Calcutta High Court
Shree Laxmi Iron And Steel Works Private ... vs The Eastern Railway And Ors on 18 January, 2022
Author: Prakash Shrivastava
Bench: Prakash Shrivastava
IN THE HIGH COURT AT CALCUTTA
ORIGINAL CIVIL JURISDICTION
(Original Side)
A.P. No. 316 of 2020
(Through Video Conference)
Reserved on: 20.12.2021
Pronounced on: 18.01.2022
SHREE LAXMI IRON AND STEEL WORKS PRIVATE LIMITED
...Applicant
-Vs-
THE EASTERN RAILWAY AND ORS.
...Respondents
Present:-
Mr. Debnath Ghosh Mr. Avijit Dey, Advocates ... for the applicant Mr. Shankar Ranjan Sen, Advocate ... for the respondents Coram: THE HON'BLE JUSTICE PRAKASH SHRIVASTAVA, CHIEF JUSTICE Prakash Shrivastava, CJ:
1. This application under Section 11 of the Arbitration and Conciliation Act, 1996 has been filed for appointment of arbitrator to resolve the dispute between the parties.
2. Case of the applicant is that the applicant had submitted offer in pursuance to the Notice Inviting Tender floated by the respondents, and, thereafter, purchase order dated 10th of August 2019 was issued to the applicant for supply of 850 sets of joggled fishplates as per the specifications mentioned in the Tender Documents. The delivery 2 A.P. No. 316 of 2020 period, at the instance of the applicant, was extended by the Railways by a letter dated 26th November 2018. There was some dispute about the inspection by the inspecting agency. Hence, the delivery period at the request of the applicant was again extended up to 8th March 2019 by a letter dated 8th of January 2019. According to the applicant, thereafter, the materials were duly inspected by the inspecting agency and the applicant had dispatched 265 sets of joggled fishplates to the respondents on 25th February, 2019 but respondents had refused to accept it. Hence the dispute arose between the parties. In paragraph 23 of the A.P., the applicant has disclosed that he suffered the loss of damages to the tune of Rs. 90,57,903/- (Rupees Ninety Lakhs Fifty Seven Thousand Nine Hundred Three). The applicant, vide letter dated 26th of June 2020, had invoked the arbitration clause and had sent a panel of three senior advocates seeking concurrence of the respondents for appointment of arbitrator from the said panel. Case of the applicant is that even after the letter dated 26th of June 2020, no arbitrator was appointed nor the dispute was resolved within 30 days.
Hence, the respondents have lost their right to appoint arbitrator and, therefore, the applicant has approached this Court for appointment of arbitrator.
3. The arbitration clause in the agreement is undisputed which reads as under:
"2903 : Demand for Arbitration:
2903(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 if the Railway fails to make a decision within 120 days (as 3 A.P. No. 316 of 2020 referred in 2902), then and in any such case, but except in any of the "excepted matters" referred to in Clause 2902 of these Conditions, parties to the contract, after 120 days but within 180 days of their presenting their final claim on disputed matters shall demand in writing that the dispute or difference be referred to arbitration. Provided that where the claim is raised by Railways para 2903(i) shall not apply.
2903(ii)(a): 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 item-wise. Only such dispute or difference, in respect of which the demand has been made, together with counter claims or set off, shall be referred to arbitration and other matters shall not be included in the reference.
2903(ii)(b): The parties may waive off the applicability of Sub- Section 12(5) of Arbitration and Conciliation Act 1996 (as amended), if they agree for such waiver in writing, after dispute having arisen between them.
2903(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.
2903(iii)(b): The claimant shall submit his claims stating the facts supporting the claims alongwith all the relevant documents and the relief or remedy sought against each claim within a period of 30 days from the date of appointment of the Arbitral Tribunal.
2903(iii)(c): Respondent 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, unless otherwise extension has been granted by Arbitral Tribunal.
2903(iii)(d): Place or 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.4 A.P. No. 316 of 2020
2903 (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.
2904: Obligation During Pendency of Arbitration: Supplies under the contract shall, unless otherwise directed by the Purchase Officer, 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 supplies should continue during arbitration proceedings."
4. Clause 2905(b) relates to appointment of arbitrator where applicability of Section 12 (5) of the Act is not waived off and reads as under:
"2905(b): Appointment of Arbitrator where applicability of Section 12 (5) of Arbitration and Conciliation Act has not been waived off:
(i) In cases where the total value of all claims in question added together does not exceed 50,00,000/- (Rupees Fifty Lakh only), the Arbitral Tribunal shall consist of a Retired Railway Officer, retired not below the rank of Senior Administrative Grade Officer, as the arbitrator. For this purpose, the Railway will send a panel of at least four (4) names of retired Railway Officer(s) empanelled to work as Railway Arbitrator duly indicating their retirement dates to the Contractor within 60 days from the day when a written and valid demand for arbitration is received by the General Manager.
Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as arbitrator 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 arbitrator.
5 A.P. No. 316 of 2020
(ii) In cases where the total value of all claims in question added together exceeds 50,00,000/- (Rupees Fifty Lakh only), The Arbitral Tribunal shall consist of three (3) retired Railway officers, retired not below the rank of Senior Administrative Grade Officer,. For this purpose, the Railway will send a panel of at least four (4) names of retired Railway Officer(s) empanelled to work a Railway Arbitrators duly indicating their retirement date to the Contractor within 60 days from the day when a written and valid demand for arbitration is received by the General Manager.
Contractor 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 as 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. General Manager 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 has served in the Accounts Department."
5. In the present case, the material on record reveals that the respondents had sent the communication dated 13.08.2018 to the applicant giving the option to waive off the applicability of Section 12 (5) of the Act. The respondents, vide reply dated 02.11.2018, had refused the waiver of Section 12 (5) of the Act.
6. The material on record further reflects that the respondents subsequently vide communication dated 23.12.2020 had informed the applicant that the General Manager had nominated the panel of four retired railway officers suggesting their nominee arbitrators and 6 A.P. No. 316 of 2020 requested the applicant to suggest two names out of the said panel as his nominee.
7. The objection of learned counsel for the respondent is that in terms of arbitration clause the panel of retired officers of the railways had already been suggested, therefore, the appointment is required to be made in terms of the arbitration clause and independent arbitrator under Section 11 is not required to be appointed. In support of his submission, he has placed reliance on the judgment of the Supreme Court in the matter of Central Organisation for Railway Electrification vs. ECI-SPIC-SMO-MCML (JV) A Joint Venture Company, 2009 SCC OnLine SC 1635.
8. The submission of learned counsel for the applicant is that the judgment in the case of Central Organisation (supra) has already been referred to the larger Bench and that after making the request by the applicant invoking the arbitration clause, no arbitrator was appointed by the respondents within 30 days. Therefore, they have lost their right and in the present case after filing the present application, no right exists in their favour.
9. Having heard the learned counsel for the parties and on perusal of the record, it is noticed that the arbitration clause is not in dispute in the present case. In terms of Clause 2905(b)(ii), the respondents had an option to send the panel of at least four names of retired railway officers with 60 days from the date when a written arbitral demand was received by General Manager. In the present case, the notice invoking the arbitration clause was sent by the applicant on 26.06.2020. Within 60 days from the receipt of the said notice no panel of the retired railway officers in terms of the arbitration clause 7 A.P. No. 316 of 2020 was sent by the respondents. Present application under Section 11 of the Act has been filed on 15.10.2020. Thereafter, the panel of four retired railway officers had been sent on 23.12.2020 but by that time, respondents had lost the right to make appointment in terms of Clause 2905 (b) (ii).
10. The Supreme Court in the matter of Datar Switchgears Ltd. vs. Tata Finance Ltd. & Anr., (2000) 8 SCC 151 has held that if the party having responsibility to appoint arbitrator does not do so within 30 days of demand by the other party, the right to make the appointment is not automatically forfeited but once the other party moves the Court, the right to make the appointment ceases to exist.
11. The Hon'ble Supreme Court, in the matter of TRF Limited vs. Energo Engineering Projects Limited, (2017) 8 SCC 377, has held that nomination of an arbitrator by named arbitrator, when such named arbitrator is disqualified by virtue of 2015 Amendment is invalid. In the matter of Perkins Eastman Architects DPC vs. HSCC (India) Limited, 2019 SCC OnLine SC 1517 it has been clarified that there are two categories of cases one similar to that dealt with in TRF Limited (supra). In the second category, the Managing Director is not to act as arbitrator himself but he is authorised to appoint any other person of his choice or discretion as an arbitrator. If in the first category the Managing Director is incompetent then similar invalidity will always arise even in the second category of cases.
12. The Supreme Court in the matter of Bharat Broadband Network Limited vs. United Telecoms Limited, (2019) 5 SCC 755 has reiterated that an arbitrator appointed by a person who himself is de jure ineligible to be arbitrator is void ab initio and arbitration 8 A.P. No. 316 of 2020 proceedings conducted by such arbitrator and award passed by such arbitrator is void.
13. The three Judge Bench in the matter of Central Organisation for Railway Electrification (supra), relied upon by learned Counsel for the respondents, after considering similar arbitration clause has laid down that retired railway employees are not ineligible to act as arbitrator and that since General Manager, Railways is to send the panel of arbitrators, out of which contractor has option to suggest at least 2 names and the General Manager, thereafter, has to appoint at least one out of them as contractor's nominee and can appoint simultaneously balance number of arbitrators from the panel or outside, therefore, the right of General Manager in formation of Arbitral Tribunal is counterbalanced by the contractor's power to choose any two from out of four names and the General Manager has to appoint at least one out of them as contractor's nominee. In this background, it has been held that the clause providing such an option does not make a General Manager ineligible to act as the arbitrator. Hence Hon'ble Supreme Court has held that the decision of TRF Limited (supra) is not applicable in such case. The judgment in the case of Central Organisation (supra) has been referred to the larger Bench by order dated 11.01.2021 passed in SLP Civil No. 12670 of 2020.
14. In the facts of the present case, respondent is not entitled to the benefit of the judgment in the matter of Central Organisation for Railway Electrification (supra) because in that case the panel of four retired Railway Officers was sent before filing of the application under Section 11(6) of the Act. Whereas, in the present case, the panel has been sent by General Manager on 23.12.2020 after filing of the 9 A.P. No. 316 of 2020 application under Section 11(6) of the Act, when the right was already extinguished.
15. Counsel for the respondents has also relied upon the judgment of the Supreme Court in the matter of Union of India vs. B.M. Construction Company, (2020) 2 SCC 464 but in that case it was found that the request for appointment of arbitrator was made much prior to coming into force of amendment of 2015 (with effect from 23.10.2015). Therefore, the amended provisions were not applicable.
16. Having regard to the above discussion, I am of the opinion that after filing of the present application under Section 11 of the Act, the respondents had lost their right to appoint the arbitrator. Hence, the panel dated 23rd of December 2020 sent by them is of no consequence. The respondents have failed to appoint the arbitrator in terms of the arbitration clause within time. Hence, the applicant has rightly invoked Section 11 of the Act. The arbitration clause is undisputed and dispute exists between the parties in respect of the claim of payment raised by the applicant. Therefore, a case is made out to appoint the arbitrator to resolve the dispute between the parties.
17. Accordingly, the present A.P. deserves to be allowed.
18. Hence, I proposed the name of Justice Amit Talukdar, retired Judge High Court at Calcutta, resident of 6/1/1, Anil Moitra Road, Kolkata - 700 019 (Near Ballygunge Phari), Mobile No. 8697481474 for appoint as arbitrator to resolve the dispute. Concerned Registrar is directed to obtain his consent in terms of Section 12 (1) in the Proforma prescribed in the Sixth Schedule of the Act. 10 A.P. No. 316 of 2020
19. List on 2nd of February 2022 on the top of the list.
(PRAKASH SHRIVASTAVA) CHIEF JUSTICE Kolkata 18.01.2022 ___________ PA (P. Adak)