A former employee is not disqualified from acting as an arbitrator

[Case Brief] The Government of Haryana PWD Haryana (B and R) Branch v/s G.F. Toll Road Pvt. Ltd. & Ors.

Case name The Government of Haryana PWD Haryana (B and R) Branch v/s G.F. Toll Road Pvt. Ltd. & Ors.
Case number Civil Appeal Number 27 of 2019
Court Supreme Court of India
Bench Justice Indu Malhotra and Justice Abhay Mohan Sapre
Author of the judgment Justice Indu Malhotra
Decided on January 3, 2019
Relevant Act/Section Arbitration and Conciliation Act, 1996
Author of the case brief Lavanya Gupta ([email protected])

Brief Facts and Procedural History:

Appellant-State and Respondent No. 1 had entered into a contract for construction and the contract contained a dispute resolution clause. As per the dispute resolution clause, each party was to appoint one arbitrator. During the subsistence of the contract, disputes arose between the parties, which were referred to arbitration, and both parties appointed their nominee arbitrators. Respondent no. 2, Indian Council of Arbitration, as well as Respondent no. 1 raised an objection about the nominee arbitrator appointed by the Appellant-State for he was a retired employee of the State, which raised justifiable doubts with respect to his integrity and impartiality. The Appellant-State requested a period of 30 days to appoint a substitute arbitrator, however, by then Respondent no. 2 had already appointed another nominee arbitrator on behalf of the Appellant-State as well as the presiding arbitrator. Aggrieved by the aforesaid appointment, the Appellant-State filed an application before the District Court, Chandigarh challenging the constituted arbitral tribunal. The District Court held the application to be non-maintainable, and the judgement upheld by the Punjab and Haryana High Court. Thus, the Appellant-State filed the present appeal.

Issues before the Court of Law:

1) Whether or not the appointment of nominee arbitrator made by Respondent no. 2, on behalf of Appellant-State, was justified?

2) Whether or not the appointment of arbitrator by Appellant-State could be objected to, on the grounds of the arbitrator being an ex-employee of the State?

Ratio of the Court:

No. The Appellant-State vide a letter placed on record had requested Respondent no. 2 to grant a time of 30 days for appointment of a substitute arbitrator in light of the objections raised against the first appointed arbitrator. The Respondent no. 2 could not have filled up the vacancy unless the Appellant-State had no intention to do so, which is clearly rebutted by the letter of the Appellant-State. Thus, the appointment of arbitrator by Respondent no. 2 was unjustified.

No, the appointment of the first arbitrator could not be challenged and objected on the ground that he was an ex-employee of the State as the objection is unjustified and contrary to statutory provisions. The Arbitration and Conciliation Act, 1996 does not disqualify a former employee from acting as an arbitrator. Even if the 2015 Amendment to the 1996 Act is considered, an ex-employee cannot be said to be disqualified from acting as an arbitrator.

Decision Held:

It was held by the Apex Court that a former employee is not disqualified from acting as an arbitrator. Thus, the tribunal constituted by Respondent no. 2 was terminated.

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