Summary
The Court appointed an independent sole arbitrator in a dispute under a Union government supply contract. Expressing the contract in the President’s name did not exempt it from statutory arbitrator-ineligibility rules. The clause allowing a serving Union employee to appoint another serving Union employee as sole arbitrator conflicted with Section 12(5) and the Seventh Schedule.
Issues
- Whether a contract expressed in the President’s name was immune from Section 12(5) of the Arbitration Act.
- Whether the contractual appointment of a serving government officer as sole arbitrator could be enforced.
- Whether the precedent concerning a panel of retired railway officers governed this appointment.
Provisions considered
- Section 12(5) read with Seventh Schedule, paragraph 1, Arbitration and Conciliation Act, 1996The proposed serving government officer was an employee of the Union, a contracting party, and fell within the statutory ineligible category notwithstanding the prior contractual clause. (¶¶ 8, 9, 15, 16, 17, 18, 19, 21)
- Article 299, Constitution of IndiaThe article prescribes formal requirements for government contracts and excludes personal liability; it does not immunise a contract from generally applicable statutory conditions or arbitrator-ineligibility rules. (¶¶ 10, 11, 12, 13, 14)
- Section 11(6), Arbitration and Conciliation Act, 1996The Court allowed the appointment application and appointed an independent sole arbitrator, subject to mandatory Section 12 disclosures. (¶¶ 1, 5, 22)
Held
- Article 299 concerns the form necessary to bind government contractually. Formal validity under it does not remove substantive restrictions imposed by general law. A contract made in the President’s name therefore enjoys no exemption from Section 12(5) safeguards against conflicts of interest. (¶¶ 10, 11, 12, 13, 14)
- The Secretary of the Ministry of Home Affairs represented the Union, a party to the contract, and the designated Ministry of Law officer would also be a serving Union employee. The clause providing for that sole-arbitrator appointment fell within paragraph 1 of the Seventh Schedule and could not be given effect in view of Section 12(5), which operates notwithstanding a prior contrary agreement. (¶¶ 8, 9, 15, 16, 17, 18, 19)
- The Court distinguished Central Organisation for Railway Electrification and Voestalpine on the appointment structures and retired-officer panels considered there. This case concerned a serving employee appointing another serving employee of the contracting Union as sole arbitrator. The reported larger-Bench reference concerning the railway decision did not affect the outcome here. (¶¶ 20, 21)
- The application was allowed and former Supreme Court Justice Indu Malhotra appointed sole arbitrator to adjudicate disputes arising under and in connection with the tender conditions, subject to mandatory statutory disclosures. (¶ 22)
Result
Section 11(6) application allowed. Justice Indu Malhotra, former Judge of the Supreme Court, appointed sole arbitrator, subject to mandatory Section 12 disclosures.