Ghaziabad Development Authority vs Subodh Builders (P.) Ltd. and Another

Sushil Harkauli, J.—The Respondent No. 2, Sri M.M.D. Seth was appointed arbitrator in a dispute between the Petitioner Ghaziabad Development Authority (for short GDA) and the Respondent No. 1, i.e. Subodh Builders (Pvt.) Ltd. The case is admittedly governed by the Arbitration and Concilliation Act, 1996.

Towards the later part of the arbitral proceedings, the arbitrator Sri M.M.D. Seth was challenged by the Petitioner by moving an application (Annexure-6 to the writ petition). The facts on the basis of which the arbitrator was challenged are such, of which the Petitioner claims to have become aware subsequent to the appointment of the said arbitrator. The challenge has been overruled by the Arbitrator. This writ petition has been filed basically against the said overruling. During the pendency of the writ petition, an interim order has been sought staying the proceedings before the arbitrator.

The grounds of challenge are:

(1) The arbitrator is prejudiced against the GDA because two earlier awards given by him has been challenged by the GDA before the Court;

(2) During the hearings of the said two earlier arbitrations, an executive engineer of GDA had felt that the arbitrator was giving less importance to the submissions of the GDA as compared to the submissions of the opposite parties.

(3) The departmental Engineers had seen the arbitrator sitting in the contractor''s vehicle, and the arbitrator used the contractor''s vehicle to come to the office of GDA.

(4) The arbitrator was holding the arbitral proceedings at his residence instead of the GDA office on the request of the contractor''s advocate whose residence is closer to the residence of the arbitrator.

A preliminary objection has been raised about the maintainability of this writ petition. For appreciating the objection, it is necessary to examine the scheme of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) with regard to challenging the Arbitrator.

The Act provides in Section 12(3) that after appointment of arbitrator, he may be challenged either on ground (a) the existence of circumstances which give rise to the justifiable doubts as to the arbitrator''s independence or impartiality, or (b) not being qualified. Sub-section (4) of Section 12 provides that the ground must be such of which, the party challenging arbitrator became aware after the appointment was made.

Thereafter Section 13 of the Act provides that where such challenge is made, it shall be decided according to the procedure agreed to by the parties; and in absence of such agreement, according to Sub-section (2) of Section 13.

u/s 13(4) of the Act, if the challenge, under any procedure agreed upon by the parties or under the procedure contemplated under Sub-section (2) of Section 13, fails, the arbitral Tribunal shall continue the arbitral proceedings and make an arbitral award.

Section 34 of the Act gives a right to the parties to apply for setting aside of an arbitral award on certain grounds mentioned in Section 34(2). Unlike the Arbitration Act, 1940, misconduct of the Arbitrator is not one of the grounds mentioned in Section 34, except to the extent to which the same may be covered by Section 34(2)(a)(iii).

However, if the above scheme of the Arbitration and Conciliation Act, 1996, and the provisions of Sub-sections (5) and (6) of Section 13 are read with Section 34, it becomes quite apparent that apart from the grounds given in Section 34(2) of the Act, an additional ground has provided by Sub-sections (5) and (6).

The reference to Section 34 in Section 13(5) of the Act, is merely a reference to the procedure u/s 34. The words "in accordance with Section 34" occurring in Section 13(5) are not intended to confine the challenge u/s 13(5) to the grounds mentioned in Section 34(2), because the lack of impartiality or want of independence of arbitrator is not one of the grounds mentioned in Section 34 of the Act.

An overall reading of the Act and its scheme suggests that only after the final award has been made, the same can be challenged before the Court u/s 34 on the grounds mentioned in Section 34(2) or Section 13(5). If such challenge succeeds before the Court, then the Court will decide as to whether arbitrator is entitled to any fee.

Thus, the scheme of the Act does not permit any of the parties to an arbitral proceeding, to stall the same at intermediate stages of the proceedings. In view of this legislative intent, I see no reason to permit the writ jurisdiction of this Court under Articles 226 and 227 of the Constitution of India to be used as a forum for what is virtually a ''transfer application'' for transferring the case from an arbitrator.

The writ petition, is, therefore, not being entertained, and is hereby dismissed.