Calcutta High Court
R.K. Associates And Hoteliers ... vs Eastern Railway Through Its ... on 25 January, 2021
ORDER SHEET
AP 348 of 2019
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
R.K. ASSOCIATES AND HOTELIERS PVT. LTD.
-Versus-
EASTERN RAILWAY THROUGH ITS DEPUTY CHIEF COMMERCIAL MANAGER
BEFORE:
The Hon'ble JUSTICE ASHIS KUMAR CHAKRABORTY
Date : 25th January, 2021.
Appearance:
Mr. Arijit Basu, Advocate
...for the petitioner.
Ms. Aparna Banerjee, Advocate
...for the respondent.
The Court : In this application under Section 11(6) of the
Arbitration & Conciliation Act, 1996 (in short, 'the Act of 1996')
the petitioner has prayed for appointment of an independent sole
Arbitrator to adjudicate the disputes arisen between the parties
herein relating to the Master License Agreement dated June 23,
2014 (hereinafter referred to as 'the license agreement').
By the said agreement executed in Kolkata the respondent
railway appointed the petitioner to render the services to
operate, manage and supply catering services on the Sealdah-New
Delhi Rajdhani Express.
Articles 20.1 and 20.2 of the license agreement contemplated
that all disputes arising between the parties thereto would first
sought to be amicably resolved, failing which the disputes shall
be referred to arbitration as per the provisions of the Act of
1996. Such arbitration proceeding would be conducted by a sole
Arbitrator being a Gazetted Railway Officer to be appointed by the
General Manager of the Zonal Railway awarding the licence. The
said clause further stipulated that no person other than a person
appointed by the said General Manager would act as the Arbitrator
and if for any reason, that is not possible, the matter is not to
be referred to arbitration at all.
It appears from the records disclosed in the petition that
the petitioner filed a writ petition being WP No.218 of 2017
against the respondent railway. By a judgment and order dated
July 28, 2017 a Co-ordinate Bench of this Court dismissed the said
writ petition on the ground of existence of the alternative
remedy. Petitioner carried out the said order of dismissal in
appeal being APO No.385 of 2017 which was disposed of by the
Division Bench on February 25, 2019 without interfering with the
decision of the learned Single Judge. Thereafter, by a letter
dated March 7, 2019 addressed to the Chief Commercial Manager of
the respondent railway, the petitioner invoked the arbitration
agreement and pointed out that in view of the incorporation of
Section 12(5), read with the entries in the Seventh Schedule to
the Act of 1996, the General Manager of the respondent railway
cannot nominate any Arbitrator. By the said letter the petitioner
requested the respondent railway authority to accept the
Arbitrator named by them. The respondent railway authority,
however, refused to accept the person named by the petitioner as
the sole Arbitrator. They asserted that in view of the arbitration
clause between the parties it is the General Manager of the
respondent railway who alone has the authority to appoint the
Arbitrator.
In the above factual background, the petitioner has
approached this Court seeking appointment of an independent person
as the sole Arbitrator.
Learned Counsel appearing for the petitioner referred to the
decision of the Supreme Court in the case of Perkins Eastman
Architects DPC and Another -versus- HSCC(India) Limited reported
in 2019 SCC Online SC 1517 and submitted that in the said decision
the Supreme Court has already held that in view of the provisions
of Section 12(5), read with the Seventh Schedule to the Act of
1996 when a person himself is debarred from acting as the
Arbitrator he cannot even nominate an Arbitrator. On the strength
of the said decision, learned Counsel for the petitioner pressed
for an order allowing the above prayer made in this application.
On the other hand, the respondent railway raised objection to
the maintainability of the present application on two grounds. In
the first place it was submitted that the arbitration agreement
between the parties, as mentioned above, stipulates that the
disputes between the parties should first sought to be resolved
through amicable settlement, but in the present case, the
petitioner has not taken any steps in that direction. Secondly, it
is the General Manager of the respondent railway who alone has the
authority to appoint the Arbitrator and, as such, when the
petitioner did not invoke the arbitration agreement by issuing any
notice to the General Manager, the present application on the
basis of the said letter dated March 7, 2019 issued to the Chief
Commercial Manager is not maintainable.
I have considered the materials on record and the arguments
advanced by the respective parties. In the present case,
admittedly the Chief Commercial Manager of the respondent railway
who represented the President of India in the said license
agreement dated June 23, 2014. Further, in view of the
introduction of sub-Section(5) of Section 12, as well as the
Seventh Schedule to the Act of 1996, no Gazetted Officer of the
respondent railway can act as an Arbitrator to adjudicate the
disputes between the parties. In the case of TRF Ltd.-vs-ENERGO
Engineering Projects Ltd. reported in (2017) 8 SCC 377 the Supreme
Court held that when a person is ineligible to act as an
Arbitrator because of Section 12(5) and the entries in the Seventh
Schedule to the Act of 1996 he cannot even appoint any Arbitrator.
Even after considering the said decision in the case of TRF Ltd.
(supra) in paragraphs 20 and 21 of the decision in the case of
Perkins Eastment Architects (supra), the Supreme Court held as
follows:
"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, the 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 Arbitration". 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 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 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."
In view of the above decisions of the Supreme Court, it is
evident in the present case, there is a statutory prohibition
impose on the General Manager of the respondent railway from
involving himself with the appointment of an Arbitrator. Thus, I
find no merit in the contention of the respondent railway that the
petitioner could invoke the arbitration agreement only upon
issuing a notice under Section 21 of the Act of 1996 to the
General Manager. The statutory prohibitions imposed by Section
12(5), read with the entries in Seventh Schedule to the Act of
1996 does not render the entire arbitration agreement between the
parties inoperative.
For the foregoing reasons, the application, AP No.348 of 2019
succeeds. Mr. Surendra Kumar Kapur, Senior Advocate and Barrister
of Bar Library Club (First Floor) is appointed as the sole
Arbitrator to adjudicate the disputes arisen between the parties
relating to the said license agreement dated June 23, 2014. The
learned sole Arbitrator will be free to fix his remuneration and
to engage the secretarial staff. The fees of the learned sole
Arbitrator, as well as the remuneration of the secretarial staff
shall be borne by the parties in equal shares.
With the above direction, the application, AP No.348 of 2019
stands disposed of without any as to costs.
Urgent certified website copies of this order, if applied
for, be supplied to the parties subject to compliance with all
requisite formalities.
(ASHIS KUMAR CHAKRABORTY, J.)
spal/mg
