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Haryana Space Application Centre (HARSAC) & Anr. v. M/s Pan India Consultants Pvt. Ltd.

Civil Appeal · 2021 INSC 33Decided 20 Jan 2021
Civil Appeal No. 131 of 2021
Justice L. Nageswara Rao · Justice Indu Malhotra · Justice Ajay Rastogi

Background

HARSAC, a Haryana government agency, had awarded a land-records digitisation contract to Pan India Consultants in 2011. When the contractor allegedly failed to complete the work on time, HARSAC invoked the contractor's bank guarantee, leading to litigation and eventually arbitration under the contract's dispute-resolution clause. The arbitral tribunal, which included HARSAC's own nominee, a senior IAS officer who was Principal Secretary to the Haryana Government, took over four years without pronouncing its award, despite twice recording that it was "ready to pronounce the award forthwith." Lower courts kept extending the tribunal's time to decide, and HARSAC challenged one such extension order before the Supreme Court.

Decision Breakdown

The Supreme Court found that appointing a senior government officer with a controlling influence over HARSAC (itself a government nodal agency) as an arbitrator was invalid under Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996: a mandatory, non-waivable disqualification. Given the inordinate four-year delay with no award in sight, and with both parties consenting to a substitution, the Court exercised its power under Section 29A(6) of the Act to replace the entire tribunal with a sole arbitrator (a retired Supreme Court judge), directing the new arbitrator to continue from the stage already reached and deliver the award within six months.

Lesson Learnt

An arbitrator who has a controlling or managerial link to one of the parties, even an employee nominated by a government body to arbitrate for that very body, can be disqualified under the law's mandatory conflict-of-interest rules, and courts can step in to replace a non-performing arbitral tribunal to prevent endless delay in dispute resolution.

Official source (sci.gov.in)View Judgment (PDF)

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