HARYANA SPACE APPLICATION CENTRE (HARSAC) & ANR. versus M/S PAN INDIA CONSULTANTS PVT. LTD.

Citation: [2021] 1 S.C.R. 282 · Decided: 20-01-2021 · Supreme Court of India · Bench: L. NAGESWARA RAO · Disposal: Disposed off
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Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 1 S.C.R.
HARYANA SPACE APPLICATION CENTRE (HARSAC) &
ANR.
v.
M/S PAN INDIA CONSULTANTS PVT. LTD.
(Civil Appeal No. 131 of 2021)
JANUARY 20, 2021
[L. NAGESWARA RAO, INDU MALHOTRA AND
AJAY RASTOGI, JJ.]
Arbitration and Conciliation Act, 1996 – s.12(5) r/w Seventh
Schedule – Appointment of Principal Secretary, Government of
Haryana as nominee arbitrator of appellant-company (HARSAC),
a Nodal Agency of Government of Haryana – Validity of – Held:
s.12(5) of the Act (as amended by the 2015 Amendment Act) provides
that notwithstanding any prior agreement to the contrary, any person
whose relationship with the parties, or counsel, falls within any of
the categories specified in the Seventh Schedule, shall be ineligible
to be appointed as an arbitrator – s.12(5) read with the Seventh
Schedule is a mandatory and non-derogable provision of the Act –
Principal Secretary to the Government of Haryana would be
ineligible to be appointed as an arbitrator, since he would have a
controlling influence on the Appellant-company being a nodal
agency of the State –  In exercise of powers u/s.29A(6) of the Act
(as amended), a former judge of Supreme Court, appointed as the
substitute arbitrator, who shall conduct the proceedings in
continuation from the stage arrived at, and pass award within 6
months.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 131 of
2021.
From the Judgment and Order dated 24.08.2020 of the High Court
of Punjab & Haryana at Chandigarh in CR No. 3 of 2020(O&M).
Hemant Gupta, AAG, Alok Sharma, Ms. Payal Gupta, Ms. Sunakshi
Gupta, Tushar Sharma Sanjay Kumar Visen, Kaushik Laik, Angad Mehta
Advs. for the appearing parties.
   [2021] 1 S.C.R. 282
282
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The Order of the Court was passed by
INDU MALHOTRA, J.
1. The Appellant No. 1 / HARSAC, Department of Science &
Technology, Government of Haryana is the nodal agency for Geographic
Information System (“GIS”) Application and Remote Sensing for the
Government of Haryana. The Ministry of Rural Development,
Department of Land Resources designated HARSAC as the nodal agency
for the State of Haryana. HARSAC invited Request for Proposal in
September 2010 from qualified vendors for the modernisation of Land
Record (including digitisation of cadastral Maps, Integration with records
and management of old revenue documents). HARSAC vide Letter
dated 28.02.2011 awarded the contract to the Respondent – Pan India
Consultants Pvt. Ltd, and three other vendors for works specified in the
allotment letter. In pursuance thereof, Service Level Agreements were
executed between the parties.
Clause 6.11 of the Service Level Agreement dated 29.03.2011 in
the present case contains an arbitration clause, which reads as under :
“6.11 Resolution of Dispute
HARSAC, Haryana and the Vendor shall make every effort
to resolve amicably, by direct informal negotiation, any
disagreement or dispute arising between them under or in
connection with the contract. If after, thirty days from the
commencement of such informal negotiations, HARSAC,
Haryana and the Vendor are unable to resolve amicably a
contract dispute; either party may require that the dispute be
referred for resolution by formal arbitration.
All question, disputes or differences arising under and out of
or in connection with the contract, shall be referred to two
Arbitrators one arbitrator to be nominated by HARSAC,
Haryana and the other two to be nominated by the Vendor. In
the case of the said Arbitrators not agreeing, then the matter
will be referred to an umpire to be appointed by the Arbitrators
in writing before proceeding with the reference. The award of
the arbitrators, and in the event of their not agreeing, the award
HARYANA SPACE APPLICATION CENTRE (HARSAC) v. M/S PAN INDIA
CONSULTANTS PVT. LTD.
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SUPREME COURT REPORTS
[2021] 1 S.C.R.
of the Umpire appointed by them shall be final and binding on
the parties. The arbitration and reconciliation act 1996 shall
apply to the arbitration proceedings and the venue & jurisdiction
of the arbitration shall be in the State of Haryana.”
2. As per HARSAC, the Respondent failed to complete the work
assigned within the period specified i.e. 31.12.2011, and was delaying
the entire project. Even though two extensions were granted till
31.07.2012, and later extended upto 31.12.2013, the Respondent failed
to complete the work. This led to the invocation of the Performance
Bank Guarantee by HARSAC vide letter dated 18.03.20
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