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IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR, J.
M/s. Lanco-Rani (JV) - Petitioner
Versus
National Highways Authority of India Limited - Respondent
O.M.P. No. 199 of 2008
Decided On : 06-12-2016
Arbitration - Impugned Award - Section 34 of the Arbitration and Conciliation Act, 1996 - 12, 15(2), 34(2) - The court set aside the impugned Award dated 5th January, 2008 due to non-disclosure of an engagement by the Arbitrator nominated by the Respondent as an advisor for remuneration with the Respondent, leading to justifiable doubts as to his independence and impartiality. The court emphasized the mandatory requirement for an Arbitrator to disclose any circumstances likely to give rise to justifiable doubts as to his independence or impartiality, as stipulated in Section 12(2) of the Act. The failure to do so vitiated the impugned Award, and the court held that even if one of the Members of the Arbitral Tribunal has compromised the essential requirement of fairness by failing to disclose such circumstances, the Award of the Arbitral Tribunal would get vitiated.
Fact of the Case:
The dispute arose from the delay in completion of piling works for the Kishangunj Flyover, leading to a detailed statement of facts and additional costs submitted by the Petitioner for a decision of the Engineer under Clause 44.1 of the Contract. The matter was referred to the Dispute Review Expert and then to the Arbitral Tribunal. The Petitioner challenged the impugned Award on the ground of bias due to non-disclosure of an engagement by the Arbitrator nominated by the Respondent as an advisor for remuneration with the Respondent.
Finding of the Court:
The court set aside the impugned Award due to non-disclosure of the Arbitrator's engagement as an advisor for remuneration with the Respondent, leading to justifiable doubts as to his independence and impartiality.
Issues: The main issue was the challenge to the impugned Award under Section 34 of the Arbitration and Conciliation Act, 1996, based on the ground of bias due to non-disclosure of the Arbitrator's engagement as an advisor for remuneration with the Respondent.
Ratio Decidendi: The court emphasized the mandatory requirement for an Arbitrator to disclose any circumstances likely to give rise to justifiable doubts as to his independence or impartiality, as stipulated in Section 12(2) of the Act. The failure to do so vitiated the impugned Award, and the court held that even if one of the Members of the Arbitral Tribunal has compromised the essential requirement of fairness by failing to disclose such circumstances, the Award of the Arbitral Tribunal would get vitiated.
Final Decision: The court set aside the impugned Award dated 5th January, 2008 of the Arbitral Tribunal.
1. The challenge in this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act’) filed by the Petitioner, M/s. Lanco-Rani (JV), is to the impugned Award dated 5th January, 2008 passed by the Arbitral Tribunal (‘AT’) in the disputes between the Petitioner JV and the Respondent, National Highways Authority of India Limited (‘NHAI’) arising out of the contract awarded to the JV for the construction of “Four Laning of km 419.00 to km 447.00 of Purnea to Gayakota of NH-31 in the State of Bihar.
2. It is stated that the work of construction of the Kishangunj Flyover in KM-473-475 on NH No. 31 spanning over 738 meters was added to the said contract work by an addendum to the tender. The start date of the work was reckoned as 19th September, 2001 and the Kishangunj Flyover was to be completed by March 2002. The entire contract work, apart from the Kishangunj Flyover, was to be completed within 36 months, i.e., by 18th September, 2004.
3. The dispute between the parties arose from the delay in completion of piling works for the Kishangunj Flyover. Resultantly, the Petitioner submitted a detailed statement of facts, supported with evaluation of additional costs and losses, for a decision of the Engineer under Clause 44.1 of the Contract. The Engineer by his letter dated 23rd March, 2004 conveyed his decision to the Team Leader that the Petitioner was not entitled to any compensation. The matter was then referred at the instance of the Petitioner to the Dispute Review Expert (DRE) who gave his recommendation on 29th January, 2005. The Petitioner being dissatisfied with the recommendation of the DRE referred the matter to the AT for a decision.
4. By the impugned Award dated 5th January, 2008, the AT held Issue Nos. 1, 2, 3(a) and 6 against the Petitioner whereas Issue No. 5 was held in favour of the Petitioner. The AT did not decide on Issue Nos. 3(b) and 4.
5. At the outset, Dr. Amit George, learned counsel appearing for the Petitioner stated that he was confining the challenge to the impugned Award on the ground of bias. He drew the attention of the Court to the fact that on 2nd May 2008, an application being IA No. 5527 of 2008 was filed in the present petition by the Petitioner seeking permission to urge an additional ground ‘K’. IA No. 5527/2008 was allowed by the Court by its order dated 9th July, 2008.
6. In the said application it was pointed out that on 28th April, 2008, while discussing some business affairs with the General Manager of M/s. Progressive Constructions Limited (PCL), another construction company taking up identical contracts with NHAI, it was revealed to the Petitioner that one of the Arbitrators nominated by NHAI in the AT which passed the impugned Award, Mr. Basant Kumar, had taken up employment with NHAI in or about January 2007. He had been acting as an Arbitrator, nominated by NHAI, in another similar arbitration case between PCL and NHAI.
7. PCL provided to the Petitioner a copy of the proceedings of the 34th hearing dated 19th January, 2007 in the said arbitration case between PCL and NHAI. A copy of the said proceedings was enclosed as Annexure A to the said application. These were proceedings of the AT comprising Mr. G.S. Tawarmalani (the Presiding Arbitrator) and two other Arbitrators viz., Mr. Basant Kumar and Mr. Y. Lal. It showed that in the said arbitration, on 19th January 2007 Mr. Basant Kumar referred to Section 12 of the Act and declared that he “had taken up the assignment to act as technical expert/advisor in some other arbitration cases of NHAI, which are in no way connected with this arbitration case.” The representatives of PCL then informed the said AT that the declaration earlier given under Section 12 of the Act had changed. They, accordingly, objected to the continuation of Mr. Basant Kumar as an Arbitrator. The proceedings then recorded as follows:-
“On hearing the objection registered by the Contractor’s Representatives, learned Shri Basant Kumar immediately sta
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