Lite Bite Foods Pvt. Ltd. v. Airports Authority Of India

therefore, reproduce now paragraphs 20 and 21 of Perkins Eastman.

20. We thus have two categories of cases. The frst, similar to the one dealt with in TRF Limited where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself but is empowered or authorised to appoint any other person of his choice or discretion as an arbitrator. If, in the frst category of cases, the Managing Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or Page 20 of 28 4th December 2019 Lite Bite Foods Pvt Ltd v Airports Authority Of India CARAPL495-19-F2.DOC result of the dispute. The element of invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be the test, similar invalidity would always arise and spring even in the second category of cases. If the interest that he has in the outcome of the dispute, is taken to be the basis for the possibility of bias, it will always be present irrespective of whether the matter stands under the frst or second category of cases. We are conscious that if such deduction is drawn from the decision of this Court in TRF Limited, all cases having clauses similar to that with which we are presently concerned, a party to the agreement would be disentitled to make any appointment of an Arbitrator on its own and it would always be available to argue that a party or an ofcial or an authority having interest in the dispute would be disentitled to make appointment of an Arbitrator.

21. But, in our view that has to be the logical deduction from TRF Limited. Paragraph 50 of the decision shows that this Court was concerned with the issue, whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an Arbitrator The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator. The next sentences in the paragraph, further show that cases where both the parties could nominate respective arbitrators of their choice were found to be completely a different situation. The reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter balanced by Page 21 of 28 4th December 2019 Lite Bite Foods Pvt Ltd v Airports Authority Of India CARAPL495-19-F2.DOC equal power with the other party. But, in a case where only 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. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016) and recognised by the decision of this Court in TRF Limited. (Emphasis added)

22. Then Perkins Eastman says in paragraph 24 that in light of the principles it sets out, the reports of the law commission and the decision in Voestalpine Schienen the imperatives of a healthy arbitration environment demand that the instant application i.e. for appointment by Court of an arbitrator, deserved acceptance.

23. The present case may not be within the confnes of TRF Ltd,

i.e. the tender approving authority is not both arbitrator and, if disqualifed, the sole repository of arbitrator-appointing power. He is only the latter. But that now matters at all. Perkins Eastman clearly holds the feld and it covers a situation precisely such as the present one where AAI and only AAI has the exclusive right of appointed (not merely nominating) an arbitrator. The question is not, as Ms Munim would have it, the perceived bias or impartiality of the arbitrator. He may well be an unknown entity. The question is of one- sidedness in the arbitral tribunal appointment procedure itself. This is the destination to which Perkins Eastman takes us for it requires Page 22 of 28 4th December 2019 Lite Bite Foods Pvt Ltd v Airports Authority Of India CARAPL495-19-F2.DOC that there be neutrality in the dispute resolution process throughout. If I might be permitted a license, in my reading of it, what Perkins Eastman says is this: that you cannot have an impartial arbitration free from all justifable doubt if the manner in which the arbitral tribunal is constituted itself is beset by justifable doubt.

24. There is also little point in Ms Munim now showing me a list of empanelled ofcers and saying that Lite Bite may choose from any of them, presumably to bring it into line with her reading of Voestalpine Schienen. But that is a misreading of Voestalpine Schienen, as we have seen. The Supreme Court specifcally deprecated the preparation of narrowly-tailored panel and required the drawing up of a far more broad-based one. It specifcally required that the petitioner and the two nominee arbitrators be given the freedom of choice not from a short-list or any bespoke panel of retired engineers, etc., but from a much wider spectrum.

25. Ms Munims last submission is that the only prohibition is against a named person being the arbitrator or empowered to appoint an arbitrator. This is clearly incorrect. The interdiction runs against any one party being given unilateral or one-sided power in the matter of constitution of the arbitral tribunal.

26. In summary, the legal principles are these: (a) An ofcer or employee of one party cannot be the arbitrator or, upon eligibility, the person empowered to appoint an arbitrator. This is the TRF Ltd category or rule. Page 23 of 28 4th December 2019 Lite Bite Foods Pvt Ltd v Airports Authority Of India CARAPL495-19-F2.DOC (b) Where the arbitration clause provides for nomination by each side, and for the appointment of an umpire by the two nominee arbitrators, of a person from a panel: (i) that panel cannot be hand-picked by one side; and (ii) it must be broad-based and inclusive, not narrowly tailored to persons from a particular category. The opponent and the two nominee arbitrators must have the plenitude of choice. This is the rule in Voestalpine Schienen. Conceivably, a broad-based panel commonly agreed in the contract by both sides would serve the purpose. (c) A clause that confers on one partys employee the sole right to appoint an arbitrator, though that employee is himself not to the arbitrator, is also not valid, and this is a logical and inescapable extension of the TRF Ltd doctrine. It makes no difference whether this power is to be exercised by choosing from a panel or otherwise. This is the rule in Eastman Perkins. The guiding principle is neutrality, independence, fairness and transparency even in the arbitral-forum selection process.

27. I see no means to separate or distinguish the case at hand from Perkins Eastman at all. It is entirely within the frame of that decision. For that reason must succeed.

28. I am therefore required to exercise my discretion under Section 11 and make an appointment of a sole arbitrator. I nominate the Honble Mr Justice Mohit S Shah, former Chief Justice of this Court, to act as sole arbitrator to decide the disputes and differences Page 24 of 28 4th December 2019 Lite Bite Foods Pvt Ltd v Airports Authority Of India CARAPL495-19-F2.DOC between the parties arising from the two concession agreements dated 9th July 2018 read with the two Letters of Intent dated 27th January 2018. (a) Appointment of Arbitrator: Mr Justice Mohit S Shah, Former Chief Justice of this Court, is hereby nominated to act as a Sole Arbitrator to decide the disputes and differences between the parties arising from the two concession agreements dated 9th July 2018 read with the two Letters of Intent dated 27th January 2018. (b) Communication to Arbitrator of this order:

(i) A copy of this order will be communicated to the learned Sole Arbitrator by the Advocates for the Applicant within one week from today of the order being uploaded.

(ii) In addition, within one week of this order being uploaded, the Registry will forward an ordinary copy of this order to the learned Sole Arbitrator at the following postal and email addresses: Arbitrator The Honble Mr Justice Mohit Shah, former Chief Justice, Bombay High Court Address 218 Commerce House

140 Nagindas Master Road Kala Ghoda Mumbai 400 001 Mobile +91 2269 3954 Page 25 of 28 4th December 2019 Lite Bite Foods Pvt Ltd v Airports Authority Of India CARAPL495-19-F2.DOC Email justiceshah.ofcecgmail.com (c) Disclosure: The learned Sole Arbitrator is requested to forward his statement of disclosure under Section 11(8) read with Section 12(1) of the Arbitration Act to the Prothonotary and Senior Master of this Court, referencing this arbitration application, as soon as possible, and in any case sufciently in advance of his entering upon the reference to his arbitration. That statement will be retained by the Prothonotary & Senior Master on the fle of this application. Copies will be given to both sides. (d) Appearance before the Arbitrator: Parties will appear before the learned Sole Arbitrator on such date and at such place as he nominates to obtain appropriate directions in regard to fxing a schedule for completing pleadings, etc. (e) Contact/communication information of the parties: Contact and communication particulars are to be provided by both sides to the learned Sole Arbitrator within one week of this order being uploaded. The information is to include a valid and functional email address. (f ) Application under Section 16: Liberty to either side to fle an application before the learned Sole Arbitrator under Section 16 in regard to any matter or claim and its Page 26 of 28 4th December 2019 Lite Bite Foods Pvt Ltd v Airports Authority Of India CARAPL495-19-F2.DOC arbitrability, jurisdiction and the arbitral tribunal competence. (g) Interim Application/s:

(i) Liberty to both sides parties to make an interim application or interim applications including (but not limited to) interim applications under Section 17 of the Arbitration & Conciliation Act, 1996 before the learned Sole Arbitrator.

(ii) Any such application will be decided in such manner and within such time as the learned Sole Arbitrator deems ft. (h) Fees: The arbitral tribunals fees shall be governed by the Bombay High Court (Fee Payable to Arbitrators) Rules, 2018.

(i) Sharing of costs and fees: Parties agree that all arbitral costs and the fees of the arbitrator will be borne by the two sides in equal shares in the frst instance. (j) Consent to an extension if thought necessary. Parties immediately consent to a further extension of up to six months to complete the arbitration should the learned Sole Arbitrator fnd it necessary. (k) Venue and seat of arbitration: Clause 22.2.1 says that the venue will be at the Central Headquarters or the Regional Headquarters. Mr Andhyarujina points out Page 27 of 28 4th December 2019 Lite Bite Foods Pvt Ltd v Airports Authority Of India CARAPL495-19-F2.DOC that the Regional Headquarters are in Mumbai and, therefore, parties agree that the arbitration will be seated in Mumbai.

(l) Contentions kept open. All contentions before the learned Sole Arbitrator are specifcally kept open.

29. It is clarifed that it is open to the Respondent, the AAI, to fle a counter-claim, if so advised, before the learned Sole Arbitrator within such time and subject to such terms as the learned Sole Arbitrator may direct.

30. The application is disposed of in these terms. Costs of the arbitration application may be included by both sides in their claims before the learned Sole Arbitrator. (G. S. PATEL, J) Page 28 of 28 4th December 2019