CASE TITLE:
Union Of India Vs. Reliance Industries Limited And Ors.
DATE OF ORDER:
9th December 2022.
JUDGE(S):
Mr. Justice Yashwant Varma.
PARTIES:
Petitioner: Union of India.
Respondent: Reliance Industries Limited and Ors.
SUBJECT
In the present case, the Ministry of Petroleum and Natural Gas in the Union Government has instituted proceedings under Section 14(2) r/w Section 15(2) of the Arbitration and Conciliation Act, 1996 for declaring that the majority of the members of the Arbitral Tribunal are de jure/ de facto unable to discharge their functions and consequently their mandate stands terminated.
IMPORTANT PROVISIONS
The Arbitration and Conciliation Act, 1996
- Section 12- Grounds to challenge an arbitrator.
- Section 13- Procedure of the challenge
- Section 14- Resignation/termination of the appointed arbitrator.
BRIEF FACTS
- In the present case, the majority of the members of the Arbitral Tribunal and the two arbitrators nominated by respondent no. 1 and respondent no. 3 are de jure/ de facto unable to discharge their functions and consequently their mandate is terminated under Section 14 of the Arbitration and Conciliation Act, 1996 (hereinafter to be referred to as “A&C Act”).
- With this complaint, proceedings have been purportedly instituted by the Ministry of Petroleum and Natural Gas in the Union Government under Section 14(2) r/w Section 15(2) of the Arbitration and Conciliation Act, 1996.
- The respondent no. 1 and respondent no. 3 executed a Product Sharing Contract with the petitioner on 12 April 2000 which was related to the development and production of gas from D1 to D3 gas discoveries falling in the D-6 block and marketing of gas in term thereof. The arbitration proceedings mentioned above emanated from this case.
- The petitioner is alleged to be apprehended with an evident bias and justifiable doubts by the independence and impartiality of the arbitrators. This statement was supported by the various procedural orders passed by the Arbitral Tribunal and the manner in which the proceedings were conducted.
QUESTIONS RAISED
- Whether the issue of “bias” is correctly contemplated under Section 12 of the Arbitration and Conciliation Act, 1996?
ARGUMENTS ADVANCED BY THE PETITIONER
- Mr. Ganguli, learned Senior Counsel accepted the provisions of Section 14 of the A&C Act which was highlighted by the respondent counsel. But he mentioned one important point in Section 14 (1)(a) which provides a valuable right to the party to question the independence or impartiality of an arbitrator. Hence, it would be totally incorrect deprive such a salutary remedy which is provided to the party under this Act said the petitioner.
- The petitioners’ counsel referred to National Highways Authority of India v. K.K. Sarin &Ors. and Alcove Industries Ltd. v. Oriental Structural Engineers Ltd. to give a judicial recognition to the issue of bias and the right of a party to challenge the same which is stated in the provisions of Section 14 of the Act. Apart from this, he also relied upon the decision of the Supreme Court in Swadesh Kumar Agarwal v. Dinesh Kumar Agarwal[(2022) 10 SCC 235].
- The learned Senior Counsel submitted copious material and evidence with respect to the allegations placed by the Arbitral Tribunal in the petition under Section 14 of the Act.
- Majority members of the Arbitral Tribunal virtually rejected the challenge and therefor this petition has clearly rendered otiose said the petitioners’ counsel.
- Mr. Ganguli concluded that in any case if the members of the Arbitral Tribunal have to formally rule on that application then it would be “useless formality”.
ARGUMENTS ADVANCED BY THE RESPONDENT
- Mr. Salve firstly submitted Section 12 of the A&C Act wherein an arbitrator is obliged to make a disclosure if there is an existence any kind of relationship or interests with any of the parties or to the subject matter of the dispute which can thereby give rise to justifiable doubts as to their independence or impartiality.
- Thereafter, he proceeded to Explanation 1 to Section 12(1) of the Act and stated that the Fifth Schedule acts as a guide to determine whether there are any such circumstances which may give rise to justifiable doubts.
- Mr. Salve mentioned Explanation 5 of Section 12 of the Act which creates an ineligibility criterion on the grounds specified in the Seventh Schedule and which would operate notwithstanding any prior agreement to the contrary between the parties. According to the respondent counsel, an arbitrator would become de jure unable to perform his functions if he is accused under Section 12(5) r/w the Seventh Schedule of the A&C Act. According to him, de jure disqualification alone can be challenged under Section 14.
- The respondent counsel further submitted that if a challenge is raised in terms of Section (3), (4) and (5) of Section 13 and in terms of Section 12(3) and the arbitrator fails to withdraw from office then the Arbitral Tribunal would rule on the challenge. If this fails then the Arbitral Tribunal can continue the arbitral proceedings and render an award.
- The respondent counsel mandates the Court to pursue Section 13 alone as the present case was raised on the ground of bias and a justifiable doubt.
- Mr. Salve said that the de jure disqualification could possibly form a subject matter of a petition under Section 14 and therefore it would have to necessarily be confined to the Arbitrator who is suffering a disqualification under the Seventh Schedule.
- The counsel relied on the stands taken by the Supreme Court in HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited (Formerly Gas Authority of India Limited) [(2018) 12 SCC 471] and contended that the aforesaid issue is no longer res integra.
- Mr. Salve also relied on Bharat Broadband Network Ltd. V. United Telecoms Ltd.[(2019) 5 SCC 755] in support of his argument.
- Furthermore, the respondent counsel declared that the instant petition is not maintainable as it seeks to invoke the powers of this Court conferred by Section 14 of the A&C Act.
- The petitioner has supposedly submitted that an application has been independently filed by him before the Arbitral Tribunal itself u/s 14 of A&C Act. Moreover, Mr. Salve says that if that petition is also incorrectly titled then he must be relegated to pursue that application before the Arbitral Tribunal itself and if he is aggrieved by any final decision then necessary steps can be taken under Section 13(4) and (5) of the A&C Act.
ANALYSIS BY THE COURT
- The Court considers that the trinity provisions i.e Section 12, 13 and 14 of the Act constitutes a composite statutory scheme that deals with the subject of challenge to an arbitrator and termination of mandate but it construct separate causeways for a challenge that may be laid. Hence, if these sections are read conjointly then only the disqualifications set out in the Seventh Schedule can be considered as de jure disqualifications under the Act.
- In respect to the topic of “bias”, the Court said that it would have to be axiomatically established. The Court stands fortified that Section 12(3) of the Act mandates a party to prove that “circumstances exist” that give rise to a justifiable doubt with respect to the independence or impartiality of an arbitrator.
- The Court is not of the opinion that a bias allegation would fall within the ambit of Section (1) (a) of the Act.
- The Court agreed with the decisions of the Supreme Court which were recommended by the respondent counsel Mr. Salve.
- The Court did not sustain the submission made by learned petitioner, Mr. Ganguly. It said that his submissions will cause grave prejudice to the provisions of the A&C Act. Thereforethe Court firmly opined that by interpreting Section 14(1)(a) in the manner suggested by the petitioner would be wholly impermissible by the Court to either create or countenance such right as is laid down in that Section.
- Accordingly, the Court upholds the objection and dismisses the petition.
CONCLUSION
The Arbitration and Conciliation Act, 1996 is very exhaustive and does not holds any ambiguity in defining any of its sections or the procedures to execute those. It is very clear in the present case how the submissions of the learned petitioners’ counsel was strong but was unambiguous to the Sections of the Act due to misconception of the learned counsel. Therefore, one must cautiously read and understand the Act before contesting on it.
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