Delhi High Court terminates mandate of arbitrator appointed by CEO of a party unilaterally, in arbitration dispute

  • Shreya Agarwal
  • 01:29 PM, 13 Nov 2021

Hearing a plea by the Delhi Integrated Multi Modal Transit Systems Ltd (DIMMTSL) against Delhi Jal Board's appointment of a sole arbitrator for resolution of a contractual dispute, the Delhi High Court has terminated the mandate of the sole arbitrator stating that he had been appointed unilaterally by the CEO of Delhi Jal Board. 

The bench of Justice Vibhu Bakhru said, however, that this was not on account of any of the other apprehensions expressed by the petitioner. 

Interpreting Section 12(5) and waiver of the right to object, the court also held that in the present case, although DIMMTSL had participated in the arbitral proceedings before the Arbitrator, "the same cannot be construed as the petitioner waiving its right under Section 12(5) of the Arbitration and Conciliation Act. Once it is held that the appointment of the learned Arbitrator has been made unilaterally by the CEO of the respondent, it would follow that the said appointment is void ab initio."

Further, the court also refused to go into the question of the sole arbitrator's impartiality or independence, relying on the judgment of the Supreme Court in HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited:(2018) 12 SCC 471 wherein it has been held that 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 only. 

Stating that the law is well settled in this regard, the court held, "if a challenge to the arbitrator is not accepted by the arbitral tribunal, the arbitral tribunal is required to proceed and deliver an award. The parties challenging the learned arbitrator have to await the declaration of the award before seeking any recourse in that regard."

The brief facts of the case were that on June 10, 2011, the parties had entered into an agreement for the purpose of “Design, Development, Implementation and Operation of WTDMS Project involving the development of Software, Supply, & Installation of System Software, Hardware Networks, establishment of WTDMS Service Centres and Operation & Maintenance of WTDMS Solution”, and subsequently, disputes arose between the parties in respect of the said contract. 

In view of the dispute, by a letter dated December 3, 2018, the CEO of Delhi Jal Board appointed one Dr. RCM as the Sole Arbitrator to adjudicate the disputes between the parties, after which, the Arbitrator entered upon reference and on April 10, 2019, the Arbitrator submitted its declaration as required under Section 12 of the Arbitration and Conciliation Act.

During the pendency of the proceedings, DIMMTSL had become aware of Dr. RCM's appointment as a whole-time member of the District Consumer Forum for Central Delhi on March 8, 2019 and subsequently, also became aware that Dr RCM was empaneled as an arbitrator on the panel maintained by Delhi Jal Board. 

On August 13, 2020, therefore, DIMMTSL filed an application before the Arbitral Tribunal under Sections 12 and 13 of the Arbitration and Conciliation Act, seeking recusal of Dr RCM as an arbitrator on the sole ground that he was ineligible to act as such.

Dr RCM rejected the said application by an order dated January 12, 2021, aggrieved by which, DIMMTSL moved the High Court.

Cause Title: Delhi Integrated Multi Modal Transit Systems Ltd vs Delhi Jal Board