The court ruled that the award was a nullity, as the arbitrator was ineligible under Section 12(5) of the Arbitration and Conciliation Act, 1996
In a significant decision, the Calcutta High Court has set aside an arbitral award dated January 5, 2023, concerning Tata Steel Limited and MSP Sponge Iron Limited due to the ineligibility of the appointed arbitrator. Justice Shampa Sarkar ruled that the unilateral appointment of an arbitrator by one party contravenes the principles of fairness and equal participation in arbitration proceedings, as stipulated under Section 12(5) of the Arbitration and Conciliation Act, 1996.
The judgment arose from a dispute related to an agreement dated October 31, 2014, between Tata Steel Limited and MSP Sponge Iron Limited, which included an arbitration clause permitting unilateral appointment of an arbitrator by the seller, MSP Sponge Iron Limited. The court deemed such a clause void ab initio, emphasizing that unilateral appointments compromise the independence and impartiality required in arbitration.
Mr. Ratnanko Banerji, representing Tata Steel, argued that the arbitrator lacked jurisdiction, as his appointment was contrary to the Act's provisions. Despite Tata Steel's participation in the arbitration proceedings, the court held that mere participation does not equate to waiver of the ineligibility clause under Section 12(5).
The court underscored the necessity for an express agreement in writing to waive ineligibility, which was absent in this case. Relying on precedents such as Bharat Broadband Network Ltd. v. United Telecoms Ltd. and TRF Ltd. v. Energo Engineering Projects Ltd., the court reinforced that unilateral appointments are inherently biased and violate the fundamental policy of Indian law.
Furthermore, the court instructed the Registrar to return the deposit made by Tata Steel during the proceedings, emphasizing that the arbitral award was unenforceable. This decision marks a critical stance against unilateral arbitrator appointments and underscores the judiciary's commitment to ensuring impartial arbitration processes.
Bottom line:-
Arbitration - Unilateral appointment of arbitrator - Arbitrator unilaterally appointed by one party is ineligible as per Section 12(5) of the Arbitration and Conciliation Act, 1996 - Such unilateral appointment is void ab initio and against the principle of party equality in arbitration proceedings.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Sections 12(5), 34
Tata Steel Limited v. MSP Sponge Iron Limited, (Calcutta) : Law Finder Doc id # 2896192
