1. The challenge in this petition under Section 34 of the Arbitration & Conciliation Act, 1996 (`Act’) is to the majority Award dated 24th December 2005 of the Arbitral Tribunal whereby the claims of the Petitioner arising out of the award of the work of Four-Laning of the Ongole - Chilakaluripet section on NH -5 in the State of Andhra Pradesh by an Agreement dated 25th May 2001 were rejected.
2. Since one of the principal grounds of challenge to the impugned majority Award is on the ground of bias, other facts are not being detailed in this order.
3. The three-member Arbitral Tribunal comprised of Mr. Jagdish Panda, the Presiding Arbitrator, Justice S.S. Sodhi, Co-arbitrator (a nominee of the Petitioner) and Mr. L.R. Gupta, Co-arbitrator [a nominee of the Respondent National Highways Authority of India (NHAI)]. Mr. Jagdish Panda was appointed as Presiding Arbitrator by a letter dated 29th December 2004 of the Indian Roads Congress (`IRC’) in keeping with the procedure outlined in the contract for constitution of the Arbitral Tribunal.
4. One Prof. (Dr.) J. Purshottam, a nominee of the Petitioner, participated as co-arbitrator in two hearings of the Arbitral Tribunal but resigned and in his place Justice S.S. Sodhi was appointed as the co-arbitrator.
5. There were four meetings of the Arbitral Tribunal held in Delhi. The arguments were heard finally on 17th September 2005 and thereafter the impugned Award came to be passed. While on 24th December 2005 the majority Award was passed by the Presiding Arbitrator, Mr. Jagdish Panda and Mr. L.R. Gupta (the co-arbitrator) rejecting the Petitioner’s claim, Justice S.S. Sodhi gave the minority dissenting award on 31st December 2005, allowing the claims of the Petitioner together with interest at 10% per annum compounded monthly.
6. In para 20 of the present petition, the Petitioner has averred as under:-
'20. The impugned award, apart from being contrary to the express terms of the contract as also the substantive law of the country, also suffers from another serious infirmities. At the time of appointment, each arbitrator is required and obliged to disclose in writing any and all circumstances which could rise to justifiable doubts as to his independence and impartiality. It now transpires that Shri Jagdish Panda, the Presiding Arbitrator was working as an employee of the Consultant of the Respondent with regard to Packages OR-VI, OR-VII and ORVIII and in that capacity was interacting extensively with the Respondent. However, Shri Jagdish Panda, never disclosed this fact to the Applicant herein at any stage of the arbitration proceedings. In essence the employment of Shri Panda was dependent upon the Respondent. Further, even otherwise the Respondent was in a position to dictate to Shri Jagdish Panda.It is submitted that under and in terms of Section 12 of the Act of 1996, Shri Jagdish Panda was required and obliged to disclose this fact in writing to the parties, which he failed to do. It is respectfully submitted that this failure alone vitiates the Award.'
7. In reply to the petition, NHAI has stated in para 20 as under:-
'20. That the contents of para no.20 are absolutely wrong & incorrect, hence denied. It is denied that the impugned award, apart from being contrary to the express terms of the contract as also the substantive law of the country, also suffers from another serious infirmities. It is further denied that Sh. Jagdish Panda, the Presiding Arbitrator never disclosed the fact of his being an employee of the Respondent to the Applicant herein at any stage of the arbitration proceedings. It is further denied that the employment of Sh. Panda was dependent upon the Respondent. It is further denied that the Respondent was even otherwise in a position to dictate to Sh. Jagdish Panda. It is also denied that Sh. Jagdish Panda failed to disclose this fact to the Applicant and this failure alone vitiates the award.'
8. When the petition was heard by this Court finally on 16th March 2012, Mr. Arun Kathpalia, learned counsel appearing for the Petitioner specifically raised the above objection and this Court passed the following order on that date:-
'1. In para 20 of the present petition it is stated by the Petitioner that Mr. Jagdish Panda, who was the Presiding Arbitrator, was engaged as a Consultant by the National Highways Authority of India (‘NHAI’) in another project which concerned package OR-VII and that this fact was not disclosed by Mr. Jagdish Panda in the present arbitral proceedings.
2. The proceedings of the Disputes Resolution Board (‘DRB’) held on 13th December 2004 for package OR-VII has been filed.It shows that the said DRB was chaired by Mr. L.R. Gupta & Mr. Jagdish Panda appeared in the said proceedings, with the attendance sheet describing him as ‘Senior Project Engineer’ of ‘DHB Consultant’, who were consultants in the said project appointed by NHAI. Incidentally in the Arbitral Tribunal which passed the impugned Award by a majority of 2:1, Mr. J. Panda was the presiding member and Mr. L.R. Gupta, a member nominated by NHAI and both of them constituted the majority.
3. In reply to para 20 while the NHAI does not deny that Mr. Panda acted as its Consultant. NHAI’s stand is: 'it is further denied that Mr. Panda, the Presiding Arbitrator never disclosed the fact of his being an employee of the Respondent to the applicant herein at any stage of the arbitration proceedings'.
4. This Court had by orders dated 5th December 2008 and 17th April 2009 called for the arbitral record. In response to the letter written by the Registry, Mr. Jagdish Panda has on 8th May 2009 sent a letter stating that since the Award was pronounced more than three years earlier, he did not retain any document with himself and that the records may be called from the NHAI.
5. Consequently, this Court does not have a copy of the orders passed in the arbitral proceedings or the complete arbitral record.
6. Counsel for both the parties state that they will produce on the next date copies of the orders passed in the arbitral proceedings. In addition, counsel for NHAI states that the arbitral record will be traced out and brought to the Court on the next date.'
9. Copies of the arbitral proceedings have thereafter been placed on record. It contains the minutes of the proceedings of the Arbitral Tribunal held on 12th February 2005, 9th April 2005, 2nd July 2005 and 17th September 2005. These minutes do not reflect that either Mr. Panda or Mr. Gupta disclosed to the parties of there being any conflict of interest in their acting as Presiding Arbitrator and Co-arbitrator respectively in the matter. Therefore, the denial by the NHAI in para 20 of its reply that Mr. Panda did not disclose the fact of his being an employee of the Respondent NHAI at any stage of the arbitration proceedings, is actually both misleading and incorrect. The averment by the Petitioner in para 20 of the petition was that Mr. Panda was an employee of the DHB Consultants who were engaged by the NHAI in its projects particularly with regard to the package OR-VII and VIII. There is in fact no denial of this fact by the NHAI. Further, the proceedings of the first Disputes Review Board (`DRB’) held on 13th December 2004 shows that Mr. L.R. Gupta was the Chairman of that DRB and Mr. J. Panda represented on the side of the NHAI as Senior Project Engineer of DHB Consultants. There is no denial of this fact either by the NHAI.
10. Clearly, there was a conflict of interest in both Mr. L.R. Gupta acting as Co-arbitrator and Mr. J. Panda acting as Presiding Arbitrator of the Arbitral Tribunal constituted to adjudicate the disputes between the Petitioner & NHAI. It was incumbent on both Mr. Panda and Mr. Gupta to have disclosed, at the very outset to the parties, of the above facts and enquire if parties had any objection in their continuing in the Arbitral Tribunal. While NHAI certainly would have been aware of the fact that Mr. Panda and Mr. Gupta were associated with disputes concerning the NHAI arising out of other contracts, it is unlikely that the Petitioner would have been in a position to discern this fact without either of them disclosing it at the very commencement of the arbitral proceedings. Therefore, the contention of the NHAI that the Petitioner ought to have raised this objection at the very beginning is without merit.
11. Section 12 of the Act permits a party to challenge the appointment of an arbitrator when there are justifiable doubts as to his independence or impartiality. However, this is premised on the mandatory requirement under Section 12(2) of the Act that 'an arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him'. It is mandatory for an arbitrator to disclose 'without delay' to the parties and in writing 'any circumstances' that are 'likely to give rise to justifiable doubts as to his independence or impartiality'. A perusal of the minutes of the arbitral proceedings in the present matter indicates that there was indeed no such disclosure by either Mr. Gupta or Mr. Panda as required by Section 12(2) of the Act. In the circumstances, the Petitioner was deprived of an opportunity under Section 12 read with Section 13 to challenge the appointment of either of them. The failure by both Mr. Gupta and Mr. Panda to disclose their likely conflict of interest at the commencement of the arbitral proceedings in the present case vitiates the majority Award. It is, therefore, liable to be set aside on this ground alone.
12. For the aforementioned reasons, the impugned majority Award dated 24th December 2005 of Mr. Jagdish Panda, the Presiding Arbitrator and Mr. L.R. Gupta, the Co-arbitrator is hereby set aside.
13. Consequently, the disputes will have to be adjudicated afresh by an arbitral Tribunal comprising a fresh nominee of the NHAI to replace Mr. L.R. Gupta. Thereafter, if there is no agreement between the fresh nominee and Justice S.S. Sodhi as to the appointment of a Presiding Arbitrator (other
Please Login To View The Full Judgment!
than Mr. Jagdish Panda), it will be open to the IRC to nominate a Presiding Arbitrator in terms of the procedure outlined in the contract. 14. The NHAI will within a period of four weeks from today, nominate another co-arbitrator to replace Mr. L.R. Gupta and forthwith inform both the Petitioner as well as Justice S.S. Sodhi of such appointment. Within a period of thirty days thereafter, the nominee arbitrator of the NHAI & Justice Sodhi will take a decision as to the Presiding Arbitrator failing which within a further period of two weeks, the IRC will be requested by the NHAI to nominate the Presiding Arbitrator. The IRC will nominate the Presiding Arbitrator within a period of two weeks after receipt by it of the request from the NHAI. The IRC will forthwith communicate the said decision to the parties as well as the co-arbitrators. The Arbitral Tribunal so constituted will hear the parties on the basis of the existing pleadings on record & endeavour to pass a fresh Award within a period of six months after its first sitting. 15. The petition is allowed in the above terms but, in the circumstances with no order as to costs.