Cobra Cipl Jv vs Chief Project Manager
2021 Latest Caselaw 5570 MP

                                                                   AC-96/2019
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THE HIGH COURT OF JUDICATURE FOR MADHYA PRADESH
                   AT JABALPUR
                    (Single Bench)

                     Arbitration Case No.96/2019
Cobra-CIPL JV                                             .... Petitioner
                                    Vs.
Chief Project Manager, Railway Electrification, ....Respondent
Jabalpur
___________________________________________________________
Presence:

Shri Kapil Arora, learned Counsel with Shri Shashank Verma and Shri
Mallikarjun Khare, learned counsel for the petitioner.

Shri Atul Choudhary, learned counsel for the respondent.
_______________________________________________________
Heard on: 03.09.2021
_______________________________________________________

                              ORDER

(Passed on this 17th day of September, 2021)

This order will dispose of the application filed by petitioner Cobra-

CIPL JV, a joint venture established by M/s Cobra Instalaciones Y

Servicios, S.A. and Cobra Instalaciones Y Servicios India Pvt. Ltd. under

Section 11(4) of the Arbitration and Conciliation Act, 1996 (for short "the

Arbitration Act") praying for a direction to appoint the Sole Arbitrator for

resolving the dispute between the petitioner and the respondent.

2. The facts of the case are that the Central Organization for Railway

Electrification, Allahabad (for short "CORE") through the Chief Electrical

Engineer floated a tender in March, 2013 for composite electrical works,

design, supply, erection, testing and commissioning of 25 KV, 50 Hz, AC

single phase electrification works including OHE, TSS and SCADA

works in Satna (Excl.)-Jabalpur (Excl.) Section, Group (Gr.) 174 of AC-96/2019

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Jabalpur Division of West Central Railway under RE project Jabalpur.

The petitioner in response to the aforesaid tender submitted its offer on

22.05.2013 and thereafter submitted negotiated offer on 10.03.2014,

which was accepted by the respondent vide letter of acceptance dated

21.03.2014. The letter of acceptance dated 21.03.2014 was issued by the

Chief Electrical Engineer, CORE, Allahabad vide Annexure A/3.

Consequently, a contract was entered into between the parties on

18.06.2014. Thereafter, on account of disputes having arisen between the

parties, the respondent terminated the contract on 12.02.2019. The

petitioner served a notice on the respondent on 06.08.2019 invoking

arbitration clause 1.2.54 of the contract. The respondent in turn wrote to

the petitioner seeking its consent to waive off the applicability of Section

12(5) of the Arbitration Act. Thereafter, the respondent issued a letter on

25.09.2019 proposing names of four retired Railway Officers and asking

the petitioner to select any two out of the four names so proposed.

According to the petitioner, this was contrary to the terms of the contract

which provides for appointment of serving Railway Officers as

Arbitrators and not retired once. Since the respondent failed to nominate

its Arbitrator within 30 days from the date of notice given by the

petitioner, the petitioner filed the present application on 4.10.2019. While

the respondent put in appearance before this Court on 01.11.2019 but

despite pendency of the present application, the General Manager of

CORE unilaterally appointed an Arbitral Tribunal comprising retired

Railway Officers.

3. Shri Kapil Arora, learned counsel for the petitioner submitted that AC-96/2019

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the respondent have wrongly raised the preliminary objection about

territorial jurisdiction of this Court. It is not correct to contend that the

jurisdiction to file the application would lie only with the Courts at

Allahabad. The respondent has not even remotely alleged in the reply that

the parties had agreed in the agreement or otherwise that the seat of

arbitration shall be only at Allahabad. It is contended that the Allahabad

was only the place from where letter of acceptance was issued. In terms of

Clause 15 of the contract, it is clear that subsequent to award of the

contract, there is no role of the Allahabad office of the respondent. The

aforesaid clause also clarified that prior to award of the contract, any

correspondence and documents in relation to contractual and commercial

matters were required to be sent to the Chief Electrical Engineer, Railway

Electrification, Allahabad. However, subsequent to award of the contract,

all such correspondence and documents in relation to contractual and

commercial matters and also the correspondence and documents in

relation to design, working and drawing as well as field work, scheduling

of quantifies and submission of bills had to be addressed to the Chief

Project Manager, Railway Electrification, Jabalpur. It is clear that in terms

of Clause 15 of the contract, for all purposes arising out of the contract

subsequent to award of the contract, the relevant authority was the Chief

Project Manager, Railway Electrification, Jabalpur and therefore, the

Chief Project Manager, Railway Electrification, Allahabad had no

authority in the matter.

4. Referring to Clause 1.2.54 of the contract, Shri Kapil Arora, learned

counsel argued that Clause 1.2.54(k) has clearly provided that the venue AC-96/2019

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for an arbitration to be the place from where the letter of acceptance of

tender is issued or such other place as the purchaser at his discretion may

determine. In respect of similar project i.e. tender for composite electrical

works, design, supply, erection, testing and commissioning of 25 KV, 50

Hz, AC single phase overhead equipment including TSS and SCADA

works in Manikpur (Excl)-Satna (Incl) and Satna to Rewa Section, Gr.

173-B of Jabalpur Division of West Central Railway under RE Project

Jabalpur, similar disputes had arisen between parties. This Court vide

order dated 4.2.2019 in A.C No.107/2017-Cobra CIPL Vs. Chief Project

Manager while allowing the application appointed Mr. Justice (Retd.)

D.M.Dharmadhikari, former Judge of the Supreme Court as the Sole

Arbitrator. It is argued that the arbitration clause in the aforesaid matter

was exactly similar to the arbitration clause in the present matter. This

Court in the aforesaid case has categorically held that this Court will have

jurisdiction to appoint arbitrator under Section 11 of the Arbitration Act

on the basis that the word 'venue' used in the arbitration clause referred

only to the venue for conducting arbitration proceedings and the same

cannot be construed as or equated with, 'seat' of the arbitration

proceedings. This Court in the aforesaid case held that the definition of

'venue' did not fulfill the requirement to be 'seat: as set forth in Indus

Mobile Distribution Pvt. Ltd. Vs. Datawind Innovations Pvt. Ltd. and

others (2017) 7 SCC 678.

5. The learned counsel argued that the respondent has heavily relied

on the judgment of the Supreme Court in Brahmani River Pellets Ltd.

Vs. Kamachi Industries Ltd. (2020) 5 SCC 462 to argue that this Court AC-96/2019

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will not have territorial jurisdiction to entertain present application. It is

argued that the judgment in Brahmani River Pellets (supra) has been

passed relying on earlier judgment of the Supreme Court in Indus Mobile

(supra). The judgment of the Supreme Court in Indus Mobile (supra) was

also discussed and distinguished by this Court in the earlier case between

the present parties having the exactly similar arbitration clause. Moreover,

the arbitration clause in Brahmani River Pellets (supra) categorically

mentioned that the arbitration shall be under Indian Arbitration and

Conciliation Act, 1996 and venue of arbitration shall be Bhubaneshwar. A

comparison of the arbitration clause in the present matter and the

arbitration clause in the Brahmani River Pellets (supra) would clearly

bring it out that both are entirely different. Even in Indus Mobile (supra),

the agreement provided that all disputes and differences of any kind

whatever arising out of or in connection with the agreement shall be

subject to the exclusive jurisdiction of Courts of Mumbai only, which is

not the situation in the present case. It is argued that after Brahmani

River Pellets judgment, the Supreme Court has examined this issue in

BGS SGS Soma JV Vs. NHPC (2020) 4 SCC 234, which being later

judgment would prevail over the judgments in Brahmani River Pellets

(supra) and Indus Mobile (supra). It is judgment of three-judge Bench

whereas the judgment in Brahmani River Pellets (supra) was delivered

by a two-judge Bench. The arbitration clause in BGS Soma (supra) had

provided that the arbitration proceedings shall be held at New

Delhi/Faridabad, India and the language of the arbitration proceedings and

that of all documents and communications between the parties shall be

English. The learned counsel argued that the test for the seat of the AC-96/2019

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arbitration proceedings in the Shashoua principle has to be applied before

determining the question of jurisdiction. Referring to para 61 of BGS

Soma judgment, learned counsel for the petitioner argued that wherever

there is an express designation of a venue and no designation of any

alternative place as the seat, combined with a supranational body of rules

governing the arbitration and no other significant contrary indicia, the

inexorable conclusion is that the stated venue is actually the jurisdictional

seat of the arbitral proceeding. It is argued that role and purpose of

Section 42 of the Arbitration Act is for determining the jurisdiction of the

Courts where seat is not identifiable from arbitration agreement entered

between the parties and multiple Courts may have jurisdiction because

cause of action arises at multiple places. The Supreme Court while

dealing with Section 20(1) and (2) of the Arbitration Act categorically

mentioned that if seat is not identifiable by bare reading of the contract,

then seat has to be determined by the Arbitral Tribunal under Section

20(2) of the Act and not by the Court. It is argued that for a venue to be

designated as seat, it must be discernible from the clause that the

arbitration proceedings as a whole are to be held at a particular place and

not one or more individual hearings.

6. Shri Kapil Arora, learned counsel has argued that the cause of

action in the present case arose within the territorial jurisdiction of this

Court, inter alia, for the reasons; (1) the tender was floated for composite

electrical works for design, supply, erection, testing and commissioning of

works in Satna-Jabalpur Section, Gr. 174 of Jabalpur Division of West

Central Railway under RE Project Jabalupr; (2) the entire works

pertaining to the contract were performed in Jabalpur and (3) the AC-96/2019

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extension letters were also issued to the petitioner from the office of Chief

Project Director, Railway Electrification, Jabalpur. Moreover, the

petitioner in the present case filed a petition (MJC (AV)-11/2019) under

Section 9 of the Arbitration Act before the District Judge, District Court at

Jabalpur seeking injunction against invocation of bank guarantees. The

respondent did not however raise any objection in that matter to the

jurisdiction of Jabalpur District Court. The respondent filed an appeal

(AA No.91/2019) under Section 37 of the Arbitration Act before this

Court challenging the order dated 17.09.2019 passed by the District

Judge, District Court, Jabalpur in the aforementioned case under Section 9

of the Arbitration Case. The petitioner thereafter also filed an application

under Section 14 of the Arbitration Act before the Jabalpur District Court

challenging the constitution of the Arbitral Tribunal by the respondent.

Even during proceeding of that application, no objection with regard to

territorial jurisdiction was raised by the respondent. The District Court

passed an order dated 10.09.2020 on the aforesaid application. It is argued

that the judgment of the Supreme Court in Central Organization for

Railway Electrification Vs. ECI-SPIC-SMO-MCML, 2019 SCC

OnLine SC 1635 is distinguishable on facts. On the contrary, the Supreme

Court in the case of Union of India Vs. Tantia Constructions, wherein

the Calcutta High Court held that the General Manager of the respondent-

Railway could not appoint any existing Railway Officer as the Arbitrator,

upheld the said order while dismissing SLP No.12670/2020 on

11.01.2021, filed by the Railway.

7. Relying on the judgment of the Supreme Court in Bharat

Broadband Network Limited Vs. United Telecoms Limited, (2019) 5 AC-96/2019

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SCC 755, leaned counsel for the petitioner argued that if a person

becomes ineligible to be appointed as Arbitrator vide Section 12(5) read

with Schedule VII of the Arbitration Act, then an Arbitrator appointed by

him is de jure ineligible and appointment of such Arbitrator is void ab

initio. Moreover, all the members of the Tribunal including the Presiding

Arbitrator were in the present case appointed unilaterally by the General

Manager, CORE without any involvement of the petitioner. Relying on

the judgment of the Supreme Court in TRF Limited Vs. Energo Engg

Project Limited (2017) 8 SCC 377, learned counsel argued that it was

held therein that once the Managing Director has become ineligible to act

as the Arbitrator by operation of law, he cannot nominate another

arbitrator. Aforesaid judgment of TRF Limited (supra) was followed in

Bharat Broadband Network Limited (supra). Since the General

Manager, CORE is the head/employee of the respondent, who is a party to

the dispute, his interest in the outcome of the present matter would only

be natural. Even if retired Railway Officers have been appointed as

Arbitrators, considering the fact that the General Manager became

ineligible, he could not have appointed them as members/presiding

member of the arbitral tribunal. It is argued that the unilateral constitution

of the Arbitral Tribunal by the respondent is in blatant violation of Section

11(6) of the Arbitration Act. Once when this Court was in seisin of the

matter, the respondents lost their right to appoint the arbitrator. The

respondent's right to issue a letter dated 19.11.2019 constituting the

Tribunal was extinguished upon expiry of the statutory period of 30 days

and especially after the present application was filed by the petitioner

before this Court. In support of this argument, learned counsel has relied AC-96/2019

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on the judgments of the Supreme Court in Union of India Vs. Bharat

Battery Manufacturing Co. (P) Ltd. (2007) 7 SCC 684 and Dakshin

Shelters (P) Ltd. Vs. Geeta S.Johari (2012) 5 SCC 152.

8. Per contra, Shri Atul Choudhary, learned counsel for the respondent

argued that contract of the petitioner had to be terminated by the

respondent because it failed to complete the work as per the schedule of

work, which is evident from termination order dated 12.02.2019. The

petitioner submitted a legal notice dated 06.08.2019 invoking arbitration

clause in terms of Clause 1.2.54(b) of the contract, which required that all

such disputes must be referred to an Arbitral Tribunal. This notice was

addressed to the Chief Project Manager and not to the General Manager of

the Zonal Railways, Allahabad, which is requirement of arbitration clause

d(i) and (ii). As per this clause, the application had to be made to the

office of the General Manager, Allahabad and no notice has been filed

with the present application so as to indicate that any application was

made before the General Manager, Allahabad. It is submitted that the

appointment of the Arbitrator was made by the General Manager and it

was informed by e-mail as well as speed post, which was served well

before expiry of 30 days. The argument of the petitioner that the right of

the respondent to appoint Arbitral Tribunal is waived is liable to be

rejected. Learned counsel argued that in the present matter, the questions

which emerge for consideration are that; (1) whether "venue" synonyms

to word "seat"; (2) whether after the amendment of Section 12(5) of the

Arbitration Act, the respondent will have any right to constitute arbitration

tribunal as per procedure given in the agreement; (3) whether in this case

the tribunal was appointed by the respondent after the expiry of 30 days AC-96/2019

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period from the date of receipt of notice and (4) whether the judgment

passed by this Court in earlier application of the petitioner

A.C.No.107/2017 is binding in the light of judgment of the Supreme

Court in Brahmani River Pellets's case (supra)?.

9. Learned counsel for the respondent argued about applicability of

Part 1 of the Arbitration Act to internationally seated arbitrations right

from Bhatia International Vs. Bulk Trading SA (2002) 4 SCC 105,

which was finally settled by the Supreme Court in Bharat Aluminium

Co. Vs. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552, it

was held that the place of arbitration to be chosen on behalf of the parties

has to be designated in the arbitration agreement or the terms of the

reference, minutes of proceedings or in some other way as the place or

seat of the arbitration. It would be quite unusual for an Arbitral Tribunal to

hold the meetings in a place other than the designated place of arbitration

either for its own convenience or for the convenience of the parties or

their witnesses. Learned counsel submitted that in view of Section 20(1),

(2) and (3), the correct depiction of the practical consideration and the

distinction between 'seat' and 'venue' would be quite crucial in the event,

the arbitration agreement designates a foreign country as the seat/place of

the arbitration. Only if the agreement of the parties is construed for the

seat/place being in India, Part 1 of the Arbitration Act would be

applicable. If the agreement has provided for a seat/place outside India,

Part 1 would not be applicable to the extent inconsistent with the

arbitration law of the seat. The same principle of law has been laid down

by the Supreme Court in Brahmani River Pellets (supra), which has been

followed in subsequent judgment of Mankastu Impex Pvt. Ltd. Vs. AC-96/2019

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Arivisual Ltd. (2020) 4 SCC 399, wherein the Supreme Court held that

when the seat is agreed by contracting parties to be outside India, in that

case the seat and venue are not synonymous and interchangeable, because

the laws of Hongkong are different than the laws which govern arbitration

in India.

10. Shri Atul Choudhary, learned counsel for the respondent argued that

earlier order passed by this Court in A.C.No.107/2017 was based on

wrong interpretation of the judgment in Bharat Aluminium Co. Vs.

Kaiser Aluminium Technical Services INC (2012) 9 SCC 552. The

findings recorded by this Court in para 13 and 14 of judgment in Cobra

CIPL Vs. Chief Project Manager reported in 2020(2) MPLJ 71 are

therefore liable to be declared per curiam. Aforesaid judgment of this

Court should be taken as impliedly overruled by the Supreme Court in

subsequent judgment of Brahmani River Pellets Ltd. (supra). It is

argued that after the judgment of the Supreme Court in BGS Soma

(supra), the choice of venue is choice of seat in the absence of any

contrary indicia. The Supreme Court in BGS Soma (supra) in para 61 of

the report held that whenever there is an express designation of a venue

and no designation of any alternative place as the seat combined with a

supranational body of rules governing the arbitration and no other

significant contrary indicia, the inexorable conclusion is that the stated

venue is actually the juridical seat of the arbitral proceedings.

11. Learned counsel argued that the Supreme Court in Mankastu

Impex Pvt. Ltd. Vs. Airvisual Ltd. 2020 5 SCC 399 was dealing with

the case where arbitration agreement did not use the words "seat" or

"venue". The arbitration agreement laid down that the arbitration would AC-96/2019

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be administered in Hongkong and the place of arbitration was Hongkong.

The governing law was Indian law and the Courts of New Delhi shall

have jurisdiction. When the disputes arose, Mankastu approached the

Supreme Court for appointment of arbitrator contending that as Indian law

was the governing law and the courts at New Delhi had jurisdiction and

therefore New Delhi was the seat of arbitration. Reliance was placed on

the judgment of Supreme Court in Union of India Vs. Hardy

Exploration and Production (India) INC (2018) SCC Online SC 1640.

The Supreme Court arrived at its conclusion that Hong Kong was the seat

of arbitration. The Supreme Court instead of applying that ratio in Hardy

Exploration (supra) or BGS Soma (supra) employed a different method

of inquiry altogether. It is therefore argued that in cases where the venue

is described in agreement then it will mean that the venue and seat are

same and both are interchangeable. The finding recorded by the leaned

Single Bench in earlier application filed by the petitioner is thus contrary

to the law laid down by the Supreme Court in Brahmani River Pellets

(supra).

12. Shri Atul Choudhary, learned counsel for the respondent argued that

in Union of India Vs. Pradeep Vinod Construction Company, 2020 14

SCC 712, the Supreme Court relying on the earlier judgment in Union of

India vs Parmar Construction Co. (2019) 15 SCC 682 held that the

Court should depart from the agreement procedure for appointment of

arbitrator, only where exceptional reasons exit. Clause 64 of the General

Condition of the Contract in that case is pari materia to the arbitration

clause in the present case which also similarly provided for appointment

of serving railway officers as the arbitrators. The Supreme Court in above AC-96/2019

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case set aside the appointment of the independent arbitrators and directed

the General Manager of the Railways to appoint arbitrator in terms of

Clause 64(3). In that case, the Supreme Court held that the appointment of

an employee as arbitrator cannot be assailed merely because he is a retired

employee of the parties.

13. Learned counsel for the respondent further submitted that the

contention of the petitioner that respondent's right to appoint the arbitrator

was forfeited because they failed to act within 30 days from the date of

receipt of the notice, is factually incorrect. The present application which

was submitted by the petitioner as Annexure A/14 clearly shows that the

application invoking arbitration clause was submitted by the petitioner to

the Chief Project Manager on 06.08.2019 and not to the General Manager.

Therefore, the period of 30 days' as per Section 11(5) of the Arbitration

Act cannot be counted from the date mentioned in the application

submitted before incompetent authority. Then the petitioner submitted a

fresh application on 26.08.2019 and on that basis, a panel of arbitrators

was sent to the petitioner on 25.09.2019 (Annexure R/1) within 30 days

from the date of service of notice. Instead of submitting the response to

the said panel, the petitioner straightaway approached this Court by filing

present application. It is therefore prayed that the application be

dismissed.

14. I have given my anxious consideration to the rival submissions and

perused the record.

15. This Court in earlier application filed by the petitioner having

dispute with the respondent herein, albeit, in the context of another

agreement having similar arbitration clause in Arbitration Case AC-96/2019

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No.107/2017 decided vide judgment dated 04.02.2019 also considered the

same objection regarding lack of territorial jurisdiction which is being

again agitated by the respondent in the present case. The Clause 1.2.54(k)

which is the bone of the contention between the parties in the present

case, was exactly similarly worded in that case as well, which reads as

under:-

"(k) VENUE- the Venue for an arbitration shall be the place from which the letter of acceptance of tender is issued or such other place as the purchaser at his discretion may determine." (Emphasis supplied)

In that case the "letter of acceptance" was issued from Allahabad

but neither "seat" nor "place" of arbitration was indicated in the

agreement. The question was whether "venue" will determine the

jurisdiction of this Court and whether "venue" and "seat" are

synonymous.

16. Relying on the Constitution Bench judgment of the Supreme Court

in BALCO (supra), it was held that since the parties have not mandated

out any clause prescribing the seat of arbitration, it can be safely

concluded that they intended to give jurisdiction to two Courts which

would also include the court having jurisdiction based upon the cause of

action. Since except letter of acceptance from Allahabad, all necessary

events had taken place within the territorial jurisdiction of this Court at

Jabalpur, therefore, mere use of the "venue" in the agreement cannot be

equated with "seat" and it cannot form basis for determining the question

of jurisdiction of this Court.

17. The only additional argument which the learned counsel for the

respondent has now sought to advance for persuading this Court to take a AC-96/2019

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different view than the one taken in the earlier order dated 04.02.2019 is

that in Brahmani River Pellets (supra), the Supreme Court held that

parties are free to agree on the place of arbitration. Party autonomy can be

construed in the context of parties choosing a court which has jurisdiction

out of two or more competent courts having jurisdiction under Section

2(1)(e) of the Arbitration Act. It was held that when the parties, in the

facts of that case agreed to have "venue" of arbitration at Bhubaneswar,

the Madras High Court erred in assuming the jurisdiction under Section

11(6) of the Act, as per which, if the subject matter of the suit is situated

within the arbitral jurisdiction of two or more courts, the parties may

confine jurisdiction in one of the competent courts. For this purpose, the

provisions of Section 2(1)(e) of the Act have to be read in conjunction

with Section 20 of the Arbitration Act which gives recognition to the

autonomy of the parties as to the "place of arbitration". Obviously, unlike

in the present case, relevant clause of the observation in Brahmani River

Pellets (supra), Bhubaneshwar was indicated as the one venue of

arbitration. However, in the present case, this is not the position. Even in

Indus Mobile Distribution (P) Ltd. (supra), the judgment relied by the

Supreme Court in Brahmani River Pellets (supra), the relevant clause of

arbitration provided that all disputes and differences of any kind whatever

arising of or in connection with the agreement shall be subject to

exclusive jurisdiction of courts at Mumbai only. Even that is not the

situation in the present case.

18. This issue in fact has been clarified in later three-judge Bench

judgment of the Supreme Court in BGS SGS Soma JV (supra) on

analysis of Constitution Bench judgment in BALCO (supra) holding that AC-96/2019

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juridical or legal seat of arbitration once designated or determined,

exclusively determines which courts will have jurisdiction over the

arbitration, as opposed to the place where all or part of the cause of action

arises. Once the seat of arbitration is designated or determined, the same

operates as an exclusive jurisdiction clause as a result of which only the

courts where the seat is located would have the jurisdiction over the

arbitration to the exclusion of all other courts, even courts where part of

cause of action may have arisen. However, where it is found on facts of

the very case that either no "seat" is designated by agreement or has not

been so determined by the arbitral tribunal or the so-called "seat" is only a

convenient "venue", then there may be several courts where a part of

cause of action arises, that may have jurisdiction over arbitration. It was

held that an application under Section 9 of the Arbitration Act, in such a

situation, may be preferred before a court in which part of the cause of

action arises in a case where the parties have not agreed on the "seat" of

arbitration and before such a "seat" may have been determined, on the

facts of the particular case by the arbitral tribunal under Section 20(2) of

the Arbitration Act. The Supreme Court held that test for determination of

juridical seat wherever there is an express designation of a "venue" and no

designation any alternative place as the "seat" under Indian law as laid

down by the Constitution Bench of the Supreme Court in BALCO(supra)

is the Shashoua principle as laid down in Shashoua, 2009 EWHC 957

(Comm).

19. The Supreme Court in Central Organisation for Railway

Electrification (supra) was dealing with the case where as per the

agreement procedure, the contractor was to suggest to General Manager at AC-96/2019

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least two names out of the panel of four names sent by the Department,

for appointment as his nominee and the General Manager had to appoint

at least one out of them to three-member arbitral tribunal as his nominee.

It was held that since the contractor had been given the power to select

two names out of panel of four retired railway officers, at least one of

them has to be appointed as one of three arbitrators by the General

Manager as per the agreed procedure. It was held that the right of General

Manager, who is himself ineligible to act as arbitrator, in formation of the

arbitral tribunal was counterbalanced by the respondent's above said

power to choose any two from out of the four names. In that case also

panel of the arbitrators consisted of retired Railway employees who have

worked with the Railways and it was held that this did not make him

eligible to act as arbitrator.

20. The Supreme Court in Union of India vs. M/s Tantia

Constructions Limited in Special Leave to Appeal No.12670/2020 vide

order dated 11.01.2021 while disagreeing with the view taken in that case

observing that once appointing authority itself is incapacitated from

referring the matter to arbitration, it does not then follow that

notwithstanding this yet appointments may be valid depending on the

facts of the case. The aforesaid judgment, therefore, cannot help in any

manner in the present facts of the case. As to the relevance of Section 42

of the Arbitration Act, it was held that it is the seat of arbitration alone and

not the place where the cause of action arises wholly or partly, which

determines the jurisdiction of courts over the arbitration, when such seat is

found to be designated or determined. Section 42 is meant to avoid

conflicts in jurisdiction of courts by placing the supervisory jurisdiction AC-96/2019

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over all arbitral proceedings in connection with the arbitration in one

court exclusively. Further, where it is found on the facts of a particular

case that either no "seat" is designated by agreement, or the so-called

"seat" is only a convenient "venue", then there may be several courts

where the part of the cause of action arises that may have jurisdiction and

application under Section 9 of the Act may be preferred in a case where

the parties have not agreed as regards the "seat" of arbitration and before

such "seat" may have been determined on the facts of a particular case by

the arbitral tribunal under Section 20(2).

21. Contention of the respondent that since the "venue" was clearly

defined in the agreement between the parties and, therefore, "letter of

acceptance" having been issued from Allahabad, "venue" in this context

should be taken as a "seat" of the arbitration and the court of Allahabad

would have only the jurisdiction if it cannot be that clause 1.2.54(k) while

providing that the "venue" for arbitration shall be the place from which

the "letter of acceptance" of tender is issued also alternatively provided

such other place as the purchaser at his discretion may determine. On a

pointed query by the court whether the respondent, independent of the

"letter of acceptance" ever separately conveyed to the petitioner in

response to its notices invoking the arbitration clause or otherwise in the

pleadings before this Court that they as purchasers in their discretion have

determined Allahabad as the "venue", the learned counsel for the

respondents was not in a position to dispute that no such option was ever

exercised. The clause of the arbitration in the arbitration case, apart from

the fact that it does not indicate "seat" of arbitration but has merely

mentioned "venue" has itself left the possibility of having more than one AC-96/2019

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places as possible venue. Since the respondent failed to act in response to

notice of the petitioner served on them on 06.08.2019 invoking

arbitration clause followed by another notice dated 26.08.2019 and did not

act upon the said notices in accordance with the agreed procedure in the

agreement by proposing name of serving Railway Officers till the filing of

application on 04.10.2019 and rather offered the name of four retired

Railway Officers vide letter dated 25.09.2019, it would be deemed that

the respondents have failed to act according to the agreed procedure

thereby forfeiting their right to appoint arbitrators in terms of the Section

11(6) of the Arbitration Act. Moreover, the identical application between

the same parties in respect of the similar dispute having been already

allowed by this Court in view of Section 12(5) of the Act, when the

respondent-Railway have decided not to challenge any further, they

cannot be now allowed to proceed with the appointment of their own

employees as the arbitrators. The present application, therefore, deserves

to succeed and is allowed.

22. Resultantly, I deem it proper to provisionally appoint Hon'ble Shri

Justice D.M. Dharmadhikari, Former Judge of Supreme Court of India as

a Provisional Arbitrator in the present case. The Registry of this Court

shall seek his consent/willingness in terms of section 11(8) of the Act.

23. List the matter on 22.10.2021.

(Mohammad Rafiq) Chief Justice

C.

Digitally signed by CHRISTOPHER PHILIP Date: 2021.09.20 16:31:16 +05'30'