Research › Search › Judgment

Meghalaya High Court · body

2018 DIGILAW 50 (MEG)

Jamil Ahmed Bechu v. Bharat Sanchar Nigam Ltd.

2018-08-14

MOHAMMAD YAQOOB MIR

body2018
JUDGMENT : Mohammad Yaqoob Mir, J. 1. The instant petition seeks appointment of a sole arbitrator under sub-section (6A) of section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act of 1996). 2. The petitioner and respondent-BSNL had executed a contract agreement on 10.07.2009 effective for a period of three years with the option of further extension of one year and maximum two years on the same rates, for installation, commissioning and maintenance of DSPTs in NE-1 Circle. The petitioner claim to have deposited Rs. 6,12,206/- on 29.05.2009, claim to have executed the work successfully and completed in the month of June 2013 therefore, claimed the final bill amounting to Rs. 8,09,554/- and Rs. 9,48,599/- but the respondent-BSNL disputed the amount. 3. BSNL vide letter dated 17.10.2014 conveyed that the final payment due to the petitioner would be Rs. 15,20,463/-. Despite representation, the BSNL has not agreed to the amount claimed by the petitioner which compelled the petitioner to invoke arbitration clause i.e. Clause 36 of the contract agreement, requesting the BSNL Chief General Manager to appoint the arbitrator to settle the dispute. Despite reminder and notice, no action was taken. Hence, the instant petition under Section 11 (6A) of the Act of 1996. 4. In the counter affidavit filed by the respondents, it is stated that as per the request of M/s Jamil Ahmed, CGMT NE-1 Circle vide letter dated 29.06.2018 appointed Shri Suhas D Mankar, General Manager (CM), Shillong as an arbitrator to settle the dispute between M/s Jamil Ahmed and BSNL. But, however, the matter being subjudice the arbitration proceedings have been kept in abeyance in terms of the letter dated 20.07.2018. 5. Learned CGC submits that the petition in view of the clear stand of the respondents having appointed arbitrator is rendered infructuous. 6. The contention of the learned counsel for the petitioner is that even though after filing of this petition under Section 11 of the Act of 1996 arbitrator has been appointed but same in not in consonance with Section 12(5) of the Act of 1996 as amended because the appointed arbitrator Shri Suhas D Mankar, General Manager (CM), Shillong falls within the categories specified in the Seventh Schedule to the Act of 1996 therefore, was ineligible to be appointed as an arbitrator. Supporting this contention has placed reliance on the judgments reported in (2017) 4 SCC 665 and (2017) 8 SCC 377 . 7. Considered the rival submissions, sub-section (5) of Section 12 of the Act of 1996 is reproduced hereunder: "[(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 shall be ineligible to be appointed as an arbitrator. Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.]" 8. The Seventh Schedule as referred to in sub-section (5) refers to 19 prohibited categories of the arbitrator's relationship with the parties or counsel. Categories 1, 5 and 12 being relevant in this case are as under:- "1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party. 5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration. 12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties." 9. No doubt, at the request of the petitioner-M/s Jamil Ahmed, the BSNL has appointed Shri Suhas D Mankar, General Manager (CM), Shillong as an arbitrator but he is ineligible because he falls within the prohibited categories of 1, 5 and 12 of the Seventh Schedule as quoted above. Once he falls within the categories specified in the Seventh Schedule then, in terms of sub-section (5) as quoted above, he is ineligible so could not be appointed as an arbitrator. 10. Though proviso to sub-section (5) of Section 12 of the Act of 1996 leaves scope for such appointment only when subsequent to disputes having arisen parties wave the applicability of sub-section (5) with express agreement in writing. From the pleadings of the parties, it is clear that after the dispute arose, the petitioner had requested for appointment of arbitrator but, there is no any express agreement in writing between the parties waiving the applicability of sub-section (5). From the pleadings of the parties, it is clear that after the dispute arose, the petitioner had requested for appointment of arbitrator but, there is no any express agreement in writing between the parties waiving the applicability of sub-section (5). When it is so, Shri Suhas D Mankar, General Manager (CM), Shillong, being ineligible cannot proceed with the arbitration proceedings therefore, arbitrator has to be appointed. 11. Sub-section (5) of Section 12 of the Act of 1996 by amendment has been included in Section 12 with an object to provide for neutrality of arbitrators. Paras 18 and 25 of the judgment rendered in the case of "Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Limited": (2017) 4 SCC 665 are advantageous to be quoted: "18. Keeping in mind the afore quoted recommendation of the Law Commission, with which spirit, Section 12 has been amended by the Amendment Act, 2015, it is manifest that the main purpose for amending the provision was to provide for neutrality of arbitrators. In order to achieve this, sub-section (5) of Section 12 lays down that 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, he shall be ineligible to be appointed as an arbitrator. In such an eventuality i.e. when the arbitration clause finds foul with the amended provisions extracted above, the appointment of an arbitrator would be beyond pale of the arbitration agreement, empowering the court to appoint such arbitrators as may be permissible. That would be the effect of non obstante clause contained in sub-section (5) of Section 12 and the other party cannot insist on appointment of the arbitrator in terms of the arbitration agreement. 25. Section 12 has been amended with the objective to induce neutrality of arbitrators viz. their independence and impartiality. The amended provision is enacted to identify the "circumstances" which give rise to "justifiable doubts" about the independence or impartiality of the arbitrator. If any of those circumstances as mentioned therein exists, it will give rise to justifiable apprehension of bias. The Fifth Schedule to the Act enumerates the grounds which may give rise to justifiable doubts of this nature. The amended provision is enacted to identify the "circumstances" which give rise to "justifiable doubts" about the independence or impartiality of the arbitrator. If any of those circumstances as mentioned therein exists, it will give rise to justifiable apprehension of bias. The Fifth Schedule to the Act enumerates the grounds which may give rise to justifiable doubts of this nature. Likewise, Seventh Schedule mentions those circumstances which would attract the provisions of sub-section (5) of Section 12 and nullify any prior agreement to the contrary. In the context of this case, it is relevant to mention that only if an arbitrator is an employee, a consultant, an advisor or has any past or present business relationship with a party, he is rendered ineligible to act as an arbitrator. Likewise, that person is treated as incompetent to perform the role of arbitrator, who is a manager, director or part of the management or has a single controlling influence in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration. Likewise, persons who regularly advised the appointing party or affiliate of the appointing party are incapacitated. A comprehensive list is enumerated in Schedule 5 and Schedule 7 and admittedly the persons empanelled by the respondent are not covered by any of the items in the said list." 12. Para 36 of the contract agreement for installation, commissioning and maintenance of DSPTs, in NE-1 Circle executed by the parties pertains to "Dispute and arbitration proceedings i.e. all disputes arising between the contractor and BSNL out of the contract shall be referred to the sole arbitrator of CGMT, NE-1 Circle, Shillong." 13. As per para 41 of the counter affidavit, CGMT, NE-1 Circle, Shillong has appointed Shri Suhas D Mankar, General Manager (CM), Shillong as an arbitrator. When CGMT, NE-1 Circle, Shillong pursuant to sub-section (5) of Section 12 of the Act of 1996 has become ineligible therefore, he could not nominate Shri Suhas D Mankar, General Manager (CM), Shillong as an arbitrator. The same position has been settled by the Hon'ble Apex Court in the case of "TRF Limited v. Energo Engineering Projects Limited: (2017) 8 SCC 377 . Para 54 is advantageous to be quoted: "54. The same position has been settled by the Hon'ble Apex Court in the case of "TRF Limited v. Energo Engineering Projects Limited: (2017) 8 SCC 377 . Para 54 is advantageous to be quoted: "54. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so." 14. For the stated reasons and position of law, the appointment of Shri Suhas D Mankar, General Manager (CM), Shillong as an arbitrator being in contravention to the law i.e. offending Section 12 (5) of the Act of 1996 therefore has to be ignored. That being so, the arbitrator has to be appointed by having recourse to Section 11 of the Act of 1996. 15. Learned counsel for the petitioner suggested that Hon'ble Mr. Justice B.K. Sharma (retired) Judge of Gauhati High Court if not opposed by the other side may be appointed as a sole arbitrator for settling the disputes. Learned CGC submits that as per instructions of his client, he has no objection. 16. Subject to the consent of Hon'ble Mr. Justice B.K. Sharma (retired) Judge, he is appointed as an arbitrator for settling the disputes between the parties. 17. Copy of this order be sent to the appointed arbitrator who shall enter upon the reference. 18. Learned CGC submits that as per instructions of his client, he has no objection. 16. Subject to the consent of Hon'ble Mr. Justice B.K. Sharma (retired) Judge, he is appointed as an arbitrator for settling the disputes between the parties. 17. Copy of this order be sent to the appointed arbitrator who shall enter upon the reference. 18. The fees of arbitrator shall be fixed in accordance with the Fourth Schedule of the Act of 1996 payable by the parties in equal share. 19. Petition is accordingly disposed of as above.