Karnataka High Court
M/S Gounder Infratech Company vs The Union Of India on 13 June, 2022
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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CMP No. 228 of 2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF JUNE, 2022
BEFORE
THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
CIVIL MISC. PETITION NO. 228 OF 2021
BETWEEN:
M/S GOUNDER INFRATECH COMPANY
B-004, MANTRI ELITE APARTMENT
J.P. NAGAR 4TH PHASE, BANNERGHATTA ROAD
BANGALORE-560076
REP BY ITS MANAGING PARTNER
P. CHANDRAVELU
...PETITIONER
(BY SRI. VASU DEVA NAIDU.S, ADVOCATE)
AND:
1. THE UNION OF INDIA
REP BY THE GENERAL MANAGER
SOUTH WESTERN RAILWAY
GADAG ROAD, HUBLI
2. THE CHIEF ADMINISTRATIVE OFFICER (CONSTRUCTION)
SOUTH WESTERN RAILWAY
NO.18 MILLERS ROAD
BANGALORE-560046
Digitally signed
by POORNIMA 3. THE CHIEF ENGINEER/WEST/CONSTRUCTION
SHIVANNA
Location: HIGH
SOUTH WESTERN RAILWAY
COURT OF
KARNATAKA
NO.18 MILLERS ROAD
BANGALORE-560046
4. THE DEPUTY CHIEF ENGINEER/BRIDGES/CONSTRUCTION
SOUTH WESTERN RAILWAY
NO.18 MILLERS ROAD
BANGALORE-560046
5. RAIL INFRASTRUCTURE DEVELOPMENT COMPANY
KARNATAKA LIMITED (K-RIDE)
MSIL HOUSE, 7TH FLOOR
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CMP No. 228 of 2021
NO.36, CUNNINGHAM ROAD
BANGALORE-560052
...RESPONDENTS
(BY SRI. SATISH KUMAR.N, ADVOCATE FOR R1 TO R4;
SRI. ABHINAYA.Y.T, ADVOCATE FOR R5)
THIS PETITION IS FILED UNDER SECTION 11(6) OF THE
ARBITRATION AND CONCILIATION ACT, 1996, PRAYING TO APPOINT
A SOLE ARBITRATOR TO RESOLVE THE DISPUTES AND
OUTSTANDING ISSUES BETWEEN THE PARTIES IN ACCORDANCE
WITH THE PROVISIONS OF AGREEMENT BEARING
NO.CAO/CN/BNC/74551/A/152/X/19 DATED 25.10.2019
(ANNEXURE-C) AS PER CLAUSE 64 OF THE GENERAL CONDITIONS
OF CONTRACT AT ANNEXURE-D IN CONSONANCE WITH
ARBITRATION AND CONCILIATION ACT, 1996.
THIS PETITION COMING ON FOR ADMISSION, THIS DAY THE
COURT MADE THE FOLLOWING:
ORDER
1. The petitioner is before this Court seeking for the following reliefs:
"To appoint a sole arbitrator to resolve the disputes and outstanding issues between the parties in accordance with the provisions of Agreement bearing NO.CAO/CN/BNC/74551/A/152/X/19 dated 25/10/2019 (Annexure-C) as per clause 64 of the general conditions of contract at Annexure-D in consonance with arbitration and conciliation act, 1996 and pass such further or other orders as the Hon'ble Court may deems fit and proper in the circumstances of the case and in the interest of justice and equity".
2. The petitioner is a contractor, respondent No.2 had issued a tender in which the petitioner had participated. The petitioner being a successful -3- CMP No. 228 of 2021 tenderer, an acceptance letter was issued on 08.03.2019. The project was subsequently transferred to respondent No.5.
3. There being certain dispute which arose between the parties, the petitioner had invoked arbitration Clause in terms of 64 of the General Conditions of Contract (GCC) by issuing a letter/notice dated 22.05.2020 at Annexure-J and made a demand for arbitration. The respondent No.1 did not convey any decision on the said request and therefore, the petitioner is before this Court seeking for appointment of an arbitrator in terms of the prayers extracted hereinabove.
4. Sri.Vasu Deva Naidu S., learned counsel for the petitioner submits that in terms of Clause 64 of GCC, a demand for arbitration had been made by the petitioner and in terms of Clause 64(3) of GCC, the respondent was to appoint an Arbitral Tribunal by conveying a list of panel of three names of Gazetted -4- CMP No. 228 of 2021 Railway Officers to the petitioner which has not been done. Therefore, the respondents have lost its right to appoint an arbitrator and as such, this Court may appoint a sole arbitrator to decide the dispute between the parties.
5. Sri.Abhinay Y.T., learned counsel for the respondent No.5 would rely on the decision of the Apex Court in the case of CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION VS. ECI-SPIC-SMO-
MCML (JV) A JOINT VENTURE COMPANY reported in AIR ONLINE 2019 SC 1904 more particularly Paragraphs 35 to 39 thereof which are extracted hereunder for easy reference:
35. As discussed earlier, after Arbitration and Conciliation (Amendment) Act, 2015, the Railway Board vide notification dated 16.11.2016 has amended and notified Clause 64 of the General Conditions of Contract. As per Clause 64(3)(a)(ii) [where applicability of Section 12(5) of the Act has been waived off], in a case not covered by Clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below the rank of Junior Administrative Grade or two Railway Gazetted Officers not below the rank of Junior Administrative Grade and a retired Railway Officer -5- CMP No. 228 of 2021 retired not below the rank of Senior Administrative Grade Officer, as the arbitrators. For this purpose, the General Manager, Railway will send a panel of at least four names of Gazetted Railway Officers of one or more departments of the Railway within sixty days from the date when a written and valid demand for arbitration is received by the General Manager. The contractor will be asked to suggest to General Manager at least two names out of the panel for appointment as contractor's nominees within thirty days from the date of dispatch of the request from the Railway. The General Manager shall appoint at least one out of them as the contractor's nominee and will also simultaneously appoint balance number of arbitrators from the panel or from outside the panel duly indicating the "Presiding Officer" from amongst the three arbitrators so appointed. The General Manager shall complete the exercise of appointing the Arbitral Tribunal within thirty days from the date of the receipt of the names of contractor's nominees.
36. Clause 64(3)(b) of GCC deals with appointment of arbitrator where applicability of Section 12(5) of the Act has not been waived off. In terms of Clause 64(3)(b) of GCC, the Arbitral Tribunal shall consist of a panel of three retired Railway Officers retired not below the rank of Senior Administrative Grade Officers as the arbitrators. For this purpose, the Railway will send a panel of at least four names of retired Railway Officers empanelled to work as arbitrators indicating their retirement date to the contractor within sixty days from the date when a written and valid demand for arbitration is received by the General Manager. The contractor will be asked to suggest the General Manger at least two names out of the panel for appointment of contractor's nominees within thirty days from the date of dispatch of the request of the Railway. The General Manager shall appoint at least one out of them as the contractor's nominee and will simultaneously appoint the remaining arbitrators from the panel or from outside the panel, duly indicating the "Presiding Officer" from amongst the three arbitrators. The exercise of appointing Arbitral Tribunal shall be completed within thirty days from the receipt of names of contractor's nominees. Thus, the right of -6- CMP No. 228 of 2021 the General Manager in formation of Arbitral Tribunal is counter- balanced by respondent's power to choose any two from out of the four names and the General Manager shall appoint at least one out of them as the contractor's nominee.
37. In the present matter, after the respondent had sent the letter dated 27.07.2018 calling upon the appellant to constitute Arbitral Tribunal, the appellant sent the communication dated 24.09.2018 nominating the panel of serving officers of Junior Administrative Grade to act as arbitrators and asked the respondent to select any two from the list and communicate to the office of the General Manager. By the letter dated 26.09.2018, the respondent conveyed their disagreement in waiving the applicability of Section 12(5) of the Amendment Act, 2015. In response to the respondent's letter dated 26.09.2018, the appellant has sent a panel of four retired Railway Officers to act as arbitrators giving the details of those retired officers and requesting the respondent to select any two from the list and communicate to the office of the General Manager. Since the respondent has been given the power to select two names from out of the four names of the panel, the power of the appellant nominating its arbitrator gets counter-balanced by the power of choice given to the respondent. Thus, the power of the General Manager to nominate the arbitrator is counter-balanced by the power of the respondent to select any of the two nominees from out of the four names suggested from the panel of the retired officers. In view of the modified Clauses 64(3)(a)(ii) and 64(3)(b) of GCC, it cannot therefore be said that the General Manager has become ineligible to act as the arbitrator. We do not find any merit in the contrary contention of the respondent.
The decision in TRF Limited is not applicable to the present case.
38. There is an express provision in the modified clauses of General Conditions of Contract, as per Clauses 64(3)(a)(ii) and 64(3)(b), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers [Clause 64(3)(a)(ii)] and three retired Railway Officers retired not below the rank of Senior -7- CMP No. 228 of 2021 Administrative Grade Officers [Clause 64(3)(b)]. When the agreement specifically provides for appointment of Arbitral Tribunal consisting of three arbitrators from out of the panel serving or retired Railway Officers, the appointment of the arbitrators should be in terms of the agreement as agreed by the parties. That being the conditions in the agreement between the parties and the General Conditions of the Contract, the High Court was not justified in appointing an independent sole arbitrator ignoring Clauses 64(3)(a)(ii) and 64(3)(b) of the General Conditions of Contract and the impugned orders cannot be sustained.
39. In the result, the impugned orders dated 03.01.2019 and 29.03.2019 passed by the High Court of Judicature at Allahabad in Arbitration Application No.151 of 2018 are set aside and these appeals are allowed. The appellant is directed to send a fresh panel of four retired officers in terms of Clause 64(3)(b) of the General Conditions of Contract within a period of thirty days from today under intimation to the respondent-contractor. The respondent- contractor shall select two from the four suggested names and communicate to the appellant within thirty days from the date of receipt of the names of the nominees. Upon receipt of the communication from the respondent, the appellant shall constitute the Arbitral Tribunal in terms of Clause 64(3)(b) of the General Conditions of Contract within thirty days from the date of the receipt of the communication from the respondent. Parties to bear their respective costs.
6. Firstly, by relying on the aforesaid decision, he submits that the Apex Court in that decision had permitted the Railways to issue a fresh panel of four retired railway officers in terms of Clause 64 (3) (b) of the General Conditions Contract which is in pari -8- CMP No. 228 of 2021 materia with the General Conditions of Contract of the present case and as such, the same order could be passed in the present case and the respondents will send a list of panel of railway officers to the petitioner to make their choice.
7. He submits that the appointment of an arbitrator would have to be strictly in terms of the said clause and the parties having agreed that the arbitrator would be from the Railways, it is for the respondent to send a panel of arbitrators.
8. Secondly, he submits on facts that there are various disputes as regards the maintainability of the claim of the petitioner, the claim of the petitioner being barred by limitation and therefore the matter cannot be referred to an arbitrator.
9. Thirdly, Sri.Abhinay Y.T., learned counsel further submits that there is no notice which has been issued to respondent No.5 since the contract has been -9- CMP No. 228 of 2021 transferred to the respondent No.5. They ought to have been issued notice to respondent No.5.
10. Heard Sri.Vasu Deva Naidu S., learned counsel for the petitioner, Sri.Sathish Kumar N, learned counsel for respondents No.1 to 4 and Sri.Abhinay Y.T., learned counsel for the respondent and perused the papers.
11. Clause 64 of the General Conditions of Contract (GCC) is the dispute resolution clause which reads as under:
64. (1) Demand for Arbitration:
64.(1) (i) In the event of any dispute or different 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
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item-wise. Only such dipuste(s) or difference(s) in respect of which the demand has been made, together with counter claims or set off given 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 assume 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 the 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 the 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 the 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 Railway 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
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CMP No. 228 of 2021released 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 Arbitration Tribunal
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 Lakh Only), the Arbitral Tribunal shall consist of a sole arbitrator who shall be a gazette officer of Railway not below JA grade nominated by the General Manager in that behalf.
The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by the GM.
64.(3)(a) (ii) In cases not covered by Clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway officers not below JA grade or two 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 within 60 days from the day when a written and vail demand for arbitration is received by the GM. Contractor will be asked to suggest to the General Manager upto 2 names out the panel for appointment as the Contractor's nominee within 30 day from the date of dispatch of the request by Railway. The General Manager shall appoint atleast one out of them as the Contractor's nominee and will, also
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CMP No. 228 of 2021simultaneously 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 the exercise of appointing the Arbitral Tribunal within 30 days 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 Railways for the purpose of appointment of arbitrators.
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 officer/offices or is /are unable or unwilling to perform his functions as arbitrator for any reasons 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 to-day proceedings. The proceedings shall normally be conducted on the basis of documents and written statements.
64.(3) (a) (v) While appointing arbitrator(s) under Sub-Clause (i), (ii) and (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 courser of his/their duties as Railway servant(s) expresses 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,
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CMP No. 228 of 2021in 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 thereform.
64.(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 and interpretation of a specific point of award to Tribunal within 30 days of receipt of the award.
64.(3)(b) (iii) A party may apply to Tribunal within 30 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 or award shall be made by a majority of members of the 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 inter-alia include fee of the arbitrator(s) as per the rates fixed by the Railway Administration 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 the Hon'ble Court otherwise on the matter.
64.(7) Subject to the provisions of the aforesaid, Arbitration & conciliation Act, 1996 and the rules
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CMP No. 228 of 2021thereunder and any statutory modification thereof shall apply to the arbitration proceedings under this Clause".
12. A perusal of the decision of the Apex Court in CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION VS. ECI-SPIC-SMO-MCML (JV) A JOINT VENTURE COMPANY indicates that the Hon'ble Apex Court has considered the aspect of the amendment to the Arbitration and Conciliation Act 1996 brought about in the year 2015 and thereby introducing Section 12(5) to the said Act dealing with the conflict of interest of the arbitrators.
13. The Hon'ble Apex Court at Para 35 of the said judgment has considered as regards the situation where the applicability of Section 12(5) of the Act has been waived by the parties and in para 36, the effect where there is no such waiver.
14. Both the counsels on enquiry submit that there is no waiver. Thus, Para 35 of the decision which had
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CMP No. 228 of 2021been relied upon would not apply and it is only para 36 of the said decision which would apply to the present case.
15. In the above referred case, the contractor had requested the Railways for appointment of an Arbitral Tribunal. In reply, the concerned officer had sent a list of four serving Railway Electrification Officers of JA Grade to act as arbitrators and the contractor was asked to select any two and communicate to the Railways for the purpose of formation of the Arbitral Tribunal. A list of another four retired Railway Officers was sent subsequently, and the contractor was asked to select any two from the list and to communicate within thirty days.
16. Since the contractor did not send a reply, Railways filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking for appointment of a sole arbitrator for resolution of
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CMP No. 228 of 2021differences from and out of the list already forwarded contending that appointment of an arbitrator can be only from the said list.
17. The High Court rejected the said contention and held that the High Court had the powers to appoint an arbitrator independent of the contract and no fetters could be imposed for exercise of powers by the High Court. It is in that background that the appeal before the Apex Court had been filed.
18. Para 36 of the judgment in CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION VS. ECI-SPIC-SMO-MCML (JV) A JOINT VENTURE COMPANY referred to supra deals with the situation where there is no waiver. In that case, the Railways had sent a panel for the contractor to choose from.
The contractor being entitled to select from the said list, it was held that the right of the General Manager
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CMP No. 228 of 2021in formation of the Arbitral Tribunal is counter balanced.
19. In my considered opinion the said decision would not apply to the present case for the reason that on the petitioner raising a demand for appointment of an Arbitral Tribunal by invoking the arbitration clause, the respondent has kept quiet and done nothing even though the request was sent as far as back 22.05.2020. No list of panel for selection by the petitioner has been sent by the Railways.
20. It is aggrieved by the same that the petitioner had to approach this Court and now the respondent has raised the contention that Respondent would send a panel to the petitioner to chose from and name the arbitrator from the panel given by the respondent.
21. I'am of the considered opinion that the respondent not having acted within a reasonable time frame of receiving the letter dated 22.05.2020, the respondent has lost its right to appoint the Arbitral
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CMP No. 228 of 2021Tribunal and therefore, the respondent cannot now claim that the respondent would send the panel of names for the petitioner to consider. In view thereof, the first submission made by the learned counsel for the respondent stands rejected.
22. As regards the second contention of the claims being barred by limitation, I'am of the considered opinion that the same would have to be adjudicated by the Arbitral Tribunal and not by this Court. All the claims and counter claims as also objections thereto are left open to be considered by the Tribunal.
23. Though it is contended that the contract being transferred, there is no document which has been produced. Even otherwise, respondent No.5 being a group entity invoking the concept of 'group of companies' doctrine in terms of the decision in the case of CHLORO CONTROLS INDIA PRIVATE LIMITED VS. SEVERN TRENT WATER PURUFICATION INC. & ORS., REPORTED IN [(2013)
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CMP No. 228 of 20211 SCC 641], I'am of the considered opinion that there is no particular notice required to be issued specifically to respondent No.5. Even otherwise, other respondents being aware of the disputes and having been represented in the present case by the same counsel, I'am of the considered opinion that such a technicality ought not to come in the way of this Court in disposing of the matter.
24. Hence, I pass the following:
ORDER i. The petition is allowed.
ii. Smt.S.Sujatha, former Judge of this Court is appointed as a sole arbitrator to arbitrate the dispute between the parties under the aegis of the Arbitration Centre attached to this Court.
iii. Registry is directed to forward a copy of this order to the Director, Arbitration Centre for doing the needful.
iv. All contentions are left open.
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CMP No. 228 of 2021
v. Since in similar matter i.e., in CMP
No.228/2021, the very same arbitrator has been appointed, the said arbitrator is requested to consider both the matters together.
Sd/-
JUDGE Prs*