Sri Kondaiah C C vs Union Of India
2022 Latest Caselaw 8611 Kant

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                                                              CMP No. 56 of 2021


                      IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                             DATED THIS THE 13TH DAY OF JUNE, 2022

                                                  BEFORE
                           THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
                              CIVIL MISC. PETITION NO. 56 OF 2021
                      BETWEEN:

                      SRI. KONDAIAH.C.C.
                      LATE CHENNAIAH
                      AGED ABOUT 70 YEARS
                      R/AT NO.793, 9TH CROSS
                      1ST PHASE, VIJAYANAGAR
                      4TH STAGE, MYSURU-570 030
                                                                      ...PETITIONER
                      (BY SRI. SAMPATH BAPAT, ADVOCATE-PH)

                      AND:

                      1.   UNION OF INDIA
                           REP. BY THE GENERAL MANAGER
                           SOUTH WESTERN RAILWAY
                           CLUB ROAD, HUBLI-580 031

                      2.   THE CHIEF ADMINISTRATIVE OFFICER (CONST)
                           SOUTH WESTERN RAILWAY
                           NO.18, MILLERS ROAD
                           BENGALURU-560 046
Digitally signed by
POORNIMA
SHIVANNA              3.   THE CHIEF ENGINEER (CONST)/WEST
Location: HIGH
COURT OF                   SOUTH WESTERN RAILWAY
KARNATAKA
                           NO.18, MILLERS ROAD
                           BENGALURU-560 046

                      4.   THE DEPUTY CHIEF ENGINEER (CONST) MYSURU
                           SOUTH WESTERN RAILWAY
                           YADAVAGIRI, MYSURU-560 020
                                                                  ...RESPONDENTS
                      (BY SRI. ABHINAY. Y.T, ADVOCATE-PH)

                           THIS PETITION FILED UNDER SECTION 11(6) OF THE
                      ARBITRATION AND CONCILIATION ACT 1996, PRAYING TO APPOINT
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                                                      CMP No. 56 of 2021


A SOLE ARBITRATOR TO RESOLVE THE DISPUTES AND
OUTSTANDING ISSUES BETWEEN THE PARTIES IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT BEARING NO.
CAO/CN/BNC/72550/A/177/VII/07 DATED  20/07/2007 VIDE
ANNEXURE-B AND IN CONSONANCE WITH ARBITRATION AND
CONCILIATION ACT, 1996.

     THIS PETITION COMING ON FOR ADMISSION, THIS DAY THE
COURT MADE THE FOLLOWING:

                                ORDER

1. The petitioner is before this Court seeking for the

following reliefs:

"To appoint a sole arbitrator to resolve the disputes and outstanding issues between the parties in accordance with the provisions of the Agreement bearing No.CAO/CN/BNC/72550/A/177/VII/07 dated 20/07/2007 vide Annexure-B and in consonance with arbitration and conciliation act, 1996 in the interest of justice".

2. The petitioner is a contractor. Respondent had called

for the tender in which the petitioner had

participated and his bid was accepted. In

furtherance of which, a letter of acceptance was

issued on 13.03.2007. Thereafter, an agreement

was entered into between the parties on 20.07.2007,

which made a reference to the General Conditions of

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Contract governing the Engineering Department of

South Western Railway.

3. There being certain dispute which arose between the

parties, the petitioner had invoked Clause 64 of the

General Conditions of Contract (GCC) and made a

demand for arbitration on 19.10.2020 at Annexure-T

thereof.

4. Respondent No.1 did not convey any decision on the

said request and therefore, the petitioner is before

this Court seeking for appointment of an arbitrator in

terms of the prayers extracted hereinabove.

5. Sri.Sampath Bapat, learned counsel for the petitioner

submits that in terms of Clause 64 of GCC, a demand

for arbitration had been made by the petitioner and

in terms of Clause 64(3) of GCC, the respondent was

to appoint an Arbitral Tribunal by conveying a list of

panel of three names of Gazetted Railway Officers to

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the petitioner which has not been done. Therefore,

the respondent has lost its right to appoint an

arbitrator and as such, this Court may appoint a sole

arbitrator to decide the dispute between the parties.

6. Sri.Abhinay Y.T., learned counsel for the respondents

would rely on the decision of the Apex Court in the

case of CENTRAL ORGANISATION FOR RAILWAY

ELECTRIFICATION VS. ECI-SPIC-SMO-MCML (JV) A

JOINT VENTURE COMPANY reported in AIR ONLINE

2019 SC 1904 more particularly Paragraphs 35 to 39

thereof which are extracted hereunder for easy

reference:

35. As discussed earlier, after Arbitration and Conciliation (Amendment) Act, 2015, the Railway Board vide notification dated 16.11.2016 has amended and notified Clause 64 of the General Conditions of Contract. As per Clause 64(3)(a)(ii) [where applicability of Section 12(5) of the Act has been waived off], in a case not covered by Clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below the rank of Junior Administrative Grade or two Railway Gazetted Officers not below the rank of Junior Administrative Grade and a retired Railway Officer retired not below the rank of Senior Administrative Grade Officer, as the arbitrators. For this purpose, the General Manager, Railway will send a panel of at least four names of Gazetted Railway Officers of one or more

CMP No. 56 of 2021

departments of the Railway within sixty days from the date when a written and valid demand for arbitration is received by the General Manager. The contractor will be asked to suggest to General Manager at least two names out of the panel for appointment as contractor's nominees within thirty days from the date of dispatch of the request from the Railway. The General Manager shall appoint at least one out of them as the contractor's nominee and will also simultaneously appoint balance number of arbitrators from the panel or from outside the panel duly indicating the "Presiding Officer" from amongst the three arbitrators so appointed. The General Manager shall complete the exercise of appointing the Arbitral Tribunal within thirty days from the date of the receipt of the names of contractor's nominees.

36. Clause 64(3)(b) of GCC deals with appointment of arbitrator where applicability of Section 12(5) of the Act has not been waived off. In terms of Clause 64(3)(b) of GCC, the Arbitral Tribunal shall consist of a panel of three retired Railway Officers retired not below the rank of Senior Administrative Grade Officers as the arbitrators. For this purpose, the Railway will send a panel of at least four names of retired Railway Officers empanelled to work as arbitrators indicating their retirement date to the contractor within sixty days from the date when a written and valid demand for arbitration is received by the General Manager. The contractor will be asked to suggest the General Manger at least two names out of the panel for appointment of contractor's nominees within thirty days from the date of dispatch of the request of the Railway. The General Manager shall appoint at least one out of them as the contractor's nominee and will simultaneously appoint the remaining arbitrators from the panel or from outside the panel, duly indicating the "Presiding Officer" from amongst the three arbitrators. The exercise of appointing Arbitral Tribunal shall be completed within thirty days from the receipt of names of contractor's nominees. Thus, the right of the General Manager in formation of Arbitral Tribunal is counter- balanced by respondent's power to choose any two from out of the four names and the General Manager shall appoint at least one out of them as the contractor's nominee.

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37. In the present matter, after the respondent had sent the letter dated 27.07.2018 calling upon the appellant to constitute Arbitral Tribunal, the appellant sent the communication dated 24.09.2018 nominating the panel of serving officers of Junior Administrative Grade to act as arbitrators and asked the respondent to select any two from the list and communicate to the office of the General Manager. By the letter dated 26.09.2018, the respondent conveyed their disagreement in waiving the applicability of Section 12(5) of the Amendment Act, 2015. In response to the respondent's letter dated 26.09.2018, the appellant has sent a panel of four retired Railway Officers to act as arbitrators giving the details of those retired officers and requesting the respondent to select any two from the list and communicate to the office of the General Manager. Since the respondent has been given the power to select two names from out of the four names of the panel, the power of the appellant nominating its arbitrator gets counter-balanced by the power of choice given to the respondent. Thus, the power of the General Manager to nominate the arbitrator is counter-balanced by the power of the respondent to select any of the two nominees from out of the four names suggested from the panel of the retired officers. In view of the modified Clauses 64(3)(a)(ii) and 64(3)(b) of GCC, it cannot therefore be said that the General Manager has become ineligible to act as the arbitrator. We do not find any merit in the contrary contention of the respondent. The decision in TRF Limited is not applicable to the present case.

38. There is an express provision in the modified clauses of General Conditions of Contract, as per Clauses 64(3)(a)(ii) and 64(3)(b), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers [Clause 64(3)(a)(ii)] and three retired Railway Officers retired not below the rank of Senior Administrative Grade Officers [Clause 64(3)(b)]. When the agreement specifically provides for appointment of Arbitral Tribunal consisting of three arbitrators from out of the panel serving or retired Railway Officers, the appointment of the arbitrators should be in terms of the agreement as agreed by the parties. That being the conditions in the agreement between the parties and the General Conditions of the Contract, the High Court was not

CMP No. 56 of 2021

justified in appointing an independent sole arbitrator ignoring Clauses 64(3)(a)(ii) and 64(3)(b) of the General Conditions of Contract and the impugned orders cannot be sustained.

39. In the result, the impugned orders dated 03.01.2019 and 29.03.2019 passed by the High Court of Judicature at Allahabad in Arbitration Application No.151 of 2018 are set aside and these appeals are allowed. The appellant is directed to send a fresh panel of four retired officers in terms of Clause 64(3)(b) of the General Conditions of Contract within a period of thirty days from today under intimation to the respondent-contractor. The respondent- contractor shall select two from the four suggested names and communicate to the appellant within thirty days from the date of receipt of the names of the nominees. Upon receipt of the communication from the respondent, the appellant shall constitute the Arbitral Tribunal in terms of Clause 64(3)(b) of the General Conditions of Contract within thirty days from the date of the receipt of the communication from the respondent. Parties to bear their respective costs.

7. Firstly, by relying on the aforesaid decision, he

submits that the Apex Court in that decision had

permitted the railways to issue a fresh panel of four

retired railway officers in terms of Clause 64 (3) (b)

of the General Conditions Contract which is in pari

materia with the General Conditions of Contract of

the present case and as such, the same order could

be passed in the present case and the respondents

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will send a list of panel of railway officers to the

petitioner to make their choice.

8. He submits that the appointment of an arbitrator

would have to be strictly in terms of the said clause

and the parties having agreed that the arbitrator

would be from the railway, it is for the respondent to

send a panel of arbitrators.

9. Secondly, he submits on facts that there are various

disputes as regards the maintainability of the claim

of the petitioner, the claim of the petitioner being

barred by limitation and therefore the matter cannot

be referred to an arbitrator.

10. Heard Sri.Sampath Bapat, learned counsel for the

petitioner and Sri.Abhinay Y.T., learned counsel for

the respondent and perused the papers.

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11. Clause 64 of the General Conditions of Contract

(GCC) is the dispute resolution clause which reads as

under:

64. (1) Demand for Arbitration:

(i) In the event of any dispute or different between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account, or as to the withholding by the Railway of any certificate to which the Contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the "excepted matters" referred to in clause 63 of these conditions, the Contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters, shall demand in writing that the dispute or difference be referred to arbitration.

(ii) The demand for arbitration shall specify the matters, which are in question or subject of the dispute or difference as also the amount of claim itemwise. Only such dipuste(s) or difference(s) in respect of which the demand has been made, together with counter claims or set off given by the Railway, shall be referred to arbitration and other matters shall not be included in the reference.

(a) The Arbitration proceedings shall be assume to have commenced from the day, a written and valid demand for arbitration is received by the Railway.

(b) The Claimant shall submit his claim stating the facts supporting the claims alongwith all relevant documents and the relief or remedy sought against each claim within a period of 30 days from the date of appointment of the Arbitral Tribunal.

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(c) The Railway shall submit its defence statement and counter claim(s), if any, within a period of 60 days of receipt of copy of claims from Tribunal thereafter; unless otherwise extension has been granted by the Tribunal.

(iii) No new claim shall be added during proceedings by either party. However, a party may amend or supplement the original claim or defence thereof during the course of arbitration proceedings subject to acceptance by the Tribunal having due regard to the delay in making it.

(iv) If the Contractor(s) does/do not prefer his/their specific and final claims in writing, within a period of 90 days of receiving the intimation from the Railway that the final bill is ready for payment, he/they will be deemed to have waived his/their claim(s) and the Railway shall be discharged and released of all liabilities under the contract in respect of these claims.

64. (2) Obligation during pendency of arbitration

Work under the contract shall, unless otherwise directed by the Engineer, continue during the arbitration proceedings, and no payment due or payable by the Railway shall be withheld on account of such proceedings, provided, however, it shall be open for Arbitral Tribunal to consider and decide whether or not such work should continue during arbitration proceedings.

64. (3) Appointment of Arbitration Tribunal

(a) (i) In cases where the total value of all claims in question added together does not exceed Rs.10,00,000/- (Rupees Ten Lakh Only), the Arbitral Tribunal shall consist of a sole arbitrator who shall be a gazette officer of Railway not below JA grade nominated by the General Manager in that behalf. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by the General Manager.

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(ii) In cases not covered by Clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway officers not below JA grade or two Railway Gazetted Officers not below JA grade and a retired Railway officer, retired not below the rank of SAG officer, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway officers of one or more departments, of the Railway, which may also include the name(s) of retired Railway officer(s) empanelled to work as Railway Arbitrator to the Contractor within 60 days from the day when a written and vail demand for arbitration is received by the General Manager. Contractor will be asked to suggest to the General Manager upto 2 names out the panel for appointment as the Contractor's nominee within 30 day from the date of dispatch of the request by Railway. The General Manager shall appoint atleast one out of them as the Contractor's nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the "Presiding Arbitrator" from amongst the 3 arbitrators so appointed. General manager shall complete the exercise of appointing the Arbitral Tribunal within 30 days from the Accounts Department. An officer of Selection Grade of the Accounts Department shall be considered of equal status to the officers in SA grade of other Departments of the Railways for the purpose of appointment of arbitrators.

(iii) If one or more of the arbitrators appointed as above refuses to act as arbitrator, withdraws from his office as arbitrator, or vacates his/their officer/offices or is /are unable or unwilling to perform his functions as arbitrator for any reasons whatsoever or dies or in the opinion of the General manager fails to act without undue delay, the General Manager shall appoint new arbitrator/arbitrators to act in his/their place in the same manner in which the earlier arbitrator/arbitrators had been appointed. Such reconstituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator(s).

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CMP No. 56 of 2021

(iv) The Arbitral Tribunal shall have power to call for such evidence by way of affidavits or otherwise as the Arbitral Tribunal shall think proper, and it shall be the duty of the parties hereto to do or cause to be done all such things as may be necessary to enable the Arbitral Tribunal to make the award without any delay.

(v) While appointing arbitrator(s) under Sub- Clause (i), (ii) and (iii) above, due care shall be taken that he/they is/are not the one/those who had an opportunity to deal with the matters to which the contract relates or who in the courser of his/their duties as Railway servant(s) expresses views on all or any of the matters under dispute or differences. The proceedings of the Arbitral Tribunal or the award made by such Tribunal will, however, not be invalid merely for the reason that one or more arbitrator had, in the course of his service, opportunity to deal with the matters to which the contract relates or who in the course of his/their duties, expressed views on all or any of the matters under dispute.

(b)(i) The arbitral award shall state itemwise, the sum and reasons upon which it is based.

(ii) The party may apply for corrections of any computational errors, any typographical or clerical errors or any other error of similar nature occurring in the award and interpretation of a specific point of award to Tribunal within 30 days of receipt of the award.

(iii) A party may apply to Tribunal within 30 days of receipt of award to make an additional award as to claims presented in the arbitral proceedings but omitted from the arbitral award.

(4) In case of the Tribunal, comprising of three members, any ruling or award shall be made by a majority of members of the Tribunal. In the absence of such a majority, the views of the Presiding Arbitrator shall prevail.

(5) Where the arbitral award is for the payment of money, no interest shall be payable on whole or any part of the money for any period till the date on which the award is made.

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(6) Where the arbitration shall be borne by the respective parties. The cost shall inter-alia include fee of the arbitrator(s) as per the rates fixed by the Railway Administration from time to time. (7) Subject to the provisions of the aforesaid, Arbitration & conciliation Act, 1996 and the rules thereunder and any statutory modification thereof shall apply to the arbitration proceedings under this clause".

12. A perusal of the decision of the Apex Court in

CENTRAL ORGANISATION FOR RAILWAY

ELECTRIFICATION VS. ECI-SPIC-SMO-MCML (JV) A

JOINT VENTURE COMPANY indicates that the Hon'ble

Apex Court has considered the aspect of the

amendment to the Arbitration and Conciliation Act

1996 brought about in the year 2015 and thereby

introducing Section 12(5) to the said Act dealing with

the conflict of interest of the arbitrators.

13. The Hon'ble Apex Court at Para 35 of the said

judgment has considered as regards the situation

where the applicability of Section 12(5) of the Act

has been waived by the parties and in para 36, the

effect where there is no such waiver.

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CMP No. 56 of 2021

14. Both the counsels on enquiry submit that there is no

waiver. Thus, Para 35 of the decision which had

been relied upon would not apply and it is only para

36 of the said decision which would apply to the

present case.

15. In the above referred case, the contractor had

requested the Railways for appointment of an Arbitral

Tribunal. In reply, the concerned officer had sent a

list of four serving Railway Electrification Officers of

JA Grade to act as arbitrators and the contractor was

asked to select any two and communicate to the

Railways for the purpose of formation of the Arbitral

Tribunal. A list of another four retired Railway

Officers was sent subsequently, and the contractor

was asked to select any two from the list and to

communicate within thirty days.

16. Since the contractor did not send a reply, Railways

filed an application under Section 11(6) of the

Arbitration and Conciliation Act, 1996 seeking for

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appointment of a sole arbitrator for resolution of

differences from and out of the list already forwarded

contending that appointment of an arbitrator can be

only from the said list.

17. The High Court rejected the said contention and held

that the High Court had the powers to appoint an

arbitrator independent of the contract and no fetters

could be imposed for exercise of powers by the High

Court. It is in that background that the appeal had

been filed.

18. Para 36 of the said judgment CENTRAL

ORGANISATION FOR RAILWAY ELECTRIFICATION

VS. ECI-SPIC-SMO-MCML (JV) A JOINT VENTURE

COMPANY stated supra dealing with the situation

where there is no waiver has been extracted

hereinabove. In that case, the Railways had sent a

panel for the contractor to choose from. The

contractor being entitled to select from the said list,

it was held that the right of the General Manager in

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formation of the Arbitral Tribunal is counter

balanced.

19. In my considered opinion the said decision would not

apply to the present case for the reason that on the

petitioner raising a demand for appointment of an

Arbitral Tribunal by invoking the arbitration clause,

the respondent has kept quiet and done nothing even

though the request was sent as far as back

19.10.2020. No list of panel for selection by the

petitioner has been sent by the Railways.

20. It is aggrieved by the same that the petitioner had to

approach this Court and now the respondent has

raised the contention that Respondent would send a

panel to the petitioner to chose from and name the

arbitrator from the panel given by the respondent.

21. I'am of the considered opinion that the respondent

not having acted within a reasonable time frame of

receiving the letter dated 19.10.2020, the

respondent has lost its right to appoint the arbitral

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Tribunal and therefore, the respondent cannot now

claim that the respondent would send the panel of

names for the petitioner to consider. In view

thereof, the first submission made by the learned

counsel for the respondent stands rejected.

22. As regards the second contention of the claims being

barred by limitation, I'am of the considered opinion

that the same would have to be adjudicated by the

Arbitral Tribunal and not by this Court. All the claims

and counter claims as also objections thereto are left

open to be considered by the Tribunal.

23. Hence, I pass the following:

ORDER

i. The petition is allowed.

ii. Sri.John Michael Cunha, former Judge of this

Court is appointed as a sole arbitrator to

arbitrate the dispute between the parties under

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the aegis of the Arbitration Centre attached to

this Court.

iii. Registry is directed to forward a copy of this

order to the Director, Arbitration Centre for

doing the needful.

  iv.    All contentions are left open.




                                    Sd/-
                                   JUDGE


Prs*