O.M.P. (T) (COMM.) Nos. 22/2017 & 23/2017. Case: HRD Corporation (Marcus Oil and Chemical Division) Vs Gail (India) Limited (Formerly Gas Authority of India Ltd.). High Court of Delhi (India)
| Case Number | O.M.P. (T) (COMM.) Nos. 22/2017 & 23/2017 |
| Counsel | For Appellant: Mr. Arvind K. Nigam, Senior Advocate with Mr. Shailendra Swarup, Ms. Bindu Saxena and Ms. Aparajita Swarup, Advs. and For Respondents: Mr. Abhisaar Bairagi, Adv. |
| Judges | Vibhu Bakhru, J. |
| Issue | Arbitration and Conciliation Act, 1996 - Sections 14, 15; Constitution of India - Articles 226, 227 |
| Judgement Date | April 24, 2017 |
| Court | High Court of Delhi (India) |
Judgment:
Vibhu Bakhru, J.
1. HRD Corporation (Marcus Oil and Chemical Division) (hereafter ''HRD''), a Corporation organised and existing under the laws of the State of Texas, USA, has filed the present petitions under Section 14 and 15 of the Arbitration and Conciliation Act, 1996 (hereafter ''the Act''), inter alia, seeking termination of the mandate of Justice Tejinder Singh Doabia (Retired), Justice K.K. Lahoti (Retired) as arbitrators comprising of arbitral tribunal of three members. According to HRD, circumstances exist which give rise to justifiable doubts as to the independence and impartiality of the said arbitrators. It is also claimed that the arbitrators are ineligible under Section 12(5) of the Act and this would warrant termination of the mandate of the said arbitrators and appointment of two other arbitrators in their place.
2. Briefly stated, the relevant facts necessary to address the controversy are as under:-
2.1 The respondent (hereafter ''GAIL'') issued a notice inviting tender for sale and supply of Wax (a waste by-product) generated at GAIL''s HDPE/LLDPE Plant at Petro Chemical Complex at Pata, Uttar Pradesh for a period of 20 years on an exclusive basis. HRD successfully tendered for the said contract and the parties entered into an agreement dated 01.04.1999 (hereafter ''the Agreement''). Certain disputes arose between the parties in connection with the Agreement. HRD claimed that GAIL had wrongfully withheld the supplies of Wax. Consequently, HRD invoked the arbitration clause, as included in the Agreement.
2.2 The disputes between the parties were referred to arbitration (being Arbitration Case No. 1001/2004-ICADR) (hereafter ''the first arbitration'') before the Arbitral Tribunal comprising of Justice Late A.B. Rohatgi (Retired), presiding arbitrator, Justice J.K. Mehra (Retired) and Justice N.N. Goswamy (Retired). The said tribunal made and published an award on 08.04.2006 (hereafter ''the 2006 award'') directing specific performance of the Agreement dated 01.04.1999. The 2006 award was not challenged and has become final.
2.3 After the 2006 award was rendered, certain disputes arose mainly with respect to the price to be charged for Wax for the period of 13.07.2007 to 12.07.2010. The said disputes were also referred to arbitration before an arbitral tribunal comprising of the same members as in the first arbitration: Justice N.N. Goswamy (Retired), Justice J.K. Mehra (Retired) and Justice A.B. Rohatgi (Retired) as the presiding arbitrator.
2.4 HRD claims that GAIL supplied Wax at the prices determined by the arbitral tribunal.
2.5 The disputes in relation to the period 13.07.2010 to 12.07.2013 were also referred to the same arbitral tribunal (being Arbitration Case No. 38 of 2010-ICADR). While the proceedings were pending, Justice N.N. Goswamy (Retired) expired. Thereafter, in a petition filed under Section 15 of the Act, the Supreme Court, by an order dated 23.03.2012, appointed Justice Tejinder Singh Doabia (Retired), a former Judge of the Jammu and Kashmir High Court, to fill the vacancy caused by the demise of Justice N.N. Goswamy (Retired).
2.6 Subsequent thereto, Justice A.B. Rohatgi (Retired) tendered his resignation on 17.02.2013 as the presiding arbitrator, on account of ill health. The vacancy so caused was filled on 28.02.2013 with Justice Doabia and Justice Mehra jointly nominating Justice S.S. Chadha (Retired) as the presiding arbitrator. These arbitral proceedings culminated into two separate awards dated 22.07.2015: one determining the price for Wax and the other determining the scope of supply of Wax under the Agreement.
2.7 HRD has filed a petition under Section 34 of the Act (OMP No. 525/2015) assailing the said award, which is pending before this Court.
2.8 In respect of the period commencing 13.07.2016 to 31.12.2019, GAIL claims that a price of ₹83,000/- per metric tonne of Wax was payable, on the basis as fixed in the 2006 award. This was disputed and HRD filed a petition under Section 9 of the Act, being OMP(I)(COMM) 389/2016), seeking interim directions. The said petition was disposed of by an order dated 03.10.2016 directing GAIL to offer all its production pertaining to the plant as specified in the award dated 22.07.2015 to HRD at the price of ₹60,000/- per metric tonne, subject to further orders that may be passed by the arbitral tribunal. This Court also directed the parties to nominate their respective arbitrators.
2.9 By a letter dated 10.10.2016, HRD nominated Justice K. Ramamoorthy (Retired) as its arbitrator. However, he subsequently withdrew from the case on account of personal reasons and communicated the same to ICADR by an email dated 14.12.2016. Accordingly, ICADR called upon HRD to nominate an arbitrator in place of Justice Ramamoorthy (Retired).
2.10 GAIL appointed Justice Doabia (Retired) as its nominee arbitrator by a letter dated 28.10.2016. In the meanwhile, HRD''s Advocate sent a letter dated 25.10.2016 requesting ICADR to secure compliance with Section 12 of the Act. ICADR in turn requested the arbitrators appointed by the parties to make a disclosure in the form as prescribed in the Sixth Schedule to the Act read with Rule 5(7) of the ICADR Arbitration Rules, 1996 together with the letter accepting their appointment.
2.11 Thereafter, HRD forwarded a copy of the disclosure received from Justice K. Ramamoorthy (Retired). It is HRD''s case that it did not receive any letter of disclosure from Justice Tejinder Singh Doabia (Retired), the arbitrator nominated by GAIL. On 16.11.2016, both the arbitrators appointed Justice K.K. Lahoti (Retired) as the presiding arbitrator. On 16.11.2016, ICADR informed the parties as to the constitution of the arbitral tribunal and that a preliminary hearing had been fixed on 24.11.2016.
2.12 On 23.11.2016, HRD filed an application under Section 12 and 13 of the Act read with the ICADR Arbitration Rules, 1996 praying that the mandate of Justice Tejinder Singh Doabia as an arbitrator, be terminated. Subsequently, on 24.11.2016 during the course of hearing of HRD''s application under Section 12 of the Act, a copy of the letter of disclosure dated 24.11.2016 furnished by Justice K.K. Lahoti (Retired), as also a copy of the letter of disclosure dated 31.10.2016 furnished by Justice Tejinder Singh Doabia (Retired) were handed over to HRD's counsel.
2.13 Thereafter, HRD filed another application under Section 12 of the Act praying for termination of the mandate of Justice K.K. Lahoti (Retired) as the presiding arbitrator. On 16.12.2016, Justice Mukul Mudgal (Retired) was nominated by HRD as its arbitrator in place of Justice Ramamoorthy.
3. The two applications filed by HRD under Section 12 - one seeking termination of the mandate of Justice Doabia and the other seeking termination of Justice Lahoti - were heard by the arbitral tribunal on 05.01.2017 and orders thereon were reserved. On 16.02.2017, the arbitral tribunal rejected HRD''s application dated 23.11.2016 seeking termination of the mandate of Justice Doabia (Retired) by majority of 2:1, with Justice Mukul Mudgal (Retired) dissenting. HRD''s application dated 26.11.2016 seeking termination of the mandate of Justice K.K. Lahoti (Retired), was unanimously dismissed by the arbitral tribunal. Each of the arbitrators entered separate orders in respect of HRD''s aforesaid applications.
4. HRD has moved the present petitions, being OMP(T)(Comm) 22/2017, seeking termination of the mandate of Justice Tejinder Singh Doabia (Retired) and OMP(T)(Comm) 23/2017 for seeking termination of the mandate of Justice K.K. Lahoti (Retired).
Submissions in support of termination of the mandate of Justice Tejinder Singh Doabia (Retired)
5. Mr Nigam, learned senior counsel appearing for HRD contended that there were justifiable grounds to give rise to doubts as to the independence and impartiality of the arbitrator. He referred to the Fifth Schedule to the Act and submitted that the grounds referred to at serial nos. 15 and 16 clearly applied in respect of the arbitrator and, therefore, by virtue of Section 12(1) of the Act, as amended by the Arbitration and Conciliation (Amendment) Act, 2015 (hereafter ''the Amendment Act''), it was clear that there were justifiable grounds to doubt the independence and impartiality of the arbitrator. Further, it was contended that the relationship of the arbitrator to the dispute rendered him ineligible for being appointed as an arbitrator. He also referred to grounds mentioned at serial nos. 22 and 24 of the Fifth Schedule and submitted that Justice Doabia had been appointed as an arbitrator on more than one occasion by GAIL and, therefore, HRD was justified in doubting his impartiality.
6. Next, Mr Nigam referred to the disclosure made by Justice Doabia and pointed out that the said disclosure was handed over to the learned counsel for HRD at a hearing held on 24.11.2016. He contended that in terms of Section 12(1) of the Act, the arbitrator was required to make a disclosure in the first instance when he was approached for his appointment and his failure to do so, itself gives rise to justifiable doubts as to his impartiality and independence. Lastly, he referred to the disclosure made by Justice Doabia and pointed out that the said disclosure was palpably erroneous inasmuch as Justice Doabia had disclosed that he was nominated as an arbitrator in the earlier round to fill the vacancy caused by resignation of Justice Rohatgi (Retired). He submitted that this was factually incorrect as Justice Doabia was appointed to fill the vacancy caused by the demise of Justice N. N. Goswamy (Retired). Further, according to Mr Nigam, Justice Doabia''s statement that he was not associated with GAIL in any manner as detailed in Section 12(1)(b) read with the Fifth and the Seventh Schedule to the Act, is palpably erroneous. He earnestly contended that erroneous statements in the disclosure made at a belated stage, were sufficient to...
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