Pre-Appointment No-Objection Could Not Cure the Ineligibility; Court Says Any Waiver Must Be Express, Written and Given After Tribunal Is Constituted
Jaipur: The Rajasthan High Court has set aside an arbitral award after holding that the appointment of a departmental officer as Sole Arbitrator was invalid under Section 12(5) of the Arbitration and Conciliation Act, 1996.
A Division Bench of Justice Arun Monga and Justice Ashutosh Kumar allowed an appeal filed by Mechelonic Industries, setting aside both the Commercial Court’s order upholding the award and the arbitral award itself.
Pre-Appointment No-Objection Could Not Cure Ineligibility
The dispute centred on the appointment of a departmental officer as the Sole Arbitrator. The appellant had initially given a no-objection to the appointment mechanism but later challenged the appointment after the tribunal was constituted.
The Bench held that a waiver under the proviso to Section 12(5) must specifically relate to the particular arbitrator who was otherwise ineligible under the Seventh Schedule. Such a waiver must be express, in writing and made after the tribunal has been constituted.
The Court held that a general no-objection given before the tribunal was constituted could not amount to a valid waiver of the arbitrator’s statutory ineligibility.
Arbitral Award Set Aside
The dispute arose from a contract for the manufacture and supply of metal liners for Indian Railways. Company had raised claims relating to liquidated damages, price variation, release of bank guarantee, interest and arbitration costs.
The Sole Arbitrator had partly allowed the claims, following which the company challenged the award under Section 34 of the Arbitration Act. The Commercial Court, however, rejected the challenge and upheld the award.
The Division Bench disagreed and set aside both the Commercial Court’s order and the arbitral award.
The Court further held that if the appellant refunded the amount received under the award within 60 days.