A.

WHETHER THE PRESENT APPLICATION FILED BEFORE THE SUPREME

COURT IS MAINTAINABLE

(I) WHETHER PARTY HAS THE CAPACITY TO INITIATE PROCEEDINGS UNDER S. 14 OF THE

ARBITRATION AND CONCILIATION ACT, 1996?

(A) Arbitrator has become party to dispute by giving his opinion on subject matter

The Arbitrator is thus ineligible to decide on the application under Section 13. Thus,
Section 13 would not have mandatory application in the present factual circumstance.
The application under Section 13 would not preclude the present application.

(B) Once a challenge under section 13(3) fails before the Tribunal, the recourse would be under
Section 34 of the Act. Hence, the present application under Section 14 is barred.

NHAI v. Behrampore-Farakka Highways Ltd. (Del HC)

A division bench of the Delhi High Court stated that the decision of the Tribunal under an
application under Section 13(3) could be considered to be an interim award. The
definition of award under Section 2(1)(c) includes an “interim award”. Thus, the decision
on a Section 13(3) application may be challenged under Section 34.

(C) Interplay between Section 13 and Section 14

(i) Impartiality is a de jure compliance and can be challenged under section 14.

West Haryana Highways Project Pvt. Ltd. v. National Highways Authority of India
(Del HC)

If an arbitrator is appointed contrary to Section 12(5) read with the Seventh Schedule, he
is de jure ineligible to perform his functions and the mandate of such an arbitrator can be
terminated by the court under Section 14(2) of the Act. Section 13(3) and 13(5) would
have no application in such circumstances.

H.R.D. Corporation (Marcus Oil and Chemical Division) v. Gail (India) Limited
(Formerly Gas Authority of India Ltd.) (Del HC)
The Seventh Schedule can be held to be a subset of the Fifth Schedule. The more serious
of grounds are mentioned in the Seventh Schedule and on these grounds, recourse to the
courts is available. The introduction of Section 12(5) with amendment to Section 14(1)
by the Amendment Act while bringing no changes in Section 13 of the Act plainly
indicate the above legislative scheme of culling out the cases falling under Seventh
Schedule from the discipline of Section 13 of the Act.

[Supported by Gurcharan Singh Sahney and others v. Harpreet Singh Chabbra and
Others (APHC)]

(ii) Court cannot sit in appeal over the decision of the Tribunal-powers under Section 14
are not appellate in character.

(a) Progressive Career Academy Pvt. Ltd. v. FIITJEE Ltd. (Del HC)

Once a challenge under Section 13 does not succeed, the only remedy of the aggrieved
party is to await the Award and raise the objections under Section 34 of the Act.
Parliament by deviating from the UNCITRAL Model Law on count of Section 13(3) has
made it clear that did not want curial interference at an interlocutory stage of the arbitral
proceedings on perceived grounds of alleged bias.

[Supported by Cal HC Judgment]

Chennai Metro Rail Limited v. M/s Lanco Infratech Limited (Mad HC)

The scheme of the Act makes it clear that the legislature did not intend (i) either to
provide multiple remedies; (ii) or to provide mutually exclusive concurrent remedies.
Section 13 operates in a field that is completely different from Section 14. One has no
connection with the other. This is why both Sections stipulate both the right as well as the
remedy. Section 13 is a complete code in itself.

(b) Schedule 7 is a subset of Schedule 5- As Tribunal has already made a finding on

ineligibility.- Court cannot overrule such finding as findings on facts cannot be
reappreciated by court.
(II) WHETHER THE PRESENT COURT HAS TERRITORIAL JURISDICTION TO HEAR THE

APPLICATION

(A) Which “court” has the territorial jurisdiction to entertain the present application under the
Act?

(i) Section 42 of the Act

Under the Act, any application has been made in a particular court, that court alone shall
have jurisdiction to entertain subsequent applications. Thus, the present application must
be filed before the Calcutta High Court, where S. 11 application had been filed.

(ii) The amendment to Section 11 clarifies that the function of appointing an arbitrator is
not a judicial function, but an administrative function. Hence, “court” under Section 42
would not include a court where S. 11 application was filed.

(B) Parties agreed to conduct proceedings in Bombay

(i) Seat is where the arbitration agreement is performed

The venue of arbitration is the place where the arbitration agreement is performed. The
place of performance can be considered as a connecting factor as per the ABC Laminart
test. Thus, courts of Bombay may be designated to have jurisdiction as it is where the
parties agreed to perform the arbitration agreement.

R B Saxena & Sons v. Mahindra Logistics (Del HC)

Parties may agree through an exclusive jurisdiction clause that the courts of the place
where the arbitration agreement is performed will have exclusive jurisdiction.

(ii) Factually speaking, the parties only intended to designate Bombay as the venue for
the proceedings, taking into consideration the old age of Ms. Aishwarya Gaur. The
parties had the limited intention of selecting Bombay as the venue and never had the
intention of designating the same as the seat of arbitration.

(C) Exclusive jurisdiction clause

(i) Parties cannot confer jurisdiction on a court that does not inherently have jurisdiction.

Parties cannot confer jurisdiction on a court, but only designate that one among the
multiple courts that inherently have jurisdiction to be the only forum for disputes.

Swastik Gases P. Ltd. v. Indian Oil Corporation (SC)

An exclusive jurisdiction clause indicates that the parties intend to oust the jurisdiction of
all other courts. Such a clause is not affected by Section 28 of the Indian Contract Act.

ABC Laminart Pvt. Ltd. v. A. P. Agencies, Salem (SC)

Presence of an exclusive jurisdiction clause does not by itself take away the jurisdiction
of a court. Connecting factors must be looked at to determine whether a court does or
does not have jurisdiction

(ii) A designation of seat along with an exclusive jurisdiction clause would have the
effect of ousting the jurisdiction of all other courts.

Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd. (SC)

By applying the principle of BALCO and Enercon to domestic arbitration, the court
concluded that when the seat has been decided, it is analogous to an exclusive jurisdiction
clause and the jurisdiction of all other courts would be ousted. This is so even when no
part of the cause of action arises in the particular “seat”.

Relied on BALCO v. Kaiser Aluminium Technical Services, where the court held that
under S. 2(1)(e), the court of cause of action as well as the court where the arbitral
proceedings takes place shall have supervisory jurisdiction over the process.

(iii) Section 2(1) (e) defines jurisdiction independent of the intention of the parties.

The court which has jurisdiction is that which would have jurisdiction over subject matter
as if in a suit. Section 2(1) (e) is very clear that domestic arbitration does not call for the
designation of a seat. S. 2(1) (e) r/w ABC Laminart Case suggests that the connecting
factors must be looked into to decide which court has jurisdiction. A stipulation of seat by
the parties would not suffice to confer jurisdiction.
 The BALCO findings on “seat” in domestic arbitration are not supported by the text of S.
2(1) (e).

B. WHETHER THE MANDATE OF MR. ADITYA NARAYAN AND MS. AISHWARYA

GAUR SHOULD BE TERMINATED AS ARBITRATORS?

I. WHETHER MR. ADITYA NARAYAN IS DISQUALIFIED BY VIRTUE OF APPLICABILITY OF V AND VII

SCHEDULE.

As per the facts, Mr. Ashish Singh resigned from the Arbitral Tribunal on 20.11.2015. Mr.
Aditya Narayan was appointed by the Contractor in place of Mr. Singh on 19.12.2015.

On 23.10.2015 the Arbitration and Conciliation (Amendment) Ordinance 2015 was passed
with immediate effect and wherein second proviso to proposed Section 12 (5) clearly stated that
challenge to appointment of arbitrator vis-à-vis the Seventh Schedule could not be raised for
appointments made on or before the commencement of the Ordinance.

The Amendment was passed on 31-12-2015 having retrospective effect from 23-10-2015.
However, in the final Amendment passed, the said second proviso to proposed Section 12 (5)
was absent and instead the present Section 26 was newly added to the Act.

(i) The new Act would be applicable if the parties “otherwise agree” as per Section 26.
Carefully analyzing the Arbitration Clause, as given in the facts, it can be seen that the phrase
“conducted under the provisions of the Arbitration and Conciliation Act, 1996 as
amended…”itself causes the present situation to be governed by the Amendment Act. Thus,
the element of consent as required by the Section 26 is there in the present case.

Shiv Shakti Enterprise v. Union of India (All HC)

“…the parties had agreed to the application of any statutory modifications of the principal
Act of 1996 to the arbitral proceedings contemplated under the arbitration clause, therefore
the amended provisions contained in the Amending Act 2015 will apply…”

The court followed ThyssenStahlunion v. Steel Authority of India Ltd. wherein Section
85 of the 1996 Act was compared when transition from the 1940 regime was made. By virtue
of the arbitration clause in the agreement, the new law would be applicable.
 (ii) The new Act will not be applicable to the present situation but the appointment can still
be challenged by invoking the Ordinance. Section 27 (2) of the Amendment Act clearly
stated that all actions done under the Ordinance would be deemed to have been taken under
the corresponding provisions of principle Act, as amended.

Simplex Infrastructure v. Energo Engineering Projects. (Del HC)

“…in Raja Shatrunji v. Mohammed Azmat Azim Khan the Supreme Court explained that
Amendment Act, 1961 by which the UP Zamindar’s Debt Reduction Act, 1952 was
amended, was meant to have effect as if the Amendment Act had been in force from the
beginning…it is in this context that the Supreme Court held that an amendment was deemed
to have been given effect from the very beginning of the Act…”

(iii) As per Section 26, the arbitration proceedings having begun before the commencement
of the Amendment Act, the appointment won’t be affected by Schedules V and VII.

Clause 7 and Clause 8 of Schedule V are relevant to show whether Mr. Narayan was not
qualified to be an arbitrator.

Clause 7 – “The arbitrator’s law firm currently has a significant commercial relationship
with one of the parties or an affiliate of one of the parties”

Clause 8 - “The arbitrator regularly advises the appointing party or an affiliate of the
appointing party even though neither the arbitrator nor his or her firm derives a significant
financial income there from.”

Facts indicate that on 1.7.2015 KP Infrastructure Pvt. Ltd. made public announcement to acquire
SSN Enterprise Pvt. Ltd. and the transaction was completed on 8.12.2015 (much before Mr.
Narayan’s appointment). DT Associates, of which Mr. Narayan is a partner, advises a wholly
owned subsidiary of KP Infrastructure and hence an affiliate corporation of SSN Enterprise. Mr.
Narayan did not, however, disclose the fact of takeover being completed before his appointment
on 19.12.2015.

However, the disclosure is not dependent upon the belief of the arbitrator himself. The disclosure
must be made if the circumstances are likely to give rise to justifiable doubts as to his
independence or impartiality. The test is not whether there is actual bias but whether, considering
the facts and circumstances, a reasonable person is likely to apprehend the possibility of bias and
hence rendering it a factual analysis.1

Reliance Infrastructure Ltd. v. Haryana Power Generation Corporation Ltd (P&H HC)

The independence and impartiality of the arbitrator could also be questioned by using the
argument under Partnership Act, i.e. the partner and a firm not being a separate entity in eyes
of law and hence Mr. Narayan will be deemed to derive substantial income from the said
advisory work.

II. WHETHER THE MANDATE OF AISHWARYA GAUR SHOULD BE TERMINATED.

(i) In the present matter Mr. Ashish Patel himself resigned from the Arbitral tribunal
which shows the acceptance of ineligibility from being an arbitrator by Mr Ashish Patel
himself. Further, once the identity of Mr. Ashish Patel as an arbitrator was lost, the power
to nominate someone else as an arbitrator ceased to exist.

TRF Ltd. v. Energo Engineering Projects (SC)

“In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator,
like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a
respectable person… By our analysis, we are obligated to arrive at the conclusion that
once the arbitrator has become ineligible by operation of law, he cannot nominate
another as an arbitrator. The arbitrator becomes ineligible as per prescription contained
in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily
ineligible can nominate a person…to put it differently, once the identity of the Managing
Director as the sole arbitrator is lost, the power to nominate someone else as an
arbitrator is obliterated…” [para 57]

The Supreme court in this case also referred to Firm of PratapchandNopaji v. Firm of
KotrikeVenkataSetty, which rightly applied the logic that something which cannot be
done directly cannot be done indirectly [Qui facit per alium facit per se].

1
It is open to the participants to interpret the facts and prove the independence and impartiality. There are several
facts which can be used from both sides.
(ii) The TRF judgment may not be reliable in the present matter

The Supreme Court in this case has applied the logic that what cannot be done directly
cannot be done indirectly. However, this analogy can be problematic because an
arbitrator is never expected to simply adopt the views of the nominating party.

In addition, there is no statutory basis for the conclusion that the nominee arbitrator acts
as an agent or designate of the nominator. The arbitrator has the statutory obligation to
act in a fair and impartial manner. And if he acts to the contrary, there are adequate
procedural safeguards at the enforcement and vacatur stage.

Further, there exists no basis for differentiating a nominator who is disqualified in law
and a nominator who is not. The nominee arbitrator is not acting as a designate of the
nominator, but has to act impartially under the statutory mandate. As per the facts, the
nominee arbitrator herself is not disqualified by law and, thus, there is no reason to find
her appointment illegal.

DBM Geotechnics v. Bharat Petroleum Corporation Ltd (Bom HC)

The Bombay High Court has drawn a conceptual distinction between the power to
nominate and the choice of the nominee. The court observed that the power to nominate
itself would survive even if the arbitrator becomes ineligible because of the application of
the amendment. As per law, he must exercise that power in the manner that the law
requires, i.e., by appointing an independent and neutral Arbitrator.