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Shivani Bhati | Jan 14, 2022 | Views 438000

Members of arbitral tribunal are ineligible to act as arbitrators according to sub-section(5) of Sec 12 read with Seventh Schedule of Arbitration Act 1996: SC

Members of arbitral tribunal are ineligible to act as arbitrators according to sub-section(5) of Sec 12 read with Seventh Schedule of Arbitration Act 1996: SC

Issue  

Appeal filed against the impugned judgement and order dated 27.08.2021 passed by the High Court of Madhya Pradesh, by which the appeal seeking termination of the mandate of originally constituted Arbitral Tribunal and to appoint a new arbitrator has been dismissed, application preferred by the appellant under Section 14 read with Sections 11 and 15 of the Arbitration and Conciliation Act, 1996, the original applicant before the High Court has preferred the present appeal.  

Facts  

  • The respondent issued a tender for supply of the cream wove paper and duplicating paper for the year 1993-94. 
  • The appellant participated in the said tender process and was awarded the contract vide supply order dated 22.09.1993. 
  • A dispute arose between the appellant and the respondent. According to the appellant, though it supplied 420 MT of cream wove paper and 238 MT of duplicating paper to the respondent, the latter not only did not make the payment of 90% of the amount as per the terms of the contract, but also rejected some consignments without any justification, causing loss to it. 
  • The respondent vide letter dated 15.11.1993 informed the appellant that the paper supplied by it did not conform to the specification and therefore could not be utilized. 
  • Thereafter, the appellant filed a civil suit in the year 1994 seeking the relief of permanent injunction against the respondent in the Civil Court at Bhopal seeking to restrain it from awarding the supply order to a third party. The respondent, in the meantime, awarded the contract to the third party for the remaining supply. Therefore, the aforesaid civil suit became infructuous. 
  • The appellant thereafter filed another suit seeking recovery of an amount of Rs.95,32,103/- bearing Civil Suit No. 2-B/1998 before the Civil Court at Bhopal. 
  • Feeling aggrieved by the judgement of Civil Court respondent filed revision petition before the High Court which came to be allowed by the High Court vide order dated 03.05.2000. The High Court referred the parties to arbitration by the Stationery Purchase Committee comprising of the officers of the respondent. 

Findings  

This Court in the case of Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited (supra). It is held that the earlier Arbitral Tribunal – Stationery Purchase Committee comprising of Additional Secretary, Department of Revenue as President and (i) Deputy Secretary, Department of Revenue, (ii) Deputy Secretary, General Administration Department, (iii) Deputy Secretary, Department of Finance, (iv) Deputy Secretary/Under Secretary, General Administration Department and (v) Senior Deputy Controller of Head Office, Printing as Members, has lost its mandate by operation of law in view of Section 12(5) read with Seventh Schedule and a fresh arbitrator has to be appointed under the provisions of the Arbitration Act, 1996. The impugned judgment and order passed by the High Court is therefore unsustainable and deserves to be quashed and set aside. 

Judgement  

Therefore, this Court held that the impugned judgment and order passed by the High Court of Madhya Pradesh dated 27.08.2021 is hereby quashed and set aside.  

It is declared that the earlier Arbitral Tribunal – Stationery Purchase Committee comprising of Additional Secretary, Department of Revenue as President and  

(i) Deputy Secretary, Department of Revenue,  

(ii) Deputy Secretary, General Administration Department,  

(iii) Deputy Secretary, Department of Finance 

(iv) Deputy Secretary/Under Secretary, General Administration Department and  

(v) Senior Deputy Controller of Head Office,  

Printing as Members are ineligible to act/continue as arbitrators in view of sub-section (5) of Section 12 read with Seventh Schedule of the Arbitration Act, 1996 and therefore a fresh arbitrator under the provisions of the Arbitration Act, 1996 is to be appointed to adjudicate upon and resolve the dispute between the parties. 

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