Bombay High Court
M/S Sadbhav Engineering Limited, ... vs M/S Western Coalfileds Limited, ... on 4 May, 2023
Bench: Avinash G. Gharote
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1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH AT NAGPUR
MISC. CIVIL APPLICATION NO.543/2022
APPLICANT : Shri Sunil Kumar Jindal,
Sole Proprietor of Reliance Electric
Work, Class A Electrical & Civil
Contractor, through power of attorney
Shri Vivek Kumar s/o Late Shri Omprakash,
Corporate Office, 410, 1st Floor, Sector 1, Vaishali
Ghaziabad 201010, UP
...VERSUS...
RESPONDENTS : 1. Union of India,
(NON-APPLICANTS) through its Executive Engineer (E)
NCED, CPWD, B-Block, 3rd Floor
CGO Building, Seminary Hills,
Nagpur, 440 006.
2. Superintending Engineer (E)
NCED, CPWD, B-Block, 3rd Floor
CGO Building, Seminary Hills,
Nagpur, 440 006.
3. Chief Engineer (E)
CGO Building,, A-Block, 3rd Floor
CPWD, Seminary Hills, Nagpur, 440 006.
WITH
MISC. CIVIL APPLICATION NO. 11/2022
APPLICANT : M/s Sadbhav Engineering Limited,
Through its duly constituted attorney
and authorized person Shri Dharmendrakumar
Prajapati, Sadbhav House, Opp. Law Garden
Police Chowki, Ellis Bridge, Ahmedabad-380006.
::: Uploaded on - 04/05/2023 ::: Downloaded on - 05/05/2023 18:13:13 :::
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2
...VERSUS...
NON-APPLICANT : M/s. Western Coalfields Limited,
Through its General Manager (CMC)
WCL HQ, Nagpur, Coal Estate
Civil Lines, Nagpur - 440001.
WITH
MISC. CIVIL APPLICATION NO.10/2022
APPLICANT : M/s Sadbhav Engineering Limited,
Through its duly constituted attorney
and authorized person Shri Dharmendrakumar
Prajapati, Sadbhav House, Opp. Law Garden
Police Chowki, Ellis Bridge, Ahmedabad-380006.
...VERSUS...
NON-APPLICANTS : 1. M/s Western Coalfields Limited,
Through its General Manager (CMC)
WCL HQ, Nagpur, Coal Estate
Civil Lines, Nagpur.
2. M/s Western Coalfields Limited,
Through its Area Manager, Wani Area,
Urjagram, Dist : Chandrapur-442406.
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Shri Y.D.Shukla, Advocate for the applicant in MCA No.543/2022
Shri M.U.Dastane, Advocate for applicant in MCA Nos.10/2022 & 11/2022
Shri N.G.Moharir, Advocate for respondent in MCA Nos.10/2022 & 11/2022
----------------------------------------------------------------------------------------------
CORAM : AVINASH G. GHAROTE, J.
Order reserved on : 28/04/2023
Order pronounced on : 04/05/2023
ORDER:
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1. As the arbitration clauses in all the three matters, are
similar, which are required to be interpreted, they are being decided
together.
2. On 21/4/2023, the following position was recorded :-
"Misc. Civil Application Nos.10/2022 and 11/2022.
The applications seek appointment of an Arbitrator.
There is no dispute between the parties regarding the execution
of the agreement dated 27.04.2018 in M.C.A. No. 10/2022 and
agreement dated 20.11.2017 in M.C.A. No. 11/2022, both of
which contain an Arbitration Clause. The bone of contention, is
the language of the Arbitration Clause, inasmuch as, it is
contended by Mr. Dastane, learned counsel for the applicant,
that inspite of Clause 13A (b) the later of which mandates,
that in case if for any reason what is contemplated by the first
part is not permissible, the matter is not to be referred to
arbitration at all, on account of the applicability of the
doctrine of severability, the said clause can be severed from
the arbitration clause and taking into consideration the intent
to arbitrate it is permissible for an Arbitrator to be appointed.
In support of his contention, he relies upon Shin Satellite
Public Co. Ltd. Vs. Jain Studios Ltd., (2006) 2 SCC 628 and
specifically para 26 and 27, which is on the doctrine of
severability ; Enercon (India) Limited And Others Vs. Enercon
GMBH And Another, (2014) 5 SCC 1 (para 87), which holds
that it is the duty of the Court to make the clause workable.
He also relies upon the judgment of this Court in M/s. Shri
Khatu Shyam Traders Vs. Western Coalfield Limited, Misc.
Civil Application (ARBN) No. 90/2022 decided on 07.01.2023.
2. Mr. Moharir, learned counsel for the non-applicant
submits, that Clause 13A (b) itself is severable into two parts,
the former part being admittedly hit by the amendment of the
year 2015 in the Arbitration and Conciliation Act, 1996 and by
the judgment of the Hon'ble Apex Court in Perkins Eastman
Architects DPC and Another Vs. HSCC (India) Limited, (2020)
20 SCC 760. He however submits, that the later part of this
Clause which mandates that in case the former part is not
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possible then the parties would not go to arbitration at all,
would continue to govern the field, and therefore, the matter
cannot be referred to arbitration. Reliance is placed by him on
Perkins Eastman Architects DPC and Another (supra) as well
as Ellora Paper Mills Ltd. Vs. State of Madhya Pradesh, (2022)
3 SCC 1 and Jagdish Chander Vs. Ramesh Chander And
Others, (2007) 5 SCC 719 (para 8 (iii)).
3. In Misc. Civil Application No. 543/2022, upon a
similar Clause Mr. Shukla, learned counsel for the applicant,
relies upon the decision of the Full bench of the Delhi High
Court in Ved Prakash Mitthal Vs. Union of India and others,
AIR 1984 DELHI 325 and to contend that the Arbitration
Clause has to be enforced. In his case, already an Arbitrator
was appointed on earlier two occasions and in the present
situation the proceedings have been adjourned sine die by the
Arbitrator on account of objections being raised under Section
12 (5) read with VIIth Schedule of the Arbitration and
Conciliation Act, 1996, on account of which, it is contended,
that the Arbitrator appointed has become ineligible to act, and
therefore, needs to be replaced by an independent Arbitrator."
3. In Misc Civil Application Nos.10/2022 and 11/2022 the
dispute resolution clauses, as quoted in the applications, are identical
and are quoted as under :-
"13. SETTLEMENT OF DISPUTES :-
It is incumbent upon the contractor to avoid litigation and
disputes during the course of execution. However, if such
disputes take place between the contractor and the
department, effort shall be made first to settle the disputes at
the company level.
The contractor should make request in writing to the
Engineer-In-charge for settlement of such disputes / claims
within 30 (thirty) days of arising of the cause of dispute /
claim failing which no disputes / claims of the contractor shall
be entertained by the company.
Effort shall be made to resolve the dispute in two stages :-
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In first stage dispute shall be referred to Area CGM, GM. If
difference-still persist the dispute shall be referred to a
committee constituted by the owner. The committee shall have
one member of the rank of Director of the company who shall
be chairman of the company.
If differences still persist, the settlement of the dispute shall be
resolved in the following manner.
Disputes relating to the commercial contracts with Central
Public Sector Enterprises/Govt. Departments (except
Railways, Income Tax, Customs & excise duties) / State Public
Sector Enterprises shall be referred by either party for
Arbitration to the PMA (Permanent Machinery-of Arbitration)
in the department of Public Enterprises.
In case of parties other than Govt. Agencies, the rederessal of
the dispute may be sought through Arbitration (THE
ARBITRATION AND CONCILIATION ACT, 1996 as amended by
Amendment Act of 2015).
13 (A) : Settlement of Disputes through Arbitration :
If the parties fall to resolve the disputes/differences
by In house mechanism, then, depending on the position of
the case, either the employer/Owner-or the contractor shall
give notice to other party to refer the matter to arbitration
instead of directly approaching Court "The contractor shall,
however, be entitled to invoke arbitration clause only after
exhausting the remedy available under the clause 13:.
In case of parties other than Govt. agencies, the redressal of
disputes/differences shall be sought through Sole Arbitration
as under :-
Sole Arbitration :-
In the event of any question, dispute or difference arising
under these terms & conditions or any condition contained in
this contract or interpretation of the terms of, or in connection
with this Contract (except as to any matter the, decision of
which is specially provided for by these conditions) the same
shall be referred to the sole arbitration of a person, appointed
to be the arbitrator by the Competent Authority of CIL/CMD
of Subsidiary Company (as the case may be). The award of the
arbitrator shall be final and binding on the parties of this
contract.
a) In the event of the Arbitrator dying, neglecting or
refusing to act, resigning or being unable to act for any
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reason, or his/her award being set aside by the court for any
reason, it shall be lawful for the Competent Authority of CIL/
CMD of Subsidiary Company (as the case may be) to appoint
another arbitrator in place of the outgoing arbitrator in the
manner aforesaid.
(b) It is further a term of this contract that no person
other than the person appointed by the Competent Authority
of CIL/CMD of Subsidiary Company (as the case may be) as
aforesaid should act as arbitrator and that, if for any reason
that is not possible, the matter is not to be referred to
Arbitration at all.
Subject as aforesaid, Arbitration and Conciliation Act, 1996 as
amended by Amended Act of 2015 and the rules thereunder
and any statutory modification thereof for the time being in
force shall be deemed to apply to the Arbitration proceedings
under this clause.
The venue of arbitration shall be the place from which the
contract is issued.
Applicable law : The contracts shall be interpreted in
accordance with the laws of the Union of India."
4. The existence of the aforesaid clauses and their
invocation is not disputed by Mr. Dastane, learned counsel for the
applicant and Mr. Moharir for the non-applicants in Misc Civil
Application Nos.10/2022 and 11/2022.
5. In Misc. Civil Application No.543/2022 the arbitration
clause - 25 (pg.86) reads as under :-
" CLAUSE 25. Except where otherwise provided in the contract, all
questions and disputes relating to the meaning of the specifications,
design, drawings and instructions here-in before mentioned and as
to the quality of workmanship or materials used on the work or as
to any other question, claim, right, matter or thing whatsoever in
any way arising out of or relating to the contract, designs,
drawings, specifications, estimates, instructions, orders or these
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conditions or otherwise concerning the works or the execution or
failure to execute the same whether arising during the progress of
the work or after cancellation, termination, completion or
abandonment thereof shall be dealt with as mentioned
hereinafter :-
(i) If the contractor considers any work demanded of him to
be outside the requirements of the contract, or disputes any
drawings, record or decision given in writing by the Engineer-in-
Charge on any matter in connection with or arising out of the
contract or carrying out of the work, to be unacceptable, he shall
promptly within 15 days request the Superintending Engineer in
writing for written instruction or decision. Thereupon, the
Superintending Engineer shall give his written instructions or
decision within a period of one month from the receipt of the
contractor's letter.
If the Superintending Engineer fails to give his instructions or
decision in writing within the aforesaid or if the contractor is
dissatisfied with the instructions or decision of the Superintending
Engineer, the contractor may within 15 days of the receipt of
Superintending Engineer's decision, appeal to the Chief Engineer
who shall afford an opportunity to the contractor to be heard, if the
latter so desires, and to offer evidence in support of his appeal. The
Chief Engineer shall give his decision within 30 days of receipt of
contractor's appeal. If the contractor is dissatisfied with his decision,
the contractor shall within a period of 30 days from receipt of the
decision give notice to the Chief Engineer for appointment of
arbitrator failing which the said decision shall be final binding and
conclusive and not referable to adjudication by the arbitrator.
(ii) Except where the decision has become final, binding and
conclusive in terms of Sub Para (i) above, disputes or difference
shall be referred for adjudication through arbitration by a sole
arbitrator appointed by the Chief Engineer, CPWD, in charge of the
work or if there be no Chief Engineer, the Additional Director
General of the concerned region of CPWD or if there be no
Additional Director General, the Director General of Works, CPWD.
If the arbitrator so appointed is unable or unwilling to act or resigns
his appointment or vacates his office due to any reason whatsoever,
another sole arbitrator shall be appointed in the manner aforesaid.
Such person shall be entitled to proceed with the reference from
the stage at which it was left by his predecessor.
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It is a term of this contract that the party invoking arbitration shall
give a list of disputes with amounts claimed in respect of each such
dispute alongwith the notice for appointment of arbitrator and
giving reference to the rejection by the Chief Engineer of the
appeal.
It is also a term of this contract that no person, other than a person
appointed by such Chief Engineer CPWD or the administrative head
of the CPWD, as aforesaid should act as arbitrator and if for any
reason that is not possible, the matter shall not be referred to
arbitrator at all.
It is also a term of this contract that if the contractor does not make
any demand for appointment of arbitrator in respect of any claims
in writing as aforesaid within 120 days of receiving the intimation
from the Engineer-in-Charge that the final bill is ready for payment,
the claim of the contractor shall be deemed to have been waived
and absolutely barred and the Government shall be discharged and
released of all liabilities under the contract in respect of these
claims.
The arbitration shall be conducted in accordance with the
provisions of the Arbitration and Conciliation Act, 1996 (26 of
1996) or any statutory modification or re-enactment thereof and
the rules made thereunder and for the time being force shall apply
to the arbitration proceeding under this clause.
It is also a term of this contract that the arbitrator shall adjudicate
on only such disputes as are referred to him by the appointing
authority and give separate award against each dispute and claim
referred to him and in all cases where the total amount of the
claims by any party exceeds Rs.1,00,000/- the arbitrator shall give
reasons for the award.
It is also a term of the contract that if any fees are payable to the
arbitrator, these shall be paid equally by both the parties.
It is also a term of the contract that the arbitrator shall be deemed
to have entered on the reference on the date he issues notice to
both the parties calling them to submit their statement of claims
and counter statement of claims. The venue of the arbitration shall
be such place as may be fixed by the arbitrator in his sole
discretion. The fees, if any, of the arbitrator shall, if required to be
paid before the award is made and published, be paid half and half
by each of the parties. The cost of the reference and of the award
(including the fees, if any, of the arbitrator) shall be in the
discretion of the arbitrator who may direct to any by whom and in
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what manner, such costs or any part thereof shall be paid and fix or
settle the amount of costs to be so paid."
6. The bone of contention is regarding clause 13 -A (b) in
Misc Civil Application Nos.10/2022 and 11/2022 and clause 25 (ii)
sub para 3 in Misc. Civil Application No.543/2021, which provide
that it is a term of the contract that no person other than the person
appointed by the competent authority of CIL/CMD of subsidiary
company should act as an arbitrator, and that if for any reason that is
not possible, the matter is not to be referred to arbitration at all. In
Misc. Civil Application No.543/2021, arbitrator has already been
appointed, however, since the appointment is hit by Section 12 (5)
r/w Schedule -VII of the A and C Act, the plea is for appointment of
an independent arbitrator.
7. Learned counsels for the applicants place reliance on
Ved Prakash Mithal Plaintiff Vs. The Union of India and others
Defendants AIR 1984 DELHI 325; Perkins Eastman Architects DPC
and another Vs. HSCC (India) Ltd. AIR 2020 SC 59 and TRF Ltd. Vs.
Energo Engineering Projects Ltd. AIR 2017 SC 3889.
8. What constitutes an arbitration clause has been
elucidated by the Hon'ble Apex Court in Jagdish Chander (supra) in
the following terms :-
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"8. This Court had occasion to refer to the attributes or
essential elements of an arbitration agreement in K. K. Modi v.
K. N. Modi [1998 (3) SCC 573], Bharat Bhushan Bansal Vs.
U.P. Small Industries Corporation Ltd. [1999 (2) SCC 166] and
Bihar State Mineral Development Corporation v. Encon
Builders (I) (P) Ltd. [2003 (7) SCC 418]. In State of Orissa v.
Damodar Das [1996 (2) SCC 216], this Court held that a
clause in a contract can be construed as an "arbitration
agreement" only if an agreement to refer disputes or
differences to arbitration is expressly or impliedly spelt out
from the clause. We may at this juncture set out the well-
settled principles in regard to what constitutes an arbitration
agreement :
(i) The intention of the parties to enter into an arbitration
agreement shall have to be gathered from the terms of the
agreement. If the terms of the agreement clearly indicate an
intention on the part of the parties to the agreement to refer
their disputes to a private tribunal for adjudication and a
willingness to be bound by the decision of such tribunal on
such disputes, it is arbitration agreement. While there is no
specific form of an arbitration agreement, the words used
should disclose a determination and obligation to go to
arbitration and not merely contemplate the possibility of
going for arbitration. Where there is merely a possibility of
the parties agreeing to arbitration in future, as contrasted
from an obligation to refer disputes to arbitration, there is no
valid and binding arbitration agreement.
(ii) Even if the words "arbitration" and "Arbitral Tribunal (or
arbitrator)" are not used with reference to the process of
settlement or with reference to the private tribunal which has
to adjudicate upon the disputes, in a clause relating to
settlement of disputes, it does not detract from the clause
being an arbitration agreement if it has the attributes or
elements of an arbitration agreement. They are : (a) The
agreement should be in writing. (b) The parties should have
agreed to refer any disputes (present or future) between them
to the decision of a private tribunal. (c) The private tribunal
should be empowered to adjudicate upon the disputes in an
impartial manner, giving due opportunity to the parties to put
forth their case before it. (d) The parties should have agreed
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that the decision of the private tribunal in respect of the
disputes will be binding on them.
(iii) Where the clause provides that in the event of disputes
arising between the parties, the disputes shall be referred to
arbitration, it is an arbitration agreement. Where there is a
specific and direct expression of intent to have the disputes
settled by arbitration, it is not necessary to set out the
attributes of an arbitration agreement to make it an
arbitration agreement. But where the clause relating to
settlement of disputes, contains words which specifically
excludes any of the attributes of an arbitration agreement or
contains anything that detracts from an arbitration
agreement, it will not be an arbitration agreement. For
example, where an agreement requires or permits an
authority to decide a claim or dispute without hearing, or
requires the authority to act in the interests of only one of the
parties, or provides that the decision of the authority will not
be final and binding on the parties, or that if either party is
not satisfied with the decision of the authority, he may file a
civil suit seeking relief, it cannot be termed as an arbitration
agreement.
(iv) But mere use of the word "arbitration" or "arbitrator" in a
clause will not make it an arbitration agreement, if it requires
or contemplates a further or fresh consent of the parties for
reference to arbitration. For example, use of words such as
"parties can, if they so desire, refer their disputes to
arbitration" or "in the event of any dispute, the parties may
also agree to refer the same to arbitration" or "if any disputes
arise between the parties, they should consider settlement by
arbitration" in a clause relating to settlement of disputes,
indicate that the clause is not intended to be an arbitration
agreement. Similarly, a clause which states that "if the parties
so decide, the disputes shall be referred to arbitration" or "any
disputes between parties, if they so agree, shall be referred to
arbitration" is not an arbitration agreement. Such clauses
merely indicate a desire or hope to have the disputes settled
by arbitration, or a tentative arrangement to explore
arbitration as a mode of settlement if and when a dispute
arises. Such clauses require the parties to arrive at a further
agreement to go to arbitration, as and when the disputes
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arise. Any agreement or clause in an agreement requiring or
contemplating a further consent or consensus before a
reference to arbitration, is not an arbitration agreement, but
an agreement to enter into an arbitration agreement in
future."
9. In Babanrao Rajaram Pund Vs. Samarth Builders and
Developers and another (2022) 9 SCC 691 the Hon'ble Apex Court
after considering Encon Builders (I) (P) Ltd. and Jagdish Chander
(supra) has held that when the concerned term discloses the
intention and obligation of the parties to be bound by decision of the
Tribunal and it can be gleaned from other parts of the arbitration
agreement that the intention of the parties was surely to refer the
dispute to arbitration, the said intention ought to be given effect to.
10. By insertion of Section 12 (5) and VII th Schedule to the
Arbitration and Conciliation Act, 1996 (for short, "A and C Act",
hereinafter) the independence and impartiality of the arbitrators
have been ensured by way of a statutory provision which was earlier
absent. Independence and impartiality of an arbitrator are the
hallmarks of a successful arbitration mechanism and have to be
ensured in any arbitration between the parties. Considering this
position, when there exists an arbitration clause between the parties,
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the same is required to be made workable (see : Shin Satellite Public
Co. Ltd. Vs. Jain Studios Ltd. (2006) 2 SCC 628)
11. The non-applicants, once having agreed for resolution of
the dispute, by way of an arbitration, as a dispute resolution
mechanism between them cannot be permitted, to wriggle out of the
same on the plea that the clause required arbitration by certain
officer of the non-applicant or not at all, as it will have to be held
that the entire clause, in that regard, was capable of being severed in
furtherance of the intention to arbitrate as specifically spelt out from
clause 13-A and clause 25 (ii) sub para 3, as all the essential
elements which constitute a binding arbitration agreement, between
the parties, were satisfied by the above referred clauses.
12. It is worthwhile to note what the learned Full Bench of
the Delhi High Court in Ved Prakash Mithal (supra) has held while
considering a similar term as occurring in clause 25 of the agreement
therein, which was as under :-
"Clause 25. ......It is also a term of this contract that no person
other than a person appointed by such Chief Engineer or
administrative head of the C.P.W.D. as aforesaid should act as
arbitrator and if for any reason, that is not possible, the matter is
not to be referred to arbitration at all.
21. The clause which the Division Bench thought was an
"absolute" stipulation uses two critical words: "reason" and
"possible." These are strong words. The Chief Engineer's action must
be dictated by reason. Reason is used in contradistinction to
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caprice. The word "possible" means that it is within the realm of the
practical. If it is within the range of possibility the Chief Engineer
must do his duty. It may be impossible to appoint an arbitrator
where the office of the Chief Engineer is abolished and there is no
administrative head of the department earlier. In that case, it may
well be argued that the matter is not to be referred to arbitration at
all. We can conceive of those cases where the nominator of the
arbitrator is not in existence. But so long as the office of the Chief
Engineer exists we cannot conceive that there can be an
"insuperable obstacle" to the appointment of the arbitrator by the
Court, as the division bench thought in Kishan Chand's case (ILR
(1974) 2 Delhi 637). Section 20 (4) shows that the refusal by the
Chief Engineer is capable of being surmounted. There is nothing
new or novel in the clause which says that no person other than a
person appointed by the Chief Engineer shall act as the arbitrator
and if for any reason, that is not possible the matter is not to be
referred to arbitration at all.
22. The clause shows that the Chief Engineer is accountable
to the Court. He cannot say that he is not answerable to any one,
as was argued before us on behalf of the Union of India. He is
amenable to our jurisdiction under Section 20 (4). He is not
above the law. Nor is he a law unto himself. The contract which
contains the arbitration clause is a business document. We must
give it business efficacy so as to effectuate the intention of the
parties. We will be doing great injustice to the contractor if we
tell him that the Chief Engineer has destroyed the clause and we
are powerless to redress his grievance.
23. One of us (Avadh Behari J.) protested against the
reasoning of the Division Bench sitting singly in Alkarma v. Delhi
Development Authority, AIR 1981 Delhi 230. In the Full Bench
we should now overrule Kishan Chand. It was a suicidal
argument which the Division Bench accepted. It had disastrous
consequence for the contractor. It meant the death of the clause
and the abrogation of judicial power. The appointer became the
destroyer of the clause. The judges in the Division Bench made
him the master of the show, leaving the contractor at his mercy.
They denuded the Court of its jurisdiction. This was against all
canons of construction. Such was the unfortunate effect of their
decision.
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29. It will appear from this discussion that the Chief Engineer,
"the chosen appointer," to use a phrase of Russell is a third party.
(Russell- Arbitration, 18th Edition, page 10 8, Mustill and Boyd,
p. (sic). The parties to the dispute are the contractor on the one
hand, and the Union of India on the other. The arbitrator has to
be nominated by a person designated in the agreement. This is
the contractual mechanism for appointment of the arbitrator.
Two important consequences follow from it. First, the function of
this third party is ministerial and not judicial. As the Privy
Council has said:
"It is very common in England to invest responsible public
officials with the duty of appointing arbitrators under given
circumstances. Such appointment should be made with integrity
and impartiality, but it is new to their Lordships to hear them
called judicial acts."
(Palgrave Gold Mining Co. v. McMillan, 1892 AC 460 (470) per
Lord Hobhouse).
The Supreme Court has said
"The powers and duties of the Court under S.20 (4) are of two
distinct kinds. The first is the judicial function to consider
whether the arbitration agreement should be filed or not. This
may involve dealing with objections to the existence and validity
of the agreement itself. Once that is done the Court has decided
that the agreement must be filed, the first part of its powers and
duties is over. Then follows a ministerial act of reference to
arbitrator or arbitrators appointed by the parties."
(Per Hidayatullah J. in Re: M/s. D. Gobindram v. Shamji Kalidas
and Co., AIR 1961 SC 1285 (1294)).
30. The second consequence is that a ministerial functionary
cannot destroy the arbitration agreement. He cannot defeat the
agreement. The law gives him no such power nor the arbitration
agreement. The Supreme Court calls the matter of appointment
by the Court or third party a "ministerial" act. The power to
appoint is placed by the parties in the hands of the Chief
Engineer. But the power to destroy the clause is not placed in his
hands.
31. That the Chief Engineer is a third party is borne out by
the fact that he nowhere appears as a central figure in the arena.
He is not the real contestant. He is the appointer. The Union of
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India is the real defendant. It can oppose the filing of the
arbitration agreement on all the grounds open to it. Once the
objections have been dealt with by the Court the judicial battle is
over. Only the ministerial function remains to be discharged by
the third party. Viewed in this light the legal puzzle, as the
Division Bench described it, becomes easy to answer.
33. The dominant theme of the Division Bench in Kishan
Chand is that power to appoint the arbitrator is in the Chief
Engineer. There was no power in the Court, they thought. On
their reasoning it is the Chief Engineer's prerogative to appoint or
refuse and no one could question his decision. The moment the
Chief Engineer refuses the clause goes. They hold that if the
appointer refused to appoint it was impossible to arbitrate. Such
is the line of their reasoning. This is a fallacious reasoning, in our
respectful opinion. Such absolute power as they give to the Chief
Engineer is unknown to law whatever be the field-contract or
administrative law. The Chief Engineer has a ministerial act to
perform. He is a third party. It is a confusion of thought to
identify him with the party to the litigation. It is another thing
that the disputes relate to his department and he is the
Government's own man. But his role is secondary. He cannot be
given place of primacy. He cannot be allowed to destroy the
clause. It is for the Union of India to raise objection to the filing
of the agreement and to give reasons for not going to arbitration.
That reason is subject to the scrutiny of the Court. The Chief
Engineer's role is passive. The Union of India plays the active role
in the legal battle.
34. The truth is that the Division Bench did not differentiate
between a judicial act and a ministerial act. As opposed to a
judicial act a ministerial act is an act or duty which involves the
exercise of administrative powers. If the Chief Engineer refuses to
appoint he refuses to do his duty. This is administrative nihilism,
if we may call it. He stultifies himself. But the clause he cannot
destroy."
13. It is, thus, apparent that when the intention to arbitrate
is manifest from the terms of the clause, the parties cannot be
MCA 543 of 2022 + 2.odt
permitted to digress from the same on any ground as that is the
chosen forum agreed by the parties and they should be relegated to
such forum. The choice of getting the dispute resolved by arbitration
is one thing and the choice of a specific arbitrator, is another thing
and both are severable from each other. In case the choice to get the
arbitration proceeding decided by specific person/arbitrator falls
through for any reasons whatsoever, as in this case on account of the
introduction of Section 12 (5) r/w VII th Schedule of A and C Act,
that by itself would not mean that the intention to arbitrate has been
wiped out as what is affected by Section 12 (5) r/w VII th Schedule
is the choice of the arbitrator, and nothing else. The intention to
arbitrate still remains. Such intention to arbitrate cannot be
permitted to be done away by such clauses as clause 13-A (b) or
clause 25 (ii) sub para 3, as that would defeat the very purpose of
ensuring independence and impartiality of an arbitrator in the
arbitration proceeding, as a party cannot be forced to arbitrate,
before an arbitrator, of the choice of the other side.
14. In that view of the matter, it is clearly apparent that the
intention to arbitrate exists between the parties in view of which
clause 13 -A is clearly severable, from clause 13 -A (b) in Misc Civil
MCA 543 of 2022 + 2.odt
Application Nos.10/2022 and 11/2022 and on account of such
severability, the parties can always be referred to arbitration.
15. In Misc Civil Application No.543/2022 also since the
clause is severable and the intention to arbitrate is manifest and the
appointment of Shri K.K. Peshin is affected by clause -1 of VII th
Schedule under Section 12 (5) of the A and C Act, in view of what
has been held by the Hon'ble Apex Court in Perkins Eastman
Architects DPC (supra) it would be necessary to appoint an
independent arbitrator.
16. In the result, all the misc. civil applications are allowed.
Shri V.M. Deshpande, Former Judge of this Court is hereby appointed
as an arbitrator to arbitrate between the parties in all the three
matters. The parties shall appear before the learned Arbitrator on
08/05/2023. The processing charges shall be paid before that.
17. No order as to costs.
(AVINASH G. GHAROTE, J.)
Wadkar
