After the amendment to the Act in 2015, Section 12(5) prohibits current employees of any party from being appointed as the arbitrator.

[Case Brief] Rajasthan Small Industries Corporation Limited  v/s Ganesh Containers Movers Syndicate

Case name Rajasthan Small Industries Corporation Limited  v/s Ganesh Containers Movers Syndicate
Case number Civil Appeal Number 1039 of 2019
Court Supreme Court of India 
Bench  Justice R. Banumathi and Justice Indira Banerjee
Author of the judgement  Justice R. Banumathi
Decided on  January 23, 2019
Relevant Act/Sections Arbitration and Conciliation Act, 1996-  Section 12, Section 26
Author of the case summary Lavanya Gupta ([email protected]

Brief Facts and Procedural History:

The Appellant and Respondent entered into an agreement and as per the general conditions of the agreement, all disputes were to be resolved by arbitration by the Managing Director or his/her nominee. Soon disputes arose between the parties. One I.C. Shrivastava was appointed as a sole arbitrator however, he was replaced with the Chairman-cum-Managing Director of the Appellant by the consent of both parties. However, the matter was adjourned repeatedly as no one appeared on behalf of the Respondent. A few days later the Respondent raised doubts regarding impartiality of the newly appointed sole arbitrator. The Respondent filed an application before the High Court for appointment of an independent arbitrator. Meanwhile, the sole arbitrator passed an ex-parte award. The High Court appointed another sole arbitrator and observed that the Chairman-cum-Managing Director had hurried up to conclude the proceedings and frustrate them. Aggrieved by the High Court’s order, the Appellant filed the present appeal.

Issues before the Court of Law:

1) Whether or not the Respondent was right in approaching the High Court for appointment of independent arbitrator?

2) Whether or not the High Court was right in terminating the Chairman-cum-Managing Director as the arbitrator, even though he was appointed with the parties’ consent, on the ground that there was delay in passing the award?

3) Whether or not the High Court was right in deviating from the terms of the agreement between the parties and appointing an independent arbitrator?

4) Whether or not the Chairman-cum-Managing Director was ineligible to act as arbitrator in view of Section 12 of the Arbitration and Conciliation Act, 1996 (“Act”)?

Ratio of the Court:

  1. The Respondent had consciously agreed by way of the agreement for resolving of disputes through arbitration presided by the Managing Director on his nominee. Additionally, the Respondent participated in the arbitration proceedings for some time. Thus, the Respondent was estopped from approaching the High Court for appointment of an independent arbitrator.
  2. No, just because there was mere neglect to act or delay in passing the award, it does not become a ground to appoint another arbitrator in deviation from the terms agreed by the parties.
  3. No, the High Court was not right in appointing an independent arbitrator, as it was not in consonance with the terms of the agreement.
  4. After the amendment to the Act in 2015, Section 12(5) prohibits current employees of any party from being appointed as the arbitrator. However, in the present case, the agreement was entered into on January 28, 2000 and the arbitration proceedings in 2009 and thus, the case falls out of the purview of applicability of Section 12(5) in view of Section 26 of the Act.

Decision Held:

The impugned order of the High Court was set aside as the Court cannot appoint arbitrator(s) in deviation from the agreement between the parties and on the ground of mere delay in passing of arbitral award. The then Managing Director of the Appellant was directed to be the sole arbitrator and to pass the final award within four months from the date of the judgement.

Leave a Reply

Close Menu