Case: PERKINS EASTMAN ARCHITECTS DPC Vs. HSCC (INDIA) LIMITED

from today. 20. In the light of the aforestated principles, the report of the Law Commission and the decision in Voestapline Schienen Gmbh , the imperatives of creating healthy arbitration environment demand that the instant application deserves acceptance. 21. The further question that arises is whether the power can be exercised by this Court under Section 11 of the Act when the appointment of an arbitrator has already been made by the respondent and whether the appellant should be left to raise challenge at an appropriate stage in terms of remedies available in law. Similar controversy was gone into by a Designated Judge of this Court in Walter Bau AG (2015) 3 SCC 800 and the discussion on the point was as under:- 9. While it is correct that in Antrix (2014) 11 SCC 560 and Pricol Ltd. (2015) 4 SCC 177 , it was opined by this Court that after appointment of an arbitrator is made, the remedy of the aggrieved party is not under Section 11(6) but such remedy lies elsewhere and under different provisions of the Arbitration Act (Sections 12 and 13), the context in which the aforesaid view was expressed cannot be lost sight of. In Antrix (2014) 11 SCC 560 , appointment of the arbitrator, as per the ICC Rules, was as per the alternative procedure agreed upon, whereas in Pricol Ltd. (2015) 4 SCC 177 . , the party which had filed the application under Section 11(6) of the Arbitration Act had already submitted to the jurisdiction of the arbitrator. In the present case, the situation is otherwise. 10. Unless the appointment of the arbitrator is ex facie valid and such appointment satisfies the Court exercising jurisdiction under Section 11(6) of the Arbitration Act, acceptance of such appointment as a fait accompli to debar the jurisdiction under Section 11(6) cannot be countenanced in law. In the present case, the agreed upon procedure between the parties contemplated the appointment of the arbitrator by the second party within 30 days of receipt of a notice from the first party. While the decision in Datar Switchgears Ltd. 18 may have introduced some flexibility in the time frame agreed upon by the parties by extending it till a point of time anterior to the filing of the application under Section 11(6) of the Arbitration Act, it cannot be lost sight of that in the present case the appointment of Shri Justice A.D. Mane is clearly contrary to the provisions of the Rules governing the appointment of arbitrators by ICADR, which the parties had agreed to abide by in the matter of such appointment. The option given to the respondent Corporation to go beyond the panel submitted by ICADR and to appoint any person of its choice was clearly not in the contemplation of the parties. If that be so, obviously, the appointment of Shri Justice A.D. Mane is non est in law. Such an appointment, therefore, will not inhibit the exercise of jurisdiction by this Court under Section 11(6) of the Arbitration Act. It cannot, therefore, be held that the present proceeding is not maintainable in law. The appointment of Shri Justice A.D. Mane made beyond 30 days of the receipt of notice by the petitioner, though may appear to be in conformity with the law laid down in Datar Switchgears Ltd (2000) 8 SCC 151 . , is clearly contrary to the agreed procedure which required the appointment made by the respondent Corporation to be from the panel submitted by ICADR. The said appointment, therefore, is clearly invalid in law. 22. It may be noted here that the aforesaid view of the Designated Judge in Walter Bau AG (2015) 3 SCC 800 was pressed into service on behalf of the appellant in TRF Limited (2017) 8 SCC 377 and the opinion expressed by the Designated 1Judge was found to be in consonance with the binding authorities of this Court. It was observed:- 32 Mr Sundaram, learned Senior Counsel for the appellant has also drawn inspiration from the judgment passed by the Designated Judge of this Court in Walter Bau AG (2015) 3 SCC 800 , where the learned Judge, after referring to Antrix Corpn. Ltd 16 . , distinguished the same and also distinguished the authority in Pricol Ltd. v. Johnson Controls Enterprise Ltd. 17 and came to hold that: (Walter Bau AG case (2015) 3 SCC 800 , SCC p. 806, para 10) 10. Unless the appointment of the arbitrator is ex facie valid and such appointment satisfies the Court exercising jurisdiction under Section 11(6) of the Arbitration Act, acceptance of such appointment as a fait accompli to debar the jurisdiction under Section 11(6) cannot be countenanced in law. …33. We may immediately state that the opinion expressed in the aforesaid case is in consonance with the binding authorities we have referred to hereinbefore. 23. In TRF Limited (2017) 8 SCC 377 , the Managing Director of the respondent had nominated a former Judge of this Court as sole arbitrator in terms of aforesaid Clause 33(d), after which the appellant had preferred an application under Section 11(5) read with Section 11(6) of the Act. The plea was rejected by the High Court and the appeal therefrom on the issue whether the Managing Director could nominate an arbitrator was decided in favour of the appellant as stated hereinabove. As regards the issue about fresh appointment, this Court remanded the matter to the High Court for fresh consideration as is discernible from para 55 of the Judgment. In the light of these authorities there is no hindrance in entertaining the instant application preferred by the Applicants. 24. It is also clear from the Clause in the instant case that no special qualifications such as expertise in any technical field are required of an arbitrator. This was fairly accepted by the learned Senior Counsel for the respondent. 25. In the aforesaid circumstances, in our view a case is made out to entertain the instant application preferred by the Applicants.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]8. It is not disputed by the respondent that it was a requisite condition to declare a lead member of the Consortium and that by aforesaid declaration the applicant No.1 was shown to be the lead member of theConsortium. The reliance is however placed by the respondent on Clause 9 of the Consortium Agreement by virtue of which both the Applicants would be jointly and severely responsible for the execution of the project. It is clear that the declaration shows that the Applicant No.1 was accepted to be the lead member of the Consortium. Even if the liability of both the Applicants was stated in Clause 9 to be joint and several, that by itself would not change the status of the Applicant No.1 to be the lead member. We shall, therefore, proceed on the premise that Applicant No.1 is the lead member of the Consortium9. In Larsen and Toubro Limited SCOMI Engineering BHD 5 more or less similar fact situation came up for consideration. The only distinction was that the lead member in the consortium was an entity registered in India10. It was thus held that Association and Body of individuals referred to in Section 2(1)(f) of the Act would be separate categories. However, the lead member of the Association in that case being an Indian entity, the Central Management and Control of the Association was held to be in a country other than India. Relying on said decision we conclude that the lead member of the Consortium company i.e. Applicant No.1 being an Architectural Firm having its registered office in New York, requirements of Section 2(1)(f) of the Act are satisfied and the arbitration in the present case would be an International Commercial ArbitrationWe thus have two categories of cases. The first, similar to the one dealt with in TRF Limited (2017) 8 SCC 377    where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself but is empowered or authorised to appoint any other person of his choice or discretion as an arbitrator. If, in the first category of cases, the Managing Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or result of the dispute. The element of invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be the test, similar invalidity would always arise and spring even in the second category of cases. If the interest that he has in the outcome of the dispute, is taken to be the basis for the possibility of bias, it will always be present irrespective of whether the matter stands under the first or second category of cases. We are conscious that if such deduction is drawn from the decision of this Court in TRF Limited (2017) 8 SCC 377   , all cases having clauses similar to that with which we are presently concerned, a party to the agreement would be disentitled to make any appointment of an Arbitrator on its own and it would always be available to argue that a party or an official or an authority having interest in the dispute would be disentitled to make appointment of an Arbitrator16. But, in our view that has to be the logical deduction from TRF Limited (2017) 8 SCC 377  .  Paragraph 50 of the decision shows that this Court was concerned with the issue, whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an Arbitrator The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator. The next sentences in the paragraph, further show that cases where both the parties could nominate respective arbitrators of their choice were found to be completely a different situation. The reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter balanced by equal power with the other party. But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016) and recognised by the decision of this Court in TRF Limited (2017) 8 SCC 377  19. In Voestalpine 3 , this Court dealt with independence and impartiality of the arbitrator as under:20. Independence and impartiality of the arbitrator are the hallmarks of any arbitration proceedings. Rule against bias is one of the fundamental principles of natural justice which applied to all judicial and quasi- judicial proceedings. It is for this reason that notwithstanding the fact that relationship between the parties to the arbitration and the arbitrators themselves are contractual in nature and the source of an arbitrators appointment is deduced from the agreement entered into between the parties, notwithstanding the same non-independence and non- impartiality of such arbitrator (though contractually agreed upon) would render him ineligible to conduct the arbitration. The genesis behind this rational is that even when an arbitrator is appointed in terms of contract and by the parties to the contract, he is independent of the parties. Functions and duties require him to rise above the partisan interest of the parties and not to act in, or so as to further, the particular interest of either parties. After all, the arbitrator has adjudicatory role to perform and, therefore, he must be independent of parties as well as impartial. The United Kingdom Supreme Court has beautifully highlighted this aspect in Hashwani v. Jivraj (2011) 1 WLR 1872; 2011 UKSC 40 in the following words: (WLR p. 1889, para 45)45. … the dominant purpose of appointing an arbitrator or arbitrators is the impartial resolution of the dispute between the parties in accordance with the terms of the agreement and, although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not personal services under the direction of the parties21. Similarly, Cour de Cassation, France, in a judgment delivered in 1972 in Consorts Ury, underlined that:an independent mind is indispensable in the exercise of judicial power, whatever the source of that power may be, and it is one of the essential qualities of an arbitrator22. Independence and impartiality are two different concepts. An arbitrator may be independent and yet, lack impartiality, or vice versa. Impartiality, as is well accepted, is a more subjective concept as compared to independence. Independence, which is more an objective concept, may, thus, be more straightforwardly ascertained by the parties at the outset of the arbitration proceedings in light of the circumstances disclosed by the arbitrator, while partiality will more likely surface during the arbitration proceedings30. Time has come to send positive signals to the international business community, in order to create healthy arbitration environment and conducive arbitration culture in this country. Further, as highlighted by the Law Commission also in its report, duty becomes more onerous in government contracts, where one of the parties to the dispute is the Government or public sector undertaking itself and the authority to appoint the arbitrator rests with it. In the instant case also, though choice is given by DMRC to the opposite party but it is limited to choose an arbitrator from the panel prepared by DMRC. It, therefore, becomes imperative to have a much broadbased panel, so that there is no misapprehension that principle of impartiality and independence would be discarded at any stage of the proceedings, specially at the stage of constitution of the Arbitral Tribunal. We, therefore, direct that DMRC shall prepare a broadbased panel on the aforesaid lines, within a period of two months from today20. In the light of the aforestated principles, the report of the Law Commission and the decision in Voestapline Schienen Gmbhthe imperatives of creating healthy arbitration environment demand that the instant application deserves acceptance23. In TRF Limited (2017) 8 SCC 377 ,  the Managing Director of the respondent had nominated a former Judge of this Court as sole arbitrator in terms of aforesaid Clause 33(d), after which the appellant had preferred an application under Section 11(5) read with Section 11(6) of the Act. The plea was rejected by the High Court and the appeal therefrom on the issue whether the Managing Director could nominate an arbitrator was decided in favour of the appellant as stated hereinabove. As regards the issue about fresh appointment, this Court remanded the matter to the High Court for fresh consideration as is discernible from para 55 of the Judgment. In the light of these authorities there is no hindrance in entertaining the instant application preferred by the Applicants24. It is also clear from the Clause in the instant case that no special qualifications such as expertise in any technical field are required of an arbitrator. This was fairly accepted by the learned Senior Counsel for the respondent25. In the aforesaid circumstances, in our view a case is made out to entertain the instant application preferred by the Applicants22. It may be noted here that the aforesaid view of the Designated Judge in Walter Bau AG (2015) 3 SCC 800    was pressed into service on behalf of the appellant in TRF Limited (2017) 8 SCC 377    and the opinion expressed by the Designated 1Judge was found to be in consonance with the binding authorities of this Court. It was observed:-32 Mr Sundaram, learned Senior Counsel for the appellant has also drawn inspiration from the judgment passed by the Designated Judge of this Court in Walter Bau AG(2015) 3 SCC 800 ,  where the learned Judge, after referring to Antrix Corpn. Ltd 16 . , distinguished the same and also distinguished the authority in Pricol Ltd. v. Johnson Controls Enterprise Ltd. 17 and came to hold that: (Walter Bau AG case(2015) 3 SCC 800   , SCC p. 806, para 10)10. Unless the appointment of the arbitrator is ex facie valid and such appointment satisfies the Court exercising jurisdiction under Section 11(6) of the Arbitration Act, acceptance of such appointment as a fait accompli to debar the jurisdiction under Section 11(6) cannot be countenanced in law. …22. It may be noted here that the aforesaid view of the Designated Judge in Walter Bau AG (2015) 3 SCC 800    was pressed into service on behalf of the appellant in TRF Limited (2017) 8 SCC 377    and the opinion expressed by the Designated 1Judge was found to be in consonance with the binding authorities of this Court. It was observed:-32 Mr Sundaram, learned Senior Counsel for the appellant has also drawn inspiration from the judgment passed by the Designated Judge of this Court in Walter Bau AG(2015) 3 SCC 800 ,  where the learned Judge, after referring to Antrix Corpn. Ltd 16 . , distinguished the same and also distinguished the authority in Pricol Ltd. v. Johnson Controls Enterprise Ltd. 17 and came to hold that: (Walter Bau AG case(2015) 3 SCC 800   , SCC p. 806, para 10)10. Unless the appointment of the arbitrator is ex facie valid and such appointment satisfies the Court exercising jurisdiction under Section 11(6) of the Arbitration Act, acceptance of such appointment as a fait accompli to debar the jurisdiction under Section 11(6) cannot be countenanced in law. …33. We may immediately state that the opinion expressed in the aforesaid case is in consonance with the binding authorities we have referred to hereinbefore.