THE GOVERNMENT OF HARYANA PWD HARYANA (B AND R) BRANCH versus M/S. G. F. TOLL ROAD PVT. LTD. & ORS.

Citation: [2019] 1 S.C.R. 270 · Decided: 03-01-2019 · Supreme Court of India · Bench: ABHAY MANOHAR SAPRE, INDU MALHOTRA · Disposal: Disposed off
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SUPREME COURT REPORTS
[2019] 1 S.C.R.
THE GOVERNMENT OF HARYANA PWD HARYANA (B AND
R) BRANCH
v.
M/S. G. F. TOLL ROAD PVT. LTD. & ORS.
(Civil Appeal No. 27 of 2019)
JANUARY 03, 2019
[ABHAY MANOHAR SAPRE AND INDU MALHOTRA, JJ]
Arbitration and Conciliation Act, 1996 – ss. 15, 15(2) –
Termination of mandate and substitution of arbitrator – Government
works contract – Dispute between the parties – Nomination of
arbitrator in terms with the dispute resolution clause in the agreement
– Indian Council of Arbitration-ICA raised objection to arbitrator
nominated by the State that being a retired employee of the State,
his integrity and impartiality doubtful – State sought 30 days time
to appoint a substitute arbitrator – Meanwhile, ICA appointed a
nominee arbitrator on behalf of the State, as also Presiding
arbitrator – Challenge to, by the State by filing application u/s. 15
before the District Judge as also objection before the arbitral tribunal
u/s. 16 – District Court held the petition not maintainable since the
tribunal had been constituted – Revision Petition before the High
Court – Dismissal of – On appeal, held: High Court failed to take
note of s. 15(2) which provides that a substitute arbitrator must be
appointed according to the rules that are applicable for the
appointment of the arbitrator being replaced – ICA could not have
usurped the jurisdiction over appointment of the nominee arbitrator
on behalf of the State prior to the expiry of the 30 days’ period
requested by the State – Appointment of the nominee arbitrator on
behalf of the State by the ICA unjustified and contrary to the Rules
of the ICA itself – Objection of reasonable apprehension of bias
raised as regards the arbitrator nominated by the State wholly
unjustified and unsubstantiated – Thus, the order passed by the
High Court set aside – On basis of the mutual agreement between
both the parties, Justice S.S. Nijjar (Retd.) appointed as the Sole
Arbitrator to adjudicate the disputes arising out of the Agreement.
[2019] 1 S.C.R. 270
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Disposing of the appeal, the Court
HELD: 1.1 The High Court while considering the
application under Section 15 of the Arbitration and Conciliation
Act, 1996 failed to take note of the provisions of Section 15(2) of
the Act. Section 15(2) provides that a substitute arbitrator must
be appointed according to the rules that are applicable for the
appointment of the arbitrator being replaced. This would imply
that the appointment of a substitute arbitrator must be according
to the same procedure adopted in the original agreement at the
initial stage. The provisions of Section 15(2) require that when
the mandate of an arbitrator terminates either by his withdrawal
from office, or pursuant to an agreement by the parties, or for
any reason, a substitute arbitrator shall be appointed according
to the rules applicable to the appointment of the arbitrator being
replaced. [Paras 3.1, 3.2][276-F-H; 277-C]
1.2 Clause 39.2.2. of the agreement expressly provided that
each party shall nominate one arbitrator and the third arbitrator
shall be appointed in accordance with the Rules of the ICA. [Para
3.3][277-C-D]
1.3 The appellant-State had requested for 30 days ’time to
appoint another nominee arbitrator, after objections were raised
by the ICA to the first nomination. The ICA declined to grant the
period of 30 days, and instead appointed the arbitrator on behalf
of the Appellant-State. The ICA could have filled up the vacancy
only if the Appellant-State had no intention of filling up the
vacancy. The ICA could not have usurped the jurisdiction over
appointment of the nominee arbitrator on behalf of the State prior
to the expiry of the 30 days’ period requested by the Petitioner.
The appointment of the nominee arbitrator on behalf of the
Appellant-State by the ICA was unjustified and contrary to the
Rules of the ICA itself. [Paras 3.4, 3.5][277-E-G]
1.4 The 1996 Act does not disqualify a former employee
from acting as an arbitrator, provided that there are no justifiable
doubts as to his independence and impartiality. The fact that the
arbitrator was in the employment of the State of Haryana over 10
GOVT. OF HARYANA PWD HARYANA (B & R) BRANCH v.
M/S. G. F. TOLL ROAD PVT. LTD.
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[2019] 1 S.C.R.
years ago, would make the allegation of bias clearly untenable.
[Para 3.9][278-F-G]
1.5 The instant case is governed by the pre-amended 1996
Act. Even as per the 2015 Ame
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