ELLORA PAPER MILLS LIMITED V. THE STATE OF MADHYA PRADESH

COURT: The Supreme Court of India

CORAM: Mr. M.R.Shah and Mrs Nagarathna

DATE OF JUDGMENT:4 January 2022

FACTS

For the years 1993-1994, the Respondent launched a tender for the supply of cream woe paper and duplicating paper. The appellant in this case took part in the tender procedure and was granted the contract by supply order dated September 22, 1993. The appellant and the Respondent had a disagreement. The Respondent’s officers made up the Arbitral tribunal, which was dubbed the stationary buying committee.

On September 12, 2000, the appellant filed its objections to the formation of the Arbitral Tribunal/stationery procurement committee. By filing an application under Section 13 of the Arbitration Act of 1996, the appellant in this case also disputed its jurisdiction.

The above- mentioned Application was denied by the Arbitral Tribunal in an order dated February 2, 2001. Following that, the appellant filed the current application in the High Court under Section 14 read with Sections 11 & 15 of the Arbitration and Conciliation Act, 1996, seeking to terminate the mandate of the originally constituted Arbitral Tribunal- Stationery Purchase Committee, which was made up of officers of the Respondent, and heavily relied on Section 12(5) of the Act. However, the High Court did not agree with the Appellant’s arguments and held that the Amendment Act, 2015 will take effect on October 23, 2015, and that it will not apply retrospectively to arbitration proceedings that have already begun unless the parties agree otherwise. In the present case, the arbitration tribunal was established long before the Amendment Act, 2015 took effect, and the arbitration tribunal had already begun its proceedings therefore the Amendment Act, 2015 – Section 12(5) of the Arbitration Act, 1996 shall not be applicable.

The High Court denied the application filed under Section 14 read with Sections 11 and 15 of the Arbitration Act, 1996, prompting the appellant to file a petition with the Supreme Court of India.

ISSUE RAISED

Whether the tribunal members who had initiated the arbitration had lost their mandate post-2015 Amendments because of Section 12 (5) Arbitration And Concilliation Act, 1996?

JUDGEMENT

In light of Section 12(5) read with the Seventh Schedule of the 1996 Act, the Supreme Court of India held that the arbitrator’s mandate can be challenged at any moment during the proceedings.

The Supreme Court of India overturned the judgement of the High Court of Madhya Pradesh, which held that the Amendment Act, 2015 will take effect on October 23, 2015, and that it will not apply retrospectively to arbitration proceedings already in progress unless the parties agree otherwise. In the present case, the arbitral tribunal was established long before the Amendment Act, 2015, and its proceedings had already begun.

As a result, in the absence of an express written agreement entered into after the disputes arose between them, waiving the applicability of the Section, specifically referring to a person who is interdicted by the seventh Schedule of the 1996 Act, an ineligible arbitrator can be challenged, even in a pre-2015 case and even in an ongoing arbitration.

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