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SP Singla Constructions Pvt. Ltd. v. State of Himachal Pradesh & Anr.

Civil Appeal · 2018 INSC 1149Decided 4 Dec 2018
Civil Appeal Nos. 11824-11825 of 2018
Justice R. Banumathi · Justice Indira Banerjee

Background

A construction company was awarded a bridge contract by the Himachal Pradesh government, with a clause providing that any dispute would go to an arbitrator appointed by the department's Chief Engineer. When a payment dispute arose, the department appointed a serving Superintendent Engineer as sole arbitrator. The company objected, arguing the appointment should have been by name (not designation) and that a government employee could not be an arbitrator, and separately moved the High Court for an independent arbitrator instead of filing its claim with the appointed one.

Decision Breakdown

The Supreme Court held that appointing an arbitrator by official designation was valid under the contract's own wording, and that a government employee can lawfully act as arbitrator in government contracts unless the later 2015 amendment to the Arbitration Act (which bars this) applies, which it did not here, since the arbitration had commenced before that amendment came into force. The Court also held that once an arbitrator is validly appointed under the agreed procedure, a party cannot separately approach the court under Section 11(6) for a different arbitrator. However, because the arbitrator had terminated the proceedings for non-filing of a claim-statement without first warning the company that no further adjournment would be granted, the Court set aside that termination in the interest of justice, directed a fresh arbitrator be appointed per the contract clause, and allowed the company to file its claim before the new arbitrator.

Lesson Learnt

In government contracts, an arbitration clause naming an arbitrator by official post rather than by name is generally valid, and parties who want to challenge who was appointed as arbitrator must raise that objection before the arbitrator (and later under Sections 13/34), not through a fresh court application for a different arbitrator, but tribunals must give clear warning before terminating proceedings for a party's non-appearance or delay.

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

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