N.S. Associates Pvt. Ltd. v. The Life Insurance Corporation of India

44. Clause 23 is the arbitration clause and it is distinct from Clause 19. The arbitration contract is contained in Clause 23 and it is a complete contract between the parties relating to arbitration. When Clause 23 is read, it clearly establishes that the parties agreed that the venue of the entire arbitration proceedings would be Delhi, India. Even in case of a disagreement between the two selected arbitrators, the appointment of the third arbitrator is to be done by the Arbitration Council of India, New Delhi, Clause 23.1.5, which is under the main Clause 23 pertaining to arbitration stipulates that the provisions of the clause shall survive the termination of the agreement. This clearly shows that Clause 23 pertaining to arbitration is distinct from the collaboration agreement and is to survive even the termination of the agreement.”

8. As such, no merit is found in the objection raised by learned counsel for the respondent as regards territorial jurisdiction of this Court to entertain the present petition.

9. The second aspect that has been urged by learned counsel for the respondent is that the entire arbitral proceedings and the resultant award are non est inasmuch as, the present case is the case of unilateral appointment of arbitrator which is impermissible in terms of the judgments of the Supreme Court in ‘Perkins Eastman Architects DPC & Ors. v. HSCC Ltd.’, (2020) 20 SCC 760, ‘TRF Ltd. v. Energo Engineering Projects Ltd.’, 2017 8 SCC 377, and ‘Bharat Broadband Network Limited v. United Telecoms Limited’, (2019) 5 SCC 755, and the judgments of this Court in ‘Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat’, 2023 SSC OnLine Del 3148 and Govind Singh (supra).

10. There can be no cavil with the proposition that unilateral appointment of arbitrator renders the entire arbitral proceedings non est in view of the inherent lack of jurisdiction and de jure inability of a unilaterally appointed arbitrator. This position has been expressly noticed by this Court in catena of judgments.

11. In Kotak Mahindra (Supra), the Division Bench of this Court has observed as under –

12. In the case of ‘Naveen Kandhari and Another v. Jai Mahal Hotels Pvt. Ltd.’ 2018 SCC OnLine Del 9180, a Coordinate Bench of this Court has observed as under:-

13. In ‘M/s Upper India Trading Co. Pvt. Ltd v. M/s Hero Fincorp Ltd’ 2024:DHC:1721, this Court observed as under:-

14. In Bharat Broadband (supra), the Supreme Court dealt with a situation where invalidity of the appointment of the arbitrator and the arbitral proceedings were pleaded by the party which appointed the arbitrator. The Supreme Court after taking note of the judgments in HRD Corp. V/s. GAIL (India) Ltd, (2018) 12 SCC 471 and TRF Ltd. (supra) noticed that the only way the de jure inability can be overcome is if the parties, subsequent to the disputes having arisen between them, waive the applicability of Section 12(5) of the A&C Act by an express agreement in writing. It was observed in that case as under:

parties may, subsequent to disputes having arisen between them, waive the applicability of Section 12(5) by an express agreement in writing. What is clear, therefore, is that where, under any agreement between the parties, a person falls within any of the categories set out in the Seventh Schedule, he is, as a matter of law, ineligible to be appointed as an arbitrator. The only way in which this ineligibility can be removed, again, in law, is that parties may after disputes have arisen between them, waive the applicability of this sub-section by an "express agreement in writing". Obviously, the "express agreement in writing" has reference to a person who is interdicted by the Seventh Schedule, but who is stated by parties (after the disputes have arisen between them) to be a person in whom they have faith notwithstanding the fact that such person is interdicted by the Seventh Schedule.”

15. Learned counsel for the petitioner contends that in the present case, there was an agreement in writing between the parties whereby the applicability of Section 12(5) of the A&C Act was waived. It is submitted that the same is implicit from a letter dated 04.12.2019 addressed by the petitioner/claimant to the learned Arbitrator after his appointment. The said letter reads as under: - “This is to felicitate you profusely on your appointment as arbitrator in the matter of disputes between M/s N S Associates Pvt. Ltd. (NSAPL) and LIC of India vide letter No. 436 dated 14.11.2019 from LIC of India. As efforts have been underway since May June 2018 for settlement of disputes you are requested to set the ball of arbitration in to motion at your earliest convenience.”

16. Further, it is pointed out that in the proceedings dated 24.12.2019 before the learned Arbitrator it was expressly noticed by the Arbitrator that ‘appointment of A.T. has been made by the ED, LIC, Mumbai & no party had any objection to this’.

17. I am unable to agree that the aforesaid bring about an ‘express agreement’ between the parties, as required for the purpose of waiving applicability of Clause 12(5) of the A&C Act. In Bharat Broadband (supra) the Supreme Court has clarified that an express agreement in writing refers to an agreement by which both the parties affirmed that despite full knowledge of the factum of ineligibility of the Arbitrator, they have full faith and confidence in the said arbitrator to continue to act as such.

18. The Supreme Court noticed that the proviso to Section 12(5) was in stark contrast with Section 4 of the A&C Act; Section 4 deals with cases of deemed waiver by conduct, whereas the proviso to Section 12(5) deals with waiver only by express agreement in writing by the parties made subsequent to the disputes having arisen between them.

19. In Bharat Broadband (supra) the Supreme Court expressly laid down that an express agreement in writing is quite distinct from an agreement which is to be inferred by the conduct. The relevant observations of the Supreme Court are as under:

typically arise under Section 14 may be as to whether such person falls within any of the categories mentioned in the Seventh Schedule, or whether there is a waiver as provided in the proviso to Section 12(5) of the Act.

20. This then brings us to the applicability of the proviso to Section 12(5) on the facts of this case. Unlike Section 4 of the Act which deals with deemed waiver of the right to object by conduct, the proviso to Section 12(5) will only apply if subsequent to disputes having arisen between the parties, the parties waive the applicability of sub-section (5) of Section 12 by an express agreement in writing. For this reason, the argument based on the analogy of Section 7 of the Act must also be rejected. Section 7 deals with arbitration agreements that must be in writing, and then explains that such agreements may be contained in documents which provide a record of such agreements. As a matter of law, it is important to note that the proviso to Section 12(5) must be contrasted with Section 4 of the Act. Section 4 deals with eases of deemed waiver by conduct; whereas the proviso to Section 12(5) deals with waiver by express agreement in writing between the parties only if made subsequent to disputes having arisen between them.

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appointment only became clear after the declaration of the law by the Supreme Court in TRF Ltd. which, as we have seen hereinabove, was only on 3-7-2017. After this date, far from there being an express agreement between the parties as to the validity of Shri Khan's appointment, the appellant filed an application on 7-10-2017 before the sole arbitrator, bringing the arbitrator's attention to the judgment in TRF Ltd. and asking him to declare that he has become de jure incapable of acting as an arbitrator. Equally, the fact that a statement of claim may have been filed before- the arbitrator, would not mean that there is an express agreement in words which would make it clear that both parties wish Shri Khan to continue as arbitrator despite being ineligible to act as such. This being the case, the impugned judgment i is not correct when it applies Section 4, Section 7, Section 12(4). Section 13(2) and Section 16(2) of the Act to the facts of the present case. and goes on to state that the appellant cannot be allowed to raise the issue of eligibility of an arbitrator, having itself appointed the arbitrator.

20. In the present case, the letter dated 04.12.2019 and the proceedings dated 24.12.2019 clearly do not qualify as an ‘express agreement in writing’. The petitioner seeks to infer the existence of an agreement waiving Section 12(5) of the A&C Act, based on what is stated in letter dated 04.12.2019 and recorded in the proceedings dated 24.12.2019. This is clearly impermissible inasmuch as the statutory requirement for overcoming de jure inability is “an express agreement in writing” and not an agreement to be inferred from the conduct of the parties. The judgment under appeal is also incorrect in stating that there is an express waiver in writing from the fact that an appointment letter has been issued by the appellant, and a statement of claim has been filed by the respondent before the arbitrator. The moment the appellant came to know that Shri Khan's appointment itself would be invalid, it filed an application before the sole arbitrator for termination of his mandate.”

21. For the aforesaid reason, the impugned award is clearly unsustainable. Consequently, the prayer (a) of the petitioner is allowed; the impugned award is set aside in terms of the said prayer.

22. The present petition, alongwith pending applications, stand disposed of in the above terms.

SACHIN DATTA, J OCTOBER 29, 2024/at,sv