A construction contractor challenged an arbitral award for arbitrator ineligibility and bias. The Court held the 2015 amendment inapplicable to proceedings commenced before it, absent contrary agreement, and rejected the bias challenge. The appeal was dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
ARBA No. 7 of 2019 M/s Navakar Industries Vs. C.g. State Cooperative Marketing Federation Limited Raipur
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AFR
HIGH COURT OF CHHATTISGARH, BILASPUR (Judgment Reserved on 02-05-2023 ) (Judgment Delivered on 20-06-2023)
ARBA No. 7 of 2019
M/s Navakar Industries M I G- 59, Sector-1, Shanker Nagar Raipur Chhattisgarh --- Appellant
Versus
C.G. State Cooperative Marketing Federation Limited Raipur 880, Civil Lines, Raipur Chhattisgarh --- Respondent
For Appellant : Shri Abhinav Kardekar, Advocate along with Meha Kumar, Advocate For Respondent : Shri Ashish Surana, Advocate along with Shri Chetan Singh Chouhan, Advocate
Hon'ble Shri Justice Goutam Bhaduri
& Hon’ble Shri Justice Sanjay Kumar Jaiswal
CAV JUDGMENT
Per Goutam Bhaduri, J
Heard.
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to bring fairness, independence and impartiality, when the neutrality of the arbitrator is in question and the statutory bar is created, any award passed by him would be nullity. He would further submit that the language of the award would show that the words were picked up as verbatim from the pleadings of reply for the reason that the arbitrator himself was the Managing Director who has controlling influence of the respondent Markfed. He would further submit that when the statute creates a bar coupled with the fact of bias, the arbitrator could not have passed such award. He would further submit that under the circumstances, the case needs to be adjudicated afresh by another arbitrator to be newly appointed.
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before this Court were not raised before the Commercial Court and with respect to bias, it is stated that the claim was only with respect to the damages and the prayer of the appellant that the award be partially set aside cannot be entertained in view of the subsequent amendment of Section 34 of the Act, 1996. He placed reliance in MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 and Rajasthan Small Industries Corporation Limited v. Ganesh Containers Movers Syndicate {(2019) 3 SCC 282} and would submit that the scope of interference by this Court would, therefore, be very limited, which cannot be extended.
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“(1) Learned Senior Counsel appearing for the respondents and Mr. Anbalgan P, Managing Director, Chhattisgarh State Cooperation Marketing Federation, Raipur jointly would submit that the arbitral proceedings would be concluded within a period of three months from today after getting records from the Madhya Pradesh State Cooperation Marketing Federation.
(2) The above statement is taken on record.
(3) Mr. Anbalgan P., M.D., Chhattisgarh State Cooperation Marketing Federation, Raipur submits that he has made a request for supplying the records but the Madhya Pradesh State Corporation Marketing Federation has not responded.
(4) Be that as it may, Madhya Pradesh State Cooperation Marketing Federation shall trace out the record and make available to the Chhattisgarh State Cooperation Marketing Federation promptly.
“Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator :
Provided that the parties may, subsequent to
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7 disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.”
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8 from that, on which reliance is placed by Appellant. In that case though the agreement was entered into on 19.12.1994 but the approach to the Arbitrator was on 19.10.2019 and in case of Bharat Broadband Network Ltd. Vs. United Telecoms Ltd. {(2019) 5 SCC 755} the dispute having arisen between the parties, the arbitration clause was invoked by the respondent from 03.01.2017. In the case on hand, the dispute arose on 16.08.1998 and much after long time, the application for arbitration was filed and the arbitration proceeding commenced. Subsequently, the State of Chhattisgarh came in existence in the year 2000. Since the State of Chhattisgarh came into being and the proceedings were in dormant stage an application was filed before the High Court to fast-track the case. The order of the High Court would also reflect that no fresh arbitration proceedings were commenced and only old arbitration proceedings were directed to be fast-tracked within a stipulated time.
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be ineligible for appointment, the proviso allows the parties to waive such ineligibility through an “express agreement” in writing”. The Act therefore recognizes that any potential ineligibility can be over-ridden by the parties only through an express agreement, and such a waiver cannot be inferred from mere conduct of parties. This position has been declared by the Supreme Court in Bharat Boardband Network Ltd. Vs. United Telcoms Ltd (2019) 5 SCC 755 (Supra) and Ellora Paper Mills Limited Vs. State of M.P . (2022) 3 SCC 1 where the Supreme Court has reaffirmed that filing of pleadings and mere participation by the parties cannot be interpreted as an implicit waiver on the ineligibility of the arbitrator under Section 12(5). The Court stressed upon the requirement of an express written agreement, through which parties repose their faith in the appointed arbitrator, which indicates their intention to waive the ineligibility under Section 12(5).
“21. Commencement of arbitral proceedings .- Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
“26. Act not to apply to pending arbitral
ARBA No. 7 of 2019 M/s Navakar Industries Vs. C.g. State Cooperative Marketing Federation Limited Raipur
10 proceedings.- Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.”
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“37. What will be noticed, so far as the first part is concerned, which states--
“26. Act not to apply to pending arbitral proceedings.-- Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree…”
is that : (1) “the arbitral proceedings” and their commencement is mentioned in the context of Section 21 of the principal Act; (2) the expression used is “to” and not “in relation to” ; and (3) parties may otherwise agree. So far as the second part of Section 26 is concerned, namely, the part which reads, “… but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act” makes it clear that the expression “in relation to” is used; and the expression “the” arbitral proceedings and “in accordance with the provisions of Section 21 of the principal Act” is conspicuously by its absence.
38. That the expression “the arbitral proceedings” refers to proceedings before an Arbitral Tribunal is clear from the heading of Chapter V of the 1996 Act, which reads as follows:
“Conduct of arbitral proceedings”
The entire chapter consists of Sections 18 to 27 dealing with the conduct of arbitral proceedings before an Arbitral Tribunal. What is also important to notice is that these proceedings alone are referred to, the expression “to” as contrasted with the expression “in relation to” making this clear. Also, the reference to Section 21 of the 1996 Act, which appears in Chapter V, and which speaks of the arbitral proceedings commencing on the date on which a request for a dispute to be referred to arbitration is received by the respondent, would also make it clear that it is these proceedings, and no others, that form the subject-matter of the first part of Section 26. Also, since the conduct of arbitral proceedings is largely procedural in nature, parties may “otherwise agree” and apply the Amendment Act to arbitral proceedings that have commenced before the Amendment Act came into force. [Section 29-A of the Amendment (sic Amended) Act provides for
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time-limits with which an arbitral award is to be made. In Hitendra Vishnu Thakur v. State of Maharashtra, (1994) 4 SCC 602 at p.633 : 1994 SCC (Cri) 1087, this Court stated : (SCC p. 633, para 26) “26…… (iii) Every litigant has a vested right in substantive law but no such right exists in procedural law. (iv) A procedural statute should not generally speaking be applied retrospectively where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished. (v) A statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication.” It is, inter-alia, because timelines for the making of an arbitral award have been laid down for the first time in Section 29-A of the Amendment (sic Amended) Act that parties were given the option to adopt such timelines which, though procedural in nature, create new obligations in respect of a proceeding already begun under the unamended Act. This is, of course, only one example of why parties may otherwise agree and apply the new procedure laid down by the Amendment Act to arbitral proceedings that have commenced before it came into force.] In stark contrast to the first part of Section 26 is the second part, where the Amendment Act is made applicable “in relation to” arbitral proceedings which commenced on or after the date of commencement of the Amendment Act. What is conspicuous by its absence in the second part is any reference to Section 21 of the 1996 Act. Whereas the first part refers only to arbitral proceedings before an Arbitral Tribunal, the second part refers to court proceedings “in relation to” arbitral proceedings, and it is the commencement of these court proceedings that is referred to in the second part of Section 26, as the words “in relation to the arbitral proceedings” in the second part are not controlled by the application of Section 21 of the 1996 Act.
39. Section 26, therefore, bifurcates proceedings, as has been stated above, with a great degree of clarity, into two sets of proceedings – arbitral proceedings themselves, and court proceedings in relation thereto. The reason why the first part of Section 26 is couched in negative form is only to state that the Amendment Act will apply even to arbitral proceedings commenced before the amendment if parties otherwise agree. If the first part of Section 26 were couched in a positive language
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(like the second part), it would have been necessary to add a proviso stating that the Amendment Act would apply even to arbitral proceedings commenced before the amendment if the parties agree. In either case, the intention of the legislature remains the same, the negative form conveying exactly what could have been stated positively, with the necessary proviso. Obviously, “arbitral proceedings” have been subsumed in the first part cannot re-appear in the second part and the expression “in relation to arbitral proceedings” would therefore, apply only to court proceedings which relate to the arbitral proceedings. The scheme of Section 26 is thus clear : that the Amendment Act is prospective in nature, and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the principal Act, on or after the Amendment Act, and to court proceedings which have commenced on or after the Amendment Act came into force.”
“22. The principles which emerge from the decisions referred to above are :
22.1 The fact that the named arbitrator is an employee of one of the parties is not ipso facto a ground to raise a presumption of bias or partiality or lack of independence on his part. There can however be a justifiable apprehension about the independence or impartiality of an employee arbitrator, if such person was the controlling or dealing authority in regard to the subject contract or if he is a direct subordinate to the officer whose decision is the subject-matter of the dispute.
22.1.2. Unless the cause of action for invoking jurisdiction under clauses (a) (b) or (c) of
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sub-section (6) of Section 11 of the 1996 Act arises, there is no question of the Chief Justice or his designate exercising power under subsection (6) of Section 11.
22.1.3. The Chief Justice or his designate while exercising power under sub-section (6) of Section 11 shall endeavour to give effect to the appointment procedure prescribed in the arbitration clause.
22.1.4 While exercising such power under sub-section (6) of Section 11, if circumstances exist, giving rise to justifiable doubts as to the independence and impartiality of the person nominated, or if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, the Chief Justice or his designate may, for reasons to be recorded ignore the designated arbitrator and appoint someone-else.
22.2 In cases governed by the 1996 Act after the Amendment Act has come into force : if the arbitration clause finds foul with the amended provisions, the appointment of the arbitrator even if apparently in conformity with the arbitration clause in the agreement, would be illegal and thus the court would be within its powers to appoint such arbitrator(s) as may be permissible.”
(Emphasis applied)
“16. Considering the facts and circumstances of the present case, we are not inclined to go into the merits of this contention of the appellant nor examine the correctness or otherwise of the above
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view taken by the Delhi High Court in Ratna Infrastructure Projects case [Ratna Infrastructure Projects (P) Ltd. v. Meja Urja Nigam (P) Ltd., 2017 SCC OnLine Del 7808]; suffice it to note that as per Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015, the provisions of the amended 2015 Act shall not apply to the arbitral proceedings commenced in accordance with the provisions of Section 21 of the principal Act before the commencement of the Amendment Act unless the parties otherwise agree. In the facts and circumstances of the present case, the proviso in Clause (65) of the general conditions of the contract cannot be taken to be the agreement between the parties so as to apply the provisions of the amended Act. As per Section 26 of the Act, the provisions of the 2015 Amendment Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of the 2015 Amendment Act (w.e.f. 23.10.2015). In the present case, arbitration proceedings commenced way back in 2013, much prior to coming into force of the amended act and therefore, the provisions of the amended Act cannot be invoked.”
27. We are also of the view that the 2015 Amendment Act which came into force i.e., on 23.10.2015) shall not apply to the arbitral proceedings which have commenced in accordance with the provisions of Section 21 of the principal Act, 1996 before the coming into force of the 2015 Amendment Act, unless the parties otherwise agree.”
(Emphasis supplied)
ARBA No. 7 of 2019 M/s Navakar Industries Vs. C.g. State Cooperative Marketing Federation Limited Raipur
16 442 , in relation to application under Section 11(6) of the Act in a case where notice for arbitration is received/invoked prior to the Amendment Act , 2015 but the application under Section 11(6) of the Act is filed post Amendment Act, 2015, it is observed in paragraphs 25 to 26 as under:
“25. As on 1-1-2016, the 2015 Amendment Act was gazetted and according to Section 1(2) of the 2015 Amendment Act, it was deemed to have come into force on 23-10-2015. Section 21 of the 1996 Act clearly envisages that unless otherwise agreed by the parties, the arbitral proceedings in respect of a dispute shall commence from the date on which a request for that dispute to be referred to arbitration is received by the respondent and the plain reading of Section 26 of the 2015 Amendment Act is self-explicit, leaves no room for interpretation. …….”
Reading the language of sections 21 of 1996 and 26 of 2015 Amendment Act, the Supreme Court further held that conjoint reading of section 21 read with Section 26 leaves no manner of doubt that the provisions of the 2015 Amendment Act shall not apply to such of the arbitral proceedings which have commenced in terms of the provisions of Section 21 of the principal Act unless the parties otherwise agree.
ARBA No. 7 of 2019 M/s Navakar Industries Vs. C.g. State Cooperative Marketing Federation Limited Raipur
17 2015 Amendment Act, unless the parties otherwise agree. Similar view has been expressed in S.P. Sangla Construction Private Ltd. Versus State of Himachal Pradesh (2019) 2 SCC 488 .
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Accordingly, the appeal is dismissed.
Sd/Sd/-
(Goutam Bhaduri) (Sanjay Kumar Jaiswal) Judge Judge
Rao
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Head-notes
(1) Filing of pleadings and mere participation by the parties in arbitral proceedings cannot be interpreted as an implicit waiver on the ineligibility of the Arbitrator under Section 12(5) of the Amendment Act, 2015 unless an express agreement in writing is executed.
(1) i{kdkjksa }kjk ek/;LFke~ dk;Zokgh esa vfHkopuksa ds izLrqrhdj.k rFkk Hkkx fy;s tkus ek= ls ;g ugha le>k tk ldrk gS fd la’kksf/kr vf/kfu;e] 2015 dh /kkjk 12¼5½ ds varxZr e/;LFk dh vik=rk dk foof{kr :i ls vfHkR;tu dj fn;k x;k gS] tcrd fd rRlaca/k esa fyf[kr esa ,d vfHkO;Dr djkj fu"ikfnr u fd;k x;k gksA
(2) The new Amendment Act 2015 which came into force w.e.f. 23.10.2015 shall not apply to the arbitral proceedings which have commenced in terms of provisions of Section 21 of the Principal Act, 1996 before coming into force of 2015 Amendment Act, unless the parties otherwise agree.
(2) uohu la’kksf/kr vf/kfu;e] 2015 tks fnuk¡d 23-10-2015 ls izHkko’khy gS] ,sls ek/;LFke~ dk;Zokfg;ksa ij ykxw ugha gksxk] tks la’kksf/kr vf/kfu;e] 2015 ds izHkko esa vkus ds iwoZ eq[; vf/kfu;e] 1996 dh /kkjk 21 ds mica/kksa ds fuca/kuksa ds vuqlkj izkjEHk dh xbZ gS] tc rd fd i{kdkjksa }kjk vU;Fkk djkj u fd;k x;k gksA
(3) The fact that the named arbitrator is an employee of one of the parties is not ipso facto a ground to raise a presumption of bias or partiality or lack of independence on his part.
(3) ;g rF; fd ukfer e/;LFk] i{kdkjksa esa ls ,d i{kdkj dk deZpkjh gS] mlds i{kikrh gksus ;k mldh vksj ls i{kikr djus ;k fu"i{k u gksus dh mi/kkj.kk fd;s tkus dk Lor% ,d vk/kkj ugha gSA
2 issues framed by the court
Did the 2015 amendment apply to arbitral proceedings commenced before it came into force, absent an agreement adopting it?
Did reproduction of the respondent's pleadings in the award establish bias by its Managing Director acting as arbitrator?
Colour shows how this judgement treated each authority
Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited Versus M/s Ajay Sales & SuppliersDistinguished¶45
Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited Versus M/s Ajay Sales & Suppliers {(2021) 17 SCC 248} · Who else cites this
Bharat Broadband Network Ltd. Vs. United Telecoms Ltd.Distinguished¶47
Bharat Broadband Network Ltd. Vs. United Telecoms Ltd. {(2019) 5 SCC 755} · Who else cites this
Sampada Yogesh Waghdhare Vs. State of MaharashtraReferred¶26
Sampada Yogesh Waghdhare Vs. State of Maharashtra {(2019) 5 SCC 682} · Who else cites this
MMTC Ltd. v. Vedanta Ltd.Referred¶29
MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 · Who else cites this
Rajasthan Small Industries Corporation Limited v. Ganesh Containers Movers SyndicateReferred¶29
Rajasthan Small Industries Corporation Limited v. Ganesh Containers Movers Syndicate {(2019) 3 SCC 282} · Who else cites this
Ellora Paper Mills Limited Vs. State of M.P.Relied on¶51
(2022) 3 SCC 1 · Who else cites this
Shree Vishnu Constructions Versus Engineer in Chief Military Engineering ServicesFollowed¶57
Shree Vishnu Constructions Versus Engineer in Chief Military Engineering Services 2023 SCC OnLine SC 600 · Who else cites this
BCCI vs. Kochi Cricket Pvt. LtdRelied on¶58
BCCI vs. Kochi Cricket Pvt. Ltd, (2018) 6 SCC 287, · Who else cites this
Aravali Power Co. (P) Ltd v. Era Infra Engg. LtdRelied on¶75
Aravali Power Co. (P) Ltd v. Era Infra Engg. Ltd (2017) 15 SCC 32 · Who else cites this
S.P. Singla Constructions (P) Ltd. Versus State of H.PRelied on¶87
S.P. Singla Constructions (P) Ltd. Versus State of H.P (2019) 2 SCC 488 : (2019) 1 SCC (Civ) 748 · Who else cites this
Union of India Versus Parmar Construction CompanyFollowed¶101
Parmar Construction Company(2019) 15 SCC 682 (supra) · Who else cites this
M/s. Dyna Technologies Pvt. Ltd Versus M/s. Crompton Greaves Ltd.Referred¶104
(2019) 20 SCC 1 (M/s. Dyna Technologies Pvt. Ltd Versus M/s. Crompton Greaves Ltd.). · Who else cites this
Ssangyong Engg. & Construction Co. LtdDistinguished¶104
Ssangyong Engg. & Construction Co. Ltd (Supra)
5 provisions across 2 enactments
M/s Navakar Industries
C.G. State Cooperative Marketing Federation Limited Raipur
Goutam Bhaduri
Sanjay Kumar Jaiswal
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
