Holding that the neutrality of the arbitrator is the touchstone of arbitral proceedings, the Madras High Court has set aside an arbitral award pertaining to the Railways as the authority appointing the arbitrator and the person appointed as arbitrator were ineligible.
Also, noting that the amendments introduced to Section 12 by Act 3 of 2016 reiterated this concept more stringently, Justice Asha said, “Therefore, taking into consideration the legislative intent and the judicial pronouncements in this regard, it is clearly evident that the arbitrator who had entered the reference in the instant case is ineligible.”
The judge set aside the arbitral award on three grounds: General conditions of the contract does not contain the amendments, the arbitrator is an employee of the Railways and there is no express waiver in writing by the petitioner of the bar imposed under Section 12 (5) of the 1996 Act.
Justice Asha in her order also held that since the award is being set aside on the ground of the competence of the Arbitral Tribunal to enter reference, this court is not traversing into the merits of the case.
JV Engineering had contended that it was awarded the contract for the construction of the control room for Traction Sub-Station within 15 months. But thereafter, nearly five extensions were granted on account of certain procedural delays on the part of the Railways. For four of the extensions, the Railways had granted the extension with Price Variation Clause (PVC).
However, regards the disputed claim, the Railways failed to allow the price escalation and, therefore, left with no other alternative the arbitral proceedings were invoked.