Haryana Space Application Centre (HARSAC) & Anr. Vs. M/s Pan India Consultants Pvt. Ltd. - (Supreme Court) (20 Jan 2021)

Section 12(5) r/w Seventh Schedule of Arbitration & Conciliation Act, 1996, which deals with ineligibility of a person to be appointed as Arbitrator, is mandatory and non-derogable provision

MANU/SC/0033/2021

Arbitration

The Appellant No. 1 / HARSAC, Department of Science and Technology, Government of Haryana is the nodal agency for Geographic Information System (“GIS”) Application and Remote Sensing for the Government of Haryana. HARSAC invited Request for Proposal in September 2010 from qualified vendors for the modernisation of Land Record (including digitisation of cadastral Maps, Integration with records and management of old revenue documents). HARSAC vide Letter dated 28th February, 2011 awarded the contract to the Respondent – Pan India Consultants Pvt. Ltd, and three other vendors for works specified in the allotment letter.

As per HARSAC, the Respondent failed to complete the work assigned within the period specified iand was delaying the entire project. Even though two extensions were granted, the Respondent failed to complete the work. This led to the invocation of the Performance Bank Guarantee by HARSAC vide letter dated 18th March, 2014.

The Appellant herein filed Civil Revision Petition under Article 227 of the Constitution of India, 1950 before the High Court for setting aside the Order passed by the Additional District Judge, whereby an extension of time had been granted for passing the Award. It was submitted that, the extension of time had been mutually agreed by both parties upto 15th August, 2018. However, the tribunal failed to pronounce the Award even within this extended period, and did not show any inclination of doing so even on 7th January, 2019, when the letter terminating the mandate of the tribunal was sent. The tribunal failed to pronounce the Award in a period of over 28 months from the date of constitution of the tribunal.

The learned Single Judge of the High Court passed an Interim Order dated 31st July, 2020 wherein it was observed that since the period of 3 months granted by the District Court had already elapsed, both parties were directed to obtain instructions for grant of a period of 3 months on account of the prevailing Pandemic. The High Court, in light of the Pandemic, granted an extension of 4 months to enable the parties to conclude their arguments within 3 months, and a period of 1 month for the tribunal to pass the Award. Aggrieved by the said Order, HARSAC has filed the present Special Leave Petition.

The appointment of the Principal Secretary, Government of Haryana as the nominee arbitrator of HARSAC which is a Nodal Agency of the Government of Haryana, would be invalid under Section 12(5) of the Arbitration and Conciliation Act, 1996 read with the Seventh Schedule. Section 12(5) of the Arbitration Act, 1996 (as amended by the 2015 Amendment Act) provides that, notwithstanding any prior agreement to the contrary, any person whose relationship with the parties, or counsel, falls within any of the categories specified in the Seventh Schedule, shall be ineligible to be appointed as an arbitrator.

Section 12(5) read with the Seventh Schedule is a mandatory and non- derogable provision of the Act. In the facts of the present case, the Principal Secretary to the Government of Haryana would be ineligible to be appointed as an arbitrator, since he would have a controlling influence on the Appellant Company being a nodal agency of the State.

The Counsel for both parties during the course of hearing has consented to the substitution of the existing tribunal, by the appointment of a Sole Arbitrator to complete the arbitral proceedings. In exercise of power under Section 29A(6) of the Arbitration and Conciliation Act, 1996 (as amended), present Court appoints Justice Kurian Joseph (Retd.), former judge of this Court, as the substitute arbitrator. The matter is disposed of.

Tags : ARBITRATOR ELIGIBILITY PROVISION