M. Baiasubramaniam v. Union of India, rep. by the Chief Engineer, Madras Zone, Madras
1996-09-27
JAYASIMHA BABU
body1996
DigiLaw.ai
Judgment :- 1. Petitioner has entered into a contract dated 1-11-1993, with the respondent herein, which inter-alia contains a provision for arbitration. The procedure for appointing the arbitrator is also provided therein. The arbitration is to be by a sole arbitrator, who shall be “an Engineer Offieer to be appointed by the authority mentioned in the tender document”. The authority mentioned in the Tender documents is the Chief Engineer, Madras Zone, or in his absence, the Officer officiating as Chief Engineer, Madras Zone. 2. The applicant has invoked Sections 11(8) and 12(3)(a) of the Arbitration and Conciliation Ordinance, 1996, which has since been replaced by Arbitration and Conciliation Act. Similar provisions exist under the Act, which replaced the Ordinance. The Act provides that proceedings instituted under the Ordinance are also to be continued and disposed of of in terms of the Act. 3. The case pleaded-by the applicant is that the Engineer/Officer who is to be appointed as Arbitrator, being the subordinate officer would necessarily follow the instructions/decisions already taken by the respondent, and therefore, such Engineer Officer/Arbitrator would not be impartial and would be disentitled under Sec. 12 of the Ordinance, from functioning as Arbitrator. 4. Learned counsel for the applicant submitted that the scheme of Ordinance as also of the Act is to ensure the settlement of the dispute by Arbitrators, who are independent and impartial. Sec. 12 expressly requires the Arbitrator to disclose in writing any circumstance likely to give rise to justifiable doubts as to his independence or impartiality. Sub-section(2) requires the Arbitrator, throughout the arbitral proceedings, without delay to disclose to the parties in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality, unless they have already been informed of them by him. Sub-Section (3) of Section 12 permits challenge to the Arbitrator, if circumstances exist which give rise to justifiable doubts as to his independence or impartiality. Counsel also referred to Sub-section (8) of Section II, which requires the Chief Justice, or any person or institution designated by him, to have due regard to considerations as are likely to secure the appointment of an independent and impartial arbitrator, while appointing the arbitrator.
Counsel also referred to Sub-section (8) of Section II, which requires the Chief Justice, or any person or institution designated by him, to have due regard to considerations as are likely to secure the appointment of an independent and impartial arbitrator, while appointing the arbitrator. Counsel therefore, submitted that at the heart of the scheme of arbitration is the independent and impartial arbitrator, and therefore if there be any doubt regarding the arbitrators ability to remain independent and be impartial, such an arbitrator would be disentitled to continue, and if yet to be appointed as arbitrator, from accepting the appointment as arbitrator. 5. The point stressed by counsel is undoubtedly one of utmost importance as the independent and impartial arbitrator is at the heart of the scheme of arbitration provided for in the Act. Arbitration is intended to enable the parties to obtain just and fair resolution of the dispute which can be only ensured by a competent, independent and impartial arbitrator who is free of bias for or against either party, and has no conflict of interest. Any party to the dispute entertaining justifiable doubt as to the independence or impartiality of the arbitrator is entitled to challenge the appointment as also continuance of the arbitrator. Sections 11 and 12 are, inter alia, intended to ensure the purity of the arbitral process, more so as under the new Act, the award passed by the Arbitrator is deemed to be a decree of the Court, and can be executed as a decree unless the award is set aside in proceedings instituted under Sec. 34 of the Act. 6. The new Act has limited the area of intervention of the Court in arbitral proceedings. In Section 5 of the Act, it is provided thus: “5. Extent of Judicial intervention: - Not withstanding anything contained in any other law for the time being in force, in matters governed by this part, no judicial authority shall intervene except where so provided in this Part”. The part referred to therein is Part I, comprising of Sections 1 to 43. 7. Section 11 of the Act deals with the appointment of the Arbitrators, and Sub-section (5) thereof permits intervention of the Court, only if the parties fail to agree upon the arbitrator in accordance with the procedure prescribed in the agreement between the parties.
The part referred to therein is Part I, comprising of Sections 1 to 43. 7. Section 11 of the Act deals with the appointment of the Arbitrators, and Sub-section (5) thereof permits intervention of the Court, only if the parties fail to agree upon the arbitrator in accordance with the procedure prescribed in the agreement between the parties. Sub-Section (6) of Section 11 permits intervention by the Court, if the parties fail to act in accordance with the agreed procedure or the parties fail to reach an agreement expected of them under the procedure, or if the person including the institution, fails to perform any function entrusted to him or it under that procedure. It is only when any one of the requirements of Sub-section(5) or Sub-section (6) of Section 11, are fulfilled, the Court would have the jurisdiction to intervene and appoint an Arbitrator. 8. On the admitted facts of the case, none of the circumstances contemplated in Sections 11(5) or Section 11(6) of the Act, have arisen. The applicant has come to Court with the apprehension that the arbitrator/Engineer Officer, for appointing whom, power is vested in the Chief Engineer, is not likely to be independent or impartial. The Act has prescribed the procedure for ventilating such an apprehension if such apprehension is justified - before the arbitral Tribunal itself. Section 13 provides for a challenge procedure. 9. Sub-Section (1) of Section 13 permits parties to agree on a procedure for challenging an Arbitrator. In this case, the parties have not agreed upon any such procedure for challenging the Arbitrator. Sub-Section (2) of Section 13 provides that in the absence of an agreement regarding the procedure to be followed for challenging the Arbitrator, the party who intends to challenge the Arbitrator shall within fifteen days after becoming aware of the constitution of the Arbitral Tribunal or after becoming aware of any circumstances referred to in Sub-section (3) of Section 12 send a written statement of the reasons for the challenge to the Arbitral Tribunal. By Sub-section (3) of Section 13, the arbitral tribunal is empowered to decide on the challenge, unless the arbitrator who is challenged withdraws from his office, or other party agrees to the challenge. Sub-section (4) of Section 13 permits the Arbitral Tribunal to continue the proceedings and make an award, if the challenge is not successful.
By Sub-section (3) of Section 13, the arbitral tribunal is empowered to decide on the challenge, unless the arbitrator who is challenged withdraws from his office, or other party agrees to the challenge. Sub-section (4) of Section 13 permits the Arbitral Tribunal to continue the proceedings and make an award, if the challenge is not successful. The remedy to the unsuccessful challenger is provided by Section 13(5) which enables such a party to make an application for setting aside Arbitral Award in accordance with Section 34. 10. Section 34, which enumerates the grounds on which the Arbitral Award may be set aside omits to mention the lack of independence or impartiality of the arbitrator as a ground of setting aside the award. Even Section 13(5) requires the unsuccessful challenger to seek setting aside the arbitral award, only ‘in accordance with Section 34’. If such a challenge is upheld, under Sec. 13(6) the Court may decide not to award any fees to the Arbitrator. S. 13(5) makes it clear that the decision of the arbitrator on the doubts raised by ‘a’ party regarding his independence and impartiality, is not conclusive. A combined reading of Sections 11(8)(b), 12, 13(5) and 34(2)(b)(ii) would indicate that an award, if made by an arbitrator, who is shown to have been partial or lacked independence by reason of which the ultimate award is affected, is liable to be set aside under Section 34. The Public Policy of India referred to in Sec. 34(2)(b) also is wide enough to include the requirement that the Arbitrator who has functioned as such should have functioned as an independent and impartial arbitrator. Failure on his part to do so, can be regarded as resulting in an award which is in conflict with the Public Policy of India, and therefore, liable to be set aside. 11. On the facts of this case, it is clear, that the applicant has failed to utilise the right conferred on the applicant by Section 13(2) of the Act, as it is submitted that after the institution of these proceedings an Arbitrator has been appointed, and the applicant has not so far challenged the Arbitrator in accordance with Section 13(2).
11. On the facts of this case, it is clear, that the applicant has failed to utilise the right conferred on the applicant by Section 13(2) of the Act, as it is submitted that after the institution of these proceedings an Arbitrator has been appointed, and the applicant has not so far challenged the Arbitrator in accordance with Section 13(2). The applicant had come to Court, even before the Arbitrator was appointed, and at a time, when the applicant could not have been aware as to the identity of the person, who will be appointed as an Arbitrator, and the existence or otherwise of justifiable doubts, as to the independence or impartiality of the person, who was to be appointed as an Arbitrator. 12. Counsel submitted that as an Engineer Officer is subordinate to the Chief Engineer, he is incapable of being independent or impartial. It is not necessary to decide such a contention at this stage, as the applicant has the right to apply under Section 34, for setting aside the award, and it is open to him at that stage to urge all these contentions in support of the case, if he should have an occasion to seek the setting aside of the award. 13. The present application is, therefore, misconceived, and is dismissed.