Uttarakhand High Court
M/S Goyal Builders vs Ministry Of Defence on 22 April, 2022
IN THE HIGH COURT OF UTTARAKHAND
AT NAINITAL
Arbitration Petition No. 24 of 2017
M/s Goyal Builders. ..............Petitioner.
-Versus-
Ministry of Defence
and others. .........Respondents.
Present:
Shri Shiv Pandey, learned counsel for the petitioner.
Shri Pankaj Chaturvedi, learned Standing Counsel for the Union of India / respondents.
Date of hearing and judgment: April 22, 2022
Sri Sanjaya Kumar Mishra, ACJ.
Upon hearing the learned counsel for the appellant, the Court has passed
following Judgment:
1. This is an application under Section 11 (5) of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as "Act" for
brevity) for setting aside the appointment of respondent no. 3, as
a sole arbitrator to settle the dispute between the petitioner and
respondent no. 2 - Director General, Ordnance Factory, 10-A, S.K.
Bose Road, Kolkata 700 001. It is not disputed by the parties at
this stage that petitioner participated in a tender process floated
by respondent no. 2; he was successful in the tender process; he
was awarded the work contract; but due to certain reasons, he
could not complete the work in time, therefore, a dispute arose
between the parties. It is also not disputed by the parties that
there is an arbitration clause in the agreement executed between
the parties for execution of the work. What is disputed at this
stage is appointment of respondent no. 3 - Director, Ordnance
Factories Institute of Learning, Raipur, Dehradun to act an
Arbitrator, especially in view of the provisions of sub-Section 5 of
Section 12 read with entry 5 of the Seventh Schedule of the Act.
2. Sub Section 5 provides 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,
shall be ineligible to be appointed as an arbitrator provided that
parties may, subsequent to disputes having arisen between them,
waive the applicability of this sub-section by an express
agreement in writing. Entry 5 of the Seventh Schedule is relevant
for this case, which reads as under:
"(5) The arbitrator is a manager, director, or part of the
management, or has a similar controlling influence, in an
affiliate of one of the parties, if the affiliate is directly
involved in the matters in dispute in the arbitration."
3. Explanation 2 - The term "affiliate" encompasses all
companies in one group of companies including the parent
company.
4. Learned counsel for the petitioner submits that petitioner
raised objection regarding appointment of respondent no. 3 as
sole arbitrator. The sole arbitrator in reply vide communication
dated 21.07.2017 submitted that GM/ Ordnance Factory,
Dehradun is a separate unit of Ministry of Defence and he is not
an employee, Manager, Director or part of Management of
Ordnance Factory, Dehradun and he has no controlling influence
in an affiliate of any of the parties in the present arbitration case.
5. I have very carefully gone through the contents of the
petition and counter affidavit filed by the respondent. I do not
find anywhere in the petition that any direct interest of
respondent no. 3 is involved in the matter. In order to invoke sub-
section 5 of Section 12 read with entry 5 of the Seventh Schedule
of the Act, following must be established that arbitrator is a
Manager or Director or part of the Management etc. (ii) that he is
an employee in any such affiliate of any of the parties to the
arbitration. (iii) any affiliate is directly involved in the matters in
dispute in the arbitration.
6. In this case, first two ingredients are satisfied. There is
neither any plea nor any material available on record to come to
the conclusion that any affiliate is directly involved in the matter.
7. In view of the above, I do find any merit in the petition, and
the same is dismissed.
(Sanjaya Kumar Mishra)
Acting Chief Justice.
SKS
