[Cites 6, Cited by 0]
Calcutta High Court
Strescon Industries Limited vs The Union Of India on 3 February, 2026
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD 2
ORDER SHEET
AP-COM/977/2025
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
STRESCON INDUSTRIES LIMITED
VS
THE UNION OF INDIA
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 3rd February, 2026.
Appearance:
Mr. Ayan Banerjee, Adv.
Mr. Arijit Bhowmick, Adv.
Ms. Pooja Agarwal, Adv.
. . .for the petitioner.
Mr. Brajes Jha, Adv.
Mr. Pradyat Saha, Adv.
. . .for the respondent.
The Court:
1. This is an application under Section 11 of the Arbitration and
Conciliation Act, 1996 for appointment of an Arbitrator for settlement of
disputes between the licensor and licensee which arose out of an
agreement for grant of license.
2. Clause 12 of the agreement dated March 29, 2007 provides that
disputes and differences arising between the licensor and the licensee in
connection with the demised land or in relation to the said agreement
shall be referred to the arbitration of a sole Arbitrator who shall be the
Railway Officer nominated in this behalf by the General Manager of
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Eastern Railway. The petitioner and the respondent entered into the
agreement based on a letter of acceptance dated November 11, 1986.
Under the said agreement, the demised land was to be used for
manufacture and supply of Mono-Block Pre-Stressed Concrete (PSC).
The agreement was extended from time to time and lastly on March 29,
2007. The land measured approximately 5 acres. The license was for a
period of 10 years with an option to renew the same. The license fee
was to be revised annually by adding 7% over and above the last paid
rent.
3. The specific contention of the petitioner is that even after expiry of the
agreement, the respondent requested the petitioner to pay rent and the
petitioner continued to make such payment in terms of the agreement.
Reliance has been placed on 11 letters written by the respondent
claiming such rent/license fee. It appears from those letters that the
petitioner had paid license fee for those periods even beyond 2017.
Cheques were paid under the said head, for occupation of the railway
land even in 2022, 2023, 2024 and 2025. The Railway Authorities did
not take any steps for renewal of the agreement, but it is the specific
contention of the petitioner that the agreement stood renewed by
conduct of the parties as the respondent allowed the petitioner to
continue to possess the said land.
4. The petitioner was thereafter informed by a letter dated February 5,
2025, that the payment made by the petitioner since 2022 was
unacceptable to the respondent as the said payment was contrary to the
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guidelines of the Master Circular of the Railways. The respondent
informed the petitioner that the calculation of the licensee fee was
under financial vetting, based on the updated measured land area and
prevailing land value. The same would be made on the updated
measured land area and the prevailing land value in accordance with
the Railway Board Circulars. The respondent also informed the
petitioner that upon completion of the vetting and approval from the
competent authority, a demand note would be issued to the petitioner to
enable the petitioner to deposit the outstanding licensee fee.
5. The dispute arose when the petitioner was suddenly informed in
February 20, 2025, that is, nine years after the alleged expiry of the
license agreement that, the payments towards the occupation of the
land were unacceptable and the calculation of the licensee fee which
was demanded from the petitioner was erroneous. Moreover, by a letter
dated February 10, 2025, the petitioner was informed for the first time
that the license granted in favour of the petitioner to occupy the railway
land had expired. The specific case of the petitioner is that the rent was
being paid to the petitioner as per the demand raised, although no
formal agreement for license had been executed after 2017. The parties
for all intent and purpose had extended the license and fees were
accordingly paid. Thus, disputes arose between the parties. It also
appears that by a letter dated March 3, 2025, the petitioner was asked
to pay an amount of Rs.1,08,88,090.45/- along with GST of
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Rs.19,59,856.28 for the period from 2022-23 to 2024-25. The petitioner
disputed the amount.
6. It appears that a formal application seeking renewal of the said license
is pending with the authority and the authority had informed the
petitioner that the same was waiting consideration.
7. Under such circumstances, the petitioner had various claims and had
raised various disputes with the authority. A notice invoking arbitration
was issued for appointment of an Arbitrator. The respondent did not
reply to the notice invoking arbitration. Learned advocate for the
respondent submits that the license had already expired on 2017. The
payments which were demanded by the respondent had not been made.
The petitioner did not exercise the right of renewal. Once the agreement
expired, the petitioner could not invoke arbitration clause.
8. Clause 8 of the agreement provides that the licensor may at its option or
on an application by the licensee consider the renewal of the license for
any further period and on such terms and conditions as the licensor
shall consider reasonable, fit and proper. Clause 12 provides that all
questions, disputes, differences arising between the licensor and the
licensee in connection with the said land or in connection with the
agreement including the construction and interpretation thereof shall be
referred to a sole Arbitrator. The clause provides that the sole
Arbitrator shall be a Railway Officer to be nominated by the General
Manager of Eastern Railway.
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9. Unilateral appointment is no-longer permissible in law. Reference is
made to the following decisions:-
(i) Perkins Eastman Architects DPC and Another vs. HSCC (India)
Ltd. ; 2019 SCC OnLine SC 1517;
(ii) Central Organisation for Railway Electrification vs. ECI SPIC
SMO MCML (JV) A Joint Venture Company : 2024 SCC OnLine SC
3219.
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
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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..."
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."
10. Thus the petitioner has rightly approached this Court for
appointment of an Arbitrator. The other issue is as to whether the
petitioner has any locus to invoke the arbitration clause in view of the
expiry of the license, this Court, prima facie finds, that even after expiry
of the period of license by efflux of time, the parties were engaged in
continuous conversation and discussions with regard to renewal. The
petitioner was asked to make payment for occupation of the land. The
application for renewal is pending without any decision.
11. There are letters which would indicate that the petitioner's
application is under consideration. The letter will also indicate that the
Railway Authorities had raised the demand towards payment of the land
rent and the petitioner had, accordingly, paid. There is also a letter
which indicates that the petitioner had paid lesser amount than what
was required under the Railway Master Circular and, as such, the
demand was made for a higher amount. All these issues arise and
emanate from the license agreement itself and, as such, even if the
agreement has expired by efflux of time, the disputes which arise
between the parties from the said agreement must be decided by the
Arbitrator. In any event, if the respondents have objection with regard
to the arbitrability of the disputes, the same touches the jurisdiction of
the learned Arbitrator and as such may be raised before the learned
Arbitrator at the appropriate stage.
12. It is also evident that the Railway Authorities also have a claim
against the petitioner on account of land rent and all such issues
indicate that there are subsisting dispute between the parties.
13. Under such circumstances, this Court allows the application by
appointing Hon'ble Justice Sahidullah Munshi, former Judge of this
Hon'ble Court as the learned Arbitrator, to adjudicate the disputes
between the parties. This appointment is subject to compliance of
Section 12 of the Arbitration and Conciliation Act, 1996.
14. The learned Arbitrator shall fix his remuneration as per the Schedule
of the Act.
15. All objections with regard to jurisdiction, arbitrability, admissibility
and limitation etc, are left open.
16. AP-COM 977 of 2025 is, accordingly, disposed of.
(SHAMPA SARKAR, J.)
SP/
