Any Challenge To Arbitrator Appointed Should Be Raised Before The Arbitrator Himself In First Instance: SC [Read Judgment]

“In the present case, arbitration proceedings commenced way back in 2013, much prior to coming into force of the amended Act and therefore, provisions of the Amended Act cannot be invoked.”

The Supreme Court has reiterated that any challenge to the arbitrator appointed should be raised before the arbitrator himself under Section 13 of the Arbitration and Conciliation Act 1996, in the first instance and thereafter under Section 34 of the Act.

The bench comprising Justice R. Banumathi and Justice Indira Banerjee was considering high court order that held that the appointment of arbitrator could not be challenged by way of an application under Section 11(6) of the Act.

 SP Singla Constructions Pvt. Ltd. raised a dispute and requested for the appointment of an arbitrator. The arbitrator (Superintendent Engineer) entered upon a reference on 11.11.2013. After several adjournments at the instance of the contractor, arbitration proceedings were terminated by the arbitrator under Section 25(a) of the Act.

Thereafter, the contractor filed a petition before the high court under Section 11(6) of the 1996 Act praying for the appointment of an independent arbitrator. The high court dismissed the plea holding that any party is dissatisfied or aggrieved by the appointment of an arbitrator in terms of the agreement by other party/parties, his remedy would be by way of a petition under Section 13 of the Act, and, thereafter while challenging the award under Section 34 of the Act.

This order was assailed before the apex court raising the issue whether in the light of the agreement between the parties in Clause (65) of the general conditions of the contract, the contractor can challenge the appointment of the Superintendent Engineer, Arbitration Circle, as an arbitrator to resolve the dispute between the parties.

It was contended that the wordings in Clause (65) “that the agreement is subject to any statutory modification or re-enactment thereof and the rules made thereunder and for the time being shall apply to the arbitration proceeding under this clause” would certainly attract Section 12(5) of the Act as amended with effect from 23.10.2015, which bars appointment of a departmental arbitrator.

Senior Advocate Maninder Singh also relied on Delhi High Court judgment in Ratna Infrastructure Projects Pvt. Ltd. v. Meja Urja Nigam Private Limited wherein interpreting the similar words in a contract, the Delhi High Court had held that those words satisfy the requirement of Section 26 (amended Act of 2015) of there being an agreement between the parties that the Act as amended with effect from 23.10.2015 will apply.

2015 amendment can’t have retrospective operation

But the bench rejected this contention and said: “We are not inclined to go into the merits of this contention of the appellant nor examine the correctness or otherwise of the above view taken by the Delhi High Court in Ratna Infrastructure Projects case; suffice it to note that as per Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 the provisions of the Amended Act, 2015 shall not apply to the arbitral proceedings commenced in accordance with the provisions of Section 21 of the Principal Act before the commencement of the Amendment Act unless the parties otherwise agree. In the facts and circumstances of the present case, the proviso in clause (65) of the general conditions of the contract cannot be taken to be the agreement between the parties so as to apply the provisions of the amended Act. As per Section 26 of the Act, the provisions of the Amendment Act, 2015 shall apply in relation to arbitral proceedings commenced on or after the date of commencement of the Amendment Act, 2015 (w.e.f. 23.10.2015). In the present case, arbitration proceedings commenced way back in 2013, much prior to coming into force of the amended Act and therefore, provisions of the Amended Act cannot be invoked.”

Agreeing with the high court view that petition under Section 11 would not be maintainable, the bench observed: “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.”

However, the bench noticed that the arbitrator could have issued a notice warning the contractor that no adjournment would be granted under any circumstances. The bench then set aside the proceedings of the arbitrator terminating the arbitral proceedings and directed the Chief Engineer, Himachal Pradesh Public Works Department, to appoint an arbitrator in terms of Clause (65) of the agreement.

Read the Judgment Here