It is inconceivable in law that person who is statutorily ineligible can nominate a person, it observed.
The Supreme Court on Monday held that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator.
“Once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth,” said Justice Dipak Misra, who authored the judgment for the bench which held that, once the identity of the managing director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated.
The issue, the apex court was addressing was whether, if the managing director is disqualified to act as an arbitrator, is he deprived of his right to nominate an arbitrator who has no relationship with the respondent.
In the instant case, the managing director of the company was required to arbitrate upon the disputes arisen under the terms and conditions of the contract but he became ineligible by operation of amendment to Section 12 of the Arbitration and Conciliation Act. Thereafter, he nominated another person as an arbitrator and the same was questioned before the high court, which negated the challenge.
Allowing the appeal, the three-judge bench, also comprising Justice AM Khanwilkar and Justice Mohan M Shantanagoudar, agreed with the contention put forth that if the nomination of an arbitrator by an ineligible arbitrator is allowed, it would tantamount to carrying on the proceeding of arbitration by himself, and that ineligibility strikes at the root of his power to arbitrate or get it arbitrated upon by a nominee.