J.R. Midha, J
1. The petitioner is seeking appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act.
2. The arbitration agreement between the parties is contained in clause XIII of the Memorandum of Family Arrangement-cum-Deed of
Relinquishment dated 09th June, 2020 according to which the parties agreed for reference of disputes to the sole arbitrator, Mr. Sachin Dev Sharma,
Chartered Accountant.
3. The arbitration agreement between the parties is not disputed. The respondents have no objection to the reference of disputes to the sole arbitrator
named in the arbitration agreement.
4. Learned counsel for the petitioner submits that the sole arbitrator named in the arbitration agreement is not competent to act as an arbitrator in
terms of Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act as the named arbitrator is a consultant/advisor to the
respondent; and is a director and shareholder in PEB Steel Lloyd (India) Ltd. Reference is made to para 9 of the petition which is reproduced
hereunder:
“9. That the Petitioners have become aware that the proposed Arbitrator, named III the said Memorandum, IS a Consultant/Advisor to the
Respondents, in his capacity as a professional Chartered Accountant; IS a Director and Shareholder in PEB Steel Lloyd (India) Ltd. an
affiliate/subsidiary company of Lloyd Insulation India Limited (a family concern of Late Chander Prakash Khanna); has contacted
Petitioners No. 1 and 2 indicating that they are not entitled to any amounts, other than release of the Fixed Deposits already standing in
their names. All of the foregoing has rendered Mr.Sachin Dev Sharma ineligible to be appointed, and act, as an Arbitrator, in terms of
Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996. Consequently, the Petitioners herein pray unto
this Hon'ble Court to appoint an independent Arbitrator for adjudication of disputes/differences between the parties arising out of the said
Memorandum.â€
5. The respondents have filed the reply in which they have admitted that the named arbitrator is a consultant/advisor to the respondents in his capacity
as a professional Chartered Accountant and is a director and shareholder of PEB Steel Lloyd (India) Ltd. Para 9 of the reply of the respondents is
reproduced hereunder:
9. The contents of para 9 of the petition as stated are wrong and denied. It is denied that petitioners have become aware now that the
proposed Arbitrator, named in the said Memorandum, is a consultant/Advisor to the Respondents in his capacity as a professional chartered
Accountant is a Director and Shareholder in PEB Steel Lloyd (India) Ltd. an affiliate/subsidiary company of Lloyd Insulation (India) Ltd.
In this regard it is submitted that petitioners have themselves agreed to the name of Mr. S.D. Sharma as an Arbitrator, in case of any
dispute/differences between the parties in the Memorandum, for the reason that he knew both Late Mr. Chander Prakash Khanna and Late
Mrs. Nirmal Khanna and know all the family for last 40 years. Further it was at the insistence of the petitioners that name of Mr. S. D.
Sharma was decided as Arbitrator in the said Memorandum. In fact on earlier occasion also in 2014 while the Late Mr. Chander Prakash
Khanna and Late Mrs. Nirmal Khanna both were alive, at that time also the name of Mr. S.D. Sharma was agreed by all the family members,
including Petitioners, to appoint him as a sole arbitrator to settle all the disputes with respect to various assets and properties owned by the
family. However, the said proceeding did not initiate/proceeded further at that time.
Petitioners were well aware of the fact that Mr. S. D sharma, named Arbitrator in the said Memorandum, is an independent Director of the
PEB Steel Lloyd (India) Ltd. since 24.9.2018, while signing the said Memorandum in June 2020. He is not the Director or Shareholder in
PEB steer Lloyd (India) Ltd., as has been alleged. It is denied for want of knowledge that Arbitrator has contacted Petitioner No.1 & 2
indicating that they are not entitled to any amounts, other than release of the Fixed Deposits already standing in their names. It is submitted
that Petitioners are falsely and frivolously raising these issues with regard to appointment of Arbitrator, while there is already a named
arbitrator in the Memorandum, just to delay performing their obligation under the said Memorandum and harass the Respondents
particularly when Respondents have honored their obligation.
It is denied that for the any reason much less as alleged has rendered Mr. Sachin Dev Sharma ineligible to be appointed and act as
Arbitrator, in terms of Section 12(5) read with Seventh Schedule of the Arbitrator and Conciliation Act, 1996. It is, thus, prayed to this
Hon'ble Court to not to appoint other Arbitrator for adjudication of dispute/differences between the parties particularly when there is no
doubt on the integrity and neutrality of the Mr. S. D.Sharma as an Arbitrator, who has been appointed with the consent and at the instance
of Petitioners. Thus, Petitioner cannot now for false and frivolous reasons challenge him being appointed as Arbitrator.â€
6. Vide order dated 26th March, 2021, this Court directed the named arbitrator, Mr. Sachin Dev Sharma, Chartered Accountant to file an affidavit
with respect to his relationship between the parties in terms of the Seventh Schedule under Section 12(5) of the Arbitration and Conciliation Act.
7. The named arbitrator Mr. Sachin Dev Sharma, has filed the affidavit in which he has admitted that he is an independent director in PEB Steel Lloyd
(India) Ltd. in which respondent No.1 is also a director. He has further admitted that he had acted as a mediator between the parties.
8. Learned counsel for the petitioner urged at the time of the hearing that the named arbitrator is not competent to act as an arbitrator under the
Seventh Schedule read with Section 12 (5) of the Arbitration and Conciliation Act.
9. Learned counsel for the respondent urged at the time of the hearing that the named arbitrator be appointed as an arbitrator to adjudicate the
disputes between the parties. It is further submitted that the named arbitrator is an independent arbitrator in PEB Steel Lloyd (India) Ltd. in which
respondent No.1 is also a director. It is further submitted that the petitioner having agreed to the named arbitrator cannot wriggle out of the arbitration
agreement.
10. On careful consideration of the rival contentions of the parties, this Court has serious doubt to the independence of the named arbitrator and
therefore, it would be appropriate and in the interest of justice to appoint an independent arbitrator to adjudicate the disputes between the parties.
11. Learned counsel for the petitioner submits that the petitioner has claims to the tune of over Rs.5 crore against the respondent.
12. The petition is allowed and Mr. Saurabh Kirpal, Senior Advocate, Mobile: 9811027511 is appointed as a sole arbitrator to adjudicate the disputes
between the parties.
13. The learned arbitrator shall ensure the compliance of Section
12 of Arbitration and Conciliation Act, 1996 before commencing the arbitration.
14. The fees of the arbitrator shall be according to Fourth Schedule of the Arbitration and Conciliation Act, 1996.
15. Copy of this order be sent to the learned Arbitrator.
