Dismissed

Amril-Esscon v. North Western Railway Thr Gen Manger

Rajasthan HC1 Feb 2019ARBAP/55/2018

Case brief

AI extract

What is this about?

In an arbitration application under section 11 of the Arbitration Act, 1996, the High Court deemed the petition premature as the statutory 60-day period for appointing an arbitrator under the contract agreement had not expired, dismissing the plea.

What did the court decide?

Petition to appoint an arbitrator dismissed as it was filed before the expiry of the 60-day period permitted under the contract.

Amril-Esscon Vs North Western Railway Thr Gen Manger — Arbitration | Rajasthan HC (2019)

¶1

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

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S.B. Arbitration Application No. 55/2018

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M/s Amril Esscon (JV), G-2, Samatha Nilayam, Plot No. 82, Srinagar Colony, Hyderabad 500073, Telengana

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----Petitioner

¶5

Versus

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North Western Railway Through General Manager, Near Jawahar Circle, Malviya Nagar, Jaipur - 302017

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----Respondent For Petitioner(s) : Mr Manish Parihar Mr Brijesh Kumar Goel Mr Prakash Lamba For Respondent(s) : Mr Shailesh Prakash Sharma

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HON'BLE MR. JUSTICE MUNISHWAR NATH BHANDARI

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Order

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01/02/2019

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Heard on the application filed under section 11 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act of 1996’).

¶12

The parties entered into an arbitration agreement. Pursuant to the agreement, work was executed by the applicant. On a dispute, letter was sent to the respondent on 12.4.2018 to seek appointment of Arbitrator. It was with a request to refer it to a sole Arbitrator as per section 29B of the Act of 1996.

¶13

The respondent did not act pursuant to the letter/notice dated 12.4.2018 thus present application was filed to seek appointment of an independent Arbitrator. It is when the main

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(2 of 13)

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[ARBAP-55/2018]

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clause of the arbitration agreement got over shadowed by the Arbitration and Conciliation (Amendment) Act, 2015 (for short ‘the Amending Act of 2015’).

¶17

As per the Amending Act of 2015, an employee cannot be appointed as an Arbitrator, whereas, the clause of arbitration agreement permits for the aforesaid. In fact, the arbitral tribunal was to be constituted from and amongst three serving employees and one retired employee after its choice by the contractor. After the Amending Act of 2015, a serving employee cannot be appointed as an Arbitrator in reference to the Seventh Schedule to the Act. Clause (1) of the Seventh Schedule does not permit an employee to be an Arbitrator thus, according to the applicant, the clause for arbitration in reference to it has become ineffective and, accordingly, this application was filed even before expiry of the period of 60 days, as otherwise agreed for appointment of Arbitrator under clause 64(3)(a)(i), which is quoted hereunder -

¶18

“64(3)(a)(i) – In case 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 shall consist of a sole arbitrator who shall be a Gazetted Officer of Railway not below JA grade, nominated by the General Manager.

¶19

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

¶20

The notice for appointment of Arbitrator was given on 12.4.2018 and the present application was filed on 30.5.2018 i.e. before expiry of the period of 60 days, as was agreed by the parties for appointment of Arbitrator. The procedure was agreed

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(3 of 13)

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[ARBAP-55/2018]

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by the parties for appointment of Arbitrator under clause 64 of General Conditions of Contract (GCC). It is quoted hereunder for ready reference -

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“40. Arbitration Clause No.64 of GCC

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64 (1) (i)- Demand for Arbitration-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.

¶26

64(1)(ii)- The demand for arbitration shall specify the matters which are in question, or subject of the dispute or difference as also amount of claim item wise. Only such dispute (s) or difference (s) in respect of which the demand has been made, together with counter claims or set off, given by the Railway, shall be referred to arbitration and other matters shall not be included in the reference.

¶27

64(1)(ii)-(a) The Arbitration proceedings shall be assumed to have commenced from the day, a written and valid demand for arbitration is received by the Railway.

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(b) The claimant shall submit his claim stating the facts supporting the claims along with all the relevant documents and the relief or remedy sought against each claim within a period of 30 days from the date of appointment of the Arbitral Tribunal.

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(c) The Railway shall submit its defence statement and counter claim(s), if any, within a period of 60 days of receipt of copy of claims

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(4 of 13)

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[ARBAP-55/2018]

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from Tribunal thereafter, unless otherwise extension has been granted by Tribunal.

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(d) The place of arbitration would be within the geographical limits of the Division of the Railway where the cause of action arose or the headquarters of the concerned Railway or any other place with the written consent of both the parties.

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64(1)(iii)- No new claim shall be added during proceedings by either party. However, a party may amend or supplement the original claim or defence thereof during the course of arbitration proceedings subject to acceptance by Tribunal having due regard to the delay in making it.

¶35

64(1)(iv)- If the contractor(s) does/do not prefer his/their specific and final claims in writing, within a period of 90 days of receiving the intimation from the Railways that the final bill is ready for payment, he/they will be deemed to have waived his/their claim(s) and the Railway shall be discharged and released of all liabilities under the contract in respect of these claims.

¶36

64(2)- Obligation during Pendency of Arbitration- Work under the contract shall, unless otherwise directed by the Engineer, continue during the arbitration proceedings, and no payment due or payable by the Railway shall be withheld on account of such proceedings, provided, however, it shall be open for Arbitral Tribunal to consider and decide whether or not such work should continue during arbitration proceedings.

¶37

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 shall consist of a sole arbitrator who shall be a Gazetted Officer of Railway not below JA grade, nominated by the General Manager.

¶38

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

¶39

64(3)(a)(ii)- In cases not covered by the clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a Panel of three Gazetted Rly. Officers not below JA grade or 2 Railway Gazetted Officers not below JA Grade and a retired Railway Officer, retired not below the rank of

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(5 of 13)

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[ARBAP-55/2018]

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SAG Officer, 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. 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 day when a written and valid demand for arbitration is received by the GM. Contractor will be asked to suggest to General Manager at least 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 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. GM shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of contractor’s nominees. 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 Railway for the purpose of appointment of arbitrator.

¶43

64(3)(a)(iii)- If one or more of the arbitrators appointed as above refuses to act as arbitrator, withdraws from his office as arbitrator, or vacates his/their office/offices or is/are unable or unwilling to perform his functions as arbitrator for any reason whatsoever or dies or in the opinion of the General Manager fails to act without undue delay, the General Manager shall appoint new arbitrator/arbitrators to act in his/their place in the same manner in which the earlier arbitrator/arbitrators had been appointed. Such re-constituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator(s).

¶44

64(3)(a)(iv)- The arbitral Tribunal shall have power to call for such evidence by way of affidavits or otherwise as the Arbitral Tribunal shall think proper, and it shall be the duty of the parties hereto to do or cause to be done all such things as may be necessary to enable the Arbitral Tribunal to make the award without any delay. The Arbitral Tribunal should record day today proceedings. The proceedings shall normally

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(6 of 13)

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[ARBAP-55/2018]

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be conducted on the basis of documents and written statements.

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64(3)(a)(v)- While appointing arbitrator(s) under sub-clause (i), (ii) and (iii) above, due care shall be taken that he/they is/are not the one/those who had an opportunity to deal with the matters to which the contract elates or who in the course of his/their duties as Railway servant(s) expressed views on all or any of the matters under dispute or differences. The proceedings of the Arbitral Tribunal or the award made by such Tribunal will, however, not be invalid merely for the reason that one or more arbitrator had, in the course of his service, opportunity to deal with the matters to which the contract relates or who in the course of his/their duties expressed views on all or any of the matters under dispute.

¶49

64(3)(b)(i)- The arbitral award shall state item wise, the sum and reasons upon which it is based. The analysis and reasons shall be detailed enough so that the award could be inferred there from.

¶50

64(3)(b)(ii)- A party may apply for corrections of any computational errors, any typographical or clerical errors or any other error of similar nature occurring in the award of a tribunal and interpretation of a specific point of award to tribunal within 60 days of receipt of the award.

¶51

64(3)(b)(iii)- A party may apply to tribunal within 60 days of receipt of award to make an additional award as to claims presented in the arbitral proceedings but omitted from the arbitral award.

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64(4) In case of the Tribunal, comprising of three Members, any ruling on award shall be made by a majority of Members of Tribunal. In the absence of such a majority, the views of the Presiding Arbitrator shall prevail.

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64(5) 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.

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64(6) The cost of arbitration shall be borne by the respective parties. The cost shall inter-alia include fee of the arbitrator(s), as per the rates fixed by the Railway Board from time to time and the fee shall be borne equally by both the

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(7 of 13)

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[ARBAP-55/2018]

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parties. Further, the fee payable to the arbitrator(s) would be governed by the instructions issued on the subject by Railway Board from time to time irrespective of the fact whether the arbitrator(s) is/are appointed by the Railway Administration or by the court of law unless specifically directed by Hon’ble court otherwise on the matter.

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64(7): Subject to the provisions of the aforesaid Arbitration and Conciliation Act 1996 and the rules there under and any statutory modifications thereof shall apply to the arbitration proceedings under this clause.

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(i)The provision of Clauses 63 and 64 of the General Conditions of contract will be applicable only for settlement of claims of disputes between the parties for values less than or equal to 20% of the value of the contract and when the claims and disputes are of value more than 20% of the value of the contract, provisions of Clauses 63 & 64 and other Clauses of the General Conditions of Contract will not be applicable and arbitration will not be a remedy for settlement of such disputes.

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(ii)The contractor shall not be entitled to ask for reference to arbitration before the completion of the work assigned to him under this contract. The contractor shall seek reference to arbitration to settle the disputes only once within the ambit of condition (i) above.

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(iii)These special conditions (i) & (ii) above shall prevail over existing Clauses 63 & 64 of the “General Conditions of the Contract”.

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(Authority: Chief Engineer’s Circular No.1 on Contract Policy circulated vide letter No. W- 118/0/Policy dated 11/06/2003).

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(iv)If there is any dispute arisen between the parties with respect to this agreement, then any application or suit shall be initiated only in the court with the local limits, falling under the jurisdiction of the North-Western Railway and both the parties shall be bound by this clause.

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(v)For settlement of disputes between one Government Departments and the other or between the Government Department and Public Sector undertaking the following special conditions shall be applicable.

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(8 of 13)

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[ARBAP-55/2018]

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“In the event of any dispute or difference between the parties hereto, such dispute or condition shall be resolved amicably by mutual consultation through the good offices of empowered agencies of the Government. If such resolution is not possible, then the unresolved dispute or difference shall be referred to arbitration of an arbitrator to be nominated by Secretary, Department of Legal Affairs (Law Secretary) in terms of office Memorandum No.55/3/1/75/CF dated 19-12-75 issued by the Cabinet Secretariat (Department of Cabinet Affairs) as modified from time to time.

¶68

The arbitration and Conciliation Act, 1996 or the arbitration clause contained in the General Conditions of Contract shall not be applicable to the arbitration under this clause. The award of the Arbitrator shall be binding upon parties in the dispute, provided however; any party aggrieved by such award make further reference for setting aside or revision of the award to Law Secretary whose decision shall bind the parties finally and conclusively”.

¶69

Learned counsel for applicants submits that when serving employee cannot be appointed as an Arbitrator, the condition agreed for appointment of Arbitrator within a period of 60 days is also over shadowed by the Amending Act of 2015. The appointment of Arbitrator should have been made within a period of 30 days, hence application was not filed pre-maturely. It is also stated that during pendency of the application, respondent has appointed Arbitrator, that too, without a choice by the applicant. It is from and amongst four retired employees. The Arbitrator could not have been appointed during pendency of the application and, otherwise should have been after taking choice of the applicant from and amongst named persons.

¶70

It is also stated that the date of retirement of the named persons has not been given though as per the circular of

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(9 of 13)

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[ARBAP-55/2018]

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the Railways, it was required. Accordingly, respondent even failed to act as per the amended clause of agreement thus also, appointment of the Arbitrator needs to be interfered.

¶74

Learned counsel has lastly submits that if this court is not inclined to interfere in the appointment of the Arbitrator, already appointed, request is to keep one member instead of three members. It is as per section 29B of the Act of 1996. In that case, cost of arbitration would not be heavy. The Railways have nominated the Arbitrators, who may charge heavy fee. It would be nothing but burden on the parties. The prayer is to either cause interference in the arbitral tribunal appointed by the respondent or to reduce size of the tribunal from three to one.

¶75

Learned counsel for the respondent-Railway has opposed the application and raised objection, which would be discussed during course of recording finding on the arguments of the applicant.

¶76

I find that both the parties entered into an arbitration agreement and, for that, clause 64 of the GCC has been reproduced. The procedure for appointment of Arbitrator has been given. As per the clause aforesaid, it is to be out of serving employees. After the agreement between the parties, Amending Act of 2015 came and, as per section 12 of the Amended Act of 2015 read with Seventh Schedule, an employee of any of the parties cannot be appointed as an Arbitrator. In view of the above, the arbitration clause to that extent could not have been applied in violation of the statutory provision.

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(10 of 13)

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[ARBAP-55/2018]

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It seems that for that reason alone, Railways amended the General clause of agreement to delete the provision for appointment of Arbitrator from and amongst the serving employees. The amended provision was sent to the applicant but there is nothing on record to show its acceptance by the applicant. The fact, however, remains that after the amendment in section 12 of the Act of 1996 by the Amending Act of 2015, an employee of any of the parties cannot be appointed as an Arbitrator thus, to that extent, the clause of arbitration became ineffective. However, for the aforesaid reason, entire provision would not become redundant or over shadowed. The procedure is otherwise not hit by the Amending Act of 2015 rather would remain operative and, therefore only, Arbitrator can be appointed.

¶80

As per clause of arbitration 64(3((a)(i), an Arbitrator has to be appointed within 60 days from the date when a written and valid demand for arbitration is received. In the instant case, the application was filed without expiry of the period of 60 days. Notice for appointment of Arbitrator was given on 12.4.2018 and the present application was filed on 30.5.2018 i.e. within the period of around 48 days, instead of 60 days.

¶81

At this stage, reference of section 11 of the Act of 1996 would be relevant. Section 11(2) applies to the present case in view of the procedure given in the agreement for appointment of Arbitrator. It is not a case falling under sub-section (3) of section 11 of the Act of 1996. Sub-section (3) of section 11 applies when Arbitration agreement does not provide for the procedure. It can

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(11 of 13)

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[ARBAP-55/2018]

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be in a case where agreement provides for arbitration in case of dispute without giving procedure for its appointment.

¶85

In the instant case, procedure has been given thus section 11 (2) of the Act of 1996 would apply and, for that reason, present application is premature having been filed without waiting for the period of 60 days, as given in the arbitration clause. It is not hit by the Amending Act of 2015. The application can be dismissed on the aforesaid ground itself.

¶86

Learned counsel for applicant has referred section 29B of the Act of 1996 to appoint sole Arbitrator to resolve the dispute on fast track basis. Section 29B of the Act of 1996 is quoted hereunder for ready reference-

¶87

“29B. Fast track procedure.- (1) Notwithstanding anything contained in this Act, the parties to an arbitration agreement, may, at any stage either before or at the time of appointment of the arbitral tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub-section (3).

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(2) The parties to the arbitration agreement, while agreeing for resolution of dispute by fast track procedure, may agree that the arbitral tribunal shall consist of a sole arbitrator who shall be chosen by the parties.

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(3)The arbitral tribunal shall follow the following procedure while conducting arbitration proceedings under sub-section (1):

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(a)The arbitral tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing;

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(b)The arbitral tribunal shall have power to call for any further information or clarification from

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(12 of 13)

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[ARBAP-55/2018]

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the parties in addition to the pleadings and documents filed by them;

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(c)An oral hearing may be held only, if all the parties make a request or if the arbitral tribunal considers it necessary to have oral hearing for clarifying certain issues;

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(d)The arbitral tribunal may dispense with any technical formalities, if an oral hearing is held, and adopt such procedure as deemed appropriate for expeditious disposal of the case.

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(4)The award under this section shall be made within a period of six months from the date the arbitral tribunal enters upon the reference.

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(5)If the award is not made within the period specified in sub-section (4), the provisions of sub-sections (3) to (9) of section 29A shall apply to the proceedings.

¶99

(6)The fees payable to the arbitrator and the manner of payment of the fees shall be such as may be agreed between the arbitrator and the parties.].”

¶100

Section 29B applies when both the parties agree for its application, that too, in writing. There is nothing on record to show that both the parties have agreed in writing to apply section 29B of the Act of 1996. It may be that petitioner applicant has sent a notice to apply section 29B of the Act but the consent in writing from the respondent side does not exist. In view of the above, section 29B of the Act of 1996 cannot be applied on the facts of this case thus I am unable to accept the prayer of the applicant even for reducing the size of the arbitral tribunal from three to one.

¶101

The issue about fee of the Arbitrator has also been raised. The perusal of the letter of the Arbitrator does not show a

¶102

(13 of 13)

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[ARBAP-55/2018]

¶104

demand contrary to the statutory provisions. The fee has been demanded as per the Fourth Schedule thus I do not find that an exorbitant fee has been demanded by the Arbitrator.

¶105

Herein, it is further necessary to submit that if any objection to the appointment of the Arbitrator exists, it can very well be raised by invoking section 13 of the Act of 1996 and not in the application under section 11 of the Act of 1996.

¶106

In view of the facts given above, I am unable to accept any of the arguments raised by the applicant, rather, treating this arbitration application to be premature and as appointment of the Arbitrator has already been made, it is dismissed.

¶107

(M.N. BHANDARI),J

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bnsharma

Amril-Esscon v. North Western Railway Thr Gen Manger

Case brief

What is this about?

What did the court decide?

Amril-Esscon v. North Western Railway Thr Gen Manger

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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