Dibyendu Bose vs South Eastern Railway & Ors.

Mr. Palash Mukherjee, Advocate...for the petitioner.

Mr. Ashok Chakraborty, Senior Advocate., Ms. Tanusri Chanda, Advocate ...for the respondents.

The Court : In this application under section 11(6) 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 a sole arbitrator to adjudicate the disputes between him ,as the sole proprietor of the firm M/S Bose Enterprises and the respondent, South Eastern Railway relating to the contract agreement no.TRD/SRC/W/2013-14/02/AG dated September 29, 2014 (hereinafter referred to as "the said contract").

Admittedly, the terms and conditions under which the petitioner was required to execute the said contract included those stipulated in the Indian Railways standard General Conditions of Contract (hereinafter referred to as "the GCC").

As per clause 63 of the GCC any claim of the petitioner arising out of the said contract would be first referred to the respondent Railway for their decision. Clause 64(1)(i) of the GCC provides that if, the respondent Railway fails to render their decision on the claim/dispute raised by the petitioner contractor under clause 63, within a period of 120 days, such dispute/claim would be referred to arbitration. As per clause 64(3)(a)(ii) of the GCC any claim of a contractor against the respondent Railway for more than Rs. 25 lakhs would be referred to for arbitration to an arbitral tribunal consisting of a panel of three Gazetted Railway Officers not below JA Grade or 2 Railway Gazetted Officers not below JA Grade and a retired Railway Officer not below the rank of SAG Officer(s) to be appointed by the General Manager of the respondent Railway. For this purpose, the Railway will send a panel of more than three names of Gazetted Railway Officers of one or more than departments of the Railway which may also include the name(s) of retired Railway Officer(s) empanelled to work as Railway Arbitrator to the contractor within 60 days from the date when a written and valid demand for arbitration is received by the General Manager. Thereafter, 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 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 nominee of arbitrators either from the panel or from outside panel, duly indicating the Presiding Arbitrator of the Arbitral Tribunal.

According to the petitioner, the respondent Railway has not only terminated the said contract wrongfully but they have also refused to refund the security deposit and return the performance bank guarantee furnished by the petitioner as per the terms of the said contract. As stated by the petitioner in the notices dated February 22, 2018, referred to hereinafter his claim against the respondent Railway is more than Rs. 66 lakhs.

The petitioner, however, filed a writ petition before a learned Single Judge of this Court which was rejected by an order dated June 21, 2017. In an appeal filed against the said order of rejection, by order dated October 23, 2017 the Division Bench directed the petitioner to pursue the alternative remedy under arbitration. Thereafter, by a letter dated February 22, 2018, the petitioner invoked the arbitration agreement between the parties and requested the General Manager of the respondent Railway to refer the disputes between the parties to arbitration. By an internal communication dated February 26, 2018, the Assistant Deputy General Manager of the respondent Railway informed the PCEE-S.E. Rly./GRC to look into the matter and resolve the case under intimation to his office and if, the case is arbitrable to furnish the case at the earliest. The respondent Railway, however, forwarded a communication to the petitioner for waiver of the provisions incorporated under clause 12(5) and 31-A(5) of the Act of 1996. By a letter dated April 6, 2018, the petitioner informed the said Assistant Deputy General Manager of the respondent Railway that it is not agreeable to submit any waiver under clause 12(5) and 31-A(5) of the Act of 1996. Thereafter, the respondent neither issued any communication to the petitioner nor the General Manager of the respondent Railway appointed any arbitrator. Thus, on October 12, 2018, the petitioner filed this application seeking for the relief already mentioned above. The petitioner has also filed a supplementary affidavit wherefrom it appears that it was only after filing of the present application on October 12, 2018, the said Assistant Deputy General Manager of the respondent Railway issued a fresh communication dated April 15, 2018 to the petitioner for waiver of the provisions under Sections 12(5) and 31-A(5) of the Act of 1996.

In the facts of the present case as discussed above, it is evident that although by the letter dated February 22, 2018, the petitioner had invoked the arbitration agreement but the General Manager of the respondent Railway has done nothing to discharge his function for appointment of arbitrator under clause 64(3)(a)(ii) of the GCC. By the said letter dated April 06,2018 the petitioner through his advocate informed the Assistant Deputy General Manager of the respondent Railway that he will not the form for waiver of the provisions under Sections 12(5) and 31A(5) of the Act of 1996. In spite of receipt of the said letter dated April 06, 2018 the Assistant Deputy General Manager of the respondent Railway sat tight over the matter. It was only after the petitioner filed the present application on October 12,2018 upon service on the General Manger, the Assistant Deputy General Manager of the respondent issued the further communication dated October 15,2018 to the petitioner requesting him to submit the information for waiver of the provisions under Sections 12(5) and 31A(5) of the Act of 1996.

The said Assistant Deputy General Manager of the respondent Railway who has issued the aforementioned communications to the petitioner is present before this Court and he is unable to explain his conduct in this matter. The Assistant Deputy General Manager claimed that he has all along been discharging his functions and taking all decisions towards appointment of the arbitrator in this case with the authority conferred upon him by the General Manager of the respondent Railway. According to the respondent Railway its General Manager still has the right to appoint the members of the arbitral tribunal and the present application is premature. It is further submitted by the respondent Railway that some of the claims/disputes raised by the petitioner appear to be excepted matters which cannot be adjudicated by arbitration and, as such, this application is not maintainable.

As per Clause 64(3) (a) (ii) of the GCC the arbitral tribunal shall consist of panel of three Gazetted Officers not below JA Grade or two Railway Gazetted Officers not below JA Grade and the retired Railway Officer, retired not below the rank of SA Officer as arbitrators. The General Manager of the respondent Railway would suggest to the petitioner contractor at least two names and out of the said two persons. The General Manager would appoint at least one of them as the petitioner's nominee and simultaneously, appoint the balance numbers of arbitrators either from the panel or outside the panel duly indicating the 'Presiding Arbitrator' from amongst the three arbitrators so appointed. The General Manager shall complete the exercise of appointing the arbitral tribunal within 30 days from the receipt of the names of the petitioner's nominee.

In the present case, due to the inaction on the part of the General Manager of the respondent Railway, as mentioned above. The agreed procedure of appointment of arbitrator has failed.

It is, however, submitted by the petitioner that once the present application has been filed before this Court on October 23, 2018, the General Manager of the respondent Railway has ceased to have any right to appoint any arbitrator. It is further submitted by the petitioner that there is no dispute between the parties with regard to the existence of the arbitration agreement. In view of the provisions of sub-section (6A) of section 11 of the Act of 1996 and the decision of the Supreme Court in the case of M/s. Duro Felguera S.A. vs. M/s. Gangavaram Port Limited, reported in (2017) 9 SCC 729, when the existence of the arbitration agreement there is no merit in the contention raised by the respondent that this application should not be entertained on such ground.

I have considered the materials on record as well as the arguments advanced by the learned advocates appearing for the respective parties. As per clause 64(3)(a)(ii) of the GCC, the office of the General Manager of the South Eastern Railway carries a heavy responsibility to constitute the arbitral tribunal to adjudicate any claim or dispute raised by a contractor against the respondent under any contract. However, in the present case it appears that in purported exercise of the authority delegated by the General Manager, the Assistant Deputy General Manager of the South Eastern Railway has been acting in a negligent manner. It is over a period of about one-year from February 26, 2018, the said Assistant Deputy General Manager has been sitting tight over the matter and compelled the petitioner to file this application. Consequently, the blame lies at the door of the office of the General Manager not to have appointed the arbitrators as per clause 64(3)(a)(ii) of the GCC. In the present case, even after expiry of 30 days from the date of receipt of the petitioner's said letter dated April 06, 2018 by the said Assistant Deputy General Manager, the General Manager, being the appointing authority has not taken any step under clause 64(3)(a)(ii) of the GCC to constitute the arbitral tribunal for adjudicating the disputes raised by the petitioner. Thus, once the petitioner has filed this application on October 23, 2018, the right of the General Manager of the respondent Railway to appoint the arbitrators stands forfeited. This view is fortified by the decisions of the Supreme Court in the cases of M/s. Datar Switchgear Ltd.-vs- Tata Finance Ltd. reported in (2000)8 SCC 151 and Deep Trading Co.-vs- Indian Oil Corporation, reported in (2013)4 SCC 35.

Further, in view of the provisions contained in sub-section (6A) of section 11 of the Act of 1996 and the decision of the Supreme Court in the case of M/s. Duro Felguera S.A.(supra), it is within the domain of the arbitrator to decide the validity of the claims raised by a party in arbitration. For the reasons as aforesaid, the present application of the petitioner succeeds.

Accordingly, Mr. Amitabha Ghosh, Advocate and Mr. Suman Dutt, Advocate of Bar Library Club (First Floor) are appointed as the nominee arbitrator for the petitioner and the respondent Railway, respectively. Mr. Moloy Kumar Ghosh, Senior Advocate is appointed as the Presiding Arbitrator of the Arbitral Tribunal.

The learned Arbitrators and the learned Presiding Arbitrator shall be free to fix their remuneration as per the Fourth Schedule of the Act of 1996 and to engage the secretarial staff.

The fees of the learned Arbitrators and the learned Presiding Arbitrators remuneration of the secretarial staff shall be borne by the parties in equal share.

The learned Arbitral Tribunal is requested to make and publish his award within a year from the date of completion of the pleadings by the parties.

With the above directions, AP No.778 of 2018 is disposed of, without any order as to costs.