Full Judgment Text
$~49 (2022)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Date of Decision: 29 March, 2022
+ O.M.P. (T) (COMM) 34/2022
SACHEEROME ADVANCED
TECHNOLOGIES (SAT) ..... Petitioner
Through Ms Geeta Luthra, Senior Advocate with
Ms Kamakshi Gupta, Ms Manas Agrawal,
Advocates.
versus
NEC TECHNOLOGIES PVT. LTD. (NECI) ..... Respondent
Through Mr Ramesh Singh, Senior Advocate
with Mr Arjun Pall, Ms Satya Jha, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
VIBHU BAKHRU, J. (ORAL)
1. The petitioner has filed the present petition under Section 14 (2)
of the Arbitration and Conciliation Act, 1996 (hereafter ‘the A&C
Act’), inter alia , praying that the mandate of the learned Sole Arbitrator
be terminated.
2. The disputes between the parties have arisen in the context of an
agreement dated 11.06.2019 (the Agreement). On 08.10.2020, the
petitioner had issued a notice under Section 21 of the A&C Act,
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invoking the Arbitration Agreement and called upon the respondent to
concur on appointment of an arbitrator. The respondent rejected the said
request. Consequently, the petitioner filed a petition under Section 11
of the A&C Act [being ARB. P. 702/2020] seeking appointment of an
Arbitrator.
3. The said petition was allowed by an order dated 04.12.2020 and
Sh Rajiv Bansal, Senior Advocate (since deceased) was appointed as
the Sole Arbitrator to adjudicate the disputes between the parties.
4. The learned Arbitrator expired on 17.05.2021. In the
circumstances, the petitioner filed a petition before this Court under
Section 14(1)(a) read with Section 15 of the A& C Act being OMP (T)
(COMM) 74/2021. This Court disposed of the said petition by an order
dated 09.08.2021 and appointed Ms Radhika Biswajit Dubey, Advocate
as the Sole Arbitrator to adjudicate the disputes between the parties.
5. The petitioner is aggrieved by the manner in which the Arbitral
Tribunal has conducted the arbitral proceedings. It is also averred in the
present petition that the learned Arbitrator did not make the complete
disclosure as required under Section 12(1) of the A&C Act at the time
of accepting her appointment. She had, however, subsequently
disclosed that she had worked as a junior to one of the senior counsels
appearing for the petitioner. She had also worked with a law firm, which
had subsequently split. After the split she thereafter, was associated
with one of the resultant firms as a partner (not the firm representing the
respondent). The other resultant firm is representing the respondent.
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6. Ms Luthra, learned senior counsel appearing for the petitioner
states that the petitioner had not challenged the appointment of the
learned Arbitrator and had participated in the arbitral proceedings;
however, the learned Arbitrator’s inclinations were revealed
subsequently.
7. It is important to note that the learned Arbitrator had made full
disclosure at the first preliminary hearing held on 26.08.2021. This was
prior to the learned Arbitrator receiving the Arbitral record. She had
also recorded that none of the circumstances as disclosed fall foul of the
Fifth or the Seventh Schedule to the A&C Act. Nonetheless she had
made the disclosure for the comfort of the parties. Admittedly, the
petitioner did not express any reservations and participated in the
arbitral proceedings. However, in the present petition it is averred that
the learned Arbitrator’s “ direct and indirect ” contact and connection
with the Law firms. have created a reasonable apprehension as to the
independence and impartiality of the learned Arbitrator.
8. There is no dispute that the circumstances as disclosed by the
learned Arbitrator do not fall within the scope of the Fifth Schedule of
the A&C Act. Concededly, the petitioner had accepted the disclosure
and had unreservedly participated in the arbitral proceedings.
9. Although Ms Luthra, learned Senior Counsel appearing for the
petitioner had referred to the disclosure made by the learned Arbitrator
to suggest an apprehension of bias, she did not press the same. She has
confined the challenge to the appointment of the Arbitral Tribunal on
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two grounds. First, she submitted that the conduct of the Arbitral
Tribunal does not inspire confidence. She stated that the Arbitral
Tribunal had also found the petitioner (Claimant before the Arbitral
Tribunal) guilty of inordinate delays and had also imposed costs, even
though the alleged delays had occurred prior to the appointment of the
learned Arbitrator. She submits that the learned Arbitrator could not
have imputed any delay on the petitioner in conducting the arbitral
proceedings or approaching this Court for appointment of the
Arbitrator, in respect of a period prior to her appointment.
10. She also referred to certain correspondence (e-mails) exchanged
for fixing the dates of examination and the manner of conducting the
cross-examination (virtual or physical). She submits that the
Arbitrator’s conduct gives rise to apprehension of real likelihood of bias
on her part and the said Arbitrator is thus, de jure incapable of
performing her functions.
11. Second, Ms Luthra, submits that there has been an inordinate
delay on the part of the learned Arbitrator in conducting the arbitral
proceedings and therefore, she has failed to act with due dispatch.
12. It is seen that the petitioner had filed an application before the
learned Arbitrator under Section 15 read with Section 14(1)(a) of the
A&C Act seeking termination of her mandate, which was rejected.
13. The contention that the mandate of the learned Arbitrator stands
terminated under Section 14(1) of the A&C Act is unmerited. The
present petition is not maintainable.
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14. It is well settled that a petition under Section 14(1) of the A&C
Act cannot be filed to challenge appointment of the Arbitral Tribunal
on grounds as set out under Section 12(3) of the A&C Act. Any party
seeking to challenge the appointment of the arbitrator is required to do
so in accordance with the procedure set out in Section 13 of the A&C
Act. In the first instance, the said challenge is required to be considered
by the Arbitral Tribunal. In terms of Sub-section (3) of Section 13 of
the A&C Act, the learned Arbitrator could either withdraw from the
office failing which the Arbitral Tribunal is required to decide the said
challenge. In terms of Sub-section (4) of Section 13 of the A&C Act, if
the challenge is not successful, the Arbitral Tribunal is required to
continue with the arbitral proceedings and make an award. In such
circumstances, the only recourse available to a party challenging the
appointment of an Arbitrator under Section 13 of the A&C Act, is to
await for the arbitral award and if aggrieved, take recourse to the
provisions as set out under Section 34 of the A&C Act.
15. In the present case, the petitioner did not make any application
challenging the appointment of learned Arbitrator under Section 13 of
the A&C Act; it filed an application styled as under Section 16 read
with Section 14(1)(a) of the A&C Act. Nonetheless, in substance, the
petitioner had challenged the appointment of the learned Arbitrator. The
learned Arbitrator considered the said application and has since decided
the same. In the circumstances, the only recourse now available to the
petitioner is to proceed with the arbitral proceedings and challenge the
arbitral award under Section 34 of the A&C Act, if it so desires.
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16. The contention that Section 14 of the A&C Act provides a
separate remedy available to parties to challenge appointment of an
arbitrator, notwithstanding, the provisions under Section 13 of the A&C
Act, is unmerited. In Progressive Career Academy Pvt. Ltd. v.
FIITJEE Ltd.: 180 (2011) DLT 714, the Court had examined the
UNCITRAL Model Law and noted that the Parliament had not adopted
the Model Law in its entirety on the subject of impartiality of the
Arbitral Tribunal. The Court had further noted that a departure from the
said Model Law, indicated that the Indian Parliament did not want any
curial interference at an interlocutory stage of the arbitral proceedings
on the perceived ground of bias. The Court held that such a challenge
would be permissible only under Section 34 of the A&C Act after the
award had been rendered. The relevant extract of the said decision is set
out below:
“ 20. A comparison of the provisions dealing with the
challenge to the arbitrator's authority in the A&C Act and
the UNCITRAL Model Law discloses that there are
unnecessary and cosmetic differences in these provisions,
except for one significant and far-reaching difference. The
UNCITRAL Model Law, in Article 13(3), explicitly enables
the party challenging the decision of the Arbitral Tribunal
to approach the Court on the subject of bias or impartiality
of the Arbitral Tribunal. However, after making provisions
for a challenge to the verdict of Arbitral Tribunal on the
aspect of bias, the UNCITRAL Model Law prohibits any
further Appeal. It seems to us, therefore, that there is no
room for debate that the Indian Parliament did not want
curial interference at an interlocutory stage of the arbitral
proceedings on perceived grounds of alleged bias. In fact,
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| Section 13(5) of the A&C Act indicates that if a challenge | |
|---|---|
| has been made within fifteen days of the concerned party | |
| becoming aware of the constitution of the Arbitral Tribunal | |
| or within fifteen days from such party becoming aware of | |
| any circumstances pointing towards impartiality or | |
| independence of the Arbitral Tribunal, a challenge on this | |
| score is possible in the form of Objections to the Final | |
| Award under Section 34 of the A&C Act. Indeed, this is a | |
| significant and sufficient indicator of Parliament's resolve | |
| not to brook any interference by the Court till after the | |
| publication of the Award. Indian Law is palpably different | |
| also to the English, Australia and Canadian Arbitration | |
| Law. This difference makes the words of Lord Halsbury | |
| in Eastman Photographic Materials Co. all the more pithy | |
| and poignant. |
21. In this analysis, we must immediately observe that the
approach taken by one of us (Vikramajit Sen, J.)
in Interstate Constructions is not correct as it transgresses
and infracts the provisions of the A&C Act. Learned Single
Benches have interfered and removed arbitrators obviously
on pragmatic considerations, viz. the futility and idleness of
pursuing arbitral proceedings despite lack of faith therein
because of justifiable doubts as to the independence or
impartiality of the arbitrators. Clearly, Parliament has also
proceeded on the compelling expediency and advisability of
expeditious conclusion of these proceedings. Relief against
possible mischief has been provided by making clarification
in Section 13(5) that apart from the challenges enumerated
in Section 13(4), an assault on the independence or
impartiality of the Arbitral Tribunal is permissible by way
of filing Objections on this aspect after the publishing of the
Award. We, therefore, affirm the approach in Pinaki Das
Gupta, Neeru Walia, Ahluwalia Contracts (India)
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| Ltd. and Newton Engineering and Chemicals Ltd.. We are | |
|---|---|
| of the opinion that the Single Benches who interfered with | |
| the progress of the proceedings of the Arbitral Tribunal in | |
| the pre-Award stage fell in error. Humans often fall prey to | |
| suspicions which may be proved to be ill-founded on the | |
| publication of an Award. There is compelling wisdom in | |
| Parliament's decision to allow adjudication on grounds of | |
| bias, lack of independence or impartiality of the Tribunal | |
| only on the culmination of the arbitral proceedings.” |
17. This Court in HRD Corporation (Marcus Oil and Chemical
Division) v. GAIL (India) Ltd.: 2017 SCC OnLine Del 8034 held that
insofar as a challenge to the Arbitral Tribunal in the circumstances
referred is Section 12(3) of the A&C Act is concerned, recourse to
Section 14 of the A&C Act would not be available. However, in a case
where a person is ineligible to act as an arbitrator in terms of Section
12(5) of the A&C Act, a petition under Section 14 may be maintainable.
The said view was upheld by the Supreme Court in HRD Corporation
(Marcus Oil and Chemical Division) v. GAIL (India) Ltd.: (2018) 12
SCC 471 . The Supreme Court has authoritatively explained the said
scheme of the A&C Act as under:
“12. After the 2016 Amendment Act, a dichotomy is made
by the Act between persons who become “ineligible” to be
appointed as arbitrators, and persons about whom justifiable
doubts exist as to their independence or impartiality. Since
ineligibility goes to the root of the appointment, Section
12(5) read with the Seventh Schedule makes it clear that if
the arbitrator falls in any one of the categories specified in
the Seventh Schedule, he becomes “ineligible” to act as
arbitrator. Once he becomes ineligible, it is clear that, under
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| Section 14(1)(a), he then becomes de jure unable to perform | |
|---|---|
| his functions inasmuch as, in law, he is regarded as | |
| “ineligible”. In order to determine whether an arbitrator is | |
| de jure unable to perform his functions, it is not necessary | |
| to go to the Arbitral Tribunal under Section 13. Since such | |
| a person would lack inherent jurisdiction to proceed any | |
| further, an application may be filed under Section 14(2) to | |
| the Court to decide on the termination of his/her mandate on | |
| this ground. As opposed to this, in a challenge where | |
| grounds stated in the Fifth Schedule are disclosed, which | |
| give rise to justifiable doubts as to the arbitrator's | |
| independence or impartiality, such doubts as to | |
| independence or impartiality have to be determined as a | |
| matter of fact in the facts of the particular challenge by the | |
| Arbitral Tribunal under Section 13. If a challenge is not | |
| successful, and the Arbitral Tribunal decides that there are | |
| no justifiable doubts as to the independence or impartiality | |
| of the arbitrator/arbitrators, the Tribunal must then continue | |
| the arbitral proceedings under Section 13(4) and make an | |
| award. It is only after such award is made, that the party | |
| challenging the arbitrator's appointment on grounds | |
| contained in the Fifth Schedule may make an application for | |
| setting aside the arbitral award in accordance with Section | |
| 34 on the aforesaid grounds. It is clear, therefore, that any | |
| challenge contained in the Fifth Schedule against the | |
| appointment of Justice Doabia and Justice Lahoti cannot be | |
| gone into at this stage, but will be gone into only after the | |
| Arbitral Tribunal has given an award. Therefore, we express | |
| no opinion on items contained in the Fifth Schedule under | |
| which the appellant may challenge the appointment of either | |
| arbitrator. They will be free to do so only after an award is | |
| rendered by the Tribunal.” |
18. The contention that the Arbitral Tribunal has not acted with due
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dispatch is bereft of any merit. It is seen that the learned Arbitrator was
appointed on 09.08.2021. It is seen that a number of hearings have been
held by the Arbitral Tribunal despite the mitigating circumstances
resulting from the outbreak of Covid-19. The matter is at the stage of
recording of evidence.
19. Ms Luthra, spent considerable time in advancing arguments that
the appointment of the learned Arbitrator was completely unjustified in
changing the manner of hearings scheduled on 28.01.2022 to
30.01.2022 from physical to virtual by her communication dated
05.01.2022, ostensibly on account of surge in covid cases. She
submitted that the learned Arbitrator could under no possible
circumstance have any reason to know the status of covid cases on
28.01.2022.
20. A virtual hearing was held before the Arbitral Tribunal on
29.11.2021. The procedural order no.7 issued thereafter (on
03.12.2021) indicates that the Arbitral Tribunal had, with the consent
of the parties, scheduled sittings for three days – from 28.01.2022 to
30.01.2022 in physical board with two sessions per day. Apparently, the
same was fixed as the respondent’s witness (who had located to
Singapore) had expressed his inability to be physically present prior to
28.01.2022. The petitioner states that the respondent was willing for
cross-examination of his witness by the virtual mode for three days –
17.12.2021 to 19.12.2021.
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21. After the hearing was concluded before the Arbitral Tribunal on
29.11.2021, the petitioner sent an email dated 30.11.2021 requesting
that the cross-examination of witness be fixed for 17.12.2021 to
19.12.2021. However, the same was not acceptable to the respondent
and this was communicated by the learned counsel for the respondent
by its email dated 02.12.2021. Since the respondent did not accede to
the petitioner’s request for change in the schedule of hearings which
were fixed on 28.01.2022 to 30.01.2022, the same were retained by the
Arbitral Tribunal. Thereafter, on 05.01.2022, the Arbitral Tribunal
issued an email changing the mode of hearing fixed on 28.01.2022 to
30.01.2022 from physical to virtual on account of surge in Covid-19
cases. The learned counsel for the petitioner had objected to the same
by its email dated 19.01.2022 and requested that the mode of hearing as
fixed earlier be retained as there was a decrease in the number of Covid-
19 cases. There was an exchange of correspondence between the
parties.
22. It is in this context that Ms Luthra contends that the Arbitral
Tribunal ought to have retained the mode of hearing as physical and if
there was a surge in Covid-19 cases, she could have taken a decision on
a date closer to the dates of hearing.
23. The said contention is clearly without substance. It is common
knowledge that the number of Covid-19 cases had increased. It is
material to note that the petitioner did not immediately object to the
communication dated 05.01.2022. It did so after two weeks, that is, by
an email dated 19.01.2022. Interestingly, the reason provided by the
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petitioner for a delayed response is that the counsels on record were
“ down with COVID-19 in the first two weeks of January and were in
quarantine, and hence, they were unable to access their emails in due
course of time ”.
24. This is sufficient to demonstrate that the Arbitral Tribunal’s
decision to change the mode of hearing was not unjustified. The
contentions advanced on behalf of the petitioner in this regard are
unsubstantial.
25. It is also relevant to note that in view of the pandemic, the
Supreme Court has also passed various orders in Re: Cognizance for
Extension of Limitation: Suo Motu Writ Petition (Civil) No.3/2020 ,
extending the period of limitation in all cases including the time for an
Arbitral Tribunal to make an award as contemplated under Section 29A
of the A&C Act. The question whether the Arbitral Tribunal has acted
with due dispatch is required to be considered bearing the mitigating
circumstances resulting from the outbreak of Covid 19, in mind.
26. In the present case, this Court is unable to accept that the Arbitral
Tribunal has not acted with due dispatch or there has been any delay on
its part.
27. In view of the above, the present petition is dismissed with costs
quantified at ₹25,000/-. The costs shall be deposited with the Delhi
High Court Legal Services Committee within a period of two weeks
from date.
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28. It is clarified that nothing stated in this order shall preclude the
parties from raising such contentions, as advised, either before the
Arbitral Tribunal or before this Court under Section 34 of the A&C Act,
after the Arbitral Award has been rendered.
VIBHU BAKHRU, J
MARCH 29, 2022
pkv
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