OCD 5
ORDER SHEET
AP-COM/466/2025
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
NEO BUILT CORPOTATION
VS
EAST CENTRAL RAILWAY AND ANR.
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 14th July, 2025.
Appearance:
Mr. Mainak Bose, Sr. Adv.
Mr. Sabyasachi Sen, Adv.
...for the petitioner
Ms. Aparna Banerjee, Adv.
Mr. Ravi Ranjan Kumar, Adv.
...for the respondents
The Court:
1. This is an application for appointment of an arbitrator, upon recording
termination of mandate of the erstwhile arbitral tribunal. According to
the petitioner, the erstwhile arbitral tribunal commenced the proceeding,
but did not publish the award. In the meantime, one of the arbitrators
resigned, making the said tribunal non-functional and unable to perform
duties and complete the proceedings. The mandate also expired.
2. It is also submitted that the question of approaching the railway
authorities for constitution of a panel in terms of the mechanism
provided under the contract will not arise. Appointment of an arbitrator
or arbitral tribunal from the curated panel of the respondents is no
2
longer permissible in law. The respondents can no longer unilaterally
appoint an arbitrator. Reference has been made to the decisions Perkins
Eastman Architects DPC and Another vs. HSCC (India) Ltd. reported
in 2019 SCC OnLine SC 1517 and Central Organisation for Railway
Electrification vs. ECI SPIC SMO MCML (JV) A joint Venture Company
reported in 2024 SCC OnLine SC 3219.
3. Ms. Banerjee, learned advocate for the respondent submits that by a
letter dated December 23, 2024, the petitioner was requested to give its
consent and waive the applicability of Section 12(5) of the Arbitration and
Conciliation Act, 1996, so that a fresh arbitral tribunal comprising of
retired railway officers could be constituted for adjudication of the
pending disputes. Although, the petitioner by a letter dated March 18,
2025 extended consent, but the matter did not progress and no written
agreement was entered into. By a letter dated March 13, 2025, a panel
of four retired officers of the railways was sent to the petitioner. The
petitioner did not respond. A reminder was sent to the petitioner once
again on April 21, 2005, reiterating the contents of the letter dated March
13, 2025 on April 21, 2025.
4. In the above conspectus, the petitioner has moved this Court for
constitution of an arbitral tribunal. Mr. Mainak Bose, learned senior
advocate representing the petitioner submits that the petitioner has
requested for appointment of a sole arbitrator and prays before this
Court that a sole arbitrator may be appointed. Similarly, Ms. Banerjee
has also handed over a written instruction issued by Dy. Chief
3
Engineer/Con-II, East Central Railway, Hazaribagh, granting consent for
appointment of either a sole arbitral or an arbitral tribunal from the
panel maintained by the respondent.
5. The prayer for appointment of a tribunal from the panel of retired railway
officers cannot be granted.
6. The Hon'ble Apex Court in Central Organization for Railway
Electrification (supra), held thus:-
"73. The 2015 amendment has introduced concrete standards of
impartiality and independence of arbitrators. One of the facets of
impartiality is procedural impartiality. Procedural impartiality
implies that the rules constitutive of the decision-making process
must favour neither party to the dispute or favour or inhibit both
parties equally. Further, a procedurally impartial adjudication
entails equal participation of parties in all aspects of adjudication
for the process to approach legitimacy. Participation in the
adjudicatory process is meaningless for a party against whom the
arbitrator is already prejudiced. Equal participation of parties in
the process of appointment of arbitrators ensures that both sides
have an equal say in the establishment of a genuinely independent
and impartial arbitral process.
74. Under Sections 12(1) and 12(5), the Arbitration Act recognises
certain mandatory standards of independent and impartial
tribunals. The parties have to challenge the independence or
impartiality of the arbitrator or arbitrators in terms of Section 12(3)
before the same arbitral tribunal under Section 13. If the tribunal
rejects the challenge, it has to continue with the arbitral
proceedings and make an award. Such an award can always be
challenged under Section 34. However, considerable time and
expenses are incurred by the parties by the time the award is set
aside by the courts. Equal participation of parties at the stage of
the appointment of arbitrators can thus obviate later challenges to
arbitrators.
75. Independence and impartiality of arbitral proceedings and
equality of parties are concomitant principles. The independence
and impartiality of arbitral proceedings can be effectively enforced
only if the parties can participate equally at all stages of an arbitral
process. Therefore, the principle of equal treatment of parties
applies at all stages of arbitral proceedings, including the stage of
the appointment of arbitrators.
***
124. The doctrine of bias as evolved in English and Indian law
emphasizes independence and impartiality in the process of
adjudication to inspire the confidence of the public in the
adjudicatory processes. Although Section 12 deals with the quality
of independence and impartiality inherent in the arbitrators, the
provision's emphasis is to ensure an independent and impartial
arbitral process.
***
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;"
7. In Perkins Eastman (supra), the Hon'ble Apex Court held thus :-
"...20. We thus have two categories of cases. The first, similar to
the one dealt with in TRF Ltd. [TRF Ltd. v. Energo Engg. 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. Energo Engg. 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.
***
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..."
8. In view of the agreement between the parties for reference of the dispute
to a sole arbitrator and as the request of the respondents with regard to
constitution of arbitral panel from a list of arbitrators maintained by
them is no longer permissible in law, this Court records termination of
the mandate of the erstwhile proceeding upon resignation of one of the
learned arbitrators and allows this application for appointment of an
arbitrator. The proceeding will commence before the newly appointed
learned Arbitrator from the stage prior to the resignation of one of the
members of the erstwhile tribunal.
9. As both parties are ad idem on the issue of reference to a sole arbitrator,
the Court appoints Hon'ble Justice Subrata Talukdar, former Judge 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 own remuneration as per the Schedule of the Act.
10. AP-COM/466/2025 is, accordingly, disposed of.
(SHAMPA SARKAR, J.)
B.Pal
