BHARAT BROADBAND NETWORK LIMITED versus UNITED TELECOMS LIMITED

Citation: [2019] 6 S.C.R. 97 · Decided: 16-04-2019 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Appeal(s) allowed

Cited by 5 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

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BHARAT BROADBAND NETWORK LIMITED
v.
UNITED TELECOMS LIMITED
(Civil Appeal No. 3972 of 2019)
APRIL 16, 2019
[R. F. NARIMAN AND VINEET SARAN, JJ.]
Arbitration and Conciliation, 1996: s.12(5) and its proviso –
Applicability of the proviso – Held: The proviso to s.12(5) applies
only if subsequent to arising of disputes between the parties, the
parties waive the applicability of sub-section (5) of s.12 by an express
agreement in writing – The expression “express agreement in
writing” refers to an agreement made in words as opposed to an
agreement which is to be inferred by conduct – The instant case
disclosed no such express agreement – The fact that a statement of
claim was filed before the arbitrator, would not mean that there was
an express agreement in words that both parties wished continuation
of arbitrator so appointed despite his being ineligible to act as such.
Arbitration and Conciliation, 1996: s.12(5) – Interpretation
of – Eligibility to be appointed as arbitrator – In the instant case,
agreement provided for appointment of arbitrator by the Managing
Director of appellant-company – Accordingly, in terms of the
arbitration clause, appointment of arbitrator was made – On
3.7.2017, TRF judgment of Supreme Court held that since Managing
Director of a company which was one of the parties to the arbitration
was himself ineligible to act as arbitrator, such ineligible person
could not appoint an arbitrator, and any such appointment would
be null and void – In view of TRF judgment, in the instant case,
validity of appointment of arbitrator challenged by the Managing
Director himself – Held: In the instant case, appointment of the
arbitrator was after the introduction of s.12(5) in the statute book
– The Managing Director of the appellant himself could not have
acted as an arbitrator, being rendered ineligible to act as arbitrator
under Item 5 of the Seventh Schedule – The scheme of ss.12, 13
and 14 was that where an arbitrator makes a disclosure in writing
which is likely to give justifiable doubts as to his independence or
impartiality, the appointment of such arbitrator may be challenged
   [2019] 6 S.C.R. 97
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SUPREME COURT REPORTS
[2019] 6 S.C.R.
under ss.12(1) to 12(4) r/w s.13 – However, where such person
becomes “ineligible” to be appointed as an arbitrator, there is no
question of challenge to such arbitrator, before such arbitrator –
In such a case, i.e., a case which falls under s.12(5), s.14(1)(a) of
the Act gets attracted inasmuch as the arbitrator becomes, as a
matter of law (i.e., de jure), unable to perform his functions under
s.12(5), being ineligible to be appointed as an arbitrator – This
being so, his mandate automatically terminates, and he shall then
be substituted by another arbitrator under s.14(1) itself – If an
arbitrator continues as such, being de jure unable to perform his
functions, as he falls within any of the categories mentioned in
s.12(5), r/w the Seventh Schedule, a party may apply to the Court,
which will then decide on whether his mandate has terminated.
Allowing the appeals, the Court
HELD: 1.1 Section 12(1), as substituted by the Arbitration
and Conciliation (Amendment) Act, 2015 makes it clear that when
a person is approached in connection with his possible
appointment as an arbitrator, it is his duty to disclose in writing
any circumstances which are likely to give rise to justifiable
doubts as to his independence or impartiality.  Once this is done,
the appointment of the arbitrator may be challenged on the ground
that justifiable doubts have arisen under sub-section (3) of Section
12 subject to the caveat entered by sub-section (4) of Section 12.
The challenge procedure is then set out in Section 13, together
with the time limit laid down in Section 13(2). The arbitral tribunal
must first decide on the said challenge, and if it is not successful,
the tribunal shall continue the proceedings and make an award.
It is only post award that the party challenging the appointment
of an arbitrator may make an application for setting aside such an
award in accordance with Section 34 of the Act. [Para 14]
[113-E-H; 114-A-B]
1.2 Section 12(5), on the other hand, is a new provision
which relates to the de jure inability of an arbitrator to act as
such. Under this provision, any prior agreement to the contrary
is wiped out by the non-obstante clause in Section 12(5) the
moment any person whose relationship with the parties or the
counsel or the subjec

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