Madhya Pradesh High Court
M/S Velji Ratna Sorathia Infra Pvt. Ltd. ... vs Union Of India on 5 December, 2023
Author: Vishal Dhagat
Bench: Vishal Dhagat
1
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VISHAL DHAGAT
ON THE 5 th OF DECEMBER, 2023
ARBITRATION CASE No. 10 of 2023
BETWEEN:-
M/S VELJI RATNA SORATHIA INFRA PVT. LTD. A
LIMITED COMPANY INCORPORATED UNDR
COMPANIES ACT 1956 THROUGH ITS POWER OF
ATTORNEY HOLDER MR. PARESH M. SORATHIA AGED
ABOUT 37 YEARS S/O SHRI MEGHJI BHAI SORATHIA
OFFICE AT SHOP NO. 6 OM COMPLEX OP. GULAB MILL
BHUJ BHACHAU BYPAS ROAD DABADA ANJAR
KACHCHH (GUJ) 370110 R/O B-305 KEELANDEV TOWER
VYAPAM SQUARE BHOPAL (MADHYA PRADESH)
.....PETITIONER
(BY SHRI NAVNEET SHUKLA - ADVOCATE)
AND
1. UNION OF INDIA THROUGH THE GENERAL
MANAGER WEST CENTRAL RAILWAY NEAR
RAILWAY STATION JABALPUR (MADHYA
PRADESH)
2. THE DEPUTY CHIEF ENGINEER (CONSTRUCITION)
WEST CENTRAL RAILWAY NEAR RAILWAY
STATION JABALPUR 462001 (MADHYA PRADESH)
.....RESPONDENTS
(BY SHRI PUSHPENDRA YADAV - ASSISTANT SOLICITOR GENERAL)
This petition coming on for admission this day, th e court passed the
following:
ORDER
Applicant has filed present applicant under Section 11(6) of the
Arbitration and Conciliation Act, 1996 seeking appointment of an Arbitrator.
2 . Counsel appearing for applicant submitted that as per amended
provision of Arbitration and Conciliation Act, 1996, Section 12(5) lays down
that Railway Officers and Retired Railway Officers cannot be appointed as
Arbitrators. Insistence on part of non-applicant is contrary to Provision of
Arbitration and Conciliation Act, 1996. Respondent cannot dilute the Provision
of Arbitration and Conciliation Act, 1996 by modifying the general conditions
of contract. Independent Arbitrator is to be appointed to settle the dispute
between the parties.
3. Counsel for applicant relied upon the judgment passed by the Apex
Court in case of Glock Asia - Pacific Ltd. Vs. Union of India, 2023 SCC
Online SC 664. It is submitted that judgment passed in Central Organization
fo r Railway Electrification Vs. ECI-SPIC-SMO-MCML(JV) A Joint Venture
Company, (2020) 14 SCC 712 was not relied upon by Apex Court while
considering the same issue. Judgment of Central Organization of Railway
Electrification has been challenged and referred to Larger Bench in case of
Tantia Construction Ltd. and also in case of JSW Steels Limited. Apex
Court in said case appointed independent Arbitrator In view of same, it is
prayed that an independent Arbitrator be appointed.
4. Learned counsel appearing for respondents had filed reply and raised
objection regarding appointment of independent Arbitrator by Court. He
submits that similar order has been passed in Arbitration Case No.122 of 2023
on 10.10.2023 and present case is on parity with said order. It is submitted that
applicant has not submitted the agreement with regard to waiving off of
applicability of Section 12(5) & 31-A(5) of the Arbitration and Conciliation Act,
1996. Such request was made by letter dated 27.08.2022. Failure on part of
applicant to comply with letter dated 27.08.2022 i.e. not filing application to
General Manager for appointment of Arbitrator and not submitting agreement
regarding waiving off of applicability of Section 12(5) and 31-A(5) of the Act,
1996, therefore, non-applicant could not proceed for appointment of Arbitrator.
It is further argued that Arbitrator can be appointed as per agreement between
the parties. It is submitted that after amendment of Arbitration and Conciliation
Act 1996, clause 64 of General Conditions of Contract was modified and
Arbitrator is to be appointed as per conditions 2905 of IRS Conditions of
Contract. Said conditions are quoted as under:-
" 2905 Appointment of Arbitrator
2905 (a): Appointment of Arbitrator where
applicability of section 12 (5) of Arbitration
and Conciliation Act has been waived off;
(i ) : I n cases where the total value of all
claims in question added together does not
exceed Rs. 1,00,00,000/- (Rupees One Crore
only), the Arbitral Tribunal shall consist of a
Sole Arbitrator who shall be a Gazetted Officer
of Railway not below Junior Administrative
Grade, nominated by the General Manager.
The sole arbitrator shall be appointed within
60 days from the day when a written and valid
demand for arbitration is received by General
Manager.
(ii): In cases where the total value of all
claims in question added together exceeds Rs.
1,00,00,000/- (Rupees One Crore only), the
Arbitral Tribunal shall consist of a panel of
three Gazetted Railway Officers not below
Junior Administrative Grade or 2 Railway
Gazetted Officers not below Junior
Administrative Grade and a retired Railway
Officer, retired not below the rank of Senior
Admi ni st rat i ve Grade Officer, as the
arbitrators. For this purpose, the Railway will
send a panel of at least four (4) names of
Gazetted Railway Officers of one or more ad
departments of the Railway which may also
include the name(s) of retired Material
Manager/Sales Officers(s) empanelled to work
as Railway Arbitrator to the contractor within
60 days from the day when a written and valid
demand for arbitration is received by the
General Manager.
Contractor will be asked to suggest to General
Manager at least 2 names out of the panel for
appointment as Contractor's nominee within
30 days from the date of dispatch of the
request by Railway. The General Manager
shall appoint at least 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 'residing
arbitrator' from amongst the 3 arbitrators so
appointed. General Manager shall complete
this exercise of appointing the Arbitral
Tribunal within 30 days from the receipt of the
receipt of the names of Contractor's nominees.
While nominating the arbitrators, it will be
necessary to ensure that one of them is from
the Accounts Department. An officer of
Selection Grade of the Accounts Department
may be considered of equal status to the
officers in Senior Administrative Grade of
o t h e r departments of the Railway for the
purpose of appointment of arbitrator.
(iii): The serving railway officer working in
arbitral tribunal in the ongoing arbitration cases
as per clause 2905(a)(i) and clause 2905 (a)(ii)
above, can continue as arbitrator in the tribunal
even after his retirement.
2905(b): Appointment of Arbitrator where
applicability of Section 12 (5) of Arbitration
and Conciliation Act has not been waived off:
(i) In cases where the total value of all claims
in question added together does not exceed Rs.
50,00,000/- (Rupees Fifty Lakh only), the
Arbitral Tribunal shall consist of a Retired
Railway Officer, retired not below the rank of
Senior Administrative Grade Officer, as the
arbitrator. For this purpose, the Railway will
send a panel of at least four (4) names of
retired Railway Officers empanelled to work as
Railway Arbitrator duly indicating their
retirement dates to the contractor within 60
days from the day when a written and valid
demand for arbitration is received by the
General Manager.
Contractor will be asked to suggest to General
Manager at least 2 names out of the panel for
appointment as arbitrator within 30 days from
the date of dispatch of the request by Railway.
The General Manager shall appoint at least
one out of them as the arbitrator. (ii) In cases
where the total value of all claims in question
a d d e d together exceeds Rs. 50,00,000/-
(Rupees Fifty Lakh only), the Arbitral
Tribunal shall consist of three (3) retired
Railway Officers, retired not below the rank of
Senior Administrative Grade Officer. For this
purpose, the Railway will send a panel of at
l e a s t four (4) names of retired Railway
Officer(s) empanelled to work as Railway
Arbitrators duly indicating their retirement
date to the Contractor within 60 days from the
day when a written and valid demand for
arbitration is received by the General
Manager. Contractor will be asked to suggest
to General Manager at least 2 names out of the
panel for appointment as Contractor's nominee
within 30 days from the date of dispatch of the
request by Railway. The General Manager
shall appoint at least 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 this exercise of appointing the
Arbitral Tribunal within 30 days from the
receipt of the names of Contractor's nominee.
While nominating the arbitrators, it will be
necessary to ensure that one of them has
served in the Accounts Department."
5. Further reliance is placed on judgment passed by Apex Court in case
of Central Organization For Railway Electrification Vs. ECI-SPIC-SMO-
MCML (JV) A Joint Venture Company, (2020) 14 SCC 712. The relevant
paragraphs i.e. 18 to 22 and 31 of said judgment are quoted as under:-
"18. 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.
The modified Clause 64(3)(b) inter alia provided
that the arbitral tribunal shall consist of a panel of
three retired railway officers not below the rank of
SAO officer as arbitrator. For this purpose, the
Railway will send a panel of at least four names of
retired railway officer(s) empanelled. The
contractor will be asked to suggest to the General
Manager at least two names out of the panel for
appointment as the contractor's nominee and the
General Manager shall appoint at least one out of
them as the contractor's nominee. The General
Manager will also simultaneously appoint the
balance number of arbitrators from the panel or
from outside the panel. The modified Clause 64(3)
(b) of the General Conditions of Contract reads as
under:-
"64. (3)(b) Appointment of Arbitrator where
applicability of Section 12(5) of A&C Act has
not been waived off.
The Arbitral Tribunal shall consist of a Panel of
three retired Railway Officer retired not below the
rank of SAO officer, as the arbitrator. For this
purpose, the Railway will send a panel of at least
four names of retired Railway Officer(s)
empanelled to work as Railway. Arbitrator
indicating their retirement date to the contractor
within 60 days from the day when a written and
valid demand for arbitrators is received by the
GM.
Contractor w ill be asked to suggest to General
Manager at least two names out of the panel for
appointment as contractor's nominee within 30
days from the date of dispatch of the request by
Railway. The General Manager shall appoint at
least one out of them as the contractor's nominee
and will, also simultaneously appoint the balance
number of arbitrators other from the panel or from
outside the panel, duly indicating the 'presiding
arbitrator' from amongst the three arbitrators so
appointed CM shall complete this exercise of
appointing the Arbitral Tribunal within 30 days
from the receipt of the names of contract's
nominees. While nominating the arbitrators, it will
be necessary to ensure that one of them has served
in the Accounts Department."
19. After coming into force of the Arbitration and
Conciliation (Amendment) Act, 2015, when
Clause 64 of the General Conditions of Contract
h a s been modified inter alia providing for
constitution of Arbitral Tribunal consisting of three
arbitrators either serving or retired railway
officers, the High Court is not justified in
appointing an independent sole arbitrator without
resorting to the procedure for appointment of the
arbitrator as prescribed under Clause 64(3)(b) of
the General Conditions of Contract.
20. It is pertinent to note that even in the
application filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996, the
respondent prayed for appointment of a sole
arbitrator in terms of Clause 1.2.54(b)(i) of the
Tender Agreement/Clause 64 of the General
Conditions of Contract for adjudicating the
disputes which have arisen between the parties. In
the petition filed under Section 11(6) of the Act,
the respondent prayed for appointment of one Shri
Ashwani Kumar Kapoor to act as the arbitrator.
Thus, the respondent itself sought for appointment
of arbitrator in terms of Clause 64 of the General
Conditions of Contract. The appointment of Shri
Ashwani Kumar Kapoor as arbitrator, of course,
was not agreeable to the appellant, since it was
found that said Shri Ashwani Kumar Kapoor was
not in the panel of arbitrators and therefore, could
not be considered for appointment as arbitrator. As
the value of the work contract was worth more
than Rs.165 crores, the dispute can be resolved
only by a panel of three arbitrators in terms of
Clause 64(3)(b) of the General Conditions of
Contract. The respondent was not right in seeking
for appointment of a sole arbitrator in terms of
Clause 1.2.54(b)(i) of the Tender
Agreement/Clause 64 of the General Conditions of
Contract.
21. Considering the various matters of railway
contracts and interference with the appointment of
independent arbitrators, after referring to Union of
India and Another v. M.P. Gupta (2004) 10 SCC
504 and Union of India and Another v. V.S.
Engineering (P) Ltd. (2006) 13 SCC 240 and other
judgments, in Union of India v. Parmar
Construction Company (2019) SCC Online SC
442, the Supreme Court set aside the appointment
of an independent arbitrator and directed the
General Manager of Railways to appoint arbitrator
in terms of Clause 64(3) of the agreement. In Para
(44) of Parmar Construction Company, the
Supreme Court held as under:- "44. To conclude,
in our considered view, the High Court was not
justified in appointing an independent arbitrator
without resorting to the procedure for
appointment of an arbitrator which has been
prescribed under clause 64(3) of the contract
under the inbuilt mechanism as agreed by the
parties."
22. Applying ratio of the Parmar Construction
Company, in Pradeep Vinod Construction
Company (2019) SCC Online SC 1467, the
Supreme Court held that the appointment of
arbitrator should be in terms of the agreement and
the High Court was not right in appointing an
independent arbitrator ignoring Clause 64 of the
General Conditions of Contract. As held in Parmar
Construction Company and Pradeep Vinod
Construction Company, the High Court was not
justified in appointing an independent arbitrator
without resorting to the procedure for appointment
of the arbitrators which has been prescribed under
the General Conditions of Contract."
31. As discussed earlier, as per the modified
Clause 64(3)(b) of GCC, when a written and valid
demand for arbitration is received by the General
Manager, the Railway will send a panel of at least
four names of retired railway officers empanelled
to work as arbitrators. The contractor will be
asked to suggest to the General Manager at least
two names out of the panel for appointment as
contractor's nominee within thirty days from the
date of dispatch of the request by the Railway.
Vide letter dated 27.07.2018, the respondent has
sought for appointment of an arbitrator for
resolving the disputes. The appellant by its letter
dated 24.09.2018 (which is well within the period
of sixty days) in terms of Clause 64(3)(a)(ii)
(where applicability of Section 12(5) of the Act
has been waived off) sent a panel of four serving
railway officers of JA Grade to act as arbitrators
and requested the respondent to select any two
from the list and communicate to the office at the
earliest for formation of Arbitration Tribunal. 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. By the letter dated 25.10.2018, in terms
of Clause 64(3)(b) of GCC (where applicability of
Section 12(5) has not been waived off) the
appellant has nominated a panel of four retired
railway officers to act as arbitrators and requested
the respondent to select any two from the list and
communicate to the appellant within thirty days
from the date of the letter for formation of
Arbitration Tribunal. The respondent has neither
sent its reply nor selected two names from the list
and replied to the appellant. Without responding to
the appellant, the respondent has filed petition
under Section 11(6) of the Arbitration and
Conciliation Act before the High Court on
17.12.2018. When the respondent has not sent any
reply to the communication dated 25.10.2018, the
respondent is not justified in contending that the
appointment of Arbitral Tribunal has not been
made before filing of the application under Section
11 of the Act and that the right of the appellant to
constitute Arbitral Tribunal is extinguished on
filing of the application under Section 11(6) of the
Act.
6 . On the basis of aforesaid submissions, counsel appearing for
respondent submitted that applicant has failed to make request to General
Manager for appointment of Arbitrator in accordance with 2905 of IRS
Conditions, therefore, application be dismissed.
7. Heard counsel for the parties.
8 . As per contract agreement between the parties, arbitration clause is
mentioned in 2900-A. Said clause provides that in question of dispute between
the parties, the same shall be referred to the Sole Arbitration of a Gazetted
Railway Officer appointed to be the Arbitrator by General Manager, in case of
contracts entered into by Zonal Railways and Production Units and by Member
of the Railway Board, in case of contracts and entered into by Railway Board
and Head of the Organization in respect of contracts entered into by other
organization under Ministry of Railway.
9 . There is conflict between judgments of two equal Benches. The
decision of earlier Bench prevails unless the later Bench provides a valid
explanation for departing from it. In case of Glock Asia Pacific Ltd. (supra), the
Bench has taken into consideration the decision of Central Organisation For
Railway Electrification. Said judgment was not followed as arbitration clause in
Central Organisation For Railway Electrification and Voestalpine Schienen
GmbH Vs. DMRC, (2017) 4 SCC 665, was different in case of Glock Asia
Pacific Ltd. clause provides for appointment of sole Arbitrator.
1 0 . In reply filed by Railways, it has been stated that in agreement
between petitioner and respondent, in event of question of dispute or difference
arising under the conditions or special conditions of contract, or in connection
with this contract, the same shall be referred to sole Arbitrator of a Gazetted
Railway Officer appointed to be Arbitrator, by General Manager in case of
contracts entered into Zonal Railways as per conditions 2900. Since there is an
agreement for appointment of sole Arbitrator and similar was the case in Glock
Asia-Pacific Ltd., wherein Apex Court has departed from the ratio of Central
Organisation For Railways Electrification decision and has appointed sole
Arbitrator in the case. Present case being similar to that of Glock Asia-Pacific
Ltd, application filed by applicant for appointment of Arbitrator is disposed off
with following directions:-
(i) Shri Justice K.K. Lahoti (Retired) is appointed as sole Arbitrator to
resolve the dispute between the parties. Said arbitration will take place at
Madhya Pradesh Arbitration Centre (Domestic and International) Jabalpur.
( ii) Director of Madhya Pradesh Arbitration Centre (Domestic and
International), Jabalpur (M.P.D.I.S.E.) after taking consent from Arbitrator will
inform the parties regarding the fixed for arbitration. In between, applicant is at
liberty to file his claim before Director of Madhya Pradesh Arbitration Centre
(Domestic and International), Jabalpur (M.P.D.I.S.E.).
(iii) Parties are directed to deposit necessary charges and fees as per
M.P. Arbitration Center (Domestic and International) Rule, 2019.
(iv) Other provisions of Section 15 (3)(4) of the Arbitration and
Conciliation Act, 1996 will apply to Substitute Arbitrator.
11. With aforesaid directions, arbitration case is disposed off.
C.C. as per rules.
(VISHAL DHAGAT)
JUDGE
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