Jharkhand High Court
Ms G S Malhotra Represented By G S ... vs Union Of India Represented By General ... on 8 December, 2017
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Arbitration Application No. 22 of 2017
M/s. G. M. Malhotra represented by G.S. Malhotra .... Petitioner
vs.
1. Union of India represented by General
Manager, East Central Railway, Hazipur, Bihar
2. The Chief Engineer, Construction, Planning, MHX,
Hazipur ...... Respondents
CORAM: HON'BLE MR. JUSTICE APARESH KUMAR SINGH
For the Petitioner : Mr. Ramawatar Sharma, Adv.
For the Respondents : Mr. Gautam Rakesh, Adv.
11/8.12.2017 Pursuant to the order dated 15th September, 2017 and the previous order dated 17th November, 2017, a declaration in terms of Section 12(1) and read with VIth Schedule of the Arbitration and Conciliation Act, 1996 as amended by Act no. 3 of 2016 has been furnished by the proposed Arbitrator Hon'ble Mr. Justice Ramesh Kumar Merathia (Retd.), Former Judge of this Court.
This Court by order dated 15th September, 2017 had proposed to appoint Hon'ble Mr. Justice Ramesh Kumar Merathia (Retd.), Former Judge of this Court as an independent Arbitrator. For better appreciation, the order dated 15th September, 2017 is reproduced hereunder:
"Heard learned counsel for the parties.
2. Petitioner has invoked the jurisdiction of Hon'ble the Chief Justice of this Court under section 11(6)(c) of Arbitration and Conciliation Act, 1996 for appointment of an independent Arbitrator to adjudicate the dispute between the parties.
3. Petitioner was awarded a work for construction of 08 Units type-1(D/S), 101 Units type-II(D/S) and 08 Units type- III(D/S) quarters at Garhwa Road Railway Station vide letter of acceptance dated 28.09.1998 at the cost of Rs. 2,01,30,365.68. The work was to be completed in eighteen months from the date of letter of acceptance i.e. 27.03.2000. The Agreement was executed vide letter no. CE/Con/II/1416 dated 12.04.1999. The petitioner agency raised the dispute in relation to outstanding dues against the Respondent Railways.
4. Even as per the case of the Respondents, set up through their counter affidavit, after exchange of several correspondences to settle the dispute, the Railway vide letter no. CE/Con/WT/1416/ ARBN/5294 dated 05.09.2007 asked the claimant to suggest two names as his nominee arbitrator for Arbitral Tribunal to settle the dispute. The Arbitral Tribunal was constituted on 17.10.2007 consisting of Sri Bal Krishan, CWM/PD/MGS, Presiding 2. Arbitrator, Sri S.L. Prasad, CSTE/C/MHX, Patna and Sri A.K. Sinha, Sr. DFM/MGS being the Co-arbitrators. Tribunal was reconstituted by appointment of A.K. Dubey, EDCE/Railway Board/NDLS, Presiding Arbitrator, Vinod Kumar Shukla, CE/Con/Central/MHX,Patna and Ravi Nandkeolyar, FA&CA/Con/MHX being the Co-arbitrators. As per the case of the Respondent themselves, due to frequent transfer of the appointed Arbitrators being part and parcel of their service condition being the employees of Railways, hearing could not be held. The provisions of the Clause 64(3)(a)(iii) of the Agreement provided for appointment of new Arbitrator / Arbitrators in place of previous Arbitrators in case the Arbitrator earlier appointed refused to act or withdrew from his office or had vacated his office or was unable or unwilling to function as an Arbitrator or for any reason including death. The General Manager was authorized to appoint new Arbitrator / Arbitrators under the same procedure as earlier panel of Arbitrators.
Since Arbitration Proceedings got interrupted due to termination of the Tribunal for the aforesaid reasons, at frequent intervals, petitioner made repeated correspondences such as letter dated 27.07.2015 (Annexure-8), 23.03.2016 (Annexure-9) and again letter dated 15.03.2017 (Annexure-11) requesting the Respondent Railways to complete the arbitration, failing which it would be compelled to approach the High Court for appointment of an independent and impartial Arbitrator. Petitioner complained that the Arbitration Proceeding is lingering since last nine years. Though, Tribunal was reconstituted vide letter dated 07.02.2017, but the petitioner have not received any communication in that regard.
5. It appears from the stand of the Railways that in terms of provisions of Clause 64(3)(a)/(ii), if the claimed amount is more than Rs. 10.00 lakhs, the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below J.A. grade as Arbitrators. The Respondent Railways reconstituted the Tribunal through letter dated 07.02.2017 comprising of Sri A.K. Dubey as the Presiding Arbitrator, Sri Vinod Kumar Shukla and Sri Ravi Nandkeolyar as co-arbitrators. However, as per the statement made at para-11 of the counter affidavit, the Presiding Arbitrator A.K. Dubey (EDCE/G/Railway Board / NDLS) has been transferred and another Member Shri Ravi Nandkeolyar has become Member (Technical) and posted at Railway Claims Tribunal. Respondent in that light, has taken the plea that action is being taken to conclude the Arbitral Proceedings at the earliest. They have also prayed for three months time to conclude it.
6. It is apparent from the stand of the Respondent themselves that not only the Arbitration Proceeding is pending since 2007 but Arbitral Tribunal has been terminated due to frequent transfer of one or the other Arbitrators from time to time. Even after constitution of a fresh Tribunal by letter dated 07.02.2017 and its termination for the reasons stated above, no substituted Arbitrator has been appointed by the Respondent under the provisions of Clause 64(3)(a)/(iii), as claimed by them.
7. It is useful to refer to the provisions of Clause 64.7 of the Agreement at this stage, which reads as under:
"64.7. Subject to the provisions of the aforesaid Arbitration and Conciliation Act 1996 and the rules there under and any statutory modification thereof shall apply to the arbitration proceedings under this clause."
It is clear from the aforesaid condition of Clause 64.7 of 3. the Agreement that any statutory modification under Arbitration and Conciliation Act, 1996 shall apply to the Arbitration Proceeding.
8. A similar plea was raised on behalf of the Respondent Railways in Arbitration Application No. 12/2017 (M/s Sahil Project and Planning Private Limited versus Eastern Railway through its Chief Administrative Officer (Con), Construction Department, Kolkata) wherein also, the Arbitration Proceeding had remained inconclusive even after reconstitution of the Arbitral Tribunal thrice. Clause 64.7 is exactly in similar terms as that of the Agreement in question in Arbitration Application No. 12/2017. This Court took into account the judgment rendered by the Learned Single Judge of Delhi High Court in the case of Ratna Infrastructure Projects Pvt. Ltd. Versus Meja Urja Nigam Private Limited (MUNPL) passed in the Arb.P. No. 537/2016 dated 11.04.2017 whereunder it was held that section 12(5) of the amended Act, 2015 would apply in case where parties have agreed to be governed by the statutory modifications or re-enactment thereof and the rules made under the Act of 1996. This Court also relied upon the judgment rendered by the Hon'ble Supreme Court in the case of Union of India & others versus U.P. State Bridge Corporation Limited (2015) 2 SCC 52, para-16, 19 and 20 thereof, which reads 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 the 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 where 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 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 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
4. of default procedure is extended by this Court in such cases as well as is clear from the judgment in Singh Builders Syndicate.
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 non-conclusion 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 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 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."5.
9. The sublime principle behind interpreting such a neutrality clause in the new amended Act has also been explained in the judgment rendered by the Hon'ble Supreme Court in the case of Voestalpine Schienen GMBH Versus Delhi Metro Rail Corporation Limited (2017) 4 SCC 665, para-15 to 25. Learned Single Judge of this Court exercising powers under section 11 of Arbitration and Conciliation Act, 1996 has, in similar case, such as Arbitration Application Case No. 20/2016, also dealt with the issue at hand and after profitably relying upon the judgment of the Apex Court in the case of U.P. State Bridge Corporation Limited (Supra) relating to default procedure, proceeded to appoint an independent Arbitrator to adjudicate the dispute between the parties. The Arbitration Application No. 20/2016 also related to an Agreement with the Respondent Railways whereunder, the Arbitration Proceeding could not be concluded from 2004 itself due to frequent transfer of Arbitrators being the employees of Railway Authority themselves.
10. In the aforesaid factual matrix, and the scheme of the Arbitration and Conciliation Act, 1996, as amended under Act 3 of 2016, Respondent cannot appoint their own employee as an Arbitrator as it is against the neutrality clause. The Arbitration Proceeding in the instant case have remained pending for about ten years by now, is undisputed state of facts. In such circumstances, the whole aim and object of the Act of 1996 would be defeated if an independent Arbitrator is not appointed even at this stage by this Court under the provisions of Section 11(6) of Arbitration and Conciliation Act, 1996 for adjudication of the pending dispute between the parties.
11. This Court therefore proposes to appoint Hon'ble Mr. Justice R.K. Merathia, former judge of this Court, as an independent Arbitrator to adjudicate the dispute between the parties. Learned Registrar General of this Court is directed to apprise the proposed Arbitrator of the instant order for submission of declaration in terms of section 12 of Arbitration and Conciliation Act, 1996, as amended by the Act 3 of 2016. Let such declaration be submitted within a period of two weeks from the date of receipt of such communication.
12. Let the case be listed on 06.10.2017 under the same heading as an unfixed case."
In terms of the said order a formal declaration has been furnished by the proposed Arbitrator. I, therefore, hereby appoint Hon'ble Mr. Justice Ramesh Kumar Merathia (Retd.), Former Judge of this Court as an independent Arbitrator to adjudicate the dispute between the parties.
Learned Registrar General of this Court is directed to communicate the instant order along with entire pleadings of the case to learned Arbitrator. Learned Arbitrator would be free to lay down his fees and legal remuneration for conduct of the arbitration proceeding, however, keeping in view the mandate and ceiling prescribed under ScheduleIV of the Act of 1996. Learned Arbitrator would endeavour to conclude the arbitration proceeding in an expeditious manner also 6. keeping into account the time period stipulated under Section 29A of the Act of 1996.
Accordingly, the instant petition stands disposed of.
(Aparesh Kumar Singh,J) jk