Petitioner is a private company engaged into an agreement with respondents no.2 who is a government of Kerala undertaking On 24.11.2014 and agreement was executed between them, by which petitioner was to make person employable in security profession by setting up a CEIS ( centre of excellence in security sector). Thereafter dispute arose between the parties above mentioned which led 2nd respondent referred the dispute to Arbitration by invoking clause 37(2) of the agreement. On 5.9.22 Government of Kerala issued a G.O appointing the 1st respondent as the sole arbitrator. According to the petitioner, due to having interest in the dispute Government of Kerala not entitled to appoint arbitrator as it has 100% share in the respondent no. 2 company.
2nd respondent argued that petitioner’s approach towards this court is not maintainable under section 14 of this act as this court does not fulfill the definition of “court” under section 2(1)(e) of the act. The Court also pronounced in judgement that
“According to the 2nd respondent, the mere fact that the 1st respondent was a previous Government servant would no way make him ineligible to be appointed as Arbitrator in the issue on hand. Thus, it is stated that the ineligibility or disqualification of the Arbitrator would come into play only if the Arbitrator is an employee, a consultant, an advisor, or has any past or present business relationship with a party to the dispute. It is further contended that the 1st respondent is a retired employee of the Public Works Department of Government of Kerala which has no direct involvement in the matter in issue involved in this case. Thus it is contended that the arbitration clause in the agreement between the petitioner and the 2nd respondent empowering the Government of Kerala to appoint Arbitrator, cannot be said to be invalid.”
2nd Respondent also have argued that petitioner’s objection regarding appointment of Arbitrator at this stage attract principal of estoppel at therefore not maintainable Because he shows his assend towards Arbitration proceedings as he filled of statement of defence , counter claim and active participation in Arbitration proceedings.
As per the provision of sec 12(5) of Arbitration and Conciliation Act 1996 as ammendment by Act 3 of 2016 a person can’t be qualified as arbitrator if he has interest in the dispute regarding subject within 19 probabilities described under the VIIth schedule of the act Arbitrator appoint unilaterally by Govt. Of Kerala who is also one of the parties to the dispute.
Court is also in opinion that exemption from application of sec 12(5) of the act only possible if it is expressed in writing.
The apex court held in a famous case [(2019) 5 SCC 755] that when the appointment of Arbitrator itself is void ab initio application of waiver or estoppel does not lie against the person challenging the appointment.
In respondent no 2’s argument that learned court would not come within the definition of court as per section 2(1)(e), court relied upon a judgement by honorable division bench of Kerala High Court namely M/s Lots Shipping Company Ltd. V. Cochin Port Trust [O.P (C) No. 586 of 2018] said that this court can appoint, terminate the mandate and substitute Arbitrator as per section 11(6), 14 and 15 of the act.
Hon’ble Court terminate the mandate given by the Arbitrator and nominated a respected person who is a Retd.District Judge and also ordered that all submissions are open to be pleaded before the Arbitrator.
Pronounced by: Hon’ble Justice G GIRISH
Citation: 2024: KER: 28749