Himachal Pradesh Power Corporation Limited Vs. Hindustan Construction Company Limited - (High Court of Delhi) (25 Sep 2020)

An Arbitrator shall be ineligible, if his close family member has significant financial interest in one of the parties or an affiliate of one of the parties

MANU/DE/1778/2020

Arbitration

The Petitioner is seeking termination of the mandate of the Presiding Arbitrator under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996. The Petitioner and the Respondent entered into an agreement dated 3rd March, 2009 relating to Kashang Hydroelectric Project in Kinnaur District of Himachal Pradesh ('Kashang Project') which contains an arbitration clause.

Disputes arose between the parties with respect to the Respondent's claim for extension of time for delays/disruptions in the project and additional costs/losses for the period 01st July, 2014 to 31st March, 2016 whereupon both the parties appointed one Arbitrator each in terms of arbitration agreement. On 4th March, 2019, the two Arbitrators unanimously appointed the former Chief Justice of Andhra Pradesh High Court as the Presiding Arbitrator.

Learned counsel for the Petitioner urged that, the Presiding Arbitrator is de jure ineligible under Section 14 (1) (a) of the Act. It was further submitted that, the Presiding Arbitrator is ineligible to act as a Presiding Arbitrator on the ground that, his younger brother and nephew have significant financial interest in the Respondent.

Section 12 (5) of the Act provides that, any person whose relationship with the parties/counsel or subject matter of the dispute falls in any of the 19 categories of the Seventh Schedule shall be ineligible to be appointed as an Arbitrator. Category 10 of the Seventh Schedule read with Section 12 (5) of the Act provides that, an Arbitrator shall be ineligible, if his close family member has significant financial interest in one of the parties or an affiliate of one of the parties. Explanation 1 of the Seventh Schedule defines the term "close family members" as a spouse/sibling/child/parent or life partner.

According to the Petitioner, the younger brother of the Presiding Arbitrator is a "close family member" of the Presiding Arbitrator whereas according to the Respondent, the younger brother of the Presiding Arbitrator is not a close family member as defined in Explanation - I of the Seventh Schedule of the Act.

The Petitioner's brother who appeared as a Senior Advocate on behalf of the Respondent before the High Court in a separate un-connected matter is not "close family member" as defined in Category 10 of the Seventh Schedule and therefore, the learned Presiding Officer is not ineligible to act as an Presiding Officer under Section 12 (5) of the Act.

The present case does not fall in any of the 19 categories mentioned in Seventh Schedule of the Act and therefore, Section 12 (5) of the Act does not bar his eligibility to act as Presiding Arbitrator.

Present Court is of the view that, the voluntary recusal of the Presiding Arbitrator in another arbitration proceeding is not a ground for terminating the mandate of a Presiding Arbitrator under the Act. The Arbitral Tribunal which has kept the arbitration proceedings in abeyance due to the pendency of present petition, shall commence the arbitration proceedings forthwith and shall complete the same within a period of 12 months. The petition is dismissed.

Tags : PRESIDING ARBITRATOR MANDATE TERMINATION