IN THE HIGH COURT OF MADHYA PRADESH
Mohammad Rafiq, CJ.
Ellora Paper Mills Limited v. State of Madhya Pradesh
Arbitration Case No. 100 of 2019 (Jabalpur);
Decided on 27.8.2021
(1) Arbitration andConciliation Act, 1996 -- S. 12 (5) (as inserted on 23.10.2015) -- arbitrator employee of one party to arbitration agreement -- not ipso facto ground to raise presumption of bias or partiality so longas there is no justifiable apprehension about arbitrator's independence orimpartiality -- does not by itself, before Amendment Act came into force, render such appointment invalid and unenforceable. (2017) 15 SCC 32, (2009) 8 SCC 520, (2007) 5 SCC 304 and (2004) 10 SCC 504 followed. 2021 (2) JLJ 107 distinguished. (2020)10 SCC 1, (2017)8 SCC 377, (2019) SCC Online SC 1517, 2019 SCC Online SC 1635 and (2018) SCC Online Del. 8914 referred to. [Paras 10 to 12
(2) Arbitration and Conciliation Act, 1996 -- S. 12 (5) (as inserted on 23.10.2015) -- arbitration proceeding commenced prior to introduction of amendment -- provision cannot have retrospective operation unless parties otherwise agree. (2019) 15SCC 682, (2019) 3 SCC 282 and BCCI (2018) 6 SCC 287 followed. [Para 13
(3) Arbitration andConciliation Act, 1996 -- S. 12 (5) (as inserted on 23.10.2015) r/w Fifth Schedule and Seventh Schedule, Ss. 21, 14 r/w Ss. 11 and 15 -- termination of mandate of originally constituted Arbitral Tribunal and appointment of new arbitrator -- permissible to appoint person by designation -- arbitration agreements involving government contracts providing that employee of departmentor higher official unconnected with work or contract will be arbitrator -- neither void nor unreasonable -- Arbitral Tribunal consisting of officers named by designation already appointed and acted upon before amendment in Act -- change of incumbents by reason of transferor retirement -- would not make any difference as they were made members by designation, not by name -- no necessity to appoint another Arbitral Tribunal -- petitioner has not been ableto produce any material to show any bias or partiality on part of any member. (2020) 2 SCC 464 and (2019) 2 SCC 488 followed.
[Paras 15 & 17
¼1½ ek/;LFke~ vkSj lqyg vf/kfu;e] 1996 && /kkjk 12¼5½ ¼23&10&2015 dks ;Fkk var%^ LFkkfir½ && e/;LFk ek/;LFke~ djkj ds ,d i{kdkj dk deZpkjh && vius&vki esa iwoZ xzg ;k i{kikr dh mi/kkj.k djus ds fy, vk/kkj ugha] tc rd fd e/;LFk dh Lora=rk ;k fu"i{krk ds ckjs esa U;k;ksfpr vk'kadk ugha gks && blls vius&vki gh] la'kks/ku vf/kfu;e izo`Ùk gksus ds iwoZ] ,slh fu;qfDr vfof/kekU; vizorZuh; ugha gks tkrhA ¼2017½15 ,l lh lh 32] ¼2009½8 ,l lh lh 520] ¼2007½5 ,l lh lh 304 rFkk ¼2004½10 ,l lh lh 504 vuqlfjrA 2021 ¼2½ ts ,y ts 107 izHksfnrA ¼2020½10 ,l lh lh 1] ¼2017½8 ,l lh lh 377] ¼2019½ ,l lh lh vkWuykbu ,l lh 1517] 2019 ,l lh lh vkWuykbu ,l lh 1635 rFkk ¼2018½ ,l lh lh vkWuykbu fnYyh 8914 fufnZ"VA ¼iSjk 10 ls 12
¼2½ ek/;LFke~ vkSj lqyg vf/kfu;e] 1996 && /kkjk 12¼5½ ¼23&10&2015 dks ;Fkk var% LFkkfir½ && ek/;LFke~ dk;Zokgh la'kks/ku dh iqu%LFkkiuk ds iwoZ vkjaHk gqbZ && mica/k dk Hkwry{kh izHkko ugha gks ldrk] tc rd fd i{kdkj vU;Fkk lger ugha gksaA ¼2019½15 ,l lh lh 682] ¼2019½3 ,l lh lh 282 rFkk ¼2018½6 ,l lh lh 287 vuqlfjrA ¼iSjk 13
¼3½ ek/;LFke~ vkSj lqyg vf/kfu;e] 1996 && /kkjk 12¼5½ ¼23&10&2015 dks ;Fkk var% LFkkfir½ && lgifBr ik¡poha vuqlwph rFkk lkroha vuqlwph] /kkjk 21] 14 lgifBr /kkjk 11 rFkk 15 && ewyr% xfBr ek/;LFke~ vf/kdj.k dh vkKk dh lekfIr rFkk u, e/;LFk dh fu;qfDr && inkfHk/kku ls O;fDr fu;qDr djuk vuqKs; && ljdkjh lafonkvksa ls lacaf/kr ek/;LFke djkj ftuesa ;g micaf/kr fd foHkkx dk deZpkjh vFkok ladeZ ;k lafonk ls vlac) mPprj in/kkjh e/;LFk gksxk && u rks 'kwU; vkSj u v;qfDr;qDr gh && inkfHk/kku ls ukfer vf/kdkfj;ksa okyk ekè;LFke~ vf/kdj.k vf/kfu;e esa la'kks/ku ds iwoZ gh fu;qDr vkSj dk;Zjr && LFkkukarj.k ;k lsokfuo`fÙk ds dkj.k in/kkfj;ksa esa ifjorZu && dksbZ varj ugha iM+sxk D;ksafd og inkfHk/kku ls lnL; cuk, x, Fks] uke ls ugha && dksbZ vU; ek/;LFke~ vf/kdj.k fu;qDr djus dh vko';drk ugha && ;kph fdlh lnL; dk iwoZxzg ;k i{kikr n'kkZus ds fy, dksbZ lkexzh izLrqr ugha dj ldkA ¼2020½2 ,l lh lh 464 rFkk ¼2019½2 ,l lh lh 488 vuqlfjrA ¼iSjk 15 ,oa 17
ORDER
1. This application under section 14 read with sections 11 and 15 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act of 1996” for short) has been filed by the petitioner-Ellora Paper Mills Limited, seeking termination of the mandate of originally constituted Arbitral Tribunal and appointment of a new Arbitrator.
2. Facts of the case, as averred in the application, are that the petitioner Company is engaged in manufacturing of printing and writing paper of various grades. Its plant is located in Maharashtra State. The respondent issued a tender for supply of the cream wove paper and duplicating paper for the year 1993-94. The petitioner participated in the said tender process and was awarded contract for supply of 1510MT of Cream Wove and 238 MT of Duplicating Paper aggregating 1748 MT vide supply order dated 22.9.1993. According to the terms of the payment, 90% of the amount was to be paid by the respondent immediately after receipt of paper and balance 10% after receipt of the test report. According to the petitioner, it supplied 420 MT of cream wove and 238 MT of duplicating paper to the respondent but the respondent not only did not make the payment of 90% of the amount, as per the terms of the contract, but also rejected some consignment without any justification, causing huge loss to the petitioner. The respondent vide letter dated 15.11.1993 informed the petitioner that the paper supplied by them does not conform to the specification and therefore cannot be utilized. The petitioner made several representations to the respondent in the year 1993 seeking details and asserting that the paper meets the requirements which failed to invoke any response, much less positive response. The petitioner then filed a civil suit in the year 1994 for permanent injunction against the respondent in the civil Court at Bhopal seeking to restrain them from awarding the supply order to the third party. The respondent, however, in the meantime, awarded the said contract to the third party for remaining supply and therefore, the said suit became infructuous. The petitioner therefore filed another suit seeking recovery of an amount of Rs.95,32,103/- bearing Civil Suit No.2-B/98 before the civil Court, Bhopal. During the pendency of the said suit, the respondent preferred an application under section 8 of the Act of 1996 seeking stay of the proceedings on the ground that there exists an arbitration clause in the agreement between the parties. The civil Court however rejected the said application vide order dated 27.2.1999. The respondent then filed Revision Petition No.1117/1999 before this Court which was allowed vide order dated 3.5.2000. This Court referred the parties to the arbitration by Stationery Purchase Committee comprising of the officers of the respondent. Against the said order of this Court, the petitioner filed Special Leave Petition bearing SLP (C) No.13914/2000 before the Supreme Court, which however was dismissed as withdrawn vide order dated 28.9.2000. The respondent constituted the Arbitral Tribunal, styled as Stationery Purchase Committee comprising their officers. The petitioner filed its objection to the constitution of the Arbitral Committee on 12.9.2000. The petitioner also challenged its jurisdiction by filing an application under section 13 of the Act of 1996. The learned Arbitral Tribunal however vide order dated 2.2.2001 rejected the said application of the petitioner. Aggrieved thereby the petitioner filed a writ petition bearing W.P. No.1824/2001 before this Court which however was dismissed vide order dated 24.1.2017 with liberty to the petitioner to raise objections before the appropriate forum. In the meanwhile, the National Company Law Tribunal admitted and initiated the proceedings against the petitioner under the Insolvency and Bankruptcy Code. The Corporate Insolvency Resolution Process was commenced which ultimately culminated on its approval on 26.6.2018.
Arbitral Tribunal consisting of officers of State have become ineligible to become Arbitrators and to continue as Arbitrators.
The appointment of an arbitrator must comply with the Arbitration and Conciliation Act, particularly Section 12(5), which disqualifies certain individuals from serving as arbitrators.
Appointment of arbitrator by designation is permissible. Arbitration clauses in government contracts providing that an employee of the department will be the sole arbitrator are neither void nor unen....
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....
An arbitrator's mandate can be terminated when they fail to act without undue delay; new appointments must ensure impartiality as per updated legal standards.
The court emphasized the necessity for impartiality in arbitration, ruling that automatic appointments of arbitrators undermined the arbitration clause, rendering the award invalid.
Login now and unlock free premium legal research
Login to SupremeToday AI and access free legal analysis, AI highlights, and smart tools.
Login
now!
India’s Legal research and Law Firm App, Download now!
Copyright © 2023 Vikas Info Solution Pvt Ltd. All Rights Reserved.