An appointment of an arbitrator made by a person ineligible to act as an arbitrator himself is null and void.

[Case Brief] Bharat Broadband Network Limited v/s United Telecom Limited

Case name Bharat Broadband Network Limited v/s United Telecom Limited
Case number Civil Appeal Number 3972 of 2019 
Court Supreme Court of India
Bench Justice Rohinton Fali Nariman and Justice Vineet Saran
Author of the judgement Justice Rohinton Fali Nariman
Decided on  April 4, 2019
Relevant Act/Sections Arbitration and Conciliation Act, 1996- Section 12(5)
Author of the case brief  Lavanya Gupta ([email protected]

Brief Facts and Procedural History:

The Appellant and Respondent had entered into an agreement for turnkey projects and the agreement contained a dispute resolution clause. As per the dispute resolution clause, all disputes were to be referred to the sole arbitration of the Chairman and Managing Director of the Appellant or some other person appointed by him. During the subsistence of the contract, disputes arose between the parties and the Chairman and Managing Director of the Appellant company appointed one Shri K.H. Khan as the sole arbitrator on January 17, 2017. In the judgement passed by the Apex Court on July 3, 2017 in the case of TRF Ltd. v. Energo Engineering Projects Ltd. (2017) 8 SCC 377 it was held that since a Managing Director of a company, which was one of the parties to the arbitration, was ineligible to act as an arbitrator, any appointment of another arbitrator by him would be null and void. In light of the said judgement, the Appellant prayed before Shri K.H. Khan to withdraw from proceedings however, the same was rejected by Shri K.H. Khan without giving any reasons. The Appellant thus filed a petition before the High Court of Delhi, which was rejected on the grounds of estoppel and waiver of applicability of Section 12(5) of the Arbitration and Conciliation Act, 1996 (“Act”) by way of filing of statement of claims by both parties. The present appeal was presented before the Supreme Court by the Appellant.

Issues before the Court of Law:

1) Whether or not Shri K.H. Khan’s appointment as the sole arbitrator was free from infirmities?

Ratio of the Court:                        

Yes. The 2015 Amendment to the Act clearly made the Managing Director ineligible to act as an arbitrator. Subsequently, any appointment of an arbitrator by such an ineligible person was ruled upon in the case of TRF Ltd. Thus, Shri K.H. Khan’s appointment was void.

Decision Held:

The 2-judge bench held that an appointment of an arbitrator made by a person ineligible to act as an arbitrator himself is null and void. Thus, the appeal was allowed and Shri K.H. Khan was terminated from his position of being an arbitrator.

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