Delhi District Court
S S Ahluwalia (Since Deceased) Through ... vs General Manager, Northern Railway on 18 February, 2026
IN THE COURT OF SH. PULASTYA PRAMACHALA
DISTRICT JUDGE, (COMMERCIAL COURT)-01,
PATIALA HOUSE COURT, NEW DELHI
INDEX
Sl. HEADINGS Page Nos.
No.
1. Memo of Parties 2
2. Description of case 3
3. Brief Facts of the case 3-4
4. Grounds of objection/challenge 4-5
5. Reply of Respondent and Arguments 6-7
6. Arguments of Petitioner 7
7. Appreciation of Arguments, Facts & Law 8-13
8. Decision 13
Digitally signed
by PULASTYA
PULASTYA PRAMACHALA
PRAMACHALA Date:
2026.02.18
13:19:26 +0530
OMP (COMM.) No. 23/2020 (Pulastya Pramachala)
District Judge (Commercial Court)-01,
Page No.1 of 13 Patiala House Court, New Delhi
OMP (COMM.) No. 23/2020
In the matter of: -
S.S. Ahluwalia (since Deceased)
Through LRs
a) Smt. Balbir Kaur
W/o Late S.S. Ahluwalia
b) Sh. Manjeet Singh Ahluwalia
S/o Late S.S. Ahluwalia (Since deceased)
Through it's LR's
aa) Mandeep Kaur (wife)
W/o Late. Manjit Singh Ahluwalia
ab) Praleen Kaur (Minor Daughter)
D/o Manjit Singh Ahluwalia
Through her Natural Guardian Mother
Mandeep Kaur
ac) Haraditya Singh Ahluwalia (Minor Son)
S/o Manjit Singh Ahluwalia
Through her Natura Guardian Mother
Mandeep Kaur
c) Smt. Mandeep Kaur
W/o Sh. Saran Pal Singh
All residents of:
J-9/9, 2nd Floor, Rajouri Garden,
New Delhi-110027.
...Petitioner
Versus
1. General Manager
Norther Railway, Baroda House, New Delhi.
2. Sr. Divisional Engineer-III
Northern Railway, DRM office, New Delhi.
...Respondents
Date of institution : 14.02.2020
Date of reserving judgment : 09.02.2026
Date of pronouncement : 18.02.2026
Decision : Petition is allowed.
OMP (COMM.) No. 23/2020 (Pulastya Pramachala)
District Judge (Commercial Court)-01,
Page No.2 of 13 Patiala House Court, New Delhi
JUDGMENT
DESCRIPTION OF THE CASE
1. The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (herein after referred to as the Act) has been filed by the petitioner for setting aside of arbitration Award dated 13.11.2019 passed by Respondent no.2, partly in respect of rejection of claim 1 to 18.
BRIEF FACTS OF THE CASE
2. The case of Petitioner, as set out in the petition, is that Petitioner was a railway contractor duly empanelled with the Indian Railways. Petitioner was awarded the work of providing basic facilities for disabled passengers at Nizamuddin Railway Station under the administrative control of the Senior Divisional Superintendent Engineer. The contract was awarded vide agreement dated 13.07.2001 for a total contract value of Rs. 19,84,455/-, which was subsequently enhanced to Rs. 24,09,122.54. It is stated that Petitioner's tender dated 06.06.2001 was accepted and the stipulated period for completion of the work was six months. The agreement between the parties incorporated the General Conditions of Contract, which contained an arbitration clause for adjudication of disputes arising out of the contract. Petitioner alleges that immediately upon receipt of the acceptance communication dated 06.06.2001, he approached the concerned Senior Section Engineers of three stations for demarcation and handing over of the work site and clarification regarding the scope and volume of work. However, according to Petitioner, the work site was not handed over in time on account of internal administrative lapses on the part of the OMP (COMM.) No. 23/2020 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.3 of 13 Patiala House Court, New Delhi railway authorities, including non-issuance of formal acceptance letters and communication of work particulars by higher authorities. Petitioner states that vide letter dated 12.10.2001, the Senior Divisional Engineer (III), Northern Railway, NDLS, issued a seven-day notice under Clause 26 of the General Conditions of Contract proposing termination of the contract. Subsequently, another seven-day notice dated 12.04.2003 was issued alleging slow progress of work. According to Petitioner, the delay in execution of the work was attributable to the respondent authorities, inter alia, due to non-supply of cement, non-handing over of the work site, and non-availability of 2 mm thick cement tiles in the market. Petitioner claims that he had verbally as well as through written communications informed the concerned authorities regarding the non-availability of the specified tiles in Delhi and elsewhere in India. It is further Petitioner's case that due to the alleged lapses on the part of the railway authorities, the work could not be completed within the stipulated time. However, the railway authorities continued to attribute the delay to Petitioner. Petitioner further submits that despite repeated reminders and requests, the respondent failed to prepare and release the final bill. It is alleged that there was undue delay on the part of the respondent in approving addenda and corrigenda, resulting in disputes between the parties, which ultimately led to invocation of the arbitration clause.
GROUNDS OF CHALLENGE
3. Aggrieved by the impugned award dated 13.11.2019, petitioner has preferred the present petition, inter alia, on the following grounds: -
OMP (COMM.) No. 23/2020 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.4 of 13 Patiala House Court, New Delhi i. It is contended that ld. Arbitrator failed to render the award within the statutory period prescribed under Section 29A of the Act. According to petitioner, ld. Arbitrator entered into reference on 17.10.2017 and was required to make award within one year therefrom. It is alleged that no extension of mandate was obtained either by consent of parties or by order of Court. Consequently, the mandate of the Arbitrator allegedly expired on 16.10.2018 and the award dated 13.11.2019 is without jurisdiction and liable to be set aside.
ii. It is further contended that the impugned award is contrary to public policy, inasmuch as the evidence adduced by the petitioner allegedly remained unrebutted and uncontroverted, yet was not properly appreciated.
iii. The petitioner submits that ld. Arbitrator failed to consider that although the contract was awarded in the year 2001 (as per the record), the final bill was not prepared by the respondent for several years, thereby causing prejudice to the petitioner.
iv. It is stated that the learned Arbitral Tribunal erred in law by partially allowing the claims, while allegedly ignoring the documentary evidence and pleadings placed on record by the petitioner. It is further averred that the award is contrary to the public policy of India and against the settled principles of law.
v. The petitioner also contends that ld. Arbitrator failed to appreciate that the contract remained subsisting for nearly fourteen years on account of the conduct of the respondent, and that the finding attributing delay to the claimant is erroneous and contrary to the material on record.
OMP (COMM.) No. 23/2020 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.5 of 13 Patiala House Court, New Delhi REPLY OF RESPONDENT AND ARGUMENTS
4. The respondent did not file a formal reply to the petition and, vide statement of learned counsel dated 02.05.2022, declined to file the same. However, written submissions were placed on record.
5. In the written submissions, it is stated that the contract was awarded on 06.06.2001 with a stipulated completion period of six months, i.e., up to 05.12.2001. It is contended that the work was not completed within the stipulated period and that the petitioner sought extensions of time on various grounds, which were granted by the respondent from time to time, ultimately extending the completion period up to 31.08.2008. It is submitted that no extension was sought beyond 31.08.2008 and, therefore, the contract ceased to remain operative thereafter. According to the respondent, petitioner abandoned the work after that date. The respondent further submits that portions of the work under two contracts were completed in the years 2005 and 2008 respectively, whereas the arbitration clause was invoked by petitioner only on 24.08.2012, i.e., after expiry of the limitation period of three years. It is argued that the period between 31.08.2008 and 24.08.2012 remained unexplained and that the invocation of arbitration was barred by limitation. Reliance is placed upon Section 43 of the Arbitration and Conciliation Act, 1996 read with the provisions of the Limitation Act, 1963, to contend that the claims were ex facie time-barred. In support of the aforesaid contentions, learned counsel for the respondent relied upon the following judgments: -
i. Satender Kumar v. Municipal Corporation of Delhi & Anr OMP (COMM.) No. 23/2020 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.6 of 13 Patiala House Court, New Delhi [169(2010) DLT 15] ii. Sukhbiri Devi & Ors. v. UOI & Ors. [162(2002) DLT 720] iii. Khatri Hotels Pvt. Ltd Anr. v. UOI & Anr [182(2011) DLT 597 (SC)] iv. M/s Kamalkanta Engineering & Construction Co. Pvt. Ltd v.
National Projects Construction Corporation Ltd [2022 (2) RAJ 250(ORI)] v. Secunderabad Cantonment Board v. M/s B. Ramachandraiah & Sons [(2021 AIR (SC) 1391] vi. B and T AG v. Ministry of Defense [2023 LIVE LAW (SC) 466] vii. ABB India Limited v. Bharat Electricals Limited [2020:DHC:3127] ARGUMENTS OF PETITIONER
6. During the course of arguments and in written submission, ld.
counsel for petitioner argued that disputes had arisen between the parties pursuant to which respondent invoked arbitration clause and raised monetary claims against petitioner. It was contended that respondent no.1 unilaterally appointed a Sole Arbitrator Sh. R.P Khurana, Dy. CE/C/D-I, N. Railway through Ameer Hamza, Deputy Chief Engineer (General), to adjudicate the disputes between the parties. Ld. counsel further argued that ld. Arbitrator entered into reference on 17.10.2017 but failed to render the award within the statutory period of one year as prescribed under Section 29A of the Arbitration and Conciliation Act, 1996. It was submitted that no extension of time was obtained in accordance with law, either by consent of parties or by order of Court. Consequently, according to petitioner, the mandate of ld. Arbitrator stood terminated on 16.10.2018 and the award dated 13.11.2019 is without jurisdiction and liable to be set aside.
APPRECIATION OF ARGUMENTS, FACTS & LAW OMP (COMM.) No. 23/2020 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.7 of 13 Patiala House Court, New Delhi
7. The scope of enquiry under section 34 is restricted to consideration whether any one of the grounds mentioned in section 34 exists for setting-aside the award. Section 34 of the Act reads as under: -
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3). (2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof That-i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only That part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds That-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or OMP (COMM.) No. 23/2020 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.8 of 13 Patiala House Court, New Delhi
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified That an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds That the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re- appreciation of evidence."
8. One of the principal objections raised by petitioner pertains to the legality of the appointment of the Sole Arbitrator. From the record, it is an admitted position that vide letter dated 17.10.2017 bearing No. 63-W/5/1053-WA, Respondent No. 1, through the Deputy Chief Engineer (General), Northern Railway, respondent department appointed Sh. R.P. Khurana, Deputy Chief Engineer (Construction/D-I), Northern Railway, Kashmere Gate, Delhi, as the Sole Arbitrator. The arbitral award was thereafter rendered on 13.11.2019. The award itself records that: -
"Whereas General Manager, Northern Railway, Baroda House, New Delhi vide letter No: Dy. Chief Engineer/General/Northern Railway, Baroda House, New Delhi (for General Manager) Letter no. 63-W/5/1053-WA dated 17.10.2017 appointed the undersigned to act as sole arbitrator to settle dispute arising out OMP (COMM.) No. 23/2020 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.9 of 13 Patiala House Court, New Delhi of the subject matter work."
9. Now, first of all, I shall refer to Section 12(5) of the Act, which reads as under: -
"[(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.]"
10. In the present case, it is not in dispute that both Respondent No. 1 and learned Sole Arbitrator were serving officers of Northern Railway, which forms part of Indian Railways. The appointment was made unilaterally by the respondent to appoint its own officer as sole Arbitrator. There is nothing on record to show that, subsequent to the disputes having arisen, petitioner executed any express written waiver in terms of the proviso to Section 12(5) of the Act.
11. This issue is no more res-integra in view of the judgment passed by the Hon'ble Supreme Court of India in a case titled as Perkins Eastman Architects DPC & Anrs. v. HSCC [2019 SCC Online SC 1517], wherein it has been categorically held that a person who has an interest in the outcome or decision of the dispute must not have the power to appoint a Sole Arbitrator and thus, unilateral appointment of Sole Arbitrator has been held as illegal.
12. The Supreme Court in the case of Perkins Eastman Architects DPC and Anr. v. HSCC (India) Limited (Supra) considered the effect of Section 12(5) of the Act, read with the Seventh Schedule, and held in para 20 and 21 as under: -
OMP (COMM.) No. 23/2020 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.10 of 13 Patiala House Court, New Delhi "20. We thus have two categories of cases. The first, similar to the one dealt with in TRF Limited where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself but is empowered or authorised to appoint any other person of his choice or discretion as an arbitrator. If, in the first category of cases, the Managing Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or result of the dispute. The element of invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be the test, similar invalidity would always arise and spring even in the second category of cases. If the interest that he has in the outcome of the dispute, is taken to be the basis for the possibility of bias, it will always be present irrespective of whether the matter stands under the first or second category of cases. We are conscious that if such deduction is drawn from the decision of this Court in TRF Limited, all cases having clauses similar to that with which we are presently concerned, a party to the agreement would be disentitled to make any appointment of an Arbitrator on its own and it would always be available to argue that a party or an official or an authority having interest in the dispute would be disentitled to make appointment of an Arbitrator.
21. But, in our view that has to be the logical deduction from TRF Limited. Paragraph 50 of the decision shows that this Court was concerned with the issue, "whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an Arbitrator" The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator. The next sentences in the paragraph, further show that cases where both the parties could nominate respective arbitrators of their choice were found to be completely a different situation. The reason is clear that whatever advantage a OMP (COMM.) No. 23/2020 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.11 of 13 Patiala House Court, New Delhi party may derive by nominating an arbitrator of its choice would get counter balanced by equal power with the other party. But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution.
Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016) and recognized by the decision of this Court in TRF Limited."
13. The judgment passed by Hon'ble Apex Court in Perkins (Supra) was further relied upon by the Hon'ble High Court of Delhi in a case titled as Poddatur Cable TV Digi Services v. SITI Cable Network Limited, (2020) SCC OnLine Del 350, wherein it was observed that: -
"The Managing Director was ineligible from appointing an Arbitrator on the simple logic that a Managing Director of a Company would always have an interest in the outcome of the arbitration proceedings. The interest in this context takes the shape of bias and partiality. As a natural corollary, if the Managing Director suffers this disability, even if he was to appoint another person as an Arbitrator, the thread of biasness, partiality and interest in the outcome of the dispute would continue to run. Seen in this light, it can hardly be argued that the judgment in Perkins (Supra) will not apply only because the designated Authority empowered to appoint an Arbitrator in other than a Managing Director. Moreover, as brought out by the respondent itself, Company here is run by the Board of Directors."
14. In the present case, the Sole Arbitrator was an employee of Northern Railway and was appointed by an authority of the same organization, which was a party to the dispute. Such appointment squarely attracts the ineligibility contemplated under Section 12(5) read with the Seventh Schedule of the Act. In the absence OMP (COMM.) No. 23/2020 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.12 of 13 Patiala House Court, New Delhi of any express written waiver by petitioner after the disputes arose, such appointment of the Sole Arbitrator is legally unsustainable.
15. Once the appointment itself is rendered invalid in law, the arbitral tribunal lacked inherent jurisdiction to adjudicate the disputes. The defect goes to the root of the matter and is not a mere procedural irregularity. Consequently, the entire arbitral proceedings stand vitiated.
DECISION
16. In view of the foregoing discussion and in light of the binding law laid down by the Hon'ble Supreme Court, I am of the considered opinion that learned Sole Arbitrator was appointed unilaterally by the respondent, who was statutorily ineligible in terms of Section 12(5) of the Act and therefore, the award is liable to be set aside under Section 34 of Arbitration Act. Accordingly, the present petition is allowed. The arbitral award dated 13.11.2019 is hereby set aside.
Digitally signed by PULASTYA PULASTYA PRAMACHALA PRAMACHALA Date: 2026.02.18 13:19:33 +0530 Pronounced in the (PULASTYA PRAMACHALA) Open Court on this District Judge (Commercial Court)-01,
18 Day of February, 2026 Patiala House Court, New Delhi th OMP (COMM.) No. 23/2020 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.13 of 13 Patiala House Court, New Delhi