HC Has Power To Review Its Order U/S 11(5) A&C Act Appointing Arbitrator: Patna HC
The Patna High Court has held that High Courts have the power to review its orders regarding the appointment of an arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996 (Act of 1996).
The Court allowed a review petition filed by the State to review the judgment appointing an arbitrator to decide a dispute arising from a contract between the Construction Division of the State (petitioner) and Kashish Developers Limited (respondent).
A Single Bench of Chief Justice K. Vinod Chandran remarked, “It is also a fact that by Arbitration & Conciliation (Amendment) Act, 2015 (Act 3 of 2016), the words “the Chief Justice or any person or institution designated by him” in sub sections 4, 5 and 6 of Section 11 of the Act of 1996 was substituted by the words, “the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court”. After the said amendment, the appointment made of an arbitrator is by the High Court and even an argument that it was passed by a persona designata; the Chief Justice will not stand scrutiny. Hence, there is no question of the review power not being available to this Court with respect to the proceedings under the Act of 1996.”
Advocate General P.K. Shahi appeared for the petitioner, while Senior Advocate Lalit Kishore represented the opposite party.
The petitioner submitted that the respondent did not follow the dispute resolution procedure under the General Conditions of Contract, which mentioned that any disputes arising from the contract must first be taken up with the Superintending Engineer, followed by an appeal to the Chief Engineer, before invoking arbitration.
Since the respondent completely failed to take up the issue with the Superintending Engineer or the Chief Engineer, the petitioner argued that there can be no appointment of an arbitrator under Section 11(6) of the Act of 1996.
The High Court noted that the procedure for arbitration as prescribed under the contract stated that an appointment was to be made by the Engineer-in-Chief or the head of the Public Works Division, which was not permissible under Section 12 read with Schedule-V of the Act of 1996.
The Bench referred to the decision in Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020), wherein the Apex Court held that the ineligibility as a result of operation of law, would not only be the ineligibility to act as an arbitrator, but also to appoint anyone else as an arbitrator. Therefore, the Court clarified that “the Engineer-in-Chief would not be entitled to appoint an arbitrator; the particular designate having been disqualified by operation of law.”
it was clarified that the absence of an express waiver of Section 12(5) Arbitration and Conciliation Act makes the arbitration clause otiose.
the Court referred to the decision in Municipal Corporation of Greater Mumbai v. Pratibha Industries Limited, (2019), wherein the Supreme Court emphasised Article 215 of the Constitution which designates the High Courts as courts of record which has jurisdiction to recall its own order. Therefore, the Apex Court held that the power of review exercised by the High Courts was proper.
“In the present case, as we noticed at the outset, despite a contention having been raised of consent, there is nothing recorded in the order, to find a consent of the parties…The contention that the arbitration clause was never invoked by the petitioner stands undisputed. Even if it was so invoked, the Engineer-in-Chief could not have appointed an arbitrator due to the disqualification arising from the Act of 1996,” the Court remarked.
The Court explained, “Hence, by reason of substitution of Section 12 by Act 3 of 2016, the arbitration clause enabling settlement of dispute through arbitration becomes otiose since the Engineer-in-Chief or the administrative head of the Public Works Division is dis-entitled from appointing an arbitrator.”
Accordingly, the High Court allowed the review petition.
Cause Title: The State of Bihar & Ors. v. Kashish Developers Limited
Appearance:
Petitioner: Advocate General P. K. Shahi; GA Ajay; AC Pratik Kumar Sinha and Uday Bhan Singh
Opposite Party: Senior Advocate Lalit Kishore; Advocates Ranjeet Kumar, Ayush Kumar, Shikhar Mani, Kanishka Shankar, Lakshmi Kumari and Rajnish Prakash
