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IN THE HIGH COURT OF DELHI AT NEW DELHI
C. Hari Shankar, J.
Larsen And Toubro Limited - Appellant
Versus
Hll Lifecare Limited - Respondent
O.M.P. (T) (Comm.) 59/2021 & I.A. 8324/2021
Decided On : 20-09-2021
ARBITRATION - Arbitration Clause - Arbitration & Conciliation Act 1996 - Section 12(5), Seventh Schedule - The court discussed the applicability of Section 12(5) of the Arbitration and Conciliation Act, 1996 and the proviso to the same. The court emphasized the requirement of an express agreement in writing to waive the applicability of Section 12(5) and held that the learned arbitrator was de jure rendered incapable of continuing with the arbitral proceedings. The mandate of the learned arbitrator was terminated, and a retired Judge of the Supreme Court was appointed as the arbitrator.
Fact of the Case:
The arbitral proceedings arose from a contract agreement between the petitioner and the respondent, which provided for arbitration as the mode of dispute resolution. The petitioner requested the respondent to appoint its nominee arbitrator, but the respondent unilaterally appointed a retired Chief Engineer as the sole arbitrator. The petitioner contended that this appointment was in violation of Section 12(5) of the Arbitration and Conciliation Act, 1996.
Finding of the Court:
The court found that the learned arbitrator was de jure rendered incapable of continuing with the arbitral proceedings due to the applicability of Section 12(5) of the 1996 Act. The court appointed a retired Judge of the Supreme Court as the arbitrator.
Issues: The issues revolved around the unilateral appointment of the arbitrator by the respondent and the applicability of Section 12(5) of the Arbitration and Conciliation Act, 1996.
Ratio Decidendi: The court emphasized the requirement of an express agreement in writing to waive the applicability of Section 12(5) and held that the learned arbitrator was de jure rendered incapable of continuing with the arbitral proceedings.
Final Decision: The court allowed the petition, terminated the mandate of the learned arbitrator, and appointed a retired Judge of the Supreme Court as the arbitrator.
ORDER
1. The arbitral proceedings, forming subject matter of the present petition, emanate out of a contract agreement dated 25th February, 2010, between the petitioner and the respondent. Clause 21 of the General Conditions of Contract (GCC), forming part of the said agreement, provided for arbitration as the mode of resolution of disputes and read thus:
"21. Arbitration Settlement of Disputes & arbitration Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, design, drawings and instructions herein before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter:-
(i) If the contractor considers that he is entitled to any extra payment or compensation in respect of the works over and above the amounts admitted as payable by HLL or in case the contractor wants to dispute the validity of any deductions or recoveries made or proposed to be made from the contract, the contractor shall forthwith give notice in writing of his claim, in this behalf to the Engineer-in-Charge within 30 days from the date of disallowance thereof for which the contractor claims such additional payment or compensation or disputes the validity of any deduction or recovery. The said notice shall give full particulars of the claim, grounds on which it is based and detailed calculations of the amount claimed and the contractor shall not be entitled to raise any claim nor shall HLL be in any way liable in respect of any claim by the contractor unless notice of such claim shall have been given by the contractor to the Engineer-in-Charge in the manner and within the time as aforesaid. The contractor shall be deemed to have waived and extinguished all his rights in respect of any claims not notified to the Engineer-in-Charge in writing in the manner and within the time aforesaid.
(ii) The Engineer-in-Charge shall give his decision in writing on the claims notified by the contractor within 30 days of the receipt of the notice thereof. If the contractor is not satisfied with the decision of the Engineer-in-Charge, the contractor may within 15 days of the receipt of the decision of the Engineer-in-Charge submit his claims to the conciliating authority named in Schedule 'F' for conciliation along with all details and copies of correspondence exchanged between him and the Engineer-in-Charge.
(iii) If the conciliation proceedings are terminated without settlement of the disputes, the contractor shall, within a period of 30 days of termination thereof shall give a notice, in the form prescribed by HLL, to the Chairman & Managing Director, HLL Lifecare Limited for appointment of an arbitrator to adjudicate the notified claims failing which the claims of the contractor shall be deemed to have been considered absolutely barred and waived.
(iv) Except where the decisions have become final, binding and conclusive in terms of the contract, all disputes arising out of the notified claims of the contractor as aforesaid and all claims of HLL shall be referred for adjudication through the arbitration by the Sole Arbitrator appointed by the Chairman & Managing Director, HLL Lifecare Ltd. It will also be no objection to any such appointment that the Arbitrator so appointed is a HLL Employee and that he had to deal with the matters to which the Contract relates in the course of his duties as HLL Employee. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever another
The main legal point established in the judgment is the requirement of an express agreement in writing to waive the applicability of Section 12(5) of the Arbitration and Conciliation Act, 1996.
The necessity for an express written waiver to validate an arbitrator's appointment under Section 12(5) of the Arbitration and Conciliation Act, 1996.
The main legal point established in the judgment is the ab initio void nature of the arbitrator's appointment, as it was contrary to Section 12(5) of the 1996 Act. The court's decision was based on t....
An arbitrator's appointment violating Section 12(5) of the Arbitration Act without an express written waiver is invalid, rendering any adjudicated award void.
A unilateral appointment of an arbitrator from an ineligible party is void ab initio without an express written waiver of Section 12(5) of the Arbitration and Conciliation Act, which cannot be implie....
Point of Law : Arbitration proceedings conducted by the Arbitrator-Director (South) are non-est - Awards passed by such Arbitrator were void - Awards were not enforceable.
Parties consenting to arbitration and participating without objection cannot later challenge the arbitral award based on alleged unilateral appointment of the arbitrator.
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