Court Finds Arbitrator's Appointment Invalid Under Arbitration and Conciliation Act, Citing Lack of Written Waiver by Appellant
In a significant ruling, the Allahabad High Court's Division Bench at Lucknow, comprising Chief Justice Arun Bhansali and Justice Jaspreet Singh, has set aside the arbitral award in the case of Laxmi Kant Pandey v. Hindustan Petroleum Corporation Ltd. The court found the appointment of the arbitrator by the Chairman and Managing Director of Hindustan Petroleum Corporation Ltd. to be invalid under Section 12(5) of the Arbitration and Conciliation Act, 1996, as amended in 2015.
The dispute originated from the termination of a dealership agreement between Laxmi Kant Pandey and Hindustan Petroleum, leading to arbitration proceedings. The appellant, Pandey, challenged the arbitral award and the judgment of the Commercial Court-II in Lucknow under Section 37 of the Arbitration and Conciliation Act.
The High Court scrutinized the appointment process of the sole arbitrator, Sanjay Verghese, which was initiated by the respondent corporation. The court observed that the appointment was directly hit by the statutory embargo under Section 12(1) & (5) read with the Fifth and Seventh Schedules of the Act. The ruling emphasized the absence of an express written waiver by Pandey, which is a prerequisite for overriding the ineligibility of an arbitrator under the Act.
The court also noted procedural lapses during the arbitration, including the lack of a clear declaration of impartiality by the arbitrator, and the absence of adequate opportunity for Pandey to present his case. These factors contributed to the court's decision to invalidate the arbitral award and the preceding judgment by the Commercial Court.
This judgment underscores the critical importance of adhering to statutory requirements in arbitration proceedings, particularly the necessity of obtaining an express written waiver from parties when appointing potentially ineligible arbitrators. The High Court's decision reaffirms the principles of neutrality and equal treatment of parties in arbitration, setting a precedent for future cases involving arbitral appointments.
Bottom line:-
Arbitration - Appointment of arbitrator by the Chairman and Managing Director of Hindustan Petroleum Corporation Ltd. was found invalid, as per Section 12(5) of the Arbitration and Conciliation Act, 1996 read with the Fifth and Seventh Schedule. No express written waiver by the appellant to waive the right to object against the ineligibility of the arbitrator was established, rendering the arbitral award void.
Statutory provision(s): Arbitration and Conciliation Act, 1996 - Sections 12(5), 37; Fifth and Seventh Schedule
