ARB.C/154/2022 on 30 December 2022

IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA Arb. Case No. 154 of 2022.

Date of decision: 30.12.2022 ____________________________________________________ M/s Jaswant Rai Verma …Petitioner

Versus

State of H.P. & another

…Respondents ____________________________________________________

Coram:

The Hon’ble Mr. Justice A.A. Sayed, Chief Justice Whether approved for reporting?1 _____________________________________________ For the petitioner : Mr. Tarunjeet Singh Bhogal, Advocate.

For the respondents: Mr. Yudhvir Singh Thakur, Deputy Advocate General.

A.A. Sayed, Chief Justice (Oral)

This is an Application filed by the petitioner under Section 11(6) of the Arbitration and Conciliation Act, 1996, (‘the Act’ for short), seeking appointment of an Arbitrator to adjudicate the disputes and differences between the parties.

2. Pursuant to a tender issued by the respondents, the work of "Construction of Swarghat Fakred Kollah Dungi Plate Luttani Bakruditra Kapoli Jhiranga Bara Road km 0/0 to 11/640 (SH: Formation Cutting 5/7 mtr wide, C/o Retaining wall & Breast 1 Whether the reporters of Local Papers may be allowed to see the judgment?

walls, 900 mm dia NP2 RCC Hume pipe culvert along with wing walls, katcha road side drain, parapets, providing and laying sub- base course WBM G-1, carriage of excavated earth to dumping site km 0/0 to 11/640)" was allotted to the petitioner. An Agreement was executed between the parties.

3. It is not in dispute that Clause 25 of the Agreement provides for reference of the dispute to the arbitration of a person appointed by the Engineer-in-Chief/Chief Engineer, H.P. P.W.D. Department.

4. In view of the dispute and differences between the parties, the petitioner invoked arbitration vide its notice dated 06.06.2022 (Annexure A-2) seeking appointment of an arbitrator. The respondents neither replied to the said notice nor acted upon the said notice.

5. There is no affidavit-in-reply filed by the Respondents opposing the present Application.

6. In Datar Switchgears Ltd. Versus Tata Finance Ltd. and another, (2000) 8 Supreme Court Cases 151, the Supreme Court has held in paragraph 19 that upon the filing of the Application under Section 11(6) of the Act, the right of the opposite side to make appointment of Arbitrator ceases/is forfeited.

7. In Perkins Eastman Architects DPC and another versus HSCC (India) Ltd., reported in (2020) 20 SCC 760, the Supreme Court in paragraphs 20 & 21 has held as follows:- “20. We thus have two categories of cases. The first, similar to the one dealt with in TRF Limited, 2017 8 SCC 377 where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself but is empowered or authorised to appoint any other person of his choice or discretion as an arbitrator. If, in the first category of cases, the Managing Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or result of the dispute. The element of invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be the test, similar invalidity would always arise and spring even in the second category of cases. If the interest that he has in the outcome of the dispute, is taken to be the basis for the possibility of bias, it will always be present irrespective of whether the matter stands under the first or second category of cases. We are conscious that if such deduction is drawn from the decision of this Court in TRF Limited, 2017 8 SCC 377 , all cases having clauses similar to that with which we are presently concerned, a party to the agreement would be disentitled to make any appointment of an Arbitrator on its own and it would always be available to argue that a party or an official or an authority having interest in the dispute would be disentitled to make appointment of an Arbitrator.

21. But, in our view that has to be the logical deduction from TRF Limited, 2017 8 SCC 377 . Paragraph 50 of the decision shows that this Court was concerned with the issue, "whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an Arbitrator" The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator. The next sentences in the paragraph, further show that cases where both the parties could nominate respective arbitrators of their choice were found to be completely a different situation. The reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter balanced by equal power with the other party. But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016) and recognised by the decision of this Court in TRF Limited.”

8. In view of Section 12(5) of the Act and the enunciation of law by the Supreme Court in the aforesaid case of Perkins Eastman (supra), the Engineer-in-Chief/Chief Engineer, H.P. P.W.D. Department would be ineligible to appoint an Arbitrator.

9. Having regard to the facts and circumstances of the case, a case is made out by the petitioner for this Court to exercise powers under Section 11(6) of the Act to appoint an independent Arbitrator.

10. Hence, the following order is passed:

O R D E R

(i) Mr. Justice Rajiv Sharma, former Judge of this Court, is appointed as a sole Arbitrator to adjudicate the disputes and differences between the parties.

(ii) The learned Arbitrator, before entering the arbitration reference, shall forward a statement of disclosure as per the requirement of Section 11(8) read with Section 12(1) of the Arbitration and Conciliation Act, 1996, to the Registrar (Judicial) of this Court, (to be placed on record of this application) and a copy thereof be forwarded to the parties;

(iii) The parties shall appear before the learned Arbitrator on a date which may be fixed by the learned Arbitrator, not later than four weeks from the receipt of this order by him.

(iv) The fees payable to the Arbitral Tribunal shall be as prescribed in the Fourth Schedule appended to the Arbitration and Conciliation Act, 1996.

(v) Office to forward a copy of this order to the learned Arbitrator on the following address:

Mr. Justice Rajiv Sharma, Former Judge, High Court of Himachal Pradesh, House No. 505, Sector 36-B, Chandigarh.

(vi) The Application is allowed in the above terms.

( A.A.Sayed )

Chief Justice

December 30, 2022 (hemlata)