CENTEX(INDIA) ENGINEERS(P) LTD. vs THE GENERAL MANAGER, SOUTH EASTERN RAILWAY

In this application under sub-Section(6) of Section 11 of the Arbitration and Conciliation Act, 1996, as amended by Act 3 of 2016 (in short "the Act of 1996") the petitioner has prayed for appointment of Arbitrators to constitute the Arbitral Tribunal for adjudication of the disputes arisen between itself and the South Eastern Railway, represented by its General Manager the respondent herein.The disputes between the parties relate to an agreement dated March 14, 2007 under which the petitioner was required to execute certain work for the respondent in terms of the letter of acceptance dated November 15, 2006 issued by the latter in favour of the former. Admittedly, the general terms and conditions of the contract applicable to the parties to the agreement in question provide for adjudication of the disputes between the parties through arbitration. The said arbitration agreement provides as follows: "64(3)(a) (i) In cases where the total value of all claims in question added together does not exceed Rs. 10,00,000/- (Rupees ten lakhs only), the Arbitral Tribunal consist of a sole arbitrator who shall be either the General Manager or a gazetted officer of Railway not below the grade of JA grade nominated by the General Manager in that behalf. The sole arbitrator shall be appointed within 60 days from the date when a written and valid demand for arbitration is received by Railway.

(ii) In cases not covered by clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Rly. Officers not below JA grade, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Rly. Officers of one or more departments, of the Rly., to the contractor who will be asked to suggest to General Manager upto 2 names out of the panel for appointment as contractor''s nominee. 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. 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 shall be considered of equal status to the officers in SA grade of other departments of the Railways for the purpose of appointment of arbitrators."

Since the petitioner''s claim against the respondent in this case is for a sum of more than Rs.10 lakhs, clause 64(3) (a)(ii) above is applicable for appointment of the Arbitral Tribunal to adjudicate the disputes between the parties. By a letter dated June 6, 2017 the petitioner requested the respondent to take steps constitute an Arbitral Tribunal in accordance with the above arbitral agreement in the context of the amended provisions of the Act of 1996. By a letter dated July 3, 2017 the respondent requested the petitioner to enter into a fresh agreement towards waiver as per the Proviso to sub-Section (5) of Section 12 of the amended Act of 1996. The petitioner, however, did not agree to execute any new agreement and by a letter dated July 15, 2017 communicated the same to the respondent. In the meantime, the period of thirty days expired from the date of the receipt of the said notice dated June 6, 2017 by the respondent but, the latter did not take any step in terms of the arbitral agreement quoted above. Therefore, in exercise of its right under sub- Section (6) of Section 11 of the Act of 1996, on September 12, 2017 the petitioner filed the present application for appointment of three Arbitrators of the Arbitral Tribunal by this Court, as per the arbitral agreement between the parties.

After the petitioner filed this application, by a letter dated September 20, 2017 the respondent forwarded a panel of four retired railway officers to the petitioner for selecting one of them as its nominee arbitrator. By a letter dated September 25, 2017 the petitioner informed the respondent that since it has already filed the present application before this Court there is no scope for the respondent to constitute the Arbitral Tribunalany further. However, by a letter dated October 05, 2017 the respondent informed the petitioner of the constitution of the Arbitral Tribunal comprising three retired officers of the Indian Railways.

According to the petitioner, in view of the amended provisions contained in Section 12 of the Act of 1996 the respondent cannot appoint any serving railway officer as the arbitrator for adjudication of the disputes between the parties. It was further submitted that in any event, once the present application has been filed before this Court under sub-Section (6) of Section 11 of the Act of 1996 after expiry of a period of thirty days from the date of receipt of the said letter dated June 6, 2017 by the respondent, the latter ceased to have any authority to appoint any arbitrator in this matter. In this regard, the petitioner relied on the decision of the Supreme Court in the case of Deep Trading Corporation vs. Indian Oil Corporation & Ors. reported in (2013) 4 SCC 35. On the strength of the said Supreme Court decision, the petitioner strongly urged that in the present case this Court would appoint all the three Arbitrators to constitute the Arbitral Tribunal for adjudication of the disputes between the parties.

Per contra, Mr. Das, the learned Advocate appearing for the respondent raised objection to the prayer of the petitioner in this application. He urged that no indisputably the amended provisions contained in Section 12, read with the seventh schedule of the Act of 1996 are applicable in the present case and, as such, the respondent sent to the petitioner a panel of four retired officers of the Indian Railway and the petitioner could agree to the appointment of anyone of them as its nominee arbitrator. Relying on the decision of the Supreme Court in the case of Voestalpine Schienen GmbHI vs. Delhi Metro Rail Corporation Ltd. reported in (2017) 4 SCC 665 it was further submitted that the respondent is ready to provide the petitioner with more names of the retired officers of the Indian Railway for selecting one of them as its nominee arbitrator. It was, however, not disputed that the respondent had issued the said letter dated September 20, 2017 after the petitioner filed the present application. According to the respondent, in any event, the petitioner''s application is not maintainable as it had already received all payments from the respondent after issuance of a ''No Claim Certificate'' In this regard, he cited the decision of the Supreme Court in the case of Chittaranjan Maity Vs. Union of India reported in AIR 2017 SC 4588. He, however, submitted that in the said decision, the Supreme Court had considered a case before the Amendment Act of 3 of 2016 came into force and before incorporation of the provisions of sub-Section (6A) of Section 11 of the Act of 1996.

I have considered the materials-on-record, as also the submissions made by for the respective parties. In the present case, by the letter dated June 6,2017 the petitioner, after the Amending Act of 2016 came into force, invoked the arbitration agreement and requested the respondent to refer the disputes relating its claim to arbitration. The existence of the arbitration agreement between the parties is not in dispute. As per the arbitration agreement quoted above, the respondent had to constitute the Arbitral Tribunal comprising three members, after granting an opportunity to the petitioner to select its nominee Arbitrator from a panel of three railway officers. Admittedly, on June 7, 2017 the respondent received the petitioner''s letter dated June 6, 2017 for referring the disputes to arbitration as per the arbitration agreement between the parties. Long after the expiry of the statutory period of 30 days, under sub-Section (4) of Section 11 of the Act, the petitioner filed the present application on September 12, 2017. It was only after filing of the present application, on September 20, 2017 the respondent sent the panel of four retired railway officers to the petitioner for nominating one of them as its Arbitrator. Therefore, in view of the provisions in sub-Section (4) of Section 11 of the Act of 1996 and the decision of the Supreme Court in the case of Deep Trading Company (Supra) cited by the petitioner, I find that the respondent has forfeited its authority to do anything for constitution of the Arbitral Tribunal. In the case of Voestalpine (Supra), the appointing authority had taken steps for nomination of the Arbitrator by the contractor before the latter filed the application before the Court under sub-Section (6A) of Section 11 of the Act of 1996. Thus, I find that as rightly contended by the petitioner the said decision has no application in the present case.

With regard to the objection raised by the respondent to the maintainability of this application on the ground that the petitioner has received all its payment after issuance of ''No due certificate'', it is to be noted that in view of incorporation of the provisions contained in sub-Section (6A) of Section 11 of the Act of 1996 when the existence of the arbitration agreement between the parties is not in dispute this Court has to allow this application without deciding the maintainability of the claim of the petitioner in the arbitral proceeding. This view is fortified by the decision of the Supreme Court in the case of Duro Felguera S.A. vs. Gangavaram Port Ltd. reported in (2017) 9 SCC 729. The maintainability of the claim by the petitioner in the arbitral proceeding shall be decided the Arbitral Tribunal. In view of the provisions incorporated in sub-Section (6A) of the Act of 1996 the decision of the Supreme Court in the case of Chittaranjan Maity (supra) has no application in this case.

For all the foregoing reasons, the application of the petitioner succeeds.

The arbitration agreement between the parties does not require the members of the Arbitral Tribunal to hold any technical or professional qualification. Accordingly, Justice Jayanta Kumar Biswas and Justice Tapan Dutt, the former Judges of this Court are appointed as the two Arbitrators of the Arbitral Tribunal.

Along with the above two Arbitrators, Justice Subhro Kamal Mukherjee, the former Chief Justice of Karnataka High Court is appointed as the Presiding Arbitrator of the Arbitral Tribunal.

The Arbitral Tribunal shall be free to fix the remuneration of its respective members and the Presiding Arbitrator, as well as the other incidental expenses to be borne by the parties in equal share.

With the above directions, AP No. 791 of 2017 stands disposed of. Accordingly, the connected application being GA No. 4 of 2018 also stands disposed of without any further order.

There shall, however, be no order as to costs.

Urgent certified website copies of this order, if applied for, be made available to the parties subject to compliance with all requisite formalities.