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M/s Laxmi Continental Construction Co. v. State of U.P.

Civil Appeal · 2021 INSC 498Decided 20 Sept 2021
Civil Appeal No. 6797 of 2008
Justice M.R. Shah · Justice A.S. Bopanna

Background

A construction company had a contract with the U.P. government that required disputes to be resolved by a government-nominated engineer acting as sole arbitrator. The appointed arbitrator continued conducting the proceedings even after he retired from government service, and eventually issued an award of about Rs. 11 lakh in the company's favour. The government objected that the arbitrator had lost his authority upon retirement, and a trial court initially rejected that objection and upheld the award, but the High Court later reversed this, cancelling the award on the ground that the arbitrator had "misconducted himself" by continuing after retirement.

Decision Breakdown

The Supreme Court restored the arbitrator's original award and overturned the High Court. It held that nothing in the arbitration clause said an arbitrator's authority ends upon retirement from the post that qualified him for appointment, once validly appointed, he remains the arbitrator until the proceedings conclude unless expressly disqualified under the Arbitration Act, 1940. The Court also noted that the trial court had earlier granted the arbitrator a specific time extension to complete the award after his retirement, and that order had gone unchallenged and become final, so the government could not revisit the same objection later. It further rejected reliance on a U.P. state amendment to the Arbitration Act, since that provision applied only when an arbitrator became incapable of acting, not merely retired.

Lesson Learnt

Retirement from a government post does not automatically end that person's authority to continue as an arbitrator in a pending case unless the contract or law specifically says so, and once a court order on such a procedural objection goes unchallenged, it cannot be reopened later in the same dispute.

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

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