The person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator : Delhi High Court
Arbitration and dispute resolution is an effective tool to work out the differences between parties amicably, however it shouldn’t be biased. This was held in the judgment passed by a single judge Hon’ble Mr. Justice Suresh Kumar Kait, in the matter Of Amazing India Contractors Private Limited V. Indian Railway Stations Development Corporation Limited. [ARB.P. 922/2021], dealt with an issue where the petitioner filed a petition seeking appointment of a Sole Arbitrator under the provisions of Section 11(6) of the Arbitration and Conciliation Act, 1996. Petitioner, a private limited company is involved in the business of Facilities Management and Infrastructure Management Projects throughout India. Respondent is said to be a Special Purpose vehicle and a Joint Venture company of IRCON International Limited, a Government of India Undertaking, under the Ministry of Railways and Rail Land Development Authority. According to petitioner, the respondent issued Notice Inviting Tender Parking issued by the Indian Railway Station Development Corporation for the project “Management of Parking Area at Bangalore Railway Station Along with Access Control for a period of 3 (Three) years” and petitioner submitted a bid. Respondent invited petitioner to attend negotiation meeting and after successful negotiations, respondent issued a Letter of Award in favour of petitioner for the said project, to which petitioner gave its Letter of Acceptance. According to petitioner, acting in an arbitrary and fraudulent manner, the total security deposit and bank guarantee of Rs.86,88,750.00 along with unexpired period of license fee was forfeited by the respondent. To resolve the aforesaid disputes, petitioner vide its legal notice called upon the respondent to appoint an Arbitrator, who vide communication informed the petitioner that due to Covid pandemic that the matter shall be looked into in due course of time. However, vide email, the Managing Director of the respondent informed the petitioner about appointment of Arbitrator. Counsel for petitioner submitted that unilateral appointment of Arbitrator by the respondent is contrary to the law laid down by the Hon’ble Supreme Court in Perkins Eastman Architects DPC &amp; Anr. Vs. HSCC (India) Ltd. 2019. Counsel for respondent disputed the contentions raised in the present petition and submitted that, it was mutually agreed that the disputes shall be referred to the sole Arbitrator, who shall be appointed by Managing Director &amp; CEO of IRSDC and thereby, the present petition seeking appointment of an Arbitrator is not maintainable. After hearing both the parties The Hon’ble Delhi High Court allowed the petition and held that in cases where one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. Accordingly, Mr. Justice (Retd) I.S.Mehta, former Judge of Delhi High Court was appointed sole Arbitrator to adjudicate the dispute between the parties. The arbitration shall be conducted under the Delhi International Arbitration Centre (DIAC). Click here to view judgement
 IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision: 20.09.2021 ARB.P. 922 2021 AMAZING INDIA CONTRACTORS PRIVATE LIMITED Through: Mr. Rajat Bhalla Advocate Petitioner INDIAN RAILWAY STATIONS DEVELOPMENT CORPORATION LIMITED Through: Mr. Rakesh Bhalla Advocate Respondent HON BLE MR. JUSTICE SURESH KUMAR KAIT JUDGMENT The hearing has been conducted through video conferencing. I.A. 12233 2021Allowed subject to all just exceptions. Application is disposed of. ARB.P. 922 2021 & I.A.12232 2021 The present petition has been filed by petitioner seeking appointment of a Sole Arbitrator under the provisions of Section 11(6) of the Arbitration and Conciliation Act 1996. Petitioner a private limited company registered under the Companies ARB.P. 922 2021 Act 1956 claims to be involved in the business of Facilities Management and Infrastructure Management Projects throughout India. Respondent is said to be a Special Purpose vehicle and a Joint Venture company of IRCON International Limited a Government of India Undertaking under the Ministry of Railways and Rail Land Development Authority incorporated under the Companies Act 1956. According to petitioner on 24.09.2019 the respondent issued Notice Inviting Tender No. IRSDC HQ TENDER 2019 25 SBC Parking issued by the Indian Railway Station Development Corporation for the project Management of Parking Area at Bangalore Railway Station Along with Access Control for a period of 3 years" and petitioner submitted a bid thereto on 24.09.2020. Pursuant thereto respondent invited petitioner to attend negotiation meeting on 13.11.2019 and after successful negotiations a Letter of Award TENDER 2019 25 SBC Parking 1861 dated 14.11.19 in favour of petitioner for the said project to which petitioner gave its Letter of Acceptance on It is further averred on behalf of petitioner that in terms of aforesaid Letter of Award petitioner is required to pay annual license fee of ARB.P. 922 2021 Rs.2 62.50 000 which was duly deposited and also respondent was duly sent “Letter of Acceptance dated 16.11.2019” by the petitioner. Petitioner vide its letter dated 06.12.2019 also communicated the respondent about payment of first quarter of license fee and security deposit and acceptance of the project for period of three years. Further pleaded by petitioner that it sent an e mail to the respondent informing that petitioner was ready to execute its part of obligation from 15.12.2019. However despite visit by Director of petitioner from Hyderabad to New Delhi office of respondent on 05.12.2019 and 19.12.2019 for signing the Agreement however the agreement could not be signed on the pleas of respondent that the format of Agreement was not ready. Thereafter according to petitioner a communication dated 24.01.2020 was received from respondent stating that temporary electricity connection was granted for the work and payment of Rs.500 per day was required to be made in favour of Sr. Technical Manager Knight Frank which the petitioner did and commenced the work. But even thereafter the Agreement for the work could not be signed and Director of the Petitioner had to return empty hand back to Hyderabad as authorized representative of respondent was said to be unavailable. The respondent vide ARB.P. 922 2021 communication dated 18.03.2020 asked for present of Director of petitioner for the purpose of signing the Contract Agreement however due to Covid 19 pandemic and declaration of Janta Curfew by the Hon’ble Prime Minister from 22.03.2020 none on behalf of petitioner could reach the respondent to sign the Contract Agreement. In furtherance thereto even respondent itself vide letter dated IRSDC BLR C SBC 2020 0 192 dated 23.03.2020 issued an advisory with aspect to the closure of all commercial establishments at the KSR Bengaluru Railway Station till 31.03.2020 and the said advisory was further extended vide further letters dated 31.03.2020 14.04.2020 02.05.2020 and 17.05.2020. It is averred on behalf of petitioner that due to Covid pandemic and phrased lockdown it became difficult for petitioner’s representative Director to reach Delhi to sign the Agreement. Further vide notification dated 20.05.2020 bearing reference No. COVID 19 Corres issued by the Railway Board & South Western Railways respondent advised opening of all static catering and vending units. However vide its communication dated 21.05.2020 bearing reference No. IRSDC BLR SBC 2020 0108 stating that furtherance to the letters from Railway Board & South Western Railways bearing nos.2020 Catering 600 0I Pt.2 an C. 79 Catg COVID 19 Corres dated ARB.P. 922 2021 20.05.2020 the order dated 02.05.2020 bearing reference No. IRSDC BLR C SBC 2020 0 100 stands cancelled on the plea that they would be unable to start the operation with the current license fee since the Central Government has discouraged people from taking public transport. Hence on 25.05.2020 Director of petitioner sent an email to the DGM of respondent seeking exemption from payment of license fee due to Covid pandemic till the situation normalized and requested the respondent to provide some percentage from the earnings and not to include the 03 years tenure. Thereafter on 02.06.2020 petitioner re commenced the operations at the Parking site at KSR Bengaluru Railway Station with pro rata license fee of 10% of prevailing license fee. On even date respondent communicated the petitioner that only 18 staffers are allowed to operate at the parking lot and also invited Director of the petitioner to sign the contract agreement on 15.06.2021. However vide communications dated 17.06.2021 petitioner’s Director informed the respondent that due to ill health and under treatment to Covid pandemic he is unable travel. However vide communication dated 13.06.2020 petitioner had already communicated the respondent that due to heavy monetary loss because of Covid pandemic ARB.P. 922 2021 petitioner was unable to provide services at 10% pro rata license fee as also to meet the salary of the staff and other expenses and so requested to take over the parking lot and permit the petitioner to stop its services without including the stop period in the 3 year contract tenure. This was followed by various communications dated 09.07.2020 11.08.2020 08.09.2020 18.09.2020 15.10.2020 and 27.10.2020 between the parties. 10. However thereafter respondent issued a Show Cause Notice dated 18.11.2020 bearing No. IRSDC HQ TENDER 2019 25 SBC Parking 1444 stating that in terms of clause 1.12.3 of “Instruction to Bidders” with the Letter of Award dated 14.11.2019 petitioner was required to enter into the Contract within thirty(30) days and has thereby violated the terms of clause 1.12.4. and also alleged that the Directors of the petitioner had been disqualified by the Registrar of Companies Patna from 01.12.2017 to 30.11.2022 under Section 164(2) of the Companies Act 2013 resulting in their offices becoming vacant under Section 167 of the Companies Act and since the bid was submitted by Mr. Kalyan Kumar Singh Director his position as Director in AICPL stood void ab initio and that the bid was won under fraudulent practices as defined under Clause 2(c) of Instructions to Bidders . Again on 9.12.2020 the respondent issued a Termination Notice ARB.P. 922 2021 Bearing IRSDC HQ TENDER 2019 21 SBC Parking 1528 to petitioner under Clause 5.2 of the General Condition of Contract Schedule II of the Contract and Terminated the contract in question. 11. According to petitioner acting in an arbitrary and fraudulent manner the total security deposit and bank guarantee of Rs.86 88 750.00 along with unexpired period of license fee was forfeited by the respondent. Further claimed that petitioner vide its letter dated 19.12.2020 sent its reply to aforesaid Show Cause Notice as well as Termination Notice to the respondent. However respondent has forfeited the security deposit amount as well as amount of unexpired period of license fee and also has illegally and unlawfully invoked the bank guarantees despite pendency of OMP 440 of2020 filed on behalf of petitioner. 12. To resolve the aforesaid disputes petitioner vide its legal notice dated 8.4.2021 called upon the respondent to appoint an Arbitrator who vide communication dated 26.04.2021 informed the petitioner that due to Covid pandemic that the matter shall be looked into in due course of time. However vide email dated 15.7.2021 the Managing Director of the respondent informed the petitioner about appointment of Arbitrator. 13. During the course of hearing learned counsel for petitioner submitted ARB.P. 922 2021 that unilateral appointment of Arbitrator by the respondent is contrary to the law laid down by the Hon’ble Supreme Court in Perkins Eastman Architects DPC & Anr. Vs. HSCCLtd. 2019 SCC Online SC 1517. Reliance is also placed upon decisions of Hon’ble Supreme Court in Bhara tBroadband network Ltd. Vs. United Telecom Limited 2019 5 SCC 755 and TRF Ltd. Vs. Energo Engineering Projects Ltd.8 SCC 377 in support of above submissions. 14. Thus a prayer is made to allow the present petition and appoint an Arbitrator to resolve the disputes between the parties. 15. On the other hand Mr. Rakesh Bhalla Advocate appearing on behalf of respondent has disputed the contentions raised in the present petition and submits that in terms of Clause 10.4(d) of the Agreement it was mutually agreed that the disputes shall be referred to the sole Arbitrator who shall be appointed from the panel of Arbitrators Arbitration Tribunal appointed by Managing Director & CEO of IRSDC and thereby the present petition seeking appointment of an Arbitrator is not maintainable. 16. This Court has heard learned counsel for the parties and has gone through the petition as well as decisions relied upon. Pertinently invocation of arbitrator vide legal notice dated 8.4.2021 by the petitioner as well as ARB.P. 922 2021 appointment of Arbitrator under the General Condition of Contract Schedule II is not disputed by counsel for the parties. The submission of learned counsel appearing on behalf of respondent that the respondent has a right to appoint the Arbitrator does not stand as the Hon’ble Supreme Court in Perkins Eastman Architects DPC & Anr. Vs. HSCCLtd. 2019 SCC Online SC 1517 has categorically stated that “in cases where one party has a right to appoint a sole arbitrator its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator.” 17. The afore noted dictum of Hon’ble Supreme Court in Perkins Eastmanhas been followed by Coordinate Benches of this Court in Proddatur Cable Tv Digi Services Vs. Siti Cable Network Limited 2020 SCC OnLine Del 350 and VSK Technologies Private Limited and Others Vs. Delhi Jal Board 2021 SCC OnLine Del 3525 in unequivocal terms. 18. Concurring with the decisions as noted above the present petition is allowed. 19. Accordingly Mr. JusticeI.S.Mehta former Judge of Delhi High Court is appointed sole Arbitrator to ARB.P. 922 2021 adjudicate the dispute between the parties. The arbitration shall be conducted under the Delhi International Arbitration CentreAdministrative Cost and Arbitrators Fees) Rules 2018. 21. The learned Arbitrator shall ensure compliance of Section 12 of Arbitration and Conciliation Act 1996 before commencing the arbitration. 22. A copy of this order be sent to the learned Arbitrator as well as Delhi International Arbitration Centrefor information. 23. With aforesaid directions the present petition is accordingly disposed of. I.A.12232 2021 is disposed of as infructuous. JUDGE SURESH KUMAR KAIT) SEPTEMBER 20 2021 ARB.P. 922 2021 