Supreme Court replaces Justice Arun Mishra as arbitrator by consent in Adani-Rajasthan power dispute

The Supreme Court has, with the consent of the parties, replaced former Supreme Court judge Justice Arun Mishra as the arbitrator in a dispute involving Adani-linked Parsa Kente Collieries Limited (PKCL) and Rajasthan Rajya Vidyut Utpadan Nigam Limited (RRVUNL).

The Court replaced him with another Supreme Court judge - Justice Sanjay Kishan Kaul - as the sole arbitrator after the parties agreed to his appointment.

A Bench of Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana passed the order on August 3 on a plea by RRVUNL challenging the Rajasthan High Court's decision to appoint Justice Mishra.

During the hearing, the Court said that it wanted to avoid causing embarrassment to a former judge by allowing questions surrounding his appointment to persist through the arbitration.

“Our problem is that we don't want any embarrassment to a former judge. Unnecessarily they will raise an objection time and again in Section 34,” the Bench said.

The Bench went on to record in its order,

"Though we do not find the ground urged for change of arbitrator legally sustainable, however, during the course of hearing, the parties have mutually agreed for appointment of Justice Sanjay Kishan Kaul, former Judge of this Court, to be the sole arbitrator."

PKCL was formed as a joint venture between Adani Enterprises Limited and RRVUNL for development, mining and transportation of coal. Adani Enterprises held 74 per cent in the joint venture while RRVUNL held 26 per cent when the earlier dispute arose.

The case arose from a July 3 order of the Rajasthan High Court appointing Justice Mishra as the sole arbitrator to adjudicate disputes between PKCL and RRVUNL. Acting Chief Justice Sanjeev Prakash Sharma had made the appointment after noting that an arbitrator had already been appointed in a similar dispute.

However, RRVUNL objected to the same, citing Justice Mishra's involvement as a Supreme Court judge in an earlier dispute under the agreement. The earlier dispute concerning price escalation, fixed costs and an escrow account had resulted in an arbitral award in 2015. After the Rajasthan High Court interfered with the award, the matter reached the Supreme Court.

In May 2019, a Bench of Justices Arun Mishra and MR Shah partly allowed PKCL's appeal. The judgment, authored by Justice Shah, restored the arbitral award on price escalation but upheld the setting aside of PKCL's claims towards ₹78 crore in fixed costs and money lying in an escrow account.

This was flagged by RRUVNL in the present proceedings.

Senior Advocate Shyam Divan, appearing for RRVUNL, emphasised that the previous proceedings involved the same contractual relationship between the parties.

“This very contract, this very clause, these very parties,” he submitted.

Senior Advocate Gourab Banerjee, appearing for PKCL, initially opposed changing the arbitrator. He pointed out that Justice Mishra was a court-appointed arbitrator and that the earlier judgment was several years old. He also argued that it would be unfair to replace Justice Mishra based on the manner in which the objection had been presented since the former judge was not before the Court to respond.

“In normal circumstances, I would have done, but the way the petition has been made and the way the matter has been presented, that gentleman can't defend himself. He is not here,” Banerjee said.

The Bench then asked whether the parties could instead agree upon another arbitrator. It explained that it wanted to avoid the possibility of this controversy later surfacing in proceedings challenging the award under Section 34 of the Arbitration and Conciliation Act.

Divan agreed that another arbitrator could be appointed and urged the Court to put an end to the controversy.

After discussions, the parties informed the Court that there was consensus on two possible names and left the final choice to the Bench. The Court then chose Justice Kaul.

However, in its formal order dated August 3, the Supreme Court expressly clarified that it did not consider RRVUNL's ground for changing the arbitrator legally sustainable.

It then proceeded to modify the Rajasthan High Court's order and appointed Justice Kaul to arbitrate the dispute.

Divan appeared for RRVUNL along with Advocates Kartik Seth, Shilpa Saini, Ratakshi Sarvaria, Gauri Soni, KM Abish, Ragib and Abhijeet Kumar.

Banerjee appeared for PKCL along with Advocates Abhisaar Bairagi, Milind Sharma and Ausaf Ayyub from Khaitan & Co.

[Read Order]