondents/Defendant: Anil Sapra, Sr. Adv. and Sachin Puri, Adv.
The main legal point established is that the court has the power to terminate the mandate of an arbitrator under Section 14 of the Arbitration and Conciliation Act, 1996, if the arbitrator is unable to perform duties impartially and independently due to bias.
Headnote:
Arbitration - Petition - Arbitration and Conciliation Act, 1996, Section 14 - 33, 12, 13, 34 - The court terminated the mandate of the arbitrator due to bias and inability to perform duties impartially and independently.
Fact of the Case:
The Petitioner filed a petition seeking relief under Section 14 of the Arbitration and Conciliation Act, 1996, alleging that the appointed arbitrator had financial interests and bias, rendering him unable to act impartially.
Finding of the Court:
The court found that the arbitrator had financial interests and bias, and therefore terminated the mandate of the arbitrator in the proceedings.
Issues: The issues involved financial interests and bias of the arbitrator, jurisdiction of the court, and the applicability of Section 14 of the Act.
Ratio Decidendi: The court held that the arbitrator's bias and inability to act impartially warranted termination of his mandate, and that the court had jurisdiction to decide on the termination of the arbitrator's mandate.
Final Decision: The court terminated the mandate of the arbitrator and referred the disputes to arbitration under the aegis of Delhi High Court Arbitration Centre.
Manmohan Singh, J.
1. The Petitioner has filed the present petition under Section 14 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) seeking following relief:
a. call for the records of the arbitration proceedings presently before Sh. Subhash Lakhotia as the sole arbitrator titled "Himgiri Realtors Pvt. Ltd. v. Delhi Chemical & Pharmaceutical Works Pvt. Ltd. & 4 Ors.;
b. terminate the mandate of Sh. Subhash Lakhotia, S-228 Greater Kailash Part-II, New Delhi - 110 048 to act as the sole arbitrator in the proceedings presently being conducted by him on the behest of the Respondent titled "Himgiri Realtors Pvt. Ltd. v. Delhi Chemical & Pharmaceutical Works Pvt. Ltd. and 4 Ors.
c. stay the proceedings being conducted by Sh. Subhash Lakhotia acting as a Sole Arbitrator in the matter titled "Himgiri Realtors Pvt. Ltd. v. Delhi Chemical & Pharmaceutical Works Pvt. Ltd. & 4 Ors. and;
d. award costs in favour of the Petitioners.
e. Pass any other or further order/s as may be deemed fit, just and proper in the facts and circumstances of the case in favour of the Petitioners.
2. The contention made by the Petitioners in the case is that the Petitioners had appointed one Subhash Lakhotia as a consultant for the purpose of development of a plot bearing No. A-8 (Site IV) Link Road, Sahibabad, District Ghaziabad (UP) belonging to Petitioner No. 1. An agreement dated 03.03.2006 was entered into for the said purpose where an assurance was given by Subhash Lakhotia that he shall identify, locate and introduce independent parties to develop the plot and further negotiate on behalf of the Petitioners with the parties. It is also stated that Subhash Lakhotia introduced the Petitioners to the Respondent, a company belonging to Aeren Group of Companies. Subhash Lakhotia had assured the Petitioners that after due diligence he has ascertained the capability, capacity and expertise of the Respondent and the group it belonged to, in the field of developing properties.
3. Subsequently, the Petitioners signed the Collaboration Agreement with the Respondent on 06.07.2006. The said agreement was neither registered nor stamped. It is alleged that the Respondent failed to adhere to the commitments and assurances given by it and various meetings were held between the parties as well as Subhash Lakhotia to amicably resolve the disputes between the parties, however, the said meetings did not materialise between them. It is further contended that during the course of the said meetings, it came to the knowledge of the Petitioners that Subhash Lakhotia, who is now arbitrator, in fact had been deeply involved in various other financial and property deals with the Respondent, its group of companies, directors and their family members prior to acting as a consultant for the Petitioners. It is stated that the nexus and financial involvement between Subhash Lakhotia and the Respondent company came to the knowledge of the Petitioner, when further financial benefits were sought to be conferred on Subhash Lakhotia by the Respondent company and its directors by forcing the Petitioners into agreeing to illegal and unwarranted demands of the Respondent company.
4. The Petitioner received the communication dated 08.02.2011 from Subhash Lakhotia alleging that he had been appointed as the sole arbitrator in terms of the communication dated 07.02.2011 sent by the Respondent appointing him as the arbitrator in terms of the arbitration agreement. Thereafter, the Petitioners communicated to the arbitrator their inability to join the proceedings. Copy of the communication is on record. On 23.02.2011, the Petitioners made an application under Section 13 of the Act, inter alia, setting out in detail the facts and circumstances which in terms disqualified Subhash Lakhotia to act as sole arbitrator. The relevant details of the facts in this regard spelt out are given as under:
There were financial and pecuniary interests between Subhash Lakhotia and the R
