Case Note & Summary
The petitioner, Solutions Advertising, entered into an agreement with the Thane Municipal Corporation on 19 September 2008 to construct 298 bus shelters, maintain 172 bus shelters, and supply 9 transport buses. In consideration, the petitioner was permitted to display advertisements. The contract was terminated on 25 October 2010. The petitioner filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before the Principal District Judge, Thane, who on 21 December 2010 restrained the Corporation from preventing the petitioner from putting advertisements on 470 bus stops until disputes were referred to arbitration under clause 85 of the agreement. Clause 85 provided for reference of disputes to the sole arbitration of the Commissioner of the Thane Municipal Corporation. The Transport Undertaking invoked the arbitration clause on 24 December 2010. The petitioner, by letter dated 13 January 2011, objected to the appointment of the Commissioner on the ground that he was a party to the agreement. The petitioner then filed this petition under Section 11(6) of the Act for appointment of an arbitrator. The court considered the objection that the Commissioner, being a party to the agreement, could not act as an impartial arbitrator. The court held that the petitioner had justifiable doubts about the impartiality of the Commissioner and that the Commissioner, being a party to the agreement, could not act as arbitrator. The court allowed the petition and appointed Mr. Justice S.S. Parkar, a former Judge of the Bombay High Court, as the sole arbitrator to adjudicate the disputes between the parties.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - Justifiable Doubts as to Impartiality - Where the arbitration clause names the Commissioner of the Municipal Corporation as the sole arbitrator, but the Commissioner is a party to the agreement, the petitioner has justifiable doubts about his impartiality. The court held that the named arbitrator cannot act as an arbitrator as he is a party to the contract, and appointed an independent arbitrator. (Paras 1-3) B) Arbitration Law - Challenge to Arbitrator - Section 12(3) of the Arbitration and Conciliation Act, 1996 - Grounds of Challenge - A person who is a party to the agreement cannot be appointed as an arbitrator as it would violate the principle of impartiality. The court held that the Commissioner, being a signatory to the agreement, is disqualified from acting as arbitrator. (Para 3)
Issue of Consideration
Whether the Commissioner of Thane Municipal Corporation, being a party to the agreement, can be appointed as the sole arbitrator under the arbitration clause, and if not, whether the court should appoint an independent arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Final Decision
The court allowed the petition and appointed Mr. Justice S.S. Parkar, a former Judge of the Bombay High Court, as the sole arbitrator to adjudicate the disputes between the parties. The court held that the Commissioner, being a party to the agreement, could not act as an impartial arbitrator.
Law Points
- Section 11(6) of the Arbitration and Conciliation Act
- 1996
- Appointment of arbitrator
- Justifiable doubts as to impartiality
- Named arbitrator being party to contract
- Section 12(3) of the Arbitration and Conciliation Act
