Point of Law: Arbitration clause - Appointment of Arbitrator - Interest of justice to appoint an independent arbitrator to adjudicate disputes between parties.

JUDGMENT :

J.R. MIDHA, J.

1. The petitioner is seeking appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act.

2. The arbitration agreement between the parties is contained in clause XIII of the Memorandum of Family Arrangement-cum-Deed of Relinquishment dated 09th June, 2020 according to which the parties agreed for reference of disputes to the sole arbitrator, Mr. Sachin Dev Sharma, Chartered Accountant.

3. The arbitration agreement between the parties is not disputed. The respondents have no objection to the reference of disputes to the sole arbitrator named in the arbitration agreement.

4. Learned counsel for the petitioner submits that the sole arbitrator named in the arbitration agreement is not competent to act as an arbitrator in terms of Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act as the named arbitrator is a consultant/advisor to the respondent and is a director and shareholder in PEB Steel Lloyd (India) Ltd. Reference is made to Para 9 of the petition which is reproduced hereunder:

“9. That the Petitioners have become aware that the proposed Arbitrator, named III the said Memorandum, IS a Consultant/Advisor to the Respondents, in his capacity as a professional Chartered Accountant, IS a Director and Shareholder in PEB Steel Lloyd (India) Ltd. an affiliate/subsidiary company of Lloyd Insulation India Limited (a family concern of Late Chander Prakash Khanna); has contacted Petitioners No. 1 and 2 indicating that they are not entitled to any amounts, other than release of the Fixed Deposits already standing in their names. All of the foregoing has rendered Mr. Sachin Dev Sharma ineligible to be appointed, and act, as an Arbitrator, in terms of Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996. Consequently, the Petitioners herein pray unto this Hon'ble Court to appoint an independent Arbitrator for adjudication of disputes/differences between the parties arising out of the said Memorandum.”

5. The respondents have filed the reply in which they have admitted that the named arbitrator is a consultant/advisor to the respondents in his capacity as a professional Chartered Accountant and is a director and shareholder of PEB Steel Lloyd (India) Ltd. Para 9 of the reply of the respondents is reproduced hereunder:

“9. The contents of Para 9 of the petition as stated are wrong and denied. It is denied that petitioners have become aware now that the proposed Arbitrator, named in the said Memorandum, is a consultant/Advisor to the Respondents in his capacity as a professional chartered Accountant is a Director and Shareholder in PEB Steel Lloyd (India) Ltd. an affiliate/subsidiary company of Lloyd Insulation (India) Ltd. In this regard it is submitted that petitioners have themselves agreed to the name of Mr. S.D. Sharma as an Arbitrator, in case of any dispute/differences between the parties in the Memorandum, for the reason that he knew both Late Mr. Chander Prakash Khanna and Late Mrs. Nirmal Khanna and know all the family for last 40 years. Further it was at the insistence of the petitioners that name of Mr. S.D. Sharma was decided as Arbitrator in the said Memorandum. In fact on earlier occasion also in 2014 while the Late Mr. Chander Prakash Khanna and Late Mrs. Nirmal Khanna both were alive, at that time also the name of Mr. S.D. Sharma was agreed by all the family members, including Petitioners, to appoint him as a sole arbitrator to settle all the disputes with respect to various assets and properties owned by the family. However, the said proceeding did not initiate/proceeded further at that time.

Petitioners were well aware of the fact that Mr. S.D. sharma, named Arbitrator in the said Memorandum, is an independent Director of the PEB Steel Lloyd (India) Ltd. since 24.9.2018, while signing the said Memorandum in June 2020. He is not the Director or Shareholder in PEB steer Lloyd (India) Ltd. as has been alleged. It i