Retirement Will Not Terminate Mandate Of Dept Officer Appointed As Sole Arbitrator : Supreme Court Restores 1998 Award

Deciding an appeal arising out of the Arbitration Act 1940, the Supreme Court has held that a department officer, who was appointed as the arbitrator, can continue to preside over the arbitration proceedings even after his retirement.

A bench comprising Justices MR Shah and AS Bopanna was considering the question "whether once an officer of the department is appointed as an Arbitrator considering the arbitration clause, whether his mandate to continue the arbitration proceedings shall come to an end on his retirement?".

The further question posed was whether the conduct of the arbitration proceedings by such an Arbitrator after his retirement can be said to be committing a misconduct by such a Sole Arbitrator.

The dispute arose out of an agreement of 1988 between a contractor and the State of Uttar Pradesh. As per the Arbitration Clause, the Chief Engineer was to be the sole arbitrator for the disputes arising out of the agreement. In 1992, the arbitration proceedings commenced.

The award, which was passed in 1998 in favour of the contractor, was set aside by the High Court of Uttaranchal in 2007. The High Court held that the mandate of the Arbitrator came to an end with his retirement and his continuation of the proceedings after his retirement amounted to misconduct. In 2008, special leave petition was filed in the Supreme Court against the High Court's verdict.

The Supreme Court, referring to the provisions of the Arbitration Act 1940 and the Arbitration Agreement, held that there was legal infirmity in the arbitrator continuing with the arbitration after his retirement.

The judgment authored by Justice Shah observed :

"...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".

"In the present case also 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"

The Supreme Court held that the observations made by the High Court in the impugned judgment and order that the Sole Arbitrator has misconducted himself by continuing with the arbitration proceedings after his retirement are not tenable at law.

The High Court's judgment was set aside and the award passed by the Sole Arbitrator dated 08.01.1998 was restored.

Case Details

Title : M/s Laxmi Continental Construction Co v. State of UP

Coram : Justices MR Shah and AS Bopanna

Citation : LL 2021 SC 499

Click here to read/download the judgment