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Madhya Pradesh High Court

M/S Mks Engineeringh Co. Pvt. Ltd. vs Union Of India (Ministry Of Railway) on 10 August, 2017

     HIGH COURT OF MADHYA PRADESH, PRINCIPAL SEAT AT
                       JABALPUR

Case No.                             A.C. No.03/2016
Parties Name                                 MKS Engineering Co. Pvt. Ltd.
                                                          Vs.
                                               Union of Indian & others
Date of Judgment                     10/08/17
Bench Constituted                    Single Bench
Judgment delivered by                Justice Sujoy Paul
Whether approved for reporting YES/NO
Name of counsels for parties         Applicant: Mr. A.K. Jain, Advocate

                                     Respondents: Mr. Atul Choudhari,

Advocate Law laid down -

Significant paragraph numbers                              -

                                     (Order)
                                    10.08.2017

This application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeks appointment of an independent arbitrator for resolving the dispute between the parties.

2. Mr. A.K. Jain, learned counsel for the applicant submits that the applicant submitted an application/dispute (Annexure-A/32) under Section 63 of the General Conditions of Contract Part-I. In the entire application, the applicant nowhere prayed for appointment of arbitrator. By attracting in-house remedy, he prayed for making payment of the with-held amount. It is submitted that this application is erroneously treated to be an application seeking appointment of an arbitrator. Accordingly, by order dated 12.09.2016 (Annexure-A/33) certain names were suggested for the purpose of attracting mechanism of arbitration. The applicant promptly sent another letter dated 29.09.2016 (Annexure-A/35) and prayed for appointment of an arbitrator for the first time. Mr. Jain, submits that he prayed for appointment of Former District Judge as a sole arbitrator. It is submitted that Arbitration and Conciliation Act, 1996 had undergone drastic

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amendment on 29th of October, 2015. As per Section 12(5) and Schedule V the departmental authority cannot be appointed as an arbitrator.

3. Per-contra, Mr. Atul Choudhari, learned counsel for the respondents submits that the applicant's application (Annexure-A/32) was treated as an application seeking appointment of arbitrator. In turn, the applicant attended the meeting with General Manager, West Central Railway, Jabalpur on 30.08.2016. In the meeting, the applicant agreed to resolve all the matters with the mechanism of arbitration. Hence, applicant cannot take a U-turn and he must choose the arbitrators from the panel suggested in letter dated 12.09.2016 (Annexure-A/33). Learned counsel for the respondents submitted that Annexure- A/32 was filed prior to introduction of the amendment act of 2015 and therefore the said provision will apply in the teeth of statutory provision mentioned under Section 26 of the amendment of 2015.

4. No other point has been pressed by the learned counsel for the parties.

5. I have bestowed my anxious consideration on the rival contention of the parties and perused the record.

6. Before dealing with the rival contentions, it is apposite to quote Section 21 of the Act, which reads as under:

"21. Commencement of arbitral proceedings.- Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent"

[Emphasis Supplied]

7. A plane reading of this provision makes it clear that arbitration proceedings commences on the date on which the request for appointment of an arbitrator is received by the order side. Despite specific quarry, learned counsel for the respondents is unable to show from Annexure-A/32 that such request was made by the applicant in this application. Putting it differently, Annexure-A/32 is not pregnant with any such prayer for appointment of an arbitrator. Thus, I am not inclined to hold that Section 21 is attracted on the strength of Annexure-

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A/32. Arbitral proceedings have not been commenced on preferring Annexure- A/32.

8. Clause 63 of General Conditions of Contract reads as under:

"63. Matters finally determined by the railway - All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the work or after its completion and whether before or after the determination of the contract shall be referred by the contractor to the Railway and the Railway shall within 120 days after receipt of the contractor's representation make and notify decisions on all matter referred to by the contractor in writing provided that matters for which provision has been made in clauses 8(a), 18, 22(5), 39, 43(2), 45(a), 55, 55-A(5), 57, 57A, 61(1), 61(2) and 62(1)(b) of General Conditions of Contract or in any clause of the special conditions of the contract shall be deemed as 'excepted matters' and decisions of the Railway authority, thereon shall be final and binding on the contractor provided further that 'excepted matters' shall stand specifically excluded from the purview of the arbitration clause and not be referred to arbitration."

9. A careful reading of this provision makes it clear that in this clause the railways have to take decision on all the matters referred to by the contractor. Thus, this is a in-house mechanism provided under Section 63, wherein the demand may be decided by the administration itself. Thereafter, only the question of demand or appointment of an arbitrator would arise. In the present case, the application preferred by the the applicant under Section 32 is in relation to Clause 63 and not in relation to Clause 64 of the agreement. Accordingly, it can be safely concluded that respondents have erred in proposing names of arbitrator by treating the said application as an application seeking appointment of arbitrator.

10. The second contention of the learned counsel for the respondents is based on alleged agreement/consent of applicant to get the matter resolved through departmental arbitrator. I do not find any merit in this contention. A plain reading of Annexure-A/33 dated 12.09.2016 shows that the applicant has only given consent to adopt the mechanism of arbitration, but it nowhere shows that the applicant has given consent for adjudication by departmental arbitrator. Apart from this, as held in AIR 1954 SC 340, [Kiran Singh vs. Chaman Paswan] the

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jurisdiction cannot be assumed on the basis of consent of the parties. The jurisdiction can be assumed/traced from the enabling contractually/statutory provision. Thus, the document dated 12.09.2016 is of no assistance to the respondents. The applicant submitted another application dated 29 th September, 2016 for appointment of an independent arbitrator. Since, no arbitrator was appointed, the present application is filed.

11. In view of the aforesaid factual back drop, two things are crystal clear. Firstly, that after receiving the application dated 29.09.2016 (Annexure-A/35), the respondents have not appointed any arbitrator and therefore in view of judgment of Supreme Court delivered in the case reported in 2013 (4) SCC 35, M/s. Deep Trading Co. vs. M/s. Indian Oil Corporation & others, the respondents now cannot be permitted to appoint an arbitrator. Secondly, the arbitration proceedings commenced after preferring the representation dated 29.09.2016 (Annexure-A/35). By this time, the amending act of 2015 came into being w.e.f. 29th of October, 2015. As per the legislative mandate ingrained in Section 12(5) r/w Schedule V of the amending act, the departmental arbitrator cannot be permitted to resolve the dispute.

12. Thus, I am satisfied that the applicant has fulfilled the formalities as mentioned in the arbitration agreement for appointment of an arbitrator. Since, respondents have failed to appoint any arbitrator, it is a fit case where power under Sub-section 6 of Section 11 can be exercised. Resultantly, I deem it proper to provisionally appoint Shri M.A. Khan, Former District Judge, 1157, South Civil Lines, Pachpari, Jabalpur (M.P.) as an arbitrator in this matter. It is pertinent to mention here that both the learned counsel appearing for their respective clients agreed for appointment of said arbitrator. The Registry shall seek declaration as per Sub-section 8 of Section 11 from the appointed arbitrator.

13. List this matter alongwith said declaration on 21st August, 2017.

                                                                 (Sujoy Paul)
s@if                                                               Judge