Case Study: Government of Haryana Vs. G.F Toll road Pvt. Ltd.
Facts of the Case
The Appellant issued a letter of acceptance to G.F Toll road Pvt. Ltd, for construction work and maintenance of roads in the City. A contractual agreement was made by the parties. The agreement also included a dispute resolution clause which said there shall be three arbitrators of whom each party may choose one arbitrator and the third arbitrator will be appointed based on the rules of Indian Council of Arbitration
Disputes arose between the parties during the time execution of the agreement .G.F Toll Road Pvt.Ltd invoked the clause and requested to commence the judicial proceedings of Arbitration. On 05.05. 2015 respondent G.F Toll Road Pvt.Ltd appointed a retired Engineer in Chief Surjeet Singh as the nominee arbitrator. The state also wanted to appoint a retired Engineer in Chief M.K Aggarwal as the nominee arbitrator. The Indian Council of Arbitration raised objections for the nominee of the Appellant. Because the person was a retired employee of the State, which could lead to biases of the decision through the arbitration Mechanism. The state refuted the objections made by the ICR and was reluctant to change the arbitrator nominee.
Aggrieved by the Appointment the State filed a petition under Sec 15 of the Arbitration and Conciliation Act, 1996 in the district court of Chandigarh on the grounds that the Arbitral Tribunal was illegal, arbitrary and contrary to the principles of Natural Justice. On 27.01.217 order was given by the District Court of Chandigarh, held the petition not maintainable. The Arbitral Tribunal has been constituted and any objection under 16 should be put forth before the Arbitral Tribunal.
Later, the Appellant (State) filed a revised petition in Haryana and Punjab High Court, the petition was dismissed the petition dated 1.03.2018. The state again appealed to the Supreme Court
- Whether a party to an arbitration agreement can select a former employee as a nominee arbitrator?
- Scope of Sec 15 of Arbitration and Conciliation Act?
The judgment of the Supreme Court
The Supreme Court based on the facts observed that,
The arbitration and Conciliation Act, 1996 does not disqualify its former employee from being an arbitrator for resolving disputes between the parties but based on conditions of impartiality and no justifiable doubts as to his independence. The fact that the arbitrator was an employee in the State of Haryana, 10 years ago would make allegations of biasness, to support the State of Haryana (Appellant). The present case was governed by the provisions to the Pre-amended Arbitration and Conciliation Act, 1996. The Court later referred to the fifth Schedule of the 2015 Amendment Act.
It was held from the schedule of Amendment act a person who is related to the party as an employee, advisor, or counselor is disqualified from being an arbitrator. Any arbitrator who has a past and present relationship with the parties of the arbitration agreement is disqualified.
Thus, the Court held that the Chief Engineer nominee by the State cannot act as there arbitrator as it is wholly unjustified. Particularly the nominee arbitrator selected by the appellant was an employee for the state 10 years ago. Hence, the petition was dismissed.