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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
M/s. VSK Technologies Private Limited & Ors. - Appellants
Versus
Delhi Jal Board - Respondent
Arbitration Petition No. 2 of 2021
Decided On : 27-01-2021
Arbitration - Water Tanker Supply Services - Arbitration and Conciliation Act, 1996, Section 11(6) - 8.1 DISPUTE RESOLUTION - Summary of the acts and sections referenced and discussed by the court: The court discussed the appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 and the relevant provisions of the Arbitration Clause contained in Clause 8.1.2 of the Contract. The court also referred to the decisions of the Supreme Court in Perkins Eastman Architects DPC &Anr. v. HSCC (India) Limited and Proddatur Cable TV Digi Services v. Citi Cable Network Limited, and the decision of the Supreme Court in TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377. The court analyzed the implications of these decisions on the appointment of an arbitrator and the importance of ensuring the independence and impartiality of arbitrators.
Fact of the Case:
The petitioner filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator to adjudicate disputes arising from a Contract for Water Tanker Supply Services. The respondent failed to make payments, leading to the petitioner invoking the Arbitration Agreement as per the Contract.
Finding of the Court:
The court found that the appointment of an arbitrator by the respondent was not in accordance with the agreed procedure and the decisions of the Supreme Court. The court emphasized the importance of ensuring the independence and impartiality of arbitrators and appointed a former judge of the Supreme Court as the Sole Arbitrator.
Issues: The issues included the unilateral appointment of an arbitrator by the respondent, the interpretation of the Arbitration Clause, and the implications of relevant decisions of the Supreme Court on the appointment of arbitrators.
Ratio Decidendi: The court held that the appointment of an arbitrator must adhere to the agreed procedure and ensure the independence and impartiality of the arbitrator, as emphasized in relevant decisions of the Supreme Court.
Final Decision: The court allowed the petition and appointed a former judge of the Supreme Court as the Sole Arbitrator to adjudicate the disputes between the parties.
JUDGMENT
Vibhu Bakhru, J. - The petitioner has filed the present application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereafter 'the A&C Act'), inter alia, praying that a Sole Arbitrator be appointed to adjudicate the disputes that have arisen between the parties in relation to an Agreement dated 28.08.2012 entered into between the parties for performing the work of "Water Tanker Supply Services (WTSS)"for Zone-I (hereinafter 'the Contract').
2. The respondent (hereafter 'DJB') issued a Request for Proposal (RFP) bearing NIT No.07/RPC-I/(2011-12) inviting competitive tenders from agencies for operating Stainless Steel (SS) Water Tanker Services on hire basis for the purposes of supplying water through vehicle mounted water tankers in order to facilitate supply of potable drinking water to different areas in Delhi. Such services were to be provided in five different Zones - Zone I, Zone II, Zone V, Zone VII and Zone VIII on identical terms. The subject dispute relates to Zone I.
3. The petitioner submitted its bid pursuant to the RFP. After negotiations, an offer made by the petitioner was accepted and the DJB issued a Letter of Intent (LoI) dated 16.07.2012. Thereafter, the DJB issued a Work Order under the cover of its letter dated 21.08.2012 and on 27.08.2012, the parties entered into a formal agreement with respect to performance of the work "Water Tanker Supply Services (WTSS) for Zone-I."
4. The petitioner claims that it has been diligently performing the contract, however, the DJB has failed to make payments of the invoices raised by the petitioner. The petitioner claims that it had issued a notice calling upon the DJB to release the payments outstanding for the months of August, September and October, 2020 and had also made representations in this regard. However, the petitioner claims that the DJB has failed to address the issues raised by it.
5. In view of the disputes that have arisen between the parties, the petitioner issued a notice dated 20.11.2012 invoking the Arbitration Agreement as set out in Clause 8.1.2 of the Contract. It also suggested the name of a former Chief Justice of this Court for being appointed as an Arbitrator.
6. Thereafter, on 25.11.2020, the petitioner filed a petition (OMP (I) (COMM.) 390/2020) under Section 9 of the A&C Act before this Court seeking certain interim measures of protection. The said matter was listed for hearing on 01.12.2020 and 02.12.2020. On 02.12.2020, this Court issued notice but did not grant any interim relief, as prayed for by the petitioner. The petitioner has also preferred an appeal - FAO(OS)(COMM.) 174/2020 - under Section 37 of the A&C Act - challenging the said order dated 02.12.2020.
7. The name of the Sole Arbitrator as suggested by the petitioner was not accepted by the DJB. However, the DJB sent a letter dated 15.12.2020 responding to the petitioner's notice dated 20.11.2020, whereby the petitioner had invoked the Arbitration Clause. The DJB proposed names of two persons, one being a former Chief Justice of the Patna High Court and the other being a former Judge of this Court to be appointed as Arbitrators. However, the same were not acceptable to the petitioner. Therefore, on 24.12.2020, the petitioner moved this application for appointment of an Arbitrator.
8. After the petitioner had filed the present application, the DJB issued a letter dated 31.12.2020 nominating Justice (Retired) Iqbal Ahmed Ansari as a Sole Arbitrator to adjudicate the disputes between the parties. It is material to note that he was one of the two persons who were proposed by the DJB for being appointed as an Arbitrator, in its letter dated 15.12.2020
9. The respondent does not dispute the existence of the Arbitration Clause contained in Clause 8.1.2 of the Contract is relevant and is set out below:-
"8.1 DISPUTE RESOLUTION
1) Any dispute arising out of or in connection with this Agreement shall in the first instance be dealt with in accordance with the escalation proc
The main legal point established in the judgment is the importance of ensuring the independence and impartiality of arbitrators in the appointment process, as emphasized in relevant decisions of the ....
The main legal point established in the judgment is that the unilateral appointment of an Arbitrator by a party with an interest in the matter is impermissible, as it could compromise the impartialit....
A party's unilateral appointment of an arbitrator is impermissible to ensure impartiality; the appointed arbitrator must not be influenced by party interests.
Point of law: As per the legal position settled by the Supreme Court in catena of judgments, the High Court has the jurisdiction under Section 11(6) of the said Act to nullify the appointments made b....
Unilateral appointment of an Arbitrator by a party is impermissible, and the ineligibility of the Arbitrator under Section 12(5) of the A&C Act is a valid ground for challenging the appointment.
An employee of the respondent or even a retired employee would be ineligible to be appointed as an arbitrator. The panel of arbitrators should be broad-based and should include persons with diverse b....
The court reinforced that impartiality and independence of arbitrators is essential, disqualifying those with vested interests under Section 12(5) of the Arbitration and Conciliation Act, 1996.
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