PC :

This is an application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) for resolution of the disputes through the mechanism of arbitration.

2. The applicant was awarded a contract enumerated in the Letter of Acceptance, dated 28.02.2018. According to the Letter of Acceptance, the General Conditions of Contract of 2014 were to apply to the said works. Disputes, having arisen between the parties, led the respondents to terminate the contract vide letter, dated 20.06.2019. By virtue of communication, dated 01.07.2019, the applicant sought invoking the arbitration clause and sought reference of the disputes to an Arbitrator in terms of arbitration clause contained in General Conditions of Contract.

3. The applicant, by virtue of communication, dated 01.12.2019, also informed the respondents that it would not agree to waive the prescribed condition under Section 12(5) of the Arbitration and Conciliation Act, 1996. It appears that the applicant then approached the High Court of Orissa at Cuttack vide Arbitration Application No.10 of 2021, which was allowed vide judgment and order, dated 03.12.2021, by virtue of which Mr. S. P. Mishra was appointed as a sole Arbitrator.

4. The respondents challenged the order in Civil Appeal No.4747 of 2022 before the Supreme Court. By virtue of its order, dated 22.07.2022, the Apex Court set aside the order passed by the Orissa High Court on the ground that the High Court of Orissa had no jurisdiction to entertain the application under Section 11(6) of the Act inasmuch as the application under Section 9 of the Act had been filed in the Court at Visakhapatnam.

5. The Apex Court, however, left it open to the applicant to move an application before the High Court of Andhra Pradesh at Amaravati under Section 11(6) of the Act within a period of four weeks from the date of the said order. The Apex Court held:

               “10… However, it is observed that it will be open for the respondent claimant to submit/move an application under Section 11(6) of the Act before the competent High Court having jurisdiction namely the High Court of Andhra Pradesh at Amaravati and if such an application is made before the High Court of Andhra Pradesh at Amaravati within a period of four weeks from today, the same be dealt with and considered in accordance with law and on its own merits at the earliest.”

6. It is immediately thereafter that the present application was filed by the applicant seeking appointment of a sole Arbitrator to adjudicate the disputes that have arisen between the parties.

7. At this stage, it is deemed appropriate to notice a few material facts:

               In the Letter of Acceptance, dated 28.02.2018, it was clearly envisaged that the General Conditions of Contract of 2014 would be applicable to the works in question.

               In the year 2016, Government of India, Ministry of Railways, amended clause 64 of the General Conditions of Contract of 2014 for purposes of implementation of the Arbitration of Conciliation Amendment Act, 2015. Amendments were incorporated in clause 64.3, whereas clause 64(3)(a) dealt with a situation where a party had waived off the conditions as prescribed under Section 12(5) of the Act of 1996. 64(3)(b) dealt with a situation where the party had not waived the applicability of Section 12(5) of the Act.

               Since 64(3)(b) is relevant in the present case, the same is reproduced hereunder:

               “64 (3) (b) Appointment of Arbitrator where applicability of Section 12(5) of A&C Act has not been waived off:

               The arbitral Tribunal shall consist of a panel of three (3) retired Railway officer retired not below the rank of SAG officer, as the arbitrators. For this Purpose, the Railway will send a panel of atleast four (4) names of retired Railway officers) empanelled to work as Railway Arbitrator duly indioating their retirement date to the contractor within 60 days from the day when and valid demand for arbitration is received by the GM.

               Contractor will be asked to suggest to General Manager at lease 2 names out of the panel for appointment as contractor's nominee within 30 days from the date of dispatch of the request by Railway. The General Manager shall appoint the balance number of arbitrators from amongst the 3 arbitrators so appointment GM shall complete in exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of contractors nominees. While nominating the arbitrators, it will be necessary consideration of them has served in the Accounts Department.”

               It will not be also out of place here to mention that there was a further amendment incorporated in November, 2018, to clause 64 of the General Conditions of Contract.

8. Although an effort was made by learned counsel for the respondents to suggest it was the General Conditions of Contract of 2018 which would be applicable for purposes of determining the issue of reference to arbitration in the present case, yet it is clear that the amendments incorporated in General Conditions of Contract of 2018 are only prospective as is also clarified by the communication, dated 05.11.2018, issued by the Government of India, Ministry of Railways, which clearly stated that the General Conditions of Contract of 2018 would be applicable to works contract of Indian Railways with prospective effect. Even otherwise, since the contract stood awarded to the applicant before the promulgation of General Conditions of Contract, 2018, the same would not have any applicability to the case at hand.

9. Interestingly, the respondents appear to have appointed an Arbitrator on 24.02.2020. The Arbitrator issued notices calling upon the parties to submit their respective claims. The Arbitrator adjourned the proceedings to 03.04.2020 when the applicant herein sought time vide their communication, dated 02.04.2020. But instead of submitting the claim, vide letter, dated 01.09.2020, the applicant questioned the validity of the Arbitral Tribunal. Thereafter as narrated in the earlier paragraphs, an Arbitration Application came to be filed before the High Court of Orissa.

10. The sole Arbitrator appointed by the respondents, in the meantime, rendered its Award on 08.03.2021.

11. Learned counsel for the respondents in the light of the aforementioned facts would submit that the present application is not maintainable under Section 11 of the Act inasmuch as the Award stands rendered by the sole Arbitrator by the respondents.

12. One of the issues that arises for consideration, therefore, is as to whether in the light of the fact that an Arbitrator appointed by respondent No.1 having already passed an Award, should the applicant be left to challenge the Award so passed in appropriate proceedings.

               This issue, in my opinion, is no longer res integra as the same was considered by the Apex Court in the case of Walter Bau AG v. Municipal Corporation of Greater Mumbai ((2015) 3 SCC 800) wherein it was held:

               “10. Unless the appointment of the arbitrator is ex facie valid and such appointment satisfies the Court exercising jurisdiction under Section 11(6) of the Arbitration Act, acceptance of such appointment as a fait accompli to debar the jurisdiction under Section 11(6) cannot be countenanced in law. In the present case, the agreed upon procedure between the parties contemplated the appointment of the arbitrator by the second party within 30 days of receipt of a notice from the first party. While the decision in Datar Switchgears Ltd.[(2000) 8 SCC 151] may have introduced some flexibility in the time frame agreed upon by the parties by extending it till a point of time anterior to the filing of the application under Section 11(6) of the Arbitration Act, it cannot be lost sight of that in the present case the appointment of Shri Justice A.D. Mane is clearly contrary to the provisions of the Rules governing the appointment of arbitrators by ICADR, which the parties had agreed to abide by in the matter of such appointment. The option given to the respondent Corporation to go beyond the panel submitted by ICADR and to appoint any person of its choice was clearly not in the contemplation of the parties. If that be so, obviously, the appointment of Shri Justice A.D. Mane is non est in law. Such an appointment, therefore, will not inhibit the exercise of jurisdiction by this Court under Section 11(6) of the Arbitration Act. It cannot, therefore, be held that the present proceeding is not maintainable in law. The appointment of Shri Justice A.D. Mane made beyond 30 days of the receipt of notice by the petitioner, though may appear to be in conformity with the law laid down in Datar Switchgears Ltd., is clearly contrary to the agreed procedure which required the appointment made by the respondent Corporation to be from the panel submitted by ICADR. The said appointment, therefore, is clearly invalid in law.”

               Learned counsel for the respondents does not dispute the aforementioned settled principle of law, which still continues to hold the field.

13. When the ratio of the aforementioned judgment is tested on the facts of the present case, it can be seen that according to General Conditions of Contract of 2014 (as they stood amended in the year 2016), disputes could have been referred for adjudication to a Tribunal consisting of three members.

14. The procedure prescribed under clause 64(3)(b) of the General Conditions of Contract, 2014 (as amended in the year 2016), which required the applicant to select two names from out of a panel of four retired Railway Officers empanelled by the Railways as Empanelled Arbitrators for appointment as contractor’s nominee is a clause which is otherwise also unsustainable, in view of the position of law as settled by the Constitution Bench of the Apex Court in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) A Joint Venture Co. (2024 SCC OnLine SC 3219) wherein it was held:

               “129. Equal treatment of parties at the stage of appointment of an arbitrator ensures impartiality during the arbitral proceedings. A clause that allows one party to unilaterally appoint a sole arbitrator is exclusive and hinders equal participation of the other party in the appointment process of arbitrators. Further, arbitration is a quasi-judicial and adjudicative process where both parties ought to be treated equally and given an equal opportunity to persuade the decision- maker of the merits of the case. An arbitral process where one party or its proxy has the power to unilaterally decide who will adjudicate on a dispute is fundamentally contrary to the adjudicatory function of arbitral tribunals. …

               169. c. A clause that allows one party to unilaterally appoint a sole arbitrator gives rise to justifiable doubts as to the independence and impartiality of the arbitrator. Further, such a unilateral clause is exclusive and hinders equal participation of the other party in the appointment process of arbitrators; d. In the appointment of a three-member panel, mandating the other party to select its arbitrator from a curated panel of potential arbitrators is against the principle of equal treatment of parties. In this situation, there is no effective counterbalance because parties do not participate equally in the process of appointing arbitrators.”

15. Considering the ratio of the Constitution Bench judgment supra, the action of the respondents in unilaterally appointing Mr. B.N. Mishra as a sole Arbitrator, therefore, was clearly impermissible in law and even any Award rendered by such an Arbitrator is non-est in the eye of law and is held so accordingly.

16. Be that as it may, the present Arbitration Application is allowed. Justice T. Rajani, former Judge of the High Court of Andhra Pradesh, is appointed as an Arbitrator, who shall enter upon the reference and render the Award within the statutory period. The parties shall be free to file detailed claims and counter-claims, before the learned Arbitrator. The learned Arbitrator shall also be entitled to claim the fee as per the provisions of the Fourth Schedule of the Arbitration and Conciliation Act, 1996.

Pending miscellaneous applications, if any, shall stand closed. No costs.