Kalicharan Sharma v. The State Of U.P And Others

Factual and Procedural Background

The petitioner, Kalicharan Sharma, sole proprietor of M/s. K.C Sharma and Co, Engineers and Contractors, filed an Original Miscellaneous Petition (O.M.P.) seeking the removal of respondent No. 2, the Superintending Engineer, Construction Circle, Hindan Works Khand, Irrigation Department, Okhla, New Delhi, from his position as arbitrator. The petitioner alleged that the arbitrator failed to use reasonable dispatch in commencing and proceeding with the arbitration reference for over two years and that he had expressed an opinion adverse to the petitioner while acting as in-charge of the work in question. The respondents 1 and 3 opposed the petition, contending that no valid arbitration clause existed, which justified the arbitrator’s inaction. The court also considered three other O.M.Ps involving the same parties and arbitrator, with identical grounds and responses.

Legal Issues Presented

1. Whether the arbitrator can be removed for failing to use reasonable dispatch in entering upon and proceeding with the arbitration reference for over two years.
2. Whether the absence of a valid arbitration clause justifies the arbitrator's failure to commence arbitration proceedings.
3. Whether the court should appoint a new independent arbitrator in place of the removed arbitrator.

Arguments of the Parties

Petitioner’s Arguments

• The arbitrator delayed for more than two years in entering upon and proceeding with the arbitration reference and making the award, showing gross neglect.
• The arbitrator had a conflict of interest as he was previously in charge of the work and expressed opinions adverse to the petitioner regarding payment dues.
• Due to the above, the arbitrator should be removed and replaced by an independent person.

Respondents’ Arguments

• There was no valid arbitration clause between the parties, which justified the arbitrator not entering upon the reference.
• The arbitrator is now willing to take up the arbitration matter, which they suggested as a reason to retain him.

Table of Precedents Cited

Court's Reasoning and Analysis

The court reasoned that the arbitrator’s failure to commence and proceed with the arbitration reference for over two years was a clear instance of gross neglect and a failure to use reasonable dispatch, which is a mandatory requirement under Section 11(1) of the Arbitration Act, 1940. The arbitrator's reliance on the alleged invalidity of the arbitration clause as a justification for inaction was rejected because it was the respondents’ responsibility to challenge the arbitration clause validity in the appropriate forum, not the arbitrator’s. The court further found that the arbitrator’s prior involvement in the work and expression of opinions adverse to the petitioner created a conflict of interest, undermining his impartiality. Consequently, the court removed the arbitrator and appointed a new independent arbitrator under sub-section (2) of Section 12 of the Arbitration Act, 1940. The court also consolidated the decision by disposing of three other O.M.Ps involving the same parties and arbitrator on identical grounds and responses.

Holding and Implications

Petition allowed and respondent No. 2 removed as arbitrator.

The court ordered the removal of the arbitrator due to his failure to act with reasonable dispatch and the existence of a conflict of interest. A new arbitrator, Shri M.S Joshi, retired High Court judge, was appointed to resolve the disputes. The arbitrator’s fees were fixed and to be shared equally by the parties. The order also disposed of three other related O.M.Ps with identical issues. This decision directly affects the parties by ensuring the arbitration proceeds under an impartial and diligent arbitrator but does not establish any broader precedent beyond the application of the Arbitration Act provisions.