2017 (7) TMI 1456 - HC - Indian Laws

Interpretation and application of Statute - Section 12(5) of the Arbitration and Conciliation Act, 1996 read with its Seventh Schedule - eligibility to be appointed as arbitrator. According to the arbitration clause the contractor had to choose two out of which the railways would appoint one as the arbitrator - this panel is challenged by the petitioner on the ground that it is against the permitted relationship of the arbitrator with the parties, mentioned in the fifth and seventh schedules. HELD THAT - The general conditions of contract provide that the railways are to provide a list of more than three persons. But this condition is not followed as the highest Court desires it to be followed. The railways have forwarded only three names. They ought to prepare and furnish to a contractor a much longer and wider list. They should be given a wide choice amongst persons with different backgrounds and professional attainments - Therefore, the railways are required to furnish a longer list to the petitioner containing at least 30 names. Secondly, the arbitration clause provides that the railways can appoint any person from within or outside that panel. This stipulation is bad. The railways do not disclose the personnel from whom they would appoint their arbitrator. The Contractor does not know whether the appointed arbitrator of the railways would be disqualified under Schedules V and VII. Therefore, it is also imperative that the railways appoint an arbitrator from the panel sent to the petitioner or from a disclosed panel. This application is disposed of by setting aside the letter dated 24th February, 2017 (Annexure-m page 68 of the petition) by directing the respondent railways to forward a panel of at least 30 names, of persons of different backgrounds and professional avocations and attainments to the petitioner. It may include serving or retired officers of other organisations. From this panel the petitioner will be required to choose two. Thereafter, the railways can select one to be the contractor's nominee arbitrator.

Summary

Issues: Interpretation of Section 12(5) of the Arbitration and Conciliation Act, 1996 read with Seventh Schedule; Application of Supreme Court's decision in Voestalpine Schienen Gmbh. v. Delhi Metro Rail Corporation Ltd. on arbitrator eligibility; Challenge to panel of arbitrators provided by respondent railways.

In this judgment, the court delves into the interpretation and application of Section 12(5) of the Arbitration and Conciliation Act, 1996 in conjunction with the Seventh Schedule. The Seventh Schedule outlines specific relationships that render a person ineligible to be appointed as an arbitrator. The court references the Supreme Court's decision in Voestalpine Schienen Gmbh. v. Delhi Metro Rail Corporation Ltd., emphasizing the distinction between independence and impartiality of arbitrators. The judgment highlights that technical expertise or professional knowledge possessed by past government officers does not automatically disqualify them from arbitration appointments.

Regarding the specific case at hand, the court analyzes a contractual dispute between the parties involving the supply and installation of surveillance systems at metro railway stations. The court scrutinizes the arbitration clause within the contract, which mandates the appointment of arbitrators from a panel of railway officers. The petitioner challenges the panel provided by the respondent railways, citing non-compliance with the Fifth and Seventh Schedules of the Act.

The court notes that the Supreme Court's ruling clarifies that ex-government employees with technical expertise can serve as arbitrators. However, the court finds discrepancies in the panel selection process by the railways, emphasizing the need for a broader list of potential arbitrators to ensure impartiality and independence. The court directs the railways to furnish a panel of at least 30 diverse candidates for the petitioner's selection, advocating for transparency in the appointment process to align with the Supreme Court's decision.

In conclusion, the court sets aside the initial panel provided by the respondent railways and instructs them to present a more extensive list of arbitrator candidates. The judgment recommends amending the arbitration clause in the general conditions of the contract to align with the principles outlined in the Supreme Court's decision. The court emphasizes the importance of transparency and fairness in the arbitrator selection process to uphold the integrity of arbitration proceedings.