Calcutta High Court
Sterling And Wilson Pvt. Ltd vs Central Public Works Department on 9 July, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD 7
ORDER SHEET
AP-COM/434/2025
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
STERLING AND WILSON PVT. LTD.
VS
CENTRAL PUBLIC WORKS DEPARTMENT
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 9th July, 2025.
Appearance:
Mr. Sanjib Tyagi, Adv.
Ms. Shetparna Ray, Adv.
Ms. S. Sha, Adv.
Mr. Krishnayan Ghosh, Adv.
...for the petitioner
Mr. Rabi Prasad Mookerjee, Adv.
Ms. Priti Jain, Adv.
...for Union of India
The Court:
1. Supplementary affidavit is taken on record.
2. This is an application for appointment of an arbitrator in terms of Clause
25 of the General Conditions of Contract (GCC), 2020 of the Central Public Works
Department, Government of India.
3. An agreement was entered into between the parties for construction of the
permanent campus of IISER-Kolkata at Haringhata, Nadia. The agreement dated
August 31, 2018 was governed by General Conditions of Contract (GCC), which
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was available in the CPWDs official website. Copy of the same was also handed
over to the petitioner. The total value of the contract was Rs.5,90,35,393/-. The
contention of the petitioner is that although bills were raised, there were
outstanding dues. A sum of Rs.1,59,64,577/- remained outstanding. The
respondent also failed to refund the Earnest Money Deposit amounting to
Rs.4,28,093/-. The bank guarantee for an amount of Rs.29,51,770/- was not
released. The work had been completed. Despite multiple follow ups, the
authority did not take any steps. Several meetings were held with various
personnel of the CPWD official at Nizam Palace. The petitioner issued several
letters. The petitioner made a final request to the Chief Engineer for appointment
of the Dispute Redressal Committee (DRC) under Clause 25 of the GCC. The
petitioner relies on the provisions of Clause 25 of the GCC. The Chief Engineer
failed to take steps and thus, this application has been filed.
4. Mr. Mukherjee, learned advocate for the respondent submits that once the
petitioner approached the authority for constitution of the DRC, the petitioner
must wait for the committee to be constituted and the DRC shall look into the
matter. The application before this Court is, thus, premature. Moreover, the
letter to the Chief Engineer was sent to the wrong address. The DRC will be
constituted soon and the matter shall be referred.
5. Heard the parties. Clause 25 of the GCC provides for settlement of dispute
by arbitration. The said GCC was modified on June 28, 2021. The said
modification provides that a party can seek reference to arbitration even without
taking recourse to conciliation. The provision for constitution of the DRC has
3
been modified. Under such circumstances, it matters little whether the petitioner
requested the Chief Engineer for constitution of the DRC or not.
6. The petitioner invoked arbitration on February 5, 2025. The said notice
was addressed to the Superintendent Engineer. It appears from the records that
various letters were exchanged between the parties and meetings were held at
Nizam Palace. The cause of action arose within the jurisdiction of this Court.
The GCC does not provide for a seat of arbitration.
7. In my opinion, the modified GCC should be applied in this case and thus,
even if the petitioner was misled into asking for constitution of a DRC, such
request would not be a bar for the petitioner to approach this Court for
appointment of an arbitrator. This does not amount to waiver of the applicability
of Section 12 (5) of the said Act.
8. It is also important to note that after several sounds of meetings and failed
requests, the question of further conciliation does not arise. In this regard,
reliance is placed on the decisions of Visa International Limited vs.
Continental Resources (USA) Limited reported in (2009) 2SCC 55 and
Demerara Distilleries Private Limited and anr. vs. Demerara Distillers
limited reported in (2015) 13 SCC 610.
9. In the decision of Visa International (supra) the Hon'ble Apex Court held
as follows:-
"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
4
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."
10. In the decision of Demerara Distilleries Private Limited and Another v.
Demerar Distillers Limited reported in (2015)13 SCC 610, the Hon'ble Apex
Court held as follows:-
"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 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."
11. The GCC has been modified. It permits a party to request for arbitration
irrespective of the conciliation clause. The records also reveal that conciliation
between the parties were attempted when they had sat across the table at
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different meetings. Thus, at this stage, it cannot be said that this application is
premature. The existence of a dispute redressal clause, providing for settlement
of dispute by a sole arbitrator is available.
12. The issues raised by Mr. Mookerjee with regard to non-arbitrability,
admissibility, limitation etc. will be decided by the learned arbitrator. The learned
arbitrator can rule on his own jurisdiction. He can also decide on the arbitrability
of the dispute between the parties.
13. Further contention of Mr. Mookerjee that once the petitioner accepts the
terms and conditions of the GCC and proceeds to request the authority for
appointment of a redressal committee, the petitioner is bound by the terms and
conditions of the said contract and in case of failure of conciliation or redressal of
the grievance of the petitioner, the respondent/chief engineer will appoint the
arbitrator, is erroneous. The contract provides for unilateral appointment, which
is prohibited in law. Reference is made to the decisions of Perkins Eastman
Architects DPC and Another vs. HSCC (India) Ltd. ; 2019 SCC OnLine SC
1517; and Central Organisation for Railway Electrification vs. ECI SPIC
SMO MCML (JV) A Joint Venture Company : 2024 SCC OnLine SC 3219.
14. 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
6
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 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.
15. ***
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..."
16. 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."
17. Unilateral appointment by a party interested in the result of the
arbitration, is not permissible in law and as such, this application is
maintainable.
18. Under such circumstances, the Court appoints Hon'ble Justice Debasish
Kargupta, former Chief Justice of this court, as the learned Arbitrator, to
arbitrate upon the disputes between the parties. This appointment is subject to
compliance of Section 12 of the Arbitration and Conciliation Act, 1996. The
learned Arbitrator shall fix his/her own remuneration as per the Schedule of the
Act.
19. AP-COM/434/2025 is, accordingly, disposed of.
(SHAMPA SARKAR, J.)
B.Pal
