India's infrastructure sector is experiencing unprecedented growth, driven by the need for modernized urban spaces, enhanced connectivity, and robust real estate developments. Government initiatives such as the Smart Cit

CS Professional · Arbitration, Mediation and Conciliation · PYQS · December 2024
India's infrastructure sector is experiencing unprecedented growth, driven by the need for modernized urban spaces, enhanced connectivity, and robust real estate developments. Government initiatives such as the Smart Cities Mission, Housing for all, and major transportation projects require expertise in project management, adherence to regulatory standards, and efficient execution of construction activities. NAL Construction Ltd ('NAL'), with its extensive experience and established presence in the sector, brings invaluable expertise in managing and overseeing large scale projects. Its status as a large corporation ensures adherence to stringent regulatory frameworks and quality standards. On the other hand, Excel Projects Private Limited ('Excel'), known for its innovative construction techniques and swift project execution, brings the technical prowess and operational efficiency needed to meet ambitious project timelines and budgets. Both the companies, collaborated for a development and construction of a land owned by NAL in outskirts of Pune. As per the standard practice by NAL, a Letter of Intent (L.O.I.) was executed by the parties specifying various aspects including a clause that disputes, if any should be resolved through civil courts in Mumbai. Later, a contract was also executed wherein a general reference was made to a set of terms and conditions, which included an arbitration clause as well. The project went on smoothly for more than a year. Subsequently, a dispute arose around a contractual obligation. NAL claimed that Excel failed to adhere to the agreed-upon timelines and quality standards, resulting in substantial project delays and cost overruns. Conversely, Excel argued that the delays were due to unforeseen circumstances and inadequate support from NAL, which hindered their ability to complete the project as planned. Both companies presented extensive documentation and evidence to support their claims, leading to a complex legal battle. From a financial perspective, the dispute had significant implications. NAL sought compensation for the alleged breaches, including damages for the delays and additional costs incurred. Excel on the other hand, is counter-claiming for unpaid dues and additional expenses they incurred due to project scope changes and delays allegedly caused by NAL. The financial stakes are high, and the outcome of this case could set a precedent for future contractual disputes in the industry. NAL approached Mega Law and Co, a law firm specializing in arbitration matters for professional support to resolve the issues with Excel. Detailed discussions were held with the Senior partners of the law firm about the key aspects of arbitration agreement and the arbitration proceedings. The law firm suggested that they appoint Richard Peter, a London based businessman as an arbitrator. Meanwhile, Excel was not in favour of appointing a foreign professional as an arbitrator and was evaluating to communicate the same to NAL. Based on a legal advice, it filed a case in Civil Court, Mumbai against NAL breach of contract. With reference to the above facts, Excel wanted to challenge the appointment of a foreign national as an arbitrator. Prepare a brief note explaining the grounds for challenging the appointment of an arbitrator.

Answer & Explanation:

A prospective arbitrator is required to provide a written disclosure of certain circumstances that could raise questions about his independence or impartiality under the 2015 amendment to Section 12(1) of the Arbitration and Conciliation Act, 1996 (the Act) and seventh schedule thereto. According to Section 12(1)(a) of the Act, the arbitrator must reveal any direct, indirect, previous, or current relationships with the parties as well as any financial, business, professional, or other interests in the dispute's subject matter that might influence his objectivity. Similar to this, Section 12(1)(b) of the Act refers to any situations that would make it difficult for an arbitrator to dedicate enough time to complete the arbitration within a year. In the sub-section 12(1)(a), there are two explanations. The Fifth Schedule should be consulted in order to determine if the conditions outlined in Section 12(1)(a) of the Act are present, according to the first. According to the second, such a disclosure must follow the format specified in the sixth schedule. The fifth schedule deals with following types of relations which might give rise to reasonable doubts: Arbitrator's relationship with parties or counsel Arbitrator's relationship to the dispute Arbitrator's interest in the dispute Arbitrator's past involvement with the dispute Relationship of co-arbitrator's Relationship of the arbitrator with parties and others in the dispute Other Circumstances. The arbitrator may be contested if the factual situation of a case fits under any of the aforementioned categories. For optimal objectivity, these broad terms cover a variety of situations. However, this schedule's 'Explanation 3' notes that if it's a specialised arbitration involving a narrow field and it's customary to select the same arbitrators from a small pool of specialists, then this should be taken into account while implementing these criteria. None of these titles make the appointment of an arbitrator immediately prohibited. Sub-section 1 is reinforced by Section 12(2) of the Act, which mandates that an arbitrator should disclose any conflict of interest as soon as practicable, unless a written disclosure has already been made. Other Grounds Section 12(3) provides an indication of the actual grounds for challenging. An arbitrator may be challenged if his independence and impartiality are questioned as a result of the events described in Section 12(1) of the Act, or if he doesn't meet the agreed-upon requirements. A party to the dispute who names the arbitrator may object for grounds of which he learns only after the appointment. Any prospective arbitrator who fits into any of the categories listed in the Act's Seventh Schedule is automatically disqualified, according to section 12(5) of the Act, which was added by the 2015 amendment. The seventh schedule of the Act enumerates the relationship between the Arbitrator, the parties and the disputes that results ineligibility to act as an Arbitrator. The majority of the headings in the Fifth Schedule are also covered by the Seventh Schedule. Although not as comprehensive as the Fifth Schedule, the list just serves as a barrier to appointment as an arbitrator, as was already established. The Fifth Schedule inter alia includes: Arbitrator's relationship with the parties or counsel Relation of Arbitrator to the dispute Arbitrator's interest in the dispute.

Topics: Arbitrator Challenge

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic