Court dismisses appeal by Titagarh Rail Systems Limited, affirming that absence of express waiver of Section 12(5) of the Arbitration Act renders arbitrator appointment invalid.
In a significant ruling, the Delhi High Court has dismissed an appeal by Titagarh Rail Systems Limited (TRSL) challenging the setting aside of an arbitral award by a single judge, which was originally in favor of TRSL. The division bench, comprising Justices C. Hari Shankar and Om Prakash Shukla, upheld the decision that the appointment of an arbitrator, a serving employee of the Railway Board, contravened Section 12(5) of the Arbitration & Conciliation Act, 1996, due to the absence of an express written waiver.
The case stemmed from a contract between TRSL and the Railway Board for the supply of railway wagons, which included an arbitration clause. However, disputes arose when the Railway Board terminated the contract and forfeited TRSL's bank guarantee. TRSL sought arbitration but expressly stated it did not waive the provisions of Section 12(5), which disallows serving employees from being appointed as arbitrators without an express waiver.
Despite this, an arbitrator was appointed from a panel of Railway Board officers, leading to an arbitral award favoring TRSL. The Railway Board challenged this award, arguing the arbitrator's appointment was illegal under Section 12(5). The single judge agreed, setting aside the award. TRSL appealed, arguing procedural participation implied waiver of Section 12(5).
In its decision, the division bench emphasized that the Supreme Court's ruling in Bhadra International (India) (P) Ltd. v. Airport Authority of India requires a clear, express agreement in writing to waive Section 12(5), which was absent in this case. The court noted that procedural actions or conduct do not constitute a valid waiver, and merely following procedures applicable in waiver cases does not imply consent.
The court's ruling underscores the necessity for explicit agreements when waiving statutory ineligibilities, reinforcing the integrity of arbitration processes and the autonomy of parties involved. This decision serves as a reminder of the strict requirements for waiving arbitrator ineligibility, ensuring parties cannot inadvertently forfeit their rights through mere procedural actions.
Bottom Line:
Arbitration - Appointment of arbitrator in contravention of Section 12(5) of the Arbitration & Conciliation Act, 1996 - Waiver of ineligibility under Section 12(5) requires an "express agreement in writing" between the parties after the dispute arises - Procedural participation or conduct cannot constitute waiver.
Statutory provision(s): Arbitration & Conciliation Act, 1996 - Sections 12(5), 34, 37
