Previous Employment With Any Party Does Not Make An Arbitrator Ineligible: Jammu & Kashmir and Ladakh High Court

​The Bench of Justice Sanjay Dhar held, “Thus, merely because a person has been in employment of either of the parties in the previous past does not make him ineligible to be appointed as an Arbitrator. Entry-1 of the Schedule of the Act debars an employee of a party to be an Arbitrator. It also debars a consultant, advisor or a person who has any past or present business relationship with a party from acting as an Arbitrator. Er. Khalid Muzaffar i admittedly a former employee of the petitioner but he is neither a consultant nor an advisor of any party nor he has any past or present business relationship with the petitioner. Therefore, he does not fall either in Entry-1 or Entry-15 of the Seventh Schedule of the Act so as to be ineligible to act as an Arbitrator. The contention of the petitioner is, therefore, without any substance.”

Advocate Kapil Misra appeared on behalf of the Petitioner, whereas G.A. VK Singh appeared for the Respondents.

Factual Background

The Petitioner challenged the order passed by the Additional District Judge whereby the application of the Petitioner under Section 14 of the Arbitration and Conciliation Act, 1996, was dismissed. The Respondent was awarded the contract for “Upgradation of Tutan di Khuie to Khada-Madana Road” under the Jhelum Tawi Flood Recovery Project.

Contention of the parties

It was submitted by the Petitioner that, contrary to the agreed procedure and the mandate of Section 11(2) and Section 12(5) read with the Seventh Schedule of the Act of 1996, the Respondent proceeded unilaterally to appoint Engineer Khalid Muzaffar, a former Director of Jammu and Kashmir Economic Reconstruction Agency (“ERA”), as an Arbitrator.

According to the Petitioner, the aforenamed person could not have acted as an Arbitrator under Section 12(5) and the Seventh Schedule of the Act due to his past association with the Petitioner. It was submitted that the said Arbitrator did not make any disclosure in this regard as was mandated under Section 12 of the Act.

The Respondent submitted that if at all the Petitioner has any cause, it can raise the contentions only at the time of challenging the award under Section 34 of the Act. It was submitted by the Respondent that the Arbitrator is a retired employee of the Petitioner and he is not ineligible to act as an Arbitrator. It was contended that it is only if a person has a business relationship with a party that he becomes ineligible to act as an Arbitrator but being a former employee of the party does not debar such a person from acting as an Arbitrator.

Observations of the Court

“Coming to the facts of the present case, it is the contention of the petitioner that Er. Khalid Muzaffar was a retired employee of the petitioner. There is no other allegation against the said Arbitrator leveled by the petitioner. It is not even alleged that said Arbitrator had been a consultant, advisor or he had any past or present business relationship with either of the parties. It is also not the case of the petitioner that the said Arbitrator has given legal advice or provided expert opinion on the dispute which is subject matter of the present petition to any of the parties. The only ground on which the petitioner seeks declaration of Er. Khalid Muzaffar as ineligible is that he was a former employee of the petitioner. The question that arises for determination is as to whether a person merely because he has been a former employee of the parties becomes ineligible to act as an Arbitrator of either of the parties.”, the Court said.

Another issue which was dealt with by the Court was whether the conduct of the Tribunal, in the present case, gives rise to a reasonable apprehension that the Arbitrators are prejudiced and biased against it and if the Court shall consider the application under Section 14 of the Act.

The Court observed, “In view of the aforesaid consistent legal position, it is not open to the petitioner to ventilate its grievance against the order passed by the Arbitral Tribunal under Section 16 of the Act by making application under Section 14 of the Act seeking termination of the mandate of the Arbitral Tribunal. The only course available to the petitioner is to allow the arbitral proceedings to conclude and raise all these grounds at the time of challenging the final award under Section 34 of the Act. In this view of the matter, this Court refrains from making any observation on the merits of the contentions raised by the petitioner regarding its apprehension of bias ofthe Arbitral Tribunal and non-adherence to the procedure by the Tribunal, lest it may prejudice the case of the parties at the time of challenge to the Arbitral Award that may be passed.”

Conclusion

The Court found no grounds to interfere with the impugned order and hence, dismissed the petition.

Cause Title: Union Territory of J&K v. M/s SRM Contractors Ltd [Neutral Citation:2025:JKLHC-SGR:369]

Appearances:

Petitioner: Dy. AG Syed Musaib

Respondent: Senior Advocate Syed Faisal Qadiri, Advocates Manik and Sikander Hayat Khan

Click here to read/download the Judgment