Prior To 2015 Amendment Act, Non-Disclosure Of Information Per Se Not A Ground To Incur Disqualification U/S 12 Of Arbitration Act: Rajasthan High Court

The present Civil Misc. Appeal is directed against the order dated 18.03.2023 passed by the learned Judge, Commercial Court, Udaipur, wherein and whereby the award dated 23.03.2015 passed by the Arbitral Tribunal was set aside.

The appellant is engaged in the business of Coal Trading amongst other businesses. The respondent is having Industrial Plant at Dungarpur (Rajasthan). The claimant supplied coal for the respondent Industrial Plant for generation of power under various purchase orders placed by the respondent from time to time during the period of October 2009 and August 2010.

The respondent raised a dispute with regard to supply of 18,689 metric tons of coals worth of Rs.5,72,84,744/- with regard to quality of the coal supplied during the period of November 2009 to August 2010 with reference to eight purchase orders.

According to the respondent, the coal supplied was of not upto the quality agreed between the parties; on account of supply of coal with the low quality, the respondent's industrial plant and machinery were damaged.

Before the Tribunal, no oral evidence was adduced by both the parties. The Tribunal was asked to decide the claim and counter-claim on the basis of the documentary evidence only. After hearing the respective counsel and by considering the evidence on record, the Tribunal partly allowed the claim of claimant granting Rs.40,39,903/- with interest @ 15% per annum from 15.02.2011 till realisation and dismissed the counter-claim of the respondent.

The respondent assailed the order award of the Tribunal before the Commercial Court, Udaipur under Section 34 of the Arbitration and Conciliation Act raising various grounds. The Commercial Court after considering the contentions and grounds raised by respondent has set aside the award on the ground of perversity in the findings of the Tribunal with regard to counterclaim, and also disqualification incurred by one of the Arbitrator on account of non-disclosure of his affiliation with the sister-concern of claimant-Company.

Aggrieved by the same, the present appeal has been filed by the claimant.

Contentions

The appellant contended that Commercial Court was at fault in holding that the non-disclosure of affiliation by one of the Arbitrator i.e. Ramesh Saboo with the sister-concern of the claimant-Company has resulted in disqualification, which according to him, is not a correct.

• It was further contended that such ineligibility and disqualification was expressly stated in the Seventh Schedule of Amendment to the Arbitration and Conciliation Act, 1996 after 2015. Prior to the said Amendment Act, there was no existence of such specific circumstance, which would give raise to justifiable doubt as to his independence and impartiality.
• It was further submitted that the Apex Court in various judgments has upheld the appointment of Arbitrator, who is the employee of one of the parties to the arbitration proceedings.
• It was argued that in the present case, one of the Arbitrator is not either employee or advisor or representing the parties to the proceedings but incidentally, he was representing only sister-concern of the claimant-Company, which is one of the affiliate of the Company, which is party to the proceedings.

Per contra, the respondent submitted that there is suppression of material fact by one of the Arbitrator i.e. Ramesh Saboo with regard to his engagement in one of the litigation of sister-concern of the claimant-Company. Such a suppression is one of the circumstance, which creates doubt as to the independence and impartiality of the Arbitrator.

• It was further submitted that such suppression can be one of the ground to hold that the appointment of Arbitrator, Rameshm Saboo, suffer from disqualification. The Commercial Court rightly entertained his claim and rightly set aside the impugned order, which requires no interference.

Court's Analysis

The court first analysed the findings of the arbitral tribunal with respect to rejection of counter claim by the tribunal. The court held that the interference of the Commercial Court in the findings of the award would arise only in case such award suffers from perversity.

The court further referred to observations of the tribunal wherein the tribunal observed that seeing from the appreciation of evidence on record while adverting to the counter-claim, the Tribunal considered the claim set up by the respondent, which is based on the Chartered Engineer assessment.

The Tribunal found that there was no access to the claimant with regard to damaged industry and there is no independent corroborative evidence to the assessment made by the Chartered Engineer. Such findings are well reasoned findings and such findings do not suffer from any perversity.

The court further observed that the Commercial Court was wrong in holding that the Tribunal has not considered the counter-claim in right perspective without appreciating the material on record. Therefore, such a finding of the Commercial Court is liable to be set aside and accordingly, is set aside.

The court further discussed the ineligibility principles to act as an arbitrator due to grounds mentioned under section 12 of the arbitration act prior and after the amendment act of 2015.The court observed that a reading of old provision makes it clear that a duty was caused upon the Arbitrator to disclose in writing any circumstances likely to give rise to justifiable doubt as to his independence and impartiality. Such a duty is continuous one from the appointment to the conclusion of arbitral proceedings. If a circumstance exists, it gives a ground for challenge to the continuation of arbitrator.

Based on the above, the court observed that in the present facts and circumstances of the case, the appointment of one of the arbitrator as a legal counsel to one of the case of the sister-concern of the claimant-Company is not worse than allowing an employee to engage to act as an arbitrator.

The court further referred to the Supreme Court judgments in Aravali Power Co. Pvt. Ltd. Vs. Era Infra Engineering Ltd. (2017) and Indian Oil Corporation Ltd. & Anr. Vs. Raja Transport Pvt. Ltd (2009) wherein it was established that the principle of apparent bias by virtue of the affiliation of arbitrator with the parties to the proceedings on the basis of employment and/or engagement was not a recognized principle before the amendment act of 2015.

The court further observed that though there is non-disclosure of information as was required under Section 12 of Arbitration and Conciliation Act, such a non-disclosure is not a material fact or circumstance, which would invalidate the appointment of Ramesh Saboo, Advocate as an arbitrator.

The concluded that the majority view of the Tribunal is taken into consideration, even if the view of the Arbitrator Ramesh Saboo is discarded, still the award holds good.

In the said background of the facts, we find that the impugned order of the Commercial Court requires to be set aside.

Case Title: M/s Anik Industries Ltd v. M/s Shree Rajasthan Sintex Ltd.

Citation: 2024 LiveLaw (Raj) 319 

Case Reference: [2024:RJ-JD:41566-DB]

Court: Rajasthan High Court

Judgment Date: 22/10/2024

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