High Court of KeralaSingle JudgeAppointment of an independent arbitrator subjec...

John P. Vettichira & Thresiamma Vettichira v M/S DLF Southern Towns Private Limited (AR No.75 of 2017, High Court of Kerala, Ernakulam)

Case / Petition Number:AR.No.75 of 2017

Case Details & Bench

Court
High Court of Kerala
Hon'ble Judges
  • Shaji P. Chaly
Judgment Date
2017-10-13
Court Decision / Holding
The court directed that a disclosure statement under section 11(8) of the Act be called from the proposed arbitrator (Sri Anil Xavier) and placed before the court for immediate action. The court also indicated the appointment of the arbitrator in due course, following receipt of the disclosure, effectively enabling an independent arbitrator to be appointed in this dispute.
Final Disposition
Appointment of an independent arbitrator subject to disclosure under section 11(8) of the Act, 1996

Parties to the Case

Appellants / Petitioners

  • John P Vettichira
  • Thresiamma Vettichira

Respondents

  • M/S DLF Southern Towns Private Limited

Legal Representation & Advocates

Counsels for Petitioners

  • • Sri Philip T. Varghese
  • • Sri Thomas T. Varghese
  • • Sri Achu Subha Abraham

Counsels for Respondents

  • • Sri M. Gopikrishnan Nambiar
  • • Sri P. Gopinath
  • • Sri K. John Mathai
  • • Sri Joson Manaval
  • • Sri Kuryan Thomas
  • • Sri Paulose C. Abraham

Case Synopsis & Summary

This is an AR 11(6) petition under the Arbitration and Conciliation Act, 1996, relating to an Annexure A1 agreement for constructing an apartment building between the petitioners (John P. Vettichira and Thresiamma Vettichira) and the respondent (M/S DLF Southern Towns Private Limited). Clause 49 of Annexure A1 mandates arbitration under the Act, with a sole arbitrator appointed by the respondent’s Managing Director; the award to be final and binding, and the allottee waives objection to the appointed arbitrator. After a dispute arose and a notice under Annexure A5 was issued, the respondent did not reply and the petition was filed seeking appointment of an independent and impartial arbitrator. The respondent’s counter-affidavit disputed the claims. A central issue is whether the arbitrator can be an employee or connected with the respondent, given the Seventh and Fifth Schedule restrictions, and whether the court should appoint an independent arbitrator given the serious ongoing dispute. The court notes HRD Corporation (Marcus Oil and Chemical Division) v. Gail (India) Ltd (SC) to interpret the schedules and ultimately directs that a disclosure statement under section 11(8) be sought from the proposed arbitrator (Sri Anil Xavier) and the matter be placed before the court for further action, effectively paving the way for appointment of an arbitrator.

Provisions of Law Cited

Section 11(6) of the Arbitration and Conciliation Act, 1996Section 11(8) of the Arbitration and Conciliation Act, 1996Arbitration & Conciliation Act, 1996 (Fifth & Seventh Schedules)Clause 49 of Annexure A1 (Dispute Resolution by Arbitration)Seventh ScheduleFifth Schedule

Legal Doctrines & Maxims

  • Independence and impartiality of arbitrator
  • Prior involvement in the dispute does not automatically disqualify an arbitrator (interpretation of Fifth/Seventh Schedule)
  • Disclosure under section 11(8) of the Act

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners rely on Clause 49 of Annexure A1, which provides that any disputes under the agreement are to be referred to arbitration under the Act, with a sole arbitrator to be appointed by the Managing Director of the respondent and the award to be final and binding. They assert that, given the serious ongoing dispute, there is a need for an independent and impartial arbitrator, not tainted by links to the respondent, and they sought a panel of independent arbitrators under Annexure A5. They rely on the Supreme Court’s HRD Corporation v. Gail India Ltd decision to argue that prior involvement by an arbitrator with the same establishment does not automatically render them ineligible under the Fifth/Schedule provisions. The petitioners request the court to issue a disclosure under section 11(8) and to proceed with appointing an independent arbitrator to ensure fairness and impartiality in the resolution of the dispute.

Contentions of Respondents

The respondent contends that the arbitrator can be an employee of the respondent and that there is no automatic disqualification under the relevant schedules. They argued that there are numerous proceedings involving the same advocate and that the appointment by the Managing Director should not be disturbed, invoking the terms of the arbitration clause and the need for an efficient process. They further challenge the appointment on grounds of possible conflicts and prior engagements but concede that the Schedule VII parameters are not easily invoked to disqualify the proposed arbitrator. Ultimately, they failed to demonstrate a strict legal disqualification under Schedule VII, and the court is urged to consider the respondent’s position that independence could be preserved without precluding the current appointment.

Cited Precedents (1)

Case NameCitationTreatmentExplanation
HRD Corporation (Marcus Oil and Chemical Division) v. Gail (India) Limited2017(5) Arb. LR 1 (SC)PositiveThe Supreme Court held that prior involvement of an arbitrator in related matters does not automatically trigger disqualification under the Fifth and Seventh Schedules; this guided the Kerala High Court to consider appointing an arbitrator despite the respondent’s background and to require disclosure under section 11(8).

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** **FRIDAY, THE 13TH DAY OF OCTOBER 2017/21ST ASWINA, 1939** **AR.No. 75 of 2017 () ---------------------** ## **PETITIONER(S):** ## **-------------** ## **1. JOHN P VETTICHIRA,** **S/O.VARKEY PAILEE,22,POPULAR STREET,ELMSFORD, NEW YORK-10523,USA.** ## **2. THRESIAMMA VETTICHIRA,** **W/O.JOHN P.VETTICHIRA,22,POPULAR STREET,ELMSFORD, NEW YORK 10523,USA.** **BY ADVS.SRI.PHILIP T.VARGHESE SRI.THOMAS T.VARGHESE SMT.ACHU SUBHA ABRAHAM** **RESPONDENT:** **-----------** **M/S.DLF SOUTHERN TOWNS PRIVATE LIMITED, REPRESENTED BY ITS MANAGING DIRECTOR, OPPOSITE DOORDARSHAN KENDRA, SEAPORT AIRPORT ROAD,KAKKANAD.P.O,ERNAKULAM-682030.** **BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR** **SRI.P.GOPINATH SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM** **THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 13-10-2017, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **K.V.** ## **AR.No. 75 of 2017 ()** ## **---------------------** ## **APPENDIX** ## **PETITIONERS ANNEXURES:** **----------------------** - **A1: TRUE COPY OF THE AGREEMENT (WITHOUT ANNEXURES) EXECUTED BY THE APPLICANTS AND THE RESPONDENT DATED 12.5.2011.** - **A2: TRUE COPY OF THE SUPPLEMENTARY AGREEMENT EXECUTED BY THE APPLICANTS AND THE RESPONDENT DATED 12.5.2011.** - **A3: TRUE COPY OF THE E-MAIL ISSUED BY THE RESPONDENT DATED 7.11.2015.** - **A4: TRUE COPY OF THE FINAL STATEMENT OF ACCOUNTS ISSUED BY THE RESPONDENT DATED 5.11.2015.** - **A5: TRUE COPY OF THE LETTER ISSUED BY THE APPLICANTS TO THE RESPONDENT DATED 17.12.2015.** ## **RESPONDENTS ANNEXURES: NIL** **---------------------** - **K.V. P.S.TO JUDGE** ## **C.R. SHAJI P. CHALY, J.** ----------------------------------------------- ## **A.R. No.75 of 2017** ## **----------------------------------------------Dated this the 13[th] day of October, 2017** ## **O R D E R** This application is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996. Petitioners and the respondent have entered into Annexure A1 agreement in respect of construction of an apartment building. It is agreed by and between the parties as per clause 49 of Annexure A1 that, in the event of any dispute arising by and between the parties, same shall be resolved by resorting to the provisions of the Arbitration and Conciliation Act, 1996 and any modification made thereto, which read thus: ## “49. **Dispute Resolution by Arbitrations** All or any disputes arising out of or relating to or concerning or touching this Agreement including the interpretation and validity of the terms thereof and the respective rights and obligations of the parties shall be referred to arbitration by any party. The arbitration shall be governed by the Arbitration & Conciliation Act, 1996 or any statutory amendments/modifications thereof for the time being in force. The arbitration proceedings shall be held at an appropriate A.R No.75 of 2017 2 location in Ernakulam by a Sole arbitrator who shall be appointed by the Managing Director of the Company and whose award shall be final and binding upon the parties. The Allottee hereby confirms that he/she/it shall have no objection to this appointment even if the person so appointed, as the sole Arbitrator, is an employee or advocate of the Company or is otherwise connected to the Company and the Allottee confirms that notwithstanding such relationship/connection, the Allottee shall have have no doubts as to the independence or impartiality of the said sole Arbitrator. The Courts at Ernakulam alone and the Kerala High Court at Ernakulam shall have the jurisdiction. 2. Dispute arose by and between the parties and thereupon, Annexure A5 notice is issued by the petitioners seeking to resolve the dispute by appointing an independent and impartial arbitrator to resolve the dispute. However, no reply was issued by the respondent, which persuaded the petitioner to file this request. 3. A detailed counter affidavit is filed by the respondent disputing the claims and demands raised by the petitioner. A.R No.75 of 2017 3 However, from the tenor and terms of the contentions, it is categoric and clear, there is a serious dispute existing by and between the parties and it is to be resolved by resorting to the mechanism provided under Annexure A1 agreement. 4. By virtue of the introduction of the seventh schedule on and w.e.f. 23.10.2015, the arbitrator appointed as per clause 49 to resolve the dispute being an employee of the respondent is unable to act so. It was thereupon that, petitioners requested the respondent as per Annexure A5 to submit a panel of independent and impartial arbitrators to resolve the dispute. That being the situation and since there is a serious dispute pending by and between the parties, an independent arbitrator is to be appointed to resolve the dispute. 5. In that view of the matter, Sri. Anil Xavier, Advocate, Manimandir, 36/2412, Kaloor, Kochi - 682017 is proposed to be appointed as Arbitrator to resolve the issue. To the said appointment, learned counsel for respondent raised a contention that already 20 arbitrations are being heard by the very same Advocate against the respondent establishment and therefore, the appointment is hit by schedules 5 and 7 of Act, 1996. A.R No.75 of 2017 4 However, I have come across the decision of the Apex Court in **HRD Corporation (Marcus Oil and Chemical Division) v. Gail (India) Limited** [2017(5) Arb. LR 1 (SC)] which held that, merely because an arbitrator is considering other matters of the same establishment, that will not be hit by the parameters provided under schedules 5 & 7. Paragraph 24 of the said judgment is relevant, which read thus: “ “The arbitrator had a prior involvement in the dispute.” 24. On reading the aforesaid guideline and reading the heading which appears with Item 16, namely “Relationship of the arbitrator to the dispute”, it is obvious that the arbitrator has to have a previous involvement in the very dispute contained in the present arbitration. Admittedly, Justice Doabia has no such involvement. Further, Item 16 must be read along with Items 22 and 24 of the Fifth Schedule. The disqualification contained in Items 22 and 24 is not absolute, as an arbitrator who has, within the past three years, been appointed as arbitrator on two or more occasions by one of the parties or an affiliate, may yet not be disqualified on his showing that he A.R No.75 of 2017 5 was independent and impartial on the earlier two occasions. Also, if he currently serves or has served within the past three years as arbitrator in another arbitration on a related issue, he may be disqualified under Item 24, which must then be contrasted with Item 16. Item 16 cannot be read as including previous involvements in another arbitration on a related issue involving one of the parties otherwise Item 24 will be rendered largely ineffective. It must not be forgotten that Item 16 also appears in the Fifth Schedule and has, therefore, to be harmoniously read with Item 24. It has also been argued by learned counsel appearing on behalf of the respondent that the expression “the arbitrator” in Item 16 cannot possibly mean “the arbitrator” acting as an arbitrator, but must mean that the proposed arbitrator is a person who has had previous involvement in the case in some other avatar. According to us, this is a sound argument as “the arbitrator” refers to the proposed arbitrator. This becomes clear, when contrasted with Items 22 and 24, where the arbitrator must have served “as arbitrator” before he can be disqualified. Obviously, A.R No.75 of 2017 6 Item 16 refers to previous involvement in an advisory or other capacity in the very dispute, but not as arbitrator. It was also faintly argued that Justice Doabia was ineligible under Items I and 15. Appointment as an arbitrator is not a “business relationship” with the respondent under Item 1. Nor is the delivery of an award providing an expert “Opinion” i.e. advice to a party covered by Item 15.” 6. Respondent also could not point out any disqualification to the arbitrator based on the parameters stipulated under schedule VII of the Act. Therefore, in my considered opinion, the said contention cannot stand the test of law. Registry shall call for a disclosure statement as provided under section 11(8) of the Act, 1996 from the arbitrator so proposed to be appointed and place the matter before this court immediately on receipt of the same. Sd/- **SHAJI P. CHALY JUDGE** smv 13.10.2017