Bar in appointing arbitrator who is in relationship with the parties or with the counsel or with the subject matter of the dispute: High Court of Uttarakhand.

IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL THE HON’BLE THE CHIEF JUSTICE SRI RAGHVENDRA SINGH CHAUHAN ARBITRATION APPLICATION NO. 19 OF 2020 06TH AUGUST 2021 Virendra Singh Rawat And Cantonment Board Dehradun Counsel for the applicant Mr. Mahanand Joshi and Mr. Kanti Ram. Counsel for the respondent Mr. B.S. Adhikari. The Court made the following: The present Arbitration Application has been filed under Section 11(6) the Arbitration and Conciliation Act 1996 ‘’the Act’ for short) for appointment of the sole Arbitrator. According to the learned counsel for the applicant the applicant is the contractor who undertakes government contracts for supplying material goods in relation to contracts entered with the Government and the Semi Government The respondent the Cantonment Board had invited tenders for “repair and maintenance of roads” in the year 2016. Consequently the applicant had submitted his the work on 15.11.2016. By order dated 30.03.2017 the said tender was accepted by the respondent. Therefore the work order contract was issued on 06.04.2017. According to the work order contract it was agreed that the respondent shall make payments within the time stipulated under the agreement. Moreover the respondent was under the duty to clear all the bills of the applicant within 18 days’ after which the amounts had become due. According to the applicant despite the fact that the work order was completed with utmost satisfaction no payments were received by the applicant in relation to the for work orders which are as under: S. No. Work Order Repairs of cement e56 70 300 Amount of Bill in INR) 58 96 982.28 Date of leading from back side Janta Hotel to Veterinary Dr. June 2017) near Jubli Qtrs. To Road Dehradun to House No.80 Cantt. PGL 5th March 2018) leading from Jubli to 5 Vikas R.P. Post Repairs of cement 8 78 6008 9 52 523.86 Repairs of Jeep 19 98 500 21 56 875.88 Repairs of Road 12 03 000 13 49 326.51 5. Estimate for 4 50 500 3 19 450.08 January 2019) chequered tile at Jadu Ghar Total Amounts of Works 1 02 00 900 1 06 75 158.61 Therefore according to the learned counsel for the applicant the respondent owes Rs.1 06 75 158.61 along with the GST. Since the respondent was not heeding to the request of the applicant on 17.06.2020 the applicant sent a legal notice requesting the respondent to both clear the outstanding bills and since disputes had arisen between the parties to appoint the sole Arbitrator ‘the Garrison Engineer’. According to Clause 19 of the Agreement the parties had agreed that in case disputes were to arise ‘the Garrison Engineer’ shall be appointed as the sole Arbitrator. In the letter dated 17.06.2020 the applicant had clearly stated that the Garrison Engineer shall be appointed within a period of thirty days from the date of the letter. 10. According to the learned counsel for the applicant letter dated 17.06.2020 was replied by the respondent on 14.08.2020. However in the letter dated 14.08.2020 the respondent maintained a study silence with regard to the appointment of the sole Arbitrator. In the letter dated 14.08.2020 the respondent merely directed the applicant to submit further documents including photographs of the construction work carried out by the applicant. There was no whisper about the appointment of an Arbitrator. 11. Since even after making a request for appointment of an Arbitrator and due to laxity on the part of the respondent in appointing the Arbitrator left with no other option the applicant filed the present Arbitration Application under Section 11(6) of the Act. 12. The respondent has filed its counter affidavit. According to Mr. B.S. Adhikari the learned counsel for the respondent on 15.10.2020 the respondent has appointed ‘the Garrison Engineer’ as the sole Arbitrator. The learned counsel for the respondent submits that although it is true that Section 12(5) of the Act does contain a bar which prevents the appointment of any person whose relationship is with the parties or the counsel or the subject matter of the dispute. However the proviso to said sub section clearly provides that the parties may subsequent to disputes having arisen between them waive the applicability of the sub section by an express agreement in writing. 13. According to Mr. B.S. Adhikari the learned counsel for the respondent since the request to appoint ‘the Garrison Engineer’ as the sole Arbitrator was made by the applicant by letter dated 17.06.2020 the applicant has waived the bar contained in Section 12(5) of the Act. Therefore the applicant is not entitled to pray to this Court for appointment of the sole Arbitrator. Hence according to the learned counsel for the respondent only ‘the Garrison Engineer’ can be appointed as the sole Arbitrator. 14. On the other hand Mr. Mahanand Joshi the learned counsel for the applicant submits that in the letter dated 17.06.2020 the period for appointment ‘the Garrison Engineer’ as the sole Arbitration was clearly stated ‘within thirty days’. Therefore if there is any waiver of the bar contained in Section 12(5) of the Act the waiver extends only for a period of thirty days and not beyond. Secondly despite the option of the waiver made by the applicant for a period of thirty days the respondent did not accept the request in fact made mentioned hereinabove. Even in its reply dated 14.08.2020 there was not a single word about the appointment of an Arbitrator. Thus there silence is a clear indication that it has rejected the request of the applicant for appointing ‘the Garrison Engineer’ as the sole Arbitrator. Thirdly since the respondent maintained a study silence and did not appoint the Arbitrator as requested within a period of thirty days the applicant had no option but to approach this Court under Section 11(6) of the Act for appointment of the sole Arbitrator. Therefore according to the learned counsel for the applicant once this Court is seized of the matter under Section 11(6) of the Act it is only this Court which has the power to appoint the sole Arbitrator. Hence according to the learned counsel for the applicant the contentions raised by Mr. B.S. Adhikari the learned counsel for the respondent is highly misplaced. perused the record. 15. Heard the learned counsel for the parties and 16. Section 12(5) of the Act is as under: “12(5). Notwithstanding any prior agreement to the contrary any person whose relationship with the parties or counsel or the subject matter of the dispute falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator: Provided that parties may subsequent to disputes having arisen between them waive the applicability of this sub section by an express agreement in writing”. 17. A bare perusal of the proviso clear reveals that it creates a bar with regard to the appointment of an Arbitrator who is in relationship with the parties or with the counsel or with the subject matter of the dispute. However the proviso contained an exception. The exception is that after disputes have arisen between the parties both the parties agreed by ‘an express agreement in writing’ only then can the bar contained in Section 12(5) of the Act be said to be the waiver by the parties. 18. Admittedly in the letter dated 17.06.2020 the applicant had requested for appointing ‘the Garrison Engineer’ as the sole Arbitrator. However the request had to be acted upon within a period of thirty days. Undoubtedly the respondent did not act on the said request within a period of thirty days. Moreover in the present case there has been no ‘express agreement in writing’ with regard to the waiver of the bar contained in Section 12(5) of the Act. Therefore the learned counsel for the respondent is not justified in claiming that by letter dated 17.06.2020 the applicant had waived the bar imposed by Section 12(5) of the Act. Moreover admittedly the applicant had filed the present applicant on 24.09.2020 before this Court. Even after the filing of the present application the respondent sat quietly over the request of the applicant for appointing ‘the Garrison Engineer’ as the sole Arbitrator till 15.10.2020. Therefore the learned counsel for the respondent is not justified in claiming that the respondent is legally justified in appointing ‘the Garrison Engineer’ as the sole Arbitrator in accordance with the arbitral clause. Hence the contention raised by the learned counsel for the respondent is clearly unacceptable. 19. Admittedly the disputes continue to exist between the parties. Obviously the dispute needs to be resolved through the arbitral proceedings. Therefore this Court appoints Mr. B.C. Kandpal Retd. Judge High Court of Uttarakhand R o 117 Rajeshwar Nagar Phase I Sahastradhara Road Dehradun as the sole Arbitrator after his disclosure in writing is obtained in terms of Section 11(8) of the Act and only after receipt thereof shall his appointment as an arbitrator come into force. 20. On giving consent to arbitrate the disputes between the parties Mr. B.C. Kandpal Retd. Judge High Court of Uttarakhand R o 117 Rajeshwar Nagar Phase I Sahastradhara Road Dehradun shall enter reference and shall pass an award in accordance with law. The learned arbitrator shall fix his fees in consultation with both the 21. The arbitration application is disposed of Dated: 06th August 2021 RAGHVENDRA SINGH CHAUHAN C.J.) 

Summary: Section 12(5) of the Arbitration and Conciliation Act, 1996 creates a bar with regard to the appointment of an Arbitrator who is in relationship with the parties or with the counselor with the subject matter of the dispute. However, the proviso contains an exception which states that, after disputes have arisen between the parties, if both the parties agree by ‘an express agreement in writing’, only then the bar contained in Section 12(5) of the Act can be waived by the parties. A single Judge bench comprising Hon’ble chief Justice Sri Raghvendra Singh Chauhan, in the matter of Virendra Singh Rawat Vs. Cantonment Board, Dehradun (ARBITRATION APPLICATION NO. 19 OF 2020), dealt with an issue where the petitioner filed the present Arbitration Application under Section 11(6) the Arbitration and Conciliation Act, 1996 (‘’the Act’ for short), for appointment of the sole Arbitrator. In the present case, according to counsel of the applicant, the applicant was the contractor who undertakes government contracts for supplying material/goods in relation to contracts entered with the Government and the Semi-Government Organization. The respondent had invited tenders for “repair and maintenance of roads” in the year 2016. Consequently, the applicant had submitted his rates for the work, and his tender was accepted by the respondent. It was agreed on the work contract that the respondent will make payments within the stipulated time agreed upon. Moreover, the respondent was under the duty to clear all the bills of the applicant within 18 days after which the amounts had become due. The applicant submitted that all the work were duly completed within the time but the payment was not received by the applicant and the respondent owed Rs 1,06,75,158.61/-. Further, the applicant sent a legal notice to the respondent informing them to pay the dues and also appoint the sole Arbitrator, ‘the Garrison Engineer’, as was agreed by both the parties in their agreement. The counsel further submitted that the respondent remained silent with regard to the appointment of the sole Arbitrator and, merely directed the applicant to submit further documents including photographs of the construction work carried out by the applicant. Thereby the applicant approached the court with the present petition. The counsel for the respondent submitted that since the request to appoint ‘the Garrison Engineer’ as the sole Arbitrator was made by the applicant, the applicant has waived the bar contained in Section 12(5) of the Act. Therefore, the applicant is not entitled to pray to this Court for the appointment of the sole Arbitrator. The counsel also submitted before the court that only ‘the Garrison Engineer’ can be appointed as the sole Arbitrator. The counsel for the applicant submitted that the court can appoint a sole arbitrator as, the period for appointment ‘the Garrison Engineer’ as the sole Arbitration was clearly stated ‘within thirty days’ in the legal notice. Further, the counsel submitted that if there was any waiver of the bar contained in Section 12(5) of the Act, the waiver extended only for a period of thirty days and not beyond. The counsel also pointed out that silence on the part of the respondent made it clear that they rejected the request of the applicant for appointing ‘the Garrison Engineer’ as the sole Arbitrator. Hence the applicant had no option but to approach this Court under Section 11(6) of the Act for appointment of the sole Arbitrator. The court observed- “Even after the filing of the present application, the respondent sat quietly over the request of the applicant for appointing ‘the Garrison Engineer’ as the sole Arbitrator till 15.10.2020. Therefore, the learned counsel for the respondent is not justified in claiming that the respondent is legally justified in appointing ‘the Garrison Engineer’ as the sole Arbitrator in accordance with the arbitral clause.” Therefore, the court appointed the sole arbitrator and disposed of the arbitration application accordingly. Click Here For The Judgement