Summary
The Court upheld appointment of an independent arbitrator in place of the cooperative society’s chairman named in its distributorship agreements. The chairman’s management relationship made him ineligible under Section 12(5) and the Seventh Schedule despite the earlier agreements. Prior participation before him did not constitute the required express written post-dispute waiver. The cooperative-statute objection did not bar the agreed arbitration in these circumstances. All special leave petitions were dismissed.
Issues
- Whether the society’s elected chairman could continue as contractual arbitrator despite Section 12(5) ineligibility.
- Whether the earlier agreement, participation in proceedings or cooperative-societies legislation prevented appointment of an independent arbitrator.
Provisions considered
- Section 12(5), its proviso, and Seventh Schedule entries 1, 2, 5 and 12, Arbitration and Conciliation Act, 1996The chairman’s relationship with the society made him ineligible notwithstanding the prior agreement. Waiver required an express agreement in writing after disputes arose. (¶¶ 6.3, 6.4, 8, 9, 9.1, 10)
- Sections 11 and 14, Arbitration and Conciliation Act, 1996An ineligible arbitrator loses his mandate and may be replaced; the High Court validly appointed another arbitrator. (¶¶ 7, 11)
- Section 58, Rajasthan Co-operative Societies Act, 2001The Court rejected reliance on this provision and the society’s bye-laws to defeat appointment under the parties’ distributorship arbitration clause in the present dispute. (¶ 7.1)
Held
- The agreement’s execution before insertion of Section 12(5) did not preserve the named chairman’s eligibility in these later proceedings. The non obstante provision overrides contrary prior agreement to secure impartiality and independence, permitting an appointment outside the defective nomination arrangement. (¶¶ 3, 6, 6.3, 6.4)
- Omission of the word chairman from the Seventh Schedule did not prevent application of its substantive categories. An elected chairman/director forming part of the society’s management fell within the listed relationships and was ineligible to continue. (¶¶ 8, 9, 9.1)
- Section 12(5) waiver requires the parties’ express written agreement after disputes arise. A party’s initial reference to the named arbitrator or participation in proceedings does not by itself satisfy that distinct requirement. (¶ 10)
- The parties had expressly agreed to arbitrate their distributorship disputes. The Court rejected the society’s reliance on Section 58 and its bye-laws as a bar to the independent appointment in this case. (¶ 7.1)
- Ineligibility rendered the chairman legally unable to act and ended his mandate. Appointment of another arbitrator under Sections 11 and 14 was upheld and all special leave petitions dismissed. (¶¶ 7, 11, 12)
Result
All special leave petitions dismissed; High Court appointments of independent arbitrators upheld.