HERIKE RICE MILLS Vs. STATE OF PUNJAB

JUDGEMENT

(1.) WHETHER the appointment of an Arbitrator and his decision over-ruling the challenge to his appointment can be questioned in a petition filed under Article 226 of the Constitution and more so before the award has been made, is the question of law which arises for determination in this case. Facts giving rise to this petition which are not in dispute may first be noticed.

(2.) BY an agreement dated October 26, 1994 executed between the Punjab State Co-operative Supply and Marketing Federation Limited, Chandigarh (for short the Markfed) and M/s Herike Rice Mills, Mehalkalan (for short the Miller), the former agreed to have paddy milled into rice from the latter on the terms and conditions contained therein. There was an arbitration clause in the agreement which expressly stipulates that all disputes and differences arising out of or in any manner touching or concerning the agreement, whatsoever, shall be referred to the sole arbitration of the Managing Director of Markfed or any person appointed by him in this behalf and that it will be no objection to any such appointment that the person appointed is or was an employee of the Markfed or that he had to deal with matters to which the contract relates and that in the course of his duties as such employee he had expressed views on all or any of the matters in dispute or differences. It was further provided that the award of the Arbitrator shall be final and binding on the parties. However, disputes arose between the parties and on an application filed by Markfed, Shri P. J. Singh, Chief Manager (Monitoring) Markfed was appointed the Sole Arbitrator. The Arbitrator issued notice dated 6. 6. 1997 to the parties to appear before him personally or through an authorised representative on 19. 6. 1997. The parties were also directed to submit their claim/counter-claim, if any. On receipt of this notice, the Miller informed the Managing Director of Markfed that it was not agreeable to the appointment of the sole Arbitrator and a request was made to appoint an Arbitrator Under Section 11 (3) of the Arbitration and Conciliation Act, 19% (for short the Act ). The Miller also moved an application before the Arbitrator challenging his appointment and pointed out that he was an employee of Markfed which was a party to the dispute and, therefore, it was not expected that he (Arbitrator) would act impartially. It was also pointed out that it was his duty Under Section 12 of the Act to disclose in writing the circumstances likely to give rise to justifiable doubts as to his independence or impartiality which he had failed to do so. A request was made that he should not proceed with the arbitration proceedings and that the matter should be referred back to the Managing Director of Markfed for appointing another Arbitrator Under Section 11 (3) of the Act. The Arbitrator as per his Order dated 10. 7. 1997 did not agree with the ground on which his appointment was challenged and consequently over-ruled the objection observing that the parties had already agreed in the agreement for the appointment of a sole Arbitrator by the Managing Director of Markfed. He also observed that he had been validly appointed Under Section 11 (2) of the Act as per the procedure agreed upon by the parties for the appointment of the Arbitrator. He, therefore, decided to continue with the arbitral proceedings. It is this Order of the Arbitrator and also the notice dated 6. 6. 1997 issued by him informing the parties about his appointment that have been challenged in this petition filed under Article 226 of the Constitution.

(3.) THE argument of the learned counsel for the petitioner is that the appointment of the Arbitrator is in contravention of the provisions of Section 11 of the Act and that the Arbitrator on his appointment had failed to disclose in writing the circumstances which were likely to give rise to justifiable doubts as to his independence or impartiality on account of his being an employee of Markfed which is party to the dispute and, therefore, the appointment was invalid. It was also contended that the Miller had milled the paddy for Markfed in terms of the agreement and the Branch Officer at Barnala issued no objection certificate to the petitioner indicating that there were no disputes between the parties. This being so, according to the counsel, there was nothing that could be referred to the arbitration of the sole Arbitrator and, therefore, the proceedings before him were without jurisdiction. Shri Dhuriwala also contended that Markfed being ah instrumentality of the State, a writ petition was maintainable to challenge the actions of its Managing Director in appointing the sole Arbitrator. He has placed reliance on a judgment of the Apex Court in M. M. T. C. Ltd. v. Sterling Industries (India) Limited, A. I. R. 1997 SC 605.