IN THE HIGH COURT OF DELHI AT NEW DELHI
Navin Chawla, J.
Man Industries (india) Limited – Appellant
Versus
Indian Oil Corporation Limited – Respondent
O.M.P. (COMM) 252 of 2018 & I.A. 13103 of 2022
Decided On : 01-06-2023
Arbitration - Challenge to Arbitral Award - Section 34 of the Arbitration and Conciliation Act, 1996 - Section 12(5) - TRF Limited v. Energo Engineering Projects Limited, (2017)8 SCC 377; Bharat Broadband Network Limited v. United Telecoms Limited, (2019)5 SCC 755; Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd., (2020)20 SCC 760 - The court held that the learned Sole Arbitrator was de jure ineligible to act as an Arbitrator in view of Section 12(5) of the Act as he had been appointed by the respondent. The court also discussed the applicability of Section 12(5) of the Act, waiver of ineligibility, and the effect of the amendment application on the challenge to the Arbitral Award.
Fact of the Case:
The petitioner filed a petition challenging the Arbitral Award passed by the learned Sole Arbitrator. The petitioner also filed an application to amend the petition by adding a ground challenging the Impugned Award on the ground that the learned Sole Arbitrator was de jure ineligible to adjudicate the disputes between the parties in terms of Section 12(5) of the Act and the judgments of the Supreme Court.
Finding of the Court:
The court found that the learned Sole Arbitrator was de jure ineligible to act as an Arbitrator and the Award passed by the learned Arbitrator is void and unenforceable. The court allowed the application and the petition, setting aside the Arbitral Award.
Issues: The issues included the eligibility of the learned Sole Arbitrator, the applicability of Section 12(5) of the Act, waiver of ineligibility, and the effect of the amendment application on the challenge to the Arbitral Award.
Ratio Decidendi: The court held that the learned Sole Arbitrator was de jure ineligible to act as an Arbitrator and the Award passed by the learned Arbitrator is void and unenforceable. The court also discussed the applicability of Section 12(5) of the Act, waiver of ineligibility, and the effect of the amendment application on the challenge to the Arbitral Award.
Final Decision: The application and the petition were allowed, and there shall be no order as to costs.
JUDGMENT
1. This petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the `Act') challenging the Arbitral Award dated 03.02.2018 passed by the learned Sole Arbitrator adjudicating the disputes that had arisen between the parties in relation to the Purchase Order dated 08.08.2013 placed by the respondent on the petitioner for line pipes for de- bottlenecking Salya-Mathura Pipeline.
2. The present petition was filed by the petitioner around 01.05.2018. During the pendency of the present petition, the petitioner filed an application, being I.A. No. 13103/2022, praying for leave to amend the petition by adding ground `DD' as an additional ground of challenge to the Impugned Award. Ground `DD' challenges the Impugned Award on the ground that the learned Sole Arbitrator was de jure ineligible to adjudicate the disputes between the parties in terms of Section 12(5) of the Act and the judgments of the Supreme Court in TRF Limited v. Energo Engineering Projects Limited, (2017)8 SCC 377; Bharat Broadband Network Limited v. United Telecoms Limited, (2019)5 SCC 755 and Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd., (2020)20 SCC 760, as he had been appointed by the respondent.
3. The parties have been heard on the above application as also on the merit of the original challenge to the Arbitral Award.
4. Mr. Jayant Mehta, the learned senior counsel and Ms. Amrita Singh, the learned advocate for the petitioner, placing reliance on the judgments of TRF Limited (supra) and Perkins Eastman Architects DPC (supra), submit that the learned Sole Arbitrator having been appointed by the respondent, albeit in terms of the Arbitration Agreement between the parties, was de jure ineligible to act as an Arbitrator in view of Section 12(5) of the Act. Placing reliance on the judgment of the Supreme Court in Bharat Broadband Network Limited (supra), they submit that the applicability of Section 12(5) of the Act can be waived only by an express agreement of the petitioner. They submit that there was no express waiver of the ineligibility of the learned Arbitrator by the petitioner.
5. They further submit that though the learned Arbitrator was appointed at the request of the petitioner, and during the course of the arbitration proceedings, the petitioner had not challenged the authority of the learned Arbitrator, on the other hand, the petitioner had, in fact, filed applications under Section 29A of the Act seeking extension of the mandate of the learned Arbitrator, the same would not satisfy the condition of the Proviso to Section 12(5) of the Act and, therefore, the Award passed by the learned Arbitrator is a nullity. In support, they place reliance on the judgment of the Division Bench of this Court in Govind Singh v. Satya Group Pvt. Ltd. and Another, 2023 SCC OnLine Del 37 and of the learned Single Judge(s) of this Court in JMC Projects (India) Ltd. v. Indure Private Limited, 2020 SCC OnLine Del 1950 and MS Bridge Building Construction Co. Pvt. Ltd. v. Bharat Heavy Electricals Ltd., 2023 SCC OnLine Del 242.
6. On the issue of whether this objection can at all now be allowed to be raised, and the period of limitation for filing petition under Section 34 of the Act having passed, they place reliance on the judgments of the Supreme Court in Hindustan Zinc Limited (HZL) v. Ajmer Vidyut Vitran Nigam Limited, (2019)17 SCC 82 and Lion Engineering Consultants v. State of Madhya Pradesh and Others, (2018)16 SCC 758, to submit that a plea of lack of jurisdiction of the Arbitrator can be raised at any stage of the proceedings, including before the Supreme Court. They further submit that the incorporation of additional grounds by way of an amendment can be allowed depending on the facts and circumstances of each case. They submit that in the present case, as the amendment raises an issue of lack of jurisdiction of the learned Arbitrator, the same should be allowed to be raised before th
Associate Builders v. Delhi Development Authority
Bharat Broadband Network Limited v. United Telecoms Limited
Construction & Design Services v. Delhi Development Authority
Ellora Paper Mills Limited v. State of Madhya Pradesh
Hindustan Zinc Limited (HZL) v. Ajmer Vidyut Vitran Nigam Limited
Lion Engineering Consultants v. State of Madhya Pradesh and Others
Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd.
State of Maharashtra v. Hindustan Construction Company Limited
The main legal point established in the judgment is the de jure ineligibility of the learned Sole Arbitrator to act as an Arbitrator in view of Section 12(5) of the Arbitration and Conciliation Act, ....
The main legal point established in the judgment is that the appointment of the sole arbitrator unilaterally by one of the parties was improper and impermissible, violating the provisions of Section ....
An award rendered by an ineligible arbitrator is void ab-initio, and the appointment of an arbitrator by an ineligible person goes to the root of the arbitrator's jurisdiction.
Participation in arbitration without objection constitutes a waiver of the right to challenge the appointment of the arbitrator, as per Sections 4 and 12 of the Arbitration and Conciliation Act.
The appointment of an arbitrator in violation of the Arbitration and Conciliation Act renders the interim award unenforceable, emphasizing the necessity of proper notice and jurisdictional compliance....
Unilateral appointment of an arbitrator without proper notice and in violation of statutory provisions renders the resulting award unsustainable and against the public policy of India.
: An interim award passed by an ineligible arbitrator is unenforceable.
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