Calcutta High Court
M/S. Builders & Supply vs Union Of India & Anr on 20 December, 2018
Author: Ashis Kumar Chakraborty
Bench: Ashis Kumar Chakraborty
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IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
A.P. No. 394 of 2018
M/S. Builders & Supply
versus
Union of India & Anr.
BEFORE:
The Hon'ble JUSTICE ASHIS KUMAR CHAKRABORTY
For the petitioner: Mr. Jaydip Kar, Senior Advocate
Mr. Meenal Sinha, Advocate
Mr. Debdeep Sinha, Advocate
For the respondent : Mr. Swapan Banerjee, Advocate
Mr. A. Ganguly, Advocate
Judgement on : 20.12.2018
Ashis Kumar Chakraborty, J.
In this application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (in short, "the Act of 1996") as amended by Act 3 of 2016 the petitioner has prayed for appointment of a sole arbitrator to adjudicate the disputes between the parties herein relating to the contract dated September 12, 2005 (hereinafter referred to as "the said contract"). The General 2 Terms of the Contract and the specification of the North-East Frontier Railway, 1995 edition (hereinafter referred to as "the GCC") formed part of the said contract dated September 12, 2005. As per clause 64(1) of the GCC any dispute and difference between the parties herein with regard to the construction and operation of the said contract or the respective rights and liabilities of the parties would first be referred to the respondent railway for its decision and in the event of the respondent railway failing to make any decision on the disputes within 120 days, the same would be referred to the arbitration at the instance of the present petitioner contractor. As per clause 64(3)(a)(ii) of the GCC in case the value of the claims raised by the petitioner exceeds Rs. 10 lakhs, the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below J.A. Grade and for that purpose, the General Manager of the respondent railway would send a panel three Gazetted Railway Officers to the petitioner, who would suggest up to two names out of the said panel for appointment as its nominee. The General Manager shall appoint at least one out of the said two names suggested by the petitioner as its nominee and shall also simultaneously appoint the remaining Arbitrators, either from the panel or from outside the panel, duly indicating the 'Presiding Arbitrator' amongst the three Arbitrators so appointed. In the present case, the petitioner raised various claims against the respondent relating to the said 3 contract and by a letter dated September 10, 2009 placed such claims before the respondent railway for their decision. By a letter dated January 08, 2010 the respondent railway rejected the claims of the petitioner. Accordingly, by letter dated January 27, 2010 addressed to the General Manager of the respondent railway, the petitioner invoked the arbitration clause contained in clause 64(3)(a) of the said GCC and sought for appointment of arbitrators to adjudicate its claims. According to the petitioner, the General Manager of the respondent railway did not act in terms of clause 64(3)(ii) of the said GCC and, as such, it filed in application, A.P. No. 198 of 2010, under Section 11 of the Act of 1996 before this High Court. Thereafter, the General Manager of the respondent railway forwarded to the petitioner a panel of the four Railway Gazetted Officers and requested the petitioner to suggest two names as its nominee arbitrators. By an order dated August 17, 2018 a learned Single Judge of this Court disposed of the said application, A.P. No. 128 of 2010 by directing the petitioner to nominate or select one person from the panel of arbitrators forwarded by the General Manager of the respondent. As directed by the said order, from the said panel forwarded by the General Manager of the respondent railway, the petitioner nominated one of them as its nominee arbitrator. On January 24, 2011 the General Manager of the respondent railway constituted the Arbitral Tribunal comprising two arbitrators as well as the Presiding 4 Arbitrator, all being Gazetted Railway Officers. However, by a letter dated June 25, 2011 one of the arbitrators of the Arbitral Tribunal, Sri S.K. Paswan refused to act as the arbitrator. On September 28, 2011 even the Presiding Arbitrator, Shri D.R. Bora of the Arbitral Tribunal tendered resignation citing non-receipt of the Terms of Reference from the respondent in spite of repeated request. Thereafter, on November 14, 2011 the General Manager of the respondent railway constituted a fresh Arbitral Tribunal comprising two arbitrators and the Presiding Arbitrator. The said new Arbitral Tribunal constituted on November 14, 2011, however, failed to enter into reference and the Presiding Arbitrator Sri B. Hazarika resigned from the Arbitral Tribunal on the ground of his retirement from service. On October 20, 2015 the new Arbitral Tribunal was constituted by the General Manager of the respondent railway. While the new Arbitral Tribunal did not commence the arbitral proceeding, by a letter dated May 11, 2017 the respondent railway extended an option to the petitioner to switch over the arbitral proceeding to be proceeded with as per the Arbitration and Conciliation Amendment Act, 2015 provided, the petitioner waived the applicability of the amended provisions of Section 12(1) of the Act. By a letter dated June 6, 2017 the petitioner informed the respondent railway of its willingness to adopt the amended provisions of the Act of 1996 for adjudication of the disputes, but refused to waive the applicability of Section 12(5) 5 of the Act. By a letter dated November 29, 2017 the petitioner requested the respondent railway to nominate the arbitrators in pursuance of the amended provisions of the Act of 1996. The respondent by its letter dated December 13, 2017 once again forwarded to the petitioner a panel of retired Railway Gazetted Officers requesting the petitioner to suggest any two of them as its nominee. The petitioner, however, by its letter dated January 8, 2018 proposed to the respondent that at least one of the members of the Arbitral Tribunal be an outsider, other than a serving/retired officer which was not accepted by the respondent railway. Even by the letter dated January 16, 2018 the respondent requested the petitioner to nominate at least two names from the panel forwarded to it.
According to the petitioner, by the said letter dated August 17, 2018 passed in A.P. No. 128 of 2018 a learned Single Judge of this Court directed to expedite the process to constitute the Arbitral Tribunal. However, despite such direction more than seven years have elapsed and none of the Arbitral Tribunals constituted by the General Manager of the respondent railway, in the meantime, has made any progress in the arbitral proceeding. Thus, the petitioner has filed this application for appointment of an independent person as the arbitrator. In support of the prayer for appointment of an independent sole arbitrator by this Court, the petitioner has relied on the decisions of the Supreme Court in the 6 Cases of Union of India -Vs- Singh Builders Syndicate reported in (2009) 4 SCC 523, North Eastern Railway & Ors. -Vs- Tripple Engineering Works reported in (2014) 9 SCC 288 and Union of India & Ors. -Vs- Uttar Pradesh State Bridge Corporation Ltd. reported in (2015) 2 SCC 52.
The respondent railway has contested this application. In its affidavit-in-opposition the respondent has asserted that the appointment of an outside arbitrator is not acceptable, it has all along expedited the nomination of the arbitrations of the respective Arbitral Tribunals but the delay was done by the present petitioner at every stage in nomination of his choice. The respondent has relied on the decision of the Supreme Court in the case of TRF Ltd - vs- Energo Engineering Projects Ltd. reported in (2017) 8 SCC 377. It was, however, not disputed by the respondent that since the said contract was executed at Jalpaiguri, within the State of West Bengal this Court has the jurisdiction to entertain this application under Section 11 of the Act of 1996.
I have considered the materials on record and the arguments advanced on behalf of the respective parties. In the present case, indisputably from the year 2010 the General Manager of the respondent railway, from time to time, constituted three Arbitral Tribunals comprising Gazetted Railway Officers and none of the Tribunals have concluded the arbitral proceeding. The arbitral proceeding is pending for nearly 9 years from the date when the 7 petitioner first made the demand for arbitration. In the case of Singh Builders Syndicate (supra), the contractor made a request for arbitration in the year 1999 and the arbitral tribunal constituted by the General Manager of the Northern Railway under clause 64 of the General Terms and Conditions, which is similar to Clause 64 of the GCC mentioned above, from time to time failed to complete the arbitral proceeding for a period of six years. Accordingly, the contractor approached the Delhi High Court by filing an application under Section 11(6) of the Act of 1996 for appointment of an independent arbitrator by the Court. When the arbitral tribunals constituted by the General Manager of Northern Railway, as per clause 64 of the GCC, failed to conclude the arbitral proceeding over a period of six years, a learned Single Judge of the Delhi High Court allowed the said application filed by the contractor by appointing a retired Judge of the High Court as the arbitrator. In a special leave petition, the Northern Railway challenged the said decision of the learned Single Judge of the Delhi High Court before the Supreme Court. The Supreme Court, however, held that the delays and frequent changes in the arbitral tribunal make a mockery of the process of arbitration and upheld the decision of the learned Single Judge of the Delhi High court appointing a retired Judge of the High Court as the sole arbitrator. In the case of Tripple Engineering Works (supra), the Supreme Court once again found that the arbitral tribunals, 8 constituted by the General Manager of the North-Eastern Railway under clause 64 of the General Conditions of Contract, comprising three railway officers had not concluded the arbitral proceeding for a period of more than 10 years. As such, the Supreme Court upheld the decision of the High Court exercising power under section 11(6) of the Act of 1996 to appoint an independent sole arbitrator. In the case of Uttar Pradesh State Bridge Corporation Ltd. (supra), a learned Single Judge of the High Court at Judicature of Patna allowed the prayer of the contractor respondent for appointment of an independent arbitrator, on the ground that the arbitral tribunal constituted by the General Manager of the concerned Railway as per clause 64 of the General Conditions of Contract, comprising three railway officers, could not conclude the arbitral proceeding over a period of four years. The Supreme Court held that as per Section 14 of the Act of 1996, when there is a failure on the part of the arbitral tribunal to act and it is unable to perform its function either de jure or de facto, it is open to a party to the arbitration proceeding to approach the Court to decide the termination of the mandate. It was further held that the principle of party autonomy in the choice of procedure for appointment of a arbitrator, which is recognised in the Act of 1996, can be deviated from in those cases where one of the parties have committed default by not acting in accordance with the prescribed procedure. Considering the 9 inordinate delay in conclusion of the arbitration proceeding by the arbitral tribunal, the Supreme Court upheld the decision of the learned Single Judge of the High Court at Judicature of Patna, exercising of power under Section 11 of the Act of 1996 and appointing a former Chief Justice of the Sikkim High Court, as the sole Arbitrator in derogation of the procedure laid down in clause 64 of the GCC. In paragraph 20 of the said decision the Supreme Court held as follows:
"In case, the cherished and benevolent purpose and objective of speedy resolution of the disputes by arbitral proceedings is to be accomplished, it becomes the bounden duty of the persona designata to appoint such arbitrator(s) who have sufficient time at their disposal to attend to this task assigned to them and to conclude the arbitral proceedings in a speedy manner. It is a common sight that the officers who are awfully busy in their other routine functions, because of their status and position, are made arbitrators. For them, discharge of their other duties assumes more importance (and naturally so) and their role as the arbitrators takes a back seat. This kind of behaviour showing casual approach in arbitration cases is anathema to the very genesis of arbitration. Therefore, where the Government assumes the authority and power to itself, in one- sided arbitration clause, to appoint the arbitrators in the 10 case of disputes, it should be more vigilant and more responsible in choosing the arbitrators who are in a position to conduct the arbitral proceedings in an efficient manner, without compromising with their other duties. Time has come when the appointing authorities have to take call on such aspects failing which (as in the instant case), Courts are not powerless to remedy such situations by springing into action and exercising their powers as contained in Section 11 of the Act to constitute an Arbitral Tribunal, so that interest of the other side is equally protected."
In view of the above decisions of the Supreme Court in the cases of Singh Builders Syndicate (supra), Triple Engineering Works (supra) and Uttar Pradesh Breach Corporation Ltd.(supra), when the consecutive arbitral tribunals constituted by the General Manager have failed to adjudicate the disputes between the parties herein over a period of more than eight years, I find that the prayer of the petitioner in this application for appointment of a Sole Arbitrator should be allowed. The decision of the Supreme Court in the case of TRF Ltd.(supra),cited by the respondent has no application in this case. Accordingly, Justice Jyotirmoy Bhattacharya, former Chief Justice of this Court is appointed as the Sole Arbitrator to adjudicate the disputes between the parties relating to the contract bearing number CE/06/2005 dated September 12, 2005.
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The learned Arbitrator shall be free to fix remuneration as per the relevant schedule of the Act of 1996 and engage necessary secretarial staff to conduct the arbitration.
The fees of the Arbitrator and the remuneration of the secretarial staff shall be borne by the parties in equal share. The learned Arbitrator is requested to make an endeavour for expeditious disposal of the arbitral proceeding.
Urgent certified copies of this judgement, if applied for, be made available to the parties subject to compliance with all requisite formalities.
{ASHIS KUMAR CHAKRABORTY, J.]