Punjab-Haryana High Court

M/S Wonder Laminates Pvt. Ltd vs Rail Coach Factory And Another on 15 February, 2021

                               In the High Court of Punjab and Haryana, at Chandigarh


                     1.                              Arbitration Case No. 106 of 2020 (O&M)

                     M/s Wonder Laminates Private Limited
                                                                                    ... Petitioner(s)

                                                         Versus

                     Rail Coach Factory, Kapurthala and Another
                                                                                  ... Respondent(s)

                                                         AND

                     2.                              Arbitration Case No. 107 of 2020 (O&M)

                     M/s Wonder Laminates Private Limited
                                                                                    ... Petitioner(s)

                                                         Versus

                     Rail Coach Factory, Kapurthala and Another
                                                                                  ... Respondent(s)

                                             Date of Decision: 15.02.2021


                     CORAM: Hon'ble Mr. Justice Anil Kshetarpal.

                     Present:      Ms. Kanwal S. Walia, Advocate
                                   for the petitioner(s).

                                   Mr. Sanjiv Ghai, Advocate
                                   for the respondents.

                     Anil Kshetarpal, J.

By this order, two petitions under Section 11(6) of the

Arbitration & Conciliation Act, 1996 (hereinafter referred to as "the 1996

Act"), arising between the same parties with respect to identical disputes,

shall stand decided. Learned counsel for the parties have also submitted that

these two petitions can be disposed of by a common order.

The agreements containing arbitration clause are not in dispute. DEEPAK KUMAR BHARDWAJ 2021.02.18 14:39 I attest to the accuracy and integrity of this document

Arbitration Case No. 107 of 2020 (O&M)

Clause 2.21, reads as under:-

"2.21.Arbitration Clause:

2.21.1(a)(i) In the event of any dispute or difference of opinion

between the Rail Coach Factory administration

and Contractor(s) as to respective right and

obligation of the parties hereunder or of onus to

the true intent and meaning of these present and of

any articles of conditions thereof such dispute of

difference of opinion (except the matter regarding

which the decision has been specifically provided

for in the terms of the contract) shall be referred to

the sole arbitration. Arbitrator shall be a person

possessing qualification aid down in Para

2.21.1(a)(ii) and shall be appointed by the General

Manager in the case of contracts entered into by

Rail Coach Factory, Kapurthala.

2.21.1(a)(ii) Qualification for appointment as Sole Arbitrator:

(a) Retired Railway Officer not below SAG level

3 years after his date of retirement.

(b) Age of Arbitrator at the time of appointment

shall not exceed 70 years.

2.21.1(a)(iii) An Arbitrator may be appointed

notwithstanding the total no. of arbitration cases

in which he has been appointed in the past. Retire DEEPAK KUMAR BHARDWAJ 2021.02.18 14:39 Railway officer being appointed as arbitrator, I attest to the accuracy and integrity of this document

Arbitration Case No. 107 of 2020 (O&M)

however, will not be one of those who had an

opportunity to deal with the matters to which the

contract relates or who in the course of their

duties as railway servant have expressed views on

all or any of the matters under dispute or

difference.

2.21.1(a)(iv)The award of the Arbitrator shall be final and

binding on the parties to this contract.

2.21.1(b) In the event of the Arbitrator dying, neglecting or

refusing to act or resigning or being unable to act

for any reason, or his award being set aside by the

court for any reason, it shall be lawful for the

authority appointing the arbitrator to appoint

another arbitrator in place of the outgoing

arbitrator ion the manner aforesaid.

2.21.1(c) It is further a term of this contract that no person

other than the person appointed by the authority as

aforesaid should act as Arbitrator and that if for

any reason that is not possible, the matter is not to

be referred to arbitration at all.

2.21.1(d)(i) The cost of arbitration shall be borne by the

concerned parties in terms of section 31(A) of

Arbitration and Conciliation Act, 1996, as

amended by Arbitration and Conciliation DEEPAK KUMAR BHARDWAJ 2021.02.18 14:39 (Amendment) Act, 2015. The cost shall inter-alia I attest to the accuracy and integrity of this document

Arbitration Case No. 107 of 2020 (O&M)

include fee payable to the Arbitrator would be

governed by instruction issued on the subject by

Railway Board from time to time irrespective of

the fact whether the Arbitrator is appointed by the

Railway administration under this clause or by any

court of law unless specifically directed by

Hon'ble court otherwise on the matter.

2.21.1(d)(ii) Arbitrator shall be entitled to 50 percent extra fee,

if award is made within 6 months in terms of

provision contained in section 29(A) (2) of the

Arbitration and Conciliation Act, 1996 as

amended by Arbitration and Conciliation

(Amendment) Act, 2015.

Besides above, Arbitrator shall also be entitled for

this extra fee, in cases, where Fast Track

Procedure in terms of section 29(B) of the

Arbitration and Conciliation (Amendment) Act,

2015 is followed.

2.21.1(e) Subject as aforesaid, the Arbitration and

Conciliation (Amendment) Act, 2015 and the fulrs

there under and any statutory modifications

thereof for the time being in force shall be deemed

to apply to the arbitration proceedings under this

clause.

DEEPAK KUMAR BHARDWAJ 2021.02.18 14:39 I attest to the accuracy and integrity of this document

Arbitration Case No. 107 of 2020 (O&M)

2.21.1(f) The venue of arbitration shall be the place from

which the acceptance note is issued or such other

place as the arbitrator at his discretion may

determine in terms of section 20 of the Arbitration

and Conciliation Act, 1996, as amended by

Arbitration and Conciliation (Amendment) Act,

2015.

2.21.1(g) In this clause the authority, to appoint the

arbitrator includes, if there be no such authority,

the office who is for the time being discharging the

functions of the authority, whether in addition to

other functions of otherwise.

2.21.1(h) It is further a term of this contract that 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 in terms of Section 31(7)(a) of the

Arbitration and Conciliation Act, 1996, as

amended by Arbitration and Conciliation

(Amendment) Act, 2015.

2.21.1. Pre-Arbitration Meetings:

To avoid the cumbersome & time consuming

process of arbitration, pre-arbitration meeting with the

contractors can be held for settlement of claim of contractors. DEEPAK KUMAR BHARDWAJ 2021.02.18 14:39 However such meeting/discussions shall be without prejudice to I attest to the accuracy and integrity of this document

Arbitration Case No. 107 of 2020 (O&M)

the Railway's interest in the matter. If an understanding is

reached between the administration and the contractor,

discussions will be recorded indicating the claim admitted to

the extent and the claim not admitted and the contractor's no

claim certificate taken on that basis. In either case subsequent

action shall be proceeded and the residual disputes if any, shall

be referred to arbitration in terms of clause/Para 2.21.1

above."

Some facts are required to be noticed. The petitioner is a

manufacturer and supplier of laminates. The respondents issued three

purchase orders on 15.03.2018, 06.09.2018 and 03.11.2019 to the petitioner

for supply HPL sheets. The respondents claim that the HPL sheets as

supplied by the petitioner do not conform to the specifications. It is

admitted that with respect to first supply order, the HPL sheets have already

been used and payment thereof has also been released.

The petitioner claims that it supplied the material after the same

was inspected by the M/s RITES Limited. Since a dispute arose, therefore,

the petitioner requested for appointment of a sole Arbitrator. The Rail Coach

Factory, in its response, sent a panel of four persons with an option to the

petitioner to chose two names from the panel. Thereafter, the General

Manager was supposed to appoint the sole Arbitrator from one of the two

persons selected by the petitioner. Subsequently, Sh. Parmanand Singh

(Retired CDE/RCF) was nominated as the Sole Arbitrator by the General

Manager of the Rail Coach Factory.

DEEPAK KUMAR BHARDWAJ 2021.02.18 14:39 The petitioner has filed this petition for appointment of an I attest to the accuracy and integrity of this document

Arbitration Case No. 107 of 2020 (O&M)

Arbitrator in terms of the Amended Act, which came into force w.e.f.

23.10.2015. It is significant to note that the previous practice of permitting a

party to act as an Arbitrator or to nominate an Arbitrator(s) has been

abandoned with a view to improve the credibility of the arbitration awards

and to remove the doubts on the impartiality of the proceedings. By now, it

is well settled that neither the party can act as an Arbitrator nor it can appoint

an Arbitrator. A reference in this regard can be made to the judgments passed

by the Supreme Court in TRF Limited v. Energo Engineering Projects

Limited (2017) 8 SCC 377 and Perkins Eastman Architects DPC and

Another v. H.S.C.C. (India) Limited (2019) SCConline Supreme Court

1517.

This Court has heard learned counsel for the parties and with

their able assistance, perused the paper-books.

It may be noted here that on the one hand, learned counsel

appearing for the petitioner prays for appointment of an independent

Arbitrator by the Court, whereas on the other hand, Sh. Sanjiv Ghai,

Advocate, has chosen to contest the petitions. He submits that as per the

arbitration agreement, the Arbitrator has already been appointed. He further

submits that on reading of Clause 2.21.1 (a)(ii), the sole Arbitrator has to be

a retired Railways Officer not below SAG level, three years after his date of

retirement who are not disqualified to arbitrate the dispute under the

amended Act. He further submits that the petitioner has not followed the

procedure, as provided in Clause 2.21.1. He further submits that the

petitioner did not come forward for joint inspection of the material supplied, DEEPAK KUMAR BHARDWAJ 2021.02.18 14:39 inspite of repeated requests. In support of his submissions, he relies upon the I attest to the accuracy and integrity of this document

Arbitration Case No. 107 of 2020 (O&M)

judgment passed in Central Organisation for Railway Electrification v.

ECI-SPIC-SMO-MCML(JV) A Joint Venture Company (2019) SCC

Online SC 1635 and Union of India v. Pardeep Vinod Construction

Company (2020)2 SCC 464.

It is significant to note that in Central Organisation for

Railway Electrification (supra), the Supreme Court, looking into the facts of

the case, ordered that in case of Railways, the Arbitral Tribunal can consist

of retired Railways Officers. However, the aforesaid judgment is in the facts

of the case and in that case, a three members' Arbitral Tribunal was required

to be appointed. It may be noted here that another Bench of equal strength

in Union of India v. Tantia Construction Private Limited Special Leave

Petition (C) No. 12670 of 2020, decided on 11.01.2021 has doubted its

correctness and requested Hon'ble the Chief Justice of India to constitute a

larger bench for reconsideration. The order reads as under:-

"Having heard Mr. K.M. Nataraj, learned ASG for

sometime, it is clear that on the facts of this case, the judgment

of the High Court cannot be faulted with. Accordingly, the

Special Leave Petition is dismissed. However, reliance has been

placed upon a recent three-Judge Bench decision of this Court

delivered on 17.12.2019 in Central Organisation for Railway

Electrification vs. M/s ECI-SPIC-SMO-MCML (JV) A Joint

Venture Company, 2019 SCC OnLine 1635. We have perused

the aforesaid judgment and prima facie disagree with it for the

basic reason that once the appointing authority itself is DEEPAK KUMAR BHARDWAJ 2021.02.18 14:39 incapacitated from referring the matter to arbitration, it does I attest to the accuracy and integrity of this document

Arbitration Case No. 107 of 2020 (O&M)

not then follow that notwithstanding this yet appointments may

be valid depending on the facts of the case.

We therefore request the Hon'ble Chief Justice to

constitute a larger Bench to look into the correctness of this

judgment.

Pending application stands disposed of".

As regards the second judgment in Pardeep Vinod

Construction Company (supra), it is apparent that in that case, the request

for appointment of the Arbitrator was before the amendment came into force

and therefore, the amended provisions were not applicable in view of

Section 21 of the 1996 Act.

As regards the second objection, it may be noted that on careful

reading of Clause 2.21.1, it is apparent that pre-arbitration meetings are not

mandatory or a pre-condition for appointment of the sole Arbitrator. It has

been provided that the pre-arbitration meetings with the contractors can be

held for settlement of the claim of contractors. In view thereof, it would not

be appropriate to hold that the stage for invoking arbitration clause has not

arisen. Still further, the respondents have already nominated the sole

Arbitrator.

Next contention of learned counsel for the respondents with

respect to the effect of failure of the petitioner to come forward for joint

inspection, can be examined by the Arbitrator.

In view of the aforesaid discussion, this court is required to

nominate a sole Arbitrator.

DEEPAK KUMAR BHARDWAJ 2021.02.18 14:39 From the reading of the qualification of the Arbitrator, as I attest to the accuracy and integrity of this document

Arbitration Case No. 107 of 2020 (O&M)

prescribed in Clause 2.21.1(a)(ii) of the bid document, it is apparent that no

specific qualification has been prescribed except that the Arbitrator shall be

a retired Railways Officer, not below the SAG level three years after his

retirement. It is not provided that the Arbitrator shall be required to have

some specific qualifications. Still further, it is for the parties to lead

evidence. The dispute, in the present case, does not appear to be of a nature

which cannot be decided by a Judge.

Keeping in view the aforesaid facts, both the petitions are

allowed. This Court is required to exercise its power under Section 11 and

nominate the sole arbitrator to decide the disputes and differences between

the parties.

(a) Appointment of Arbitrator: Honb'ble Mrs. Justice

Rekha Mittal, Former Judge of this Court, is hereby

nominated to act as the Sole Arbitrator to decide the

disputes and differences between the parties in both the

petitions.

(b) Communication to Arbitrator of this order:

(i) A copy of this order will be communicated to the

learned Sole Arbitrator by the learned counsel for

the petitioner within one week from the date of

order being uploaded.

(ii) In addition, within one week of this order being

uploaded, the Registry will forward an ordinary

copy of this order to the learned Sole Arbitrator at DEEPAK KUMAR BHARDWAJ 2021.02.18 14:39 the following postal address: I attest to the accuracy and integrity of this document

Arbitration Case No. 107 of 2020 (O&M)

Arbitrator : Hon'ble Mrs. Justice Rekha Mittal, Former Judge, Punjab and Haryana High Court.

                                           Address         :        House No. 56, Sector 11-A,
                                                                    Chandigarh.

                                           Mobile No.      :        +91 8558809903

forward her statement of disclosure under Section 11(8)

read with Section 12(1) of the Arbitration Act, 1996 to

the Registrar General of this Court, referencing this

arbitration petition, as soon as possible, and in any case,

sufficiently in advance of her entering upon the reference

to her arbitration. That statement will be retained by the

Registrar General on the file of this application. Copies

will be given to both sides.

(d) Appearance before the Arbitrator: The parties will

appear before the learned Sole Arbitrator physically or

through video conferencing on such date and at such

place as she nominates and will obtain appropriate

directions in regard to fixing a schedule for completing

the pleadings, etc.

(e) Contact/communication information of the parties:

Contact and communication particulars are to be

provided by both sides to the learned Sole Arbitrator

within one week of this order being uploaded. The DEEPAK KUMAR BHARDWAJ 2021.02.18 14:39 I attest to the accuracy and information is to include a valid and functional email integrity of this document

Arbitration Case No. 107 of 2020 (O&M)

address.

(f) Application under Section 16: Liberty to either side to

file an application before the learned Sole Arbitrator

under Section 16 in regard to any matter or claim and its

arbitrability, jurisdiction and competency of the arbitral

tribunal.

(g) Interim Application(s):

(i) Liberty to both the parties to make an interim

application or interim applications including (but

not limited to) an interim application under Section

17 of the Arbitration & Conciliation Act, 1996

before the learned Sole Arbitrator