The Calcutta High Court dismissed an application for termination of the Arbitrator’s mandate under Section 14 of the Arbitration Act, 1996. The Court observed that the petitioner’s written acceptance of the Arbitrator with full knowledge of the Arbitrator’s previous association with the respondent satisfies the threshold test of the proviso to Section 12(5) of the Act.
Brief Facts:
The ground taken for termination is the first item of the Seventh Schedule to the 1996 Act which lays down certain criteria whereby an Arbitrator would be rendered ineligible to act as the Arbitrator in terms of independence requirement under Section 12(5) of the 1996 Act.
Contentions of the Petitioner:
The Learned Counsel for the Petitioner submitted that the Arbitrator has indeed been rendered ineligible by dint of being an employee of the respondent. She further argued that the petitioner selecting the Arbitrator would not have any bearing on the Arbitrator’s ineligibility since the petitioner was given the option to choose one of the three names given by the respondent to the petitioner. The Counsel relied on the oft-quoted decisions of the Supreme Court with regard to the unilateral appointment of Arbitrators as well as a recent decision of the Delhi High Court on the same issue.
Contentions of the Respondent:
The Learned Counsel for the Respondent submitted that the Arbitrator does not fall foul of the neutrality test since the Seventh Schedule would not apply to the facts of the case.
Observations of the Court:
The Court noted that even if the arbitrator is caught within the bar of the Seventh Schedule by reason of his being an employee of the respondent, the related question would thus be whether the Arbitrator’s appointment would, in any event, come within the contours of Section 12(5) of the 1996 Act. Section 12(5) makes neutrality non-negotiable and declares that notwithstanding any such agreement between the parties, a person who has a relationship with the parties, counsel or subject matter of the dispute will instantaneously become ineligible to be appointed as the Arbitrator. The proviso to Section 12(5) carves out an exception to what precedes it in a case where the parties subsequent to disputes having arisen between them, waives the applicability of Section 12(5) by an express agreement in writing.
The Court observed that the petitioner’s reply to the respondent’s invocation letter and specifically to the three names given shows that the petitioner made a conscious decision to appoint the Arbitrator. The petitioner’s reply also includes the designation of the Arbitrator, which means that the petitioner knew at the relevant point of time that the Arbitrator was very much an employee of the respondent. The petitioner’s written acceptance of the Arbitrator with full knowledge of the Arbitrator’s previous association with the respondent satisfies the threshold test of the proviso to Section 12(5) of the Act. The express agreement in writing waiving the applicability of Section 12(5) including the first item of the Seventh Schedule would be clear from the petitioner’s mail where the petitioner chose the present Arbitrator and agreed to appoint him in terms of the arbitration agreement.
The decision of the Court:
The Calcutta High Court, dismissing the application, held that the petitioner has not been able to establish a case where Section 12(5) and the Seventh Schedule would be applicable and the proviso to Section 12(5) would not.
Case Title: Kamlesh Kumar Singh vs Steel Authority of India Limited
Coram: Hon’ble Justice Moushumi Bhattacharya
Case no.: AP/598/2023
Advocate for the Petitioner: Ms. Amrita Pandey
Advocate for the Respondent: Mr. Arijit Basu
Read Judgment @LatestLaws.com
Picture Source :
