Amreshwar Pratap Sahi, C.J.(Oral) - Heard Shri Umesh Prasad Singh, learned senior counsel for the applicant and Shri Anil Kumar Sinha for the respondents.
2. This application prays for termination of the arbitration proceedings that has been initiated and is being continued by the third respondent acting as an Arbitrator in terms of the agreement between the parties dated 11th February, 2014.
3. There is no dispute about the fact that the applicant applied for arbitration under a legal advice tendered by the counsel of the applicant dated 15th December, 2016, copy whereof is Annexure-2 to this application. Acting thereon the third respondent was appointed as the sole Arbitrator by the Chief Executive Officer of Kanti Bijlee Utpadan Nigam Ltd. Respondent No. 2. The said appointment dated 31st January, 2017 is on record.
4. On being put to notice, the applicant responded by raising a clear objection to the effect that the appointment of the third respondent was invalid as he was ineligible to adjudicate the dispute keeping in view the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "1996 Act") as amended under the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016). It was pointed out that in view of the amendments as incorporated under the 2015 Act, particularly Section 12(5) of the 1996 Act, read with the Seventh Schedule thereof, the appointment of an employee of the Kanti Bijlee Utpadan Nigam Limited would be invalid. However, the Arbitrator entered upon the dispute and upon notice being issued the applicant vide letter dated 25.3.2017 raised his objection but also participated in the same wherein several dates were fixed and adjournments were sought on one ground or the other. The applicant registered his objection during the proceedings by filing a rejoinder affidavit on 11th of December, 2017 wherein in Paragraph 1 it was categorically stated that the constitution of the Arbitration Tribunal was bad in law in view of the provisions referred to hereinabove. In spite of this, the Arbitrator proceeded as a consequence whereof the applicant came to file this Request Case contending that the proceedings so initiated should be terminated.
5. Entertaining the application, this Court passed an order on 10th of January, 2018 staying further proceedings before the Arbitrator which interim order has continued.
6. A response has been filed on behalf of the respondents No. 2 and 3 and it is urged that firstly the applicant has already given his consent for appointing an Arbitrator and, therefore, he cannot resile back and secondly having participated in the proceedings, the same will clearly amount to a waiver as a result whereof no request can now be made for terminating the arbitration proceedings.
7. Learned counsel for the applicant has invited the attention of the Court to Clause 31 of the agreement as well as sub-section (5) of Section 12 of the 1996 Act along with the Seventh Schedule to urge that this issue is no longer res integra and now stands concluded by the pronouncement of the Apex Court in the case of TRF Limited vs. Energo Engineering Projects Limited, reported in (2017) 8 SCC 377, Paragraph 12 and 13 thereof.
8. On the other hand, learned counsel for the opposite party contends that the issue of waiver fails on the face of the facts of the present case keeping in view the participation of the applicant before the Arbitrator and to support the submissions, reliance has been placed on the decision in the case of Durga Charan Rautray vs. State of Orissa and another, reported in (2012) 12 SCC 513 and the judgment in the case of Anil, S/o Jagannath Rana and others vs. Rajendra, s/o Radhakishan Rana and others, reported in (2015) 2 SCC 583.
9. Responding to the said decisions cited on behalf of the respondents, learned counsel for the appellant has cited two decisions of the Supreme Court relating to estoppel, acquiescence and waiver, namely, State of Punjab vs. Davinder Pal Singh Bhullar and others, reported in (2011) 14 SCC 770 and the judgment in the case of Sonell Clocks and Gifts Limited vs. New India Assurance Company Limited, reported in (2018) 9 SCC 784 to contend that the principle of waiver will not even be remotely attracted keeping in view the said pronouncements, and even otherwise any amount of alleged waiver on the part of the applicant would not automatically confer the authority on the Respondent No. 3 to assume jurisdiction to enter upon arbitration.
10. Having considered the submissions raised at the Bar, it is not in dispute that the applicant did after receiving notice raise his objection vide his letter dated 25th March, 2017 at the initial stage. It is also not in dispute that the application raising this issue of the ineligibility of the Arbitrator to proceed in the matter was filed during the proceedings on 11th December, 2017.
11. Sub-section (5) of Section 12 of the 1996 Act as it stands today after amendment is extracted hereinunder:-
"12 (5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing."
12. A perusal thereof would leave no room for doubt that the Legislature in unambiguous terms has categorically indicated that waiver cannot be presumed in an implied manner inasmuch as the said sub-section positively recites the exercise of such right of waiver in writing in an express form. Thus, waiver by implication is clearly excluded keeping in view the unambiguous language of sub-section (5) of Section 12. It is this aspect which has been held to be a fundamental component by the Apex Court in the case of TRF Limited vs. Energo Engineering Projects Limited (supra). Paragraphs 12 and 13 of the said judgment are gainfully extracted hereinunder:-
"12. Sub-section (5) of Section 12, on which immense stress has been laid by the learned counsel for the appellant, as has been reproduced above, commences with a non obstante clause. It is categorically lays down that if a person whose relationship with the parties or the counsel or the subject-matter of dispute falls under any of the categories specified in the Seventh Schedule, he shall be ineligible to be appointed as an arbitrator. There is a qualifier which indicates that parties may, subsequent to the disputes arisen between them, waive the applicability by express agreement in writing. The qualifier finds place in the proviso appended to subsection (5) of Section 12. On a careful scrutiny of the proviso, it is discernible that there are fundamentally three components, namely, the parties can waive the applicability of the sub-section; the said waiver can only take place subsequent to dispute having arisen between the parties, and such waiver must be by an express agreement in writing.
13. At this stage, we think it appropriate to refer to the Seventh Schedule, which finds mention in Section 12(5). The Seventh Schedule has three parts, namely, (i) arbitrator''''s relationship with the parties or counsel; (ii) relationship of the arbitrator to the dispute; and (iii) arbitrator''''s direct or indirect interest in the dispute."
13. In the said background, there cannot be any iota of doubt that the applicant had nowhere waived his right either expressly or impliedly to raise this objection and even otherwise, as rightly contended on behalf of the applicant, any amount of consent would not confer the authority on the third respondent so as to enable him to proceed with the arbitration. Reliance has rightly been placed on Section 12(5) of the 1996 Act as amended in 2015 read with the VIIth Schedule that renders the 3rd respondent ineligibility as Arbitrator. There is nothing on record for us to construe an express waiver in writing or even an implied waiver otherwise. The principles of waiver, estoppel or acquiescence is neither attracted on the facts of the case nor on law. The application is, therefore, allowed. The arbitration proceedings before the third respondent are hereby terminated.
14. In order to resolve the dispute, it is proposed that Shri Radha Krishna (retired District Judge) be appointed as Arbitrator to enter upon the arbitration. The Registrar General shall intimate the proposal to the proposed Arbitrator and obtain a consent/declaration from him in terms of sub-section (a) of Section 12 of the 1996 Act within 15 days from today.
15. The matter shall be listed on a Friday immediately after 15 days for orders.
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