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04 January 2022 | Ellora Paper Mills Limited v. State of Madhya Pradesh | Civil Appeal No. 7697 of 2022 | Supreme Court of India | MR Shah J | 2022 SCC OnLine SC 8
Applying the principle of independence and impartiality, the Supreme Court has terminated the mandate of a five-member committee appointed in 2000 to arbitrate the dispute. All of them were respondents’ employees. Back then, the tribunal had rejected Ellora’s jurisdictional challenge (grounds of challenge not discussed), and Ellora filed a writ petition against the rejection. This petition was rejected in 2017 with liberty. By this time, the appointees had retired. Ellora applied to the High Court under Section 14 ACA read with Sections 11 and 15 ACA to substitute the (dysfunctional) tribunal with independent members. It argued that given the 2015 Amendments and the precedent, a tribunal of respondent’s employees was ineligible.
The High Court did not accept Ellora’s contentions. It said, among other things, that: (i) the 2015 Amendments were not retrospective; (ii) the tribunal was appointed and (the agreement) acted upon. Furthermore, because the agreement referred to the tribunal members by designation and not names, individuals' retirement would not matter. See the High Court’s decision here.
Reversing, the Supreme Court noted Section 12 (5) ACA under which the grounds of ineligibility are attracted, notwithstanding any prior agreement to the contrary. It ruled that the tribunal “comprising of officers of the respondent – State are all ineligible to become and/or to continue as arbitrators in view of the mandate of sub – section (5) of Section 12 read with Seventh Schedule.” It declared that the tribunal “has lost its mandate by the operation of law.” It found the High Court’s decision was contrary to TRF (2017) 8 SCC 377, Bharat Broadband (2019) 5 SCC 755 and ‘Jaipur Dairy’ (Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited) 2021 SCC OnLine SC 730. It highlighted that in Jaipur Dairy also, the court had “negatived the submission” of waiver resulting from participation in arbitration proceedings.
The court said it was “not considering whether those persons could have been continued” post-retirement. In its discussion, the court also noted that after the tribunal’s constitution, “no further steps whatsoever have been taken in the arbitration proceeding and therefore technically it cannot be said that the arbitration proceeding …commenced.”
Read the decision here.
Categories: 2015 Amendments | Applicability of 2015 Amendments | Appointment of Arbitrators | Bharat Broadband | De Jure Ineligibility | Express Agreement in Writing | Failure or Impossibility to Act | Fifth Schedule | Grounds for Challenge | Independence and Impartiality of Arbitrator | Party Appointed Arbitrator | Perkins | Section 11 ACA | Section 12 (5) ACA | Section 12 ACA | Section 14 ACA | Section 15 ACA | Seventh Schedule | Termination of Mandate and Substitution of Arbitrator | TRF | Unilateral Appointment of Arbitrator | Voestalpine