Supreme Court: The bench of MR Shah* and AS Bopanna, JJ has held that once an officer of the department is appointed as an Arbitrator considering the arbitration clause, his mandate to continue the arbitration proceedings shall come to an end on his retirement if the Arbitration clause doesn’t specifically provide for the same. Consequently, it was held that continuance of the arbitration proceedings by such an Arbitrator after his retirement cannot be said to be committing a misconduct by such a Sole Arbitrator.
The ruling came in the case where a Chief Engineer was appointed as a Sole Arbitrator based on the Arbitration Clause in a contract relating to the earthwork including lining of V.U.G.C. from KM 10 to KM 11.
In order to understand the issue, it is important to note the key highlights of the Arbitration Clause i.e. Clause 52 of the Agreement:
- on the receipt of the notice from the contractor of his intention to refer the dispute to the arbitration the Chief Engineer shall send to the contractor a list of three officers of the rank of Superintending Engineer or higher, who have not been connected with the work under the contract.
- the contractor shall within fifteen days of receipt of the list select and communicate to the Chief Engineer the name of one officer from the list, who shall then be appointed as the Sole Arbitrator.
- if a contractor is failed to communicate his selection of name, within the stipulated period, the Chief Engineer shall without delay select one officer from the list and appoint him as the Sole Arbitrator.
- if the Chief Engineer fails to send such a list within 30 days, as stipulated, the contractor shall send a similar list to the Chief Engineer within fifteen days and the Chief Engineer shall then select an officer from the list and appoint him as the Sole Arbitrator within fifteen days.
- the arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1940.
The Court, hence, noticed that the only qualification for appointment as an arbitrator is that he should be the officer of the rank of the Superintending Engineer or higher. Once such 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.
“Even after his retirement, the arbitration proceedings have to be continued by the same Arbitrator. Clause 52 of the agreement does not provide at all that on the retirement of such an officer, who is appointed as a Sole Arbitrator, he shall not continue as a Sole Arbitrator and/or the mandate to continue with the arbitration proceedings will come to an end.”
It is also pertinent to note that, in the present case, the Civil Judge (Senior Division), Roorkee extended the time to the Sole Arbitrator to complete the arbitration proceedings and granted further period of 30 days which was after his retirement and after specifically overruling/rejecting the objections raised by the respondents that after retirement, he cannot continue with the arbitration proceedings. Therefore, once the Sole Arbitrator continued with the arbitration proceedings and passed the award within the extended period of time, it cannot be said that he has misconducted himself as he continued with the arbitration proceedings.
Considering the relevant law and the provisions under the Arbitration clause, the Court held that the Sole Arbitrator, who at the relevant time was the Chief Engineer and was qualified to become the Sole Arbitrator was even nominated and/or appointed by the Chief Engineer as per clause 52. Therefore, considering the clause 52 of the agreement, it cannot be said that his mandate to continue with the arbitration proceedings would come to an end on his retirement.
[Laxmi Continental Construction Co. v. State of UP, 2021 SCC OnLine SC 750, decided on 20.09.2021]
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Appearances before the Court by:
For appellant: Advocate Mukesh Kumar Sharma
For State of UP: Senior Advocate Ravindra Raizada
*Judgment by: Justice MR Shah