Delhi High Court
M/S. S.B. Construction vs General Manager, Northern Railway & ... on 27 January, 2009
Equivalent citations: AIR 2009 (NOC) 1971 (DEL)
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Arb. Appl. No. 467/2007
*
% Date of decision : 27.01.2009
M/S. S.B. CONSTRUCTION ....Petitioner
Through: Mr. Manjit Singh, Advocate
Versus
GENERAL MANAGER, NORTHERN
RAILWAY & ANR. .... Respondents
Through: Mr. Kumar Rajesh Singh,
Advocate
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. Whether reporters of Local papers may
be allowed to see the judgment? Yes
2. To be referred to the reporter or not? Yes
3. Whether the judgment should be reported Yes
in the Digest?
RAJIV SAHAI ENDLAW, J.
1. This application under Section 11(6) of the Arbitration Act, 1996 was filed upon the failure of the respondent Railways to comply with the arbitration procedure contained in the agreement between the parties.
2. The petitioner vide letter dated 4th September, 2007 to the General Manager of the Railways made claims of over Rs. 10 lacs and demanded Arbitration. Clause 64(1)(i) of the agreement provides for arbitration in the event of any dispute or difference between the parties as to the construction or operation of the contract or the respective rights and liabilities of the parties on any matter in question, dispute or difference etc. Clause 64 (3) (a) (i) deals with the cases where all the claims added together do not exceed Rs. 10 Arb. A. No. 467/2007 Page 1 of 4 lacs. Clause 64(3)(a)(ii) deals with the cases where the claims are of over Rs. 10 lacs and provides that the Arbitral Tribunal shall consist of a panel of 3 gazetted railway officers not below JA Grade, as the arbitrators and provides for the Railways sending a panel of more than three names of gazetted railway officers of one or more departments of the Railways to the contractor; the contractor is to suggest to the General manager upto two names out of the panel for appointment as contractor's nominee and the General Manager is required to appoint at least one out of them as the contractor's nominee and to simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the presiding arbitrator from amongst the two arbitrators so appointed. Further it is provided that while nominating the arbitrators it will be necessary to ensure that one of them is from the accounts department.
3. The respondent Railways, in the present case, did not act in spite of receipt of letter dated 4th September, 2007. The present petition was filed on 24th October, 2007. The respondent Railways are informed to have vide letter dated 24th March, 2008 i.e. after the institution of the petition appointed a sole arbitrator to go into the claims of Rs. 20, 000/- only of the petitioner towards release of earnest money and of Rs 1,11,753 of the respondent Railways towards 10% penalty due to failure of the petitioner Contractor to fulfill the contractual obligations.
4. The counsel for the respondent Railways has today argued that since the arbitrator has already been appointed, the present petition has become infructuous.
5. However, neither is the aforesaid appointment in terms of the agreement nor with respect to the entire claims nor made prior to Arb. A. No. 467/2007 Page 2 of 4 the institution of the petition. In terms of the agreement, the claims of the petitioner Contractor being in excess of Rs. 10 lacs, the respondent Railways was required to send a panel of arbitrators to the petitioner who was to recommend two names out of the said panel. The respondent Railways has on the contrary appointed a sole arbitrator. All the claims of the petitioner have not been referred to the sole arbitrator. In any case, the right of the respondent Railways stood forfeited upon the required procedure having not been followed till the institution of the petition.
6. The counsel for the petitioner has argued that in the circumstances an independent arbitrator, preferably a retired Additional District Judge be appointed, since the claims of the petitioner are of a little above Rs. 20 lacs.
7. However, in my view, even though the respondent Railways has failed to act and thereby forfeited its right of appointment under the agreement but considering the arbitration agreement between the parties, the petitioner is not entitled to appointment of an independent arbitrator. Apex Court in Northern Railway Administration, Ministry of Railways; New Delhi vs. Patel Engineering Company Ltd. VII 2008 SLT 432 has held that the Court as the nominee of the Chief Justice, under Section 11 (8) of the Act is to give due regard to any qualification required of the arbitrator by the agreement of the parties and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
8. The parties had agreed to a qualification of the arbitral tribunal. It was agreed that the arbitral tribunal shall comprise of gazetted railways officers not below JA grade and of whom at least one shall be from the accounts department. Harmonizing the law Arb. A. No. 467/2007 Page 3 of 4 laid down in Datar Switchgears Ltd. vs. Tata Finance Ltd. (2000) 8 SCC 151 with Northern Railway Administration (supra), in my view, even upon the failure of the respondent as aforesaid, the arbitrators having the agreed qualification only can be appointed by this Court. The only effect of the respondent Railways having forfeited the right to appoint two out of the three arbitrators would be that instead of the respondent Railways being entitled to nominate two out of the three arbitrators, it is the petitioner who would be entitled to nominate all the three arbitrators and to also designate one as the presiding arbitrator, however all having the qualification agreed.
9. The counsel for the respondent has today in Court handed over a list of panel arbitrators of the Railways to the counsel for the petitioner. The counsel for the petitioner to, within four weeks intimate to the respondent Railways the three arbitrators out of the said panel including as to who shall act as the presiding arbitrator and the arbitral tribunal shall be so constituted and shall go into the claims and counter claims, if any, in accordance with law. The counsel for the petitioner has stated that as per his information there are other gazetted officers also on the panel besides those shown in the list handed over today. It is clarified that the petitioner shall be entitled to nominate the arbitrator from the panel arbitrators whether included in the list handed over today or not.
With the aforesaid directions the petition is disposed of.
RAJIV SAHAI ENDLAW (JUDGE) January 27, 2009 rb Arb. A. No. 467/2007 Page 4 of 4