Jharkhand High Court
Ms S B Construction Pvt Ltd Through Its ... vs Eastern Central Railways Represented ... on 3 February, 2017
Equivalent citations: AIR 2017 JHARKHAND 132, 2017 (3) AJR 387, (2018) 1 CIVLJ 442, (2017) 2 JLJR 524, (2017) 4 JCR 362 (JHA)
Author: D.N.Patel
Bench: D.N. Patel
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Arbitration Application No. 20 of 2016
M/s S.B. Construction Pvt. Ltd. having its office at Mahtab Road,
New Traffic Chowk, P.O. & P.S.-Rourkela, Dist.-Rourkela (Odisha)
through its general power of attorney holder Sri Parmeshwar Bhagat
son of Late Laxman Bhagat resident of Jaridih Bazar, P.O.-Jaridih
Bazar, P.S.-Gandhi Nagar, Dist.-Bokaro
... ... Petitioner
Versus
1. Eastern Central Railways represented through its General Manager
East Central Railways, Hajipur, Vishali, P.O. & P.S. Vishali Dist Hajipur
Bihar
2. Deputy General Manager, East Central Railways having its office
at East Central Railways, Hajipur, Vishali, P.O. P.S. Vishali Dist. Hajipur
Bihar
3. Chief Administrative Officer (Construction) East Central
Organization (Construction Organization) East Central Railways,
Mahendru Ghat, First Floor, P.O.P.S. & Dist.-Patna Bihar
4. Chief Engineer (Construction/S.E.) East Central Organization
(Construction Organization) East Central Railways, Mahendru Ghat, First
Floor, P.O. P.S. & Dist-Patna Bihar
5. Dy. Chief Engineer, (Cosn.) East Central Organization
(Construction Organization) East Central Railways, P.O. P.S. & Dist.-
Hazaribagh
... ... Respondents
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CORAM: HON'BLE MR. JUSTICE D.N. PATEL
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For the Petitioner: M/s Rajiv Ranjan, Sr. Adv.
Shresth Gautam, Adv.
For the Respondents: M/s Gautam Rakesh, S.C., Railways Mahesh Tiwary Rahul Dev
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rd 06/Dated 3 February, 2017
1. This application has been preferred under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of arbitrator mainly for the reason that the arbitrators, who were the employees of the respondent Railways, was initially appointed on 13th October, 2004 and thereafter, they were transferred. Again in the year 2006, a fresh panel of arbitrators was constituted and again the arbitrators, viz. employees of the respondents, were transferred. Thereafter, due to similar reasons, again in the year 2007 a panel of arbitrators was appointed. This panel has also not decided the dispute. Again for the 4th time, in the year 2013 four names of the employees of the respondents were suggested to the applicants by the respondents for selection of the Contractors Nominees for constitution of the panel of arbitrators and the arbitration proceeding was not yet concluded therefore, due to this gross delay in conclusion of -2- the arbitration proceeding, present application has been preferred for appointment of an "Independent Arbitrator". The claim of this applicant is of approximately 1.5 crores plus interest
2. Counsel for the applicant has submitted that there is gross delay on the part of the respondents and the arbitrators who are the employees of the respondents and even after lapse of nine years since the dispute has started, viz. year 2004 arbitration proceeding was not concluded till the year 2013. The arbitrators are either transferred frequently or they retired.
Hence, on the basis of the decisions rendered by the Hon'ble Supreme Court in UNION OF INDIA v. SINGH BUILDERS SYNDICATE reported in (2009) 4 SCC 523 and UNION OF INDIA AND OTHERS vs. UTTAR PRADESH STATE BRIDGE CORPORATION LIMITED, reported in (2015) 2 SCC 52, it has been submitted by the counsel for the applicant that this court has all power, jurisdiction and authority to appoint any Hon'ble retired judge of this court as the Arbitrator so that the dispute is resolved at the earliest.
3. Counsel for the applicant has also taken this court to various annexures. It has been pointed out from Annexure 3 onwards to the memo of this application that time and again the employees of the respondents are retiring and arbitration has yet not been concluded. Every now and then a fresh panel is formed and again the matter is kept pending.
Annexure 8 to this Arbitration Application is the Letter dated 7th December, 2008 written by this applicant to the respondents, in which these facts have been highlighted. Therefore, it appears that even after these facts have been pointed out by this applicant, the respondents kept on appointing such officers as arbitrators, who are frequently transferred or getting retired.
Hence, this court has all power, jurisdiction and authority to appoint a retired Hon'ble Judge of this court as an Arbitrator.
4. Counsel for the respondents submitted that the fault lies on the part of this applicant, who is reluctant to give consent with respect to the name of the arbitrators, as stated in the counter affidavit, especially at Paragraph No.s 4 and 7.
Counsel appearing for respondents has also relied upon the following decisions rendered by the Hon'ble Supreme Court.:
-3-(a) YASHWITH CONSTRUCTIONS (P) LTD. versus SIMPLEX CONCRETE PILES INDIA LTD. AND ANOTHER reported in (2006) 6 SCC 204
(b) Union of India & Anr. Versus Premco-DKSPL (JV) & Ors.
reported in 2016(4) JCR 60 (SC).
On the basis of the aforesaid decisions, it is submitted by the counsel for the respondents that a new panel of employees of the respondents has already been appointed as arbitrators and they are the arbitrators fit for resolution of the dispute between the parties to the agreement and hence, there is no need of appointing any other arbitrator. REASONS:
5. Having heard counsel appearing for both sides and looking to the facts and circumstances of the case it appears that in pursuance of an agreement between the parties to this arbitration application dispute was raised by this applicant for the payment of bills for the work done. The claim is of approximately 1.5 Crores plus interest.
It appears that on 13th October, 2004 a panel of three arbitrators were appointed and they were the employees of the respondents. Thereafter, these employees have been transferred.
6. Again in the year 2006, a fresh panel of arbitrators, who were employees of the respondents, were appointed and again they were transferred.
7. In the year 2007, a panel of arbitrators have been appointed who were employees of the respondents and they have also been transferred.
8. Again on 11th April, 2013, a letter was written by the respondents to the applicant for selection of Contractors nominee from panel of four arbitrators for constitution of the arbitration tribunal.
9. Looking to Annexure 4, which is letter dated 27th March, 2006, written by respondent Dy General Manager (G), it appears that Shri A. Chaturvedi, the Presiding Arbitrator as well as Shri V. Kumar (Contractor's Nominee) both have been transferred and therefore, it became necessary to appoint a fresh panel of Arbitrators.
Thereafter, looking to Annexure 5 (at page 162 of the memo of the arbitration application), which is letter dated 18th August, 2006, it appears that vide the said letter/order a fresh list of arbitrators was sent to the applicant for selection of Contractors nominee.
-4-Again, looking to Annexure 6, which is letter dated 10th May, 2007, it appears that the respondent Railway Authority wanted to change the panel of arbitrators and again four names were suggested.
Thereafter, looking to Annexure 7, which is letter dated 26th June, 2007, Contractor's Nominee were selected out of the four employees whose names have been suggested by the respondents at Annexure 6.
Looking to Annexure 8, which is dated 7th December, 2008, it appears that old grievances have been ventilated again by the contractor that the arbitrator appointed by the respondent Railway Authority have been transferred and the panels have been reshuffled again and again.
A demand was also made by the applicant in the letter dated 7 th December, 2008 (Annexure 8) for the appointment of independent arbitrator so that arbitration proceeding can be brought to an end.
Looking to Annexure 9, which is a letter written by Respondents dated 11th April, 2013, contractor (present applicant) was to chose two arbitrators from the list of four suggested by the respondents.
Looking to the counter affidavit filed by the respondents, especially Annexure A, which is dated 15/18 February, 2016, it appears that again the panel of arbitrators was to be finalised.
10. Thus, right from year 2004, it has become a fashion that the Railway Authorities would appoint their employees as arbitrators, who will not conclude the arbitration proceeding due to the reason either they will be transferred or retired. This practice must be brought to an end forthwith. Enough is enough and It ought to be kept in mind by the Railway Authorities that whenever they are appointing Railway employees as arbitrators, arbitration should conclude in time and such employees should not be transferred till conclusion of the arbitration. Frequent transfer of the railway employees who are appointed as arbitrators without concluding the arbitration proceeding and thereafter, reappointment of some other Railway employees as arbitrators causes delay in deciding the dispute between the parties through arbitration proceeding in the present case.
11. Arbitration proceeding is conducted for speedy disposal of the cases, but, in the facts of the present case, instead of speed, there is gross delay in deciding the dispute as the railway authority is unable to conclude the arbitration process, even after lapse of a considerably long -5- time. Therefore, in such cases like the present one, appointment of independent arbitrator is required, especially when delay is due to pausity of time or due to retirement of or transfer of employee-arbitrators.
12. It has been held by Hon'ble the Apex Court in UNION OF INDIA v. SINGH BUILDERS SYNDICATE reported in (2009) 4 SCC 523, in Paragraph numbers 15 and 19 as under:
"15. The object of the alternative dispute resolution process of arbitration is to have expeditious and effective disposal of the disputes through a private forum of the parties' choice. If the Arbitral Tribunal consists of serving officers of one of the parties to the dispute, as members in terms of the arbitration agreement, and such tribunal is made nonfunctional on account of the action or inaction or delay of such party, either by frequent transfers of such members of the Arbitral Tribunal or by failing to take steps expeditiously to replace the arbitrators in terms of the arbitration agreement, the Chief Justice or his designate, required to exercise power under Section 11 of the Act, can step in and pass appropriate orders.
19. The delays and frequent changes in the Arbitral Tribunal make a mockery of the process of arbitration. Having regard to this factual background, we are of the view that the appointment of a retired Judge of the Delhi High Court as sole arbitrator does not call for interference in exercise of jurisdiction under Article 136 of the Constitution of India"
(Emphasis supplied) Principle of Default Procedure
13. It has been held by the Hon'ble Apex Court in UNION OF INDIA AND OTHERS vs. UTTAR PRADESH STATE BRIDGE CORPORATION LIMITED, reported in (2015) 2 SCC, page 52, at Paragraph numbers 16,19 and 20 as under:
"16. First and paramount principle of the first pillar is "fair", speedy and inexpensive trial by an Arbitral Tribunal". Unnecessary delay or expense would frustrate the very purpose of arbitration. Interestingly, the second principle which is recognised in the Act is the party autonomy in the choice of procedure. This means that if a particular procedure is prescribed in the arbitration agreement which parties have agreed to, that has to be generally resorted to. It is because of this reason, as a normal practice, the court will insist the parties to adhere to the procedure to which they have agreed upon. This would apply even while making the appointment of substitute arbitrator and the general rule is that such an appointment of a substitute arbitrator should also be done in accordance with the provisions of the original agreement applicable to the appointment of the arbitrator at the initial stage. [See Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd.] However, this principle of party autonomy in the choice of procedure has been deviated from in those cases where one of the parties have committed default by not acting in accordance with the procedure prescribed. Many such instances were this course of action is taken and the Court appoint the arbitrator when the persona designata has failed to act, are taken note of in 6 paras 6 and 7 of Tripple Engg. Works. We are conscious of the fact that these were the cases where appointment of the independent arbitrator made by the Court in exercise of powers under Section 11 of the account of "default procedure". We are, in the present case, concerned with the constitution of substitute Arbitral Tribunal where earlier Arbitral Tribunal has failed to perform. However, the above principle of default procedure is extended by this Court in such cases as well as is clear from the judgment in Singh Builders Syndicate"
17. in the case of contracts between government corporations/State owned companies with private parties/contractors, the terms of the agreement are usually drawn by the government company or public sector undertakings. Government contracts have broadly two kinds of arbitration clauses, first where a named officer is to act as sole arbitrator; and second, where a senior officer like a Managing Director, nominates a designated officer to act as the sole arbitrator. No doubt, such clauses which give the Government a dominant position to constitute the Arbitral Tribunal are held to be valid. At the same time, it also casts an onerous and responsible duty upon the persona disignata to appoint such persons/officers as the arbitrators who are not only able to function independently and impartially, but are in a position to devote adequate time in conducting the arbitration. If the Government has nominated those officers as arbitrators who are not able to devote time to the arbitration proceedings or become incapable of acting as arbitrators because of frequent transfers, etc., then the principle of "default procedure" at least in the cases where Government has assumed the role of appointment of arbitrators to itself, has to be applied in the case of substitute arbitrators as well and the Court will step in to appoint the arbitrator by keeping aside the procedure which is agreed to between the parties. However, it will depend upon the facts of a particular case as to whether such a course of action should be taken or not. What we emphasis is that Court is not powerless in this regard.
19. The appointment of the arbitrator by the Court, of its own choice, departing from the arbitration clause, is therefore not unknown and has become an acceptable proposition of law which can be termed as a legal principle which has come to be established by a series of judgments of this Court. Reasons for debating such a course of action are not far to seek and already taken note of above.
20. In the present case, we find the fact situation almost same as in Tripple Engg. Works and Singh Builders Syndicate. If the contention of the appellant is allowed, it would amount to giving premium to the appellant for the fault of the Arbitral Tribunal's members who were appointed by none else but by the appellant itself. As pointed above, the appellant has not questioned the order of the High Court insofar as it has terminated the mandate of the earlier Arbitral Tribunal because of their inability to perform the task assigned to them. In such a situation, leaving the respondent at the mercy of the appellant thereby giving the power to the appellant to constitute another Arbitral Tribunal would amount to adding insult to the serious injury already suffered by the respondent because of nonconclusion of the arbitral proceedings even when the dispute was raised in the year 2007. 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 7 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 antually 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 onesided arbitration clause, to appoint the arbitrators in the case of disputes, it should be more vigilant and more responsible in chossing 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), Court are not powerless to remedy such situations by springing into action 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.
(Emphasis supplied) In view of the aforesaid decisions, this court has all power, jurisdiction and authority to appoint a retired Hon'ble Judge of this court as an independent arbitrator because the employees of the respondents who were appointed arbitrators, have been frequently transferred since the year 2004 as a result of which the arbitration proceeding is yet to be concluded. Principle of default procedure has to be applied, as stated in the aforesaid decisions. When the employees of the respondents are not deciding the dispute since year 2004 onwards, in such an eventuality, this court can appoint an independent arbitrator.
14. Looking to the peculiar facts of the case, following are the details regarding appointment and reshuffling of the arbitrators by the respondents.
(a) Initially, first panel of arbitrators was appointed by the respondents in the year 2004
(b) Panel of arbitrators was reconstituted in the year 2006 due to transfer of the earlier arbitrators.
(c ) Again in the year 2007, due to similar reasons, a fresh panel of arbitrators, who were the employees of the Railways, was constituted,.
(d) Again on 11th April, 2013 four names were suggested to the applicant to select Contractors Nominee for constitution of a fresh panel of arbitrators.
Looking to the Letter dated 7th December, 2008 (Annexure 8 to the -8- memo of this arbitration application), it appears that grievances have already been ventilated with respect to delay in conclusion of the arbitration proceeding and prayer has been made for the appointment of an "Independent Arbitrator". This letter of the applicant was written to the respondents in the year 2008 and now, it is 2017 and still the arbitration proceeding in question has remained undecided.
On perusal of Annexure A to the counter affidavit filed by the respondents, it appears that again the panels of arbitrators has to be reshuffled.
15. Counsels for the respondents have referred to the following two decisions in support of their arguments:
(a) YASHWITH CONSTRUCTIONS (P) LTD. versus SIMPLEX CONCRETE PILES INDIA LTD. AND ANOTHER reported in (2006) 6 SCC 204
(b) Union of India & Anr. Versus Premco-DKSPL (JV) & Ors.
reported in 2016(4) JCR 60 (SC).
In the facts of the present case, ratio of these aforesaid two decisions are not applicable because the main reason due to which the arbitration proceeding is pending is the gross delay on the part of the respondents Railway Authorities caused due to frequent transfer and retirement of the arbitrators who were the employees of the Railways.
16. Therefore, taking into consideration the frequent change and reshuffle in the panel of arbitrators, who are the employees of the respondents, due to frequent transfer and retirement, it cannot be denied that there is gross delay in deciding the dispute between the parties, and, therefore, I, hereby, appoint Hon'ble Mr. Justice Amareshwar Sahay, retired Judge of this court as the learned arbitrator.
17. Registrar General of this court is, hereby, directed to send copy of this arbitration application along with all the annexures to the learned arbitrator appointed by this court.
18. It is expected that the arbitration proceeding will be completed as early as possible, preferably within six months from the date of its commencement.
19. We also direct the respondents and earlier panel of arbitrators to transfer all the papers relating to the arbitration to the learned Arbitrator appointed by this court, viz. Hon'ble Mr. Justice Amareshwar Sahay, -9- retired Judge of this Court, so that arbitration proceeding can be completed at the earliest.
20. Both the parties to this arbitration application should cooperate before the learned arbitrator so that dispute between the parties is resolved expeditiously.
21. This arbitration application is allowed and disposed of in view of the aforesaid directions..
(D.N.Patel, J.) s.m.