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2018 (12) TMI 1929 - SC - Indian LawsAppointment of independent arbitrator - declination to appoint holding that as per the terms of the agreement, arbitrator had already been appointed - in the light of the agreement between the parties in Clause (65) of the general conditions of contract whether the Appellant/contractor can challenge the appointment of the Superintendent Engineer, Arbitration Circle as Arbitrator to resolve the dispute between the parties? - HELD THAT - The High Court placed reliance upon the judgment in ANTRIX CORP. LTD. VERSUS DEVAS MULTIMEDIA P. LTD. 2013 (5) TMI 402 - SUPREME COURT and held that when the Superintendent Engineer, Arbitration Circle was appointed as the Arbitrator in terms of the agreement (or arbitration clause), the provisions of Sub-section (6) of Section 11 cannot be invoked again. The High Court further observed that in case, the other party is dissatisfied or aggrieved by the appointment of an arbitrator in terms of the agreement, his remedy would be by way of petition Under Section 13 and thereafter while challenging the award Under Section 34 of the 1996 Act. In the present case, the Arbitrator has been appointed as per Clause (65) of the agreement and as per the provisions of law. Once, the appointment of an arbitrator is made at the instance of the government, the arbitration agreement could not have been invoked for the second time. When the parties have specifically agreed for appointment of sole Arbitrator of the person appointed by the Engineer-in-Chief/Chief Engineer, HPPWD, the Appellant was not right in approaching the High Court seeking appointment of an independent Arbitrator - Inspite of extension of time, since the Appellant-contractor had not filed statement of claim, the arbitrator terminated the proceedings Under Section 25(a) of the 1996 Act by proceedings dated 06.08.2014. The Appellant-contractor did not file his statement of claim before the arbitrator since the Appellant had approached the High Court by filing petition Under Section 11(6) of the 1996 Act, probably under the advice that the Appellant can get an independent arbitrator appointed. The Appellant had been writing letters to the arbitrator before the hearing seeking adjournment. An opportunity is to be afforded to the Appellant to go before the departmental arbitrator (as agreed by the parties in Clause (65) of the general conditions of contract) and the proceedings of the arbitrator dated 06.08.2014 terminating the proceedings is to be set aside. After the Amendment Act, 2015, there cannot be a departmental arbitrator - in this case, the agreement between the parties is dated 19.12.2006 and the relationship between the parties are governed by the general conditions of the contract dated 19.12.2006, the provisions of the Amendment Act, 2015 cannot be invoked. The proceedings of the arbitrator dated 06.08.2014 terminating the arbitral proceedings is set aside. In terms of Clause (65) of the general conditions of contract, the Chief Engineer, Himachal Pradesh Public Works Department is directed to appoint an arbitrator in terms of Clause (65) of the agreement - the Appellant shall file his claim before the arbitrator so nominated and the arbitrator shall afford sufficient opportunities to both the parties and proceed with the matter in accordance with law. Appeal disposed off.
Issues Involved:
1. Validity of the appointment of the arbitrator by designation. 2. Applicability of Section 12(5) of the Arbitration and Conciliation Act, 1996 (as amended in 2015). 3. Termination of arbitration proceedings under Section 25(a) of the Arbitration and Conciliation Act, 1996. 4. Challenge to the appointment of the arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. Issue-wise Detailed Analysis: 1. Validity of the Appointment of the Arbitrator by Designation: The primary issue was whether the appointment of the "Superintendent Engineer, Arbitration Circle, HPPWD, Solan" as the arbitrator by designation was valid under the terms of the contract. The court examined Clause (65) of the General Conditions of Contract, which allowed the appointment of an arbitrator by designation. The court noted that if appointments were only to be made by name and not by designation, there would be no provision for appointing a successor if the arbitrator vacated office. Therefore, the appointment by designation was deemed valid as per the contract terms. 2. Applicability of Section 12(5) of the Arbitration and Conciliation Act, 1996 (as amended in 2015): The Appellant argued that the appointment of the arbitrator, who was an employee of HPPWD, was barred by Section 12(5) of the amended Act. The court, however, clarified that the amended provisions of the Act apply only to arbitral proceedings commenced on or after the date of the Amendment Act (23.10.2015). Since the arbitration proceedings in this case commenced in 2013, the provisions of the amended Act, including Section 12(5), were not applicable. The court also referenced several judgments, including *Indian Oil Corporation Limited v. Raja Transport Private Limited* and *Union of India v. M.P. Gupta*, which upheld the validity of arbitration clauses in government contracts that appointed departmental employees as arbitrators. 3. Termination of Arbitration Proceedings under Section 25(a) of the Arbitration and Conciliation Act, 1996: The arbitrator terminated the proceedings under Section 25(a) due to the Appellant's failure to file a statement of claim. The court found that the Appellant had sought adjournments and had approached the High Court for the appointment of an independent arbitrator. The court deemed it appropriate to set aside the termination order, noting that the arbitrator should have issued a warning before terminating the proceedings. The court directed that the Appellant be given an opportunity to present their claim before a newly appointed arbitrator as per Clause (65) of the contract. 4. Challenge to the Appointment of the Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996: The Appellant challenged the appointment of the arbitrator under Section 11(6), seeking an independent arbitrator. The High Court, relying on *Antrix Corporation Limited v. Devas Multimedia Private Limited*, held that once an arbitrator is appointed as per the agreement, Section 11(6) cannot be invoked again. The court upheld this view, stating that any dissatisfaction with the appointment should be addressed through a petition under Section 13 and subsequently under Section 34 of the Act. The court reiterated that the arbitrator was appointed as per the agreement and the provisions of law, and the arbitration agreement could not be invoked for a second time. Conclusion: The Supreme Court set aside the termination of arbitration proceedings and directed the Chief Engineer, HPPWD, to appoint a new arbitrator as per Clause (65) of the contract. The Appellant was given the opportunity to file their claim before the newly appointed arbitrator. The court emphasized that it had not expressed any opinion on the merits of the Appellant's claim.
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