The main legal principle established is the requirement for neutrality of arbitrators, as provided in the amended Section 12(5) of the Arbitration and Conciliation Act, 1996, and the importance of independence and impartiality of arbitrators, especially in government contracts.

Sandeep Sharma, J.

By way of instant petition filed under Section 11 (4) of the Arbitration & Conciliation Act, 1996, prayer has been made on behalf of the petitioner for appointment of an arbitrator, in terms of Clause 14 as contained in the tender document, (Annexure P-1) and Clause 13 of the purchase orders dated 7.2.2015, 10.3.2015 and 10.4.2015, (Annexures P-2 to P-4, respectively.)

2. Averments contained in the petition suggest that respondents floated an open tender for the supply of mustard oil and petitioner being the lowest bidder came to be awarded purchase order for supply of mustard oil. Since petitioner was lowest bidder, respondent No. 1 issued various orders for supply of mustard oil to be supplied at various destinations/godowns.

3. It also emerges from the averments contained in the petition and documents annexed therewith that the petitioner supplied certain quantities of mustard oil pursuant to purchase orders placed by the respondents, but for one reason or the other, respondent-Corporation withheld some amount payable to the petitioner. Since, respondents failed to release the amounts due to the petitioner despite several requests, petitioner invoked Clause 14 of the tender document, (Annexure P-1) as well as Clause 13 of purchase orders, (annexure P-2 to P-4), requesting the respondent-Corporation to appoint an impartial arbitrator.

4. Mr. Atul Jhingan, learned counsel representing the petitioner, while referring to the aforesaid Clauses contained in tender document and purchase orders, fairly contended that though a reference was made by the petitioner to the named arbitrator i.e. Secretary (Food, Civil Supplies and Consumer Affairs) to the Government of Himachal Pradesh, but petitioner has serious objections to his being appointed as an arbitrator to adjudicate the dispute inter se parties. While inviting attention of this Court to the amended provisions of Section 12(5) of Arbitration and Conciliation (Amendment) Act, 2015, learned counsel contended that despite there being prior agreement, if any, between the parties, no person, whose relationship with the parties or counsel or subject matter of dispute falls within categories as specified in the Seventh Schedule, shall be appointed as an arbitrator. Amended Section 12(5) of the Arbitration and Conciliation (Amendment) Act, 2015 provides as under:

“(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:

Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this subsection by an express agreement in writing.”

5. Mr. Atul Jhingan, learned counsel representing the petitioner further contended that in the case at hand, person as named in the agreement arrived inter se parties i.e. Secretary (Food, Civil Supplies and Consumer Affairs) can not be appointed as an arbitrator in terms of specific bar contained in Clauses 9 to 14 of Seventh Schedule as specified in Section 12 (5) of the amended Section 12 of the Arbitration and Conciliation (Amendment) Act, 2015. He specifically invited attention of this Court to Clauses No. 9 to 14 of the Seventh Schedule of the Act ibid, which are reproduced as under:

“9. The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company.

10. A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties.

11. The arbitrator is a legal representative of an entity that is a party in the arbitration.

12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.

13. The arbitrator has a significant financial interest in one of the