Jharkhand High Court
Senbo Engineering Ltd Through One Of Its ... vs The Union Of India Through Its Secretary ... on 28 July, 2017
Equivalent citations: 2018 (2) AJR 133, (2018) 1 JLJR 81, (2018) 2 JCR 144 (JHA), (2018) 1 JCR 132 (JHA)
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Arbitration Application No. 16 of 2017
Senbo Engineering Ltd, a company incorporated under the provisions of
the Companies Act, 1956, having registered office at 87, Lenin Sarani, P.O.
& P.S. Lenin Sarani, District Kolkata700013, West Bengal through one of
it's Directors namely Sri Saktimay Chakraborty, son of Late Hiranmay
Chakraborty, resident of 43/3/2, Baishnabghata Road, P.O. Naktala & P.S.
Netaji Nagar, District Kolkata, West Bengal.
.... Applicant.
Versus
1. The Union of India, through the Secretary, Ministry of Railways,
Government of India, Rail Bhawan, P.O. & P.S. Parliament Street, District
New Delhi110001.
2. The Dy. Chief Engineer (Con)III, East Central Railway, Canary Hill
Road, Dupugarah Colony, Near Old DAV School, P.O. & P.S. Hazaribagh,
District Hazaribagh, Jharkhand.
3. The General Manager, Eastern Central Railway, having his office at
Zonal Office Road, P.O. & P.S. Hajipur, District Hajipur, Bihar 844 102.
4. The Deputy Chief Engineer/C/South, East Central Railway,
Mahendrughat, P.O. & P.S. Mahendrughat, Town and District Patna
800004, Bihar.
5. The Chief Administrative Officer/C/South, East Central Railway/MHX,
Mahendrughat (1st Floor), P.O. & P.S. Mahendrughat, Town and District
Patna800004, (Bihar).
6. Bank of Maharashtra, a banking body corporate incorporated under the
Banking Companies (Acquisition and Transfer of Undertaking) Act 1970
and carrying on business inter alia from N.S. Road, Branch, 3N.S. Road,
P.O. G.P.O. & P.S. N.S. Road, District Kolkata700001, West Bengal
through is Branch Manager.
..... Opposite Parties
CORAM: HON'BLE THE ACTING CHIEF JUSTICE
For the Petitioner : Mr. Indrajit Sinha, Ajay Kr. Sah, Advocates
For the Railway : Mr. Gautam Rakesh, Advocate
05/Dated: 28th July, 2017
1. This arbitration application has been preferred under Sub Section 6 of Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an Arbitrator for the dispute arisen between the parties to this arbitration application, in pursuance of an agreement dated 31st October, 2014 (Annexure1) and especially clause no. 64 thereof.
2. Having heard counsels for both the sides and looking to the facts and circumstances of the case, it appears that an agreement has been entered into between the parties to this Arbitration Application on 31st October, 2014 (Annexure1 to the memo of this arbitration application). For ready reference clause no. 64 thereof reads as under:
2"64. (1) Demand For Arbitration
64.(1) (i) In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the "excepted matters" referred to in Clause 63 of these conditions, the contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters shall demand in writing that the dispute or difference be referred to arbitration.
64.(1) (ii) The demand for arbitration shall specify the matters which are in question, or subject of the dispute or difference as also the amount of claim itemwise. Only such dispute(s) or difference(s) in respect of which the demand has been made, together with counter claims or set off, shall by the Railway, shall be referred to arbitration and other matters shall not be included in the reference.
64.(1) (iii) (a) The Arbitration proceedings shall be assumed to have commenced from the day, a written and valid demand for arbitration is received by the Railway.
(b) The claimant shall submit his claim stating the facts supporting the claims alongwith all relevant documents and the relief or remedy sought against each claim within a period of 30 days from the date of appointment of Arbitral Tribunal.
(c) The Railway shall submit its defence statement and counter claim(s), if any, within a period of 60 days of receipt of copy of claims from Tribunal thereafter, unless otherwise extension has been granted by Tribunal.
(d) Place of Arbitration: The place of arbitration would be within the geographical limits of the Division of the Railway where the cause of action arose or the Headquarters of the concerned Railway or any other place with the written consent of both the parties.
64.(1) (iv) No new claim shall be added during proceedings by either party. However, a party may amend or supplement the original claim or defence thereof during the course of arbitration proceedings subject to acceptance by Tribunal having due regard to the delay in making it.
64.(1) (v) If the contractor(s) does/do not prefer his/their specific and final claims in writing, within a period of 90 days of receiving the intimation from the Railways that the final bill is ready for payment, he/they will be deemed to have waived his/their claim(s) and the Railway shall be discharged and released of all liabilities under the contract in respect of these claims.
64.(2) Obligation during pendency of arbitration Work under the contract shall, unless otherwise directed by the Engineer, continue during the arbitration proceedings, and no payment due or payable by the Railway shall be withheld on account of such proceedings, provided, however, it shall be open for Arbitral Tribunal to consider and decide whether or not such work should continue during arbitration proceedings.
64.(3) Appointment of Arbitrator
64.(3) (a)(i) In cases where the total value of all claims in question added together does not exceed Rs.10,00,000/ (Rupees ten lakhs only), the Arbitral Tribunal shall consist of a Sole arbitrator who shall be a Gazetted Officer of Railway not below JA Grade, nominated by the General 3 Manager. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by GM.
64.(3) (a) (ii) In cases not covered by the Clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a Panel of three Gazetted Railway Officers not below JA Grade or 2 Railway Gazetted Officers not below JA Grade and a retired Railway Officer, retired not below the rank of SAG Officer, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway Officers of one or more departments of the Railway which may also include the name(s) of retired Railway Officer(s) empanelled to work as Railway Arbitrator to the contractor withing 60 days from the day when a written and valid demand for arbitration is received by the G.M. Contractor who will be asked to suggest to General Manager at least 2 names out of the panel for appointment as contractor's nominee within 30 days from the date of dispatch of the request by Railway. The General Manager shall appoint at least one out of them as the contractor's nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the 'presiding arbitrator' from amongst the 3 arbitrators so appointed. GM shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of contractor's nominees. While nominating the arbitrators, it will be necessary to ensure that one of them is from the Accounts Department. An officer of Selection Grade of the Accounts Department shall be considered of equal status to the officers in SA grade of other departments of the Railway for the purpose of appointment of arbitrator.
64.(3) (a)(iii) If one or more of the arbitrators appointed as above refuses to act as arbitrator, withdraws from his office as arbitrator, or vacates his/their office/offices or is/are unable or unwilling to perform his functions as arbitrator for any reason whatsoever or dies or in the opinion of the General Manager fails to act without undue delay, the General Manager shall appoint new arbitrator/arbitrators to act in his/their place in the same manner in which the earlier arbitrator/arbitrators had been appointed. Such reconstituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator(s).
64.(3) (a)(iv) The Arbitral Tribunal shall have power to call for such evidence by way of affidavits or otherwise as the Arbitral Tribunal shall think proper, and it shall be the duty of the parties hereto to do or cause to be done all such things as may be necessary to enable the Arbitral Tribunal to make the award without any delay. The Arbitral Tribunal should record day today proceedings. The proceedings shall normally be conducted on the basis of documents and written statements.
64.(3) (a)(v) While appointing arbitrator(s) under SubClause (i), (ii) &
(iii) above, due care shall be taken that he/they is/are not the one/those who had an opportunity to deal with the matters to which the contract relates or who in the course of his/their duties as Railway servant(s) expressed views on all or any of the matters under dispute or differences. The proceedings of the Arbitral Tribunal or the award made by such Tribunal will, however, not be invalid merely for the reason that one or more arbitrator had, in the course of his service, opportunity to deal with the matters to which the contract relates or who in the course of his/their duties expressed views on all or any of the matters under dispute.
64.(3) (b)(i) The arbitral award shall state item wise, the sum and reasons upon which it is based. The analysis and reasons shall be detailed enough so that the award could be inferred therefrom.
464.(3) (b)(ii) A party may apply for corrections of any computational errors, any typographical or clerical errors or any other error of similar nature occurring in the award of a Tribunal and interpretation of a specific point of award to Tribunal within 60 days of receipt of the award.
64.(3) (b)(iii) A party may apply to Tribunal within 60 days of receipt of award to make an additional award as to claims presented in the arbitral proceedings but omitted from the arbitral award.
64(4) In case of the Tribunal, comprising of three Members, any ruling on award shall be made by a majority of Members of Tribunal. In the absence of such a majority, the views of the Presiding Arbitrator shall prevail. 64(5) Where the arbitral award is for the payment of money, no interest shall be payable on whole or any part of the money for any period till the date on which the award is made.
64.(6) The cost of arbitration shall be borne by the respective parties. The cost shall interallia include fee of the arbitrator(s), as per the rates fixed by Railway Board from time to time and the fee shall be borne equally by both the parties. Further, the fee payable to the arbitrator(s) would be governed by the instructions issued on the subject by Railway Board from time to time irrespective of the fact whether the arbitrator(s) is/are appointed by the Railway Administration or by the court of law unless specifically directed by Hon'ble court otherwise on the matter.
64.(7) Subject to the provisions of the aforesaid Arbitration and Conciliation Act 1996 and the rules thereunder and any statutory modifications thereof shall apply to the arbitration proceedings under this Clause."
(Emphasis Supplied.)
3. The contract was for construction of the bridges within the State of Jharkhand which was terminated and hence, the dispute has arisen for the sizable amount, as claimed by this applicant.
4. For appointment of an Arbitrator, a notice was given by this applicant on 23rd September, 2016 (Annexure3 to the memo of this Arbitration Application). In this application request was made by this applicant for appointment of learned Arbitrator and the names of learned Arbitrators have also been suggested, who are the former judges of High Court of Jharkhand.
5. The respondentRailway Authority has given reply on 20th February, 2017 which is at Annexure4 wherein the respondent has replied that any retired employee of the Railway Authority may be chosen by this applicant. Four names were given, who are the retired employees of the Railway Authority.
6. It further appears from the arguments canvassed by the counsel for both the sides that this applicant has given reply on 1st March, 2017 (Annexure5) referring and reminding the provision of Section 12 and more particularly Sub Section 5 thereof of the Arbitration and Conciliation Act, 1996 which was introduced with effect from 23rd October, 2015. For 5 the ready reference Section 12(5) of the Arbitration and Conciliation Act, 1996 reads as under: "12. Grounds for Challenge :
......................................... .................................
[(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this subsection by an express agreement in writing.]"
(Emphasis Supplied) In view of the aforesaid provision of the Arbitration and Conciliation Act, 1996, the names of the arbitrators suggested by the respondents cannot be appointed as an Arbitrator. They are retired employees of respondent Railway Authority, who will be party to the arbitration proceeding.
7. This Section 12(5) is to be read with 7th Schedule appended to the Arbitration and Conciliation Act, 1996 and the relevant part of the 7th Schedule reads as under : "THE SEVENTH SCHEDULE [see section 12(5)] ARBITRATOR'S RELATIONSHIP WITH THE PARTIES OR COUNSEL
1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.
2. ...........................................................
3. ............................................................."
(Emphasis Supplied) In view of the aforesaid provision of 7th Schedule and especially 1st item thereof the retired employee of the Railway Authority cannot be appointed as an Arbitrator, even though the agreement is earlier than the date on which the amendment has been brought into effect.
8. Section 12(5) starts with the words "notwithstanding any prior agreement to the contrary ..........." meaning thereby to even if there is an agreement, which permits the Railway Authority to appoint their own existing employees or retired employees as arbitrators, by the virtue of Sub Section 5 of Section 12 of the Arbitration and Conciliation Act, 1996, they cannot be appointed as arbitrators.
69. It has been held by Hon'ble Supreme Court in the case of North Eastern Railway & Ors. Vs Tripple Engineering Works reported in (2014) 9 SCC 288 especially in paragraph no. 10 thereof, as under: "10. In the present case Clauses 64(3)(a)(ii) and (iii) of the general condition of contract do not prescribe any specific qualification of the arbitrators that are to be appointed under the agreement except that they should be Railway Officers. As already noticed, even if the arbitration agreement was to specifically provide for any particular qualification(s) of an arbitrator the same would not denude the power of the Court acting under Section 11(6), in an appropriate case to depart therefrom. In Singh Builders Syndicate pendency of arbitration proceedings for over a decade was found by this Court to be a mockery of the process. In the present case, admittedly the award in respect of disputes and differences arising out of Contract No. CAO/CON/722 is yet to be passed. Though the appellant Railways has in its pleadings made a feeble attempt to contend that the process of arbitration arising out of the said contract has been finalized, no material, whatsoever, has been laid before the Court in support thereof. The arbitration proceedings to resolve the disputes and differences arising out of Contract No.CAO/CON/738 has not even commenced. A period of nearly two decades has elapsed since the contractor had raised his claims for alleged wrongful termination of the two contracts. The situation is distressing, and to say the least disturbing. The power of the Court under the Act has to be exercised to effectuate the remedy provided thereunder and to facilitate the mechanism contemplated therein. In a situation where the procedure and process under the Act has been rendered futile, the power of the Court to depart from the agreed terms of appointment of arbitrators must be acknowledged in the light of the several decisions noticed by us." (Emphasis Supplied)
10. In view of the aforesaid decision to be read with Section 12(5) to be read with item no.1 of the 7th Schedule of the Arbitration and Conciliation Act, 1996, despite the agreement entered into between the parties dated 31st October, 2014 the aforesaid Section and Schedule are applicable and hence, neither the existing employees nor the retired employees of the Railway can be appointed as Arbitrators, where Railway Authority is a party to the arbitration proceedings. Justice must not only be done, but, must appear to have done also.
11. Counsel appearing for the respondents Railway Authority have relied upon the decision rendered by Hon'ble Supreme Court in the case of Voestalpine Schienen GMBH Vs Delhi Metro Rail Corporation Limited reported in (2017) 4 SCC 665. The ratio decidendi of the aforesaid decision is not applicable to the facts of the present case mainly for the reason that in the aforesaid decision as narrated in paragraph no.13 thereof, it has been observed by Hon'ble Supreme Court that from the panel of more than 31 Arbitrators suggested by the Delhi Metro Rail 7 Corporation Limited, not a single Arbitrator was an employee of Delhi Metro Rail nor they were exemployees of DMRC. For ready reference paragraph no. 13 of the aforesaid decision reads as under: "13. Mr. Mukul Rohatgi, learned Attorney General justifying the stand taken by the respondent, with the aid of the provisions of the Act and the case law, also drew attention to a subsequent development. He pointed out that though in its earlier letter dated 872016 addressed by the respondent to the petitioner, a list of persons was given asking the petitioner to choose its arbitrator therefrom, the respondent has now forwarded to the petitioner the entire panel of arbitrators maintained by it. This fresh list contains as many as 31 names and therefore, a wide choice is given to the petitioner to nominate its arbitrator therefrom. It was further pointed out that many panelists were the retired officers from Indian Railways who retired from high positions and were also having high degree of technical qualifications and experience. The said list included five persons who were not from the Railways at all but were the exofficers of the other bodies like, Delhi Development Authority (DDA) and Central Public Works Department (CPWD). No one was serving or exemployee of DMRC. He further submitted that merely because these persons had served in the Railways or other government departments, would not impinge upon their impartiality."
(Emphasis Supplied)
12. In view of the aforesaid factual aspects of the matter, the ratio propounded by the Hon'ble Supreme Court in the aforesaid decision is not applicable because in the facts of the present case, all the four names suggested vide letter dated 20th February, 2017, written by Railway Authority (Annexure4) they are exemployees of the Railway Authority itself.
13. Counsel appearing for the respondents Railways Authority have also relied upon the decision rendered by the Hon'ble Supreme Court reported in (2004) 10 SCC 504 as well as (2008) 10 SCC 240.
None of the aforesaid decisions are helpful to the Railway Authority mainly for the reason that only after 23rd October, 2015 Sub Section 5 of the Section 12 has been inserted which is to be read with, 7th Schedule item no. 1 and hence, in the aforesaid both the decisions, there is no reference of Section 12(5) to be read with item no.1 of the 7th Schedule of the Act, 1996. Hence, none of the aforesaid two decisions are helpful to the respondent Railway Authority.
14. Counsel appearing for the respondent Railway Authority has also relied upon para no. 26 of the decision rendered by Hon'ble Supreme Court reported in (2017) 4 SCC 665.
8It appears that this paragraph is also not helpful to the respondents Railway Authority mainly for the reason that in the facts of the present case all the four names suggested as an Arbitrators are the exemployees of the Railway whereas, Delhi Metro Rail Corporation Limited has suggested 31 names of the Arbitrator and none of them was even present or past employee of the Delhi Metro Rail Corporation Limited. For ready reference paragraph no. 26 of the aforesaid decision reads as under: "26. It cannot be said that simply because the person is a retired officer who retired from the government or other statutory corporation or public sector undertaking and had no connection with DMRC (the party in dispute), he would be treated as ineligible to act as an arbitrator. Had this been the intention of the legislature, the Seventh Schedule would have covered such persons as well. Bias or even real likelihood of bias cannot be attributed to such highly qualified and experienced persons, simply on the ground that they served the Central Government or PSUs, even when they had no connection with DMRC. The very reason for empanelling these persons is to ensure that technical aspects of the dispute are suitably resolved by utilising their expertise when they act as arbitrators. It may also be mentioned herein that the Law Commission had proposed the incorporation of the Schedule which was drawn from the red and orange list of IBA guidelines on conflict of interest in international arbitration with the observation that the same would be treated as the guide "to determine whether circumstances exist which give rise to such justifiable doubts". Such persons do not get covered by red or orange list of IBA guidelines either."
(Emphasis Supplied)
15. Looking to the present facts of the case that all the four Arbitrators suggested by the respondents Railway authority are the exemployees of the Railway and looking to the 7th Schedule to be read with Section 12(5) of the Arbitration and Conciliation Act, 1996, the aforesaid paragraph is not of much helpful to the respondents on the contrary, as emphasized hereinabove in paragraph no. 26, Arbitrators should not have any connection with the party to the arbitration proceedings.
16. In view of the aforesaid facts, reasons and judicial pronouncements, no retired employee of Railway Authority can be appointed as an Arbitrator, as suggested vide Railway Authority letter dated 20th February, 2017 (Annexure4 to this Arbitration Application).
17. Looking to the peculiar facts and circumstances of the case I, hereby, appoint retired Hon'ble Mr. Justice D.G.R. Patnaik, as an Arbitrator to resolve the disputes between the parties as stated in Arbitration Application No. 16 of 2017.
918. Learned Arbitrator is requested to decide the disputes between the parties as prescribed by the Arbitration and Conciliation Act, 1996. Both the parties shall cooperate the hearing before the learned Arbitrator and they shall not ask for any unnecessary adjournment.
19. Registrar General of this Court is directed to supply a copy of this Arbitration Application alongwith annexures and affidavits as well as the order passed by this Court, to retired Hon'ble Mr. Justice D.G.R. Patnaik.
(D.N. Patel, A.C.J.) VK/