DELHI HIGH COURT HAS SET ASIDE THE FOREIGN AWARD AS THE ARBITRATOR HAD FAILED TO DISCLOSE HIS PREVIOUS APPOINTMENT AS ARBITRATOR BY ONE OF THE PARTIES

M/S.SHKTI BHOG FOODS LTD., VS. KOLA SHIPPING LTD.,  

   

The Shakti Bhog Foods Ltd.,  hereinafter referred to as “Petitioner” filed a suit before the III Additional District and Sessions Court, Kakinada, Andhra Pradesh claiming damages against M/s.Kola Shipping Ltd., hereinafter referred to as “Respondent”.  The Respondent issued a notice appointing Mr.Alan Okley as their Arbitrator. The Petitioner sent a communication to the Respondent denying the existence of agreement and declined to appoint an Arbitrator.  Thereafter, the Respondent filed an application u/s 45 of Arbitration and Conciliation Act, 1996 to refer the parties to arbitration in London.  Thereafter, the Respondent requested the Petitioner to appoint an Arbitrator and in the event of failing to appoint an Arbitrator, Mr. Alan Okley would be the Sole Arbitrator.  The District Court allowed the application filed u/s 45 and referred the parties to arbitration in London.  Against which the Petitioner preferred a Civil Revision Petition before the High Court of  Andhra Pradesh which came to be dismissed.  Thereafter, the Respondent sent a letter to the Arbitrator Mr. Alan Okley requesting him to act as a Sole Arbitrator as the Petitioner was not willing to appoint his Arbitrator.  Against the order of dismissal of Civil Revision Petition, the Petitioner filed a Special Leave Petition before the Supreme Court of India.  That be so, the Respondent filed a statement of claim before the appointed Arbitrator Mr. Alan Okley.  Upon which, the Arbitrator Mr.Alan Okley sent a communication to the Petitioner directing the Petitioner to file a statement of defense.  Upon which, the Petitioner’s Advocate sent a letter to the Arbitrator Mr. Alan Okley requesting for extension of time for filing the statement of defense.  Thereafter, the Petitioner sent a communication to the Respondent that the arbitration proceedings should not be continued pending S.L.P.  Finally, the Supreme Court dismissed the S.L.P. filed by the Petitioner and directed the parties to go for arbitration in London.  Thereafter, the Petitioner nominated Mr. Ramaswamy as Arbitrator, which was disputed by the Respondent.  Thereafter, the Respondent sent a letter to the Arbitrator Mr. Alan Okley requesting him to reconfirm his appointment as Sole Arbitrator.  Upon which, the Arbitrator Mr. Alan Okley sent a communication to the Petitioner confirming that he has accepted the appointment  as Sole Arbitrator and that he has ordered the Petitioner to file the defense submissions within a particular day failing which the final and voluntary order would result which would carry severe sanctions.  Upon which, the Petitioner sent a communication to the Counsel for the Respondent disputing the validity of appointment of Mr. Alan Okley as Sole Arbitrator which communication was marked to the Arbitrator Mr. Alan Okley.  To which the Arbitrator Mr. Alan Okley replied stating that his appointment as a Sole Arbitrator was in accordance with the law and agreement.  Thereafter, the Petitioner made an application challenging the constitution of Arbitral Tribunal.  Thereafter, the Petitioner filed an application Section 14 r/w Sections 17(3) and section 24 of the Arbitration and Conciliation Act, 1996 before the Court for terminating the mandate of the arbitrator Mr. Alan Okley.  The said application was contested by the Respondent stating that the Petitioner has subjected himself to the arbitration by seeking time to file the statement of defense.  The Arbitrator Mr. Alan Okley rejected the application of the Petitioner and stated that he would be proceeding to the final arbitral award, if the Respondent would make an application.  Upon which, the Respondent requested the Arbitrator Mr. Alan Okley to pass pre-emptory  order directing the Petitioner to serve the defense and counter claim.  However, the Petitioner requested the Arbitrator Mr. Alan Okley to avoid decision of the Court in the application made by them u/s 14 r/w with sec.17 (3) and 24 of Arbitration and Conciliation Act, 1996 for terminating the mandate of Arbitrator.  However, on the same day, the arbitrator Mr. Alan Okley passed final and pre-emptory order as requested by the Respondent.  Thereafter, the Arbitrator Mr. Alan Okley fixed the hearing in London.  The Petitioner did not participate in the arbitration proceedings.  On the other hand, the Respondent filed his written submission which was not provided to the Petitioner.  Based on the written submissions and evidence provided by the Respondent and upon oral hearings, the Arbitrator Mr. Alan Okley proceeded with the arbitration proceedings and passed an Award of 11.02.2009.  The said Award was challenged before the Delhi High Court on various grounds, including the contention that the Arbitrator Mr. Alan Okley failed to disclose that he had acted as Co-Arbitrator of the Respondent in a related dispute between the Respondent and the head owner of the vessel.  Finally, the Delhi High Court was pleased to hold that the constitution of Arbitral Tribunal with  Mr. Alan Okley was  invalid and such award is liable to be set aside u/s 34(2)(a)(v) of the Arbitration and Conciliation Act, 1996 as the Arbitrator Mr. Alan Okley failed to disclose the material fact concerning his appointment as the Arbitrator involving the Respondent which gives rise to justifiable doubts as to his independence on a collective reading Section 12(3), 13(5), (34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996.