Jammu & Kashmir High Court

M/S Lakhanpal Fabricators vs Union Of India Through Its Director ... on 23 August, 2024

                                                                       Sr. No.4
                                                                       Regular
       HIGH COURT OF JAMMU & KASHMIR AND LADAKH
                       AT JAMMU
                               Arb P No. 58/2023
M/s Lakhanpal Fabricators                              ...Petitioner(s)/appellant(s)
Through its partner
Raghunath Lakhanpal, Age 67 years,
S/o Late Sh. Vidhya Prakash,
R/O H. No.97-B, Sector-1
Sanjay Nagar, Jammu,
Phone 9797302964

Through:        Mr. Ankur Sharma, Advocate..

                                       Vs.

1. Union of India through its Director General,                  ...Respondent(s)
   Seema Sadak Bhawan,
   New Delhi
2. HQ DGBR
   Border Road Organization
   Delhi Cantt.
   New Delhi
3. Chief Engineer,
   Project Beacon,
   C/O 56 APO
Through:        Mr. Vishal Sharma, DSGI.

CORAM:

HON'BLE THE CHIEF JUSTICE (ACTING)
                                  ORDER

23.08.2024

1. Heard Mr. Ankur Sharma, learned counsel for the petitioner and Mr.

Vishal Sharma, learned DSGI for the respondents at length and perused the

record.

2. The present petition has been filed by the petitioner seeking

appointment of an independent Arbitrator under Section 11(6) of the J&K

Arbitration and Conciliation Act, 1996, to resolve the dispute that has arisen

between the parties.

3. According to the petitioner, the petitioner is a reputed Construction

Company registered under the name and style of M/s Lakhanpal Fabrication

which is carrying out the business of raising construction of various projects

of huge strategic importance all across the country.

4. The petitioner was allotted the contract by the Respondent vide

allotment order No.8000715/23/E8 dated 06.06.2007 for the Design and

Construction of 50mtr SPAN Steel Super Structure (Through type) Major

Permanent Bridge on open foundation over Poonch Nallah at km97.90 on

Srinagar-Baramulla-Uri under Project Beacon in J&K State, under the

contract agreement number CA No.: CE(P) BCN/08/2007-08.

5. It is averred in the petition that due to disturbance in the valley and

natural calamities which were beyond the control of the petitioner, the work

was not carried out timely and this has duly been communicated to the

respondents by the petitioner.

6. It is further averred that respondents were not allowing the

construction of laying deck slab as a revised design was not approved and

subsequently the respondents cancelled the contract vide order dated

05.11.2014. Aggrieved thereof, the petitioner approached this court in the

year 2014 by way of filing OWP No. 1685/2014, wherein this court directed

the respondents for consideration of representation of the petitioner.

7. After receiving the order from this court, the respondents deliberated

the matter and subsequently, cancelled the contract vide letter dated

03.02.2017. Thereafter the petitioner made several requests time and again

to the respondents for revocation of cancellation order dated 03.02.2017 and

to permit the petitioner to complete the work but of no avail. That aggrieved

of this action of the respondents, the petitioner again approached this court

by filing WP(C) No. 401/2020 titled M/s Lakhanpal Fabricators v. Union of

India and others. The said petition was disposed of by granting liberty to the

parties to work out their remedy of Arbitration in terms of Clause 70 of the

General Conditions of Contract and, thereafter petitioner approached the

respondents for appointment of arbitrator. The respondents acknowledge the

process of appointment of arbitrator but instead of appointing an

independent arbitrator the respondents vide letter dated 27.02.2023

appointed Sh. Rajeev Sharma, SE (Civ) of HQ DGBR as sole arbitrator.

8. It is further averred in the petition that the arbitrator so appointed by

the respondents is from the department of the respondents authorities and so

is made in contravention to Section 12(5) of the Arbitration and Conciliation

Act as also of Seventh Schedule.

9. Clause 26 of the Contract Agreement talks of reference of dispute to

the arbitrator in the department of Public Enterprises to be nominated by the

Secretary to the Government of India. Clause 26 reads as:

"26. In the event of any dispute or difference between the parties hereto, such dispute of difference shall be resolved amicably by mutual consultation or through the good offices of empowered agencies of the government. In the event of any such dispute or difference relating to the interpretation and application of the provisions of contracts where such resolution is not possible then the unresolved dispute or differences shall be referred by either party to the Arbitration of one of the Arbitrators in the department of Public Enterprises to be nominated by the Secretary to the Government of India."

10. However, Sub section 5 of Section 12 of the Arbitration and

conciliation Act, 1996 provides as:

"Notwithstanding any prior agreement to the contrary, any

person whose relationship with the parties or counsel or the

subject matter of the dispute falls under any of the categories

specified in the Seventh Schedule, he shall be ineligible to be

appointed as an arbitrator."

11. Learned counsel for the petitioner has vehemently argued that in

view of the amendment of Section 12(5) of the Act, the proceedings

conducted by the Arbitrator on 15.12.2023 and 16.02.2024 at HQ 35 BRTF

(P) Sampark, who has entered upon the reference, is required to be set

aside. In support of his contention he has relied upon the judgments passed

by the Supreme Court reported as AIR 2017 (Supreme Court) 939, AIR

2017 (Supreme Court) 3889 and 2021 AIR (Supreme Court) 653 and

AIR 2020 SC 59, Perkins Eastman Architects Dpc vs. Hscc (India)

Limited]

12. Therefore, the petitioner contends that a sole independent arbitrator

is required to be appointed to settle the dispute between the parties.

13. On the other hand, the respondents have filed their objections in

response to this petition, in which they admitted that there is a dispute

between the petitioner and the respondents. It is further stated in the

objections that due to slow progress of work and in spite of repeated

reminders in this behalf, the contract was finally cancelled on 03.02.2017.

On 27.02.2023, HQ DGBR appointed Sh. Rajeev Sharma, SE(Civil) as sole

arbitrator, however, the petitioner has not participated in the arbitral

proceedings held on 15.12.2023 and 16.02.2024 at HQ 35 BRTF (P)

Sampark and instead filed the present petition. Therefore, the present

petition seeking appointment of independent arbitrator is not maintainable

and is liable to be dismissed.

14. The fact that the petitioner has raised certain claims which,

according to the petitioner, have not been addressed by the respondents, this

Court is of the view that a dispute exists between the parties, which would

require resolution in accordance with the aforementioned Clause 26 and this

court is of the view that the dispute has to be ultimately decided by an

independent Arbitrator.

15. The parties admitted that the dispute is there. The only objection

raised by the respondents is that whether this Court can adjudicate the

present petition under Section 11(6) of the J&K Arbitration and

Conciliation Act, 1997.

16. The Supreme Court in the case titled "Haryana Space

Application Centre (HARSAC) & Anr. Vs. M/s Pan India Consultants

Pvt. Ltd." reported as 2021 AIR (Supreme Court) 653 has observed in para

17, as under:-

"17. We are of the view that the appointment of the Principal Secretary, Government of Haryana as the nominee arbitrator of HARSAC which is a Nodal Agency of the Government of Haryana, would be invalid under Section 12(5) of the Arbitration and Conciliation Act, 1996 read with the Seventh Schedule. Section 12(5) of the Arbitration Act, 1996 (as amended by the 2015 Amendment Act) provides that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties, or counsel, falls within any of the

categories specified in the Seventh Schedule, shall be ineligible to be appointed as an arbitrator.

Item 5 of the Seventh Schedule of the Act reads as under :

Arbitrator's relationship with the parties or counsel

5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration."

(emphasis supplied)

Section 12(5) read with the Seventh Schedule is a mandatory and nonderogable provision of the Act. In the facts of the present case, the Principal Secretary to the Government of Haryana would be ineligible to be appointed as an arbitrator, since he would have a controlling influence on the Appellant Company being a nodal agency of the State."

17. In view of well settled legal position as contained in Section 12(5) of

the Arbitration and Conciliation Act and in view of aforesaid judgments of

the Supreme Court on the issue involved in this petition, the earlier arbitrator

as well as proceedings conducted by him is terminated.

18. Accordingly, the present petition is disposed of and Mr. Satish

Chander, ADG, MES, be appointed to act as the sole Arbitrator who shall

proceed in the matter to decide the dispute between the parties and make an

award in accordance with law after hearing the parties and charging the

prescribed fee along with incidental expenses to be shared by the parties.

19. Parties may raise their claims and counter claims before the

Arbitrator.

20. Registry to inform the Ld. Arbitrator accordingly.