J&K&L HC Allows Appointment Of Independent Arbitrator In Substitution Of Sole Arbitrator Appointed Against Prohibition U/s. 12(5) A&C Act
The Jammu & Kashmir and Ladakh High Court has allowed the appointment of an Independent Arbitrator in substitution of a Sole Arbitrator against the prohibition contained in Section 12(5) of the Arbitration and Conciliation Act, 1996 (the Act) read with Schedule 7 thereof.
The Petition has been filed by the Company (Petitioner) under Sections 14 and 15 of J&K Arbitration and Conciliation Act, 1997 for the appointment of an Independent Arbitrator in substitution of the Sole Arbitrator.
A Single Bench of Chief Justice Tashi Rabstan remarked, “In view of the facts and circumstances of the case and the above referred judgments passed by the Supreme Court and in view of amended Section 12(5) of the Arbitration and Conciliation Act, 1996 read with the Seventh Schedule, I am of the considered opinion that continuation of earlier arbitrator in this case would be against the law governing the field. Resultantly, this petition is allowed. The mandate of the earlier Arbitrator as well as the proceedings before him is terminated.”
Advocate I H Bhat represented the Petitioner, while Senior AAG Monika Kohli appeared for the Respondents.
The Executive Engineer, Irrigation and Food Control Department issued an NIT for the construction of a Canal. The State Level Contract Committee approved the bid and allotted tender work for the Construction of the Canal in favour of the Petitioner for an amount of Rs.23.68 Crore on a turnkey basis.
After the allotment of work to the Petitioner, the work got delayed, which included the flow of perennial stream, militancy prone area and the Amar Nath Land row and other lapses on the part of the Respondents.
An application under Section 12 of the Arbitration and Conciliation Act, 1997 was filed by the Petitioner before the Sole Arbitrator to refer dispute before a new Independent Arbitrator who vide his order dismissed the application without giving any fair opportunity of hearing to the Petitioner.
It was averred in the Petition that an independent arbitrator was required to be appointed in this case as the continuation of Chief Engineer, Irrigation as Arbitrator in this case is against prohibition contained in Section 12(5) of the Act read with Schedule 7 thereof.
The High Court referred to the Supreme Court’s decision in Haryana Space Application Centre (HARSAC) v. M/s Pan India Consultants Pvt. Ltd. (2021), wherein it was held, “Appointment of the Principal Secretary, Government of Haryana as the nominee arbitrator of HARSAC…would be invalid under Section 12(5) of the Arbitration and Conciliation Act, 1996 read with the Seventh Schedule. Section 12(5) of the Arbitration Act, 1996 provides that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties, or counsel, falls within any of the categories specified in the Seventh Schedule, shall be ineligible to be appointed as an arbitrator…Section 12(5) read with the Seventh Schedule is a mandatory and non-derogable provision of the Act. In the facts of the present case, the Principal Secretary to the Government of Haryana would be ineligible to be appointed as an arbitrator, since he would have a controlling influence on the Appellant Company being a nodal agency of the State.”
Consequently, the Court appointed a sole Arbitrator in this case and directed him to “proceed in the matter in accordance with the provisions of the Act to make an award within the time provided in the Act itself, after charging the prescribed fee along with incidental expenses to be shared by the parties.”
Accordingly, the High Court allowed the Petition.
Cause Title: M/s Mir Associates Construction Company v. Superintending Engineer Hydraulic Circle Doda & Anr.
Petitioner: Advocates I H Bhat and Mohd. Akeel Wani
Respondents: Senior AAG Monika Kohli