Gauhati High Court

M/S Rke-Shimray (Jv) vs Union Of India And Ors on 30 January, 2025

Author: Soumitra Saikia

Bench: Soumitra Saikia

                                                                  Page No.# 1/9

GAHC010052322024




                                                           undefined

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

                           Case No. : Arb.P./14/2024

         M/S RKE-SHIMRAY (JV)
         SHIMRAY VILLA, NAGARAM BLOCK-E, PO LAMLONG, PS LAMPHEL, DIST
         IMPHAL EAST MANIPUR, 795010, REPRESENTED BY ITS AUTHORISED
         SIGNATORY SRI THEMREINGAM A SHIMRAY, SON OF SRI A SHIMRAY, AGE
         45 YEARS, RESIDENT OF SHIMRAY VILLA NAGARAM BLOCK E, PO
         LAMLONG, PS LAMPHEL, DIST IMPHAL EAST MANIPUR, 795010,



         VERSUS

         UNION OF INDIA AND ORS
         REPRESENTED BY THE SECRETARY TO THE MINISTRY OF RAILWAYS,
         GOVT OF INDIA, RAIL BHAWAN, RAISINA HILLS, NEW DELHI, 781006

         2:THE NORTHEAST FRONTIER RAILWAY
          REPRESENTED BY THE CHIEF ENGINEER/CONSTRUCTION-II
          NF RAILWAYS
          HEAD QUARTER
          MALIGAON
          GUWAHATI 78011 ASSAM

         3:THE CHIEF ENGINEER/CONSTRUCTION-II
          NF RAILWAYS
          HEAD QUARTER
          MALIGAON
          GUWAHATI 78011 ASSAM

         4:THE DEPUTY CHIEF ENGINNER (CONSTRUCTION-IV)
          NF RAILWAYS
          HEAD QUARTER
          MALIGAON
          GUWAHATI 78011 ASSAM
                                                                          Page No.# 2/9

            5:SENIOR ASSISTANT FINANCIAL ADVISER
             NF RAILWAYS
             HEAD QUARTER
             MALIGAON
             GUWAHATI 781011 ASSA

Advocate for the Petitioner   : MR. D J KAPIL, MR. D M NATH,MR G RAHUL

Advocate for the Respondent : DY.S.G.I., MRS. R DEVI




                                    BEFORE
                     HONOURABLE MR. JUSTICE SOUMITRA SAIKIA

                                         ORDER

30.01.2025

Heard Mr. D.J. Kapil, learned counsel for the petitioner. Also heard Ms. R.

Devi, learned CGC.

2] This arbitration petition is filed by the petitioner seeking appointment of

sole arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.

The present petitioner was awarded for construction of standard 120 units Type-

II, 16 units type-II and 3 units type-IV Quarters at Jagiroad, Aujuri,

Chaparmukh, Laopani, Kampur, Jamunamukh and Jugijan stations including all

other ancillary works in connection with Digaru to Hojai Doubling Project of N.F.

Railway pursuant to the offer made by the petitioner. The said offer was

accepted at a Total Cost of Rupees 23,07,13,257.27 (Rupees twenty three crore

seven lacs thirteen thousand two hundred fifty seven and paisa twenty seven

only). Pursuant to the work order issued, a contract was executed by and Page No.# 3/9

between the petitioner and the respondents on 12.07.2018. During the course

of the works being executed certain differences arose which led to the disputes

between the petitioner and the respondent and the respondent Authorities

terminated the Contract. Being aggrieved, notice dated 01.03.2023 under

Section 21 of the Arbitration & Conciliation Act, 1995 was served upon the

respondents by the petitioner for resolution of this dispute by requesting for

appointment of an arbitrator.

3] Pursuant to that the respondents Railway Authorities submitted their reply

circulating the name of the panel of retired Railway Officers for requesting the

petitioner to nominate at least two names of the list of retired Railway Officers

for appointment of an arbitrator. The petitioner did not proceed for nominating

the name suggested by the Railway Officers.

4] Learned counsel for the petitioner submits that under Section 12 (5) of the

Arbitration and Conciliation Act, there is a bar for these Railway Officers to be

appointed by the Railway Authorities and consequently, none of the names sent

were concurred upon by the petitioner. Learned counsel for the petitioner

submits that the Apex Court in Central Organization for Railway Electrification

(CORE) vs. M/s. ECI SPIC SMO MCML (JV), A joint Venture Company had

categorically held that nomination of arbitrators from the curated panel Page No.# 4/9

maintained by the employer would be violative of Article 14.

5] Mrs. R. Devi, learned CGC appearing for the respondents submits that at

the time when the matter was filed before the Court, the position of law was

clear that the nomination can be made from panel of arbitrators maintained by

the employer and therefore, under such circumstances, the Railway Authorities

had nominated panel of arbitrators. She, however, fairly submits that the law in

respect of the bar under Section 12(5) is now settled in view of the judgment of

the Larger Bench rendered by the Apex Court in Core judgment.

6] Learned counsel for the parties have been heard. The pleadings available

on the record have been carefully perused.

7] It is seen that the petitioner was awarded the contract by the respondent

employer by work order dated 12.07.2018. It is also seen that by order dated

03.03.2020 the contract was terminated. Clause 64 of the agreement dated

12.07.2018 executed by and between the petitioner and the respondents

provides that in the event of any dispute arising two names will be required to

be suggested to the contractor to suggest the name of the arbitrators from

which one name will be selected by the General Manager and the General

Manager will also simultaneously appoint the balance number of arbitrators from

the table maintained or outside the panel indicating the presiding arbitrator from Page No.# 5/9

amongst the three arbitrators who are pointed. It is also seen that a notice as

required under Section 21 demanding arbitration was issued by the petitioner

holding upon the respondents to appoint the arbitrators to which the railway

authorities have responded by communication dated 19.12.2023 giving a list of

four arbitrators to the petitioner to choose from and nominate the arbitrator of

the petitioner.

8] This Court has considered the submissions and the pleadings before this

Court. In the Central Organization for Railway Electrification (CORE) (supra), the

question referred to the larger Bench inter alia is whether an arbitrator can be

appointed from the curated panel maintained by the employer in view of the

waiver clause under Section 25. Since there were two earlier views arrived at by

the Apex Court in various judgments, the matter was referred to the larger

Bench and the majority view of the larger bench with Central Organization for

Railway Electrification (CORE) (supra) at paragraph 169 is quoted herein 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;

Page No.# 6/9

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."

9] Perusal of the judgment makes it clear that the appointment of an

arbitrator from the curated panel have been held to be violative of Article 14 by

the Apex Court.

10] The further question before this Court is that the agreement contemplates

appointment of three arbitrators, one each by the contracting parties and the

presiding arbitrator. Although the agreement contemplates appointment of

arbitrators from the curated panel which in the face of the judgment of the Apex

Court rendered in CORE (supra) cannot be accepted, the question still remains

whether the Court while exercising the power under Section 11 of the

Arbitration and Conciliation Act can appoint a sole arbitrator where the contract

executed by and between the petitioner and the respondents contemplates

three arbitrators. Having given anxious consideration to the questions raised by Page No.# 7/9

referring to the provisions of Section 11, it is seen that Section 11(6) provides

that where the appointment procedure agreed upon by the parties, any party

fails to act as required under that procedure, then the appointment is to be

made on an application by the High Court to take necessary measure unless the

agreement on appointment procedure provides other means for securing the

appointment.

11] This Court is of the view that the powers under Section 11 (6) bestowed

on this Court is to be exercised when the parties fail to reach an agreement for

appointment of an arbitrator as prescribed under the agreement executed by

and between the parties. In facts of the present case, the procedure prescribed

under the agreement is in conflict with Section 12 (5) of the act read with the

judgment of the Apex Court rendered in CORE (supra) and other subsequent

judgments. The power of the High Court under section 11(6) comes into play

where the parties fail to act on a procedure agreed by the parties in terms of

the arbitration agreement.

12] As such, merely because the procedure agreed upon contemplates

arbitration to be proceeded with by three arbitrators, including presiding

arbitrator, the parties having failed to reach an agreement in respect of the

appointment of an arbitrator(s) or a reference to the process of arbitration in Page No.# 8/9

terms of the clauses of the agreement and an application has been filed under

section 11(6) under the Arbitration and Conciliation Act, 1996, this Court is of

the considered views that there is no restraint under section 11(6) of the

Arbitration and Conciliation Act, 1996 to refer any matter for arbitration of a sole

arbitrator notwithstanding the clauses of the agreement requiring arbitration by

three arbitrators, inasmuch as, the power under section 11 (6) of the

Arbitration and Conciliation Act, 1996 is to be invoked only in the event of the

failure of the parties to resort to arbitration in terms of the procedure

prescribed.

13] Under such circumstances, this Court under the powers prescribed under

section 11(6) of the Act of 1996 proposed to appoint Hon'ble Mr. Justice Dinesh

Maheswari, Former Judge of Hon'ble Supreme Court of India, as sole arbitrator

to resolve the disputes and differences which has arisen between the petitioner

and the respondents. The appointment of the proposed learned arbitrator is,

however, subject to the written declaration required under section 12(1) of the

Act. The parties will approach the learned proposed arbitrator and place a copy

of the order of this Court and thereafter, the learned arbitrator shall consider

issuing the written declaration as required under Section 12(1) of the Arbitration

and Conciliation Act, 1996. If any such declaration is issued by the proposed

learned arbitrator, the same shall be placed before this Court on the next date Page No.# 9/9

fixed and subsequent, there to, the appointment will be confirmed.

14] Let the matter be listed again on 06.03.2025.