Departmental Arbitrators

It had been considered, in earlier times, that an Arbitration Clause in a Government Contract providing that an employee of the department will be the Sole Arbitrator is neither void nor unenforceable [Indian Oil Corporation Limited, (2009) 8 SCC 520; Ace Pipeline Contracts (P) Ltd., (2007) 5 SCC 304; M.P. Gupta, (2004) 10 SCC 504]. Such employment does not raise a presumption of bias or lack of independence. Responsibility in choosing Arbitrators who shall conduct Arbitral Proceedings efficiently, without affecting other duties, is the bottom-line [Uttar Pradesh State Bridge Corporation Limited, (2015) 2 SCC 52].

In the present case, on 30.10.2013, Superintendent Engineer [Arbitration Circle, HPPWD, Solan] was appointed as the Sole Arbitrator regarding a claim of the Appellant-Contractor. The appointment was challenged on the ground that the Arbitrator had been appointed by designation/post. The Arbitration Clause indeed made the same permissible. In a petition filed under Section 11(6), 14 and 15 of The A&C Act, on 28.12.2013, the Appellant prayed, nonetheless, for quashing the appointment.

SC in S.P. Singla Constructions Pvt. Ltd. v. State of Himachal Pradesh, [Civil Appeal Nos. 11824-11825 of 2018] has held:

As per Section 26 of The Arbitration and Conciliation (Amendment) Act, 2015 the provisions of The Amended Act, 2015 shall not apply to the Arbitral Proceedings commenced in accordance with the provisions of Section 21 of The Principal Act before the commencement of The Amendment Act unless the parties otherwise agree. The parties had no agreement so as to apply the provisions of The Amended Act. As per Section 26, the provisions of The Amendment Act, 2015 shall apply in relation to Arbitral Proceedings commenced on or after the date of commencement of The Amendment Act, 2015 [w.e.f. 23.10.2015]. In the present case, Arbitration Proceedings commenced way back in 2013, much prior to coming into force of The Amended Act and therefore, provisions of The Amended Act cannot be invoked.

In Board of Control for Cricket in India, (2018) 6 SCC 287, this Court has held that the provisions of The Amendment Act, 2015 [w.e.f. 23.10.2015] cannot have retrospective operation in the Arbitral Proceedings already commenced unless the parties otherwise agree. The Arbitrator had the first hearing on 07.12.2013, on which date Appellant-Contractor was absent. On the next dates of hearing before the Arbitrator [13.03.2014, 03.04.2014, 25.04.2014 and 06.08.2014] the Appellant did not appear; but only sent letters requesting for adjournment. Since the Appellant-Claimant did not appear before the Arbitrator, the Arbitrator terminated the proceedings on 06.08.2014 under Section 25(a) of The 1996 Act. The Appellant had no right in approaching the High Court seeking appointment of an Independent Arbitrator. The Arbitrator could have issued a notice warning the Appellant that no adjournment would be granted under any circumstances. Since no such warning was given, we deem it appropriate to set aside the order of termination. We are conscious that after The Amendment Act, 2015, there cannot be a Departmental Arbitrator. The relationship between the parties are governed by the general conditions of the contract, dated 19.12.2006. The provisions of The Amendment Act, 2015 cannot be invoked. An opportunity is afforded to the Appellant to go before the Departmental Arbitrator. The Arbitrator shall afford sufficient opportunities to both the parties and proceed with the matter in accordance with law.”