Shiv Shakti Builders @APPELLANT@Hash Divisional Railway Engineer

This application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (‘the Act’) has been filed by the applicant seeking reference

of dispute indicated in notice dated 15.03.2018 (Annex.-22) to the sole Arbitrator to be appointed by this Court.

It is, inter alia, indicated in the application that on 10.05.2016, the applicant was awarded work of protection and restoration of Bank boulder pitching

etc., the agreement in this regard was executed on 10.07.2016. During the course of execution of contract, on 25.09.2017, the respondent issued a 24

hours’ notice in terms of Clause 62 of the Standard General Conditions of Contract (‘the GCC’) indicating that the security deposit and

performance guarantee amount has to be forfeited. The applicant responded to the same indicating the reasons for delay in execution of the work. On

28.09.2017 (Annex.-20), the contract was rescinded in terms of Clause 62 of the GCC and it was indicated that the security deposit shall be forfeited

and performance guarantee shall also be encashed.

By representation dated 31.10.2017, the applicant, raised dispute and sought payment of Rs.36,25,511/-within a period of 120 days as specified in

Clause 63 of the GCC. Whereafter, after lapse of 120 days, on 15.03.2018, the applicant sought appointment of sole Arbitrator in terms of Clause 64

of the GCC. However, the respondent did not appoint the sole Arbitrator leading to filing of the present application. On notices being issued, a reply

has been filed by the sole-respondent, inter alia, raising several objections. It is, inter alia, indicated that in terms of Clause 63 and 64 of the GCC, the

applicant did not refer the dispute to the requisite authority i.e. the General Manager (‘the GM’) and as such the reference made invoking

provisions of Clause 63 and 64 of the GCC is not inconformity with mandatory requirement of Clause 63 and 64 of the GCC and, therefore, for

absence of pre-requisite condition for invoking provisions of Section 11(6) of the Act, the application deserves to be rejected.

It was emphasized that the notice seeking appointment also could only be issued to the GM and, therefore, the application filed by the applicant

deserves to be rejected on this count alone. Further submissions have been made that the timeline as required by provisions of Clause 63 and 64 of the

GCC have not been adhered to by the applicant and, therefore, on that count also, the application deserves to be dismissed. Learned counsel for the

applicant, made submissions that the facts are not in dispute wherein the contract was terminated on 28.09.2017, the applicant raised dispute on

31.10.2017 and, thereafter on 15.03.2018, sought appointment of Arbitrator, which is in consonance with the timeline provided under Clause 63 and 64

of the GCC and, therefore, the objection raised in this regard is baseless.

Further submission has been made that the agreement between the parties as reflected from the agreement (Annex.-2) was entered into between the

President of India acting through the Divisional Engineer (West), NWR, Jodhpur and the applicant and the order of termination of contract also has

been passed by the same authority and, therefore, the argument sought to be raised by the respondents that as the notice was not sent/given to the

GM, the application is not maintainable has not basis. It was prayed that in view of the provisions of Section 11(6-A) of the Act, the application be

allowed and an appropriate sole Arbitrator be appointed for resolving the dispute between the parties.

Learned counsel appearing for the respondent reiterated the objections and placed reliance on United India Insurance Co. Ltd. v. Hyundai Engineering

& Construction Co. Ltd. & Ors.: Civil Appeal No. 8146 of 2018 arising out of SLP(C) No.4260/2018, decided on 21.08.2018. I have considered the

submissions made by learned counsel for the parties and have perused the material available on record. Clause 63 and 64 of the GCC in so far as

relevant reads as under:-

“Settlement of disputes â€" Indian Railway Arbitration Rules.

Matters Finally determined by the Railway : All disputes and differences of any kind whatsoever arising out of or in connection with the contract,

whether during the progress of the work or after its completion and whether before or after the determination of the contract, shall be referred by the

contractor to the GM and the GM shall, within 120 days after receipt of the contractor’s representation, make and notify decisions on all matters

referred to by the contractor in writing provided that matters for which provision has been made in Clauses 8, 18, 22(5), 39, 43(2), 45(a), 55, 55-A(5),

57, 57A, 61(1), 61(2) and 62(1) to (xiii)(B) of Standard General Conditions of Contract or in any Clause of the Special Conditions of the Contract shall

be deemed as ‘excepted matters’ (matters not arbitrable) and decisions of the Railway authority, thereon shall be final and binding on the

contractor; provided further that ‘excepted matters’ shall stand specifically excluded from the purview of the Arbitration Clause.

64.(1) Demand for Arbitration :

64.(1) (i) in the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective

rights and liabilities of the parties on any matter in question, dispute or difference on any account or as to the withholding by the Railway of any

certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case,

but except in any of the “excepted matters†referred to in Clause 63 of these Conditions, the contractor, after 120 days but within 180 days of his

presenting his final claim on disputed matters shall demand in writing that the dispute or difference be referred to arbitration.

64.(3) Appointment of Arbitrator :

64.(3) (a)(i) In cases where the total value of all claims in question added together does not exceed Rs.25,00,000/- (Rupees twenty five lakh only), the

Arbitral Tribunal shall consist of a Sole Arbitrator who shall be a Gazetted Officer of Railway not below JA Grade, nominated by the General

Manager. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by GM.â€​

A bare look at the above Clauses, which deals with the settlement of disputes and indicates Arbitration Rules would reveal that disputes are to be

referred by the Contractor to the GM and the GM within 120 days after receipt of the Contractor’s representation would notify decision on all

matters referred by the Contractor in writing. Further, the Clause pertaining to demand for arbitration indicates that if the Railway fails to make

decision within 120 days, the Contractor after 120 days but within 180 days of his presenting his final claim on disputed matters shall demand in writing

from the GM that the dispute or difference be referred to arbitration.

So far as the objection pertaining to the non-adherence with the timeline provided under the Clauses is concerned, the same apparently has no

substance, inasmuch as, the dispute arose with the termination of contract by order dated 28.09.2017, the applicant raised dispute by representation

dated 31.10.2017 and after waiting for 120 days, he could sought reference of dispute to the Arbitrator within 180 days. The 180 days period from the

date of representation i.e. 31.10.2017 would have expired on 31.04.2018 and 120 days period having expired on 28.02.2018, the sending of notice

seeking reference of dispute to the Arbitrator by the applicant on 15.03.2018 was well within the said prescribed period and, therefore, the objection as

noticed hereinbefore raised by the respondent has no substance.

So far as the objection raised by the respondent pertaining to lack of compliance with the pre-requisite for appointment of Arbitrator is concerned, it

would be appropriate to refer to provisions of Section 11(6) of the Act in so far as relevant to the present case:-

“11. Appointment of arbitrators.-

(1)………………….

(2)………………….

(3)………………….

(4)………………….

(5)………………….

(6) Where, under an appointment procedure agreed upon by the parties,-

(a) A party fails to act as required under that procedure; or

(b) …………………….

(c) …………………….

a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such court to take the

necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.â€​

A bare look at the above provision would reveal that an application under Section 11(6) of the Act can be maintained if and only if a party fails to act

as required under the appointment procedure agreed upon by the parties. A perusal of the appointment procedure, as quoted hereinbefore would

reveal that on a dispute arising between the parties, the same was required to be referred by the Contractor i.e. the applicant to the GM and the GM

has the authority to decide on all the matters referred to by the Contractor.

The term ‘General Manager’ has been defined under the GCC to mean the Officer-in-Charge of the General Superintendence and Control of

the Railway and shall also include the General Manager (Construction) and shall mean and include their successors, of the successor Railway and the

‘Divisional Railway Manager’ has been separately defined to mean the Officer-in-Charge of a Division of the Railway. The very fact that the

GM under the Clauses pertaining to settlement of dispute has the power to decide the disputes, necessarily means that whatever dispute arises

between the parties, the same is required to be referred to the GM only for resolution.

The provisions of Clause 63 of the GCC clearly reveal that the reference of the dispute and difference by the Contractor to the GM is apparently

mandatory as the GM has the power to decide on the matters referred to by the Contractor as is evident from the Clause and he has been accorded

120 days to do the needful. In view of the important function assigned to the GM to resolve the dispute in-house, the reference of the dispute to the

GM, if he fails to decide the same within 120 days, the applicant in terms of Clause 64(1) of the GCC, could have demanded that the dispute or

difference be referred to the arbitration and therein also, the said demand has to be made to the GM as Clause 64.3 of the GCC clearly empowers the

GM to appoint sole Arbitrator when in writing a valid demand for arbitration is received by him.

Admittedly, the applicant by his notice dated 31.10.2017 (Annex.-21) referred the dispute to the Divisional Railway Engineer (West), NWR, Jodhpur

and not to the General Manager as required by the agreed procedure. As would be noticed even the notice demanding the reference of dispute to the

arbitration were also not made to the GM and was simply sent to the Divisional Engineer and, therefore, apparently the applicant failed to comply with

the pre-requisites for invoking the provisions of Section 11(6)(a) of the Act for seeking an appointment of Arbitrator.

So far as the submissions made by learned counsel for the applicant that as the agreement was entered into between the President of India through

the Divisional Engineer and that the order of termination was also issued by the Divisional Engineer, the notice was sent to him, by itself cannot

substitute the provisions of Clause 63 and 64 of the GCC, inasmuch as, it is not in dispute that the provisions of the GCC are applicable, the same

clearly defines ‘General Manager’ and the Clauses pertaining to the settlement of disputes requires reference of dispute to the GM, decision by

him within 120 days, demand of reference of dispute to arbitration within 120 to 180 days and appointment of Arbitrator by the GM. The mere fact

that the agreement was entered into by the Divisional Engineer and was terminated by him cannot obviate the requirement of complying with the

specific terms of the Arbitration Clause between the parties.

In view of the above discussion, the applicant having failed to comply with the necessary pre-requisite conditions for invoking provisions of Section

11(6) of the Act, the application is not maintainable and, consequently, the same is dismissed leaving it open for the applicant to act in accordance with

law. No order as to costs.