Madras High Court

M/S.Rpn Engineers Chennai ... vs The Union Of India on 7 September, 2021

Arb O.P(COM. DIV) No.63 of 2021

IN THE HIGH COURT OF JUDICATURE AT MADRAS

Dated 07.09.2021

CORAM:
THE HONOURABLE MR.JUSTICE N. SATHISH KUMAR
Arb O.P(COM. DIV) No.63 of 2021
M/s.RPN Engineers Chennai Private Limited
Rep. By its Authorized Signatory
Mr.P.K.Luqmman Basha
M-60, 9th Street,
Anna Nagar East
Chennai 600 102 . . . Petitioner
Versus

1.The Union of India,
Represented by the General Manager,
Southern Railway, Headquarters Office,
Park Town, Chennai – 600 003

2. The Deputy Chief Engineer/I,
Construction,
Southern Railway,
Near My Lady's Garden,
Park Town,
Chennai 600003 . . . Respondents
PRAYER : Petition filed under Section 11(6) of the Arbitration and
Conciliation Act, 1996 to appoint an independent and impartial Arbitrator to
adjudicate the disputes between the petitioner and the respondents in terms of
the Agreement No:26/Dy.CE/CN/1/MAS/2017 dated 25.04.2017 as set out
under details of claims in Para No.12 and direct the respondents to pay the cost
of this petition.

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Arb O.P(COM. DIV) No.63 of 2021

For Petitioner : Mr.A.Vikas
for M/s.P.Subba Reddy
For Respondent : Mr.P.T.Ramkumar
Standing Counsel
ORDER

This petition has been filed to appoint an independent and

impartial Arbitrator to adjudicate the disputes between the petitioner and the

respondents in terms of the Agreement No:26/Dy.CE/CN/1/MAS/2017 dated

25.04.2017.

2. Heard the learned counsel for the petitioner and the learned

standing counsel for the respondent.

3. Learned counsel for the petitioner submitted that the

Agreement dated 25.04.2017 entered between the parties provides for reference

to arbitration. He further submitted that despite notice of Arbitration Letter

dated 24.02.2021 invoking arbitration was issued, the Arbitrators were not

nominated by the respondent. Therefore, he has filed petition under Section

11(6) of the Arbitration and Conciliation Act for appointment of an Arbitrator.

Learned Standing counsel for the respondent contented that Clause 64(3)(a)(ii)

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of the GCC makes it clear that 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). Clause

64(3)(b) of GCC has modified later which deals with appointment of Arbitrator

where applicability of Section 12 (5) of the Act has not been waived of. In this

regard, a Three Judge Judgment of the Hon'ble Apex Court reported in Central

Organisation for Railway Electrification vs. ECI-SPIC-SMO-MCML (JV)

[2019 SCC Online SC 1635] in which it is held as follows:

"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."

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4. Learned counsel further submitted that in this case, there is

delay of five days in nominating the Arbitrator. Moreover, due to the pandemic

situation, the Hon'ble Apex Court has also extended the period of limitation.

Since the Arbitrators were already appointed in similar contracts, the

respondent can chose any one from the panel of Arbitrators. He further

contended that the dispute is mainly pertaining to the damages.

5. The main contention of the learned Standing Counsel for the

respondents that the petitioner herein has already filed petitions with similar

Contracts before this Court in O.P.Nos.700,886,765 and 786 of 2018.

The above petitions were dismissed by this Court vide order dated 20.08.2019.

6. Paragraph No.24 of the order dated 20.08.2019 in

O.P.700,886,765 and 786 of 2018 is extracted hereunder:

“24. ............. In the present case, the arbitrators

are appointed from a panel of retired employees who retired

more than three years prior to their appointment and that they

do not have any past or present business relationship with the

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respondents. Therefore, I do not find any illegality for

appointment of retired employees having no past or present

business relationship with Railways for being appointed as

arbitrators. In such circumstances, the petitioner cannot insist

that only an independent Arbitrator should be appointed

contrary to the terms of the contract between the parties. It is

no doubt that the parties to the contract are bound by the

terms and conditions of the contract and they cannot demand

appointment of independent arbitrators contrary to the

same.”

7. Learned Standing Counsel for the respondent further

contended that again, the petitioner has filed another original petition in

O.P.No.335 of 2020. This Court again dismissed the said original petition on

06.08.2020. Now, the petitioner has filed this original petition for appointment

of an independent Arbitrator. In support of his contention, he relied upon the

judgment in the case of Government of Haryana PWD Haryana (B and R)

Branch v. G.F.Toll Road Private Ltd [(2019) 3 SCC 505] is as follows:

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" An arbitrator who has “any other” past or present “business relationship” with the party is also disqualified. The word “other” used in Entry 1, would indicate a relationship other than an employee, consultant or an advisor. The word “other” cannot be used to widen the scope of the entry to include past/former employees. "

8. The Three Judge Judgment of the Apex Court in Central

Organisation for Railway Electrification (supra) further held as follows:

34. Considering the decision in TRF Limited, in Perkins Eastman Architects DPC and another v. HSCC (India) Limited (2019) SCC Online SC 1517, the Supreme Court observed that there are two categories of cases. The first, similar to the one dealt with in TRF Limited where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself; but is authorized to appoint any other person of his choice or discretion as an arbitrator. Observing that if in the first category, the Managing Director was found incompetent similar invalidity will always arise even in the second category of cases, in para (20) in Perkins Eastman, the Supreme Court held as under:-

“20. ….If, in the first category of cases, the Managing Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or result of the dispute. The element of

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invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be the test, similar invalidity would always arise and spring even in the second category of cases. If the interest that he has in the outcome of the dispute, is taken to be the basis for the possibility of bias, it will always be present irrespective of whether the matter stands under the first or second category of cases. We are conscious that if such deduction is drawn from the decision of this Court in TRF Limited, all cases having clauses similar to that with which we are presently concerned, a party to the agreement would be disentitled to make any appointment of an Arbitrator on its own and it would always be available to argue that a party or an official or an authority having interest in the dispute would be disentitled to make appointment of an Arbitrator.”

9. Similarly in Paras 22, 26, 37 and 38 of the above judgment the

Honourable Apex Court has held as follows:

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

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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.

RE: Contention:- Retired Railway Officers are not eligible to be appointed as arbitrators under Section 12(5) read with Schedule VII of the Act and were statutorily made ineligible to be appointed as an arbitrator.

24. The contention of the learned counsel for the respondent is that the panel of arbitrators proposed by the appellant vide letter dated 25.10.2018 comprising of retired employees of the appellant are not eligible to be appointed as arbitrators under Section 12(5) read with Schedule VII of the Act. Further contention of the learned counsel for the respondent is that the panel of arbitrators drawn by the appellant consist of those persons who were railway employees or Ex-railway employees and therefore, they are statutorily made ineligible to be appointed as arbitrators.

37. 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

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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.

38. 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

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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."

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10. Having regard to the above judgment, this Court is of the

view that when the contract stipulates that the Arbitrator should be appointed

from the panel of Arbitrator including the retired Officer, this Court should

consider the very provision of the contract and it is to be noted that in another

contracts, the arbitration is already in the process between the petitioner and the

Railways and the Arbitrators have been chosen from the panel sent by the

respondent. In such view of the matter to adopt uniformity, this Court is of the

view that the Arbitrator should be chosen from the panel of Arbitrators as

agreed by the respondent.

11. Since the parties are governed by the GCC, there is no