Madhya Pradesh High Court

Rajkumar Tamotia vs Alok Sharma on 22 May, 2024
IN THE HIGH COURT OF MADHYA PRADESH
AT G WA L I O R
BEFORE
HON'BLE SHRI JUSTICE VINAY SARAF

ARBITRATION CASE No. 48 of 2024

BETWEEN:-
RAJKUMAR TAMOTIA S/O LATE SHRI
1.
PRAKASH CHAND TAMOTIA, AGED
ABOUT 57 YEARS, OCCUPATION:
BUSINESS R/O 6, MUNSHIPURI, GOLE KA
MANDIR , MURAR GWALIOR (MADHYA
PRADESH)
SMT ANJANA TAMOTIA W/O SHRI
2.
RAJKUMAR TAMOTIA, AGED ABOUT 54
YEARS, OCCUPATION: BUSINESS R/O 6
MUNSHIPURI GOLE KA MANDIR MORAR
GWALIOR (MADHYA PRADESH)
.....PETITIONER
(SHRI CHETAN KANUNGO - ADVOCATE)

AND
ALOK SHARMA S/O LATE SHRI KEDAR
NATH SHARMA ADDRESS 1 ST FLOOR,
ACHALESHWAR MANSION, LALITPUR
COLONY LASHKAR GWALIOR M.P.
(MADHYA PRADESH)
.....RESPONDENTS
(SHRI SAMEER KUMAR SHRIVASTAVA - ADVOCATE FOR
RESPONDENT
..........................................................................................................................
Reserved on : 14.05.2024

Delivered on : 22.05.2024
........................................................................................................

This petition having been heard and reserved for orders
coming on for pronouncement this day, delivered the following:-

ORDER

1. Present application is preferred by applicants under
Section
of the Arbitration and Conciliation Act, 1996 (in short, "Act
1996") for appointment of Arbitrator. The relief prayed for are as
under:-

(1) Appointment of Shri Vinod Kumar Bhardwaj
(Senior Advocate) as the arbitrator be set
aside/annulled and the proceedings undertaken so far
be declared to be void and non-est.
(2) Appoint an impartial, independent, and neutral
arbitrator to preside over the arbitral proceedings and
resolve the disputes between the parties herein;
(3) Any other relief, which this Hon'ble Court may
deem fit and appropriate in the facts and
circumstances of the case, may also be ordered;
(4) Costs.

2. Brief facts of the case are that the applicants entered into an
agreement with non-applicant on 12.09.2019 for the purpose of
construction of complex. Clause 15 of the contract reads as
under:-

15- ;g fd mHk; i{k ds e/; ;g Hkh r; gqvk gS fd bl
vuqca/k i= dk mHk; i{k dMkbZ ls ikyu djsxs vkSj fdlh Hkh
fookn dh n'kk esa e/;LFkrk gsrq Jh fouksn dqekj Hkkj}kt ofj"B
vfHkHkk"kd dks fu;qDr fd;k tk;sxk rFkk muds }kjk fn;k x;k
fu.kZ; mHk; i{k dks ekuuk gksxkA

3. As per the applicants, after the execution of the agreement
between the parties for the purpose of construction and
development of the property belongs to non-applicant, the
applicants completed the construction of building/structure and
thereafter due to some dispute between the parties in February,
2024 the applicants received communication/notice dated
16.02.2024 issued by non-applicant and addressed to Shri Vinod
Kumar Bhardwaj, Senior Advocate (sole Arbitrator) wherein it
was stated that since dispute has arisen in context of agreement
dated 12.09.2019, the matter is referred for the purpose of
adjudication by sole Arbitrator nominated by the parties in the
agreement itself. The applicants after receipt of the information
regarding referring of the dispute to the sole named Arbitrator
made a request to the non-applicant to discuss, negotiate and settle
the alleged disputes amicably without the intervention of an
Arbitrator or courts of law but the same was not accepted by the
non-applicant and consequently applicants issued
notice/communication dated 08.04.2024 once again requested to
the non-applicant to resolve the dispute without intervention of
third party and also objected regarding the appointment of Shri
Vinod Kumar Bhardwaj, Senior Advocate as sole Arbitrator and
requested the non-applicant to propose the name of an impartial
and neutral arbitrator. The request of the applicants was not
accepted by non-applicant and sole arbitrator has started the
proceedings and appointed Shri Arun Vajpayee, Advocate as
Advocate Commissioner for the purpose of inspection of the site
in question and directed the parties to be present on the site on
21.04.2024.

4. The applicants have approached this Court with a request to
set aside/annulled the proceedings undertaken by the sole
arbitrator and appoint an impartial, independent and neutral
arbitrator. The sole ground of challenge to the appointment of sole
arbitrator who was named in the contract is on the basis that non-
applicant was having the professional relation with the sole
arbitrator and, therefore, the sole arbitrator is ineligible to act as
Arbitrator in view of the provisions of
Section 12(5)
read with 7 th

Schedule of the Act, 1996
.

5. Non-applicant opposed the prayer of the applicants by
submitting the detailed reply wherein the execution of agreement
is admitted. Issuance of communication dated 16.02.2024 is also
admitted. Receipt of notice dated 8.4.2024 issued by the applicants
and replied by non-applicant on 12.04.2024 are also admitted.
However, it is submitted that sole arbitrator is not ineligible on
account of professional ties and relationship between him and the
non-applicant and the name of the sole arbitrator was accepted by
the parties at the time of execution of agreement, therefore, the
same amounts to waiving of the objection. It is further stated in
the reply that the procedure for challenging the appointment of the
arbitrator and termination of the mandate is prescribed in
Section
,
,
of the Act,1996 and the issue cannot be agitate before
this Court in the proceedings initiated under
Section 11
of the Act
of 1996. It is further stated in the reply that if the applicants are
aggrieved by the appointment of the arbitrator and there are any
justifiable ground to doubt the independence and impartiality of
the arbitrator, applicants may raise this ground before the
arbitrator himself and the arbitrator is empowered to decide the
same under the provisions of
Section 13
of the Act, 1996 and
thereafter the decision of the arbitrator may be challenged before
the Court under
Section 34
of the Act. It is further stated in the
reply that even in case the arbitrator has become ineligible due to
the relationship with the parties or counsel of the subject matter of
the dispute falls under any of the categories specified in the 7 th
Schedule, the remedy lies to the applicants are to approach to the
competent court for termination of the mandate on the ground that
the arbitrator has become de jure and unable to perform his
functions and the same relief cannot be prayed before this Court
under
Section 11
of the Act. Non applicant prayed for dismissal of
the application.

6. After considering the pleadings of the parties, it appears that
the following issue is involved in the present application:-

Whether the High Court in exercise of its power
under
Section 11
of the Act, 1996 can set aside/annulled
and the proceedings undertaken by the sole named
arbitrator and appoint new arbitrator ?

7. Learned counsel for the applicants submits that the
relationship between the non-applicant and the named arbitrator is
admitted and there is no iota of doubt that the named arbitrator is
ineligible to preside over the arbitration proceedings in view of the
embargo stipulated under
Section 12(5)
of the Act read with 7 th
Schedule and in such circumstances when the named Arbitrator is
de jure ineligible to continue as the arbitrator, the proceedings
undertaken by the arbitrator are void ab initio and the same be set
aside/annulled and independent, impartial and neutral arbitrator be
appointed. He further submits that the applicants are raising the
issue mainly on the ground of ineligibility of the arbitrator under

Section 12 (5)
of the Act and, therefore, there is no need to
approach to the Court for termination of the mandate as the same
is automatically terminated. He relied on the law laid down by the
Apex Court in the case of
Bharat Broadband Network Lt. vs.
United Telecoms Ltd.
(2019) 5 SCC 755 and para 17 and 18
reads as under:-

17.The scheme of Sections 12, 13 and 14, therefore, is that
where an arbitrator makes a disclosure in writing which is likely
to give justifiable doubts as to his independence or impartiality,
the appointment of such arbitrator may be challenged under
Sections 12(1) to 12(4) read with Section 13. However, where
such person becomes "ineligible" to be appointed as an
arbitrator, there is no question of challenge to such arbitrator,
before such arbitrator. In such a case i.e. a case which falls
under Section 12(5),
Section 14(1)(a)
of the Act gets attracted
inasmuch as the arbitrator becomes, as a matter of law (i.e. de
jure), unable to perform his functions under Section 12(5), being
ineligible to be appointed as an arbitrator. This being so, his
mandate automatically terminates, and he shall then be
substituted by another arbitrator under Section 14(1) itself. It is
only if a controversy occurs concerning whether he has
become de jure unable to perform his functions as such, that a
party has to apply to the Court to decide on the termination of
the mandate, unless otherwise agreed by the parties. Thus, in all
Section 12(5) cases, there is no challenge procedure to be
availed of. If an arbitrator continues as such, being de
jure unable to perform his functions, as he falls within any of the
categories mentioned in Section 12(5), read with the Seventh
Schedule, a party may apply to the Court, which will then decide
on whether his mandate has terminated. Questions which may
typically arise under Section 14 may be as to whether such
person falls within any of the categories mentioned in the
Seventh Schedule, or whether there is a waiver as provided in
the proviso to
Section 12(5)
of the Act. As a matter of law, it is
important to note that the proviso to Section 12(5) must be
contrasted with
Section 4
of the Act.
Section 4
deals with cases
of deemed waiver by conduct; whereas the proviso to Section
12(5) deals with waiver by express agreement in writing
between the parties only if made subsequent to disputes having
arisen between them.

18. On the facts of the present case, it is clear that the
Managing Director of the appellant could not have acted as an
arbitrator himself, being rendered ineligible to act as arbitrator
under Item 5 of the Seventh Schedule, which reads as under:
"Arbitrator's relationship with the parties or counsel
***

5. The arbitrator is a manager, director or part of the
management, or has a similar controlling influence, in an
affiliate of one of the parties if the affiliate is directly involved
in the matters in dispute in the arbitration."

Whether such ineligible person could himself appoint another
arbitrator was only made clear by this Court's judgment
in
TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd.
, (2017) 8
SCC 377 : (2017) 4 SCC (Civ) 72] on 3-7-2017, this Court
holding that an appointment made by an ineligible person is
itself void ab initio. Thus, it was only on 3-7-2017, that it
became clear beyond doubt that the appointment of Shri Khan
would be void ab initio. Since such appointment goes to
"eligibility" i.e. to the root of the matter, it is obvious that Shri
Khan's appointment would be void. There is no doubt in this
case that disputes arose only after the introduction of Section
12(5) into the statute book, and Shri Khan was appointed long
after 23-10-2015.

The judgment in
TRF Ltd. [TRF
Ltd. v. Energo Engg. Projects Ltd.
, (2017) 8 SCC 377 : (2017)
4 SCC (Civ) 72] nowhere states that it will apply only
prospectively i.e. the appointments that have been made of
persons such as Shri Khan would be valid if made before the
date of the judgment. Section 26 of the Amendment Act, 2015
makes it clear that the Amendment Act, 2015 shall apply in
relation to arbitral proceedings commenced on or after 23-10-
2015. Indeed, the judgment itself set aside the order
appointing the arbitrator, which was an order dated 27-1-
2016, by which the Managing Director of the respondent
nominated a former Judge of this Court as sole arbitrator in
terms of Clause 33(d) of the purchase order dated 10-5-2014.
It will be noticed that the facts in the present case are
somewhat similar.

The APO itself is of the year 2014, whereas
the appointment by the Managing Director is after the
Amendment Act, 2015, just as in
TRF Ltd. [TRF Ltd. v. Energo
Engg. Projects Ltd.
, (2017) 8 SCC 377 : (2017) 4 SCC (Civ)
72] Considering that the appointment in
TRF Ltd. [TRF
Ltd. v. Energo Engg. Projects Ltd.
, (2017) 8 SCC 377 : (2017)
4 SCC (Civ) 72] of a retired Judge of this Court was set aside
as being non est in law, the appointment of Shri Khan in the
present case must follow suit."

8. The counsel further submits that as per
Section 14(2)
of the
Act, the parties can apply to the Court, only in the event if there is
any controversy remaining with respect to the termination of
mandate is concerned which is in the instant case is squarely
covered by the admission of the non-applicant and by virtue of
operation of law, there is no occasion to initiate such proceedings
before the Court.

9. The counsel for the applicants further relied on the
pronouncement of the Apex Court in the matter of
TRF Limited
vs. Energy Engineering Project Limited
2017 (8) SCC 377
which reads as under:-

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 [Walter Bau
AG v. Municipal Corpn. of Greater Mumbai
, (2015) 3 SCC
800 : (2015) 2 SCC (Civ) 450] , where the learned Judge, after
referring to
Antrix Corpn. Ltd. [Antrix Corpn. Ltd. v. Devas
Multimedia (P) Ltd.
, (2014) 11 SCC 560 : (2014) 4 SCC (Civ)
147] , distinguished the same and also distinguished the
authority in
Pricol Ltd. v. Johnson Controls Enterprise
Ltd. [Pricol Ltd.
v. Johnson Controls Enterprise Ltd., (2015) 4
SCC 177 : (2015) 2 SCC (Cri) 530] and came to hold that :

(
Walter Bau AG
case [
Walter Bau AG v. Municipal Corpn. of
Greater Mumbai
, (2015) 3 SCC 800 : (2015) 2 SCC (Civ) 450] ,
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.

10.
In case of
Aravali Power Company Private Ltd. vs. Era
Infra Engineering Ltd.
(2017) 15 SCC 32, Apex Court has
crystalized the guidelines in appointment of arbitrator after
amended Act under
Arbitration and Conciliation Act
has come into
force. Relevant para 22B is quoted as under:

"22B. If the arbitration clause finds foul with the amended
provisions, the appointment of the Arbitrator even if apparently
in conformity with the arbitration clause in the agreement,
would be illegal and thus the Court would be within its powers
to appoint such arbitrator(s) as may be permissible."

11. The Apex Court in the case of
Perkins Eastman Architects
DPC vs. HSCC (India) Ltd.
AIR 2020 SC 59 has held as under:

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 [Walter Bau
AG v. Municipal Corpn. of Greater Mumbai
, (2015) 3 SCC
800 : (2015) 2 SCC (Civ) 450] and the discussion on the point
was as under : (SCC pp. 805-06, paras 9-10)
"9. While it is correct that in Antrix [Antrix Corpn.

Ltd. v. Devas Multimedia (P) Ltd.
, (2014) 11 SCC 560 :

(
2014) 4 SCC (Civ) 147] and Pricol Ltd. [Pricol
Ltd. v. Johnson Controls Enterprise Ltd.
, (2015) 4 SCC
177 : (2015) 2 SCC (Civ) 530] , 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 [Antrix Corpn. Ltd. v. Devas Multimedia (P) Ltd.
,
(2014) 11 SCC 560 : (2014) 4 SCC (Civ) 147] , appointment
of the arbitrator, as per the ICC Rules, was as per the
alternative procedure agreed upon, whereas in
Pricol
Ltd. [Pricol Ltd. v. Johnson Controls Enterprise Ltd.
, (2015)
4 SCC 177 : (2015) 2 SCC (Civ) 530] , 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. [Datar Switchgears Ltd. v. Tata Finance
Ltd.
, (2000) 8 SCC 151] 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. [Datar Switchgears Ltd. v. Tata Finance
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 [Walter Bau AG v. Municipal Corpn. of
Greater Mumbai
, (2015) 3 SCC 800 : (2015) 2 SCC (Civ) 450]
was pressed into service on behalf of the appellant in
TRF
Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd.
, (2017) 8 SCC 377 :

(2017) 4 SCC (Civ) 72] and the opinion expressed by the
Designated Judge was found to be in consonance with the binding
authorities of this Court. It was observed : (
TRF
case [
TRF
Ltd. v. Energo Engg. Projects Ltd.
, (2017) 8 SCC 377 : (2017) 4
SCC (Civ) 72] , SCC p. 397, paras 32-33)
"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 [Walter Bau AG v. Municipal Corpn. of Greater
Mumbai
, (2015) 3 SCC 800 : (2015) 2 SCC (Civ) 450] ,
where the learned Judge, after referring to Antrix Corpn.

Ltd. [Antrix Corpn. Ltd. v. Devas Multimedia (P) Ltd.
,
(2014) 11 SCC 560 : (2014) 4 SCC (Civ) 147] ,
distinguished the same and also distinguished the authority
in
Pricol Ltd. v. Johnson Controls Enterprise Ltd. [Pricol
Ltd.
v. Johnson Controls Enterprise Ltd., (2015) 4 SCC
177 : (2015) 2 SCC (Civ) 530] and came to hold that :

(
Walter Bau AG
case [
Walter Bau AG v. Municipal Corpn.
of Greater Mumbai
, (2015) 3 SCC 800 : (2015) 2 SCC (Civ)
450] , 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 Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd.
, (2017) 8
SCC 377 : (2017) 4 SCC (Civ) 72] , the Managing Director of the
respondent had nominated a former Judge of this Court as sole
arbitrator in terms of the 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.

12. The Apex Court in the case of
Jaipur Zila Dugdh Utpadak
Sahkari Sangh Ltd. v. Ajay Sales & Suppliers
, (2021) 17 SCC
248 has held as under:-

8.3 So far as the submission on behalf of the petitioners that
the agreement was prior to the insertion of sub-section (5) of

Section 12
read with the
Seventh Schedule to the Act
and
therefore the disqualification under sub-section (5) of
Section 12

read with the
Seventh Schedule to the Act
shall not be applicable
and that once an arbitrator Chairman started the arbitration
proceedings thereafter the High Court is not justified in
appointing an arbitrator are concerned the aforesaid has no
substance and cannot be accepted in view of the decision of this
Court in
TRF Ltd. v. Energo Engg. Projects Ltd. [TRF
Ltd.
v. Energo Engg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4
SCC (Civ) 72] ;
Bharat Broadband Network Ltd. v. United
Telecoms Ltd. [Bharat Broadband Network Ltd.
v. United
Telecoms Ltd., (2019) 5 SCC 755 : (2019) 3 SCC (Civ)
1] ;
Voestalpine Schienen GmbH v. Delhi Metro Rail Corpn
.

Ltd. [Voestalpine Schienen GmbH v. Delhi Metro Rail Corpn.
Ltd.
, (2017) 4 SCC 665 : (2017) 2 SCC (Civ) 607] In the
aforesaid decisions this Court had an occasion to consider in
detail the object and purpose of insertion of sub-section (5) of

Section 12
read with the
Seventh Schedule to the Act
.

10. It is further observed and held by this Court in
Voestalpine
Schienen GmbH [Voestalpine Schienen GmbH v. Delhi Metro
Rail Corpn. Ltd.
, (2017) 4 SCC 665 : (2017) 2 SCC (Civ) 607]
that 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 apply
to all judicial and quasi-judicial proceedings. It is further
observed that 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 arbitrator's appointment is deduced from the agreement
entered into between the parties, notwithstanding the same non-
independence and non-impartiality of such arbitrator would
render him ineligible to conduct the arbitration. It is further
observed that the genesis behind this rationale 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.

18. Now so far as the submission on behalf of the petitioners
that the respondents participated in the arbitration proceedings
before the sole arbitrator -- the Chairman and therefore he
ought not to have approached the High Court for appointment
of the arbitrator under
Section 11
is concerned, the same has
also no substance. As held by this Court in
Bharat Broadband
Network Ltd. [Bharat Broadband Network Ltd. v. United
Telecoms Ltd.
, (2019) 5 SCC 755 : (2019) 3 SCC (Civ) 1] there
must be an "express agreement" in writing to satisfy the
requirements of
Section 12(5)
proviso. In paras 15 & 20 it is
observed and held as under : (SCC pp. 768 & 770-71)
"15.
Section 12(5)
, on the other hand, is a new provision
which relates to the de jure inability of an arbitrator to act as
such. Under this provision, any prior agreement to the
contrary is wiped out by the non obstante clause in
Section
12(5)
the moment any person whose relationship with the
parties or the counsel or the subject-matter of the dispute
falls under the Seventh Schedule. The sub-section then
declares that such person shall be "ineligible" to be
appointed as arbitrator. The only way in which this
ineligibility can be removed is by the proviso, which again is
a special provision which states that parties
may, subsequent to disputes having arisen between them,
waive the applicability of
Section 12(5)
by an express
agreement in writing. What is clear, therefore, is that where,
under any agreement between the parties, a person falls
within any of the categories set out in the Seventh Schedule,
he is, as a matter of law, ineligible to be appointed as an
arbitrator. The only way in which this ineligibility can be
removed, again, in law, is that parties may after disputes
have arisen between them, waive the applicability of this
sub-section by an "express agreement in writing".
Obviously, the "express agreement in writing" has reference
to a person who is interdicted by the Seventh Schedule, but
who is stated by parties (after the disputes have arisen
between them) to be a person in whom they have faith
notwithstanding the fact that such person is interdicted by the
Seventh Schedule.

***

20. This then brings us to the applicability of the proviso
to
Section 12(5)
on the facts of this case. Unlike
Section 4
of
the Act which deals with deemed waiver of the right to object
by conduct, the proviso to
Section 12(5)
will only apply if
subsequent to disputes having arisen between the parties, the
parties waive the applicability of sub-section (5) of
Section
by an express agreement in writing. For this reason, the
argument based on the analogy of
Section 7
of the Act must
also be rejected.
Section 7
deals with arbitration agreements
that must be in writing, and then explains that such
agreements may be contained in documents which provide a
record of such agreements. On the other hand,
Section 12(5)

refers to an "express agreement in writing". The expression
"express agreement in writing" refers to an agreement made
in words as opposed to an agreement which is to be inferred
by conduct. Here,
Section 9
of the Contract Act, 1872
becomes important. It states:

'9.Promises, express and implied.--Insofar as a
proposal or acceptance of any promise is made in words,
the promise is said to be express. Insofar as such proposal
or acceptance is made otherwise than in words, the promise
is said to be implied.'
It is thus necessary that there be an "express" agreement in
writing. This agreement must be an agreement by which
both parties, with full knowledge of the fact that Shri Khan
is ineligible to be appointed as an arbitrator, still go ahead
and say that they have full faith and confidence in him to
continue as such. The facts of the present case disclose no
such express agreement. The appointment letter which is
relied upon by the High Court [
Bharat Broadband Network
Ltd. v. United Telecoms Ltd.
, 2017 SCC OnLine Del 11905]
as indicating an express agreement on the facts of the case
is dated 17-1-2017. On this date, the Managing Director of
the appellant was certainly not aware that Shri Khan could
not be appointed by him as
Section 12(5)
read with the
Seventh Schedule only went to the invalidity of the
appointment of the Managing Director himself as an
arbitrator.

Shri Khan's invalid appointment only became
clear after the declaration of the law by the Supreme Court
in
TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd.
,
(2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] which, as we
have seen hereinabove, was only on 3-7-2017.

After this
date, far from there being an express agreement between
the parties as to the validity of Shri Khan's appointment,
the appellant filed an application on 7-10-2017 before the
sole arbitrator, bringing the arbitrator's attention to the
judgment in
TRF Ltd. [TRF Ltd. v. Energo Engg. Projects
Ltd.
, (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] and
asking him to declare that he has become de jure incapable
of acting as an arbitrator. Equally, the fact that a statement
of claim may have been filed before the arbitrator, would
not mean that there is an express agreement in words which
would make it clear that both parties wish Shri Khan to
continue as arbitrator despite being ineligible to act as
such.

This being the case, the impugned judgment [
Bharat
Broadband Network Ltd. v. United Telecoms Ltd.
, 2017
SCC OnLine Del 11905] is not correct when it applies

Section 4
,
Section 7
,
Section 12(4)
,
Section 13(2)
and

Section 16(2)
of the Act to the facts of the present case, and
goes on to state that the appellant cannot be allowed to
raise the issue of eligibility of an arbitrator, having itself
appointed the arbitrator. The judgment under appeal is also
incorrect in stating that there is an express waiver in
writing from the fact that an appointment letter has been
issued by the appellant, and a statement of claim has been
filed by the respondent before the arbitrator. The moment
the appellant came to know that Shri Khan's appointment
itself would be invalid, it filed an application before the
sole arbitrator for termination of his mandate."

19. In view of the above and for the reasons stated above once the
sole arbitrator Chairman is "ineligible" to act as an arbitrator to
resolve the dispute between the parties in view of sub-section (5)
of
Section 12
read with the
Seventh Schedule to the Act
he loses
mandate to continue as a sole arbitrator. Therefore, it cannot be
said that the High Court has committed any error in appointing
the arbitrator other than the sole arbitrator -- the Chairman as
per Clause 13 of the agreement in exercise of powers, under

Section 11
read with
Section 14
of the Act.

13. The coordinate Bench of this Court in the case of M/s Om
Sai RK Construction Pvt. Ltd. vs. M/s Forsight Infractech Pvt.
Ltd has held as under:-

"27. Since the appointment of arbitrator at the instance of
contractor is contrary to law and therefore, ineligible
appointment deserves to be set aside and it can be removed at
stage of passing of award (See :
Haryana Space Application
Centre and Others Vs. Pan India Consultants Pvt. Ltd.
, 2021 (3)
SCC 103) and contention of the respondent is that applicant
submitted the jurisdiction of the arbitrator is misplaced because
applicant did not submit to jurisdiction of arbitrator and in fact
informed the arbitrator about unilateral and invalid appointment
process and proceedings were void ab initio.

28. In cumulatively case of the applicant succeeds and
appointment of arbitrator at the instances of
respondent/contractor hereby set aside and resultantly
appointment and all proceedings 21 A.C.No.32/2021 undertaken
by arbitrator is hereby set aside."

14. Counsel for the applicants on the strength of the above
judicial pronouncements prayed for allowing the present petition.

15. Per contra, counsel for the non-applicant submits that in the
agreement dated 12.09.2019 the period was fixed for the purpose
of completion of the construction work as the same was not
completed within the period, the dispute was referred to the named
arbitrator who is senior Advocate as per Clause 15 of the
Agreement and the named arbitrator after receipt of the request of
the non-applicant initiated the arbitration proceedings and
appointed the Advocate Commissioner. However, the applicants
instead of filing the objection before the named arbitrator
approached this Court under
Section 11
of the Act, 1996 with a
prayer to set aside/annulled the arbitration proceedings and for
appointment of new arbitrator. The counsel further submits that
the applicants have raised the objections not only under
Section
12(5)
of the Act in the present petition but under
Section 12(1)
of
the Act also and for that purpose it is essential to raise the same
before the arbitrator and in case the objections are turned down by
the arbitrator then the remedy is available to the applicants under

Section 34
of the Act to challenge the order of the arbitrator.
However, the applicants have approached this Court straightway
without approaching the court.

16. Counsel for the non-applicant further submits that so far as
the grounds of ineligibility of the sole arbitrator is concerned, the
remedy lies under
Section 14
of the Act and the applicants ought
to have approached to the court for termination of the mandate. In
the present application filed under
Section 11
of the Act of 1996
the mandate can't be terminated. He further submits that in the
agreement with the consent of the parties it was decided that in
case of any dispute the matter shall be referred to the named
arbitrator and, therefore, it will be deemed to be waiver of the
objection by the applicants. He further submits that even in the
judgment relied upon by the applicants delivered in the matter of
Bharat Broadband Network
(supra) the Apex Court has held
that for violation of Section 12(5) read with 7th
Schedule of the Act

a party is required to file application under
Section 14 (2)
of the
Act before the Court.

He further submits that judgment delivered
in the matter of
Jaipur Zila Dugdh Utpadak Sahkari Sangh

(supra) the Apex Court has held that the agreement was executed
between the parties prior to the insertion of sub Section (5) of
Section 12 and 7th Schedule to the Act and under those
circumstances the matter was decided. Therefore
,
the said
judgment
is also not applicable.

17. Learned counsel for the non-applicant relied on the
judgment delivered by the Apex Court in the matter of HRD
Corp. (
Marcus Oil & Chemical Division vs. Gail
, reported in
2018 12 SCC 471 wherein it is held as under:-

12. After the 2016 Amendment Act, a dichotomy is made by the
Act between persons who become "ineligible" to be appointed as
arbitrators, and persons about whom justifiable doubts exist as to
their independence or impartiality. Since ineligibility goes to the
root of the appointment, Section 12(5) read with the Seventh
Schedule makes it clear that if the arbitrator falls in any one of
the categories specified in the Seventh Schedule, he becomes
"ineligible" to act as arbitrator. Once he becomes ineligible, it is
clear that, under Section 14(1)(a), he then becomes de jure
unable to perform his functions inasmuch as, in law, he is
regarded as "ineligible". In order to determine whether an
arbitrator is de jure unable to perform his functions, it is not
necessary to go to the Arbitral Tribunal under Section 13. Since
such a person would lack inherent jurisdiction to proceed any
further, an application may be filed under Section 14(2) to the
Court to decide on the termination of his/her mandate on this
ground. As opposed to this, in a challenge where grounds stated
in the Fifth Schedule are disclosed, which give rise to justifiable
doubts as to the arbitrator's independence or impartiality, such
doubts as to independence or impartiality have to be determined
as a matter of fact in the facts of the particular challenge by the
Arbitral Tribunal under Section 13. If a challenge is not
successful, and the Arbitral Tribunal decides that there are no
justifiable doubts as to the independence or impartiality of the
arbitrator/arbitrators, the Tribunal must then continue the
arbitral proceedings under Section 13(4) and make an award. It
is only after such award is made, that the party challenging the
arbitrator's appointment on grounds contained in the Fifth
Schedule may make an application for setting aside the arbitral
award in accordance with Section 34 on the aforesaid grounds. It
is clear, therefore, that any challenge contained in the Fifth
Schedule against the appointment of Justice Doabia and Justice
Lahoti cannot be gone into at this stage, but will be gone into
only after the Arbitral Tribunal has given an award. Therefore,
we express no opinion on items contained in the Fifth Schedule
under which the appellant may challenge the appointment of
either arbitrator. They will be free to do so only after an award is
rendered by the Tribunal.

18. In Chennai Metro Rail Ltd. Administrative Building Vs.
M/s. Transtonnelstroy Afcons (JV) & Anr. reported in 2023
SCC OnLine SC 1370 the Apex Court has held as under:

24. Returning to the present case,
Section 12 (1)
of the Act
applies at the stage of appointment - which mandates disclosure
requirements applicable to arbitrators; (a) sets out the kinds of
influence which may lead to 'justifiable doubts' about
'independence and impartibility'; Section 12 (1)(b) sets out the
disclosure requirement with respect to the arbitrator's ability to
"devote sufficient time". Explanation (1) refers to the grounds
of possible conflicts, which need disclosure : they are
enumerated under separate heads under
Section 34
of the Act,
and grouped in seven broad categories in the
Fifth Schedule to
the Act
. The second explanation to Section 12(1) requires
disclosure in the form set out in the Sixth Schedule.

25. Section 12(2) requires disclosure of any event or
circumstance which is mandatorily to be shared with the parties

- if such circumstances arise after the appointment. Section
12(3) lays out the grounds of challenge to an arbitrator if
"justifiable doubts" exist in relation to his "independence or
impartiality". Section 12(4) restricts challenge by parties - after
appointment "only for reasons which he becomes aware after
appointment is made".

26. Section 12(5) was inserted w.e.f. 23.10.2016; it begins
with a non-obstante clause overriding any "prior agreement to
the contrary" and stipulates that any person with any kind of
relationship set out in the Seventh Schedule (which outlines 19
specific heads and types of relationships - professional, familiar
or associational) would be ineligible for appointment as
arbitrator. The proviso to Section 12(5) enables the parties to
waive the ineligibility conditions under Section 12(5) (read with
Seventh Schedule) by express agreement in writing.

27. Section 13 (1) deals with the challenge procedure and
enables parties to agree on a procedure to challenge the
arbitrator. By Section 13(2), if there is no agreement, the party
who intends to challenge the arbitrator has to within 15 days
after becoming aware of the tribunal's constitution or within
fifteen days after becoming aware of any circumstances referred
to in Section 12(3) apply in writing to the reasons for challenge
to a tribunal. Section 12(3), as noticed earlier, states that the
grounds of challenge to existence of circumstances, giving rise
to justifiable doubts about tribunal's independence or
impartiality. Section 13(3) states that if the arbitrator does not
withdraw or the other party does not in the absence of the other
party agreeing according to the challenge; the tribunal has to
decide upon it. By Section 13(4) if the challenge is unsuccessful
the tribunal would continue with the proceedings and finalize its
award. Section 13(5) states that any party can challenge the
arbitrator's decision, after the award is made under Section 34.

Section 13(6) keeps open the issue of fee to be payable to the
arbitrator in the event, the award is set aside on the ground
under Section 13(5).

28. Section 14 deals with the contingency of failure or
impossibility of the arbitrator or tribunal to act and stipulates
that the mandate of an arbitrator shall terminate and he shall be
substituted by another "if he becomes de jure or de facto unable
to perform its functions or for other reasons fails to act without
undue delay or withdraws from his office or parties agrees to
the termination of his mandate". By Section 14(2) if a
controversy remains, concerning the grounds referred to in
Section 14 (1), the Court may be approached by the parties to
decide upon the issue of termination on mandate.

29. Having regard to the above statutory position it would
be necessary to consider the judgments cited. The first in this
series would be
Voestalpine Schienen GMBH v. Delhi Metro
Rail Corporation Ltd.,19
where taking note of the amendment
made to the Act in 2015, the Court underlined that it was with
the objective to induce neutrality of arbitrators especially their
independence and impartiality that the amendment act of 2015
was introduced. The amended provision was enacted to identify
the circumstances that gave rise to justifiable doubts about the
independence or impartiality of the arbitrator and in the event,
any of those circumstances exist, the remedy provided is under
Section 12. The court particularly underlined Section 12(5)
which nullified prior agreements to the contrary. In the facts of
that case, it was held that if an advisor had any past or present
business relationship with a party, he was ineligible to act as
arbitrator.

32. It is, therefore, evident that the rules for disqualification
or ineligibility are fairly clear. The ineligibility which attaches
to the appointment is the first category : it is contained in
Section 12(1) read with the explanation and the
Fifth Schedule
to the Act
. As recounted earlier this schedule has 34 items. In
the event any of these circumstances exist, the appointment of
the arbitrator is barred. The second category is where the
arbitrator to start with is eligible but after appointment incurs
any, or becomes subject, to any of the conditions, as enumerated
in the Fifth Schedule. In that event, it is open to the party to
claim that there could be justifiable doubts about his
independence or impartiality. The remedy even then, would be
that the party has to seek recourse and apply to the arbitrator in
the first stance by virtue of Section 13(2). The wording of
Section 13(2) clarifies that a party who intends to challenge the
arbitrator, after becoming aware of certain circumstances which
lead to justifiable doubts, that party has to within 15 days [of
becoming aware] approach the tribunal and seek a ruling. In
the event the party is not successful under Section 13(4), the
tribunal is duty bound to continue with the proceedings. When
the award is made, it can be subjected to challenge under
Section 34, by operation of Section 13(5). Clearly, then the
substantive grounds and the procedure applicable in relation to
situations where justifiable reasons exist or arise, for
questioning the eligibility of a tribunal to decide the reference
are enumerated in Sections 12 and 13.

19. The Apex Court in the case of
Swadesh Kumar Agarwal v.
Dinesh Kumar Agarwal
, (2022) 10 SCC 235 has held as under:-

6. Shri Divyakant Lahoti, learned counsel appearing on behalf
of the appellant has strenuously submitted that in the facts and
circumstances of the case the High Court has materially erred in
terminating the mandate of the arbitrator under Section 14(1)(a)
of the 1996 Act on an application filed under Section 11(6) of
the 1996 Act.
6.1. It is further submitted that in a case, where an arbitrator
was already appointed by the parties themselves, subsequently,
no application under Section 11(6) of the 1996 Act was
maintainable either to terminate the mandate of the sole
arbitrator and/or to substitute the arbitrator.
6.2. It is contended by Shri Lahoti, learned counsel that the
mandate of the arbitrator can be terminated and/or may come
to an end only as per the provisions of the
Arbitration and
Conciliation Act, 1996
. Reliance is placed upon Sections 13, 14,
15, 25(a), 30 and 32 of the 1996 Act. It is submitted that other
than the aforesaid provisions under the 1996 Act, there is no
provision to terminate the mandate of the arbitrator.
6.3. It is submitted that in case of the eventualities mentioned in
Section 14(1)(a) of the 1996 Act, the remedy available to the
aggrieved party would be to approach the "court" as defined
under
Section 2(1)(e)
of the 1996 Act.

6.4. Shri Lahoti, learned counsel appearing on behalf of the
appellant further submitted that in the present case as such
Respondents 1 and 3 herein parties to the arbitration
proceedings, in fact, did submit the applications under Section
14(2) of the 1996 Act, which were pending before the court
concerned at the time when the present applications under
Section 11(6) of the 1996 Act was filed.

6.5. It is further urged that in fact, there is a difference and
distinction between Section 11(5) and Section 11(6) of the 1996
Act.

6.6. That in the absence of any written contract containing the
arbitration agreement, Section 11(6) of the 1996 Act shall not
be applicable and therefore, an application under that provision
shall not be maintainable.

6.7. That even otherwise, there was no undue delay in the
arbitration proceedings on the part of the sole arbitrator which
could have led to termination of his mandate that too, in
exercise of powers under Section 11(5) and Section 11(6) of the
1996 Act.

6.8. It is further submitted by Shri Lahoti, learned counsel
appearing on behalf of the appellant that as there was no undue
delay on the part of the sole arbitrator therefore, Section 14(1)

(a) would not be attracted. Therefore, application under Section
14 of the 1996 Act was liable to be dismissed and the learned
trial court ought to have allowed the application filed by the
appellant, to reject the application under Section 14 of the 1996
Act in exercise of powers under Order 7 Rule 11
CPC
. It is
submitted that the High Court committed a grave error in
dismissing the writ petitions and confirming the order passed
by the learned trial court in dismissing the application under
Order 7 Rule 11
CPC
.

6.9. Shri Lahoti, learned counsel appearing on behalf of the
appellant heavily relied upon the decision of this Court
in
Antrix Corpn. Ltd. v. Devas Multimedia (P) Ltd. [Antrix
Corpn. Ltd.
v. Devas Multimedia (P) Ltd., (2014) 11 SCC 560 :

(2014) 4 SCC (Civ) 147] (paras 31 and 33) and the subsequent
decision of this Court in S.P. Singla Constructions (P)
Ltd. v. State of H.P. [S.P. Singla Constructions (P) Ltd. v. State
of H.P., (2019) 2 SCC 488 : (2019) 1 SCC (Civ) 748] in support
of his submissions that once the parties have invoked the
arbitration proceedings and the arbitrator has been appointed,
subsequent application under Section 11(6) of the 1996 Act
shall not be maintainable.

20. Coordinate Bench of this Court in the case of Shivhare
Road Lines vs. M/s. Container Corporation Of India Ltd.
Reported in 2017 3 MPLJ 600 has held as under:-

5.1 A plain reading of section 12(3)(a) reflects that lack of
independence and impartiality are the grounds on which
appointment of an Arbitrator can be challenged. Since the
parties to the Agreement have not agreed upon any procedure
for challenging the Arbitrator appointed under the Agreement,
sections 13(2),(3),(4) and (5) of the Act, 1996 would apply for
challenging the mandate of the Arbitrator who has suffered loss
of confidence on the ground of lack of independence and
impartiality, for which a written objection is required to be sent
by the aggrieved party to the arbitral tribunal. On receipt of the
said objection, Arbitrator under section 13(3) either withdraws
from his office voluntarily or on the basis of the consensus
between the rival parties, failing which the arbitral tribunal is
mandated by law to decide on the challenge.

5.2 In the instant case, the written objection P/13 has been
considered and rejected by the Arbitrator vide P/16 on 8-12-

2015. In such a situation, the provisions of section 13(4) come
into operation providing that in case of failure of the objection
raised to the impartiality and independence of the Arbitrator, the
Arbitrator is mandated by law to continue arbitral proceedings
and proceed to render the arbitral award.

5.3 Thereafter the remedy available to the aggrieved party who
raises an objection unsuccessfully is provided under section
13(5) which enables the aggrieved party to challenge the Award
made under section 13(4) by praying for it's setting aside under
section 34 of the 1996 Act.

5.4 It is admitted at the bar that the arbitral proceedings have
not yet terminated as the same are pending and an award by the
Arbitrator as contemplated by section 13(4) has not been passed
till date.

21. Counsel for the non-applicant submits that as no application
was moved under Section 14(2) before the Court, arbitration
proceedings cannot be set aside or annulled by this Court and
therefore, the application is liable to be dismissed.

22. Considering the arguments advanced by the counsel for the
parties and after perusal of the documents available on record it is
not in dispute that the parties have entered into agreement on
12.09.2019 for the purpose of raising construction and
development of the subjected land. It is also not is dispute that
non-applicant referred the matter by invoking the arbitration
Clause to the named sole arbitrator and after receipt of the
information the applicants issued a notice wherein they sought
consent of the non-applicant for appointment of any impartial
unbiased eligible arbitrator and as the same was not accepted, the
present application is filed.

23. The following provisions of the Act, 1996 are relevant for
the purpose of deciding the present application which reads as
under:

Section 2(1)(e)
of the Arbitration And Conciliation Act, 1996

(e)[ "Court" means-

(i)in the case of an arbitration other than international
commercial arbitration, the principal Civil Court of original
jurisdiction in a district, and includes the High Court in
exercise of its ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the subject-matter
of the arbitration if the same had been the subject-matter of a
suit, but does not include any Civil Court of a grade inferior to
such principal Civil Court, or any Court of Small Causes;

(ii)in the case of international commercial arbitration, the
High Court in exercise of its ordinary original civil
jurisdiction, having jurisdiction to decide the questions
forming the subject-matter of the arbitration if the same had
been the subject-matter of a suit, and in other cases, a High
Court having jurisdiction to hear appeals from decrees of
courts subordinate to that High Court;]

Section 4
. Waiver of right to object.-A party who knows that-

(a)any provision of this Part from which the parties may
derogate, or

(b)any requirement under the arbitration agreement,has not
been complied with and yet proceeds with the arbitration
without stating his objection to such non-compliance without
undue delay or, if a time limit is provided for stating that
objection, within that period of time, shall be deemed to have
waived his right to so object.

Section 12. Grounds for challenge.- [(1) When a person is
approached in connection with his possible appointment as an
arbitrator, he shall disclose in writing any circumstances,-

(a)such as the existence either direct or indirect, of any
past or present relationship with or interest in any of the
parties or in relation to the subject-matter in dispute,
whether financial, business, professional or other kind,
which is likely to give rise to justifiable doubts as to his
independence or impartiality; and

(b)which are likely to affect his ability to devote sufficient
time to the arbitration and in particular his ability to
complete the entire arbitration within a period of twelve
months.

Explanation 1. - The grounds stated in the Fifth
Schedule shall guide in determining whether
circumstances exist which give rise to justifiable
doubts as to the independence or impartiality of an
arbitrator.

Explanation 2. - The disclosure shall be made by
such person in the form specified in the Sixth
Schedule.]
(2)An arbitrator, from the time of his appointment and
throughout the arbitral proceedings, shall, without delay,
disclose to the parties in writing any circumstances
referred to in sub-section (1) unless they have already
been informed of them by him.

(3)An arbitrator may be challenged only if.

(a)circumstances exist that give rise to justifiable
doubts as to his independence or impartiality, or

(b)he does not possess the qualifications agreed to by
the parties.

(4)A party may challenge an arbitrator appointed by him,
or in whose appointment he has participated, only for
reasons of which he becomes aware after the appointment
has been made.

(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.]
Section 13. Challenge procedure. (1)Subject to sub-section
(4), the parties are free to agree on a procedure for
challenging an arbitrator.

(2)Failing any agreement referred to in sub-section (1), a
party who intends to challenge an arbitrator shall, within
fifteen days after becoming aware of the constitution of the
arbitral tribunal or after becoming aware of any
circumstances referred to in sub-section (3) of section 12,
send a written statement of the reasons for the challenge to
the arbitral tribunal.

(3)Unless the arbitrator challenged under sub-section (2)
withdraws from his office or the other party agrees to the
challenge, the arbitral tribunal shall decide on the
challenge.

(4)If a challenge under any procedure agreed upon by the
parties or under the procedure under sub-section (2) is not
successful, the arbitral tribunal shall continue the arbitral
proceedings and make an arbitral award.

(5)Where an arbitral award is made under sub-section (4),
the party challenging the arbitrator may make an
application for setting aside such an arbitral award in
accordance with section 34.

(6)Where an arbitral award is set aside on an application
made under sub-section (5), the Court may decide as to
whether the arbitrator who is challenged is entitled to any
fees.

Section 14. Failure or impossibility to act.- [(1) The
mandate of an arbitrator shall terminate and he shall be
substituted by another arbitrator, if']

(a)he becomes de jure or de facto unable to perform his
functions or for other reasons fails to act without undue
delay; and

24. Applicants have challenged the appointment of named
arbitrator on the ground that the arbitrator is having relationship
with the non-applicant and non-applicant had worked in the office
of the arbitrator as Junior Lawyer, therefore, the arbitrator is
ineligible to be appointed as an arbitrator in view of the 7 th
Schedule and his appointment is void ab initio. Present application
is moved under Section 11 for appointment of arbitrator. Sole
arbitrator has already initiated the proceedings and he has not
withdrawn himself from the office of arbitrator, therefore, the
issue of ineligibility is required to be decided by the court and the
applicants may apply to the court which will then decide on
whether his mandate is terminated or not. The Apex Court in the
matter of
Bharat Broadband
(supra) after considering the report
of law commission explained the scheme of Section 12, 13 and 14
and held that wherein arbitrator makes a disclosure in writing
which is likely to give justifiable doubts as to his independence or
impartiality, the appointment of such arbitrator may be challenged
under Sections 12(1) to 12(4) read with Section 13. However,
where such person becomes "ineligible" to be appointed as an
arbitrator, there is no question of challenge to such arbitrator,
before such arbitrator. In such a case, i.e., a case which falls under
Section 12(5),
Section 14(1)(a)
of the Act gets attracted inasmuch
as the arbitrator becomes, as a matter of law (i.e., de jure) and
unable to perform his functions under Section 12(5), being
ineligible to be appointed as an arbitrator. This being so, his
mandate automatically terminates, and he shall then be substituted
by another arbitrator under Section 14(1) itself. It is only if a
controversy occurs concerning whether he has become de jure
unable to perform his functions as such, that a party has to apply
to the Court to decide on the termination of the mandate, unless
otherwise agreed by the parties. Thus, in all Section 12(5) cases,
there is no challenge procedure to be availed of. If an arbitrator
continues as such, being de jure unable to perform his functions,
as he falls within any of the categories mentioned in Section 12(5),
read with the Seventh Schedule, a party may apply to the Court,
which will then decide on whether his mandate has terminated.
Questions which may typically arise under Section 14 may be as
to whether such person falls within any of the categories
mentioned in the Seventh Schedule, or whether there is a waiver
as provided in the proviso to
Section 12(5)
of the Act. As a matter
of law, it is important to note that the proviso to Section 12(5)
must be contrasted with
Section 4
of the Act.
Section 4
deals with
cases of deemed waiver by conduct; whereas the provisons to
Section 12(5) deals with waiver by express agreement in writing
between the parties only if made subsequent to disputes having
arisen between them.

25. In view of the above pronouncement of the Apex Court,
there is no scope for setting aside or terminating the mandate of
arbitrator in an application filed under
Section 11
of the Act, 1996
as in the present matter the arbitrator is continuing the proceedings
and he has not withdrawn himself from the office of the arbitrator.
Non-applicant has claimed that the arbitrator was named in the
agreement even after knowing the fact that the non-applicant was
having some professional relation with the sole arbitrator in the
past, the same shall be treated as waiver. Under these
circumstances, it is essential for the applicant to approach to the
court which is a court defined under
Section 2 (e)
of the Act i.e.
the principal Civil Court having original jurisdiction in the district
as in Madhya Pradesh High Court is not having ordinary original
civil jurisdiction and the court will decide the controversy occurs
concerning whether the arbitrator has become de jure and unable
to perform his functions or not and the court will decide the issue
of termination of the mandate. This is not a case wherein the
arbitrator was appointed by an authority who itself is ineligible,
therefore, in the present matter the appointment of arbitrator
cannot be treated as void ab initio. In the present matter, the
parties have named the arbitrator by executing the agreement and,
therefore, without termination of the mandate of the arbitration by
the competent court new arbitrator cannot be appointed and this
Court does not have jurisdiction to terminate the mandate of the
arbitrator under
Section 14
of the Act.

26. The judgment delivered by the Apex Court in the matter of

Bharat Broadband
(supra) has relied by the Apex Court in the
matter of
TRF Ltd.
(supra),
Aravali Power
(supra),
Perkins
Eastman
(supra),
Jaipur Zila
(supra) and by the coordinate
Bench in the matter of Om Sai (Supra) and in none of the
judgments it is held that if the arbitrator has not withdrawn
himself from the office of the arbitrator and there is a dispute in
respect to the eligibility of the arbitrator, the same can be decided
in a petition filed under
Section 11
of the Act. In all the cases, the
Apex Court has considered the fact that the arbitrator was
appointed by the ineligible authority and, therefore, such arbitrator
would render himself ineligible to conduct the arbitration. In none
of the case relied by the applicants, the mandate of the named sole
arbitrator was terminated in the proceedings arising out of
application filed under
Section 11
of the Act of 1996.

27. In a case when there is a dispute/controversy on the
mandate of the arbitrator being terminated on the ground
mentioned in Section 14 (1) (a) such a dispute has to be raised
before the Court "defined under
Section 2 (1) (e)
of the Act, 1996"

and such a dispute cannot be decided on an application filed under
Section 11 (6) of 1996.

28. In view of the above pronouncements of the Apex Court, the
issue involved in the present matter is answered accordingly and
consequently the application is disposed of with a liberty to the
applicants to approach to the competent court for seeking
termination of the mandate of the sole arbitrator and thereafter
avail the remedy for appointment of arbitrator afresh.

29. With the aforesaid, the present petition is disposed of.

(VINAY SARAF)
JUDGE
van
VANDANA VERMA
2024.05.22
19:42:41 +05'30'