Case: RAJASTHAN SMALL INDUSTRIES CORPORTION LIMITED Vs. M/S GANESH CONTAINERS MOVERS SYNDICATE

replacing of the arbitrator by another according to the rules that were applicable to the appointment of the original arbitrator who was being replaced. The term “rules” in Section 15(2) obviously referred to the provision for appointment contained in the arbitration agreement or any rules of any institution under which the disputes were referred to arbitration. There was no failure on the part of the party concerned as per the arbitration agreement, to fulfil his obligation in terms of Section 11 of the Act so as to attract the jurisdiction of the Chief Justice under Section 11(6) of the Act for appointing a substitute arbitrator. Obviously, Section 11(6) of the Act has application only when a party or the person concerned had failed to act in terms of the arbitration agreement. When Section 15(2) says that a substitute arbitrator can be appointed according to the rules that were applicable for the appointment of the arbitrator originally, it is not confined to an appointment under any statutory rule or rule framed under the Act or under the scheme. It only means that the appointment of the substitute arbitrator must be done according to the original agreement or provision applicable to the appointment of the arbitrator at the initial stage…….”[underlining added]As held in Yashwith Constructions, Section 11(6) of the Act would come into play only when there was failure on the part of the party concerned to appoint an arbitrator in terms of the arbitration agreement. In the case in hand, the High Court, in our view, was not right in appointing an independent arbitrator without keeping in view the terms of the agreement between the parties and therefore, the impugned order appointing an independent arbitrator/retired District Judge is not sustainable.35. Remedy to the Respondent-Contractor:- The award passed by the arbitrator dated 21.01.2016, whether sustainable, is the next question falling for consideration. As discussed earlier, after 17.08.2011 the Arbitral Tribunal could not make progress and as per the proceeding of the Arbitral Tribunal dated 17.08.2011, the arbitrator observed that the “…..missing papers are incomplete…..the chronological events need to be ascertained and reconstitution will be required….” . As pointed out earlier, the respondent filed application under Sections 11 and 15 of the Act of 1996 before the High Court on 13.05.2015. As per the proceedings of the Arbitral Tribunal dated 18.12.2015, the arbitration application before the High Court was brought to the notice of the tribunal and the same was recorded. On 05.01.2016, the respondent prayed for keeping the arbitration proceedings in abeyance and the matter was adjourned for 13.01.2016. The Arbitral Tribunal passed a detailed order on 13.01.2016 stating that the matter is pending for quite some time and on the basis of the available facts and materials, the matter will be finalized and adjourned the matter for 21.01.2016. On the basis of available materials, the Arbitral Tribunal passed the final award on 21.01.2016 awarding a sum of Rs.1,38,000/-, Rs.83,000/- and Rs.1,97,110/- in respect of claims at Serial Nos.3, 4 and 9 respectively to the claimant and the respondent’s claim in respect of other claims was rejected. So far as the counter claim of the appellant-Corporation in respect of Serial No.17, the arbitrator awarded a sum of Rs.58,39,018/-.36. Since the High Court was in seisin of the matter, the Arbitral Tribunal could have given further opportunity to the respondent to put forth his case. The proceedings of the Arbitral Tribunal was pending for quite some time from 2009 till 2015 and after the respondent approached the High Court in May, 2015, the arbitrator appears to have hurriedly passed the award. It is pertinent to note that the respondent was repeatedly praying for adjournment on 05.01.2016, 13.01.2016 and was not present on the date of passing of the final award dated 21.01.2016. As pointed out earlier, it was noted in the proceedings dated 17.08.2011 that the chronological events need to be ascertained and reconstruction will be required. It is not known whether the same was ascertained or not and whether reconstruction was done before passing the final award on 21.01.2016. The respondent has made number of claims under various heads. The respondent has to be given an opportunity to substantiate its claim under various heads. In order to do complete justice between the parties and in exercise of power under Article 142 of the Constitution of India, the award dated 21.01.2016 is to be set aside.37. In exercise of power under Article 142 of the Constitution of India, it is open to the court to mould the relief by safeguarding the interest of parties. The paramount consideration in such cases should be to ensure that there is no injustice caused. In Raj Kumar and others v. Union of India and another (2006) 1 SCC 737 , this Court held as under:-“19. …….in exercise of our powers under Article 142 of the Constitution in order to do complete justice to a section of the personnel who would otherwise be placed in an inequitable situation for which the authorities are also partly to blame. It is open to this Court to mould the relief by safeguarding the interest of the parties even while declaring the law. The paramount consideration in such cases should be to ensure that there is no injustice caused…….”38. The phrase “complete justice” engrafted in Article 142(1) is the word of width couched with elasticity to meet myriad situations created by human ingenuity or cause or result of operation of Statute law or law declared under Articles 32, 136 and 141 of the Constitution. (Vide Ashok Kumar Gupta and another v. State of U.P. and others (1997) 5 SCC 201 ) In the case in hand, to relegate the respondent to challenge the award under Section 34 of the Act, it would further prolong the litigation between the parties. Considering the facts of the case and in order to do complete justice between the parties, in exercise of power under Article 142 of the Constitution, the award dated 21.01.2016 is set aside.

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

Explanation:
1[ds]20. It is in this backdrop, the respondent has filed the arbitration petition before the High Court under Section 11 and Section 15 of the Arbitration and Conciliation Act, 1996 on 13.05.2015 seeking appointment of an independent arbitrator. As noted earlier, as per Clause 4.20.1 of Schedule-4 (General Conditions), the parties have agreed that all disputes and differences arising out of or in any way concerning the contract, shall be referred to the Managing Director himself or his nominees for the sole arbitration and that there will be no objection to any such appointment on the ground that the person so appointed is an employee of the Corporation and that he has dealt with the matter to which the contract relates. When the parties have consciously agreed that the disputes or differences shall be referred to the Managing Director himself or his nominee for sole arbitration and having participated in the arbitral proceedings before arbitrator for quite some time, the respondent cannot turn round and seek for appointment of an independent arbitrator.21. The respondent having participated in the proceedings before the arbitral tribunal for quite some time and also having expressed faith in the sole arbitrator, is not justified in challenging the appointment of the Managing Director of the appellant-Corporation as the sole arbitrator.The respondent has not placed any material to show that it has reason to believe that the arbitrator had not acted independently or impartially. The respondent has not brought on record any material to entertain an apprehension that the Managing Director of the appellant-Corporation is not likely to act independently or impartially. On the other hand, as noted earlier, as per the proceeding of the arbitral tribunal dated 21.10.2010, the respondent had expressed its full faith in the sole arbitrator and had also given a letter dated 21.10.2010 to that effect. The fact that the sole arbitrator is the Managing Director of the appellant-Corporation is not a ground to raise a presumption of bias or lack of independence on his part. The arbitration Clause 4.20.1 of Schedule-4 (General Conditions) stipulates a high official i.e. - Managing Director of the Corporation not connected with the contract or the work executed by the respondent. Having participated in the entire arbitration proceedings and acquiesced in the proceedings, the respondent is estopped from challenging the competence of the arbitrator. The respondent was not justified in filing the arbitration petition seeking appointment of an independentby virtue of Section 12 of the Amendment Act, the Managing Director has become ineligible toAfter the amendment to the Arbitration and Conciliation Act, 2015, Section 12(5) prohibits the employee of one of the parties from being an arbitrator. In the present case, the agreement between the parties was entered into on 28.01.2000 and the arbitration proceedings commenced way back in 2009 and thus, the respondent cannot invoke Section 12(5) of the Arbitration and Conciliation (Amendment) Act, 2015. As per Section 26 of the Act, the provisions of the amended Act 2015 shall not apply to the arbitral proceedings commenced in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree.24. In Board of Control for Cricket in India v. Kochi Cricket Private Limited and others, (2018) 6 SCC 287  , this Court held that the provisions of Amendment Act, 2015 (with effect from 23.10.2015) cannot have retrospective operation in the arbitral proceedings already commenced unless the parties otherwise agree. In the present case, there is nothing to suggest that the parties have agreed that the provisions of the new Act shall apply in relation to the arbitral proceedings.25. Contending that the sole arbitrator/Chairman-cum-Managing Director, by virtue of 2015 amendment, has become ineligible to act as the arbitrator, the learned counsel for the respondent placed reliance upon TRF Limited v. Energo Engineering Projects Limited (2017) 8 SCC 377.   In the said case, though the agreement/purchase order was dated 10.05.2014 (prior to the amendment), notice invoking arbitration was issued on 28.12.2015 (after the Amendment Act 2015) and the letter of the Managing Director nominating the arbitrator is dated 27.01.2016. In such factual matrix of the case, this Court has held that the named arbitrator-Managing Director of the respondent therein had become ineligible by operation of law and therefore, he cannot nominate another person as an arbitrator.The facts of the said case are entirely different from the case in hand. In the said case, when notice invoking arbitration was issued on 28.12.2015, after the Amendment Act, 2015 came into force with effect from 23.10.2015, by virtue of which the person named in the agreement became ineligible to act as the arbitrator. In the case in hand, the arbitration proceedings started way back in 2009 long before 2015 Amendment Act came into force and therefore, 2015 Amendment Act is not applicable to the case in hand. The statutory provisions that would govern the matter are those which were then in force before the Amendment Act.27. To fortify our view, we can usefully refer to the decision of this Court in Aravali Power Company Private Limited v. Era Infra Engineering Limited (2017) 15 SCC 32.   In this case, the invocation of arbitration was on 29.07.2015 and the arbitrator was appointed on 19.08.2015 and the parties appeared before the arbitrator on 07.10.2015 well before 23.10.2015 i.e. date on which the Amendment Act was deemed to have come into force. It was held that the statutory provisions that would therefore govern the controversy are those that were in force before the Amendment Act came into effect. This Court has therefore directed that the arbitration, in pursuance of the appointment of the arbitrator on 19.08.2015, shall proceed in accordance withthe High Court was right in terminating the mandate of the arbitrator appointed as per theThe main question falling for consideration is whetherthe High Court was right in terminating the mandate of the arbitrator appointed as per theagreement and appointing a substitute arbitrator in the application filed under Section 11(6) and Section 15 of the Arbitration Act. As pointed out earlier, the proceedings before the Arbitral Tribunal proceeded till 17.08.2011 and thereafter, no progress was made. The respondent issued legal notice on 07.02.2013 calling upon the appellant to pay Rs.3.90,81,602/- alleging that the said amount was settled during the course of proceedings before the Arbitral Tribunal. Reiterating the demand, the respondent has again sent the legal notice on 07.03.2013. However, no award came to be passed. The respondent filed application under Sections 11 and 15 of the Act of 1996 on 13.05.2015 seeking appointment of an independent arbitrator for adjudication of the disputes and differences between the appellant and the respondent.29.In support of his contention, the learned counsel for the respondent relied upon the decision in Union of India and others v. Uttar Pradesh State Bridge Corporation Limited (2015) 2 SCC 52.   Learned counsel for the respondent contended that the arbitrator failed to conclude the proceedings even after four years and the High Court rightly appointed the substitute arbitrator departing from the arbitration clause in the agreement between the parties.In the said case, since the Arbitral Tribunal did not pass award in spite of expiry of four years, the respondent thereon filed Request Case No.10/2010 and the High Court passed order dated 09.03.2011 giving the last chance to the Arbitral Tribunal to complete the arbitral proceedings within a period of three months. In para (6) of the judgment, this Court pointed out that the High Court took note of the various dates and hearings that are fixed by the Tribunal between 25.03.2011 and 25.06.2011 and came to the conclusion that the delay caused in the arbitral proceedings was intentional. After referring to Union of India v. Singh Builders Syndicate (2009) 4 SCC 523     and other judgments, this Court observed that the delays and frequent changes in the Arbitral Tribunal defeat the process of arbitration and therefore, the appointment of the arbitrator by the court of its own choice departing from the arbitration clause has become an acceptable proposition of law which can be termed as a legal principle which has come to be established by a series of judgments of this Court.Having regard to the factual matrix of the present case, in our considered view, the ratio of the said decision cannot be applied to the case in hand. Per contra, in the present case, the proceedings of the arbitral tribunal continued till 17.08.2011. From the proceeding of the arbitral tribunal dated 17.08.2011, it is seen that theobserved that the file regarding arbitration appears tampered/missing papers are incomplete and therefore, the chronological events need to be ascertained and reconstitution will beSection 15 deals with termination of the mandate and substitution of an arbitrator. Sub-section (1) of Section 15 states that in addition to the circumstances referred to in Sections 13 and 14 of the Act, the mandate of an arbitrator shall terminate where he withdraws from office for any reason or by pursuant to the agreement of the parties. In terms of sub-section (2), after termination ofmandate, the appointment of the substitute arbitrator shall be in accordance with the rules applicable to the appointment of an arbitrator who is beingheld in Yashwith Constructions, Section 11(6) of the Act would come into play only when there was failure on the part of the party concerned to appoint an arbitrator in terms of the arbitration agreement. In the case in hand, the High Court, in our view, was not right in appointing an independent arbitrator without keeping in view the terms of the agreement between the parties and therefore, the impugned order appointing an independent arbitrator/retired District Judge is not sustainable.Since the High Court was in seisin of the matter, the Arbitral Tribunal could have given further opportunity to the respondent to put forth his case. The proceedings of the Arbitral Tribunal was pending for quite some time from 2009 till 2015 and after the respondent approached the High Court in May, 2015, the arbitrator appears to have hurriedly passed the award. It is pertinent to note that the respondent was repeatedly praying for adjournment on 05.01.2016, 13.01.2016 and was not present on the date of passing of the final award dated 21.01.2016. As pointed out earlier, it was noted in the proceedings dated 17.08.2011 that the chronological events need to be ascertained and reconstruction will be required. It is not known whether the same was ascertained or not and whether reconstruction was done before passing the final award on 21.01.2016. The respondent has made number of claims under various heads. The respondent has to be given an opportunity to substantiate its claim under various heads. In order to do complete justice between the parties and in exercise of power under Article 142 of the Constitution of India, the award dated 21.01.2016 is to be set aside.37. In exercise of power under Article 142 of the Constitution of India, it is open to the court to mould the relief by safeguarding the interest of parties. The paramount consideration in such cases should be to ensure that there is no injustice caused.engrafted in Article 142(1) is the word of width couched with elasticity to meet myriad situations created by human ingenuity or cause or result of operation of Statute law or law declared under Articles 32, 136 and 141 of the Constitution. (Vide Ashok Kumar Gupta and another v. State of U.P. and others (1997) 5 SCC 201  ) In the case in hand, to relegate the respondent to challenge the award under Section 34 of the Act, it would further prolong the litigation between the parties. Considering the facts of the case and in order to do complete justice between the parties, in exercise of power under Article 142 of the Constitution, the award dated 21.01.2016 is set aside.