Date of Judgement:
20.09.2021
Coram:
Justice M R Shah
Justice A S Bopanna
Parties:
Appellant – M/s. Laxmi Continental Construction Co.
Respondents – State of UP & Anr.
Subject
Once an officer is appointed as an Arbitrator, he continues to be the sole Arbitrator till the arbitration proceedings are concluded unless he incurs the disqualification under the provisions of the Indian Arbitration Act, 1940.
Legal Provisions
- Section 28 of the Arbitration Act, 1940 – Power of courts only to enlarge time for making award.
- Section 30 of the Arbitration Act, 1940 – Grounds for setting aside an arbitral award.
- Section 33 of the Arbitration Act, 1940 - Arbitration agreement or award to be contested by application.
Overview
- A contract was entered into by the appellant and respondent on 06.02.1988. Various dispute and conflicts arose between the parties during the course of business. In pursuance of a contractual clause, the dispute was referred to arbitration. A chief engineer was appointed as arbitrator during the year 1992. Both parties initially participated in the arbitral proceeding. During the course of the proceedings, the arbitrator attained superannuation age and retired.
- The appellant filed another suit for extension of the proceedings for hearing and award. The respondent contended that the arbitrator had retired and prayed that the extension should not be granted.
- The civil judge, by an order, extended the period for 30 days and directed that the order should be passed within the 30 days. The arbitrator declared an award to the appellant by directing the respondent to pay compensation with interest.
- The Respondent appealed before the civil judge for setting aside the order under Section 33 of the Act which was dismissed. Feeling aggrieved, the respondent appealed before the High Court. The High Court, by an order, quashed the order of civil judge and set aside the arbitral award. The High Court held that after the retirement, the arbitrator is in misconduct of proceeding with the arbitration proceedings. Feeling aggrieved, the present was preferred by the appellant.
- The counsel for appellant argued that parties to the arbitration are bound by the agreement and the arbitral award passed by the arbitrator.
- The counsel for the respondents contended that once the tenure of the arbitrator is over, he cannot continue with proceedings, rather another arbitrator should be appointed in place of him. The counsel also brought notice to Section 4 of the Act where a state amendment was made. It provided that once an arbitrator refuses to act or becomes incapable to act, another arbitrator shall be appointed.
Issue
- Whether once an officer of the department is appointed as an Arbitrator, whether his decision to continue the arbitration proceedings on his retirement is invalid?
- Whether carrying on the arbitration proceedings by such an Arbitrator after his retirement amounts to committing a misconduct?
Judgement Analysis
- The court examined the arbitration clause in the contract and noted that it provided only the qualification required for an arbitrator. This court held that in absence of any agreement regarding the retirement, the nominated arbitrator shall continue until he attracts any provision for disqualification of an arbitrator. The court also brought to attention to Himalayan Construction Co. v. Executive Engineer, Irrigation Division, J&K (2001) wherein similar issues were raised and the court overruled the objection that a retired person becomes an ineligible arbitrator.
- With regard to the state amendment to Section 4 of the Act, the court held that it was totally untenable as by the reason that an arbitrator has retired, he does not become incapable.
Conclusion
Once an arbitrator is appointed and agreed upon by the parties, his retirement does not bar him from continuing the arbitration proceedings. In the present case, after the civil judge (senior division) granted extension, within the time period, an award was passed. Hence, he cannot be said to have neglected his duties or is misconduct and his award is final.
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Questions:
1. After the abrogation of the Arbitration Act, 1940, which Act is now governing the domestic arbitration and international commercial arbitration in India?
2. Whether an arbitral award passed by an arbitrator, who was appointed due to his designation has now retired, will be void and liable to be set aside?
