VELANKANI INFORMATION SYSTEMS vs INTER CONTINENTAL HOTELS GROUP
- Court
- Karnataka High Court
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 6 DAY OF NOVEMBER, 2026
PRESENT
THE HON'BLE MRS. JUSTICE ANU SIVARAMAN
AND
THE HON'BLE MR. JUSTICE T.P.VIVEKANANDA
COMMERCIAL APPEAL NO.455 OF 2024
BETWEEN:
VELANKANI INFORMATION SYSTEMS
PRIVATE LIMITED
NO.43, ELECTRONICS CITY
PHASE-II
HOSUR ROAD
BENGALURU 560 100
REPRESENTED BY ITS AUTHORIZED SIGNATORY
MRS. ANJU PRAKASH
…APPELLANT
(BY SRI. BASAVA PRABHU S. PATIL, SR. COUNSEL A/W
Digitally
signed by
PAVITHRA
N
Location:
High Court
of
Karnataka
SRI. AJAYKUMAR M., ADVOCATE)
AND:
1. INTER CONTINENTAL HOTELS GROUP
(INDIA) PRIVATE LIMITED
TH
TOWER C, 11 FLOOR BUILDING NO.10
DLF CYBERCITY
DLF PHASE 2
GURGAON -122 002
HARYANA
2. INTER CONTINENTAL HOTELS GROUP
(ASIA PACIFIC) PTE. LTD.
2
230 VICTORIA STREET
NO.13-00, BUGIS JUNCTION TOWERS
SINGAPORE 188 240
…RESPONDENTS
(BY SRI. DHYAN CHINNAPPA, SR. COUNSEL A/W
SRI. AJAY J. NANDALIKE, ADVOCATE FOR R1 & R2)
THIS COMAP IS FILED UNDER SECTION 37 OF THE
ARBITRATION AND CONCILIATION ACT, 1956, PRAYING TO
ALLOW THE APPEAL AND SET ASIDE THE IMPUGNED ORDER
DATED 13.09.2024 IN COM.S.NO.2 OF 2022 AND
CONSEQUENTLY SET ASIDE THE PARTIAL ARBITRAL AWARD
DATED 12.06.2019 AND FINAL AWARD DATED 28.12.2020, BOTH
PASSED BY THE ARBITRAL TRIBUNAL COMPROMISING
MR. BENJAMIN HUGHES.
THIS COMAP HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 22.09.2026 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, ANU SIVARAMAN
J., PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN
AND
HON'BLE MR. JUSTICE T.P.VIVEKANANDA
3
CAV JUDGMENT
(PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN)
This Commercial Appeal is filed challenging the order
dated 13.09.2024 passed by the learned Single Judge in
Com.S.No. 2/2022. The suit was filed under Section 34 of
the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’
for short) challenging the Partial Award on Jurisdiction dated
12.06.2019 and the Final Award dated 28.12.2020, passed
by the learned Sole Arbitrator in SIAC Arbitration No.014 of
2018. By the impugned order, the learned Single Judge
rejected the challenge to the Partial Award on Jurisdiction
and directed that the challenge to the Final Award be heard
on merits.
2. We have heard Shri. Basava Prabhu S. Patil,
learned Senior Counsel as instructed by Shri. Ajaykumar M.,
learned Advocate appearing for the appellant, and Shri.
Dhyan Chinnappa, learned Senior Counsel as instructed by
Shri. Ajay J. Nandalike, learned counsel appearing for
respondents No.1 and 2.
4
3. The learned Senior Counsel appearing for the
appellant submits that the appellant - Velankani Information
Systems Private Limited, and the respondents- Inter
Continental Hotels Group (India) Private Limited and Inter
Continental Hotels Group (Asia Pacific) Private Limited,
entered into a Management Agreement dated 26.11.2009
with respondent No.1, as Manager, and the predecessor of
respondent No.2, as Licensor. Under the Agreement, the
respondents were to operate and manage the appellant's
hotel.
4. Clause 18.2 of the Management Agreement
provides that disputes between the parties shall be referred
to arbitration under the Arbitration Act and the Arbitration
Rules of the Singapore International Arbitration Centre
('SIAC' for short) for the time being in force. The Tribunal is
to consist of a sole Arbitrator appointed by mutual
agreement, failing which the appointment is to be made by
the Chairman of SIAC. The seat of arbitration was
Bengaluru. Disputes arose between the parties regarding the
payment of management fees, licence fee, system fund
5
contributions and other charges under the Management
Agreement. On 15.12.2017 the respondents suspended the
hotel's access to their reservation system, and on
10.01.2018 the appellant terminated the Management
Agreement. The respondents invoked arbitration by filing a
Notice of Arbitration with SIAC in January, 2018. On
17.12.2018 the Vice President of the Court of Arbitration of
SIAC appointed the Sole Arbitrator.
5. Before the learned Arbitrator, the appellant raised
objections to jurisdiction on 14.02.2019, to which the
respondents replied on 27.02.2019, and the objections were
heard on 27.03.2019. The appellant contended that SIAC,
having accepted by its letters dated 12.06.2018 and
22.06.2018 that its Chairman was conflicted and that it was
unable to appoint a sole arbitrator unless the parties varied
their agreement, had become functus officio and lacked the
power to review that decision. It was further contended that
since the Management Agreement provided for appointment
by the Chairman of SIAC, the President of SIAC could not
.
make the appointment By a Partial Award on Jurisdiction
6
dated 12.06.2019, the learned Arbitrator rejected the
objections. It was held that SIAC as an institution was
neither conflicted nor disqualified. It was further held that
there was no impediment to SIAC revisiting its own decision,
and that it therefore never became functus officio . It was
also held that the respondents had not waived their right to
seek reconsideration, and that the Tribunal had been
constituted in accordance with Clause 18.2 of the
Management Agreement and the SIAC Rules, 2016.
6. Thereafter, the respondents filed their Statement
of Claim on 30.08.2019, and the appellant filed its
Statement of Defence and Counterclaim on 11.10.2019. The
learned Arbitrator heard final oral submissions on
28.06.2020 and 29.06.2020. By the Final Award dated
28.12.2020, the learned Arbitrator dismissed the appellant's
further jurisdictional objections. Those objections were
founded on the appointment of the respondents' counsel as
a member of the SIAC Court during the pendency of the
proceedings.
7
7. On merits, the learned Arbitrator held that the
respondents had not breached the Management Agreement
and were not liable to account for the system fund
contributions. It was held that the appellant's failure to pay
the management fees, licence fee, system fund contributions
and reimbursable charges, and its termination of the
Management Agreement on 10.01.2018, constituted
material breaches. The appellant was accordingly directed to
pay the respondents the outstanding amounts under the
Management Agreement, together with USD 100,000/-
towards the incentive and INR 14,02,96,782/- towards loss
of profit, with interest at 12% per annum from 10.01.2018
until payment. The appellant's counterclaims were
dismissed. The appellant was further directed to bear the
costs of the arbitration and to reimburse the respondents'
legal costs of USD 2,52,602.63/- and INR 16,04,100/-.
8. The appellant challenged the Partial Award dated
12.06.2019 and the Final Award dated 28.12.2020 by filing
Com.S.No.2/2022 under Section 34 of the Arbitration Act in
March 2021 before this Court. By the impugned order dated
8
13.09.2024, the learned Single Judge held that since the
SIAC Rules, 2016 were in force when the disputes arose, the
reference of the appointment to the President could not be
said to be erroneous. It was further held that the
communication dated 22.06.2018 was not a decision of
either the President or the Court of SIAC, and that Rules
28.1 and 40.1 of the SIAC Rules, 2016 were therefore
inapplicable. The appointment by the President was held not
to amount to a review of the earlier decision that the
Chairman was unable to act.
9. The learned Single Judge also held that the
decision in SBP & Co. v. Patel Engineering Ltd. reported
in (2005) 8 SCC 618 was distinguishable on facts. It was
further held that the appellant had not alleged any personal
bias against the Chairman, the President or the learned
Arbitrator, and had not demonstrated that any ground under
Section 12(3)(a) or Section 12(5) read with the Seventh
Schedule to the Arbitration Act was attracted. The learned
Single Judge accordingly declined to interfere with the
Partial Award under Section 34(2)(a)(v) of the Arbitration
9
Act and directed that the challenge to the Final Award be
posted for consideration on merits. Aggrieved by the said
order, the appellant has preferred the present appeal.
10. The learned Senior Counsel appearing for the
appellant contends that Clause 18.2(b) of the Management
Agreement designates only the Chairman of SIAC as the
appointing authority. Once the Chairman was found to be
conflicted and the appellant declined to vary the agreement,
the agreed appointment procedure stood exhausted. SIAC
by its communications dated 12.06.2018, 22.06.2018 and
06.08.2018, ruled that neither its Chairman nor its President
could make the appointment. The last of these specifically
rejected the respondents' request of 05.07.2018 for
appointment by the President under Rules 9.2 and 10.2 of
the SIAC Rules, 2016.
11. It is contended that neither the Management
Agreement nor the SIAC Rules, 2016 empowers SIAC to
review its decisions. Rule 28.1 contemplates termination of
the arbitration, and Rule 40.1 makes decisions of the
President, the Court and the Registrar "conclusive and
10
binding upon the parties and the Tribunal". SIAC thus
became functus officio . These Rules, being incorporated into
the arbitration clause, constitute the agreed procedure
under Section 19 of the Arbitration Act. Any reconsideration
in derogation of them was void, and the composition of the
Tribunal was therefore not in accordance with the agreement
of the parties under Section 34(2)(a)(v) of the Arbitration
Act. The Tribunal's view that Rule 40.1 of the SIAC Rules
binds the parties but not SIAC itself is self-contradictory and
would permit the institution to reverse its decisions at will.
12. It is further contended that an appointing
authority which decides a contested objection to its own
competence performs a judicial or quasi-judicial function,
relying on SBP & Co. v. Patel Engineering Ltd. ’ s case
(supra). Such an authority has no inherent power of review.
The learned Single Judge erred in confining SBP & Co. v.
Patel Engineering Ltd. ’ s case (supra) to Section 11(6) of
the Arbitration Act. In any event, it is contended that the
doctrine of functus officio would apply even to an
administrative decision on contested claims. It is contended
11
that the impugned order is internally inconsistent. The
learned Single Judge recorded SIAC's own statement that
the SIAC Court had "initially" decided the matter and later
reconsidered it. However, later the learned Single Judge
held that the decision dated 22.06.2018 was not that of the
Court. This finding is contrary to SIAC's letter dated
13.12.2018. The further finding that there was no review, is
equally untenable, since the earlier rulings were rendered
after hearing both parties and were later reversed. It is
further contended that Rules 9.2, 9.3 and 10.2 of the SIAC
Rules do not empower the President to act in substitution of
a disqualified appointing authority designated by the parties,
which is why SIAC itself had invited the parties to vary the
Agreement.
13. It is further contended that the appellant's
objection was to the neutrality of SIAC as an Institution,
since the respondents' counsel was on its panel of
arbitrators. SIAC conceded a conflict without confining it to
the Chairman. As the SIAC Court and President are
instrumental in empanelling counsel, the conflict extended to
12
them as well. Applying the reasonable-apprehension test in
Ranjit Thakur v. Union of India reported in (1987) 4
SCC 611 , and the analogy of Articles 124(7) and 220 of the
Constitution of India, the appellant's contentions are
justified. The ineligibility of the appointing authority extends
to its nominee as well. The learned Single Judge therefore
erred in requiring the appellant to bring its case within
Section 12(3)(a) or the Seventh Schedule of the Arbitration
Act. It is also contended that the respondents, having
accepted SIAC's inability and proposed an ad hoc
appointment on 28.08.2018, were estopped from seeking
reconsideration.
14. It is further submitted that the learned Arbitrator
assumed, on facts privately known to him and never
disclosed to the parties, that the Chairman's conflict was
merely personal. This violates principles of natural justice
and the learned Single Judge erred in declining to examine
it, since it formed the substratum of the Partial Award. The
appointment of the respondents' counsel to the SIAC Court
on 06.06.2019, while the Partial Award was under scrutiny,
13
further eroded the institution's neutrality, and the learned
Single Judge did not advert to it. It is further contended that
arbitration was invoked before exhausting the amicable
resolution process under Clause 18.2(a) of the Management
Agreement, and that the proceedings are vitiated by want of
independence and fairness, contrary to the public policy of
India under Section 34(2)(b)(ii) of the Arbitration Act.
15. The learned counsel appearing for the appellant
places reliance on the following decisions:-
•
Patel Narshi Thakershi & Ors. v. Shri Pradyumansinghji
Arjunsinghji, reported in ( 1971) 3 SCC 844;
•
Dr. (Smt.) Kuntesh Gupta v. Management of Hindu
Kanya Maha Vidyalaya, Sitapur (U.P.) and Others,
reported in (1987) 4 SCC 525;
•
TRF Ltd. v. Energo Engineering Projects Ltd. reported in
(2017) 8 SCC 377;
•
Perkins Eastman Architects DPC & Anr. v. HSCC (India
Ltd), reported in (2020) 20 SCC 760;
•
Bharat Broadband Network Ltd. v. United Telecoms Ltd,
reported in (2019) 5 SCC 755;
14
•
Chintels (India) Ltd. v. Bhayana Builders (P) Ltd.,
reported in (2021) 4 SCC 602;
•
National Highway Authority of India v. Oriental
Structure Engineers Ltd.- Gammon India Ltd. (JV),
reported in 2013 (3) CTC 709; and
•
National Highway Authority of India V. AFCONS
Infrastructure Ltd. reported in 2024 SCC Online Del
4491.
16. The learned Senior Counsel appearing for the
respondents contends that a preliminary objection to the
maintainability of the appeal was raised, relying on
Landmark Housing Projects Pvt. Ltd. v. Savithri Naidu
reported in 2021 SCC OnLine Mad 723 . This Court
overruled the objection by order dated 10.07.2025, following
Chintels India Ltd. v. Bhayana Builders (P) Ltd.
reported in (2021) 4 SCC 602 . It is contended that
interference under Section 37 of the Arbitration Act is even
more circumscribed than under Section 34 of the Arbitration
Act, and is confined to perversity going to the root of the
matter or conflict with public policy.
15
17. It is contended that the jurisdiction of the Court
under Section 34 of the Arbitration Act is narrow, and that
the jurisdiction of the appellate Court under Section 37 of
the Arbitration Act is all the more circumscribed. It is
contended that the appellant must demonstrate that the
impugned order suffers from perversity going to the root of
the matter or is contrary to the public policy of India, or that
the learned Single Judge exceeded or failed to exercise the
jurisdiction under Section 34 of the Arbitration Act.
18. It is contended that the grounds raised in the
appeal are a mere reiteration of those taken in the Section
34 petition, and that the impugned order is a detailed and
reasoned order which has considered each of the appellant’s
objections. It is submitted that the learned Single Judge
rightly held that the communication dated 22.06.2018
merely intimated that the Chairman was unable to act due
to a conflict, the subsequent decision of the President to
appoint the arbitrator did not constitute a review, as the two
decisions pertained to different functionaries within SIAC
and Rules 28.1 and 40.1 of the SIAC Rules were
16
inapplicable, as SIAC had not recorded any satisfaction that
the arbitration was not entitled to proceed. It is further
submitted that the learned Single Judge rightly held that no
personal bias was alleged against the President or the
learned Arbitrator and that the mere inability of the
Chairman did not preclude SIAC from referring the matter to
the President under Rule 10.2 of the SIAC Rules and that the
appellant had failed to demonstrate that any of the
categories in the Seventh Schedule to the Arbitration Act
was attracted.
19. The learned Senior Counsel places reliance on the
following decisions:-
•
UHL Power Company Ltd v. State of Himachal Pradesh,
reported in (2022) 4 SCC 116;
•
Somdatt Builders- NCC- NEC (JV) V. National Highways
Authority of India, reported in (2025) 6 SCC 757;
•
C&C Construction Ltd. v. IRCON International Ltd,
(2025), reported in 4 SCC 234;
•
Dharamvir & Co. v. Delhi Development Authority, reported
in 2022 SCC Online Del 2311;
17
•
Haryana Tourism Ltd v. Kandhari Beverages Ltd, reported in
(2022) 3 SCC 237;
•
Union of India v. Reliance Industries Ltd., reported in
(2025) SCC Online Del 841;
•
Bharat Broadband Network Ltd. v. Paramount
Communications Ltd., reported in (2024) SCC OnLine Del
7754;
•
L&T Infra Investment Partners Advisory Private Ltd v.
Bhoruka Power Corporation Ltd. dated 26.09.2025, COMAP
NO.261/2025;
•
Konkan Railway Corporation Ltd. & Ors. v. Rani
Construction Pvt. Ltd, reported in (2002) 2 SCC 388;
•
Gas Authority of India Ltd. and Anr. v. Keti Construction
(I) Ltd, reported in (2007) 5 SCC 38;
•
Food Corporation of India v. Indian Council of Arbitration
and Ors. reported in (2003) 6 SCC 564;
•
JEPH Bev Pvt. Ltd & Ors. v. Delhi International Arbitration
Centre & Ors., reported in (2021) SCC Online Del 1980;
•
Steel Authority of India Ltd v. Indian Council of Arbitration
and Anr., reported in (2016) SCC Online Del 1921;
•
Narayan Prasad Lohia v. Nikunj Kumar Lohia and Ors.,
reported in (2002) 3 SCC 572;
18
•
Oil & Natural Gas Corporation Ltd v. Oil Field
Instrumentation, reported in 2004 (4) Mh.L.J.;
•
Sachdeva & Co. v. Delhi- Gurgaon Super Connectivity Ltd.,
reported in (2016) SCC Online Del 4873;
•
Transair & Ors. v. M/s. Kuwait Airways, reported in (2013)
SCC Online Del 4184;
•
HRD Corporation (Marcus Oil & Chemical Division) v. GAIL
(India) Ltd., reported in (2018) 12 SCC 471;
•
Hunt v. Mobil Oil Corp, reported in 654 F.Supp.1487
(S.D.N.Y 1987);
•
Tamari v. Bache Halsey Stuart Inc., reported in (1980) 619
F.2d 1196; and
•
CFJ & Anr. v. CFL & Anr & Other Matters, reported in [2023]
SGHC (I) 1.
20. We have considered the contentions advanced.
We notice that Dispute Resolution Clause of the
Management Agreement dated 26.11.2009, reads as
follows:-
"18. APPLICABLE LAW & DISPUTE RESOLUTION
18.1 x x x x x
18.2 Dispute Resolution
19
(a) All disputes, controversies or claims arising out of or
in connection with this Agreement will first be discussed
by the Owner and the Manager with the objective of
resolving such dispute, controversy or claim in a friendly
manner. If such efforts fail to bring a resolution within ten
(10) Business Days of receipt of a notice issued by one
party to the other seeking resolution, such disputes,
controversies or claims will be finally determined by
arbitration pursuant to the Arbitration and Conciliation Act
1996 of India and under the Arbitration Rules of the
Singapore International Arbitration Centre (“SIAC”) for
the time being in force, which rules are deemed
incorporated by reference into this clause.
(b) The tribunal shall consist of one arbitrator to be
appointed by mutual agreement, and failing agreement
within thirty (30) days by the Chairman of the SIAC. The
place of arbitration will be in Bangalore, India and the
official language of the arbitration will be English. In
reaching a decision, the arbitrator will be bound by the
terms and provisions of this Agreement. The decision and
award of the arbitrator will be final and binding and shall
be enforceable in any court of competent jurisdiction in
accordance with the United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards
or any applicable national law.
(c) Clauses 18.2(a) and (b) will not prevent either Party
from obtaining injunctive relief in the courts of the
Country, including in the case of the Manager, to prevent
the unauthorised use of the Marks or the continued
operation of the Hotel in the event of threatened eviction
of the Manager and/or employees employed by Manager
during any dispute arising out of this Agreement. Subject
to compliance with the terms of any order of a court of
the Country obtained pursuant to the terms of this
Agreement, during any controversy, claim, disagreement
or dispute, including a dispute as to the validity of this
Agreement, the Manager will continue to operate the
Hotel as the Manager pursuant to this Agreement."
21. The following are the relevant SIAC Rules
applicable in the instant case:-
"28. Jurisdiction of the Tribunal
20
28.1 If any party objects to the existence or validity of
the arbitration agreement or to the competence of SIAC
to administer an arbitration, before the Tribunal is
constituted, the Registrar shall determine if such objection
shall be referred to the Court. If the Registrar so
determines, the Court shall decide if it is prima facie
satisfied that the arbitration shall proceed. The arbitration
shall be terminated if the Court is not so satisfied. Any
decision by the Registrar or the Court that the arbitration
shall proceed is without prejudice to the power of the
Tribunal to rule on its own jurisdiction
40. Decisions of the President, the Court and the
Registrar
40.1 Except as provided in these Rules, the decisions of
the President, the Court and the Registrar with respect to
all matters relating to an arbitration shall be conclusive
and binding upon the parties and the Tribunal. The
President, the Court and the Registrar shall not be
required to provide reasons for such decisions, unless the
Court determines otherwise or as may be provided in
these Rules. The parties agree that the discussions and
deliberations of the Court are confidential.
40.2 Save in respect of Rule 16.1 and Rule 28.1, the
parties waive any right of appeal or review in respect of
any decisions of the President, the Court and the
Registrar to any State court or other judicial authority."
(emphasis supplied)
22. We notice that the order under challenge in this
Commercial Appeal is the order passed by the learned Single
Judge in Commercial Suit No.2/2022 with regard to the
jurisdictional objection to the arbitral proceedings. After
having found that the apprehension of institutional bias
raised by the appellant is unfounded and that the President
of the SIAC is not disabled from nominating an arbitrator to
21
adjudicate the dispute between the parties, the partial
award on jurisdiction was upheld and the appeals were
posted for consideration on merits. It is as against the said
order that the present appeal is filed.
23. The partial award was rendered on 12.06.2019 by
the Arbitrator. It refers to the series of communications
between the SIAC and the parties with regard to the
appointment of the Arbitrator. The appellant on 10.05.2018,
had addressed the respondent stating as follows;
"2. We wish to point out that though clause 18.2 of the
Management Agreement provide for arbitration under [the
SIAC Rules], recently while perusing the Panel of
Arbitrators of SIAC for proposing the name/s for
appointment by mutual consent, we noticed that you [Mr.
Sumeet Kachwaha] being the counsel for [Claimants] are
one of the SIAC Arbitrators. According to us, in view of
your ongoing business / professional relationship with
SIAC, SIAC is not neutral entity qualified for nominating
an arbitrator / administering arbitration under the
Management Agreement."
24. On 14.05.2018, the respondents had denied any
disqualification of the SIAC on account of one of its counsel
being an arbitrator with the SIAC. On 15.05.2018, the
22
appellant had written both to the respondent as well as to
the SIAC, pointing out that the counsel for the respondent
herein is associated with the SIAC as one of its panel
arbitrators and that the SIAC is disqualified from nominating
an arbitrator. By the letter dated 12.06.2018, the SIAC
informed the parties that the Chairman is unable to proceed
with the appointment and the parties were invited to agree
to vary their arbitration agreement to provide for
appointment of the sole arbitrator to be made by the
President of the Court of Arbitration of SIAC. On further
objections being raised on 22.06.2018, the SIAC wrote to
the parties inter alia stating that absent the variation of the
arbitration agreement to specifically provide for the
President of the Court of SIAC to make the appointment, the
President is unable to act under the SIAC Rules. After
considering all the communications between the parties, the
provisions of the SIAC Rules as well as the decisions relied
on, the arbitrator came to the conclusion that the SIAC as
an Institution, was not disabled from appointing an
arbitrator and the contentions to the contrary were
23
incorrect. Further, it was found that the absence of power to
review would apply only to judicial or quasi-judicial actions
of any of the entities of the SIAC and would not apply to an
administrative correspondence. It was therefore found that
there was no lack of neutrality, disabling the SIAC as an
Institution from making the appointment of the Arbitrator.
25. The learned Single Judge had also considered the
entire factual aspects in detail. The series of communications
exchanged between the parties were also considered.
Thereafter, it was found that in view of the fact that no
specific allegation has been made regarding any personal
bias entertained by the Chairman or the President of the
SIAC or by the Arbitrator, the contention of institutional
bias, which was raised by the appellant was completely
devoid of merits. It was also found that the fact that the
Chairman was unable to appoint an arbitrator due to conflict
does not preclude the SIAC from referring the matter to the
President in terms of Rule 10.2 of the SIAC Rules. It was
therefore, found that the decision of the SIAC to refer the
matter to the President, who proceeded to appoint an
24
Arbitrator, does not in any manner, review the earlier
communication dated 22.06.2018 that the Chairman of the
SIAC was unable to act due to conflict.
26. In Steel Authority of India Ltd. v. Indian
Council of Arbitration reported in 2015 SCC OnLine Del
13394 , the Delhi High Court held that Section 11(6) of the
Arbitration Act applies only where the Arbitral Tribunal
cannot be constituted because a party, the arbitrators, or a
person or institution has failed to act under the agreed
appointment procedure. It has no application where the
Tribunal has been constituted under the procedure agreed to
between the parties. It was further held that an arbitral
institution appointing an arbitrator acts in terms of the
contract between the parties, and its decision to appoint
neither determines the rights of either party nor bears any
trappings of a judicial or quasi-judicial function.
27. The learned Senior Counsel for the appellant
relied on SBP & Co.’s case (supra), in which a Bench of
seven Judges of the Apex Court held that the power of the
Chief Justice under Section 11(6) of the Arbitration Act is a
25
judicial power and not administrative power. The Apex Court
found the power under Section 11(6) of the Arbitration Act
to be judicial because the Chief Justice, when confronted
with two points of view presented by the rival parties, is
called upon to decide between them and the decision vitally
affects the rights of the parties. That decision also attains
finality under Section 11(7) of the Arbitration Act. It was
further held that no person other than a Judge and no non-
judicial body can be designated for entertaining an
application for appointing an arbitrator under Section 11(6)
of the Arbitration Act, because judicial powers are to be
exercised by the judicial authorities and not by non-judicial
authorities. It was also held that a non-judicial body or
institution cannot be equated with a Judge of the High Court
or a Judge of the Supreme Court and that a non-judicial
authority cannot exercise judicial powers. It was further held
that where the Tribunal has been constituted by the parties
without having recourse to Section 11(6) of the Arbitration
Act, the Arbitral Tribunal will have the jurisdiction to decide
26
all matters as contemplated by Section 16 of the Arbitration
Act.
28. We notice that SBP & Co. 's case (supra) relates
to the power of the Chief Justice when a party invokes
Section 11(6) of the Arbitration Act. In the instant case, the
parties agreed to arbitration under the SIAC Rules, and the
Vice President of the SIAC Court appointed the learned Sole
Arbitrator on 17.12.2018 under Rules 1.3, 9.3 and 12.1 of
the SIAC Rules. In making that appointment, SIAC decided
no dispute or right of either party, and its decision had no
finality under Section 11(7) of the Arbitration Act. The
question of jurisdiction remained open before the Tribunal,
which decided it in the Partial Award dated 12.06.2019.
SIAC therefore exercised a power the parties gave it, not the
judicial power of the Chief Justice.
29. In Narayan Prasad Lohia v. Nikunj Kumar
Lohia reported in (2002) 3 SCC 572 , the Apex Court held
that Section 34(2)(a)(v) of the Arbitration Act applies only if
the composition of the Arbitral Tribunal or the arbitral
procedure was not in accordance with the Agreement of the
27
parties. Where the composition is in accordance with the
Agreement, there can be no challenge under that provision.
Even where the composition is not in accordance with the
agreement but is in accordance with the Arbitration Act, the
award cannot be challenged. The Apex Court also
emphasised that arbitration is a creature of agreement, and
that a challenge to the composition of the Tribunal must be
taken before the Tribunal itself under Section 16(2) of the
Arbitration Act. In the instant case, the Vice President, who
is included in “President” by Rule 1.3, appointed the learned
Sole Arbitrator under Rules 9.3 and 12.1 of the SIAC Rules.
The composition of the Tribunal was therefore, in
accordance with the Agreement between the parties.
30. The appellant also contends that SIAC was biased
as an institution, because the learned counsel for the
respondents was on SIAC’s panel of arbitrators and was
appointed to the SIAC Court on 06.06.2019. In HRD
Corporation v. GAIL (India) Ltd. reported in (2018) 12
SCC 471 , the Apex Court held that the Fifth and Seventh
Schedules to the Arbitration Act are not to be construed in
28
the most expansive manner, so that the remotest likelihood
of bias gets removed. Doubts are justifiable only if a
reasonable third person would conclude that the arbitrator is
likely to be influenced by factors other than the merits, and
that test requires taking a broad commonsensical approach.
31. The learned Senior counsel also places reliance on
TRF Ltd. v. Energo Engineering Projects Ltd. reported in
(2017) 8 SCC 377 , and Perkins Eastman Architects
DPC v. HSCC (India) Ltd ., reported in ( 2020) 20 SCC
760 . In both cases, a party to the dispute itself appointed
the arbitrator, and the Apex Court held that the person who
has an interest in the outcome or decision of the dispute
must not have the power to appoint a sole arbitrator.
32. In Tamari v. Bache & Co. (Lebanon) S.A.L.,
619 F.2d 1196 (7th Cir. 1980) a challenge was made to
arbitration before a panel drawn from members of the
Chicago Board of Trade, on the ground that such a panel
was inherently biased. The Court of Appeals for the Seventh
Circuit in the United States rejected the challenge and held
that a party who had agreed to arbitration before that body
29
could not complain of a feature inherent in the very forum it
had chosen, and that the charge of bias has a hollow ring,
when made by a party who had agreed to it. It further held
that bias must be direct, definite and capable of
demonstration rather than remote, uncertain, or speculative.
33. The concept of neutrality and disclosure in arbitral
proceedings is intended to protect fairness and impartiality
of the arbitral proceedings. In the instant case, the parties
have expressly agreed that the SIAC would be the entity to
appoint an arbitrator if disputes arose. The fact that the
respondents' counsel was an arbitrator included in the panel
of arbitrators of the SIAC or that another counsel had later
been appointed to the SIAC Court cannot be reasons to state
that the SIAC, as an Institution, is rendered conflicted and
disabled to appoint an arbitrator. The real test to be applied
would be whether the Arbitrator has a disclosable connection
with a party or its counsel. There are no allegations as to
any bias or interest of the arbitrator.
34. In the instant case, the arbitrator was appointed
by SIAC and SIAC is an independent institution, which is not
30
a party to the dispute, has no interest in the outcome, and
both the parties have chosen the SIAC. The appellant shows
no relationship between the learned Sole Arbitrator and the
respondents or their counsel that falls under either Fifth or
Seventh Schedule of the Arbitration Act. The learned counsel
appearing for the respondent was one of more than 500
arbitrators on SIAC’s panel, and became a member of the
SIAC Court only on 06.06.2019, after the appointment of
the learned Sole Arbitrator on 17.12.2018. Therefore, the
mere fact that counsel for the respondents was on SIAC’s
panel of arbitrators, or later became a member of the SIAC
Court, does not mean that the learned Sole Arbitrator would
be biased.
35. Having considered the contentions advanced and
the decisions relied on by both the parties, we are unable to
agree with the proposition that the appointment of the
respondents' counsel on the panel of arbitrators by the SIAC
or the later appointment of another counsel as a member of
the Court would amount to the SIAC harbouring any
institutional bias, which would preclude the appointment of
31
an arbitrator by it. The SIAC was suggested as the authority
to nominate an arbitrator by the parties by their own free
will. There was no change in circumstances or supervening
disability, which prevented the SIAC from functioning as the
authority to nominate an arbitrator.
36. Having given our anxious consideration to the
entire arguments, we find no reason to disagree with the
findings of the learned Single Judge that the appellant had
failed to substantiate its contention or even an apprehension
of institutional bias as against the SIAC. We find no reason
to interfere with the order of the learned Single Judge.
37. Accordingly, the Commercial Appeal stands
dismissed.
All pending Interlocutory Applications shall stand
disposed of.
Sd/-
(ANU SIVARAMAN)
JUDGE
Sd/-
(T.P.VIVEKANANDA)
JUDGE
PN