Bhartia Infra Projects Ltd vs Union Of India And 2 Ors
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Gauhati High Court

Bhartia Infra Projects Ltd vs Union Of India And 2 Ors on 28 January, 2025

Author: Soumitra Saikia

Bench: Soumitra Saikia

                                                                          Page No.# 1/5

GAHC010271992023




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                              THE GAUHATI HIGH COURT
   (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

                                  Case No. : Arb.P./49/2023

            BHARTIA INFRA PROJECTS LTD.,
            A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING
            ITS REGISTERED OFFICE AT 201, ROYAL ARCADE, 2ND FLOOR, DR. B.
            BARUAH ROAD, ULUBARI, GUWAHATI-781001, REPRESENTED BY ITS
            MANAGING DIRECTOR SHRI PAWAN KUMAR BHARTIA, AGED ABOUT 51
            YEARS.



            VERSUS

            UNION OF INDIA AND 2 ORS.
            REPRESENTED BY GENERAL MANAGER, N.F. RAILWAY, MALIGAON,
            GUWAHATI-781011.

            2:THE CHIEF ENGINEER/CONSTRUCTION-II

             N.F. RAILWAY. MALIGAON
             GUWAHATI-781011.

            3:THE DEPUTY CHIEF ENGINEER/CON 4

             N.F. RAILWAY. IMPHAL
             MANIPUR-795001

Advocate for the Petitioner   : MR. R HUSSAIN, MS P SEN,MR A A AHMED

Advocate for the Respondent : DY.S.G.I., MR. S S ROY
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                                 BEFORE
                  HONOURABLE MR. JUSTICE SOUMITRA SAIKIA

                                     ORDER

28.01.2025 Heard Mr. R. Hussain, learned counsel for the petitioner. Also heard Mr. S.S. Roy, learned CGC appearing for the respondents.

This is an application filed by the petitioner under Section 11 of the Arbitration and Conciliation Act, 1996 praying for appointment of an arbitrator.

The petitioner was awarded a contract for execution of the work - Tender No. CE-CON-JI-EMB-2019-08-RTI closing date 25-10-2019 14:30 for Earthwork, construction of major & minor bridges (as per Bridge list attached) and protection works between chainage 115930 to 124660 in connection with construction of Jiribam - Tupul - Imphal New BG Railway Line Project. In response to the bid submitted by the petitioner, the petitioner was awarded the work through a letter of acceptance dated 05.12.2019, following which a proper agreement was executed between the parties. As per Clause 6.0 of the agreement, any disputes arising would be governed by Clauses 63 and 64 of the General Conditions of Contract. During the execution of the work, certain disputes arose between the petitioner and the respondent authority, leading to the termination of the work by the respondent, namely the railways, due to the differences that developed between the parties. The petitioner, by issuing a notice dated 18.07.2023, called upon the respondents to refer the matter for arbitration, clarifying that the petitioner did not waive its right to the appointment of arbitrators from the panel maintained by the railways. In response, the railway authorities, through a communication dated 21.08.2023, requested the petitioner to review its claim in light of Clause 63 and 64 of the General Conditions of Contract, informing the petitioner that arbitration under Page No.# 3/5

these clauses is required only if the value of the dispute does not exceed 20% of the contract. Since the railway authority did not accede to the request made by the petitioner to appoint the arbitrator the instant arbitration petition has been filed.

The learned counsel for the petitioner has referred to the claims which are raised in the notice issued to the respondent dated 09.03.2023 submits that the details and particulars of the claims against the respondents are elaborately mentioned in the notice. A perusal of the said claim reveals that the response of the railways in not exceeding to the request made by the petitioner that his claims are below 20% of the contract value is incorrect as the total value of the contract is Rs. 150,66,92,915.20/-. The learned counsel for the petitioner further submits that if the total claim raised by the petitioner is taken into account and the same exceeds 20% of the total value of the works allotted to the petitioner. Therefore, the provisions of Clause 63 and 64 of the standard agreement maintained by the railways would not be applicable.

The learned counsel for the respondent railways has filed objections, disputing the claims raised by the petitioner. The learned counsel for the railways submits that at the time when the objections were filed the law laid down by the Apex Court in Central Organization for Railway Electrification Vs. M/s. ECI SPIC SMO MCML (JV) A Joint Venture Company did not entirely restrict an employer from appointment of arbitrators from the currated panel. However, the matter was subsequently referred to a larger bench and the majority view of the larger bench held that the appointment of an arbitrator from the currated panel maintained by the employees is contrary to the provisions of law.

The learned counsel for the petitioner also submits that subsequent judgment of the Apex Court also fortified the claims of the petitioner and Page No.# 4/5

reiterated that appointment of arbitrators from the currated penal is not permissible if the contractor does not waive his right as provided under the provision of Section 11. He referred to judgment SBI General Insurance Co. Ltd. V. Krish Spinning, 2024 SCC Online SC 1754.

The learned counsel for the parties have been heard. Pleadings available on the record have been carefully perused. The provisions of law as urged before the Court along with the judgment of the Apex Court have also been kept in noted. From the judgment rendered in CORE (larger bench) the majority view of the said larger bench are extracted below.

"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."

Subsequently, in the judgment of SBI General Insurance Co. Ltd. V. Krish Spinning, 2024 SCC Online SC 1754 has reiterated the position of law. It is further held that the power of the referring Court in the appointment of an arbitrator is extremely limited, being confined to verifying the existence of a Page No.# 5/5

valid arbitration agreement. The questions of jurisdiction and/or the arbitrability of the dispute are to be left for the arbitrator to decide.

Under such circumstances, this Court is of the view that the petitioner has been failed to make a case or issuance of order to appointment an arbitrator.

Both the parties have suggested the name of Justice C.R. Sarma, Former Judge of Gauhati High Court to act as an arbitrator to decide the dispute the claims urged between the parties.

However, the appointment of the prospective arbitrator is subject to a written declaration to be furnished by the prospective learned arbitrator, as required under Section 12(5) of the Arbitration and Conciliation Act, 1996.

Let a copy of this order be placed before the prospected learned Arbitrator and any such written declaration has been furnished by the prospected learned Arbitrator be placed before the Court on the next date fixed for pursuant to which the order of confirmation of appointment will be issued.

Let the matter be listed on 24.02.2025.

JUDGE

Comparing Assistant