Delhi High Court
Reliace Broadcast Network Ltd. vs Delhi Metro Rail Corporation Ltd. on 31 May, 2013
Author: Manmohan Singh
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment Reserved on: 29th April, 2013
% Judgment Pronounced on: 31st May, 2013
+ ARB.P. 395/2012
RELIANCE BROADCAST NETWORK LTD. ..... Petitioner
Through: Mr. Rajiv Nayar, Sr.Adv. with
Mr. Ajay Bhargava, Mr. Kunal
Tandon & Mr. V.Gupta, Advocates
versus
DELHI METRO RAIL CORPORATION LTD. ..... Respondent
Through: Mr. Tarun Johri, Advocate
+ ARB.P. 359/2012
RELIANCE BROADCAST NETWORK LTD. ..... Petitioner
Through: Mr. Rajiv Nayar, Sr.Adv. with
Mr. Ajay Bhargava, Mr. Kunal
Tandon & Mr. V.Gupta, Advocates
versus
DELHI METRO RAIL CORPORATION LTD. ..... Respondent
Through: Mr. Tarun Johri, Advocate
+ ARB.P. 393/2012
RELIANCE BROADCAST NETWORK LTD. ..... Petitioner
Through: Mr. Rajiv Nayar, Sr.Adv. with
Mr. Ajay Bhargava, Mr. Kunal
Tandon & Mr. V.Gupta, Advocates
versus
DELHI METRO RAIL CORPORATION LTD. ..... Respondent
Through: Mr. Tarun Johri, Advocate
Arb.P.No.395/2012 & Ors. Page 1 of 15
+ ARB.P. 394/2012
RELIANCE BROADCAST NETWORK LTD. ..... Petitioner
Through: Mr. Rajiv Nayar, Sr.Adv. with
Mr. Ajay Bhargava, Mr. Kunal
Tandon & Mr. V.Gupta, Advocates
versus
DELHI METRO RAIL CORPORATION LTD. ..... Respondent
Through: Mr. Tarun Johri, Advocate
+ ARB.P. 440/2012
RELIANCE BROADCAST NETWORK LTD. ..... Petitioner
Through: Mr. Rajiv Nayar, Sr.Adv. with
Mr. Ajay Bhargava, Mr. Kunal
Tandon & Mr. V.Gupta, Advocates
versus
DELHI METRO RAIL CORPORATION LTD. ..... Respondent
Through: Mr. Tarun Johri, Advocate
+ ARB.P. 441/2012
RELIANCE BROADCAST NETWORK LTD. ..... Petitioner
Through: Mr. Rajiv Nayar, Sr.Adv. with
Mr. Ajay Bhargava, Mr. Kunal
Tandon & Mr. V.Gupta, Advocates
versus
DELHI METRO RAIL CORPORATION LTD. ..... Respondent
Through: Mr. Tarun Johri, Advocate
CORAM:
HON'BLE MR. JUSTICE MANMOHAN SINGH
Arb.P.No.395/2012 & Ors. Page 2 of 15
MANMOHAN SINGH, J.
1. By this common order, I propose to decide six petitions filed by the
petitioner under Section 11(5) read with Section 11(6) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as „the Act‟) seeking prayer
of appointment of an independent arbitrator in connection with the licence
agreement between the parties.
2. It is not in dispute that three different arbitrators have already been
appointed by the respondent for adjudication in regard to the similar dispute.
3. The requisite details are mentioned below as under for the purpose of
convenience:
Petition No. License Notice of Date of Date of filing
Agreement invocation appointment
of arbitrator
Arb.P.No.359 04.02.2011, 03.09.2012 13.09.2012 20.09.2012
of 2012 clause 29 Mr.Satish
Kumar Vij,
Retd. Member
Engineering,
Ministry of
Railways
Arb.P.No.393 29.07.2010, 12.09.2012 28.09.2012 16.10.2012
of 2012 clause 25 Mr.Budh
Prakash, Retd.
General
Manager,
IRSE
Arb.P.No.394 25.10.2010 & 13.09.2012 28.09.2012 16.10.2012
of 2012 20.10.2011, Mr.Budh
clause 29 Prakash, Retd.
General
Manager,
IRSE
Arb.P.No.395 25.10.2007, 12.09.2012 28.09.2012 16.10.2012
of 2012 clause 28 Mr.Budh
Prakash, Retd.
General
Manager,
IRSE
Arb.P.No.440 06.04.2011, 12.10.2012 01.11.2012 19.11.2012
of 2012 clause 28 Mr.Budh
Prakash, Retd.
General
Manager,
IRSE
Arb.P.No.441 10.10.2010, 09.10.2012 02.11.2012 19.11.2012
of 2012 clause 2.7 Mr.Anirudh
(Under this Kumar Jain,
clause, the former
GM/O was Additional
the appointing Member
authority) (Electrical)
Railway
Board
4. As the facts in all the petitions are same except the dates of licence
agreement, notice of invocation, dates of appointment and filing of the
petitions. Relevant facts mentioned below are taken from
Arb.P.No.395/2012 and the order passed would apply in other petitions.
5. The above mentioned petition, being Arb.P.No.395/2012, has been
filed for appointment of independent sole arbitrator in connection with the
Licence Agreement dated 25th October, 2007 which was entered between the
parties for advertisements rights inside 10 underground stations in Line 2 of
Phase 1, Delhi Metro (Vishvavidyalaya to Central Secretariat Metro
Stations).
6. Disputes and differences have arisen between the parties under the
said Licence Agreement.
7. By letter dated 12th September 2012, the petitioner invoked
arbitration.
8. In the letter invoking arbitration, it was pointed out that Clause 28 of
the General Conditions being part of the Tender was void as it is vague and
uncertain, thus there was no appointing authority under Clause 28.1. The
parties therefore had to agree to an arbitrator within 30 days failing which
necessarily the arbitrator would have to be appointed under Section 11 of the
Act.
9. The petitioner alleges that in view of the nature of the disputes being
primarily one of construction of the contract and as to whether clauses apply
or did not apply to the particular facts of the case, sought for the
appointment of a retired Judge of this Court or the Supreme Court of India.
Certain suggested names have been provided by the petitioner in this regard.
It is also submitted that Clause 28.1 was unconscionable being violative of
Articles 14 and 21 of the Constitution of India.
10. It is argued by the petitioner‟s counsel that respondent has wrongly
issued a letter dated 28th September, 2012 not any Director being appointing
Sh.Budh Prakash, retired General Manager, IRSE, North Railway,
Allahabad, but stating that as per the approval of the competent authority, he
had been appointed as the sole arbitrator. In fact, the arbitrator ought to
have been nominated by the Director of the respondent. Therefore, his
appointment is not in accordance with Clause 28.1 of the Licence
Agreement.
11. Despite of appointment made by the respondent of Sh.Budh Prakash,
retired General Manager, the petitioner after 30 days has invoked the
arbitration asking for an independent arbitrator to be agreed by the parties in
its notice as the petitioner was unable to agree to the Arbitrator appointed by
the respondent. Therefore, the present petition has been filed by the
petitioner.
12. The arbitration clause contained in the Licence Agreement read with
the General Terms and Conditions i.e. Clauses 28.1 and 28.2, reads as under:
"28.1 Arbitration Procedures
If the efforts, to resolve all or any of the disputes through
conciliation fail, then such disputes shall be referred within 30
days to a Sole Arbitrator who would be nominated by Director,
Delhi Metro Rail Corporation. The venue of such arbitration
shall be at Delhi/New Delhi. The award of the Sole Arbitrator
shall be binding on all parties. The tenderer have no objection
if the sole arbitration (sic) so appointed is an employee of
DMRC.
28.2 Rules governing Arbitration Proceedings
The Arbitration Proceedings shall be governed by Indian
Arbitration and Conciliation Act, 1996, as amended from time
to time including provisions in force at the time the reference is
made."
13. The main argument of the petitioner is that clause 28.1 is void and
unenforceable being vague and uncertain on the following reasons:
i) Clause provides that the sole arbitrator would be appointed by
the Director.
ii) No particular director has been identified who would be an
appointing authority as per clause 28.1.
iii) Clause does not provide that the sole arbitrator would be
nominated by "any director"
iv) The respondent ought to have made an express and clear clause
as to who would the appointing authority by the reference to the
designation of the Director. In other words, the prime
requirement of independence and impartiality in the scheme of
the Act must be considered by the officer appointing the
Arbitrator.
v) Since there being no provision in the contract for an appointing
authority, in accordance with Clause 28.2 on the failure of the
two parties to reach an agreement on the sole arbitrator, it is
only for the Court to appoint an Arbitrator under Section 11(5)
of the Act.
14. It is also argued that the letter for appointment, which was issued by
the respondent is signed by Joint General Manager, Marketing, does not
satisfy the requirements of Clause 28.1 of the agreement as the appointment
was to be made by any Director of the respondent who was the appointing
authority.
15. It is also pleaded that even if it is presumed that Clause 28.1 is not
void, the appointment of the arbitrator is itself void as the arbitrator named
in the letter is disqualified to act due to lack of independence and
impartiality as Sh.Budh Prakash is a former employee of the Indian
Railways, which is part of Government of India, which is the 50%
shareholder of respondent. The arbitrator has a pecuniary relationship with
the Government of India as he is drawing pension as a former employee of
the Government of India. Once the person is no longer an employee of the
Government of India, the benefit of the ratio of judgments whereby
employee arbitrators have been upheld does not apply as their independence
is taken to be by virtue of their high posts held in the Government. It is also
submitted by the petitioner that the claims of the petitioner in six matter are
about `50 crores against the respondent who has counter claims of the
similar amount against the petitioner. Therefore, the petitioner has rightly
raised the apprehension that the arbitrator appointed could be biased being
former employee of the majority shareholder who has a pecuniary
relationship. Various decisions have been referred by the petitioner during
the course of the arguments. The petitioner has filed the written
submissions.
16. The petitioner has also challenged the validity of the terms of the
agreement entered into between the parties on the ground that an arbitrator
having expertise in law is to be appointed to adjudicate the disputes. There
are no technical disputes involved which would require any expertise on
those terms. The arbitrators appointed by the respondent do not have any
legal knowledge and would not be competent to adjudicate the legal disputes
between the parties. Therefore, such appointment was made with mala fide
intention. The plea has also been raised by the learned counsel for the
petitioner that in the six matters, three different arbitrators have been
appointed by the respondent for a similar dispute regarding the construction
of the contract. This may lead to contradictory findings and will also
contribute to multiplicity of the proceedings.
17. The issue about employee/officer or former employee in different
department which is part of large corporations being nominated as
Arbitrators has been dealt with and discussed by the Supreme Court in the
various matters which are referred as under:-
(a) Indian Oil Corporation v. Raja Transport (P) Ltd.
(2009) 8 SCC 520:
"The process of arbitration is a binding and voluntary
alternative dispute resolution process by a private forum chosen
by the parties. It is quite common for governments, statutory
corporations and public sector undertakings while entering into
contracts, to provide for settlement of disputes by arbitration,
and further provide that the Arbitrator will be one of its senior
officers. If a party, with open eyes and full knowledge and
comprehension of the said provision enters into a contract with
a government/statutory corporation/public sector undertaking
containing an arbitration agreement providing that one of its
Secretaries/Directors shall be the arbitrator, he cannot
subsequently turn around and contend that he is agreeable for
settlement of disputes by arbitration, but not by the named
arbitrator who is an employee of the other party. No party can
say he will be bound by only one part of the agreement and not
the other part, unless such other part is impossible of
performance or is void being contrary to the provisions of the
Act, and such part is severable from the remaining part of the
agreement. The arbitration clause is a package which may
provide for what disputes are arbitrable, at what stage the
disputes are arbitrable, who should be the arbitrator, what
should be the venue, what law would govern the parties etc. A
party to the contract cannot claim the benefit of arbitration
under the arbitration clause, but ignore the appointment
procedure relating to the named Arbitrator contained in the
arbitration clause.
"It is now well settled by a series of decisions of this Court that
arbitration agreements in government contracts providing that
an employee of the Department (usually a high official
unconnected with the work or the contract) will be the
Arbitrator, are neither void nor unenforceable."
"There can however be a justificable apprehension about the
independence or impartiaility of an Employee-Arbitrator, if
such person was the controlling or dealing authority in regard
to the subject contract or if he is a direct subordinate (as
contrasted from an officer of an inferior rank in some other
department) to the officer whose decision is the subject matter
of the dispute. Where however the named arbitrator
body/government company, had nothing to do with execution
of the subject contract, there can be no justification for anyone
doubting his independence or impartiality, in the absence of
any specific evidence. Therefore, senior officer/s (usually
heads of department or equivalent) of a government/statutory
corporation/public sector undertaking, not associated with the
contract, are considered to be independent and impartial and
are not barred from functioning as Arbitrators merely because
their employer is a party to the contract.
(b) Department of Telecommunications v. Gujarat Co-
operative Milk Marketing Federation Limited, 2010
(10) SCC 86 -
The Apex Court has held that the fact that the named Arbitrator
is an employee of one of the parties is not ipso facto a ground
to raise a presumption of bias or partiality of lack of
independence on his part. The Hon‟ble Supreme Court has
observed that although there can be a justifiable apprehension
about the independence or impartiality of an employee
Arbitrator, if such person was the controlling or dealing
authority in regard to the subject contract or if he is a direct
subordinate (as contrasted from an officer of an inferior rank in
some other department) to the officer whose decision is the
subject matter of the dispute. Where however the named
Arbitrator though a senior officer of the government/statutory
body/government company, had nothing to do with execution
of the subject contract, there can be no justification for anyone
doubting his independence or impartiality, in the absence of
any specific evidence. Therefore, senior officer/s (usually
heads of department or equivalent) of a government/statutory
corporation/public sector undertaking, not associated with the
contract are considered to be independent and impartial and are
not barred from functioning as Arbitrators merely because their
employer is a party to the contract.
(c) Secretary To Government, Telecom Department,
Madras v. Munuswamy Mudaliar and Anr. - AIR
1988 SC 2232 -
The Apex Court has held that although reasonable
apprehension of bias in the mind of a reasonable man can be a
ground for removal of the arbitrator however, there must be
reasonable apprehension of that predisposition. The reasonable
apprehension must be based on cogent materials. Vague
suspicions of whimsical, capricious and unreasonable people
should not be made the standard to regulate normal human
conduct.
(d) Union of India v. Singh Builders Syndicate (2009)
(Supra)
The Apex Court while dealing with a situation of an arbitration
clause mandating the nomination of employee arbitrators, held
that the process as contemplated under the Arbitration clause
has to be adhered to 9para 13, 14) as closely as possible and it
was only in an exceptional circumstance (see paras 4 to 9, 18
and 19) that the Court would intervene.
18. In the present case, it has been alleged by the petitioner on the basis of
mere apprehensions as the respondent has appointed the senior official who
was the former employee of Indian Railways and also is not connected with
the department concerned with the contract. The said apprehension cannot
be said to be one which should persuade this court to appoint a fresh
arbitrator. Further, there is no cogent evidence/material produced by the
petitioner showing his biasness.
19. It has also been emphasized by the Supreme Court from time to time
that the court must respect to the agreed procedure of appointment of the
arbitrator prior to stepping into the process of the appointment of the
arbitrator under section 11(6). (Kindly see Indian Iron & Steel Co Ltd vs
Tiwari Roadlines, (2007) 5 SCC 703, India Household and Healthcare Ltd
vs LG Household and Healthcare Ltd, (2007) 5 SCC 510.
20. From the above, it is clear that the court may intervene to take
measures for appointment of the arbitrator only when the party fails to act as
required under the procedure, or fail to reach an agreement expected out of
them under that procedure or a person fails to perform the function.
21. A reading of Section 11(8) further reveals that while exercising
jurisdiction invested under Section 11(6), the court can take due regard. The
consideration under Section 11(8) shall become relevant only upon
satisfaction of the provisions under Section 11(6). This is relevant due to the
reason that if the eventualities existing under Section 11(6) are not satisfied,
the court shall not even proceed further as the said Section 11(8) shall not
come into play. It is only when the court‟s jurisdiction is exercised, (by way
of presence of the eventualities under Section 11(6) the court can have due
regard for the purposes of the sub-section (8).
22. Clause 28(1) stipulates that the sole arbitrator would be nominated by
Director of respondent and tenderer i.e. petitioner would have no objection if
he appoints an employee of the respondent as an arbitrator. The sole
arbitrator has been appointed by the respondent in the terms of the relevant
provision of the agreement executed between the parties. There is no
material on record which may qualify the act of the arbitrator as partial and
call for the invocation of jurisdiction of this Court.
23. The objection of the petitioner about his appointment is without any
force that since the letter of appointment was issued by Joint General
Manager, therefore, the arbitrator has not been appointed strictly in terms of
clause 28 of the agreement. It is admitted position that the appointment has
been made by the respondent itself and in the said letter dated 28 th
September, 2012 issued to the arbitrator, it is clearly mentioned that his
appoint is as per the approval of the competent authority as per terms of the
clause 28. The extract of the said letter reads as under:
"Ref: Licence Agreement executed between M/s Reliance
Media World Ltd. (Now M/s Reliance Broadcast Network Ltd.)
on 25.10.2007.
Sir,
As per the approval of the competent authority in the above
referred matter in terms of the Clause 28 of the Conciliation and
Arbitration of the agreement you have been appointed as the
Sole Arbitrator to resolve the disputes after examination of
claims and counter claims of the respective parties.
You are requested to enter into the reference by issuing notice
to the parties. Copy of the License Agreement executed with
M/s Reliance Broadcast Network Ltd. is enclosed for your
reference.
Thanking you
Yours faithfully
(R.M. Krishnan)
Jt.General Manager/Marketing)" (emphasis added)
24. The terms agreed between the parties for the appointment of arbitrator
in the present case are under clause 28 cannot be changed or to be allowed to
be overlooked by this Court as it was an agreed procedure between the
parties and the Court should normally give effect to the said terms and
conditions of the arbitration agreement.
25. It is also the admitted position that the respondent has appointed the
arbitrator within 30 days from the date of receipt of the notice issued by the
petitioner. Thus, the petitioner cannot raise the plea that there is a failure on
the part of the respondent for the purpose of appointment procedure agreed
between the parties. It is settled law that the jurisdiction of this Court under
Section 11 of the Act can be invoked by a party in the event of failure of a
party under the agreement for appointment of arbitrator for adjudication of
dispute between the parties. None of the judgments referred by the
petitioner in support of its case are applicable to the facts and circumstances
of the present case between the parties. The said judgments have been
passed as per their own facts and circumstances which do not help the case
of the petitioner.
26. The petitioner in the present case has, no doubt, made an allegation of
bias or partiality of the sole arbitrator appointed by the respondent in terms
of the procedure agreed between the parties. It is not denied by the
petitioner that the arbitrator is neither working with the respondent nor is a
direct subordinate of the appointing authority as already mentioned that the
petitioner has failed to place any material on record to show any sort of
reasonable apprehension that the arbitrator appointed by the respondent is
not likely to act independently or impartially which may call for the
invocation of jurisdiction of this court despite of due procedure applied by
the respondent at the time of appointment of arbitrator.
27. The appointment procedure can be deviated by the Court exercising
its powers under Section 11 of the Act, in case the appointment procedure
under the agreement has not been followed. The same has been followed in
the present case. Therefore, the prayer made in the petitions cannot be
allowed.
28. From the entire gamut of the matter, it is clear that in fact there is no
failure of the appointment procedure agreed between the parties for
appointment of arbitrator which would have empowered or entitled the
petitioner to institute the above mentioned petition under Section 11 of the
act when the respondent has appointed the sole arbitrator for adjudication of
the dispute between the parties within the statutory period of 30 days. The
petition is therefore liable to be dismissed.
29. The five connected petitions, being Arb.P.No.359/2012,
Arb.P.No.393/2012, Arb.P.No.394/2012, Arb.P.No.440/2012 and
Arb.P.No.441/2012, which have common facts are also dismissed.
(MANMOHAN SINGH)
JUDGE
MAY 31, 2013
