The main legal point established in the judgment is the ineligibility of an arbitrator based on the amended provision in Section 12(5) of the Arbitration and Conciliation Act, 1996, and the voidness of an award passed by an ineligible arbitrator.

JUDGMENT :

Ajay Mohan Goel, J.

By way of this appeal filed under Section 37(1)(C) of the Arbitration and Conciliation Act, 1996, the appellant assails the judgment passed by learned District Judge, Shimla, in Arbitration Case No. 17-S/2 of 2021, titled as Hem Raj vs. The Divisional Manager, dated 16.05.2023, as also the award passed by the learned Arbitrator in the matter of dispute of Lot No. 13/2010 (Mashobra)-Resin Extraction, FWD, Shimla (Shortfall recovery an amount of Rs. Rs. 6,38,400/-).

2. Brief facts necessary for the adjudication of the present appeal are that a claim was filed by the Divisional Manager against the appellant in the matter of dispute of Lot No. 13/2010 (supra) which was allowed by the Arbitrator- cum-Executive Director, Himachal Pradesh State Forest Development Corporation, Shimla, vide award dated 17.01.2020, by awarding an amount of Rs.6,38,400/- on account of shortfall in resin alongwith 9% from the date of institution of the case till its realization.

3. The objections filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996, against the award passed by learned Arbitrator, were dismissed by the Court of learned District Judge, Shimla, vide judgment dated 16.05.2023.

4. Feeling aggrieved, the appellant has filed this appeal under Section 37(1)(C) of the Arbitration and Conciliation Act, 1996.

5. Learned Counsel for the appellant has argued that the award passed by the learned Arbitrator as well as the judgment passed in appeal, are not sustainable in the eyes of law in terms of law declared by Hon’ble Supreme Court of India in Elora Paper Mills Limited Versus State of Madhya Pradesh, (2022) 2 SCC 1, as the Arbitrator, who happened to be the Executive Director of the Himachal Pradesh State Forest Development Corporation Limited, which was the claimant, was ineligible to either officiate or continue as an Arbitrator.

6. Learned Counsel for the respondent-Corporation has submitted that this issue was neither raised by the appellant during the arbitral proceedings nor in the objections filed under Section 34 of the Arbitration and Conciliation Act, 1996, and therefore, the appellant is now estopped from raising this issue. He further submitted that otherwise also, perusal of the award passed by the learned Arbitrator would demonstrate that it is a reasoned award, passed after taking into consideration the material on record and the judgment, which has been passed by the learned District Judge, is also in terms of the law laid down Hon’ble Supreme Court vis-à-vis the scope of Section 34 of the Arbitration and Conciliation Act, 1996.

7. I have heard learned Counsel for the parties and also gone through the award passed by learned Arbitrator and the judgment passed by learned District Judge.

8. It is not in dispute that the claimant before the learned Arbitrator was the Himachal Pradesh State Forest Development Corporation through its Divisional Manager, Forest Working Division, Shimla and the arbitrator happened to be the Executive Director of the Himachal Pradesh State Forest Development Corporation Limited.

9. Hon’ble Supreme Court in Elora Paper Mills Limited Versus State of Madhya Pradesh (supra), has been pleased to hold that Section 12 of the Arbitration and Conciliation Act, has been amended by the Amendment Act, 2015, based on the recommendations of the Law Commission, which specifically dealt with the issue of ‘neutrality of arbitrators’. Hon’ble Supreme Court further observed that to achieve the main purpose for amending the provision to provide for ‘neutrality of arbitrators’, sub-section (5) of Section 12 lays down that 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, he shall be ineligible to be appointed as an arbitrator. Hon’ble Supreme Court also held that in such an eventuality, i.e. when the arbitration