# M/S Ajay Kumar Tiwari & Sons, Unnao v. U.O.I. & Ors

- **Citation:** (2023) 10 ILRA 5
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2023-10-05
- **Case number:** Civil Misc. Arbitration Application No. 30 of 2022
- **Bench:** Jaspreet Singh
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-ajay-kumar-tiwari-sons-unnao-v-u-o-i-ors-49462
- **Pages:** 33

## Headnote

Civil Law - Arbitration and Conciliation
Act, 1996- Section 11 (6) & 12-Despite 13
years, there has been no proceedings held by
the Arbitral Tribunal-Section 9 petition has been
allowed in favour of the petitioner - none has
taken the matter forward -the letter which had
been sent by the petitioner in the month of
August,
2023
during
pendency
of
the
proceedings and in the meantime since 2015
Section 12 of the Act was amended -in terms of
Section 12 (5) and the parties had a right to
waive their right in terms of an express
agreement -and though the respondents had
forwarded the said waiver to the petitioner but
he failed to submit to it - the respondents
cannot compel to proceed with the earlier
Tribunal- a fit case for appointing a sole
Arbitrator. (E-9)

Cases cited:

## Text

_Characters 0–39,988 of 114,035. This is a partial read: ask again with offset=39988 for what follows._

10 All. M/S Ajay Kumar Tiwari & Sons, Unnao Vs. U.O.I. & Ors.
5
(2023) 10 ILRA 5
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 05.10.2023

BEFORE

THE HON'BLE JASPREET SINGH, J.

Civil Misc. Arbitration Application No. 30 of 2022

M/S Ajay Kumar Tiwari & Sons, Unnao
 ...Applicants
Versus
U.O.I. & Ors. ...Opposite Parties

Counsel for the Applicants:
Sanjay Kumar Srivastava, Akshat Kumar

Counsel for the Opposite Parties:
A.S.G.I., Deepanshu Dass

Civil Law - Arbitration and Conciliation
Act, 1996- Section 11 (6) & 12-Despite 13
years, there has been no proceedings held by
the Arbitral Tribunal-Section 9 petition has been
allowed in favour of the petitioner - none has
taken the matter forward -the letter which had
been sent by the petitioner in the month of
August,
2023
during
pendency
of
the
proceedings and in the meantime since 2015
Section 12 of the Act was amended -in terms of
Section 12 (5) and the parties had a right to
waive their right in terms of an express
agreement -and though the respondents had
forwarded the said waiver to the petitioner but
he failed to submit to it - the respondents
cannot compel to proceed with the earlier
Tribunal- a fit case for appointing a sole
Arbitrator. (E-9)

Cases cited:

1. Ellora Paper Mills Ltd. Vs The St. of M.P. 2022
(3) SCC 1

2. U.O.I. (UOI) Vs U.P. St. Bridge Corporation
Ltd. (2015) 2 SCC 52

3. Northern Eastern Railways VS Tripple
Engineering Works 2014 (9) SCC 288
4.
Central
Organization
for
Railway
Electrification Vs M/s ECI SPIC SMO MCML (JV)
A Joint Venture Company 2020 (14) SCC 712;

5. Government of Haryana PWD Haryana (B and
R) Branch Vs M/s G.F. Toll Road Pvt. Ltd. &
ors.2019 (3) SCC 505,

6. Sunderlal Aklinglal Jain Vs Rekha Yogendra
Doshi & ors.2021 SCC Online Bom 10184.

7. Pt. Munshi Ram and Assoc. Pvt. Ltd. VS New
Delhi Municipal Council 2009 (3) ArbiLR 515

8. Swadesh Kumar Agarwal Vs Dinesh Kumar
Agarwal & ors.; (2022)10SCC235

(Delivered by Hon'ble Jaspreet Singh, J.)

1. The instant petition has been
preferred under Section 11 (6) of the
Arbitration and Conciliation Act, 1996 for
appointment of a sole Arbitrator.

2. The Court has heard Sri Akshat
Kumar, learned counsel for the petitioner as
well as Sri Deepanshu Dass, learned
counsel appearing for the respondents.

3. The learned counsel for the
petitioner submitted that the respondent no.
3 had published a public tender notice in
the month of August, 2008 bearing No. 13
of 2008 for supplying, stacking and loading
of Machine Crushed Ballast from Jhansi
Private Quarry and stacking at Kanpur
Anwar Ganj Ballast dump with a quantity
of 60,000 cubic meters. The petitioner had
put in his bid which was found favourable
with the respondent and in terms of the
contract, the petitioner had also deposited
the earnest money guarantee of Rs.
3,87,500/- with the respondents no. 2 and 3.

4. It is the case of the petitioner that
the offer price was given by the petitioner
was valid for a period of 90 days and since
6 INDIAN LAW REPORTS ALLAHABAD SERIES
the tender was opened on 15.09.2008, the
bid was valid till 15.12.2008. Since the
contract could not be finalized within the
time, accordingly, the respondent no. 4
extended the period by 30 days and
accordingly the petitioner also extended the
validity of its bid till 15.01.2009. Later, this
validity of the bid was further extended
with the consent of the parties till
15.02.2009.
Thereafter
nothing
was
informed
to
the
petitioner
up
till
16.02.2009 when the offer price made by
the petitioner expired.

5. The petitioner by then had not
received any communication regarding the
acceptance of his bid, accordingly, the
petitioner issued a letter dated 16.02.2009
to the respondents which was not replied. It
is only on 26th February, 2009 that the
respondent replied to the letter of the
petitioner informing that the bid of the
petitioner was accepted on 04.02.2009 and
a letter in this regard had been sent to the
petitioner on 06.02.2009. In the aforesaid
backdrop, the respondent sent a letter to the
petitioner on 13.04.2009 directing the
petitioner to supply the required machine
crushed ballast 60,000 cubic meters in
pursuance of acceptance letter dated
16.02.2009.

6. It is at this stage that the petitioner
submitted in its letter dated 20th April,
2009 informing the respondent that he had
not received any acceptance letter and
therefore his bid which was valid only till
15.02.2009, hence, he could not supply the
said Ballast at the rate earlier offered,
hence, the earnest money of the petitioner
be returned.

7. This was the flash point when the
disagreement between the parties emerged
for the first time. The petitioner and the
respondents exchanged correspondence and
later the respondent no. 2 by means of its
letter dated 06.10.2009 terminated the
contract
w.e.f.
05.08.2009
and
also
informed the petitioner that due to his nonfulfillment of his obligations, the Railways
reserved the right to claim damages.

8. The respondent no. 3 again by
means of its letter dated 06.11.2009
informed that the earnest money of the
petitioner amounting to Rs. 3,87,500/- was
being forfeited.

9. Subsequently, the respondent no. 2
published another tender bearing No. 16 of
2009 for the same supply of machine
crushed ballast. The petitioner once again
participated in the fresh tender and once
again the bid of the petitioner was found
favourable. The respondent no. 3 once
again by means of letter dated 19.10.2009
requested the petitioner to extend the
period of the validity of his bid for a further
period of one month, however, once again
the same disputes arose and the petitioner
claimed the refund of his earnest money
which
had
been
forfeited
by
the
respondent-authorities which compelled the
petitioner to file a writ petition bearing No.
10992 (MB) of 2009 wherein a Division
Bench of this Court noticing that the
petition involved breach of contractual
obligations which requires evidence, hence,
liberty was granted to the petitioner to seek
his remedy before the appropriate Forum
and with the aforesaid observations, the
petition was dismissed.

10. Thereafter the petitioner served a
notice under Section 80 C.P.C. to the
respondents which was not responded
neither the earnest money of the petitioner
was
refunded.
Thus,
the
petitioner
approached this Court under Section 11 (6)
10 All. M/S Ajay Kumar Tiwari & Sons, Unnao Vs. U.O.I. & Ors.
7
of the Arbitration and Conciliation Act,
1996 by means of Arbitration Petition No.
41 of 2010.

11. While the said petition was
pending, the respondent vide its letter dated
01.11.2010 informed the petitioner that for
the appointment of Board of Arbitrators, he
was required to suggest a name from
amongst the officers of North-Eastern
Railway in terms of Clause 64 of the
General Conditions of Contract.

12. The petitioner was once again
informed on 08.12.2010 that a Board of
Arbitrators consisting of three members
was constituted with Sri A.K. Dadariya as
the Presiding Arbitrator. The petitioner
noticing the same responded by stating that
Sri Dadariya was looking after the contract
in question and therefore it was appropriate
that the Presiding officer may be changed.

13. Since no reply was given to the
said letter and the respondents initiated
recovery of the contractual amount from
the petitioner, in such circumstances, the
petitioner filed a petition under Section 9 of
the Arbitration and Conciliation Act, 1996
before the District Judge, Lucknow which
was registered as Case No. 89 of 2010
wherein the application under Section 9 of
the Act of 1996 was allowed by means of
judgment and order dated 22.10.2010
whereby the recovery against the petitioner
for a sum of Rs. 54,38,500/- was stayed
subject to the outcome of the proceedings
in arbitration.

14. In the aforesaid backdrop, the
petition filed by the petitioner before this
Court under Section 11 of the Act of 1996
came to be decided by means of order
dated 31.05.2013 with a direction that any
person who was not associated directly or
indirectly with the case/contract in question
be appointed as a member of the Panel of
Arbitrators. The order dated 31.05.2013
reads as under:-

"Order (Oral)

Heard
Shri
Sanjay
Kumar,
learned counsel for applicant, and Ms.
Jyotsana
Pal,
learned
counsel
for
respondents.

Learned counsel for applicant
submits that in the panel of three
arbitrators, the one namely Shri A.K.
Dadaria
was
associated
with
the
processing of the case on the administrative
side.

As per the settled principles of
judicial propriety, it is directed that only
such person who was never associated
directly or indirectly with the processing of
the case on administrative side shall be
appointed as a member of the panel of
arbitrators.

With the aforesaid direction, the
matter is disposed of."

15. Subsequent to the order passed by
the High Court, the respondent by means of
its letter dated 04.03.2023 informed that
since Sri Dadariya had been transferred,
accordingly, the Presiding Arbitrator in
place of Sri Dadariya has been appointed.

16. It is submitted by learned counsel
for the petitioner that Sri H.K. Singh was
appointed in place of Sri Dadariya.
Thereafter again Sri H.K. Singh was
replaced by Sri A.C. Lathe who resigned on
03.03.2015 and thereafter once again Sri
A.K. Srivastava was appointed as the
Arbitrator. Later, Sri A.K. Srivastava was
also transferred and in his place Sri
Somveer Singh was appointed as the
Presiding Arbitrator. Sri Somveer Singh
also resigned and thereafter on 29.06.2016
8 INDIAN LAW REPORTS ALLAHABAD SERIES
Sri Niyamul Haque was appointed as the
Presiding Arbitrator.

17. It is also the case of the petitioner
that despite the repeated change of the
Presiding Arbitrators, not a single hearing
took place even till today and the petitioner
has been running from pillar to post since
the emergence of disputes in the year 2009.
It is also submitted that the petitioner had
made several letters addressed to the
respondents to inform the status of the
Arbitral Tribunal but nothing transpired and
being aggrieved against the aforesaid
inaction of the respondents to hold the
arbitral proceedings, the petitioner has once
again approached this Court to appoint a
sole Arbitrator for deciding the dispute
between the parties.

18. Upon the said application of the
petitioner, notices were issued to the
respondents and despite the service being
complete, the respondents only filed its
counter affidavit as late as on 16.08.2023.
The respondents in their counter affidavit
have not disputed the chronology of events
and has also not disputed that till date no
arbitral hearing has taken place, however,
what is sought to be contended in the
counter affidavit is that the petitioner was
informed from time to time regarding the
change of the Presiding Arbitrator and the
petitioner was also informed regarding
submission of his statements of the claim
by means of letter dated 09.04.2013,
01.05.2013 but the petitioner did not
furnish the statement of claim.

19. It is further stated in the counter
affidavit that the petitioner by means of its
letter dated 25.05.2013 had sought 15 days'
time to furnish its statement of claim,
however, the same was not done, once
again the petitioner was informed by means
of letter dated 30.05.2013 to file its
statement of claim latest by 01.06.2013,
however, even then the statement of claim
was not filed and it is thus submitted that as
the petitioner has not submitted its
statement of claim, it cannot be said that
there has been a dead-lock rather the
petitioner himself is not cooperating.

20. It is further submitted that the
petitioner was also informed by means of
letter dated 05.11.2021 to sign a waiver
agreement in terms of Section 12 (5) read
with Section 31 (A) (5) of the Arbitration
and Conciliation Act, 1996 duly amended
so that the proceedings can be taken
forward.

21. Since the petitioner did not
furnish any such declaration/waiver, hence,
the proceedings could not go on and even
now the petitioner may furnish the said
declaration
and
the
matter
can
be
proceeded especially in view of the fact
that the petitioner was informed by means
of letter dated 08.08.2023 to give his
consent for appointment of the Presiding
Arbitrator from amongst the name of
retired members mentioned in the said
letter. It is thus the case of the respondents
that in view of the negligence of the
petitioner, the proceedings could not be
taken forward and as such the petition
deserves to be dismissed.

22. It is in the aforesaid context, the
submission of learned counsel for the
petitioner is that originally the arbitration
agreement contained a clause that the
Board of Arbitrators would be constituted
from
amongst
the
officers
of
the
respondents.

23. It is urged that once the said
proceedings
for
appointment
of
an
10 All. M/S Ajay Kumar Tiwari & Sons, Unnao Vs. U.O.I. & Ors.
9
Arbitrator commenced at the behest of the
petitioner and once he invoked the
arbitration clause, yet no formal sitting took
place and even though the petitioner had
submitted its statement of claim by
registered A.D. post to the Board of
Arbitrators on 05.03.2016 when the Board
of Arbitrators comprised of Sri Somveer
Singh, Sri S.C. Srivastava and Sri D.K.
Jairaj, yet no formal sitting took place till
date.

24. It is submitted that once the 2015
amendment in the Act of 1996 came into
force, it was not open for the respondents to
continue to appoint departmental arbitrators
and it is in the aforesaid backdrop where
the petitioner had declined to sign any
declaration/waiver for continuation of the
departmental Arbitrator. It was the bounden
duty of the respondents to appoint and
agree for an independent Arbitrator which
has not been done, consequently, the
petitioner had approached this Court.

25. The learned counsel for the
petitioner has relied upon the decision of
the Apex Court in Ellora Paper Mills
Limited v. The State of Madhya Pradesh
2022 (3) SCC 1; Union of India (UOI) v.
U.P. State Bridge Corporation Ltd. (2015)
2 SCC 52 and Northern Eastern Railways
V. Tripple Engineering Works 2014 (9)
SCC 288.

26. Sri Deepanshu Dass, learned
counsel appearing for the respondents has
submitted that as the facts would indicate
that the arbitral proceedings commenced
prior to the amendment in the Act of 1996
which was introduced in the year 2015.

27. It is further urged that from time
to time the Presiding Arbitrator was
changed but nevertheless the arbitral
proceedings continued, thus, there can be
no relief sought for appointment of an
independent Arbitrator till such time the
mandate of the earlier constituted Tribunal
is terminated.

28. Sri Deepanshu Dass, learned
counsel for the respondents taking the
argument forward states that in order to
terminate the mandate, the petitioner would
have to approach the Court as defined in
the Act of 1996 and only thereafter if the
parties are not agreeable for nomination of
an Arbitrator then the petitioner could
approach the Court but not in the present
circumstance where initially the Tribunal
still continues to subsist.

29. It is thus urged that the aforesaid
petition is not maintainable and in support
of his contentions, he has relied upon the
decision of the Apex Court in Central
Organization for Railway Electrification
v. M/s ECI SPIC SMO MCML (JV) A
Joint Venture Company 2020 (14) SCC
712; Government of Haryana PWD
Haryana (B and R) Branch Vs. M/s G.F.
Toll Road Pvt. Ltd. and other 2019 (3)
SCC 505, a decision of the Bombay High
Court in Sunderlal Aklinglal Jain Vs.
Rekha Yogendra Doshi and Others 2021
SCCOnline Bom 10184.

30. The learned counsel for the
respondents have also relied upon a
decision of the Delhi High Court in Pt.
Munshi Ram and Associates Pvt. Ltd. V.
New Delhi Municipal Council 2009 (3)
ArbiLR 515 and Swadesh Kumar Agarwal
Vs. Dinesh Kumar Agarwal and others;
(2022)10SCC235.

31. The Court has heard the learned
counsel for the parties at length and also
perused the material on record.
10 INDIAN LAW REPORTS ALLAHABAD SERIES

32. At the outset, it may be noticed
that the Arbitration and Conciliation Act,
1996 was enacted on the basis of
UNCITRAL Model. The purpose to enact
the said law was to make arbitration a
litigant
friendly
and
an
expeditious
Alternate Dispute Resolution Mechanism.
The structure of the Act is such that the
parties
are
vested
with
maximum
autonomy, neutrality of the of Arbitrators
and
the
proceedings
be
decided
expeditiously and the role of the Courts
have been reduced to the minimum. The
timelines have been incorporated in the Act
and with the passage of time, the Act
underwent certain amendments in the year
2015 and 2019. It was also noticed that in
large number of cases where the disputes were
between the Departments and the Contractors
or persons dealing with the Departments, the
practice of a departmental Arbitrator being
appointed to settle such disputes was mired by
inequality and this issue was initially flagged by
the Apex Court in Indian Oil Corporation
Limited and Others Vs. Raja Transport
Private Limited; (2009) 8 SCC 520. The
relevant portion from Raja Transport (supra)
read as under:-

"38. Before parting from this issue,
we may however refer to a ground reality.
Contractors in their anxiety to secure contracts
from Government/statutory bodies/public sector
undertakings, agree to arbitration clauses
providing for employee arbitrators. But when
subsequently disputes arise, they baulk at the
idea of arbitration by such employee arbitrators
and tend to litigate to secure an "independent"
arbitrator. The number of litigations seeking
appointment of independent arbitrator bears
testimony to this vexed problem.

39. It will be appropriate if
Governments/statutory authorities/public sector
undertaking reconsider their policy providing
for arbitration by employee arbitrators in
deference to the specific provisions of the new
Act reiterating the need for independence and
impartiality in arbitrators. A general shift may
in future be necessary for understanding the
word "independent" as referring to someone
not connected with either party. That may
improve the credibility of arbitration as an
alternative dispute resolution process. Be that
as it may."

33. The observations of the Supreme
Court and the issue flagged in the case of Raja
Transport (supra) found its manifestation in the
2015 amendment and Section 12 (5) was
incorporated along with the two schedules and
it was provided that the Departmental
Arbitrators are not to be appointed rather any
proposed appointment of an Arbitrator, if he
came within the prohibited degree as
mentioned in Schedule 5 and 7 as appended
to the Act, such a person would not be
entitled to be appointed as an Arbitrator.

34. The Apex Court in T.R.F. Limited
Vs. Energo Engineering Projects Limited
(2017) 8 SCC 377 considered this issue and
this decision was followed in a later
decision in the case of Perkins Eastman
Architects DPC and another vs. HSCC
(India) Limited (2019) SCC Online SC
1517 and it was observed as under:-

"20. We thus have two categories
of cases. The first, similar to the one dealt
with in TRF Ltd. [TRF Ltd. v. Energo Engg.
Projects Ltd., (2017) 8 SCC 377 : (2017) 4
SCC (Civ) 72] where the Managing
Director himself is named as an arbitrator
with an additional power to appoint any
other person as an arbitrator. In the second
category, the Managing Director is not to
act as an arbitrator himself but is
empowered or authorised to appoint any
other person of his choice or discretion as
an arbitrator. If, in the first category of
10 All. M/S Ajay Kumar Tiwari & Sons, Unnao Vs. U.O.I. & Ors.
11
cases, the Managing Director was found
incompetent, it was because of the interest
that he would be said to be having in the
outcome or result of the dispute. The
element of invalidity would thus be directly
relatable to and arise from the interest that
he would be having in such outcome or
decision. If that be the test, similar
invalidity would always arise and spring
even in the second category of cases. If the
interest that he has in the outcome of the
dispute, is taken to be the basis for the
possibility of bias, it will always be present
irrespective of whether the matter stands
under the first or second category of cases.
We are conscious that if such deduction is
drawn from the decision of this Court in
TRF Ltd. [TRF Ltd. v. Energo Engg.
Projects Ltd., (2017) 8 SCC 377 : (2017) 4
SCC (Civ) 72] , all cases having clauses
similar to that with which we are presently
concerned, a party to the agreement would
be disentitled to make any appointment of
an arbitrator on its own and it would
always be available to argue that a party or
an official or an authority having interest
in the dispute would be disentitled to make
appointment of an arbitrator.

21. But, in our view that has to be
the logical deduction from TRF Ltd. [TRF
Ltd. v. Energo Engg. Projects Ltd., (2017) 8
SCC 377 : (2017) 4 SCC (Civ) 72] Para 50
of the decision shows that this Court was
concerned with the issue, "whether the
Managing
Director,
after
becoming
ineligible by operation of law, is he still
eligible to nominate an arbitrator" The
ineligibility referred to therein, was as a
result of operation of law, in that a person
having an interest in the dispute or in the
outcome or decision thereof, must not only
be ineligible to act as an arbitrator but
must also not be eligible to appoint anyone
else as an arbitrator and that such person
cannot and should not have any role in
charting out any course to the dispute
resolution by having the power to appoint
an arbitrator. The next sentences in the
paragraph, further show that cases where
both the parties could nominate respective
arbitrators of their choice were found to be
completely a different situation. The reason
is clear that whatever advantage a party
may derive by nominating an arbitrator of
its choice would get counter-balanced by
equal power with the other party. But, in a
case where only one party has a right to
appoint a sole arbitrator, its choice will
always have an element of exclusivity in
determining or charting the course for
dispute resolution. Naturally, the person
who has an interest in the outcome or
decision of the dispute must not have the
power to appoint a sole arbitrator. That has
to be taken as the essence of the
amendments brought in by the Arbitration
and Conciliation (Amendment) Act, 2015 (3
of 2016) and recognised by the decision of
this Court in TRF Ltd. [TRF Ltd. v. Energo
Engg. Projects Ltd., (2017) 8 SCC 377 :
(2017) 4 SCC (Civ) 72]"

35. Now, in the aforesaid background
if the record is seen, it would reveal the
following undisputed facts:

(I) In pursuance of a tender
floated by the respondents, the petitioner
had put in his bid and in furtherance
thereof, he had also deposited the earnest
money. Since as per the petitioner, the bid
was valid for a limited period which was
extended from time to time but even after
the said extended period expired, the
petitioner could not be compelled to supply
and perform the contract at the rates which
were given as part of its bid and was valid
till the agreed time.

II) The stand of the respondents is
that the petitioner failed to comply with his
12 INDIAN LAW REPORTS ALLAHABAD SERIES
contractual obligations and therefore the
contract was terminated and the earnest
money was forfeited and a recovery noticed
was issued against the petitioner.

36. The petitioner invoked the
Arbitration Clause which contains the
procedure involving constitution of a Board
of three officers of the respondentorganization. In so far as the recovery
issued by the respondents is concerned, the
petitioner instituted proceedings under
Section 9 of the Act of 1996 which came to
be allowed and the respondents were
restrained from making the recovery till the
outcome of the arbitral proceedings.

37. Both parties do not dispute that a
Board of Arbitrators was constituted but
since in the first instance the composition
of the Arbitral Tribunal was such that the
Presiding Arbitrator was involved with the
contract which prompted the petitioner to
approach this Court on the first occasion by
filing Arbitration Case No.41 of 2010
which came to be disposed of on
31.05.2013 directing the respondents to
appoint a person who was never involved
directly or indirectly with the disputed
case/contract in question.

38. It is also not disputed that after the
decision of the High Court as mentioned
above 5 Presiding Arbitrators were changed
and the 6th Presiding Arbitrator which was
appointed was Sri Niyamul Haque on
29.06.2016.

39. It is also not disputed between the
parties that till date not a single sitting of
the Arbitral Tribunal has taken place. There
are letters on record to the effect that
petitioner was required to submit its
statement of claim but apparently, it would
indicate that all such letters were issued
between 09.04.2013 till 30.05.2013 and
these letters were issued by Sri Dadariya
during the period when the petition was
pending before the High Court which came
to be decided only on 31.05.2013.

40. Though, It is also the case of the
petitioner that he had sent the statement of
claim by registered A.D. post in the year
2016 when the Board of Arbitrators
consisted of Sri Somveer Singh, Sri S.C.
Srivastava and Sri D.K. Jairaj but the
respondents do not admit this fact rather
has made an evasive denial in their reply.

41. Despite the aforesaid, there is no
dispute between the parties to the fact that
none of the Board of Arbitrators which was
constituted ever issued any letter or notice
to the parties for holding any specific
arbitral sitting. Nevertheless the fact
remains that even if it is taken that the
Tribunal received the claims of the
petitioner yet the Tribunal did not hold any
meeting to proceed further or in case if no
such claims were submitted by the
petitioner before the Arbitral Tribunal even
then the fact remains that no hearing or
proceedings took place before the Tribunal.

42. At this stage, it will be appropriate
to notice certain relevant provisions of the
Act of 1996 which are being reproduced
hereinafter:-

"11.
Appointment
of
arbitrators.-(1)
A
person
of
any
nationality may be an arbitrator, unless
otherwise agreed by the parties.

(2) Subject to sub-section (6), the
parties are free to agree on a procedure for
appointing the arbitrator or arbitrators.

(3)
Failing
any
agreement
referred to in sub-section (2), in an
arbitration with three arbitrators, each
10 All. M/S Ajay Kumar Tiwari & Sons, Unnao Vs. U.O.I. & Ors.
13
party shall appoint one arbitrator, and the
two appointed arbitrators shall appoint the
third arbitrator who shall act as the
presiding arbitrator.

15[(3-A) The Supreme Court and
the High Court shall have the power to
designate, arbitral institutions, from time to
time, which have been graded by the
Council under Section 43-I, for the
purposes of this Act:

Provided that in respect of those
High Court jurisdictions, where no graded
arbitral institution are available, then, the
Chief Justice of the concerned High Court
may maintain a panel of arbitrators for
discharging the functions and duties of
arbitral institution and any reference to the
arbitrator shall be deemed to be an arbitral
institution for the purposes of this section
and the arbitrator appointed by a party
shall be entitled to such fee at the rate as
specified in the Fourth Schedule:

Provided further that the Chief
Justice of the concerned High Court may,
from time to time, review the panel of
arbitrators.]

(4) If the appointment procedure
in sub-section (3) applies and-

(a) a party fails to appoint an
arbitrator within thirty days from the
receipt of a request to do so from the other
party; or

(b) the two appointed arbitrators
fail to agree on the third arbitrator within
thirty days from the date of their
appointment,

16[the
appointment shall
be
made, on an application of the party, by the
arbitral institution designated by the
Supreme Court, in case of international
commercial arbitration, or by the High
Court, in case of arbitrations other than
international commercial arbitration, as
the case may be.]

(5)
Failing
any
agreement
referred to in sub-section (2), in an
arbitration with a sole arbitrator, if the
parties fail to agree on the arbitrator
within thirty days from receipt of a request
by one party from the other party to so
agree 17[the appointment shall be made on
an application of the party in accordance
with the provisions contained in subsection (4).]

(6) Where, under an appointment
procedure agreed upon by the parties,-

(a) a party fails to act as required
under that procedure; or

(b) the parties, or the two
appointed arbitrators, fail to reach an
agreement expected of them under that
procedure; or

(c)
a
person,
including
an
institution, fails to perform any function
entrusted to him or it under that procedure,

18[the
appointment shall
be
made, on an application of the party, by the
arbitral institution designated by the
Supreme Court, in case of international
commercial arbitration, or by the High
Court, in case of arbitrations other than
international commercial arbitration, as
the case may be] to take the necessary
measure, unless the agreement on the
appointment procedure provides other
means for securing the appointment.

(6-A) 19[* * *]

20[(6-B) The designation of any
person or institution by the Supreme Court
or, as the case may be, the High Court, for
the purposes of this section shall not be
regarded as a delegation of judicial power
by the Supreme Court or the High Court.]

(7) 21[* * *]

22[(8) 23[The arbitral institution
referred to in sub-sections (4), (5) and (6)],
before appointing an arbitrator, shall seek
a disclosure in writing from the prospective
14 INDIAN LAW REPORTS ALLAHABAD SERIES
arbitrator in terms of sub-section (1) of
Section 12, and have due regard to-

(a) any qualifications required for
the arbitrator by the agreement of the
parties; and

(b) the contents of the disclosure
and other considerations as are likely to
secure the appointment of an independent
and impartial arbitrator.]

(9) In the case of appointment of
sole or third arbitrator in an international
commercial arbitration, 24[the arbitral
institution designated by the Supreme
Court] may appoint an arbitrator of a
nationality other than the nationalities of the
parties where the parties belong to different
nationalities.

(10) 25[* * *]

26[(11) Where more than one
request has been made under sub-section (4)
or sub-section (5) or sub-section (6) to
different arbitral institutions, the arbitral
institution to which the request has been first
made under the relevant sub-section shall be
competent to appoint.

(12) Where the matter referred to
in sub-sections (4), (5), (6) and (8) arise in an
international commercial arbitration or any
other arbitration, the reference to the arbitral
institution in those sub-sections shall be
construed as a reference to the arbitral
institution designated under sub-section (3A).

(13) An application made under
this section for appointment of an arbitrator
or arbitrators shall be disposed of by the
arbitral institution within a period of thirty
days from the date of service of notice on the
opposite party.

(14) The arbitral institution shall
determine the fees of the arbitral tribunal and
the manner of its payment to the arbitral
tribunal subject to the rates specified in the
Fourth Schedule.

Explanation.-For the removal of
doubts, it is hereby clarified that this subsection shall not apply to international
commercial arbitration and in arbitrations
(other
than
international
commercial
arbitration) where parties have agreed for
determination of fees as per the rules of an
arbitral institution.].

12. Grounds for challenge.-[(1)
When a person is approached in connection
with his possible appointment as an
arbitrator, he shall disclose in writing any
circumstances,-

(a) such as the existence either
direct or indirect, of any past or present
relationship with or interest in any of the
parties or in relation to the subject-matter in
dispute,
whether
financial,
business,
professional or other kind, which is likely to
give rise to justifiable doubts as to his
independence or impartiality; and

(b) which are likely to affect his
ability to devote sufficient time to the
arbitration and in particular his ability to
complete the entire arbitration within a
period of twelve months.

Explanation
1.-The
grounds
stated in the Fifth Schedule shall guide in
determining whether circumstances exist which
give rise to justifiable doubts as to the
independence or impartiality of an arbitrator.

Explanation 2.-The disclosure shall
be made by such person in the form specified in
the Sixth Schedule.]

(2) An arbitrator, from the time of his
appointment and throughout the arbitral
proceedings, shall, without delay, disclose
to the parties in writing any circumstances
referred to in sub-section (1) unless they
have already been informed of them by him.

(3)
An
arbitrator
may
be
challenged only if-

(a) circumstances exist that give
rise to justifiable doubts as to his
independence or impartiality; or
10 All. M/S Ajay Kumar Tiwari & Sons, Unnao Vs. U.O.I. & Ors.
15

(b) he does not possess the
qualifications agreed to by the parties.

(4) A party may challenge an
arbitrator appointed by him, or in whose
appointment he has participated, only for
reasons of which he becomes aware after
the appointment has been made.

29[(5) Notwithstanding any prior
agreement to the contrary, any person
whose relationship, with the parties or
counsel or the subject-matter of the dispute,
falls under any of the categories specified
in the Seventh Schedule shall be ineligible
to be appointed as an arbitrator:

Provided
that
parties
may,
subsequent to disputes having arisen
between them, waive the applicability of
this sub-section by an express agreement in
writing.]

13. Challenge procedure.-(1)
Subject to sub-section (4), the parties are
free
to
agree
on
a
procedure
for
challenging an arbitrator.

(2)
Failing
any
agreement
referred to in sub-section (1), a party who
intends to challenge an arbitrator shall,
within fifteen days after becoming aware of
the constitution of the arbitral tribunal or
after becoming aware of any circumstances
referred to in sub-section (3) of Section 12,
send a written statement of the reasons for
the challenge to the arbitral tribunal.

(3)
Unless
the
arbitrator
challenged
under
sub-section
(2)
withdraws from his office or the other party
agrees to the challenge, the arbitral
tribunal shall decide on the challenge.
4) If a challenge under any procedure
agreed upon by the parties or under the
procedure under sub-section (2) is not
successful, the arbitral tribunal shall
continue the arbitral proceedings and make
an arbitral award.

(5) Where an arbitral award is
made under sub-section (4), the party
challenging the arbitrator may make an
application for setting aside such an
arbitral award in accordance with Section
34.

(6) Where an arbitral award is set
aside on an application made under subsection (5), the Court may decide as to
whether the arbitrator who is challenged is
entitled to any fees.

14. Failure or impossibility to
act.-(1) [The mandate of an arbitrator
shall terminate and he shall be substituted
by another arbitrator, if]-

(a) he becomes de jure or de facto
unable to perform his functions or for other
reasons fails to act without undue delay;
and

(b) he withdraws from his office
or the parties agree to the termination of
his mandate.

(2) If a controversy remains
concerning any of the grounds referred to
in clause (a) of sub-section (1), a party
may, unless otherwise agreed by the
parties, apply to the Court to decide on the
termination of the mandate.

(3) If, under this section or subsection (3) of Section 13, an arbitrator
withdraws from his office or a party agrees
to the termination of the mandate of an
arbitrator, it shall not imply acceptance of
the validity of any ground referred to in this
section or sub-section (3) of Section 12.

15. Termination of mandate and
substitution of arbitrator.-(1) In addition
to the circumstances referred to in Section
13 or Section 14, the mandate of an
arbitrator shall terminate-

(a) where he withdraws from
office for any reason; or

(b) by or pursuant to agreement
of the parties.

(2) Where the mandate of an
arbitrator
terminates,
a
substitute
arbitrator shall be appointed according to
16 INDIAN LAW REPORTS ALLAHABAD SERIES
the rules that were applicable to the
appointment
of
the
arbitrator
being
replaced.

(3) Unless otherwise agreed by
the parties, where an arbitrator is replaced
under
sub-section
(2),
any
hearings
previously held may be repeated at the
discretion of the arbitral tribunal.

(4) Unless otherwise agreed by
the parties, an order or ruling of the
arbitral tribunal made prior to the
replacement of an arbitrator under this
section shall not be invalid solely because
there has been a change in the composition
of the arbitral tribunal.

25. Default of a party.-Unless,
otherwise agreed by the parties, where,
without showing sufficient cause,-

(a)
the
claimant
fails
to
communicate his statement of claim in
accordance with sub-section (1) of Section
23, the arbitral tribunal shall terminate the
proceedings;

(b)
the
respondent
fails
to
communicate his statement of defence in
accordance with sub-section (1) of Section
23, the arbitral tribunal shall continue the
proceedings without treating that failure in
itself as an admission of the allegations by
the claimant 36[and shall have the
discretion to treat the right of the
respondent to file such statement of defence
as having been forfeited];

(c) a party fails to appear at an
oral hearing or to produce documentary
evidence,
the
arbitral
tribunal
may
continue the proceedings and make the
arbitral award on the evidence before it.

29-A. Time limit for arbitral
award.-[(1) The award in matters other
than international commercial arbitration
shall be made by the arbitral tribunal
within a period of twelve months from the
date of completion of pleadings under subsection (4) of Section 23:

Provided that the award in the
matter
of
international
commercial
arbitration may be made as expeditiously
as possible and endeavour may be made to
dispose of the matter within a period of
twelve months from the date of completion
of pleadings under sub-section (4) of
Section 23.]

(2) If the award is made within a
period of six months from the date the
arbitral tribunal enters upon the reference,
the arbitral tribunal shall be entitled to
receive such amount of additional fees as
the parties may agree.

(3) The parties may, by consent,
extend the period specified in sub-section
(1) for making award for a further period
not exceeding six months.

(4) If the award is not made
within the period specified in sub-section
(1) or the extended period specified under
sub-section (3), the mandate of the
arbitrator(s) shall terminate unless the
court has, either prior to or after the expiry
of the period so specified, extended the
period:

Provided that while extending the
period under this sub-section, if the court
finds that the proceedings have been
delayed for the reasons attributable to the
arbitral tribunal, then, it may order
reduction of fees of arbitrator(s) by not
exceeding five per cent for each month of
such delay:

[Provided further that where an
application
under
sub-section
(5)
is
pending, the mandate of the arbitrator shall
continue till the disposal of the said
application: