Calcutta High Court: Applications for Removal of must be made before Same Court under Arbitration Act

Calcutta High Court: Applications for Removal of must be made before Same Court under Arbitration Act

The Calcutta High Court has recently rejected a petition submitted by M/S Gammon Engineers and Contractors Private Limited (the applicants). The petition was filed under sections 11(6), 14, and 15 of the Arbitration and Conciliation Act, 1996 (the Act). The applicants sought the removal of an arbitrator, citing concerns over his unilateral appointment.

Rejecting the application, a sole bench presided over by Justice Shekhar B Saraf ruled that the High Court could not entertain a plea for the withdrawal or removal of an arbitrator. This decision was based on the fact that a previous Section 9 application seeking interim relief had already been submitted to the Jalpaiguri District Court.

In instructing the petitioner to direct their approach to the District Judge at Jalpaiguri, in consideration of the restraint specified in Section 42 of the Act, the Bench concluded as follows: The definition of 'court' as outlined in Section 42 unequivocally refers to the definition provided in Section 2(1)(e) of the Act. The application under Section 9 is similarly presented to a 'court' within the meaning stipulated by Section 2(1)(e) of the Act. Once such an application, consistent with the understanding in Section 2(1)(e) of the Act, has been initiated, all subsequent applications under Part I, directed to a 'court,' must be channelled to the very 'court' where the preceding application was submitted. This requirement is explicitly stated in Section 42 of the Act. Hence, it is undeniably evident that the 'court' to be contacted pursuant to Section 14(1)(a), concerning the termination of an arbitrator's authority due to lawful or practical reasons, is indeed the 'court' in accordance with Section 2(1)(e). Consequently, the stipulation in Section 42 is applicable, and all applications destined for a 'court' must be presented to the District Judge at Jalpaiguri. In light of the aforementioned, the matter denoted as A.P. 785 of 2022 is disposed of, as it is deemed inappropriate for consideration before the High Court at this juncture.

The conflict emerged when the petitioners lodged the current application, contesting the unilateral selection of an arbitrator by the State-respondent. This act was claimed to be a breach of Clause 25 within the 'General Conditions of Contract.'

The argument put forth was that in 2011, the firm participated in an e-tender for the construction of the 'Teesta Jaldhaka Main Canal.' Subsequently, in 2012, the petitioner's bid was approved by the respondent. A letter of acceptance was dispatched for this purpose, and consequently, the firm embarked on the project, committing to finish the project by May 2014. The contract was subsequently terminated on August 1, 2014, when the firm failed to finish the project in time. The respondent further decided to invoke seven bank guarantees, which had been furnished by the petitioners.

The petitioners contended that they had presented their final statement of account, indicating an outstanding amount of around ₹50 lakhs due from the respondents. However, this submission was rejected by the respondents in December 2014, leading to the initiation of the arbitration process.

The petitioners stated that they had put forward the names of retired judges to constitute a three-member arbitral tribunal. In contrast, the State-respondents independently designated a former State government employee as the sole arbitrator.

The argument presented highlighted that the aforementioned Clause 25 of the Contract granted explicit authorisation to the Chief Engineer of the Department to serve as the exclusive arbitrator. Furthermore, it was emphasised that there existed no provision allowing the Chief Engineer to delegate this authority to another individual, which was the course of action taken in the current case.

Furthermore, the contention extended to highlight that Clause 25 did not grant the chief engineer the capability to nominate an individual who might possess a bias towards favouring the State. Additionally, it was asserted that the petitioners had not provided their written agreement to validate the selection of the sole arbitrator, a prerequisite as stipulated by Section 12(5) of the Act.

The petitioners contended that the arbitral proceedings persisted for eight years starting from 2014. They emphasised that the excessive and "unjustified" extension of these proceedings inflicted significant harm upon the petitioners. Moreover, they asserted that the arbitrator, displaying a bias towards the respondents, essentially deprived the petitioners of their right to fair treatment. This outcome was contrary to the principles outlined in the UNCITRAL model, which underscores the importance of impartiality in arbitration processes.

Lastly, the petitioners put forth the argument that despite the sole arbitrator's official affiliation with the State, he had neglected to reveal his predisposition, as mandated by Section 12(1) of the Act. This omission amounted to the suppression of a critical detail concerning his unsuitability to oversee the proceedings.

In contrast, the respondent-State contended that the petitioners had refrained from raising any objections to the selection of the sole arbitrator throughout the course of the proceedings.

The argument presented was that despite the arbitrator's previous association with the state as an employee, his involvement was unrelated to the subject matter of the ongoing dispute. This circumstance was cited to establish his eligibility to act as an arbitrator.

The respondents contended that the concept of unilateral appointment and the restrictions outlined in Section 12(5), as asserted by the petitioners, would not be applicable to arbitrations of the nature of the current one. They based this argument on the fact that the arbitration proceedings had begun before the enactment of the 2015 Amendment to the Act.

The respondents highlighted that the current application would not be viable for consideration. They reasoned that the petitioners had previously lodged a Section 9 application before the Jalpaiguri District Judge. Given the restriction stipulated in Section 42 of the Act, the respondents asserted that the petitioners would be required to direct their current concerns to the same court as well.

After carefully considering the arguments presented by both parties, the Court concluded that since the Section 9 application had already been submitted before the District Judge, the petitioners would be subjected to the prohibition outlined in Section 42 of the Act. Consequently, they would be precluded from filing any additional applications before any court apart from the one where the Section 9 application had been initially filed.

After conducting a comprehensive analysis of Sections 14 and 15 of the Act, the Court arrived at the decision to dismiss the petition due to its lack of maintainability before the High Court.

The Court's deliberation led to the conclusion that an application under Section 14(1)(a) concerning the termination of an arbitrator's authority must be addressed to a 'court' in accordance with the definition provided in Section 2(1)(e) and the constraints outlined in Section 42 of the Act. Therefore, such an application should be presented before the District Judge at Jalpaiguri.

The Court underlined that it is important to note that the determinations pertaining to the merits of the case in the preceding sections are preliminary and subject to change. The final assessment of the Section 14 application will be determined by the appropriate court following the principles of the law.