Calcutta High Court
Soumyajit Ganguly vs Kotak Mahindra Bank Limited & Ors on 4 March, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
ORDER OD-2
IN THE HIGH COURT AT CALCUTTA
ORIGINAL CIVIL DIVISION
ORIGINAL SIDE
AP/210/2024
SOUMYAJIT GANGULY
VERSUS
KOTAK MAHINDRA BANK LIMITED & ORS.
BEFORE :
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 4thMarch, 2025.
Appearance:
Mr.Kushal Chatterjee, Adv.
Mr. Oishik Chatterjee, Adv.
Ms. Salma Shah, Adv.
for the petitioner.
Mr. Dhilon Sengupta, Adv.
Mr. Ayan Chakraborty, Adv.
Ms. Sohini Mukherjee, Adv.
. . . . for the respondents.
1. Affidavit of service is taken on record.
2. Mr. Dhilon Sengupta, learned Advocate for the respondents raises
two objections as to the maintainability of the application. The
application should be described as one under Section 11(5) and not
under Section 11(6) of the Arbitration and Conciliation Act, 1996 and
the second that, the matter should have been filed in the Commercial
Division.
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3. With regard to the first objection, this Court finds that this is purely a
hyper-technical issue. Learned Advocate-on-Record for the petitioner
is given liberty to describe the application properly.
4. With regard to the matter to be registered as a commercial matter,
this Court is satisfied that the bank in its usual course of business
had extended a loan to the petitioner. The petitioner approached the
bank for such credit facility and the extension of the credit facility
culminated in an agreement, which according to this Court is a
mercantile document.
5. Under such circumstances, the office will convert and/or re-register
the application as one under Commercial Division and the learned
Advocate-on-Record shall carry out the formalities.
6. The petitioner prays for termination of the mandate of the learned
Arbitrator on the ground that the learned Arbitrator is de jure unable
to perform his duties on the ground of unilateral appointment by the
bank/respondent.
7. Mr. Sengupta submits that the reference was made on the basis of
Clause 10.15 of the agreement. The mechanism provided therein
permitted the bank to appoint the Arbitrator.
8. In my considered opinion, the provision of unilateral appointment of
the Arbitrator by a party who is interested in the ultimate outcome of
the arbitral proceeding, is no longer permissible in law after the
amendment of the Arbitration and Conciliation Act, 1996.
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9. The Hon'ble Apex Court in Central Organization for Railway
Electrification (supra), held thus:-
"169. In view of the above discussion, we conclude that:
a. The principle of equal treatment of parties applies at all stages of
arbitration proceedings, including the stage of appointment of
arbitrators ;
b. The Arbitration Act does not prohibit PSUs from empanelling
potential arbitrators. However, an arbitration clause cannot mandate
the other party to select its arbitrator from the panel curated by
PSUs;
c. A clause that allows one party to unilaterally appoint a sole
arbitrator gives rise to justifiable doubts as to the independence and
impartiality of the arbitrator. Further, such a unilateral clause is
exclusive and hinders equal participation of the other party in the
appointment process of arbitrators;
d. In the appointment of a three-member panel, mandating the other
party to select its arbitrator from a curated panel of potential
arbitrators is against the principle of equal treatment of parties. In
this situation, there is no effective counterbalance because parties do
not participate equally in the process of appointing arbitrators. The
process of appointing arbitrators in CORE (supra) is unequal and
prejudiced in favour of the Railways;
e. Unilateral appointment clauses in public-private contracts are
violative of Article 14 of the Constitution ;
f. The principle of express waiver contained under the proviso to
Section 12(5) also applies to situations where the parties seek to
waive the allegation of bias against an arbitrator appointed
unilaterally by one of the parties. After the disputes have arisen, the
parties can determine whether there is a necessity to waive the nemo
judex rule; and
g. The law laid down in the present reference will apply prospectively
to arbitrator appointments to be made after the date of this judgment.
This direction applies to three-member tribunals.
170. The reference is answered in the above terms.
171. Pending application(s), if any, shall stand disposed of."
10. In Perkins Eastman Architects DPC and Another vs. HSCC (India)
Ltd. reported in 2019 SCC OnLine SC 1517, the Hon'ble Apex Court
held thus :-
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..."20. We thus have two categories of cases. The first, similar to the
one dealt with in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd.,
(2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] where the Managing
Director himself is named as an arbitrator with an additional power
to appoint any other person as an arbitrator. In the second category,
the Managing Director is not to act as an arbitrator himself but is
empowered or authorised to appoint any other person of his choice or
discretion as an arbitrator. If, in the first category of cases, the
Managing Director was found incompetent, it was because of the
interest that he would be said to be having in the outcome or result of
the dispute. The element of invalidity would thus be directly relatable
to and arise from the interest that he would be having in such
outcome or decision. If that be the test, similar invalidity would
always arise and spring even in the second category of cases. If the
interest that he has in the outcome of the dispute, is taken to be the
basis for the possibility of bias, it will always be present irrespective
of whether the matter stands under the first or second category of
cases. We are conscious that if such deduction is drawn from the
decision of this Court in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects
Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] , all cases having
clauses similar to that with which we are presently concerned, a
party to the agreement would be disentitled to make any appointment
of an arbitrator on its own and it would always be available to argue
that a party or an official or an authority having interest in the
dispute would be disentitled to make appointment of an arbitrator.
21. But, in our view that has to be the logical deduction from TRF
Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 :
(2017) 4 SCC (Civ) 72] Para 50 of the decision shows that this Court
was concerned with the issue, "whether the Managing Director, after
becoming ineligible by operation of law, is he still eligible to nominate
an arbitrator" The ineligibility referred to therein, was as a result of
operation of law, in that a person having an interest in the dispute or
in the outcome or decision thereof, must not only be ineligible to act
as an arbitrator but must also not be eligible to appoint anyone else
as an arbitrator and that such person cannot and should not have
any role in charting out any course to the dispute resolution by
having the power to appoint an arbitrator. The next sentences in the
paragraph, further show that cases where both the parties could
nominate respective arbitrators of their choice were found to be
completely a different situation. The reason is clear that whatever
advantage a party may derive by nominating an arbitrator of its
choice would get counter-balanced by equal power with the other
party. But, in a case where only one party has a right to appoint a
sole arbitrator, its choice will always have an element of exclusivity in
determining or charting the course for dispute resolution. Naturally,
the person who has an interest in the outcome or decision of the
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dispute must not have the power to appoint a sole arbitrator. That
has to be taken as the essence of the amendments brought in by the
Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) and
recognised by the decision of this Court in TRF Ltd. [TRF
Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC
(Civ) 72]
...
24. In Voestalpine [VoestalpineSchienen GmbH v. DMRC, (2017) 4
SCC 665 : (2017) 2 SCC (Civ) 607] , this Court dealt with
independence and impartiality of the arbitrator as under : (SCC pp.
687-88 & 690-91, paras 20 to 22 & 30)
“20. Independence and impartiality of the arbitrator are the
hallmarks of any arbitration proceedings. Rule against bias is one of
the fundamental principles of natural justice which applied to all
judicial and quasi-judicial proceedings. It is for this reason that
notwithstanding the fact that relationship between the parties to the
arbitration and the arbitrators themselves are contractual in nature
and the source of an arbitrator’s appointment is deduced from the
agreement entered into between the parties, notwithstanding the
same non-independence and non-impartiality of such arbitrator
(though contractually agreed upon) would render him ineligible to
conduct the arbitration. The genesis behind this rational is that even
when an arbitrator is appointed in terms of contract and by the
parties to the contract, he is independent of the parties. Functions
and duties require him to rise above the partisan interest of the
parties and not to act in, or so as to further, the particular interest of
either parties. After all, the arbitrator has adjudicatory role to
perform and, therefore, he must be independent of parties as well as
impartial. The United Kingdom Supreme Court has beautifully
highlighted this aspect in Hashwani v. Jivraj [Hashwani v. Jivraj,
(2011) 1 WLR 1872 : 2011 UKSC 40] in the following words : (WLR p.
1889, para 45)
’45. … the dominant purpose of appointing an arbitrator or
arbitrators is the impartial resolution of the dispute between the
parties in accordance with the terms of the agreement and, although
the contract between the parties and the arbitrators would be a
contract for the provision of personal services, they were not personal
services under the direction of the parties.’
21. Similarly, Cour de Cassation, France, in a judgment delivered in
1972 in Consorts Ury [Fouchard, Gaillard, Goldman on International
Commercial Arbitration, 562 [Emmanuel Gaillard & John Savage
(Eds.) 1999] {quoting Cour de cassation [Cass.] [Supreme Court for
judicial matters] Consorts Ury v. S.A. des Galeries Lafayette, Cass.2e
civ., 13-4-1972, JCP, Pt. II, No. 17189 (1972) (France)}.] , underlined
that:
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‘an independent mind is indispensable in the exercise of judicial
power, whatever the source of that power may be, and it is one of the
essential qualities of an arbitrator’.
22. Independence and impartiality are two different concepts. An
arbitrator may be independent and yet, lack impartiality, or vice
versa. Impartiality, as is well accepted, is a more subjective concept
as compared to independence. Independence, which is more an
objective concept, may, thus, be more straightforwardly ascertained
by the parties at the outset of the arbitration proceedings in light of
the circumstances disclosed by the arbitrator, while partiality will
more likely surface during the arbitration proceedings.
***
30. Time has come to send positive signals to the international
business community, in order to create healthy arbitration
environment and conducive arbitration culture in this country.
Further, as highlighted by the Law Commission also in its report,
duty becomes more onerous in government contracts, where one of
the parties to the dispute is the Government or public sector
undertaking itself and the authority to appoint the arbitrator rests
with it. In the instant case also, though choice is given by DMRC to
the opposite party but it is limited to choose an arbitrator from the
panel prepared by DMRC. It, therefore, becomes imperative to have a
much broadbased panel, so that there is no misapprehension that
principle of impartiality and independence would be discarded at any
stage of the proceedings, specially at the stage of constitution of the
Arbitral Tribunal. We, therefore, direct that DMRC shall prepare a
broadbased panel on the aforesaid lines, within a period of two
months from today…”
11. The department is directed to carry out the necessary registration
immediately.
12. The Court appoints Ms. Sulagna Mukherjee, learned Advocate, a
member of the Incorporated Law Society as the learned Arbitrator to
arbitrate upon the disputes between the parties. This order is subject
to compliance of Section 12 of the Arbitration and Conciliation Act,
1996.
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13. The learned Arbitrator shall fix her remuneration in terms of the
14. Let this matter appear in the list on 18 th March, 2025 for disposal of
the application and this order shall be treated as an order in the
number to be assigned by the department upon registration in the
Commercial Division.
(SHAMPA SARKAR, J.)
pa/sb
