Appointment of officials of the government as arbitrator where the government itself is a party is hit by Section 12(5) read with Seventh Schedule of the amended Arbitration Act

The Delhi High Court noted that the relationship of Secretary, Ministry of Defence, GOI with the Union of India i.e. respondent in the present matter was hit by Section 12(5) read with Seventh Schedule of the Arbitration and Conciliation Act as amended in 2015.

The judgment was passed by the Delhi High Court in the matter of Hughes Communication vs. Union of India, ARB.P. 532/2018, decided on 23.8.2018.

Challenge

The present matter was a petition under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator by the Court.

It was contended by the counsel for the petitioner that the arbitration agreement between the parties stated that the Secretary, Ministry of Defence, Government of India was to act as the Sole Arbitrator or his nominee. It was further contended that in view of the judgment of the Supreme Court in TRF Limited vs. Energo Engineering Projects Limited, (2017) 8 SCC 377, the Secretary, Ministry of Defence, Government of India or his nominee cannot be appointed as an arbitrator.

Held

Finding merit in the contention of the Petitioner, the Delhi High Court held that the Secretary, Ministry of Defence, Government of India or his nominee cannot be appointed as an arbitrator where one of the party was the Union of India. This is so in view of the relationship of the Secretary, Ministry of Defence, Government of India with the respondent which is clearly hit by the provisions of Section 12(5) read with the Seventh Schedule of the 1996 Act as amended by the 2015 amendment.