IN THE HIGH COURT OF JHARKHAND AT RANCHI Arbitration Application No.01 of 2016 Alternative for India Development, having its corporate office at Plot no.1, VGN Nagar, Iyyapanthangal, P.O.- Kattupakkan, P.S. & District – Chennai through its Manager, Shashi Bharat, son of late Rameshwar Prasad, presently residing at – Morabadi, P.O.- Ranchi University, P.S. - Bariatu, District – Ranchi, Jharkhand … … … … … … Petitioner Versus 1. The State of Jharkhand, through the Secretary Information Technology, Project Bhawan, Dhurwa, Ranchi 2. Jharkhand Agency for the promotion of information Technology – JAP – IT, through its CEO, under the Societies Registration Act, 21, 1860 having its registered office at Engineer Hostel No.2, Dhurwa, Ranchi. … … ... … ... ... Respondents ------ CORAM: HON'BLE MR. JUSTICE D. N. PATEL ----- For the Petitioner: M/s. M.S. Mittal, Sheela Prasad, Rahul Lamba, Shilpi John, Navin Kumar For the Respondents : M/s. Atanu Banerjee, G.A. ------ 08/Dated:
15. h July, 2016 Per D.N. Patel, J.
1) Counsel for the petitioner submitted that an agreement has been entered into between the parties which is annexed as Annexure 1 to the memo of this Arbitration Application which is dated 11th April, 2007. As per this agreement and especially Clause 8.1(b) thereof, there is an arbitration clause, if the dispute has arisen from the said agreement. It is further submitted by the counsel for the petitioner that a dispute has arisen between the parties because of revenue support provided by the Government, for which notice was also given by this applicant dated 05.11.2015 for appointment of an arbitrator. Arbitrator was not appointed by the respondents and, hence, this Arbitration Application has been preferred on 12th January, 2016. Thereafter, on 28th January, 2016, Secretary, Department of I.T. & E. Governance, Government of Jharkhand, has bee appointed as a sole Arbitrator. This communication is at Annexure 4 to the rejoinder affidavit filed by the petitioner. Counsel for the petitioner submitted that in view of the decision rendered by Hon'ble -2- Supreme Court in a case reported in (2000) 8 SCC151(para 19 thereof) , once an application has been preferred under sub section (6) of Section 11 of the Arbitration and Conciliation Act, 1996, the respondents- State cannot appoint arbitrator. Counsel for the petitioner has also relied upon the amendment made in Section 12(5) of the Act of 1996 to be read with Seventh Schedule thereof. As per this newly amended provision, a person, who is an employee, consultant, advisor or any other past or present business relationship with the parties, cannot be appointed as an arbitrator. In view of these facts, it is suggested by the counsel for the petitioner that let any retired Hon'ble Judge of this Court may kindly be appointed as an arbitrator.
2) Counsel for the respondents submitted that it is true that the notice given by this petitioner was received by the respondents, but the talks were going on between the parties even on 12th January, 2016, the day on which this Arbitration Application has been preferred. Thus, without waiting for a negotiation between the parties, hurriedly this Arbitration Application has been preferred, that does not mean that the right of the respondents to appoint an arbitrator is being forfeited. It is also submitted by the counsel for the respondents-State that in fact arbitrator has already been appointed by the respondents in view of Clause 8.1(b) vide letter dated 28th January, 2016 which is annexed as Annexure 4 to the rejoinder affidavit and, hence, this Arbitration Application may not be entertained by this Court.
3) Having heard learned counsels for both sides and looking to the facts and circumstances of the case, more particularly, the fact that, (i) There is an agreement between the parties which is pertaining to running of Facilitation Centre at District Palamau, (ii) Agreement has been arrived at between the parties dated 11th January, 2007 which is at Annexure 1 to this memo of Arbitration Application and as per Clause 8.1(b) thereof, there is an arbitration clause. (iii) A dispute has arisen between the parties arising out of the aforesaid agreement. Notice of appointment of the arbitrator has already been given by this petitioner on 05.11.2015. Thereafter, no arbitrator has been appointed by the respondents. (iv) Thereafter, this Arbitration Application has been preferred -3- under Section 11(6) of the Act of 1996 on 12th January, 2016. (v) On 28th January, 2016, the respondents have appointed Secretary, Information Technology & e-Governance Department, Government of Jharkhand as an sole arbitrator. The said order is at Annexure 4 to the rejoinder affidavit. (vi) Looking to the decision rendered by Hon'ble Supreme Court in the case reported in (2000) 8 SCC151paragraph 19 thereof reads as under: -
“19. So far as cases falling under Section 11(6) are concerned – such as the one before us – no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11(4) and Section 11(5) of the Act. In our view, therefore, so far as Section 11(6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an arbitrator under Section 11(6) is forfeited.” (Emphasis supplied) (vii) In view of the aforesaid decision, once the parties have moved an application under sub-section (6) of Section 11 of the -4- Act of 1996, the respondent looses the right to appoint arbitrator. (viii) In the facts of the present case also, the notice for appointment of arbitrator was given on 05.11.2015 and on 12.01.2016, this application has been preferred and arbitrator has been appointed on 28th January, 2016. Thus, the respondents cannot appoint arbitrator after the application has been preferred by the petitioner under Section 11(6) of the Act of 1996. (ix) Moreover, looking to the amendment in Section 12 of the Act of 1996 by Arbitration and Conciliation (Amendment) Act, 2015, sub clause (5) of Section 12 has been inserted. The said clause reads as under: - “(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.” (Emphasis supplied) (x) The aforesaid Section 12(5) is to be read with the Seventh Schedule to the Act of 1996 as inserted by Amendment Act of 2015. Clause 1 of the Seventh Schedule reads as under: - “THE SEVENTH SCHEDULE [See section 12(5)] Arbitrator's relationship with the parties or counsel 1. The arbitrator is an employee, consultant, advisor or has any other past or present relationship with a party.
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10. … … … … … 11. … … … … … 12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.” (Emphasis supplied) (xi) In view of the aforesaid amended provision i.e. Section 12(5) to be read with Seventh Schedule, any person who is an employee, consultant, advisor or any other past or present business relationship with the parties, cannot be appointed as an arbitrator. (xii) Even as per Clause 12 also, a person, who is a manager, director or part of the management, or has a similar controlling influence in one of the parties, cannot be appointed as an arbitrator and, hence also, Secretary, Information Technology and e-Governance Department, Government of Jharkhand, cannot be appointed as an arbitrator. (xiii) Learned counsel for the respondents-State also submitted that the arbitrator has already completed the arbitration proceedings ex parte on 16.05.2016. (xiv) Once the appointment of the arbitrator is not permissible in the eyes of law, there is no question of an award passed by an employee, whatsoever arises.
4) As a cumulative effect of the aforesaid facts, reasons and judicial pronouncement, appointment of the Arbitrator made by the respondents vide order dated 28th January, 2016 of Secretary, Information Technology and e-Governance Department, Government of Jharkhand, is hereby quashed and set aside and I, hereby, appoint Justice Amareshwar Sahay (a retired Judge of this Court) as learned Arbitrator who will decide the dispute between the parties as referred to in the memo of this Arbitration -6- Application to be read with the annexures which is an agreement annexed as Annexure 1 to the memo of this Arbitration Application.
5) Learned Arbitrator is requested to decide the dispute between the parties as early as possible and practicable, preferably within a period of six months from the date of commencement of the arbitration proceedings.
6) Registrar General of this Court is directed to send a copy of this Arbitration Application along with all annexures to the learned Arbitrator.
7) Both the parties shall cooperate hearing before the learned Arbitrator and they shall not ask for any unnecessary adjournment.
8) This Arbitration Application is allowed and disposed of. Manoj/ (D. N. Patel, J)