Allowed

M/s. Prathien Infrastructures v. Union of India

Andhra Pradesh HC12 Apr 2022ARBAPPL/7/2021

Case brief

AI extract

What is this about?

The High Court of Andhra Pradesh, Amravati, dealt with an arbitration application under Section 11 of the Arbitration and Conciliation Act, 1996. The court found that a proposed arbitrator under the contract was ineligible due to Section 12(5). Consequently, the court appointed a retired judge of the High Court as the sole arbitrator to resolve the dispute.

What did the court decide?

Appointment of Sri Justice M. Venkata Ramana, Retired Judge of this Court, as sole arbitrator to resolve the dispute between the parties.

M/s. Prathien Infrastructures Vs Union of India — Arbitration | Andhra Pradesh HC (2022)

¶1

IN THE HIGH COURT OF ANDHRA PRADESH: AMARAVATI

¶2

HON’BLE MR. JUSTICE PRASHANT KUMAR MISHRA, CHIEF JUSTICE

¶3

ARBITRATION APPLICATION No.7 of 2021

¶4

(Through physical mode)

¶5

M/s. Prathien Infrastructures, a partnership firm, having its Office:280, Lakshmi Complex, Pankaja Mill Road, Ramanathapuram, Coimbatore-641045, Through its authorized representative Mr. S.A. Ramachandran.

¶6

..Applicant

¶7

Versus

¶8

Union of India through its 1. The Engineer-in-Chief, Military Engineering Services Branch Dte of Contract Management, Integrated HQ of MoD (Army) Kashmir House, Rajaji Marg, New Delhi -110011 and another.

¶9

…Respondents

¶10

Counsel for the applicant : Mr. Marella Radha

¶11

Counsel for respondents : Mr. N. Harinath, ASG.

¶12

ORAL ORDER

¶13

Dt:12.04.2022

¶14

This application under Section 11(5) and (6) of the Arbitration and

¶15

Conciliation Act, 1996 (for short, ‘the Act’) has been preferred for appointment of an arbitrator to resolve the disputes arising between the parties out of the Contract dated 08.12.2017 executed between the parties in respect of the work of Addition/Alteration of Old Dispersal at Visakhapatnam, for value of Rs.16,53,94,010.37 ps.

¶16

It is the case of the applicant that despite service of notice to the respondents for appointment of an arbitrator, steps were not taken. Therefore, this application has been preferred.

¶17

HCJ A.A.No.7/2021

¶18

¶19

On the other hand, the respondents would refer to the documents filed along with the counter-affidavit, particularly letter dated 24.08.2019, which was addressed to the Engineer-in-Chief’s Branch, Military Engineer Services Dte of Contract Management, Kashmir House, Rajaji Marg, New Delhi, informing the applicant that the consent of Union of India was accorded for appointment of arbitrator in terms of Condition 70 of IAFW2249, General Conditions of Contracts and Arbitration and Conciliation Act 1996 (as amended), and mentioning further that there is no objection to the appointment of Sole Arbitrator.

¶20

Referring to the above letter enclosed as annexure R4 to the counter-affidavit, the learned Assistant Solicitor General would submit that the disputes arose between the parties in the course of execution of work under the contract are required to be settled in terms of Condition 70 of the General Conditions of Contracts namely IAFW 2249 and that the arbitrator to be appointed for adjudication of the disputes between the parties has to be the same person as is mentioned in Condition 70.

¶21

The submission made by the learned Assistant Solicitor General is not acceptable in view of the law laid down by the Hon’ble Supreme Court in Perkins Eastman Architects DPC & Another v. HSCC (India) Limited reported in AIR 2020 (SC) 59 , wherein following the judgment in TRF Limited v. Energo Engineering Projects Limited reported in (2017) 8 SCC 377 and the provisions contained in Section 12(5) of the Act, it was reiterated that by virtue of Section 12(5) of the Act, any person who falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as arbitrator.

¶22

6 . Relevant portion of Condition 70 is reproduced hereunder:

¶23

HCJ A.A.No.7/2021

¶24

¶25

"70. Arbitration --- All disputes, between the parties to the Contract (other than those for which the decision of the C.W.E. or any other person is by the Contract expressed to be final and binding) shall, after written notice by either party to the Contract to the other of them, be referred to the sole arbitration of a Serving Officer having degree in Engineering or equivalent or having passed final/direct final Examination of sub-Division II of Institution of Surveyor (India) recognized by the Govt. of India to be appointed by the authority mentioned in the tender documents.”

¶26

It is pertinent to note that the Seventh Schedule of the Arbitration & Conciliation Act, 1996 provides list of persons, who shall be ineligible to be appointed as arbitrator due to relationship with a party to the contract. Categories of persons mentioned in the Seventh Schedule are reproduced hereunder:

¶27

Arbitrator’s relationship with the parties or counsel

¶28

The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.

¶29

The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.

¶30

The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties.

¶31

The arbitrator is a lawyer in the same law firm which is representing one of the parties.

¶32

The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.

¶33

The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself.

¶34

The arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties.

¶35

The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.

¶36

HCJ A.A.No.7/2021

¶37

¶38

The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company.

¶39

A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties.

¶40

The arbitrator is a legal representative of an entity that is a party in the arbitration.

¶41

The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.

¶42

The arbitrator has a significant financial interest in one of the parties or the outcome of the case.

¶43

The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.

¶44

Relationship of the arbitrator to the dispute

¶45

The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties.

¶46

The arbitrator has previous involvement in the case.

¶47

Arbitrator’s direct or indirect interest in the dispute

¶48

The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately

¶49

held.

¶50

A close family member of the arbitrator has a significant financial interest in the outcome of the dispute.

¶51

The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute.

¶52

Explanation 1.—The term “close family member” refers to a spouse, sibling, child, parent or life partner. Explanation 2.—The term “affiliate” encompasses all companies in one group of companies including the parent company. Explanation 3.—For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above.”

¶53

Condition 70 of specifies that the dispute shall be referred to the

¶54

sole arbitration of a Serving Officer having degree in Engineering or

¶55

HCJ A.A.No.7/2021

¶56

¶57

equivalent or having passed final/direct final Examination of sub-Division II of the Institution of Surveyor (India) recognised by the Government of India to be appointed by the authority mentioned in the tender documents. Although the respondents issued communication dated 24.08.2019 according no objection for appointment of Sole Arbitrator in terms of Condition No.70 of IAFW.2249, they did not inform the applicant as to the name of the Serving Officer who will act as arbitrator. Thus, there was no clarity as to the person to be appointed to act as arbitrator to resolve the dispute between the parties. Moreover, in view of the law down in the case of TRF Limited v. Energo Engineering Projects Limited (supra), the serving officer, who happens to be nominated/appointed by the employee of the respondent-organization, shall be ineligible to act as arbitrator in view of Section 12(5) r/w Seventh Schedule of the Act.

¶58

In view of the above and since the applicant did not concur on the appointment of Sole Arbitrator by the respondent-organization in terms of Condition 70 of IAFW 2249, this Court feels it appropriate to appoint an arbitrator.

¶59

Accordingly, Sri Justice M. Venkata Ramana, Retired Judge of this Court, is appointed as sole arbitrator to resolve the dispute between the parties. The parties are at liberty to file their respective pleadings before the arbitrator.

¶60

The fee of the arbitrator, place of arbitration and the other terms and conditions shall be settled by the arbitrator so appointed in consultation with the parties.

¶61

HCJ A.A.No.7/2021

¶62

¶63

Registry will send a copy of this order to Sri Justice M. Venkata Ramana, Retired Judge of this Court, A 204, Niharika Signature Apartments, Opp:NCC Urban, Adjacent to Nasr Boys High School, Gachibowli, Hyderabad-500032, Telangana State.

¶64

The Arbitration Application is disposed of accordingly. No costs. All pending miscellaneous applications shall stand closed.

¶65

PRASHANT KUMAR MISHRA, CJ

¶66

M/s. Prathien Infrastructures v. Union of India

Case brief

What is this about?

What did the court decide?

M/s. Prathien Infrastructures v. Union of India

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Unitech Vizag Projects Limited, Vs Andhra Pradesh Industrial Infrastructure Corporation Limited

Chappidi Sreenu, Vs M/s. Radan Health Care

Danieli India Limited Vs Rashtriya Ispat Nigam Limited

Kodali Raju Vs Prasad Rao IAS

Mr.Loka Hari Venkata Ratnam Vs Mr. P. Komaraiah

S.K. Naushad Begum Vs Sri Satyanarayana