HC: Appointment of Secretary of Department of Legal Affairs Govt. of India as an arbitrator in a case where one party is a Government Organisation might lead to impartiality [Read Judgment]

On 23^rd July a bench of Delhi High Court consisting of Justice Suresh Kumar Kait held that where an arbitration clause provides for the reference of the disputes and differences to the Sole Arbitrator of the "Secretary of Department of Legal Affairs Govt of India" or his nominee in a case where one of the parties is a Government Organisation then it is likely to give rise to justifiable doubts or to his impartiality or even his ineligibility.

Facts of the case:

The petitioners and respondent had entered into a Tripartite Agreement dated 12.10.2011 for development of process (New Process Development for Special Elastometer Compound) and for the repayment of the funds availed by the respondent- SSIL, the parties had entered into a Royalty Collection Agreement dated 12/10/2011. According to the petitioners, the project was successfully completed by the respondent and this was confirmed by the letter dated 13-04-2016 of the petitioner-DSIR. Thereafter, respondent became liable to refund the financial assistance in five annual equal instalments.

Contention of the petitioner:

The learned counsel for the petitioner submitted the following:

1. According to the petitioners, the project was successfully completed by the respondent and this was confirmed by the letter dated 13-04-2016 of the petitioner. Thereafter, respondent became liable to refund the financial assistance in five annual equal instalments.
2. It was also submitted the respondent accordingly paid the first instalment of Rs.64,74,000/- inclusive of service tax, for financial year 2016-2017 vide letter dated 06.12.2016. However, thereafter, despite request of petitioner No.1 to respondent for payment of the second instalment, the same was not made and instead the respondent expressed its inability to make payment of the second instalment.
3. It was also submitted by the petitioners that despite repeated requests, respondent failed to make the payments and so, on 11.12.2018 petitioners issued a notice to the respondent to invoke arbitration in terms of Clause No.15 of the Tripartite Agreement.

Contention of the respondent:

Learned counsel for respondents submitted that in view of aforesaid submission of learned counsel for petitioners, there is no objection to appointment of Sole Arbitrator by this Court, however, all issues should be left open to be raised before the learned Arbitrator.

Observation and Judgment of the court:

The Hon’ble bench of the court observed that since petitioners are Government Organisations, in view of limitations and conditions mentioned in Schedule Five and Schedule Seven, of Section 12 of the Arbitration and Conciliation Act, 1996, the appointment of Secretary of Department of Legal Affairs, Govt of India, is likely to give rise to justifiable doubts or to his impartiality or even his ineligibility and, therefore, to avoid any objection, at any later stage, the petitioners are seeking appointment of a Sole Arbitrator through this Court.

In the view of the above the court appointed Justice G.P.Mittal  as the sole Arbitrator to adjudicate the dispute between the parties.

Read Judgment @Latestlaws.com