Mr. Siddhartha Nagpal, Ms. Kajal Kakani, Advs v. UNION OF INDIA

Judgment

JASMEET SINGH, J

1. This is a petition filed by M/s Daulat Ram Brake Manufacturing Co. (petitioner) under Section 34 of the Arbitration and Conciliation, Act, (cid:20)(cid:28)(cid:28)(cid:25)(cid:3) (cid:11)(cid:179) 1996 Act(cid:180)(cid:12)(cid:3) (cid:86)(cid:72)(cid:72)(cid:78) (cid:76) (cid:81)(cid:74)(cid:3) (cid:87)(cid:82)(cid:3) (cid:70)(cid:75) (cid:68)(cid:79)(cid:79)(cid:72)(cid:81)(cid:74)(cid:72)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:36)(cid:85)(cid:69)(cid:76) (cid:87)(cid:85)(cid:68)(cid:79)(cid:3) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:20)(cid:25)(cid:17)(cid:20)(cid:20)(cid:17)(cid:21)(cid:19)(cid:21)(cid:22)(cid:3) (cid:11)(cid:179) Impugned Award(cid:180)(cid:12)(cid:15)(cid:3)whereby the counter claims of the respondent No. 1 were allowed and the petitioner was directed to pay an amount of Rs. 1,37,53,824/- to the respondent No. 1 within 90 days from the date of the award, failing which the awarded amount would carry a simple interest of 10% till the date of the actual payment.

2. By way of the present petition, the petitioner also seeks appointment of a fresh Arbitral Tribunal consisting of three independent arbitrators eligible under Section 12 and the Seventh Schedule of the 1996 Act. O.M.P. (COMM) 151/2024 FACTUAL MATRIX AS PER THE PETITIONER

3. The Petitioner, M/s Daulat Ram Brake Manufacturing Co., is a proprietorship firm engaged in the business of manufacturing brake blocks used in passenger coaches.

4. Respondent No.1 is Union of India for Northern Railways (NR) represented through Dy. Chief Manager/Sig/NR, Baroda House, Northern Railway, New Delhi, 110001. Respondent No. 2 is the General Manager (Northern Railways), Baroda House, Northern Railway, New Delhi, 110001. The Respondent no. 2 is the appointing authority as per Railway Board Letter No.2018/TF/Civil/Arbitration Policy dated 12.12.2018 and the Indian Railways Standard Conditions of Contract, 2018 (cid:11)(cid:179)IRS(cid:180)(cid:12).

5. Respondent No.1 floated a tender dated 16.08.2018 for the supply of (cid:179)Non-Asbestos Based (cid:181)K(cid:182)(cid:3)Type High Friction Composite Brake Blocks for coaches with bogie-mounted brake systems as per RDSO Drawing No. RDSO/ISK-98066, Alt (6), and Specification No. C9809 (Rev.-4) with Amendment-L(cid:180) (cid:11)(cid:179)Contract agreement(cid:180)(cid:12). In response, the petitioner submitted its bid, which was accepted by the respondent no.1. Pursuant thereto, respondent No. 1 issued a Purchase Order (PO) to the petitioner for the supply of 67,072 Composite Brake Blocks (CBBs) to the CSD, ANVT, Anand Vihar Terminal. The Contract agreement was governed by the IRS. The material supplied by the petitioner was inspected by the Research Designs and Standards Organization (RDSO), and due receipt notes were issued as

confirmation of acceptance. Upon satisfaction with the supplies, respondent No.1 made payments to the petitioner.

6. Subsequently, a dispute arose between the petitioner and respondent No.1 concerning the quality of the material supplied by the petitioner. O.M.P. (COMM) 151/2024 Respondent No.1 in total, rejected 64,000 items supplied by the petitioner, through two rejection memos, one dated 10.02.2022, rejecting 31,531 items, and a final/second rejection memo dated

15.10.2022, rejecting the remaining 32,469 items.

7. Hence, in terms of the arbitration clause, the petitioner invoked arbitration vide legal notice dated 26.03.2022. The arbitration clause is contained as clause 2900 of the IRS. The relevant extract is reproduced below: (cid:179)(cid:21)(cid:28)(cid:19)(cid:19)(cid:17) (a) In the event of any question, dispute or difference arising under these conditions or any special conditions of contract, or in connection with this contract (except as to any matters the decision of which is specially provided for by these or the special conditions) the same shall be referred to the sole arbitration of a Gazetted Railway Officer appointed to be the arbitrator, by the General Manager in the case of contracts entered into by the Zonal Railways and Production Units; by any Member of the Railway Board, in the case of contracts entered into by the Railway Board and by the Head of the Organisation in respect of contracts entered into by the other Organisations under the Ministry of Railways. The Gazetted Railway Officer to be appointed as arbitrator however will not be one of those who had an opportunity to deal with the matters to which the contract relates or who in the course of their duties as railway servant have expressed views on all or any of the matters under dispute or difference. The award of the arbitrator shall be final and binding on the parties to (cid:87)(cid:75) (cid:76) (cid:86)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:17)(cid:180) O.M.P. (COMM) 151/2024

8. The procedure for appointment of the arbitrator is contained under Clause 2905 of the IRS. The operative portion reads as under: (cid:179)2905: Appointment of Arbitrator: 2905 (a): Appointment of Arbitrator where applicability of section 12 (5) of Arbitration and Conciliation Act has been waived off: (cid:76) (cid:171)(cid:17)(cid:17) ii. In cases where the total value of all claims in question added together exceeds Rs.1,00,00,000/- (Rupees One Crore only), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below Junior Administrative Grade or 2 Railway Gazetted Officers not below Junior Administrative Grade and a retired Railway Officer, retired not below the rank of Senior Administrative Grade Officer, as the arbitrators. For this purpose, the Railway will send a panel of at least four (4) names of Gazetted Railway Officers of one or more departments of the VERSION 1.0 Railway which may also include the name(s) of retired Railway Officer(s) empaneled to work as Railway Arbitrator to the Contractor within 60 days from the day when a written and valid demand for arbitration is received by the General Manager Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as Contractor's nominee within 30 days from the date of dispatch of the request by Railway. The General Manager shall appoint at least one out of them as the Contractor's nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or O.M.P. (COMM) 151/2024 from outside the panel, duly indicating the 'presiding arbitrator' from amongst the 3 arbitrators so appointed. General Manager shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of Contractor's nominees. While nominating the arbitrators, it will be necessary to ensure that one of them is from the Accounts Department. An officer of Selection Grade of the Accounts Department may be considered of equal status to the officers in Senior Administrative Grade of other departments of the Railway for the purpose of appointment of arbitrator. 2905 (b): Appointment of Arbitrator where applicability of Section 12 (5) of Arbitration and Conciliation Act has not been waived off: i(cid:171)(cid:17)(cid:17)(cid:17) ii. In cases where the total value of all claims in question added together exceeds Rs.50,00,000/- (Rupees Fifty Lakh only), the Arbitral Tribunal shall consist of three (3) retired Railway Officers (retired not below the rank of Senior Administrative Grade Officer). For this purpose, the Railway will send a panel of at least four (4) names of retired Railway Officer(s) empanelled to work as Railway Arbitrators duly indicating their retirement date to the Contractor within 60 days from the day when a written and valid demand for arbitration is received by the General Manager. Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as Contractor's nominee within 30 days from the date of dispatch of the request by Railway. The General Manager O.M.P. (COMM) 151/2024 shall appoint at least one out of them as the Contractor's nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the 'Presiding Arbitrator' from amongst the 3 arbitrators so appointed. General Manager shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of Contractor's nominees. While nominating the arbitrators, it will be necessary to ensure that one of them has served in the Accounts Department.(cid:180)

9. Clause 2905 of the IRS, provides for the appointment of employees/ex-employees of Railways as Arbitrator(s), in both the cases, where the applicability of Section 12(5) has been waived off, and when the applicability of Section 12(5) has not been waived off. Aggrieved, the petitioner raised an objection to the appointment of an employee/ex-employee of the Railways as arbitrators and proposed that an independent Arbitrator must be appointed in accordance with the provisions of the 1996 Act. In regard, various communications took place between the parties. The petitioner vide letter dated 02.05.2022 also denied the consent for waiving off the applicability of Section 12(5) of 1996 Act. Since there was no response from the respondent no. 1, the petitioner filed a petition under Section 11 of the 1996 Act before the High Court of Madhya Pradesh (Jabalpur), which was disposed of as infructuous vide order dated 27.05.2024.

10. Meanwhile, a three-member Impugned Tribunal was appointed by the respondent No. 1 and the Impugned Award came to be passed on

16.11.2023. As regards, the objection of the petitioner pertaining to O.M.P. (COMM) 151/2024 the appointment of the Arbitral Tribunal is concerned, the Arbitral Tribunal inter alia held as under: (cid:179)(cid:28)(cid:17)(cid:3)Discussion and decision of the AT

9.1. Regarding objection to the constitution of the AT, it is noted that the Claimant took part in appointment of the AT and have not raised this matter during the hearing and pleadings. It is in the written arguments that they have mentioned this. The objections on this ground should have been made earlier by them in terms of Section 16 of the Act. The AC noted that the AT was formed in accordance with the provisions of the contract agreement and the IRS conditions governing the contract. Hence the Claimant's objection do not have any merit.(cid:180) SUBMISSIONS On behalf of the Petitioner

11. The petitioner has primarily challenged the Impugned Award on the premise that the constitution of the Arbitral Tribunal was void ab initio and that there exists justifiable doubts as to their impartiality and independence. The appointed arbitrators were former employees of respondent No.1 and were unilaterally appointed by its General Manager, despite the p(cid:72)(cid:87)(cid:76) (cid:87)(cid:76) (cid:82)(cid:81)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3) (cid:85)(cid:72)(cid:83)(cid:72)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:82)(cid:69)(cid:77) (cid:72)(cid:70)(cid:87)(cid:76) (cid:82)(cid:81)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:85)(cid:72)(cid:73)(cid:88)(cid:86)(cid:68)(cid:79)(cid:3) (cid:87)(cid:82)(cid:3) waive the applicability of Section 12(5) of the 1996 Act.

12. It is stated that the petitioner consistently objected to the appointment of employees or ex-employees of the respondent as arbitrators and repeatedly sought the appointment of independent arbitrators, as also noted in the notice invoking arbitration dated 26.03.2022. However, without responding to this request, respondent no.1, vide letter dated (cid:20)(cid:22)(cid:17)(cid:19)(cid:23)(cid:17)(cid:21)(cid:19)(cid:21)(cid:21)(cid:15)(cid:3) (cid:86)(cid:82)(cid:88)(cid:74)(cid:75) (cid:87)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:83)(cid:72)(cid:87)(cid:76) (cid:87)(cid:76) (cid:82)(cid:81)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) (cid:90)(cid:68)(cid:76) (cid:89)(cid:72)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:68) pplicability O.M.P. (COMM) 151/2024 of Section 12(5) of the 1996 Act, which was expressly denied the petitioner vide its reply dated 02.05.2022. It is well-settled that a waiver under Section 12(5) must be express and in writing post the appointment of the Arbitral Tribunal, and such rights cannot be deemed waived by mere conduct.

13. It is further stated that in anticipation of the appointment of ex- employees of the respondent No. 1 as arbitrator(s), the petitioner filed a petition under Section 11 of the 1996 Act before the High Court of Madhya Pradesh seeking appointment of an independent arbitrator. Despite duly informing both the respondent and the arbitral tribunal that the matter was sub judice before the High Court of Madhya Pradesh, the petitioner was compelled to nominate arbitrators from the r(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:83)(cid:68)(cid:81)(cid:72)(cid:79)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:83)(cid:68)(cid:85)(cid:87)(cid:76) (cid:70)(cid:76) (cid:83)(cid:68)(cid:87)(cid:72)(cid:3) (cid:76) (cid:81)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:68)(cid:85)(cid:69)(cid:76) (cid:87)(cid:85)(cid:68)(cid:79)(cid:3) (cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:72)(cid:71)(cid:76) (cid:81)(cid:74)(cid:86) Clause 2905(c)(i) of IRS provided that if the contractor fails to suggest his nominees for the arbitral tribunal within the prescribed time frame, then the General manager has the power to proceed for appointment of arbitral tribunal within 30 days of the expiry of such time provided to contractor.

14. Vide letter dated 31.03.2023, the General Manager provided a restricted panel of only 4 retired railway officers, to the petitioner to nominate its arbitrator. Even from this limited panel, the petitioner was not allowed to appoint an arbitrator of its choice but was to suggest two names. The General Manager unilaterally appointed the arbitrators. As a result, the entire tribunal was constituted solely at the discretion of the General Manager, which is in violation of Section 18 of the 1996 Act and against the principles of party autonomy, natural justice, neutrality, and independence and impartiality of arbitrators. O.M.P. (COMM) 151/2024

15. A party cannot be compelled to select its nominee arbitrator from a panel unilaterally curated by the opposing party, particularly when such panel is not (cid:181)broad-based(cid:182). This practice undermines the principle of equal treatment of parties and disturbs the balance in the arbitral process, as it deprives the petitioner of equal participation in the constitution of the arbitral tribunal. Reliance is placed on the judgment passed by a coordinate bench of this Court in Taleda Square Private Limited v. Rail Land Development Authority2023 SCC OnLine Del 6321 (paras 5 and 7).

16. Further, out of the proposed 4 names, one was that of Shri Khichchu Mal, which was rejected by the petitioner. However, the General Manager vide appointment letter dated 12.05.2023 appointed Shri (cid:46)(cid:75) (cid:76) (cid:70)(cid:75) (cid:70)(cid:75) (cid:88)(cid:3) (cid:48)(cid:68)(cid:79)(cid:3) (cid:68)(cid:86)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:181)(cid:83)(cid:85)(cid:72)(cid:86)(cid:76) (cid:71)(cid:76) (cid:81)(cid:74)(cid:3) (cid:68)(cid:85)(cid:69)(cid:76) (cid:87)(cid:85)(cid:68)(cid:87)(cid:82)(cid:85)(cid:182)(cid:3) (cid:76) (cid:81)(cid:3) (cid:87)(cid:75) . (cid:76) (cid:86)(cid:3) (cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)

17. It is stated that the General Manager, being himself ineligible to act as an arbitrator, could not have appointed the arbitrator(s), as it is well- settled in law that a person who is disqualified from acting as an arbitrator is equally disqualified from appointing one.

18. Reliance is placed on the judgment passed by a Coordinate bench of this Court in BW Business World Media Pvt. Ltd. v. IRCTC, 2022 SCC OnLine Del 226. On behalf of the Respondent

19. Per Contra, it is stated that the constitution of the Arbitral Tribunal was carried out strictly in accordance with the agreed contractual terms set out in Clause 2900 of the IRS, which forms an integral part of the binding arbitration agreement between the parties.

20. Clause 2900 of the IRS, provides for the appointment of a Gazetted Railway Officer as the sole arbitrator, to be appointed by the General Manager or other competent authority. The said clause excludes those O.M.P. (COMM) 151/2024 (cid:82)(cid:73)(cid:73)(cid:76) (cid:70)(cid:72)(cid:85)(cid:86)(cid:3) (cid:90)(cid:75) (cid:82)(cid:3) (cid:75) (cid:68)(cid:71)(cid:3) (cid:179)(cid:68)(cid:81)(cid:3) (cid:82)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:88)(cid:81)(cid:76) (cid:87)(cid:92)(cid:3) (cid:87)(cid:82)(cid:3) (cid:71)(cid:72)(cid:68)(cid:79)(cid:3) (cid:90)(cid:76) (cid:87)(cid:75) (cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3) (cid:90)(cid:75) (cid:76) (cid:70)(cid:75) (cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:3) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:86)(cid:180)(cid:3) (cid:82)(cid:85)(cid:3) (cid:90)(cid:75) (cid:82)(cid:3) (cid:179)(cid:75) (cid:68)(cid:89)(cid:72)(cid:3) (cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3) (cid:89)(cid:76) (cid:72) (cid:90)(cid:86)(cid:180)(cid:3) (cid:82)(cid:81)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:71)(cid:76) (cid:86)(cid:83)(cid:88)(cid:87)(cid:72)(cid:15)(cid:3) thereby ensuring impartiality and neutrality. Reliance is placed on the (cid:77) (cid:88)(cid:71)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:83)(cid:68)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:43)(cid:82)(cid:81)(cid:182)(cid:69)(cid:79)(cid:72)(cid:3) (cid:54)(cid:88)(cid:83)(cid:85)(cid:72)(cid:80)(cid:72)(cid:3) (cid:38)(cid:82)(cid:88)(cid:85)(cid:87)(cid:3) (cid:76) (cid:81)(cid:3) Voestalpine Schienen GmbH v. DMRC, (2017) 4 SCC 665.

21. It is stated that despite initial objections raised by the petitioner regarding the constitution of the Arbitral Tribunal, the petitioner actively engaged in the arbitral proceedings over an extended period including nominating arbitrators, filing pleadings, and presenting arguments on merits. Consequently, any challenge to the constitution of the tribunal stands waived by (cid:87)(cid:75) (cid:72)(cid:3) (cid:83)(cid:72)(cid:87)(cid:76) (cid:87)(cid:76) (cid:82)(cid:81)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3) conduct.

22. (cid:44)(cid:87)(cid:3) (cid:76) (cid:86)(cid:3) (cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:75) (cid:68)(cid:87)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:83)(cid:72)(cid:87)(cid:76) (cid:87)(cid:76) (cid:82)(cid:81)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3) (cid:68)(cid:85)(cid:74)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:75) (cid:68)(cid:87)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) General Manager is ineligible to appoint arbitrators cannot be entertained as it is a settled law that ineligibility under Seventh Schedule of 1996 Act applies to a person acting as an arbitrator, not merely appointing one unless such ineligibility is expressly extended through contractual interpretation or statutory bar, which is not the case here.

23. Further, the petition(cid:72)(cid:85)(cid:182)(cid:86)(cid:3) (cid:68)(cid:85)(cid:74)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:76) (cid:81)(cid:74) lack of consent under Section 12(5) is untenable. The record demonstrates that the petitioner was issued a letter dated 13.04.2022 seeking waiver of Section 12(5), to which no objection was raised at that stage. On the contrary, the petitioner proceeded to nominate arbitrators from the panel, indicating acquiescence to the process.

24. The mere pendency of a Section 11 petition does not, in itself, preclude the continuation of arbitral proceedings, particularly where the Arbitral Tribunal has already been constituted in accordance with the terms of the contract. In the absence of any stay or judicial injunction, which the Petitioner has failed to produce, the tribunal was fully competent to proceed. In any event, the Arbitral Tribunal, O.M.P. (COMM) 151/2024 exercising its powers under Section 16 of the Act, duly considered and rejected the objections to its constitution. This determination, (cid:69)(cid:72)(cid:76) (cid:81)(cid:74)(cid:3) (cid:86)(cid:84)(cid:88)(cid:68)(cid:85)(cid:72)(cid:79)(cid:92)(cid:3) (cid:90)(cid:76) (cid:87)(cid:75) (cid:76) (cid:81)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:55)(cid:85)(cid:76) (cid:69)(cid:88)(cid:81)(cid:68)(cid:79)(cid:182)(cid:86)(cid:3) (cid:77) (cid:88)(cid:85)(cid:76) (cid:86)(cid:71)(cid:76) (cid:70)(cid:87)(cid:76) (cid:82)(cid:81)(cid:68)(cid:79)(cid:3) (cid:80)(cid:68)(cid:81)(cid:71)(cid:68)(cid:87)(cid:72)(cid:15)(cid:3) (cid:76) (cid:86)(cid:3) (cid:81)(cid:82)(cid:87)(cid:3) amenable to review under Section 34. ANALYSIS 25. I have heard learned counsel for the parties and perused the material and documents placed on record.

26. The gist of the arguments by the petitioner is that the respondent went on to unilaterally appoint the Arbitral T(cid:85)(cid:76) (cid:69)(cid:88)(cid:81)(cid:68)(cid:79)(cid:15)(cid:3) (cid:71)(cid:72)(cid:86)(cid:83)(cid:76) (cid:87)(cid:72)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:83)(cid:72)(cid:87)(cid:76) (cid:87)(cid:76) (cid:82)(cid:81)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3) continuous objection to its constitution vide its letter(s) dated

26.03.2022 and 02.05.2022. Even otherwise, the General Manager provided a restricted panel of only 4 retired railway officers, which cannot be said to be (cid:181)broad based(cid:182). Per Contra, the objection raised by the respondent in a gist is that the constitution of the Arbitral Tribunal was in accordance with Clause 2900 of the IRS.

27. A perusal of the Clause 2905 of the IRS as reproduced above indicates two distinct scenarios: (i) where the applicability of Section 12(5) of the 1996 Act has been expressly waived by the petitioner in accordance with the proviso thereto, and (ii) where no such waiver has been made. Therefore, the primary issue that arises before me is whether, in the facts of the present case, there has been a valid waiver by the petitioner of the ineligibility criteria of the Arbitral Tribunal under Section 12(5) of the 1996 Act.

28. In this regard, the respondent No. 1 has contended that although the petitioner initially objected to the constitution of the Arbitral Tribunal, thereafter proceeded to actively participate the arbitral proceedings, by nominating arbitrators, filing pleadings, and making submissions on merits. Such conduct clearly signifies acquiescence O.M.P. (COMM) 151/2024 and amounts to a waiver of any objection to the Arbitral (cid:55)(cid:85)(cid:76) (cid:69)(cid:88)(cid:81)(cid:68)(cid:79)(cid:182)(cid:86)(cid:3) constitution.

29. Section 12 (5) of the 1996 Act reads as under: (cid:179)(cid:20)(cid:21)(cid:17)(cid:3) (cid:42)(cid:85)(cid:82)(cid:88)(cid:81)(cid:71)(cid:86)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:70)(cid:75) (cid:68)(cid:79)(cid:79)(cid:72)(cid:81)(cid:74)(cid:72)(cid:29) (cid:171)(cid:171) (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- (cid:86)(cid:72)(cid:70)(cid:87)(cid:76) (cid:82)(cid:81)(cid:3) (cid:69)(cid:92)(cid:3) (cid:68)(cid:81)(cid:3) (cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:76) (cid:81)(cid:3) (cid:90)(cid:85)(cid:76) (cid:87)(cid:76) (cid:81)(cid:74)(cid:17)(cid:180)

30. To my mind, the argument by the respondent is meritless. The essence of Section 12 of the 1996 Act lies in ensuring the independence and impartiality of the Arbitral Tribunal. The provision mandates that any appointment made in violation of Section 12(5) read with the Fifth and the Seventh Schedule of the 1996 Act renders the arbitrator de jure ineligible. Such ineligibility goes to the very foundation of the arbitral process(cid:17)(cid:3) (cid:55)(cid:75) (cid:72)(cid:3) (cid:43)(cid:82)(cid:81)(cid:182)(cid:69)(cid:79)(cid:72)(cid:3) (cid:54)(cid:88)(cid:83)(cid:85)(cid:72)(cid:80)(cid:72)(cid:3) (cid:38)(cid:82)(cid:88)(cid:85)(cid:87)(cid:3) (cid:76) (cid:81)(cid:3) Voestalpine (supra), inter alia held as under: (cid:179)(cid:21)(cid:19)(cid:17)(cid:3) Independence and impartiality of the arbitrator are the hallmarks of any arbitration proceedings. Rule against bias is one of the fundamental principles of natural justice which applied to all judicial and quasi-judicial proceedings. It is for this reason that notwithstanding the fact that relationship between the parties to the arbitration and the arbitrators themselves are contractual in nature O.M.P. (COMM) 151/2024 and the source of an arbitrator's appointment is deduced from the agreement entered into between the parties, notwithstanding the same non-independence and non- impartiality of such arbitrator (though contractually agreed upon) would render him ineligible to conduct the arbitration. The genesis behind this rational is that even when an arbitrator is appointed in terms of contract and by the parties to the contract, he is independent of the parties. Functions and duties require him to rise above the partisan interest of the parties and not to act in, or so as to further, the particular interest of either parties. After all, the arbitrator has adjudicatory role to perform and, therefore, he must be independent of parties as well as impartial. The United Kingdom Supreme Court has beautifully highlighted this aspect in Hashwani v. Jivraj [Hashwani v. Jivraj, (2011) 1 WLR 1872 : 2011 UKSC 40] in the following words : (WLR p. 1889, para 45) (cid:179)(cid:23)(cid:24)(cid:17)(cid:3) (cid:171)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:71)(cid:82)(cid:80)(cid:76) (cid:81)(cid:68)(cid:81)(cid:87)(cid:3) (cid:83)(cid:88)(cid:85)(cid:83)(cid:82)(cid:86)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:83)(cid:83)(cid:82)(cid:76) (cid:81)(cid:87)(cid:76) (cid:81)(cid:74)(cid:3) (cid:68)(cid:81)(cid:3) arbitrator or arbitrators is the impartial resolution of the dispute between the parties in accordance with the terms of the agreement and, although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not personal services under the direction of the (cid:83)(cid:68)(cid:85)(cid:87)(cid:76) (cid:72)(cid:86)(cid:17)(cid:180) (cid:171)(cid:171)

22. Independence and impartiality are two different concepts. An arbitrator may be independent and yet, lack impartiality, or vice versa. Impartiality, as is well accepted, O.M.P. (COMM) 151/2024 is a more subjective concept as compared to independence. Independence, which is more an objective concept, may, thus, be more straightforwardly ascertained by the parties at the outset of the arbitration proceedings in light of the circumstances disclosed by the arbitrator, while partiality will more likely surface during the arbitration (cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:72)(cid:71)(cid:76) (cid:81)(cid:74)(cid:86)(cid:17)(cid:180) (emphasis supplied)

31. The legal position with respect to Section 12(5) of the 1996 Act, read with the Seventh Schedule, is no longer res integra. It stands conclusively settled by a catena of judgments. It has time and again been held that any person having an ineligible relationship under the Seventh Schedule of the 1996 Act is disqualified from being appointed as an arbitrator, and such ineligibility cannot be cured except through an express written waiver in terms of the proviso to Section 12(5). (cid:55)(cid:75) (cid:72)(cid:3) (cid:43)(cid:82)(cid:81)(cid:182)(cid:69)(cid:79)(cid:72)(cid:3) (cid:54)(cid:88)(cid:83)(cid:85)(cid:72)(cid:80)(cid:72)(cid:3) (cid:38)(cid:82)(cid:88)(cid:85)(cid:87)(cid:3) in Bharat Broadband Network Limited v. United Telecoms Limited (2019) 5 SCC 755 has explained the same. (For reference see para nos.15 and 17)

32. Now coming to the issue at hand, that whether a party waives its right under Section 12(5) of the 1996 Act through conduct, is now well settled. Any waiver of the disqualification contemplated under Section 12(5) of the 1996 Act, must be made expressly in writing. The statute does not permit an implied waiver through conduct or participation in arbitral proceedings. The requirement of a written waiver ensures that the party unequivocally agrees to proceed with the appointment, despite the disqualification, and avoids any ambiguity in this regard. (cid:44)(cid:81)(cid:3) (cid:87)(cid:75) (cid:76) (cid:86)(cid:3) (cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:15)(cid:3) (cid:87)(cid:75) (cid:72)(cid:3) (cid:43)(cid:82)(cid:81)(cid:182)(cid:69)(cid:79)(cid:72)(cid:3) (cid:54)(cid:88)(cid:83)(cid:85)(cid:72)(cid:80)(cid:72)(cid:3) (cid:38)(cid:82)(cid:88)(cid:85)(cid:87)(cid:3) (cid:76) (cid:81)(cid:3) Bharat Broadband (supra) inter alia held as under: O.M.P. (COMM) 151/2024 (cid:179)20. This then brings us to the applicability of the proviso to Section 12(5) on the facts of this case. Unlike Section 4 of the Act which deals with deemed waiver of the right to object by conduct, the proviso to Section 12(5) will only apply if subsequent to disputes having arisen between the parties, the parties waive the applicability of sub-section (5) of Section 12 by an express agreement in writing. For this reason, the argument based on the analogy of Section 7 of the Act must also be rejected. Section 7 deals with arbitration agreements that must be in writing, and then explains that such agreements may be contained in documents which provide a record of such agreements. On the other hand, Section 12(5) refers to an (cid:179)(cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:76) (cid:81)(cid:3) (cid:90)(cid:85)(cid:76) (cid:87)(cid:76) (cid:81)(cid:74)(cid:180)(cid:17)(cid:3) (cid:55)(cid:75) (cid:72)(cid:3) (cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:76) (cid:82)(cid:81)(cid:3) (cid:179)(cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:76) (cid:81)(cid:3) (cid:90)(cid:85)(cid:76) (cid:87)(cid:76) (cid:81)(cid:74)(cid:180)(cid:3) (cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3) (cid:68)(cid:81)(cid:3) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:80)(cid:68)(cid:71)(cid:72)(cid:3) (cid:76) (cid:81)(cid:3) (cid:90)(cid:82)(cid:85)(cid:71)(cid:86)(cid:3) (cid:68)(cid:86)(cid:3) opposed to an agreement which is to be inferred by conduct. Here, Section 9 of the Contract Act, 1872 becomes important. It states: (cid:179)(cid:28)(cid:17)(cid:3) (cid:51)(cid:85)(cid:82)(cid:80)(cid:76) ses, express and implied. (cid:178)Insofar as the proposal or acceptance of any promise is made in words, the promise is said to be express. Insofar as such proposal or acceptance is made otherwise than in words, (cid:87)(cid:75) (cid:72)(cid:3) (cid:83)(cid:85)(cid:82)(cid:80)(cid:76) (cid:86)(cid:72)(cid:3) (cid:76) (cid:86)(cid:3) (cid:86)(cid:68)(cid:76) (cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:69)(cid:72)(cid:3) (cid:76) (cid:80)(cid:83)(cid:79)(cid:76) (cid:72)(cid:71)(cid:17)(cid:180)(cid:3) It is thus ne(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:92)(cid:3) (cid:87)(cid:75) (cid:68)(cid:87)(cid:3) (cid:87)(cid:75) (cid:72)(cid:85)(cid:72)(cid:3) (cid:69)(cid:72)(cid:3) (cid:68)(cid:81)(cid:3) (cid:179)(cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:180)(cid:3) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:76) (cid:81)(cid:3) writing. This agreement must be an agreement by which both parties, with full knowledge of the fact that Shri Khan is ineligible to be appointed as an arbitrator, still go ahead and say that they have full faith and confidence in him to continue as such. The facts of the present case disclose no such express O.M.P. (COMM) 151/2024 agreement. The appointment letter which is relied upon by the High Court as indicating an express agreement on the facts of the case is dated 17-1-2017. On this date, the Managing Director of the appellant was certainly not aware that Shri Khan could not be appointed by him as Section 12(5) read with the Seventh Schedule only went to the invalidity of the appointment of the Managing Director himself as an arbitrator(cid:171)(cid:171)(cid:180) (emphasis supplied)

33. Following the law laid down in Bharat Broadband (supra) several other judgment(s) have been passed by this Court, on similar lines. Reliance is placed on Govind Singh vs Satya Group Pvt. Limited and Another2023 SCC OnLine Del 37 and A K Builders vs Delhi State Industrial Infrastructure Development Corporation Ltd O.M.P. (T) (COMM.) 12/2022.

34. In the present case, the facts are not in dispute. The petitioner invoked arbitration vide letter dated 26.03.2022, whereby the petitioner indicated that an independent arbitrator be appointed. Letter dated

26.03.2022 is reproduced below: O.M.P. (COMM) 151/2024 O.M.P. (COMM) 151/2024