[Cites 12, Cited by 0]
Madhya Pradesh High Court
Continental Telepower Industries ... vs Union Of India on 22 December, 2025
1
AC No. 91 of 2025
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VIVEK JAIN
ARBITRATION CASE No. 91 of 2025
CONTINENTAL TELEPOWER INDUSTRIES LIMITED
Versus
UNION OF INDIA AND OTHERS
.........................................................................................................
Appearance:
Shri R.K. Verma - Senior Advocate along with Shri Bhuvnesh
Sharma,- Advocate for the Petitioner.
Shri Sunil Jain - Additional Solicitor General through Video
Conferencing with Shri Satyendra Kumar Patel - Central Government
Standing Counsel for the Respondent.
..........................................................................................................
ORDER
(Reserved on 26.11.2025)
(Pronounced on 22.12.2025)
The present petition under Section 14 of Arbitration and Conciliation
Act 1996, (for short referred to as 'Act 1996') has been filed for declaring
that the mandate of Arbitral Tribunal stands terminated.
2. The present petition has been filed by the contractor who was given a
contract for supply of PVC insulated armored underground signalling
cables to the Indian Railways and certain disputes and differences arose in
the matter of execution of the said contract. The petitioner requested for
arbitration in the matter and vide Annexure A-15, the Railway sent an e-
mail to the petitioner seeking waiver in terms of Section 12 (5) of the Act
1996, which was refused by the petitioner. It is the case of the petitioner
that thereafter the respondent vide letter dated 05.01.2024 forwarded a
panel of four names and called upon the petitioner to propose any two
names from among the said Ex-Officers of the Railways out of which the
Railways would select one to act as petitioner's nominee for constituting a
three-member Arbitral Tribunal. The petitioner chose two names, i.e. Shri
R. C. Meena and Shri B. P. Gupta, both retired Railway Officers. However,
it is contended that in absence of waiver by the petitioner under section
12(5) of the Act 1996, such nomination/selection holds no legal validity.
3. It is further contended that on 22-04-2024, the Railways sent a letter
to the petitioner that the Arbitral Tribunal has been constituted comprising
Shri R. C. Meena as presiding arbitrator and two other arbitrators namely
Shri Anil Kumar Agrawal and Shri Chander Mohan Jindal, which was
objected by the petitioner that the constitution of the Tribunal is not in
accordance with the Act of 1996. This objection was vide Annexure A-17
and petitioner demanded constitution of a legally valid Arbitral Tribunal.
However, the Tribunal entered into reference on 10.05.2024 and continued
with its proceedings. The learned counsel for the petitioner has submitted
that left with no choice, the petitioner filed its statement of claim before the
Tribunal and is now before this Court under Section 14 of the Act of 1996
being aggrieved by the illegal continuation of proceedings before the
illegally constituted Tribunal and therefore, now by way of this petition, a
declaration is sought that the mandate of the Tribunal stands terminated
because the arbitrators are De-Jure unable to perform their functions as
there are circumstances which give rise to justifiable doubts as to
independence and impartiality of the Tribunal.
4. The case of the petitioner is that party autonomy cannot be achieved
in absence of basic principles of rule against bias and the arbitrators have to
be unbiased and their integrity and impartiality has to be above board.
Though the arbitrators may be utterly impartial and with impeccable
integrity but there is reasonable apprehension in mind of the petitioner once
all the three arbitrators are retired Railway Officers. Because justice should
not only be done but it should also be seen to have been done, the mandate
of the arbitrators be terminated and by further exercising powers, this Court
may appoint a substituted suitable sole arbitrator to continue the arbitration
proceedings between the petitioner and the Railways.
5. Per contra, it is vehemently contended by Shri Sunil Jain, learned
Additional Solicitor General that though recently the similar type of
agreement by the Railways has been considered by Constitution Bench of
the Hon'ble Apex Court in case of Central Organisation for Railway
Electrification v. ECI SPIC SMO MCML (JV), (2025) 4 SCC 641 (for
short, "CORE") and it has been held that the Railways cannot force the
contractor to select the arbitrator from its panel but as per Para-170.7, the
Constitution Bench has been pleased to restrict the operation of the said
judgment only prospectively i.e. only for those arbitrations where arbitrator
appointment is to be made after the date of this judgment, but because in
the present case, the arbitrator(s) had already been appointed prior to date
of this judgment in the earlier part of the year 2024, whereas the judgment
was delivered on 8-12-2024, therefore the Arbitral Tribunal has rightly and
correctly entered into reference.
6. It is further argued that the petitioner was bound by the terms of
agreement and the Railways has only acted as per terms of the agreement.
Later on, it was interpreted by the Hon'ble Supreme Court that applying
nemo judex rule and doctrine of bias, that one side cannot force the other
side to choose arbitrators from its panel, but since this direction applies
prospectively, therefore this Court need not interfere in the appointment of
arbitrators in this present case because otherwise there is no illegality in
appointment of arbitrator and it was done in accordance with the
agreement. It is argued that the Hon'ble Supreme Court has saved earlier
appointments prior to the date of the judgment in the case of CORE
(supra) delivered by the Constitution Bench. It is further contended that as
per 7th Schedule to Act of 1996, there is no specific bar to appoint a retired
Officer/employee and such a relationship is not prohibited relationship as
per 7th Schedule.
7. Heard.
8. In the present case, a prayer is made to terminate the mandate of the
Arbitral Tribunal under Section 14 of Act of 1996 on the ground that the
Tribunal has become de-jure unable to perform its functions because the
Arbitral Tribunal is ineligible to conduct the arbitration and its mandate
deserves to be diclared terminated under Section 14 of Act of 1996.
9. In the present case, disputes between the parties arose and a Writ
Petition came to be filed between the parties being WP.13556 of 2019 and
at the time of disposal of the said petition on 29.8.2023, it transpired that
since the arbitral proceedings have already commenced before the
Arbitrator, therefore all the disputes will be settled by the Arbitrators only.
Prior to that, the petitioner had issued a notice for appointment of
arbitrators vide Annexure A-13 dated 20.03.2023. In pursuance to the said
notice, the Railways sent a letter Annexure R-16 dated 28.03.2023 seeking
waiver as per Section 12(5) and 31-A(5) of the Act of 1996. The petitioner
replied to this request of the Railways vide Annexure A-15 dated
20.09.2023 wherein it was specifically mentioned that the petitioner does
not agree to waive of the applicability of Section 12(5) of Act of 1996.
Despite this refusal of the petitioner to waive of the applicability of Section
12(5), the respondents went ahead and sent a letter Annexure R-18 dated 5-
01-2024 forwarding panel of four names and advising the petitioner to
select at least two of the above four officers. Nothing was disclosed in this
letter that whether these are serving or retired officers of the Railways. The
petitioner replied vide Annexure R-19 indicating two names, i.e. Shri B.P.
Gupta and Shri R.C. Meena and then the Arbitral Tribunal has been
constituted comprising Shri R.C. Meena as presiding arbitrator and two
retired officers namely Shri Anil Kumar Agrawal and Shri Chander Mohan
Jindal as co-arbitrators in the Tribunal comprising three arbitrators. The
presiding arbitrator Shri R.C. Meena is also a retired Officer of the
Railways, residing at Jaipur.
10. It is contended by the counsel for the Railways that the appointment
of one out of two Arbitrators proposed by the petitioner and the two being
out of panel of four proposed by the Railways, is something which is duly
authorized as per the agreement executed between the parties.
11. However, in the present case, initially a declaration was sought from
the petitioner, that whether he desires to waive off Section 12(5) and he
specifically denied that he does not waive off the applicability of Section
12(5) and no doubt after judgment of the Constitution Bench in CORE
(Supra) appointment of retired Railway Officers is held to be violative of
Section 12(5).
12. The situation would have been different if the petitioner had either
agreed to or acquiesced in appointment of retired Railway Officers as
arbitrators. In the present case, despite mentioning in clear terms vide
Annexure A-15 that he refuses to waive off Section 12(5) the petitioner had
further sent a letter to the Railways vide Annexure A-17 dated 02-07-2024
that the Arbitral Tribunal constituted under the said clause is non-est and
void and is ineligible to conduct arbitration and prayed for appointment of
a legally constituted Tribunal. This objection of the petitioner has to be read
in continuation of his refusal to waive-off Section 12(5) and this objection
is also taken at the very inception of arbitration proceedings i.e. on 2-07-
2024 which is not in dispute.
13. This Court would not be impressed by the argument about only
prospective applicability of judgment in the case of CORE (Supra),
because in the present case not only the petitioner had refused to waive off
applicability of Section 12(5) as far back as on 20.09.2023 but had also
written a letter to the Railways vide Annexure A-17 dated 2-07-2024 that
he does not agree to the Tribunal which has been appointed by the
Railways and that a proper Arbitral Tribunal be appointed in the matter.
This letter has been sent by the petitioner to the Railways almost
immediately after the Arbitral Tribunal had been appointed by the Railways
on 22.04.2024 by raising objection on 02.07.2024. It is not the case that he
after having participated in arbitration proceedings for substantial period
has raised the aforesaid objection.
14. The Division Bench of Delhi High Court in the case of Mahavir
Prasad Gupta & Sons v. State (NCT of Delhi), 2025 SCC OnLine Del
4241 has considered the similar issues and has held that the objection as to
appointment of arbitrator can be made at any point of time even at the stage
of Section 34 or during enforcement proceedings under Section 36 of Act
of 1996. It is further held that the waiver can only be done by express
agreement in writing after arising of disputes between the parties. The
Delhi High Court held as under:-
"83. Although it appears disingenuous, a party appointing
an the sole or presiding arbitrator unilaterally can challenge
the award on the ground that the award has been rendered in
contravention of Section 12(5) of the Act read with Seventh
Schedule of the Act notwithstanding that the said party itself
made such an appointment. When the Arbitral Tribunal
inherently lacked jurisdiction to act, the arbitration
proceedings are void ab initio, rendering the award
unenforceable irrespective of which party made such
unilateral appointment. The arbitral proceedings and an
award made by an unilaterally appointed sole or presiding
arbitrator, who is de jure ineligible to be appointed as an
arbitrator by virtue of the Seventh Schedule of the Act
are void ab initio. The waiver under the proviso to Section
12(5) of the Act must be express and subsequent to the
disputes having been arisen between the parties. Hence, the
party which appointed the sole or presiding arbitrator
unilaterally can also challenge the award under Section 34
of the Act on the ground of such ineligibility."
15. In the case of CORE (supra) the Hon'ble Constitution Bench held
as under:-
"137. Given the above discussion, it needs reiteration that
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. The PSUs can
give a choice to the other party to select its arbitrators from
the curated list provided the other party expressly waives
the applicability of the nemo judex rule."
16. Consequently, this Court has no hesitation to hold that the
constitution of Arbitral Tribunal by the Railways is unilateral constitution
despite of refusal of the petitioner to waive off applicability of Section
12(5) of Act of 1996. The application under Section 14 of Act of 1996
therefore, deserves to be and is hereby allowed. The mandate of the
arbitrators appointed by the Railways vide Annexure A-19 dated
22.04.2024 stands terminated. If any fees has already been paid to the said
arbitrators, they will be entitled to retain the already paid fees, but will not
claim any remainder fees.
17. Section 14 of the Act applies when an Arbitrator becomes de
jure or de facto unable to perform their duties, fails to act without undue
delay, withdraws from office, or the parties agree to terminate their
mandate. In such scenarios, the Arbitrator's mandate terminates. Section 15
provides for the termination of the arbitrator's mandate and the appointment
of a substitute arbitrator. This substitution allows the arbitration
proceedings to continue from where the original arbitrator left off. These
provisions ensure that arbitration can proceed efficiently by replacing
arbitrators who are unable to fulfill their roles. In the present case, this
Court has only terminated the mandate of the Arbitrators, and not the
"Arbitral proceedings" as such. Therefore, a substitute Arbitrator is
required to be appointed so as to maintain the continuity of Arbitration
proceedings.
18. The original mechanism cannot be put in service now, as that relates
to appointment of Arbitrators by one of the parties, and that cannot be done
for the reasons as detailed in this order supra. Therefore, it is a fit case
where the Court would have to appoint an arbitrator to continue the
proceedings.
19. This Court proposes to appoint Shri Justice Pritinker Diwakar,
Former Chief Justice, Allahabad High Court, Shatabdipuram, In Front
of Kesharwani College, Ukhri Road, Vijaynagar, Jabalpur (MP) Mobile-
94252-23330, Email: [email protected], as sole arbitrator for the
disputes arising between the parties in the present case, to take up and
conclude the proceedings.
20. The Registrar (Judicial-I) is directed to seek consent and disclosure
of proposed Arbitrator in terms of sections 11(8) and 12(1) of the Act of
1996 within ten days. List on 06.1.2026 for further orders.
(VIVEK JAIN)
nks JUDGE
