Rajasthan High Court - Jaipur
M/S Rajendra Prasad Bansal Partnership ... vs Union Of India on 24 January, 2020
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Arbitration Application No.69/2018
M/s Rajendra Prasad Bansal Partnership Firm, Through Its
Partner Shri Rajendra Prasad Bansal Having Its Registered Office
At New Subji Mandi Bayana District Bharatpur (Raj) 321401
----Petitioner
Versus
1. Union Of India, Through General Manager West Central
Railway Wcr Headquarter South Civil Lines, Jabalpur
2. Divisional Railway Manager (Wa), West Central Railway
Kota-324002
----Respondents
Connected With S.B. Arbitration Application No.76/2018 M/s Rajendra Prasad Bansal Partnership Firm, Through Its Partner Shri Rajendra Prasad Bansal, Having Its Registered Office At New Sabji Mandi, Bayana, District Bharatpur, Rajasthan-321401.
----Petitioner Versus
1. Union Of India Through General Manager West Central Railway, Wcr Headquater, South Civil Lines, Jabalpur.
2. Divisional Railway Manager (Wa), West Central Railway, Kota-324002.
----Respondents S.B. Arbitration Application No.77/2018 M/s Rajendra Prasad Bansal Partnership Firm, Through Its Partner Shri Rajendra Prasad Bansal, Having Its Registered Office At New Sabji Mandi, Bayana, District Bharatpur, Rajasthan-321401.
----Petitioner Versus
1. Union Of India, Through General Manager West Central Railway,wcr Headquater, South Civil Lines, Jabalpur.
2. Divisional Railway Manager (Wa), West Central Railway, Kota-324002.
(Downloaded on 16/02/2020 at 10:47:01 AM) (2 of 9) [ARBAP-69/2018]
----Respondents
S.B. Arbitration Application No.78/2018 M/s Rajendra Prasad Bansal Partnership Firm, Through Its Partner Shri Rajendra Prasad Bansal, Having Its Registered Office At New Sabji Mandi, Bayana, District Bharatpur, Rajasthan-321401.
----Petitioner Versus
1. Union Of India, Through General Manager West Central Railway Wcr Headquater, South Civil Lines, Jabalpur.
2. Divisional Railway Manager (Wa, West Central Railway, Kota-324002.
----Respondents S.B. Arbitration Application No.79/2018 M.s Rajendra Prasd Bansal Partnership Firm, Through Its Partner Shri Rajendra Prasad Bansal, Having Its Registered Office At New Sabji Mandi, Bayana, District Bharatpur, Rajasthan-321401.
----Petitioner Versus
1. Union Of India, Through General Manger West Central Railway, Wcr Headquater, South Civil Lines, Jabalpur.
2. Divisional Railway Manager (Wa), West Central Railway, Kota-324002.
----Respondents
For Petitioner(s) : Mr. Jatin Agarwal
For Respondent(s) : Mr. S.N. Meena
HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA Order 24/01/2020
1. The applicants have moved applications under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred as 'the Act of 1996') for appointment of an arbitrator for settlement of disputes and differences which have arisen between (Downloaded on 16/02/2020 at 10:47:01 AM) (3 of 9) [ARBAP-69/2018] the parties. The applicants are the partnership firms, which state to have participated in bid offered by the Railways for the purpose of contract for various type of works. After completion of work, disputes have arisen with regard to the payment of final bill and release of security deposits for which the applicants claim interest and also claim release of the amount of final bill.
2. Notices were sent raising claims to the respondent-Railways and the arbitration clause existing in the agreement, namely, Clause 64(1) was invoked vide notice dated 26.12.2017.
3. Reply to the notice was sent by the Railways giving a consent for waiver of applicability of Sections 12(5) and 31-A(5) of the Arbitration and Conciliation Amendment Act, 2015 whereafter the applicants refusing to the same have moved the present applications under Section 11(6) of the Act of 1996.
4. Reply to these applications have been filed by the Railways and stated that so far as security deposit amount is concerned, the same has already been released. While there are disputes with regard to release of final bill, it is stated that the applicants have already submitted their no claim certificate and they are thus estopped to take up the present applications. Further, it is stated that period of 90 days was over for raising of claims after the final bill was prepared.
5. This court is of the view that that there is a dispute existing between the parties. Defence as noticed above, cannot always be taken by the concerned respondent-railways before the arbitrator who shall consider all the submissions of both the parties and decide the dispute in terms of the Act of 1996. Learned counsel submits that as per the terms of the contract particularly Clause 34.5.4, the arbitrator stood already designated as an Officer of the (Downloaded on 16/02/2020 at 10:47:01 AM) (4 of 9) [ARBAP-69/2018] Railways. In view of the judgment in the case of Perkins Eastman Architect DPC & Others Versus HSCC (India) Ltd.
reported in 2019 (17) SCALE 139, a person having an interest in the dispute or in the outcome of decision shall be held to be ineligible to act as an arbitrator and learned counsel, therefore, submits that the appointment may be made of an independent person. Learned counsel for the respondent-Railways has passed over to this Court a list of Retired Railway Officers, who have been nominated for arbitration cases in the Western Railways.
6. I have considered the submissions.
7. Admittedly, there is a dispute pending between the parties.
In Perkins Easttman Architect DPC & Others (supra), it was observed as under:-
"13. However, the point that has been urged, relying upon the decision of this Court in Walter Bau AG MANU/SC/0053/2015 : (2015) 3 SCC 800 and TRF Limited MANU/SC/0755/2017 : (2017) 8 SCC 377, requires consideration. In the present case Clause 24 empowers the Chairman and Managing Director of the Respondent to make the appointment of a sole arbitrator and said Clause also stipulates that no person other than a person appointed by such Chairman and Managing Director of the Respondent would act as an arbitrator. In TRF Limited MANU/SC/0755/2017 : (2017) 8 SCC 377, a Bench of three Judges of this Court, was called upon to consider whether the appointment of an arbitrator made by the Managing Director of the Respondent therein was a valid one and whether at that stage an application moved Under Section 11(6) of the Act could be entertained by the Court. The relevant Clause, namely, Clause 33 which provided for resolution of disputes in that case was under:
33. Resolution of dispute/arbitration
(a) In case any disagreement or dispute arises between the buyer and the seller under or in connection with the PO, both shall make every effort to resolve it amicably by direct informal negotiation.(Downloaded on 16/02/2020 at 10:47:01 AM)
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(b) If, even after 30 days from the commencement of such informal negotiation, seller and the buyer have not been able to resolve the dispute amicably, either party may require that the dispute be referred for resolution to the formal mechanism of arbitration.
(c) All disputes which cannot be settled by mutual negotiation shall be referred to and determined by arbitration as per the Arbitration and Conciliation Act, 1996 as amended.
(d) Unless otherwise provided, any dispute or difference between the parties in connection with this agreement shall be referred to sole arbitration of the Managing Director of buyer or his nominee. Venue of arbitration shall be Delhi, and the arbitration shall be conducted in English language.
(e) The award of the Tribunal shall be final and binding on both, buyer and seller.
14. In TRF Limited MANU/SC/0755/2017 : (2017) 8 SCC 377, the Agreement was entered into before the provisions of the Amending Act (Act No. 3 of 2016) came into force. It was submitted by the Appellant that by virtue of the provisions of the Amending Act and insertion of the Fifth and Seventh Schedules in the Act, the Managing Director of the Respondent would be a person having direct interest in the dispute and as such could not act as an arbitrator. The extension of the submission was that a person who himself was disqualified and disentitled could also not nominate any other person to act as an arbitrator. The submission countered by the Respondent therein was as under:
7.1. The submission to the effect that since the Managing Director of the Respondent has become ineligible to act as an arbitrator subsequent to the amendment in the Act, he could also not have nominated any other person as arbitrator is absolutely unsustainable, for the Fifth and the Seventh Schedules fundamentally guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence and impartiality of the arbitrator. To elaborate, if any person whose relationship with the parties or the counsel or the subject-matter of dispute falls under any of the categories specified in the Seventh Schedule, he is ineligible to be (Downloaded on 16/02/2020 at 10:47:01 AM) (6 of 9) [ARBAP-69/2018] appointed as an arbitrator but not otherwise.
The issue was discussed and decided by this Court as under:
50. First, we shall deal with Clause (d). There is no quarrel that by virtue of Section 12(5) of the Act, if any person who falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as the arbitrator. There is no doubt and cannot be, for the language employed in the Seventh Schedule, the Managing Director of the Corporation has become ineligible by operation of law. It is the stand of the learned Senior Counsel for the Appellant that once the Managing Director becomes ineligible, he also becomes ineligible to nominate. Refuting the said stand, it is canvassed by the learned Senior Counsel for the Respondent that the ineligibility cannot extend to a nominee if he is not from the Corporation and more so when there is apposite and requisite disclosure. We think it appropriate to make it clear that in the case at hand we are neither concerned with the disclosure nor objectivity nor impartiality nor any such other circumstance. We are singularly concerned with the issue, whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an arbitrator. At the cost of repetition, we may state that when there are two parties, one may nominate an arbitrator and the other may appoint another. That is altogether a different situation. If there is a Clause requiring the parties to nominate their respective arbitrator, their authority to nominate cannot be questioned. What really in that circumstance can be called in question is the procedural compliance and the eligibility of their arbitrator depending upon the norms provided under the Act and the Schedules appended thereto. But, here is a case where the Managing Director is the "named sole arbitrator" and he has also been conferred with the power to nominate one who can be the arbitrator in his place. Thus, there is subtle distinction. In this regard, our attention has been drawn to a two-Judge Bench decision in State of Orissa v.
Commr. of Land Records & Settlement MANU/SC/0549/1998 : (1998) 7 SCC 162. In the said case, the question arose, can the Board of Revenue revise the order passed by its delegate. Dwelling upon the said proposition, the Court held: (SCC p. 173, para 25) (Downloaded on 16/02/2020 at 10:47:01 AM) (7 of 9) [ARBAP-69/2018]
25. We have to note that the Commissioner when he exercises power of the Board delegated to him Under Section 33 of the Settlement Act, 1958, the order passed by him is to be treated as an order of the Board of Revenue and not as that of the Commissioner in his capacity as Commissioner. This position is clear from two rulings of this Court to which we shall presently refer. The first of the said rulings is the one decided by the Constitution Bench of this Court in Roop Chand v. State of Punjab MANU/SC/0332/1962 : AIR 1963 SC 1503. In that case, it was held by the majority that where the State Government had, Under Section 41(1) of the East Punjab Holdings (Consolidation and Prevention of Fragmentation) Act, 1948, delegated its appellate powers vested in it Under Section 21(4) to an "officer", an order passed by such an officer was an order passed by the State Government itself and "not an order passed by any officer under this Act" within Section 42 and was not revisable by the State Government. It was pointed out that for the purpose of exercise of powers of revision by the State Under Section 42 of that Act, the order sought to be revised must be an order passed by an officer in his own right and not as a delegate of the State. The State Government was, therefore, not entitled Under Section 42 to call for the records of the case which was disposed of by an officer acting as its delegate.
51. Be it noted in the said case, reference was made to Behari Kunj Sahkari Awas Samiti v. State of U.P. MANU/SC/0811/1997 : (1997) 7 SCC 37, which followed the decision in Roop Chand v. State of Punjab MANU/SC/0332/1962 : AIR 1963 SC 1503. It is seemly to note here that the said principle has been followed in Indore Vikas Pradhikaran.
52. Mr. Sundaram has strongly relied on Pratapchand Nopaji4. In the said case, the three-Judge Bench applied the maxim "qui facit per alium facit per se". We may profitably reproduce the passage: (SCC p. 214, para 9)
9. ... The principle which would apply, if the objects are struck by Section 23 of the Contract Act, is embodied in the maxim: "qui facit per alium facit per se" (what one does through another is done by oneself). To put it in another form, that which cannot be done directly may not be done indirectly by engaging another outside the prohibited area to do the illegal act within the prohibited area. It is immaterial whether, for the doing of such an illegal act, the agent employed is given the wider powers (Downloaded on 16/02/2020 at 10:47:01 AM) (8 of 9) [ARBAP-69/2018] or authority of the "pucca adatia", or, as the High Court had held, he is clothed with the powers of an ordinary commission agent only.
53. The aforesaid authorities have been commended to us to establish the proposition that if the nomination of an arbitrator by an ineligible arbitrator is allowed, it would tantamount to carrying on the proceeding of arbitration by himself. According to the learned Counsel for the Appellant, ineligibility strikes at the root of his power to arbitrate or get it arbitrated upon by a nominee.
54. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so."
8. In view of the law laid down in Perkins Eastman Architect DPC & Others (supra), this court is of the view that an independent person can be appointed for conducting arbitration proceedings in the present cases and for the said purpose, the parties are directed to present themselves for arbitration before Hon'ble Mr. Justice Kailash Chandra Sharma (Retd.), 20/24 Near Housing Board, Bhrigu Path Mansarovar, Jaipur (94141-14941).(Downloaded on 16/02/2020 at 10:47:01 AM)
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9. These arbitration applications stand allowed. The Arbitrator shall be entitled to lay down its fees as provided under Manual of Procedure for Alternative Disputes Resolution, 2009 as amended from time to time. Formal consent shall be obtained from Hon'ble Mr. Justice Kailash Chandra Sharma (Retd.), 20/24 Near Housing Board, Bhrigu Path Mansarovar, Jaipur (94141-14941).
(SANJEEV PRAKASH SHARMA),J Karan Bhutani /531/6-10 (Downloaded on 16/02/2020 at 10:47:01 AM) Powered by TCPDF (www.tcpdf.org)