OCD 17
ORDER SHEET
AP-COM/670/2025
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
M/S UTKAL WEIGH BRIDGE AND CALIBRATION CENTRE
VS
CONTAINER CORPORATION OF INDIA LIMITED
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 17th September, 2025.
Appearance:
Mr. Farhan Ghaffar, Adv.
. . .for the petitioner.
Mr. Debashis Sarkar, Adv.
. . .for the respondent.
The Court:
1. This is an application for appointment of a learned Arbitrator, for
settlement of the disputes which arose between the parties, out of the
tender dated June 4, 2016. The contract between the parties was for
installation and operation of a pitless electronic weigh bridge (60 MT) for
weighment at Inland Container Depat. Balasore, Odisha on Built
Operate Transfer Scheme (BOT), for a period of 10 years. During the
subsistence of the contract, disputes arose. The petitioner alleged that
the respondent did not discharge its obligations under the contract. The
respondent refuted such allegation.
2
2. A writ petition was filed by the petitioner, which was dismissed for
default. Thereafter, the writ petition was restored. The same was taken
up for hearing. The same was disposed of upon recording that, as the
contract between the parties contained an arbitration clause, the
dispute should be referred to arbitration. Such order was passed on
April 28, 2025. Accordingly, the petitioner issued a notice invoking
arbitration on June 19, 2025.
3. At the time of invocation, the petitioner claimed that it had outstanding
dues of Rs. 2 crores, which was payable by the respondent. The
respondent did not agree to the request for arbitration and denied the
claim.
4. It is further contended that the mechanism provided under Clause 21.1
of the said contract required the petitioner to approach the tender
accepting authority of (CONCOR) and the petitioner could not raise any
objection if the arbitrator so appointed was an empoyee of CONCOR.
5. Admittedly, the tender was floated some time in 2016 and the contract
was entered into between the parties in 2016. By then, the 2015
amendment of the Arbitration and Conciliation Act, 1996 had already
been given effect to. Section 12(5) was incorporated by the amendment
of 2015. The said section operates as a bar. Appointment of an
Arbitrator from the panel of Arbitrators maintained by an interested
party, appointment of an employee of an interested party and unilateral
appointment of an arbitrator, are barred under the said section.
6. In this regard Reference is made to the decisions of Perkins Eastman
Architects DPC and Another vs. HSCC (India) Ltd. reported in 2019
3
SCC OnLine SC 1517, Ellora Paper Mills Ltd. v. State of M.P.,
reported in (2022) 3 SCC 1, TRF Ltd. v. Energo Engg. Projects Ltd.,
reported in (2017) 8 SCC 377 and Central Organisation for Railway
Electrification vs. ECI SPIC SMO MCML (JV) A joint Venture
Company reported in 2024 SCC OnLine SC 3219. The person, who
cannot act as an arbitrator, also cannot appoint an arbitration. The
Hon'ble Apex Court in Central Organization for Railway
Electrification (supra), held thus:-
"73. The 2015 amendment has introduced concrete standards of
impartiality and independence of arbitrators. One of the facets of
impartiality is procedural impartiality. Procedural impartiality
implies that the rules constitutive of the decision-making process
must favour neither party to the dispute or favour or inhibit both
parties equally.137 Further, a procedurally impartial adjudication
entails equal participation of parties in all aspects of adjudication for
the process to approach legitimacy.138 Participation in the
adjudicatory process is meaningless for a party against whom the
arbitrator is already prejudiced.139 Equal participation of parties in
the process of appointment of arbitrators ensures that both sides
have an equal say in the establishment of a genuinely independent
and impartial arbitral process.
74. Under Sections 12(1) and 12(5), the Arbitration Act recognises
certain mandatory standards of independent and impartial tribunals.
The parties have to challenge the independence or impartiality of the
arbitrator or arbitrators in terms of Section 12(3) before the same
arbitral tribunal under Section 13.140 If the tribunal rejects the
challenge, it has to continue with the arbitral proceedings and make
an award. Such an award can always be challenged under Section
34. However, considerable time and expenses are incurred by the
parties by the time the award is set aside by the courts. Equal
participation of parties at the stage of the appointment of arbitrators
can thus obviate later challenges to arbitrators.
75. Independence and impartiality of arbitral proceedings and
equality of parties are concomitant principles. The independence and
impartiality of arbitral proceedings can be effectively enforced only if
the parties can participate equally at all stages of an arbitral process.
Therefore, the principle of equal treatment of parties applies at all
stages of arbitral proceedings, including the stage of the appointment
of arbitrators.
***
124. The doctrine of bias as evolved in English and Indian law
emphasizes independence and impartiality in the process of
adjudication to inspire the confidence of the public in the
adjudicatory processes. Although Section 12 deals with the quality of
independence and impartiality inherent in the arbitrators, the
provision's emphasis is to ensure an independent and impartial
arbitral process."
7. In Perkins Eastman (supra), the Hon'ble Apex Court held thus :-
..."20. We thus have two categories of cases. The first, similar to the
one dealt with in TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd.,
(2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] where the Managing
Director himself is named as an arbitrator with an additional power
to appoint any other person as an arbitrator. In the second category,
the Managing Director is not to act as an arbitrator himself but is
empowered or authorised to appoint any other person of his choice
or discretion as an arbitrator. If, in the first category of cases, the
Managing Director was found incompetent, it was because of the
interest that he would be said to be having in the outcome or result
of the dispute. The element of invalidity would thus be directly
relatable to and arise from the interest that he would be having in
such outcome or decision. If that be the test, similar invalidity would
always arise and spring even in the second category of cases. If the
interest that he has in the outcome of the dispute, is taken to be the
basis for the possibility of bias, it will always be present irrespective
of whether the matter stands under the first or second category of
cases. We are conscious that if such deduction is drawn from the
decision of this Court in TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects
Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] , all cases having
clauses similar to that with which we are presently concerned, a
party to the agreement would be disentitled to make any
appointment of an arbitrator on its own and it would always be
available to argue that a party or an official or an authority having
interest in the dispute would be disentitled to make appointment of
an arbitrator.
21. But, in our view that has to be the logical deduction from TRF
Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 :
(2017) 4 SCC (Civ) 72] Para 50 of the decision shows that this Court
was concerned with the issue, "whether the Managing Director, after
becoming ineligible by operation of law, is he still eligible to nominate
an arbitrator" The ineligibility referred to therein, was as a result of
operation of law, in that a person having an interest in the dispute or
in the outcome or decision thereof, must not only be ineligible to act
as an arbitrator but must also not be eligible to appoint anyone else
as an arbitrator and that such person cannot and should not have
any role in charting out any course to the dispute resolution by
having the power to appoint an arbitrator. The next sentences in the
paragraph, further show that cases where both the parties could
nominate respective arbitrators of their choice were found to be
completely a different situation. The reason is clear that whatever
advantage a party may derive by nominating an arbitrator of its
choice would get counter-balanced by equal power with the other
party.But, in a case where only one party has a right to appoint a
sole arbitrator, its choice will always have an element of exclusivity
in determining or charting the course for dispute resolution.
Naturally, the person who has an interest in the outcome or decision
of the dispute must not have the power to appoint a sole arbitrator.
That has to be taken as the essence of the amendments brought in
by the Arbitration and Conciliation (Amendment) Act, 2015 (3 of
2016) and recognised by the decision of this Court in TRF Ltd. [TRF
Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC
(Civ) 72]
...
24. In Voestalpine [VoestalpineSchienen GmbH v. DMRC, (2017) 4
SCC 665 : (2017) 2 SCC (Civ) 607] , this Court dealt with
independence and impartiality of the arbitrator as under : (SCC pp.
687-88 & 690-91, paras 20 to 22 & 30)
"20. Independence and impartiality of the arbitrator are the
hallmarks of any arbitration proceedings. Rule against bias is one of
the fundamental principles of natural justice which applied to all
judicial and quasi-judicial proceedings. It is for this reason that
notwithstanding the fact that relationship between the parties to the
arbitration and the arbitrators themselves are contractual in nature
and the source of an arbitrator's appointment is deduced from the
agreement entered into between the parties, notwithstanding the
same non-independence and non-impartiality of such arbitrator
(though contractually agreed upon) would render him ineligible to
conduct the arbitration. The genesis behind this rational is that even
when an arbitrator is appointed in terms of contract and by the
parties to the contract, he is independent of the parties. Functions
and duties require him to rise above the partisan interest of the
parties and not to act in, or so as to further, the particular interest of
either parties. After all, the arbitrator has adjudicatory role to
perform and, therefore, he must be independent of parties as well as
impartial. The United Kingdom Supreme Court has beautifully
highlighted this aspect in Hashwani v. Jivraj [Hashwani v. Jivraj,
(2011) 1 WLR 1872 : 2011 UKSC 40] in the following words : (WLR p.
1889, para 45)
'45. ... the dominant purpose of appointing an arbitrator or
arbitrators is the impartial resolution of the dispute between the
parties in accordance with the terms of the agreement and, although
the contract between the parties and the arbitrators would be a
contract for the provision of personal services, they were not
personal services under the direction of the parties.'
21. Similarly, Cour de Cassation, France, in a judgment delivered in
1972 in Consorts Ury [Fouchard, Gaillard, Goldman on International
Commercial Arbitration, 562 [Emmanuel Gaillard & John Savage
(Eds.) 1999] {quoting Cour de cassation [Cass.] [Supreme Court for
judicial matters] Consorts Ury v. S.A. des Galeries Lafayette, Cass.2e
civ., 13-4-1972, JCP, Pt. II, No. 17189 (1972) (France)}.] , underlined
that:
'an independent mind is indispensable in the exercise of judicial
power, whatever the source of that power may be, and it is one of the
essential qualities of an arbitrator'.
22. Independence and impartiality are two different concepts. An
arbitrator may be independent and yet, lack impartiality, or vice
versa. Impartiality, as is well accepted, is a more subjective concept
as compared to independence. Independence, which is more an
objective concept, may, thus, be more straightforwardly ascertained
by the parties at the outset of the arbitration proceedings in light of
the circumstances disclosed by the arbitrator, while partiality will
more likely surface during the arbitration proceedings.
***
30. Time has come to send positive signals to the international
business community, in order to create healthy arbitration
environment and conducive arbitration culture in this country.
Further, as highlighted by the Law Commission also in its report,
duty becomes more onerous in government contracts, where one of
the parties to the dispute is the Government or public sector
undertaking itself and the authority to appoint the arbitrator rests
with it. In the instant case also, though choice is given by DMRC to
the opposite party but it is limited to choose an arbitrator from the
panel prepared by DMRC. It, therefore, becomes imperative to have a
much broadbased panel, so that there is no misapprehension that
principle of impartiality and independence would be discarded at any
stage of the proceedings, specially at the stage of constitution of the
Arbitral Tribunal. We, therefore, direct that DMRC shall prepare a
broadbased panel on the aforesaid lines, within a period of two
months from today..."
8. In the TRF Ltd (supra), the Hon'ble Apex Court held as follows:-
"53. The aforesaid authorities have been commended to us to
establish the proposition 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. According to the learned
counsel for the appellant, ineligibility strikes at the root of his power
to arbitrate or get it arbitrated upon by a nominee.
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."
9. In the decision of Ellora Paper Mills (supra), the Hon'ble Apex Court
held as follows:-
"16. As observed hereinabove, the Arbitral Tribunal--Stationery
Purchase Committee consisted of officers of the respondent State.
Therefore, as per Amendment Act, 2015 -- sub-section (5) of Section
12 read with Seventh Schedule, all of them have become ineligible to
become arbitrators and to continue as arbitrators. Section 12 has
been amended by the Amendment Act, 2015 based on the
recommendations of the Law Commission, which specifically dealt
with the issue of "neutrality of arbitrators". To achieve the main
purpose for amending the provision, namely, to provide for
"neutrality of arbitrators", 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 is
found to be foul with the amended provision, the appointment of the
arbitrator would be beyond the pale of the arbitration agreement,
empowering the Court to appoint such an arbitrator as may be
permissible. That would be the effect of the non obstante clause
contained in sub-section (5) of Section 12 and the other party cannot
insist upon the appointment of the arbitrator in terms of the
arbitration agreement.
17. It cannot be disputed that in the present case, the Stationery
Purchase Committee--Arbitral Tribunal comprising of officers of the
respondent State are all ineligible to become and/or to continue as
arbitrators in view of the mandate of sub-section (5) of Section 12
read with Seventh Schedule. Therefore, by operation of law and by
amending Section 12 and bringing on statute sub-section (5) of
Section 12 read with Seventh Schedule, the earlier Arbitral
Tribunal--Stationery Purchase Committee comprising of the
Additional Secretary, Department of Revenue as President,
and: (i) Deputy Secretary, Department of Revenue, (ii) Deputy
Secretary, General Administration Department, (iii) Deputy
Secretary, Department of Finance, (iv) Deputy Secretary/Under-
Secretary, General Administration Department, and (v) Senior
Deputy Controller of Head Office, Printing as Members, has lost its
mandate and such an Arbitral Tribunal cannot be permitted to
continue and therefore a fresh arbitrator has to be appointed as per
the Arbitration Act, 1996."
10. It is also a settled position that, mere incorporation of a clause in the
agreement that an employee of the respondent could be appointed as an
Arbitrator, would not amount to automatic waiver of the applicability of
Section 12(5) of the said Act. For a party to waive the said provision,
there has to be an agreement in writing.
11. In the instant case, the respondent has not been able to disclose that
the petitioner had agreed to waive the applicability of Section 12(5), by a
written communication.
12. Under such circumstances, the mechanism agreed to between the
parties to the contract has failed in view of the legal bar. The petitioner
has rightly approached this Court for appointment of an Arbitrator in
accordance with law.
13. The application is disposed of by appointing Justice Siddhartha Roy
Chowdhury, [Mob. No. 9434196059] former Judge of this Court, as the
Arbitrator, to arbitrate upon the disputes between the parties. This
appointment is subject to compliance of Section 12 of the Arbitration
and Conciliation Act, 1996. The learned Arbitrator shall fix his own
remuneration as per the Schedule of the Act.
14. The application is, accordingly, disposed of.
(SHAMPA SARKAR, J.)
SP/
