An arbitration agreement exists despite challenges, and an independent arbitrator must be appointed due to conflicts of interest with the originally named arbitrator.

ORAL JUDGMENT

Date: 19-04-2017

These are sixteen applications filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking constitution of an Arbitral Tribunal for adjudication of the dispute that has arisen between the parties in execution of an agreement and, as questions of law and fact are similar in all the cases, they are being disposed of by this common order.

2. For the sake of convenience, the documents and pleadings in the record of Request Case No.8 of 2016 are being referred to in this order.

3. The applicants herein and the Bihar State Food and Civil Supplies Corporation Limited, the respondents, entered into agreement for milling of paddy for Kharif marketing for the seasons 2012-2013. Annexure-1 dated 14.2.2013 is the agreement available on record and Clause 15 and 16 of the agreement, which are identical in all the cases read as under:

15. The second party agrees that in case, any amount found recoverable on account of default, loss, damage on the part of the second party, the said recoverable amount with interest will be recovered as Land Revenue under Bihar & Orissa Public Demands Recovery Act, 1914 by instituting Certificate case before the concerned District Certificate Officer.

16. In case of disputes both parties agree to settle the issue(s) on mutual discussion. Failure to reach agreement the matter will be referred to arbitrator. It has been also agreed that the arbitrator will be District Collector of the concerned District whose decision shall be final, concerning the dispute referred to him.=

4. It seems that certain dispute arose and the Board issued show cause notices and initiated certificate proceedings under the Bihar and Orissa Public Demands Recovery Act, 1914 (for short, Recovery Act) under Clause 19.

5. Petitioners challenged these proceedings by filing writ petitions before this Court and the petitioners were granted liberty to raise objections before the Certificate Officer-cum- Subdivisional Officer under Section 9 of the Recovery Act. The petitioners raised the claim. Their objections were rejected and when the certificates for recovery of the amount were issued, they filed these applications, inter alia seeking constitution of an Arbitral Tribunal in accordance to the requirement of Clause-16 reproduced hereinabove.

6. It is the case of the petitioners that the recovery proceedings initiated without adjudication of the dispute is unsustainable and, as the recovery proceedings under the Certificate Act, proceedings is unsustainable, they are not liable to pay the amount. They want resolution of the dispute by taking recourse to Clause-16 of the agreement.

7. Learned counsel for the petitioners argued that Clause-16 is an arbitration agreement and even though in the arbitration agreement the District Collector is nominated as a named arbitrator, but in view of Section-12(5) of the Arbitration and Conciliation Act and the provisions of Schedule-7, Clause-1 thereof , the Collector being an employee of the organization and a person having business relationship and interested in the dispute, cannot act as an arbitrator and, therefore, an independent arbitrator should be appointed. In support of the aforesaid contention, a reasoned judgment of the Supreme Court in the case of M/s. Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Ltd. , reported in AIR 2017 SC 939 is relied upon.

8. Learned senior Counsel for the petitioners took us through various aspects of the matter, the principle laid down by the Supreme Court, the recommendations made by the Law Commission, the amendment to the provisions of Section-12 and argues that it is a fit case where the independent arbitrator should be appointed. Learned Counsel invites our attention to the views recorded by the Supreme Court at para-17, in the case of M/s. Voestalpine (supra) various judgments of the Supreme Court on the subject in question with