The Managing Director cannot arbitrarily appoint an arbitrator if their interest affects impartiality; such appointments contravene Section 12(5) of the Arbitration Act.

JUDGMENT

1. The present Petition is preferred by the petitioner under Section 11 (5) r/w Section (6) of the Arbitration and Conciliation Act, 1996 seeking appointment of sole Arbitrator in terms of Clause-25 of Clauses of Contract of the Agreement dated 16.11.2017 executed with respondent.

2. Petitioner-M/s SRICO Projects Pvt. Ltd. is a company registered under the Companies Act, 1956 and with MSME and respondent-Central Railside Warehouse Co. Ltd., an Enterprise of the Government of India, is also a company registered under the Companies Act, 1956.

3. According to petitioner, it has participated in the tender process issued by the respondent on 05.05.2017 for construction of 20400 MTC Warehouse along with ancillaries, internal roads, and electrical installation with temperature control facility at Fatuha, Bihar, at an estimated cost of Rs.12,91,46,503.19/- and was awarded the said work at an estimate cost of Rs.22,08,40,520.45/- and for this purpose, an Agreement was executed at New Delhi on 16.11.2017. In terms of the contract, petitioner was required to furnish a security deposit of 5% of the tendered value in terms of Clause 15(i) and performance security/guarantee of 5% of the tendered value i.e. Rs.1,10,42,000/-. The work was to commence within 10 days of allocation of work order and was to be completed within 15 months thereof i.e. by 11.02.2019. However, the date of completion of work was extended various times and thereby, completion of project was extended to or before 30-062020. Petitioner claims to have satisfactorily completed the project before 30.06.2020 and after completing the necessary Defects Liability Period of one year as per the agreement, the project site was handed over to the respondent on 30.06.2021.

4. According to petitioner, respondent vide letter dated 15.04.2021 informed the petitioner that from the payable amount of the submitted 13th RA Bill dated 06.07.2021, a deduction of Rs.1,32,50,431.23/- (Rs.1,56,35,308/- with 18% GST) would be done on account of alleged delay in the completion of project. In reply to the aforesaid letter, petitioner by its reply dated 01.06.2021 denied respondents attribution of delay, liability and default on the petitioner and also requested for an amicable resolution of the disputes.

5. During the course of hearing, learned counsel for petitioner submitted that delay in completion of the project occurred due to various and frequent breaches of project, warranties, conditions, timelines, delay in removal of obstruction on sites, multiple modifications at the end of respondent and in fact, petitioner had suffered huge losses due to repeated and prolonged delays.

6. Further, petitioner vide its letter dated 22.10.2021 called upon the Manging Director of the respondent-company for release of the amount deducted from the RA bill of petitioner, which was not replied to. Thereafter, vide notice dated 12.11.2021 petitioner invoked arbitration and proposed name of Mr.Justice (Retd.) Dharnidhar Jha to act as sole arbitrator. However, the Managing Director of respondent by communication dated 22.11.2021 appointed Sh. Ratnesh Kumar Bariar as the Sole Arbitrator to adjudicate the disputes between the parties.

7. Learned counsel for petitioner submitted that appointment of Ratnesh Kumar Bariar as the Sole Arbitrator by the respondent after petitioner has appointed Mr. Justice (Retd.) Dharnidhar Jha to act as sole arbitrator, is arbitrary, illegal and non est in law. To submit that respondent is barred by law from vesting the appointing authority in the hands of a person who has an interest in the outcome of the dispute, reliance was placed upon Hon'ble Supreme Court's decision in Perkins Eastman Architects DPC & Anr. Vs. HSCC (India) Ltd., 2019 SCC Online SC 1517 and TRF Limited Vs. Energo Engineering Projects Limited, (2017)8 SCC 377 and also that in view of these decisions, the Managing Director has become ineligible to unilaterally appoint the Arbitrator.

8. To