Delhi High Court
Neha Aviation Management Pvt. Ltd vs Air India Sats Airport Services ... on 7 February, 2020
$~A-6
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 07.02.2020
+ ARB.P. 546/2019, I.A. 11873/2019
NEHA AVIATION MANAGEMENT PVT. LTD ..... Petitioner
Through Mr. Rudreshwar Singh, Mr. Rakesh
Gosain and Ms. Snehil Sonam,
Advocates.
versus
AIR INDIA SATS AIRPORT SERVICES PVT LTD. ..... Respondent
Through Mrs. Biji Rajesh, Advocate.
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JYOTI SINGH, J. (ORAL)
1. This is a petition under Section 11(5) read with Section 11(6) of the
Arbitration and Conciliation Act, 1996 ('Act') seeking appointment of a Sole
Arbitrator.
2. The parties entered into an agreement dated 15.09.2014 for
outsourcing manpower ground handling services at Indira Gandhi
International Airport for a period of three years w.e.f 01.08.2014 to
31.07.2017. The said agreement contains an Arbitration Clause which reads
as under:-
"16.2 Any dispute or differences arising between AISATS
and the Service Provider in connection with or arising out
of this agreement which cannot be resolved amicably
between them in accordance with the terms of this
agreement shall be finally decided by reference to
arbitration to be held in accordance with the provisions of
the Arbitration and Conciliation Act, 1996 or any enacted
for replacement thereof and shall be referred to the sole
arbitrator to be nominated by Senior Vice President of
AISATS. The arbitration shall be conducted in English
language and the venue of the Arbitration shall be Delhi,
India. The award of the sole arbitrator will be binding on
the parties. Any reference to arbitration shall not relieve the
Service Provider from any liability for the due and punctual
performance of its obligation under this agreement.
3. Respondent invoked clause 13.1 of the aforesaid agreement and
sought to terminate the agreement by giving a 30 days' notice on
12.10.2015.
4. By notice dated 03.11.2015, the respondent extended the notice period
to 20.11.2015 and further extended by notice dated 16.11.2015. The period
of termination was finally extended to 31.01.2015.
5. The parties were also litigating inter-se in a W.P. (C) 12185/2015 with
respect to the said termination.
6. Due to the non-payment of the bills of the petitioner, certain disputes
arose between the parties.
7. The petitioner vide notice dated 07.06.2019 invoked the Arbitration
Agreement between the parties, seeking appointment of a retired District
Judge or Additional District Judge, as a Sole Arbitrator.
8. The respondent replied to the Arbitration notice on 03.07.2019 and
appointed Mr. Vivek Kumar Tandon, Advocate as the Sole Arbitrator.
9. By letter dated 11.07.2019, the respondent sent information to the Sole
Arbitrator, namely, Mr. Vivek Kumar Tandon, Advocate intimating him of
his appointment and also pointing out that the claims raised by the petitioner
were barred by limitation.
10. The unilateral appointment of the Sole Arbitrator was disputed by the
petitioner vide letter dated 12.07.2019 and it suggested the name of two
retired Additional District Judges, to be appointed as an Arbitrator.
11. On 27.07.2019, notice was sent by the Sole Arbitrator to both the
parties and the matter was posted for the first procedural hearing on
01.08.2019.
12. On 01.08.2019, the petitioner sent a letter to the Sole Arbitrator stating
that the petitioner was disputing the appointment of the Arbitrator. It was
further informed to him that the petitioner would approach the Court for
appointment of an independent Sole Arbitrator. The Sole Arbitrator,
however, continued with the proceedings. On 01.08.2019 he ordered the
petitioner to file Statement of Claims within a period of four weeks and the
matter was listed for 01.10.2019.
13. Learned counsel for the petitioner submits that the Arbitration Clause
envisages appointment of an Arbitrator by the Vice President of the
respondent, who naturally will have an interest in the outcome of the
Arbitration Proceedings. He thus submits that the Vice President is ineligible
to appoint an Arbitrator in view of the judgment of the Supreme Court in
Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd. 2019 SCC
Online SC 1517. The disability of the Vice President to appoint an
Arbitrator will also apply to the Arbitrator appointed by him, in terms of the
said judgment.
14. Ms. Rajesh, however, per-contra argues that it was the petitioner who
had invoked the Arbitration in terms of this very Clause. Petitioner had
written a letter, where he had only requested for the change of the Arbitrator,
but had no quarrel with the power of the Vice President to appoint the
Arbitrator, as is clear from the letter sent by the petitioner on 03.07.2019.
15. Ms. Rajesh further states that the Arbitrator has also made a disclosure
under Section 12(5) of the Act which has been placed on record of this
Court.
16. I have heard the learned counsel for the parties and examined their
submissions.
17. In my view, learned counsel for the petitioner is right in his
submissions that the appointment made by the respondent is contrary to the
ratio of the judgment of Supreme Court in the case of Perkins (supra) and a
recent judgment passed by this Court in Proddatur Cable Tv Digi Services
vs. Siti Cable Network Limited passed in O.M.P. (T) (COMM) 109/2019
decided on 20.01.2020. Relevant paras of the judgment in Perkins (Supra)
read as under:-
"20. We thus have two categories of cases. The first, similar to
the one dealt with in TRF Limited 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
Limited, 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 Limited. Paragraph 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 (Act 3 of 2016) and recognised by the
decision of this Court in TRF Limited"
18. The unilateral appointment by the Vice President is thus bad in law
and the mandate of the present Arbitrator deserves to be terminated.
19. In view of the above, there is no merit in the contention of the counsel
for the respondent that only because the petitioner had invoked Arbitration in
terms of Clause 16.2, he would be bound by the appointment of the present
Arbitrator.
20. There is equally no merit in the contention that since the Arbitrator has
given his disclosure, the present case will not be governed by the aforesaid
Judgment of the Supreme Court.
21. The Supreme Court in case of Bharat Broadband Network Limited
vs. United Telecoms Limited (2019) 5 SCC 755 in context of the judgment
in TRF Ltd. Vs. Energo Engineering Projects Ltd. 2017 8 SCC 377 had
clearly stated as soon as a clarificatory judgment is pronounced, Section 14
of the Act comes into play, automatically terminating the mandate de jure.
22. In view of the above, the petition deserves to be allowed.
23. The mandate of Mr. Vivek Kumar Tandon, Advocate, the present Sole
Arbitrator, is hereby terminated. This, however, is not a reflection on the
competence of the said Arbitrator.
24. With the consent of the parties, Mr. Justice Swatanter Kumar, former
Judge of Supreme Court is appointed as a Sole Arbitrator to adjudicate the
disputes between the parties.
25. The address and mobile number of the learned Arbitrator is as under:
Mr. Justice Swatanter Kumar,
Former Judge, Supreme Court of India,
C-3/5, 1st Floor, Safdarjung Development Area,
New Delhi-110016.
Mobile: 9560413636.
26. The learned Arbitrator shall give disclosure under Section 12 of the
Act before entering upon reference.
27. Fee of the Arbitrator shall be fixed as per Fourth Schedule of the Act.
28. Needless to say that the newly appointed Arbitrator will begin the
proceedings from the stage of procedural hearing.
29. Ms. Rajesh, at this stage, also points out that the claims of the
petitioner are barred by time.
30. The question of the claims of the petitioner being barred by time is left
open to be decided by the Arbitral Tribunal.
31. The petition is allowed and the pending application is disposed of in
the aforesaid terms.
JYOTI SINGH, J
FEBRUARY 07, 2020
yo/
