Calcutta High Court
Ra Mining Private Limited vs Eastern Coalfields Limited on 12 February, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD -2
ORDER SHEET
AP-COM/60/2025
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
RA MINING PRIVATE LIMITED
VS
EASTERN COALFIELDS LIMITED
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 12th February, 2025.
Appearance:
Mr. JaydipKar,Sr.Adv.
Mr. Debdeep Sinha, Adv.
.... for the petitioner
Mr. SaunakSengupta, Adv.
Mr. P. Basu, Adv.
...for the respondent
The Court:This is an application for appointment of an arbitrator.
According to Mr. Kar, learned senior advocate, the dispute resolution clause
provides that the disputes shall be referred to arbitration and the arbitrator
shall be appointed by the Chairman cum Managing Director of the subsidiary
company or by the competent Authority of Coal India Limited, as the case may
be.
According to Mr. Kar, the above mechanism is no longer applicable in
view of the statutory bar.
Reliance is placed on the following decisions:-
2
1. Bharat Broadband Network Limited vs. United Telecoms
Limited : (2019) 5 Supreme Court Cases 755 ;
2. Perkins Eastman Architects DPC and Another vs. HSCC
(India) Ltd. ; 2019 SCC OnLine SC 1517;
3. Central Organisation for Railway Electrification vs. ECI SPIC
SMO MCML (JV) A Joint Venture Company : 2024 SCC OnLine
SC 3219.
Mr. Kar urges before this Court that the disputes and differences
between the parties arose out of a work order for crushing, loading and
transportation of coal from Rajmahal coal stockyard to Rajmahal Wharfwall
Siding. By letter dated November 28, 2024, the petitioner was asked by the
respondent to close the work order on the ground that, the petitioner had
refused to resume the work for the remaining period of the contract. Consent of
the petitioner was thereby sought for. The petitioner replied to the said letter,
informing the Engineer-in-Charge of the respondent that, the work was
hampered due to complete failure on the part of the respondent to discharge its
contractual obligation. The details of the objection of the petitioner were
recorded in that letter. The petitioner asked for release of the bank guarantee,
machineries andall dues on an urgent basis. To this, the respondent replied by
informing the petitioner that the closure process was going on and the consent
of the petitioner was awaited. Finally, when the petitioner did not give its
consent to close the work order, notice of termination dated December 20,
3
2024, was issued. The termination notice was issued by the Area General
Manager, Rajmahal Area. According to Mr. Kar, during the process of execution
of the work and before the termination noticewas issued, the matter could be
referred to the Engineer-in-Charge in terms of dispute resolution, i.e., clause
13 of the agreement. However, no attempt was made by the respondent to
settle the dispute amicably and the letters written by the petitioner,
enumerating its claims, were not responded to. Ultimately, the Area General
Manager, Rajmahal Area terminated the contract. Thus, the second level
towards amicable settlement could not be availed of. It is further submitted
that the letters relied on and the correspondences exchanged between the
parties, will indicate that chances of amicable settlement were completely non-
existent. In terms of Clause 13A of the dispute resolution clause in the
agreement, the petitioner issued a notice under Section 21 of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as the 1996 Act) with a
request to the respondent to proceed for arbitration. The respondent remained
silent. Accordingly, this Court has been approached.The termination notice,the
dues payable, non-release of the machineries deployed in the site and non-
release of the performance guarantee which was deposited with the respondent
were, inter alia, the disputes which are required to be referred to arbitration.
Mr. Sengupta, learned advocate for the respondent submits that
the arbitration clause provides for settlement of dispute by a sole arbitrator to
be appointed by the competent authority of the Coal India Limited or the
4
Chairman cum Managing Director of the subsidiary company. The notice
invoking arbitration did not contain such a request for appointment as per the
clause.Moreover, the petitioner did not exhaust the pre-arbitration dispute
resolution mechanism. This application is not maintainable in view of the
above objections.
Heard learned advocates for the respective parties.
The documents annexed to the application, clearly indicate that
the pre-arbitration resolution mechanism had failed. Moreover, such
mechanism was applicable only during the execution of the work, but in this
case,the contract had been terminated. Theseries of correspondence between
the parties indicate that possibility of amicable settlement is in the
negative.Further disputes have arisen on account oftermination of the contract
and the consequence of such termination. Any further attempt at amicable
settlement of the dispute will be an empty formality.The petitioner had written
letters with various claims and requests. Instead of considering those, the
termination notice was issued. The conduct of the respondent does not inspire
any confidence that the dispute can be resolved amicably. Under such
circumstances, the contention of Mr. Sengupta with regard to the non-
exhaustion of the clause providing for amicable settlement of the dispute, is not
accepted. Reference is made to the following decisions of the Hon'ble Apex
Court :
5
1) Visa International Limited vs. Continental Resources (USA)
Limited : (2009) 2 SCC 55. The relevant paragraph is quoted
below:-
"38. It was contended that the pre-condition for amicable
settlement of the dispute between the parties has not been
exhausted and therefore the application seeking
appointment of arbitrator is premature. From the
correspondence exchanged between the parties at pp. 54-77
of the paper book, it is clear that there was no scope for
amicable settlement, for both the parties have taken rigid
stand making allegations against each other. In this regard
a reference may be made to the letter dated 15-9-2006 from
the respondent herein in which it is inter alia stated "...
since February 2005 after the execution of the agreements,
various meetings/discussions have taken place between
both the parties for furtherance of the objective and
purpose with which the agreement and the MoU were
signed between the parties. Several correspondences have
been made by CRL to VISA to help and support its
endeavour for achieving the goal for which the
abovementioned agreements were executed". In the same
letter it is alleged that in spite of repeated requests the
petitioner has not provided any funding schedules for their
portion of equity along with supporting documents to help
in convincing OMC of financial capabilities of the parties
and ultimately to obtain financial closure of the project. The
exchange of letters between the parties undoubtedly
discloses that attempts were made for an amicable
settlement but without any result leaving no option but to
invoke the arbitration clause."
2) Demerara Distilleries Private Limited and Anr. vs.
Demerara Distillers Limited : (2015) 13 SCC 610. The
relevant paragraph is quoted below:-
"5. Of the various contentions advanced by the respondent
Company to resist the prayer for appointment of an
arbitrator under Section 11(6) of the Act, the objections with
regard the application being premature; the disputes not
6
being arbitrable, and the proceedings pending before the
Company Law Board, would not merit any serious
consideration. The elaborate correspondence by and
between the parties, as brought on record of the present
proceeding, would indicate that any attempt, at this stage,
to resolve the disputes by mutual discussions and
mediation would be an empty formality. The proceedings
before the Company Law Board at the instance of the
present respondent and the prayer of the petitioners therein
for reference to arbitration cannot logically and reasonably
be construed to be a bar to the entertainment of the present
application. Admittedly, a dispute has occurred with regard
to the commitments of the respondent Company as regards
equity participation and dissemination of technology as
visualised under the Agreement. It would, therefore, be
difficult to hold that the same would not be arbitrable, if
otherwise, the arbitration clause can be legitimately
invoked. Therefore, it is the objection of the respondent
Company that the present petition is not maintainable at
the instance of the petitioners which alone would require an
in-depth consideration."
With regard to the other contention of Mr. Sengupta that, the notice inviting
was not proper, as the respondent was not asked to appoint the learned
arbitrator, is also not accepted. The amended provisions of 1996 Act provides
for party autonomy and equal treatment in arbitral proceedings.Equal
participation, starts from the stage of appointment of an arbitrator. Section 18
of the arbitration clause is relevant for such purpose. In Perkins Eastman
(supra)the Hon'ble Apex Court held that appointment of an arbitrator by an
official of a particular party was contrary to the requirement of an impartial
and independent arbitrator. Unilateral appointment of an arbitrator was
contrary to law.
7
The relevant paragraphs of Perkins Eastman (supra) are quoted
below:-
"20. We thus have two categories of cases. The first, similar to the
one dealt with in TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd.,
(2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] 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 Ltd. [TRF Ltd. v. EnergoEngg. Projects
Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] , 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
Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 :
(2017) 4 SCC (Civ) 72] Para 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
8
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 (3 of 2016) and
recognised by the decision of this Court in TRF Ltd. [TRF
Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC
(Civ) 72]
...
24. In Voestalpine [VoestalpineSchienen GmbH v. DMRC, (2017) 4
SCC 665 : (2017) 2 SCC (Civ) 607] , this Court dealt with
independence and impartiality of the arbitrator as under : (SCC pp.
687-88 & 690-91, paras 20 to 22 & 30)
"20. Independence and impartiality of the arbitrator are the
hallmarks of any arbitration proceedings. Rule against bias is one of
the fundamental principles of natural justice which applied to all
judicial and quasi-judicial proceedings. It is for this reason that
notwithstanding the fact that relationship between the parties to the
arbitration and the arbitrators themselves are contractual in nature
and the source of an arbitrator's appointment is deduced from the
agreement entered into between the parties, notwithstanding the
same non-independence and non-impartiality of such arbitrator
(though contractually agreed upon) would render him ineligible to
conduct the arbitration. The genesis behind this rational is that even
when an arbitrator is appointed in terms of contract and by the
parties to the contract, he is independent of the parties. Functions
and duties require him to rise above the partisan interest of the
parties and not to act in, or so as to further, the particular interest of
either parties. After all, the arbitrator has adjudicatory role to
perform and, therefore, he must be independent of parties as well as
impartial. The United Kingdom Supreme Court has beautifully
highlighted this aspect in Hashwani v. Jivraj [Hashwani v. Jivraj,
(2011) 1 WLR 1872 : 2011 UKSC 40] in the following words : (WLR p.
1889, para 45)
'45. ... the dominant purpose of appointing an arbitrator or
arbitrators is the impartial resolution of the dispute between the
parties in accordance with the terms of the agreement and, although
the contract between the parties and the arbitrators would be a
contract for the provision of personal services, they were not personal
services under the direction of the parties.'
21. Similarly, Cour de Cassation, France, in a judgment delivered in
1972 in Consorts Ury [Fouchard, Gaillard, Goldman on International
Commercial Arbitration, 562 [Emmanuel Gaillard & John Savage
(Eds.) 1999] {quoting Cour de cassation [Cass.] [Supreme Court for
judicial matters] Consorts Ury v. S.A. des Galeries Lafayette, Cass.2e
civ., 13-4-1972, JCP, Pt. II, No. 17189 (1972) (France)}.] , underlined
that:
'an independent mind is indispensable in the exercise of judicial
power, whatever the source of that power may be, and it is one of the
essential qualities of an arbitrator'.
22. Independence and impartiality are two different concepts. An
arbitrator may be independent and yet, lack impartiality, or vice
versa. Impartiality, as is well accepted, is a more subjective concept
as compared to independence. Independence, which is more an
objective concept, may, thus, be more straightforwardly ascertained
by the parties at the outset of the arbitration proceedings in light of
the circumstances disclosed by the arbitrator, while partiality will
more likely surface during the arbitration proceedings.
***
30. Time has come to send positive signals to the international
business community, in order to create healthy arbitration
environment and conducive arbitration culture in this country.
Further, as highlighted by the Law Commission also in its report,
duty becomes more onerous in government contracts, where one of
the parties to the dispute is the Government or public sector
undertaking itself and the authority to appoint the arbitrator rests
with it. In the instant case also, though choice is given by DMRC to
the opposite party but it is limited to choose an arbitrator from the
panel prepared by DMRC. It, therefore, becomes imperative to have a
much broadbased panel, so that there is no misapprehension that
principle of impartiality and independence would be discarded at any
stage of the proceedings, specially at the stage of constitution of the
Arbitral Tribunal. We, therefore, direct that DMRC shall prepare a
broadbased panel on the aforesaid lines, within a period of two
months from today..."
In the decision of Central Organization for Railway Electrification
(supra)the Hon'ble Apex Court ultimately discussed the pros and cons of
unilateral appointment and held thus:-
"169. In view of the above discussion, we conclude that:
a. The principle of equal treatment of parties applies at all stages of
arbitration proceedings, including the stage of appointment of
arbitrators;
b. The Arbitration Act does not prohibit PSUs from empanelling
potential arbitrators. However, an arbitration clause cannot mandate
the other party to select its arbitrator from the panel curated by
PSUs;
c. A clause that allows one party to unilaterally appoint a sole
arbitrator gives rise to justifiable doubts as to the independence and
impartiality of the arbitrator. Further, such a unilateral clause is
exclusive and hinders equal participation of the other party in the
appointment process of arbitrators;
d. In the appointment of a three-member panel, mandating the other
party to select its arbitrator from a curated panel of potential
arbitrators is against the principle of equal treatment of parties. In
this situation, there is no effective counterbalance because parties do
not participate equally in the process of appointing arbitrators. The
process of appointing arbitrators in CORE (supra) is unequal and
prejudiced in favour of the Railways;
e. Unilateral appointment clauses in public-private contracts are
violative of Article 14 of the Constitution;
f. The principle of express waiver contained under the proviso to
Section 12(5) also applies to situations where the parties seek to
waive the allegation of bias against an arbitrator appointed
unilaterally by one of the parties. After the disputes have arisen, the
parties can determine whether there is a necessity to waive the nemo
judex rule; and
g. The law laid down in the present reference will apply prospectively
to arbitrator appointments to be made after the date of this judgment.
This direction applies to three-member tribunals."
Under such circumstances, the application is allowed.Clause 13A of
the contract provides for settlement of dispute by a sole arbitrator. The
mechanism prescribed with regard to the procedure for appointment of the
learned arbitrator has failed.
Accordingly, the application is disposed of by appointing Justice
Pinaki Chandra Ghose, former Judge of the Supreme Court of India as the sole
arbitrator, to arbitrate upon the dispute between the parties.
The learned Arbitrator shall comply with the provisions of Section 12
of the Arbitration and Conciliation Act, 1996. The learned Arbitrator shall be at
liberty to fix his remuneration as per the schedule of Arbitration and
Conciliation Act, 1996.
This Court has not considered the merits of the claim of the
petitioner. The objection with regard to the claim, can be urged before the
learned Arbitrator.
(SHAMPA SARKAR, J.)
TR/
