Case Note & Summary
The dispute arose from an agreement dated 28.2.2005, where the appellant appointed the respondent as a dealer for retail sale of petroleum products, with a clause for arbitration in case of disputes. Following the termination of the dealership on 6.8.2005, the respondent filed a suit for declaring the termination illegal. The appellant sought to refer the matter to arbitration, which was initially allowed by the Civil Judge. However, the respondent later filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, requesting the appointment of an independent arbitrator, arguing that the named arbitrator, an employee of the appellant, could not act impartially. The Chief Justice of the Uttaranchal High Court appointed a retired Judge as the sole arbitrator, leading to the present appeal. The Supreme Court examined whether the Chief Justice was justified in appointing an independent arbitrator and whether the respondent had taken necessary steps for arbitration. The court concluded that the respondent failed to act according to the agreed procedure and that the mere employment of the arbitrator by one party does not inherently imply bias. The court reiterated that parties must adhere to the terms of the arbitration agreement unless there are valid reasons to deviate from it. Ultimately, the court held that the Chief Justice's assumption of bias was unjustified and that the appointment of an employee as an arbitrator is permissible under the Act, provided there is no evidence of bias (Paras 1-24).
Headnote
A) Arbitration Law - Appointment of Arbitrators - Validity of Employee-Arbitrators - Arbitration and Conciliation Act, 1996, Section 11 - The court held that the mere fact that an arbitrator is an employee of one of the parties does not automatically disqualify him from acting as an arbitrator, provided he is not directly involved in the subject matter of the dispute. The court emphasized that parties cannot later claim bias against an arbitrator they previously agreed upon in the contract (Paras 16-16).
Issue of Consideration
Whether the Chief Justice was justified in appointing an independent arbitrator instead of the one named in the arbitration agreement.
Final Decision
The Supreme Court held that the Chief Justice was not justified in assuming bias against the employee-arbitrator and that the respondent failed to act in accordance with the agreed arbitration procedure. The court emphasized that the mere employment of an arbitrator by one party does not disqualify him from serving as an arbitrator unless there is evidence of bias.
Law Points
- Arbitration agreements
- appointment of arbitrators
- independence and impartiality
- Arbitration and Conciliation Act
- 1996
- Section 11
