Ms Rke-Shimray (Jv) vs Union Of India And 3 Ors
2025 Latest Caselaw 113 Gua

Gauhati High Court

Ms Rke-Shimray (Jv) vs Union Of India And 3 Ors on 2 May, 2025

Author: Soumitra Saikia

Bench: Soumitra Saikia

                                                                   Page No.# 1/6

GAHC010274032023




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

                            Case No. : Arb.P./47/2023

         MS RKE-SHIMRAY (JV)
         SHIMRAY VILLA, NAGARAM BLOCK-E, P.O. LAMLONG, P.S. LAMPHEL,
         DIST. IMPHAL EAST, MANIPUR-795010, REP. BY SRI THEMREINGAM A.
         SHIMRAY, S.O SRI SOMI A. SHIMRAY, AGE-43, R.O SHIMRAY VILLA,
         NAGARAM BLOCK-E, P.O. LAMLONG, P.S. LAMPHEL, DIST. IMPHAL EAST,
         MANIPUR-795010,



         VERSUS

         UNION OF INDIA AND 3 ORS.
         REPRESENTED BY THE SECRETARY TO THE MINISTRY OF RAILWAYS,
         GOVERNMENT OF INDIA,
         RAIL BHAWAN 1, RAISINA ROAD, NEW DELHI, PIN NEW DELHI- 781006.

         2:THE NORTHEAST FRONTIER RAILWAY
          REPRESENTED BY THE CHIEF ENGINEER/ CONSTRUCTION-II

         N.F. RAILWAYS HEAD QUARTER

         MALIGAON
         GUWAHATI- 781011
         ASSAM.

         3:THE CHIEF ENGINEER/ CONSTRUCTION-II
          N.F. RAILWAYS HEAD QUARTER

         MALIGAON
         GUWAHATI- 781011
         ASSAM.

         4:THE DEPUTY CHIEF ENGINEER/ CONSTRUCTION-I/ BHRB
          N.F. RAILWAYS
                                                                          Page No.# 2/6

             SILCHAR
             PIN- 788003
             ASSAM

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

Advocate for the Respondent : DY.S.G.I., MS. B SARMA




                                    BEFORE
                     HONOURABLE MR. JUSTICE SOUMITRA SAIKIA

                                         ORDER

02.05.2025

Heard Mr. G Rahul, learned counsel for the petitioner and Ms. B. Sarma, learned CGC Assam for the respondents.

2. This is an application filed under Section 11 (5) of the Arbitration and Conciliation Act, 1996 seeking for appointment of the arbitrator to adjudicate the disputes between the parties arising out of the Contract Agreement No. CON/B-S/2481 dated 27.09.2018 for construction of the work of Earthwork in cutting to form formation and earthwork in filling to form embankment/sub- bank and construction of minor bridges retaining wall, RCC drain and other ancillary work between chainage KM 15.860 to KM 16.380 at Hortoki Yard in connection of new BG Railway line from Bairabi to Sairang (Mizoram). Subsequently, the contract stood terminated by the respondent no.3 vide notice dated 31.03.2022, whereby the contract stood rescinded in terms of the Clause 62 of the General Condition of Contract. The petitioner represented before the authority and also served a notice under Section 21 of the Arbitration and Conciliation Act, 1996, calling upon the respondents to appoint an arbitrator. The respondents replied to the notice by asking the petitioner to quantify the Page No.# 3/6

amount and to submit an item-wise claim for consideration from the appropriate Authority. Since the respondents did not refer the matter to the arbitration, the present application under Section 11 (5) of the Arbitration and Conciliation Act, 1996 has been filed.

3. Learned counsel for the parties have been heard. Pleadings available on record have been perused.

4. The respondents have filed their objection disputing the claim made by the petitioner. The primary objection raised is that as required under the terms of the contract, the petitioner did not raise any item wise claim in respect of the dispute which the petitioner claims have arisen and which requires to be referred for arbitration. The respondents submit that, in the absence of any item-wise claim submitted by the petitioner, there is no question of conceding to the prayer or making a reference to arbitration.

5. Having considered the submissions made by the learned counsel for the parties and also upon conserving the judgment referred before the Court it is seen that the Co-ordinate Bench of this Court in Arb.P. No.20/2021 & others passed by the order dated 18.12.2022 arrived at a finding that the referral Court under Section 11 of the Arbitration and Conciliation Act, 1996 should have minimal intervention at the stage of appointment of an Arbitrator. All questions may be raised before the appointed Arbitrator for decision, and if the parties are aggrieved by the award, they shall have recourse to file an application under Section 34. This judgment was also referred to and relied upon in a subsequent judgment of this Court rendered in W.P.(C) No. 1076/2024, wherein, by judgment and order dated 31.08.2024, similar issues were decided while considering an application challenging a decision rendered by the arbitral tribunal.

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6. The law in this respect has been settled by the judgment of the Apex Court in SBI General Insurance Co. Ltd. v. Krish Spinning (2024 INSC

532), wherein it was held that a referral court is primarily required to examine whether an arbitration agreement exists. If such an agreement is found to be in existence, and the parties have agreed to refer the matter to arbitration--either to an arbitrator suggested by the petitioner or one appointed by the Court--the reference must be made accordingly.

7. The agreement prescribing a sole Arbitrator to be appointed from the panel of arbitrators maintained by the respondents can no longer be a valid clause in view of the law laid down by the Apex Court in Central Organization for Railway Electrification Vs. ECI SPIC SMO MCML (JV), reported in 2024 SCC Online SC 3219. A Constitution Bench of five Hon'ble Judges of the Supreme Court passed the judgment in three parts, the majority view of the Judgment is extracted as under:

"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;

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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"

The majority view of the larger Bench of the Apex Court in Central Organization for Railway Electrification (Supra) held that the prescription of the reference to an Arbitrator to be determined by the employer even in the face of the waiver by the petitioner will be contrary to the spirit of mandate of Arbitration and Conciliation Act, 1996 and accordingly held that such provisions will no longer be binding notwithstanding the same being a part of the Arbitration Agreement.

8. Under such circumstances, this Court is inclined to allow the petition and refer the matter to arbitration to decide the differences arising between the parties to the Contract Agreement No. CON/B-S/2481 dated 27.09.2018 for construction of the work of Earthwork in cutting to form formation and earthwork in filling to form embankment/sub-bank and construction of minor bridges retaining wall, RCC drain and other ancillary work between chainage KM 15.860 to KM 16.380 at Hortoki Yard in connection of new BG Railway line from Bairabi to Sairang (Mizoram) which stood terminated by vide notice dated 31.03.2022 by the Arbitrator. This Court considers it appropriate to appoint Shri HN Sarma, Former Hon'ble Judge of the Gauhati High Court to be a prospective Arbitrator to decide the dispute arising by and between the parties. The Presiding Arbitrator will furnish a written declaration as required under Section 12 (5) of the Arbitration and Conciliation Act, 1996 and upon such declaration being furnished before the Court, the appointment will be made absolute.

9. The parties are permitted to place a copy of this Order before Shri HN Sarma, Page No.# 6/6

Former Hon'ble Judge of the Gauhati High Court within a period of 3 (three) weeks from the date of receipt of a certified copy of this order and apprise the learned prospective arbitrator about the Order of the Court. The appointment of the prospective sole arbitrator shall be confirmed upon receipt of the written disclosure as presented under Section 12 of the Arbitration and Conciliation Act, 1996.

10. Accordingly, let the matter be listed again on 02.06.2025 enabling the parties to place the disclosure of the learned prospective Arbitrator sought to be appointed by this Court and place it before the Court. The order confirming the appointment of the Arbitrator will be passed upon receipt of the disclosure.

JUDGE

Comparing Assistant