Rajasthan High Court
Kirloskar Technologies Pvt. Ltd vs Rajasthan Medical Services ... on 29 January, 2021
Bench: Indrajit Mahanty
HIGH COURT OF JUDICATURE FORRAJASTHAN
BENCH AT JAIPUR
S.B. Arbitration Application No. 34/2019
Kirloskar Technologies Pvt. Ltd., Through Its
Autorized Representative/ Vice President Shri
Ananad Behera S/o Shri Surendra Nath Behera
Having Registered Office At B-58, First Floor,
Defence Colony, Bhisham Pitamah Marg, New
Delhi- 110024
----Petitioner
Versus
Rajasthan Medical Services Corporation Limited,
Through Its Managing Director, Swasthya Bhawan,
C-Scheme, Jaipur.
----Respondent
For Petitioner(s) : Mr. Punit Singhvi with
Mr. Akshay Singh
For : Mr. Nikhil Simlote on behalf
Respondent(s) of Mr. R.B.Mathur, Adv.
HON'BLE THE CHIEF JUSTICE
Order
29/01/2021
1. Heard learned counsel for the respective parties.
2. The present arbitration application has come to be filed under
Section 11 (6) (a) of the Arbitration and Conciliation Act, 1996
(hereinafter to be referred as 'the Act of 1996') seeking
appointment of an independent Arbitrator.
3. It appears that certain disputes have arisen between the
parties, arising out of an agreement pursuant to the tender
process initiated by the respondent company for repair and
maintenance of bio-medical equipment of Rajasthan dated
26.11.2015. An agreement has entered between the parties
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allotting the work of repair and maintenance of bio-medical
equipment in Rajasthan for a period of 18 months from
September, 2016 to February, 2018. Disputes having been arisen
between the parties, the applicant sought for appointment of an
arbitrator.
4. In the agreement, the disputes settlement clause is recorded
in Clause 7 which is being extracted as under:-
"7. Disputes Settlement:-
All disputes arising out of this
agreement and all questions relating to
the interpretation of this agreement shall
be decided by the Managing Director,
RMSC and the decision of the M.D. RMSC
shall be final as per bid terms and
conditions.
And it is hereby agreed and declared
between the parties hereto that in case
any question or disputes arises touching
the construction or working of any of
clause herein contained on the rights,
duties, liabilities of the parties hereto or
any other way, touching or arising out of
the present, the decision of the Managing
Director, Rajasthan Medical Services
Corporation Ltd. in the matter shall be
final and binding.
If any dispute arise out of the
contract with regard to the interpretation,
meaning and breach of the terms of the
contract, the matter shall be referred to
by the Parties to the M.D. Corporation
who will appoint his senior most deputy
[(ED, P)] as the Sole Arbitrator of the
dispute who will not be related to this
contract and whose decision shall be final.
All legal proceedings, if necessary arise to
institute may be any of the parties
(Corporation or Contractor) shall have to
be lodged in courts situated at Jaipur in
Rajasthan and not elsewhere."
5. It appears that the Managing Director of the respondent
company became aware of the amendment carried out to the
Arbitration and Conciliation Act, 1996 and interpretation of The
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(3 of 6) [ARBAP-34/2019]
Seventh Schedule of sub-section 5 of Section 12 of the Act of
1996. Relevant clause 1 & 12 of the Seventh Schedule of Section
12(5) read as under:-
1. The arbitrator is an employee, consultant,
advisor or has any other past or present business
relationship with a party.
------
12. The arbitrator is a manager, director or part of
the management, or has a similar controlling
influence in one of the parties.
6. While Act No.3 of 2016 came into effect w.e.f. 23.10.2015,
and the same read with Seventh Schedule to the Arbitration and
Conciliation Act and Clause 1 and 12 thereto appointed one Mr.
Mohan Lal Chhabra to arbitrate in the dispute.
7. Learned counsel for the respondent submits that the said
Mohan Lal Chhabra was neither an employee nor in any manner
connected with the respondent corporation and consequently,
keeping in view the requirement of Section 12(5) read with the
Seventh Schedule, his appointment is made so that he could act
independently.
8. Learned counsel for the applicant, on the other hand,
submitted that in terms of Clause 7 of the agreement, the
Managing Director of respondent corporation was only entitled to
appoint a person who was an ED of the said corporation (an Ex-
employee) and he has no justification or right to appoint any
other person apart from the said authority. Consequently prayer
is made to set aside the appointment of Mr. Mohan Lal Chhabra
and appoint independent arbitrator in his place.
9. Learned counsel appearing for the respondent corporation
suggests that if this Court considers appointment of an arbitrator,
the Court may appoint a person having technical knowledge since
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the matter involves, according to him, various technical issues,
so that the matter could be adjudicated fairly and quickly.
10. This issue is no more res integra in view of the judgment
rendered by Hon'ble Supreme Court in the case of Perkins
Eastman Architects DPC and Ors. Vs. HSCC (India) Ltd.
reported in AIR 2020 SC 59. Relevant paragraph Nos.15 and 16
of the above judgment are quoted here under:-
"15. It was thus held that as the Managing Director
became ineligible by operation of law to act as an
arbitrator, he could not nominate another person to
act as an arbitrator and that once the identity of
the Managing Director as the sole arbitrator was
lost, the power to nominate someone else as an
arbitrator was also obliterated. The relevant Clause
in said case had nominated the Managing Director
himself to be the sole arbitrator and also
empowered said Managing Director to nominate
another person to act as an arbitrator. The
Managing Director thus had two capacities under
said Clause, the first as an arbitrator and the
second as an appointing authority. In the present
case we are concerned with only one capacity of
the Chairman and Managing Director and that is as
an appointing authority.
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
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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.
16. 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."
11. In the light of the judgment of the Hon'ble Supreme
Court as noted herein above, this Court hereby appoints Mr.
Justice Alok Sharma (Retd.), R/o-K-39, Income Tax Colony, Tonk
Road, Jaipur, to act as an independent Arbitrator and to decide
this issue in accordance with the Arbitration and Conciliation Act,
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1996 and the parties, if so advised to lead expert evidence, if
circumstances so warrant.
12. Accordingly, the instant application is allowed to the
extent as indicated herein above.
(INDRAJIT MAHANTY),CJ
NAVAL KISHOR/RAJAT/05
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