2015 (5) TMI 1249 - HC - Indian Laws

Constitution of Arbitrator Panel - whether another arbitrator panel should be appointed by substituting the earlier panel constituted exclusively by technical experts? - HELD THAT - Appointment of alternate arbitrator by Court under Section 11(6) of the Arbitration Act by making a departure from the agreed procedure is permissible in deserving cases like inordinate delay in completion of arbitration proceeding and where the Arbitral Tribunal fails to perform its functions. In such events the Court may step in to appoint substitute arbitrator by disregarding the procedure agreed by the parties. The Apex Court in the case of UNION OF INDIA (UOI) VERSUS U.P. STATE BRIDGE CORPORATION LTD. 2014 (9) TMI 1274 - SUPREME COURT noted that the High Court can appoint substitute arbitrators if the appointed arbitrator fails to discharge his duties - Similarly in NORTH EASTERN RAILWAY VERSUS TRIPPLE ENGINEERING WORKS 2014 (8) TMI 1236 - SUPREME COURT it was observed by the Supreme Court that in exercise of powers under Section 11(6) of the Arbitration Act the Court can deviate from the procedure agreed by the parties to provide for effective resolution of dispute through arbitration. Thus in a deserving case when a fresh decision of the arbitrator is necessary when the previous decision was quashed by Court the law permits appointment of new arbitrator by departing from the agreed arrangement. The want of judicial approach was the primary reason for the perverse decision by the Arbitration Tribunal which was constituted only by retired/serving railway officers. In such circumstances it is felt that a departure from the agreed process will improve the quality of adjudication and the decision making process in the de-novo process necessitated by the Court quashing of the previous arbitral award. Mr. Justice H.N. Sarma a Former Judge of this Court is nominated as the Arbitrator for resolution of the contractual dispute - case disposed off.

Summary

Issues:
1. Challenge to arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996.
2. Appointment of independent arbitrator under Section 11(6) of the Arbitration Act.
3. Distinction between the Arbitration Act, 1940, and the current Arbitration Act of 1996.
4. Consideration of judicial expertise in arbitration panels.
5. Appointment of alternate arbitrator by the Court.

Issue 1: Challenge to arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996:
The contractor challenged the arbitral award due to the alleged failure of the Arbitration Tribunal to grant compensation for losses incurred because of idling of resources. The Addl. District Judge quashed the entire arbitral award, citing a perverse decision by the Tribunal for not considering critical points, leading to the dispute.

Issue 2: Appointment of independent arbitrator under Section 11(6) of the Arbitration Act:
The petitioner sought the appointment of a new arbitrator, arguing that the previous panel lacked judicial experience to address legal issues adequately. The Court considered the need for a fresh decision on merit and appointed a new arbitrator, Justice H.N. Sarma, to resolve the contractual dispute.

Issue 3: Distinction between the Arbitration Act, 1940, and the current Arbitration Act of 1996:
The judgment highlighted the differences between the Old Act and the current Act, emphasizing the limitations on remanding matters for reconsideration under the new Act. It explained the powers of the Court under Section 34(4) of the current Act and the absence of pending appeals in the present case.

Issue 4: Consideration of judicial expertise in arbitration panels:
The judgment discussed the importance of including judicial members in arbitration panels to ensure fairness, impartiality, and compliance with natural justice principles. It referenced a Supreme Court case emphasizing the role of judicial members in improving the quality of adjudication and decision-making processes.

Issue 5: Appointment of alternate arbitrator by the Court:
The Court invoked its power under Section 11(6) of the Arbitration Act to appoint a new arbitrator, departing from the agreed procedure, due to the failure of the previous arbitration panel and the need for a fresh decision. It cited precedents where Courts appointed substitute arbitrators to ensure effective dispute resolution through arbitration.

This judgment addressed various issues, including the challenge to the arbitral award, the appointment of an independent arbitrator, the distinction between the old and current Arbitration Acts, the significance of judicial expertise in arbitration panels, and the Court's authority to appoint alternate arbitrators for effective dispute resolution.