Case Number: Civil Appeal No. 7697 OF 2021

Judges Name: Hon’ble Judges M.R. Shah J, B.V. Nagarathna J

Order dated: 04.01.2022

“Arbitrators appointed prior to the Arbitration and Conciliation Amendment Act, 2015 can be set aside if there is a violation of Section 12 of the Arbitration and Conciliation Act, 1996”

Facts of the Case:

• The State of Madhya Pradesh (Respondent) issued a tender for the supply of cream woven paper and duplicating papers for the year 1993-1994 and the Ellora Paper Mills Limited (Appellant) was awarded the supply contract dated 22.09.1993.
• Disputes arose between Appellant and Respondent regarding the payments and the Appellant filed a civil suit before the Civil Court, Bhopal seeking an injunction restraining the Respondent from awarding the supply to other third parties. As the Respondent already awarded the contract to a third party, it became infructuous.
• Another Civil Suit was filed in the year 1998 by the Appellant and the Respondent moved an application seeking stay as there existing an arbitral clause in the agreement, which was rejected by Court. The respondent filed revision petition before the Hon’ble High Court of Madhya Pradesh and the High court referred the parties to arbitration.
• The Appellant challenged the jurisdiction of the Arbitral Tribunal which was rejected by the Arbitral Tribunal and an appeal was preferred before the Hon’ble High Court of Madhya Pradesh and the same was also dismissed in the year 2017. Therefore, the Appellant has now preferred this appeal before the Hon’ble Supreme Court.

Order:

The Hon’ble Supreme Court observed/held as follows:

• The Appellant relied on Section 12(5) of the Arbitration and Conciliation Act, 1996 and contended that members of the Arbitral Tribunal are ineligible to continue as arbitrators.
• The Respondent countered by arguing that the Tribunal was constituted before the 2015 Amendment Act and therefore, Section 12(5) of the Arbitration Act, 2016 is not applicable to the present case.
• Arbitration proceedings were not commenced by arbitral Tribunal in view of a stay granted by the Hon’ble High Court of Madhya Pradesh from 04.05.2001 till 24.01.2017.
• The arbitrators have become ineligible in view of Section 12(5) and Seventh Schedule of the Arbitration and Conciliation Act, 1996 and the impugned judgment and order passed by the High Court is unsustainable.

The Hon’ble Supreme Court dismissed the Appeal.