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"Para A-1: Arbitral jurisdiction is governed by arbitral agreement as per section 28 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') and such agreement exists in the present case as per the contract. The General Condition of Contract of Eastern Railway of 1969, subsequently updated and published during 2001 (hereinafter referred to as the 'GCC') forms integral part of the contract. The arbitral agreement is detailed under clause 63 and 64 of the said GCC. The Claimant was required to submit details of his disputes/claims for consideration of the Respondent within 120 days of such submission before formally demanding appointment of arbitrator from the General Manager of the Eastern Railway as per clause 64(1)(i) of the said GCC. However, the Claimant approached the Hon'ble Calcutta High Court for appointment of arbitrator under section 11 of the said Act. Consequently, you, the Learned Arbitrator, were appointed as the Sole Arbitrator by the Court in contravention of the arbitral agreement and in contravention of section (s) 11(2), 11(6)(a) and 8 of the said Act. Moreover, since the claim amount in the present case is more than Rs. 10 lakh, a panel of arbitrators should have been appointed as per clause 64(3)(a)(ii) of the said GCC and section 10 of the said Act. However, you have been appointed as the Sole Arbitrator in contravention to the above. Similarly, the arbitral agreement provides for qualification of arbitrator as per clause 64(3)(a)(ii) of the said GCC but you do not possess such qualification. The Court did not consider this in contravention of section 11(8) of the said Act, while appointing you, the Learned Arbitrator. In view of above, your appointment is illegal and you are, therefore, requested to adjudicate on the above issues under section 12 of the said Act."
"With regard to the other contention as regards the meaning of the word qualification, we find that anything which qualifies a person is his qualification. In view of the factual background of the present case in the agreement between the parties when it is stated that the arbitrator must be a gazetted railway officer, it appears to be a qualification of the Arbitrator which was agreed to between the parties. We do not find any reason for accepting the contention of the appellant that the word qualification restricted only to the academic or professional qualification. A designation also can be a qualification of an Arbitrator. The same is the position with regard to pay scale. We also find that in a given case there can be reason for prescribing a designation of the Arbitrator particularly when dispute required to be resolved by such Arbitrator and involves an authority of the same organization and it is required to ensure that the Arbitrator should be a higher authority. We also take note of the fact that dictionary meaning of the word 'qualification' includes a standard necessary to do a job. Designation being one of such standard also come within the qualification. Therefore, the expression gazetted railway officer, in our opinion, is a qualification which the parties agreed to, as a requirement for an arbitrator. In view of such findings, the appellant's contention is not accepted.
But as we have already held hereinabove that the Hon'ble Chief Justice is not bound strictly to appoint an Arbitrator who must have a qualification as agreed to between the parties, and therefore, the learned Arbitrator appointed by the Hon'ble Chief Justice though is not having the said qualification, but his appointment has not been rendered invalid thereby."

The Division Bench judgment was challenged before the Supreme Court. The appeal was allowed on 19.07.2007 with the observations that the matter was squarely covered by an earlier judgment of the Supreme Court in the case of Union of Indian & Anr. Vs. M.P.Gupta (supra). In M.P.Gupta's case (supra), the Supreme Court considered the relevant arbitration clause. It was held that in view of the said clause, Justice P. K. Bahri could not have been appointed as the sole arbitrator. A direction was issued to appoint two Gazetted Railway Officers as arbitrators. In the case of A. Mohammad Yunus (supra), the Supreme Court has held that recourse to arbitration cannot be taken contrary to the agreed stipulation contained in the agreement between the parties. The Supreme Court was considering Clause 19 of the arbitration agreement. It was the admitted case of the parties that no arbitrator had been appointed in terms of the agreement. The Supreme Court, therefore, held that the award made in such circumstances, was by "a quorum-non-juris". In the case of Sohan Lal Puglia (supra), the parties were directed to appoint arbitrator in terms of the arbitration agreement. From the above it appears that the objection with regard to the lack of jurisdiction cannot be cured by subsequent participation in the proceedings by the party taking the objection.

It was further held by the arbitrator that the term, "Gazetted Railway Officer", occurring in the relevant clause of the arbitration agreement is not a qualification. It is a class of Railway Officer. It is not a qualification within the meaning of Section 11(8)(a) of the 1996 Act.

These findings of the Arbitrator are contrary to the law laid down by the Supreme Court in the case of Krishna Kumar (supra). In that case a retired Judge of this Court had been appointed as the sole Arbitrator. The arbitration clause provided that in claims more than 5 lakhs, the claims shall be adjudicated by two Arbitrators. It was also provided that no person other than a Gazetted Railway Officer should act as an Arbitrator/umpire. Taking note of this provision the learned Single Judge had concluded that the Arbitrator appointed by this Court did not possess the necessary qualifications. In appeal, the Division Bench clearly observed that a designation also can be a qualification of an Arbitrator. Therefore, the expression "Gazetted Railway Officer" is a qualification which could be prescribed as a requirement for an Arbitrator. The award was, however, upheld by the Division Bench on the basis that the Chief Justice was not bound strictly to appoint an Arbitrator who must have a qualification as agreed between the parties. It was held that even though the Arbitrator appointed by the Chief Justice did not have the qualification as agreed between the parties, his appointment has not been rendered invalid thereby. This finding of the Division Bench was set aside by the Supreme Court upon consideration of the relevant arbitration clauses. The Supreme Court held that the matter was squarely covered by the three-Judge Bench in the case of M.P.Gupta (supra). The Supreme Court in Krishna Kumar case (supra) relied upon the observations contained in paragraph 4 of the judgment in M.P.Gupta's case (supra) which are as follows :