M/S Glock Asia-Pacific Ltd. v. Union of India

717 [2023] 6 S.C.R. 717 M/S GLOCK ASIA-PACIFIC LTD. v. UNION OF INDIA (Arbitration Petition No. 51 of 2022) MAY 19, 2023 [DR. DHANANJAYA Y CHANDRACHUD, CJI, PAMIDIGHANTAM SRI NARASIMHA AND J. B. PARDIWALA, JJ.] Arbitration and Conciliation Act, 1996 – ss.11(6), 12(5) – Ministry of Home Affairs floated tender – Applicant ’s bid was accepted as per the terms and conditions of the ten der which provided for arbitration clause which enabled the S ecretary, Ministry of Home Affairs to appoint an officer in t he Ministry of Law as the arbitrator – Applicant invoking arbitratio n, nominated a retired Judge of the High Court as the Sole Arbitr ator which as per the respondent was contrary to the Conditions o f Tender – Application filed u/s.11(6) before Supreme Court, h eld:The arbitration clause in the present case enables a se rving employee of the Union of India, a party to the contract, to nominate a s erving employee of the Union of India as the Sole Arbitrat or – Such arbitration clause clearly falls within the expressly ineligible category provided in Paragraph 1 of Schedule VII, read with s.1 2(5) of the Act – As the grounds of challenge to the appointment of an arbi trator u/s.12(5) of the Act operate notwithstanding any pr ior agreement to the contrary, the appointment of an officer of t he Ministry of Law and Justice as an arbitrator cannot be given effect to – There is no immunity arising out of Article 299, to support the cont ention that for contracts expressed to be made by the Presid ent of India, the ineligibility of appointment as an arbitrator a s contemplated u/s.12(5) of the Act, read with Schedule VII, will be inapplic able – Application u/s.11(6) allowed – Constitution of Indi a–Article 299. Constitution of India– Article 299 – Purpose and object of – Discussed–Arbitration and Conciliation Act, 1996. Voestalpine Schienen GmbH v. DMRC (2017) 4 SCC 665 : [2017] 1 SCR 798 – distinguished. Central Organisation for Railway Electrification v . M/s ECI-SPIC-SMO-MCML (JV) A Joint Venture Company (2020) 14 SCC 712 : [2019] 16 SCR 1234 – held inapplicable. Perkins Eastman Architects DPC and Another v. HSCC (India) Ltd. (2020) 20 SCC 760; Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram & Ors [1954] SCR 817 – relied on. Indian Oil Corporation Ltd. and ors. v. Raja Transport Pvt. Ltd. (2009) 8 SCC 520 : [2009] 13 SCR 510; K. P. Chowdhry v. State of Madhya Pradesh. And Others [1966] 3 SCR 919; Bhikraj Jaipuria v. Union of India [1962] 2 SCR 880; Mulamchand v. State of Madhya Pradesh (1968) 3 SCR 214; State of Assam and Ors. v. Shri Kanak Chandra Dutta, [1967] 1 SCR 679; Union of India v. M/s Tantia Constructions Ltd SLP (C) No. 12670/2020; JWS Steel Ltd v. Southwestern Railways and Anr. SLP (C) No. 9462/2022– referred to. Case Law Reference

(2020) 20 SCC 760 relied on para 6 [2009] 13 SCR 510 referred to para 7 [2019] 16 SCR 1234 held inapplicable para 7 [1954] SCR 817 relied on para 11 [1966] 3 SCR 919 referred to para 12 [1962] 2 SCR 880 referred to para 12 [1967] 1 SCR 679 referred to para 15 [2017] 1 SCR 798 distinguished para 20 CIVIL ORIGINAL JURISDICTION : Arbitration Petition No.51 of 2022. Appointment of Arbitrator u/s 11(6) of Arbitration & Conciliation Act, 1996, in pursuance of Clause 24 of the General Conditions of Contract applicable to Contracts placed by the Central Purchase Organisation of the Government of India (Now Under Department of Commerce) Form No. D.G.S. & D.68 (Revised) executed between Petiti oner and Respondent] Ramakrishnan Viraraghavan, Sr. Adv., Shyam D. Nanda n, Siddharth Bambha, Ankit Sahni, K. Krishna Kumar, Mrs. Kritika Sahni, Ms. Sucharu Garg, Advs. for the Petitioner. Mrs. Aishwarya Bhati, A.S.G., Rajat Nair, Ms. Deepabali Dutta, Sourav Roy, Ms. Shivika Mehra, Ms. Manisha Chava, Nithin Pavuluri, Arvind Kumar Sharma, Advs. for the Respondent. The Judgment of the Court was delivered by

PAMIDIGHANTAM SRI NARASIMHA, J.

¶1This is an application under Section 11(6) of the Arbitration and Conciliation Act, 19961 for the appointment of a Sole Arbitrator by Glock Asia-Pacific Ltd. 2

¶2Facts: The Ministry of Home Affairs (Procurement Division)3 floated a single party tender on 02.02.2011 for supply of 31,756 Glock Pistols. The bid was confirmed in favour of the applicant and a Tender of Acceptance was issued by the respondent on 31.03.2011. Clause 64 of the Tender of Acceptance, required the Petitione r to submit a performance bond of 10% of the value of the contract, being US D 13,29,093/-. Applicant furnished the performance bank guarantee 5 on

24.08.2011 and proceeded to perform its contractual obligations and in fact, by 06.08.2012 delivered the entire supply under the contract. The 1 Hereinafter referred as ‘the Act’ 2 Hereinafter referred as ‘applicant’ 3 Hereinafter referred as ‘respondent’. 4"6. Performance Security Deposit-You will submit performance bond of 10% of value of contract i.e. US$ 13,29,093/- (US dollars thirteen lakh twenty nine thousand and ninety three only) in the shape of bank guarantee in the required Performa in favour of Joint Secretary (Police Modernisation), Ministry of Home affairs, Jaisalmer House, New Delhi within 30 days here of i.e. by 30.04.2011. The Performance guarantee will remain valid till two months after the expiry of warranty period, which will be 18 months from the date of acceptance stores at the consignee location. If necessary, firm on their own will have to direct their bankers to extend the performance bond to remain valid till two months after warranty period. Where the performance bank guarantee is obtained from a foreign bank, it shall be got confirmed by a scheduled Indian Bank and will be governed by Indian Laws and be subject to the juris diction of Courts of the place of issue of acceptance of Tender (A/T), i.e Delhi.” 5 Hereinafter referred as ‘PBG’. respondent accepted the consignment and paid the entire consideration by 11.11.2012.

¶3The PBG which was issued on 24.08.2011 was extended from time to time during the subsistence of the contract and also thereafter till 2021, i.e., for nine years after the completion of the delivery and final payment under the contract. On 31.05.2021, the applicant informed the respondent that the PBG will not be extended any further. The respondent immediately invoked the PBG for INR 9,64,42,738/-, citing Clauses 11 and 18(c) ofSchedule II of theAcceptance of Tender. These claus es, which provide for Guarantee and Warranty, are as follows: “Clause 11. Guarantee/Warranty: 40,000 rounds for p istol and ors. 18 months from the date of acceptance of E QPT/ Stores in good condition at consignee location in India. Clause 18(c) Warranty: the supplier furnishes his w arranty that the goods supplied under the contract on you, on use of the incorporate all recent improvement in design and material. The supplier shall for the warranty the goods supplied under this contract shall have no defect arising from design, mate rial of workmanship or from any act or commission or the supplie r normal use of the supplied goods in the condition o btained in the country of final destination. Warranty shall remain v alid up to 40,000 rounds of pistol and 18 months from other item s from the date of acceptance of stores. The consigne e shall promptly notify the supplier in writing of any clai m arising under this warranty. Upon receipt of such notice the supplier having been notified failed to remedy the defects w ithin the warranty period prescribed in this clause, the purchaser ma y proceed to take such a medial action as may be necessary at the suppliers risk and expense and without prejudic e to any other rights which the purchaser may have under the contract. The manufacturer will be required by the indenter on act ual price basis. Warranty support will include installa tion and commissioning of equipment free of charge. Operatio nal training of the users personal free of cost at the site of installation and repair of the equipment when necessary free of cost during the warranty period.”

¶4The applicant issued a notice invoking arbitration on 20.07.2022, and nominated a retired Judge of the High Court of Delhi as the Sol e Arbitrator. The respondent was called upon to accept the nominat ion within 15 days. Replying to the notice invoking Arbitration, the respondent by a letter dated 03.10.2022, stated that the nomination was contrary to Clause 28 of the Conditions of Tender, as per which disputes are to be referred to arbitration by an officer in the Ministry of Law, appointed by the Secretary of Ministry of Home Affairs. Clause 28 is as under: “28. ARBITRATION In the event of any question, dispute or difference arising under these conditions or any special conditions of contra ct, 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 t he sole arbitration of an officer in the Min. of Law, appointed t o be the arbitrator by the Secretary, Ministry of Home A ffairs. It will be no objection that the arbitrator is a Gover nment Servant that he had to deal with the matters to whi ch the contract relates or that in the course of his dutie s as a Government servant he has expressed views on all or any of the matters in dispute or difference. The award of the arbitrator shall be final and binding on the partie s to this contract…..” (emphasis supplied)

¶5It is in the above-referred context that the applicant, being a foreign company, filed the present application under Section 11(6) of the Act before this Court.

¶6Submissions : Mr. Ramakrishnan Viraraghavan, learned Senior Advocate, along with Mr. Shayam D. Nandan, AOR appearing for the applicant, submitted that appointment of the Sole Arbitrator as per the respondent’s letter dated 03.10.2022 would be contrary to Section 12(5) of the Act. For this purpose, he also relied on the judgment of this Court in Perkins Eastman Architects DPC and Another v. HSCC (India) Ltd.6 The objection is simply that the respondent, Union of India, being a party to the agreement, appointing its own employee, an officer in the Ministry of Law, as the Sole Arbitrator would conflict with the mandate of Section 12(5) of the Act. 6 (2020) 20SCC 760.

¶7Ms. Aishwarya Bhati, learned Additional Solicitor General appearing for the respondent, submitted that the judgment in Perkins (supra) would have no application to the facts of the present case. S he would point out that the contract in the present case, unlike in Perkins (supra), is in the name of the President of India, and that is a clear point of distinction. The learned ASG also relied on Indian Oil Corporation Ltd. and ors. v. Raja Transport Pvt. Ltd. 7 to contend that once a party enters into an agreement for the appointment of a person as an arbitrator, it cannot simply opt-out of the arbitration clause. In the alternative, the ASG also relied on the decision of this Court in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) A joint venture company8, where appointment of a panel of arbitrators by the Ministry of Railways was held to be valid. She would, therefore, contend that the power to nominate an officer in the Ministry of Law i s not in conflict with Section 12(5) of the Act.

¶8Analysis : As the objection about appointment of the arbitrator as per Clause 28 of the Conditions of Tender is based on the statuto ry prohibition under Section 12(5) of the Act, we will reproduce relevant part of the section for ready reference: “12. Grounds of Challenge :…

(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall dis close in writing any circumstances, –– ...

(2)…

(3)…

(4)…

(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: 7 (2009) 8 SCC 520. 8 (2020) 14 SCC 712. Provided that parties may, subsequent to disputes h aving arisen between them, waive the applicability of thi s sub-section by an express agreement in writing” (emphasis supplied)

¶9The category of relationship relevant for our purpo ses as provided in the Seventh Schedule to the Act is as under: “The Seventh Schedule: Arbitrator’s relationship with the parties or counsel ;

¶1The arbitrator is an employee, consultant, adviso r or has any other past or present business relationship with a party .” Re: Submission regarding contracts expressed in the name of the President of India.

¶10We will first deal with the submission of learned ASG, Ms Bhati that the contract in the present case stands on a different footing as it is entered into in the name of the President of India. Article 299 of the Constitution of India9 provides that all contracts made in exercise of the executive power of the Union shall be expressed to be made in the name of the President. The phrase ‘expressed to be ma de’ and the word ‘executed’ are intended to mean that there must be a deed or contract, in writing, and executed by a person duly authorized b y the President of the Governor in that behalf.

¶11 The rationale of Article 299(1), as explained in Chatturbhuj Vithaldas Jasaniv.Moreshwar Parashram & Ors 10 is that there must be a definite procedure according to which contracts must be made by the agents of the government in order to bind the government, otherwise 9 “299. Contracts

(1) All contracts made in the exercise of the executive power of the Union or of a State shall be expressed to be made by the President, or by the Governor of the State, as the case may be, and all such contracts and all assurances of property made in the exercise of that power shall be executed on behalf of the Pre sident or the Governor by such persons and in such manner as he may direct or author ize.

(2) Neither the President nor the Governor shall be personally liable in respect of any contract or assurance made or executed for the purposes of this Constitution, or for the purposes of any enactment relating to the Government of India heretofore in force, nor shall any person making or executing any such contract or assurance on behalf of any of them be personally liable in respect thereof” 10(1954) SCR 817. public funds may deplete by unauthorized or illegitimate con tracts. It implies that contracts not couched in the particular form stip ulated by Article 299(1) of the Constitution cannot be enforced at the instance of any contracting party.

¶12It must be emphasized that Article 299 only lays down the formality that is necessary to bind the government with contractual liability. It is important to note that Article 299 does not lay down the substantial law relating to the contractual liability of the Government, which is to be found in the general laws of the land. It is for this reason that, even though a contract may be formally valid under Article 299, it may nevertheless fail to bind the Government if it is void or unenforceable under the general provisions of law.11

¶13Having considered the purpose and object of Article 299, we are of the clear opinion that a contract entered into in t he name of the President of India, cannot and will not create an immunity agains t the application of any statutory prescription imposing conditions on parties to an agreement, when the Government chooses to enter into a contract. We are unable to trace any immunity arising out of Article 299, to support the contention that for contracts expressed to be made by the President of India, the ineligibility of appointment as an arbitrator as contemplated under Section 12(5) of the Act, read with Schedule VII, will be inapplicable.

¶14We have no hesitation in rejecting the submission of the learned ASG that the contracts entered into by the Union of India in the name of the President of India are immune from provisions that protect against conflict of interest of a party to a contract, under Section 12(5) of the Act. Re: Conflict of the Arbitration Clause with Section 12(5) re ad with paragraph 1 of the Seventh Schedule of the Act.

¶15The tender notice dated 02.02.2011 was issued by the Government of India, Ministry of Home Affairs for the p urchase of Glock pistols. Applicant’s bid was accepted on 31.03.2011 as per the 11See Chatturbhuj Vithaldas Jasaniv. Moreshwar Parashram And Others (1954) SCR 817; K. P.C howdhry v. State of Madhya Pradesh. And Others (1966) 3 SCR 919; Bhikraj Jaipuria v. Union of India (1962) 2 SCR 880; Mulamchand v. State of Madhya Pradesh (1968) 3 SCR 214; Also see, DD Basu, Constitution of India (Vol 3),13601-13619. Terms and Conditions contained in the Tender No. D/21013/30/3218/

2.11.2011/PW-3. The said Terms and Conditions specifically provided for Arbitration as per Clause 28 of the Schedule appended to the Tender. The Arbitration clause enables the Secretary, Ministry of Home Affairs, to appoint an arbitrator for the resolution of disputes arising out of this contract. The Ministry of Home Affairs is a party to the c ontract. The arbitration clause enables the Secretary representing th e Ministry to appoint an officer in the Ministry of Law as the arbitrator. In other words, the proposed arbitrator would be an employee of the Ministr y of Law and Justice, Government of India, and at the same time, the appointing authority, the Secretary of the Ministry of Home Affairs, i s also an employee of the Government of India.12

¶16In this very context, we can beneficially refer to the recommendation of the 246th Law Commission Report which reflected on the issue of contracts with State entities and observed that when the party appointing an arbitrator is the State, the duty to appoint an impartial and independent adjudicator is even more onerous. Their deliberations and recommendations, which led to the introduction of Section 12(5) with the Seventh Schedule in the Act, are extracted as follows: “56. The limits of this provision has been tested in the India n Supreme Court in the context of contracts with State entit ies naming particular persons/designations (associated with that entity) as a potential arbitrator . It appears to be settled by a series of decisions of the Supreme Court (See Execu tive Engineer, Irrigation Division, Puri v. Gangaram Chha polia, 1984 (3) SCC 627; Secretary to Government Transport Department, Madras v. Munusamy Mudaliar, 1988 (Supp ) SCC 651; International Authority of India v. K.D.Ba li and Anr, 1988 (2) SCC 360; S.Rajan v. State of Kerala, 1992 (3) SCC 608; M/s. Indian Drugs & Pharmaceuticals v. M/s. Indo-12In State of Assam and ors.v.Shri Kanak Chandra Dutta, (1967) 1 SCR 679, this Court held that: “9. ... A person holding a post under a State is a person serving or employed under the State. See the marginal notes to Articles 309, 310 and 31 1. The heading and the sub-heading of Part XIV and Chapter I emphasise the elem ent of service. There is a relationship of master and servant between the State and a person holding a post under it. The existence of this relationship is indicated by the State’s right to select and appoint the holder of the post, its right to suspend and di smiss him, its right to control the manner and method of his doing the work and the paym ent by it of his wages or remuneration...” Swiss Synthetics Germ Manufacturing Co.Ltd., 1996 (1) SCC 54; Union of India v. M.P.Gupta, (2004) 10 SCC 504; Ace Pipeline Contract Pvt. Ltd. v. Bharat Petroleum Corporat ion Ltd., 2007 (5) SCC 304) that arbitration agreements in government contracts which provide for arbitration by a serving employee of the department, are valid and enforceable. While the Supreme Court, in Indian Oil Corp. Ltd. v. Raja Transport (P) Ltd., 2009 8 SCC 520 carved out a minor exception in situations when the arbitrator “ was the controlling or dealing authority in regard to the s ubject contract or if he is a direct subordinate (as contra sted from an officer of an inferior rank in some other depart ment) to the officer whose decision is the subject matter of the disp ute”, and this exception was used by the Supreme Court in Denel Propreitory Ltd. v. Govt. of India, Ministry of Def ence, AIR 2012 SC 817 and Bipromasz Bipron Trading SA v. Bhar at Electronics Ltd., (2012) 6 SCC 384, to appoint an independent arbitrator under section 11, this is not enough.

¶57The balance between procedural fairness and bindi ng nature of these contracts, appears to have been til ted in favour of the latter by the Supreme Court, and the Commiss ion believes the present position of law is far from sa tisfactory. Since the principles of impartiality and independence can not be discarded at any stage of the proceedings, speci fically at the stage of constitution of the arbitral tribunal, it would be incongruous to say that party autonomy can be exerc ised in complete disregard of these principles – even if the sa me has been agreed prior to the disputes having arisen between t he parties. There are certain minimum levels of indepe ndence and impartiality that should be required of the arbitral process regardless of the parties’ apparent agreement. A sensib le law cannot, for instance, permit appointment of an arbitrator who is himself a party to the dispute, or who is employe d by (or similarly dependent on) one party, even if this is what the parties agreed. The Commission hastens to add that M r. PK Malhotra, the ex officio member of the Law Commissi on suggested having an exception for the State, and allow State parties to appoint employee arbitrators. The Commis sion is of the opinion that, on this issue, there cannot be any distinction between State and non-State parties. The concept of party autonomy cannot be stretched to a point wh ere it negates the very basis of having impartial and inde pendent adjudicators for resolution of disputes. In fact, when the part y appointing an adjudicator is the State, the duty to appoint an impartial and independent adjudicator is that much more onerous – and the right to natural justice cannot b e said to have been waived only on the basis of a “prior” agr eement between the parties at the time of the contract and before arising of the disputes. ” (emphasis supplied)

¶17Following the recommendation of the Law Commission, sub-section (5) to Section 12 was inserted to the Act w ith effect from

23.10.2015. As the statutory mandate of Section 12(5) of the Act is to apply “ notwithstandingany prior agreement ”, Clause 28 of the Agreement (Conditions of Tender) falls foul of Paragraph 1 of the Seventh Schedule to the Act.

¶18In Perkins (supra), this Court held that any person who has an interest in the outcome of the dispute would be inelig ible to be an arbitrator. Naturally, such a person should not have the power to appoint a sole arbitrator. The relevant portion of this judgment is as under:

¶21But, in our view that has to be the logical deduct ion from TRF Ltd. Para 50 of the decision shows that this Court was concerned with the issue, “whether the Managing Director, after becoming ineligible by operation of law , is he still eligible to nominate an arbitrator” The ineli gibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the out come or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator . The next sentences in the paragraph, further show that cases where both the parties could nominate respective arbitrator s of their choice were found to be completely a diffe rent situation. The reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choic e would get counter-balanced by equal power with the other party. But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an ele ment of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an intere st in the outcome or decision of the dispute must not have th e power to appoint a sole arbitrator . That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) and recognised by the decision of this Court in TRF Ltd . [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377. (emphasis supplied)

¶19In conclusion, the arbitration clause which authorises th e Secretary, Ministry of Home Affairs, whose relationship with Union of India is that of an employee, to nominate an officer of the Mini stry of Law and Justice to act as a Sole Arbitrator, clearly fa lls within the expressly ineligible category provided in Paragraph 1 of Schedule VII, read with Section 12(5) of the Act. As the grounds of challenge to the appointment of an arbitrator under Section 12(5) of the Act operate notwithstanding any prior agreement to the contrary , we cannot give effect to the appointment of an officer of the Ministry of Law and Justice as an arbitrator. The submission of the learned ASG in favour of such an appointment is therefore rejected. Re: Reliance on the decision in Central Organisatio n of Railway Electrifications

20.We will now deal with the last limb of the learned ASG’ s submissions, which relates to the precedent of Central Organisation of Railway Electrifications (supra). In this case, Clause 64(3)(b) provided for the constitution of an Arbitral Tribunal consisting of three members. The appointment procedure contemplated was such that the General Manager of the Appellant was required to nominate the panel of four retired railway officers, out of which the respondent-Contractor had to select twonames. The General Manager was required to appoint at least one out of the selected officers as the contract or’snominee arbitrator(s), and unilaterally appoint the remaining arbitrators as well as the presiding officer to the tribunal. The decision of Perkins (supra) was not applicable therein as the contract contemplated a three-member arbitral tribunal, while Perkins (supra) applies to cases of unilateral appointment of Sole Arbitrators. Further, the Court noted that, “absolutely, there is no bar under Section 12(5) of th e Arbitration and Conciliation (Amendment) Act, 2015 for appointment of a retired employee to act as an arbitrator ”13. The Court in Central Organisation of Railway Electrifications (supra) also relied on the principle elucidated in the case of Voestalpine Schienen GmbH v. DMRC,14 wherein DMRC nominated a five-member panel comprising names of employees of Railways, Central Public Works Department or public sector undertakings and the Court upheld the nomination inter alia noting that empaneling of such retired persons was intended to utilise their technical expertise. 15 In Central Organisation of Railway Electrifications (supra) this Court relied on the aforementioned judgment to state that: “27. ... As held in Voestalpine Schienen GmbH [Voes talpine Schienen GmbH v. DMRC, (2017) 4 SCC 665 : (2017) 2 SCC 13 (2020) 14 SCC 712, para 26. 14(2017) 4 SCC 665. 15ibid, Paras 24, 28: “24. They cannot be treated as employee of consultant or adviser of the respondent DMRC. If this contention of the petitioner is accepted, then no person who had earlier worked in any capacity with the Central Government or ot her autonomous or public sector undertakings would be eligible to act as an arbitrator even when he is not even remotely connected with the party in question, like DMRC in this case. The amended provision puts an embargo on a person to act as an arbitrator, who is the employee of the party to the dispute. It also deprives a person to act as an arbitrator if he had been the consultant or the advisor or had any past or pre sent business relationship with DMRC. No such case is made out by the petitioner.” “26. It cannot be said that simply because the person is a retired officer who ret ired from the government or other statutory corporation or public sector undertaking and had no connection with DMRC (the party in dispute), he would be treated as ineligible to act as an arbitrator. Had this been the intention of the legislature, the Seventh Schedule would have covered such persons as well. Bias or even real likelihood of bias cannot beattributed to such highly qualified and exper ienced persons, simply on the ground that they served the Central Government or P SUs, even when they had no connection with DMRC. The very reason for empanelling these persons is to e nsure that technical aspects of the dispute are suitably resolved by utilising their expertise when they act as arbitrators. It may also be mentioned herein that the Law Commission had proposed the incorporation of the Schedule which was drawn from the red and orange list of IBA guidelines on conflict of interest in international arbitration with the observation that the same would be treated as the g uide “to determine whether circumstances exist which give rise to such justifiable doubts”. Such persons do not get covered by red or orange list of IBA guidelines either.”

(Civ) 607] , the very reason for empanelling the retired railway officers is to ensure that the technical aspects of th e dispute are suitably resolved by utilising their expertise when they act as arbitrators. Merely because the panel of the arbitr ators are the retired employees who have worked in the Railways , it does not make them ineligible to act as the arbitrators .” (emphasis supplied)

¶21In contrast, the arbitration clause in the present case enables a serving employee of the Union of India, a party to the contrac t, to nominate a serving employee of the Union of India as the Sole Arbitrator. Such an authorisation is clearly distinct from the arbitra tion clause in Voestalpine Schienen GmbH (supra) and Central Organisation of Railway Electrifications (supra), and is in conflict with Section 12(5) of the Act. It was informed at the bar that the correctness of judgement of Central Organisation of Railway Electrifications 16 has been challenged and referred to a larger bench in Union of India v. M/s Tantia Constructions Ltd 17 as well as JWS Steel Ltd v. Southwestern Railways and Anr 18. As we have noticed that the decision in Central Organisation of Railway Electrifications (supra) is not applicable in the present case, its reference to the larger Bench will have no bearing on the outcome of the present case.

¶22For the reasons stated above, the present application under Section 11(6) of the Arbitration and Conciliation Act, 1996 is allowed. We hereby appoint Ms. Justice Indu Malhotra, a former judge of this Court as the Sole Arbitrator to adjudicate upon the disputes arising under and in connection with the Conditions of Tender entered into between the parties, subject to the mandatory disclosures under the am ended Section 12 of the Arbitration and Conciliation Act, 1996. Divya Pandey Application allowed. (Assisted by : Shevali Monga, LCRA) 16Ibid. 17 SLP (C) No. 12670/2020 18 SLP (C) No. 9462/2022