Himachal Pradesh High Court: Person Ineligible To Act As Arbitrator U/s 12(5) Cannot Appoint Another Arbitrator For Determining The Dispute

The Himachal Pradesh High Court in the case Divisional Manager, H.P. State Forest Development Corporation Ltd Vs Prem Lal observed and has ruled that any person who becomes ineligible to act as an Arbitrator in terms of Section 12(5) of the Arbitration and Conciliation Act cannot be appointed or nominate another Arbitrator for determining
the dispute.
It has also been provided under Section 12(5) that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties or counsel or the subject-matter of the dispute which is falling under any of the categories specified in the Seventh Schedule, shall be ineligible for appointing of an arbitrator.
The court also stated that any appointment of other person who is being nominated by such person as an Arbitrator for determining the dispute arising under the arbitration agreement is void ab initio. Therefore, the proceeding which are so conducted will be non est and the award being passed by such persons if
any is also void.
The bench headed by Justice Rewal Dua observed while hearing the three pleas wherein challenging the order passed by District Judge dismissing petitioners’ applications under Section 36 of the Act for enforcement of arbitral awards were dismissed.
It has also been submitted by the petitioner that Clause 36 of the agreement between the parties provided reference of dispute to the Managing Director of State Forest Development Corporation. Therefore, the said agreement came into force prior to amendment of the Act whereby Sub-section 5 was being inserted in Section 12 and hence Section 12(5) of the Act, could not be applied in the said case.
The court also rejected the said argument wherein it is stated that any prior agreement executed by the parties contrary to the mandate of Section 12(5) gets “wiped out” by the non-obstante clause in the provision.
While dismissing the plea, the bench concluded that the learned District Judge did not commit any error in dismissing the execution applications filed by the petitioner, wherein seeking enforcement of
the void awards.