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TMI Blog2023 (6) TMI 1331X X X X Extracts X X X X X X X X Extracts X X X X ..... years from the date of execution till 26th March, 2024. The petitioner was to pay a licence fee of Rs.21,55,001/- per month plus service tax as applicable for the first year and gradually increasing at more or less 10% per annum till the end of the term for use of the airport space to run this business. It also had to deposit Rs.1,29,30,006/- as security money with the respondent. It was terminable by either side by giving 180 days' notice. Under Clause 33(iii) of the special terms and conditions any dispute between the parties except those covered by the Eviction of Unauthorized Occupants Act was to be referred to a Dispute Resolution Committee (DRC). If not resolved within 45 days of reference, then the dispute would be referred to the sole arbitrator of a person to be appointed by the Chairman/member of the authority. Clause 33 (iii) is set out below:- "33(iii). All disputes and differences arising out of or in any way touching or concerning this Agreement (except those the decision whereof is otherwise herein before expressly provided for or to which the public premises [Eviction of Unauthorized Occupants] Act and the rules framed there under which are now enforced or which m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.10,85,15,315/-, against the respondent. According to the instruction of the respondent, the petitioner vacated the airport space by 1st December, 2020. On 1st November, 2021 through the letter of an advocate the petitioner invoked the arbitration clause and referred the disputes mentioned in that letter to arbitration. The petitioner requested the respondent to appoint a sole arbitrator in terms of the arbitration clause within 30 days from the date of receipt of the notice. The claims mentioned in the letter are as follows:- "Claim No. 1 :- On account of compensation and damage suffered for 1st year in period between 27.03.2017 to 26.03.2018. Rs.64,63,785.00 Claim No. 2 :- On account of compensation and damages suffered for 2nd year w.e.f 27.03.2018 to 26.03.2019. Rs.1,28,76,395.00 Claim No. 3 :- On account of compensation/damages suffered for 3rd year w.e.f 27.03.2019 to 24.03.2020. Rs.89,46,874.00 Claim No. 4 :- On account of compensation/ damages suffered for 4th year w.e.f 25.03.2020 to 18.11.2020. Rs.89,46,874.00 Claim No. 5 :- Refund/Release/Payment Bank guarantee and Security Deposit. Rs.1,30,30,006.00 Total:- Rs.10,85,15,345.00 (Ten Crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attempted was invalid. Even before start of the arbitration an amount had to be deposited by the other contracting party with the authority. This necessarily affected the right given by the legislature for resolution of disputes through arbitration. Learned counsel cited ICOMM Tele Ltd. Vs. Punjab State Water Supply & Severage Board & Anr. reported in (2019) 4 SCC 401. In this case, the court ruled that the stipulation regarding pre-deposit had no connection with the genuineness of the claim as it applies to all claims. There was no provision for return of the disputed amount after conclusion of arbitration. Mr. Justice Nariman delivering the judgment of the court opined that this kind of a clause "would certainly amount to a clog on this process" (arbitration). The particular clause being severable from the rest of the contract was struck down by the court. Next, learned counsel also relied on Section 12(5) of the said Act. It is in the following terms:- "12(5). Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties. 16. The arbitrator has previous involvement in the case. Arbitrator's direct or indirect interest in the dispute 17. The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held. 18. A close family member of the arbitrator has a significant financial interest in the outcome of the dispute. 19. The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute. Explanation 1.-The term "close family member" refers to a spouse, sibling, child, parent or life partner. Explanation 2.-The term "affiliate" encompasses all companies in one group of companies including the parent company. Explanation 3.-For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of bias could exist with regard to the impartiality of the Chairman, then that suspicion would continue to exist regarding his nominee also. That has to be taken as the essence of the intention of the legislature in the amendments brought in by (the Arbitration and Amendment) Act, 2015. Learned counsel for the petitioner also cited Uttarakhand Purv Sainik Kalyan Nigam Ltd. vs. Northern Coal Field Ltd. reported in (2020) 2 SCC 455 where the Supreme Court on consideration of the insertion of Section 11 (6A) in the said Act with effect from 23rd October, 2015 to the effect that the Supreme Court or the High Court in considering an application under Section 11 of the said Act could examine the existence of the arbitration agreement. Learned counsel for the respondent cited Central Organisation for Railway Electrification vs. ECI-SPIC-SMO-MCML (JV) A Joint Venture Company reported in (2020) 14 SCC 712. This is a very interesting case. It was concerned with Clause 64 of the general clauses of contract of the Railways which provided for appointment of three arbitrators. Out of the panel of names of the Railways, the other party was required to suggest two names out of which the Railwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that only if there is default in appointment of an arbitrator by a party required to appoint one, could the jurisdiction of the court under Section 11 be invoked. Alleging default this application has been taken out by the petitioner. By insertion of Section 12(5) in the said Act with effect from 23rd October, 2015 great emphasis has been laid on the principle that anyone who in the opinion of a reasonable person is likely to be biased in favour of a party to the arbitration is made ineligible to be appointed as an arbitrator. Now if an ineligible person is appointed as an arbitrator it goes to the root of the matter. An ineligible person's appointment as arbitrator is a nullity. He has no jurisdiction to enter upon the reference. In such a case, he cannot be called upon to adjudicate upon his neutrality or impartiality because his appointment is non-est. It is for the court to decide the question. This has been emphasized by the legislature in successive amendments to subsection 6A of Section 11 of the said Act between 2015 and 2019. The Supreme Court has gone to the extent of saying that when a person is ineligible by virtue of the seventh schedule to act as an arbitrator on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 WBLR 612 ruled that being an employee of a party did not by itself disqualify a person from becoming an arbitrator unless he was biased in favour of a party or there was an apprehension about the arbitrator's independence or impartiality. The Supreme Court in Perkins Eastman Architects DPC and Anr. Vs. HSCC (India) Ltd. reported in (2020) 20 SCC 760 following Walter BAU AG, Legal Successor, of The Original Contractor, Dyckerhoff and Widmann A.G vs. Municipal Corporation of Greater Mumbai and Anr. reported in (2015) 3 SCC 800 and TRF Ltd. vs. Energo Engineering Projects Ltd. reported in (2017) 8 SCC 377 has taken a stricter view of bias to obviate the remote possibility of its presence in the arbitrator. It ruled that if the General Manager, being an employee of an organization is disqualified, then, if the General Manager is the appointing authority to appoint a sole arbitrator, then the likelihood of his being biased, is also transferred to his nominee or appointee. Such nominee of a disqualified person is also similarly disqualified to be arbitrator. In those circumstances, Clause 33 providing for appointment of a sole arbitrator as a General Manager is violative of Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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