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2020 Supreme(Del) 146
IN THE HIGH COURT OF DELHI AT NEW DELHI
Jyoti Singh, J.
Proddatur Cable Tv Digi Services – Appellant
Versus
Siti Cable Network Limited – Respondent
Original Miscellaneous Petition (T) (Comm) No. 109 of 2019; Interlocutory Application No. 17896 of 2019
Decided on : 20-01-2020
Advocate Appeared:
R.V. Yogesh, Advocate, Sindoora, Advocate, Snigdha Singh, Advocate, Ritwika Nanda, Advocate, Petal Chandhok, Advocate, Abhishek Bose, Advocate
The judgment in the case of Perkins (supra) established that a unilateral appointment by an authority interested in the outcome or decision of the dispute is impermissible in law, leading to the ineligibility of the appointed Arbitrator and the termination of the mandate.
Headnote:
Arbitration - Distribution Agreement - Arbitration and Conciliation Act, 1996 (Section 14, 15) - 13.2 - The judgment in the case of Perkins (supra) and Bharat Broadband Network Limited vs. United Telecoms Limited, (2019) 5 SCC 755 - The Arbitration Clause between the parties empowers the company to appoint a Sole Arbitrator. It can hardly be disputed that the 'Company' acting through its Board of Directors will have an interest in the outcome of the dispute. The clause is directly hit by the law laid down in the case of Perkins (supra) and the petition deserves to be allowed. The Arbitration Clause empowering the 'Company' to appoint the Sole Arbitrator in the present case would be vitiated in the light of the law laid down by the Supreme Court in the case of Perkins (supra). As a corollary to that, the ineligibility of the Company would translate and percolate to the Arbitrator appointed by the Company and thus the Arbitrator presently conducting the arbitration proceedings is declared to be ineligible to act as an Arbitrator. Since the present Arbitrator has become de jure unable to perform her functions as an Arbitrator, I hereby terminate the mandate of the present Arbitrator and substitute by another Arbitrator. Mr. Justice Mukul Mudgal, former Judge of this Court, is appointed as a Sole Arbitrator to adjudicate the disputes between the parties. The learned Arbitrator shall give disclosure under Section 12 of the Act before entering upon reference. Fee of the Arbitrator shall be fixed as per Fourth Schedule of the Act. The petition is allowed in the aforesaid terms. All pending applications are accordingly disposed of.
Fact of the Case:
The petitioner invoked the Arbitration Clause in a Distribution Agreement after failing to amicably recover the amount from the respondent. The respondent unilaterally appointed an Arbitrator, leading to a dispute. The petitioner sought termination of the appointed Arbitrator's mandate and appointment of a new Arbitrator by the Court.
Finding of the Court:
The Arbitration Clause empowering the 'Company' to appoint the Sole Arbitrator was found to be vitiated in light of the law laid down by the Supreme Court in the case of Perkins (supra). The present Arbitrator was declared ineligible to act as an Arbitrator, and the mandate was terminated. Mr. Justice Mukul Mudgal was appointed as the new Sole Arbitrator to adjudicate the disputes between the parties.
Issues: The eligibility of the 'Company' to unilaterally appoint a Sole Arbitrator and the applicability of the judgment in the case of Perkins (supra) to the ongoing arbitration proceedings.
Ratio Decidendi: The Arbitration Clause empowering the 'Company' to appoint the Sole Arbitrator was found to be vitiated in light of the law laid down by the Supreme Court in the case of Perkins (supra). The ineligibility of the Company translated to the Arbitrator appointed by the Company, leading to the termination of the Arbitrator's mandate and the appointment of a new Sole Arbitrator.
Final Decision: The petition was allowed, and the mandate of the present Arbitrator was terminated. Mr. Justice Mukul Mudgal was appointed as the new Sole Arbitrator to adjudicate the disputes between the parties.
JUDGMENT :
Jyoti Singh, J.
1. The present petition has been filed under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996 (Act) seeking a declaration that the mandate of the Arbitrator appointed by the respondent be terminated and an Arbitrator be appointed by this Court in accordance with the provisions of the Act.
2. The present petition arises out of a Distribution Agreement entered into between the parties on 03.08.2015. Clause 13 of the Agreement provides for resolution of the disputes between the parties by way of arbitration.
3. Certain disputes arose between the petitioner and the respondent as to the amounts due to the petitioner during the subsistence of the Distribution Agreement. It is the petitioner's case that all his efforts to amicably recover the amount from the respondent failed and upon which the petitioner invoked the Arbitration Clause, vide notice dated 29.10.2018. The petitioner nominated an advocate as his Arbitrator. The respondent replied to the notice on 28.11.2018 and disagreed with the name proposed by the petitioner. Placing reliance on clause 13.2 of the Agreement and claiming power to unilaterally nominate the Arbitrator, the respondent appointed Ms. Charu Ambwani as the Arbitrator.
4. On 09.01.2019, the petitioner requested the Arbitrator vide a letter to enter upon reference and on 19.01.2019, the first procedural hearing was conducted. The petitioner avers that on 10.01.2019, the Arbitrator addressed a letter to the counsels for the parties seeking consent of the petitioner to her appointment alongwith a disclosure under Section 12 of the Act. The petitioner responded vide a letter dated 14.01.2019 declining consent to her appointment.
5. The petitioner avers that through its counsel it sent an email dated 28.01.2019 to the Arbitrator pointing out that objections regarding procedure and jurisdiction would be raised in due course by the petitioner as per provisions of the Act. On 26.11.2019, the Supreme Court delivered its judgment in Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd., 2019 SCC Online SC 1517 in view of which the unilateral appointment of the Arbitrator by the respondent is vitiated under Section 12(5) of the Act.
6. The petitioner avers that in view of the said judgment, the petitioner conveyed to the nominated Arbitrator not to proceed with the arbitration as her mandate stands terminated de jure. The Arbitrator vide an email dated 07.12.2019 communicated that she would continue with the proceeding unless there was a judicial order terminating her mandate. Hence the petitioner has filed the present petition.
7. Both parties have been heard at length and have filed written submissions elaborating the arguments made.
8. The contention of the counsel for the petitioner is that the case of the petitioner is squarely covered by the judgment in the case of Perkins (supra) and Bharat Broadband Network Limited vs. United Telecoms Limited, (2019) 5 SCC 755. He contends that it is undisputed that the respondent had unilaterally appointed the Arbitrator and thus the appointment is vitiated in terms of the above judgment. Learned counsel has relied on the following paragraph of the judgment in the case of Perkins (supra):
"20. We thus have two categories of cases. The first, similar to the one dealt with in TRF Limited where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself but is empowered or authorised to appoint any other person of his choice or discretion as an arbitrator. If, in the first category of cases, the Managing Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or result of the dispute. The element of invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be
