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2001 DIGILAW 1570 (AP)

J. Bhaskar Rao v. General Manager, South Central Railway, Rail Nilayam, Secunderabad

2001-12-04

J.CHELAMESWAR

body2001
J. CHELAMESWAR, J. ( 1 ) THIS application is filed under Section 11 of the Arbitration and Conciliation Act, 1996 ( for short the Act ) with the prayer as follows :"to make the appointment of sole Arbitrator for adjudicating all the disputes relating to 9 claims made by the petitioner to be filed before the sole Arbitrator to be appointed by this Honourable Court and for passing of Award by such sole arbitrator with finality after directing the 1st respondent to produce the original agreement before the sole Arbitrator and for a direction for expeditious disposal of the above disputes in the light of the delay that was caused so far in respect of the disputes in question. " ( 2 ) THIS case has a long and checkered history. The parties herein entered into an agreement on 15-9-1984 whereunder the applicant is required to execute certain works for the respondents. The further details of the work may not be necessary for the purpose of this order. However, there are certain general conditions of contract, which are made applicable to all the contracts entered into by the respondent-Railways. This fact is not in dispute. Clause 64 of the above-mentioned general conditions provides that any dispute or differences between the parties as to the construction or operation of the contract is required to be resolved by way of arbitration. The said clause elaborately deals with the procedure of making the demand and choice of the arbitrators and the matters incidental thereto. Sub-clause 3 (a) provides that where the claim in question is below Rs. 5. 00 lakhs, arbitration must be by a sole arbitrator and Sub-clause 3 (a) (ii) provides that where the value of the claim exceeds Rs. 5. 00 lakhs, the resolution must be by two arbitrators. It further provides that "in the event of the two arbitrators being divided in their opinions the matter under disputes will be referred to an Umpire to be appointed in the manner laid down in clause" 3 (b) for his decision. 5. 00 lakhs, the resolution must be by two arbitrators. It further provides that "in the event of the two arbitrators being divided in their opinions the matter under disputes will be referred to an Umpire to be appointed in the manner laid down in clause" 3 (b) for his decision. " Clause 3 (b) reads as follows :"for the purpose of appointing two arbitrators as referred to in Sub-clause (a) (ii) above, the Railway will send a panel of more than three names of gazetted Railway Officers of one or more departments of the Railway to the Contractor, who-will be asked to suggest to the General Manager one name out of the list for appointment as the Contractor s nominee. The General Manager, while so appointing the Contractor s nominee, will also appoint a second arbitrator as the Railway s nominee either from the panel or from outside the panel, ensuring that one of the two arbitrators so nominated is invariably from the Accounts department. Before entering upon the reference the two Arbitrators shall nominate an Umpire who shall be a gazetted Railway Officer to whom the case will be referred to in the event of any difference between the two arbitrators. Officers of the Junior Administrative grade of the Accounts department of the Railways shall be considered as of equal status to the officers in the intermediate administrative grade of other departments of the Railway for the purpose of appointment as arbitrators. " ( 3 ) IT can be seen from the above clause that the manner of appointment of the Umpire as contemplated under Clause 3 (a) (ii) is that such an Umpire should be nominated before the two arbitrators enter upon the reference. ( 4 ) INITIALLY, the applicant herein placed 9 claims before the respondent-railways of which only 8 claims were referred by the respondent-railways for arbitration by two arbitrators by a letter dated 22-12-1998. Aggrieved by the decision of the respondent-railways not to refer the ninth claim of the applicant for arbitration, the applicant herein earlier approached this Court by way of application No. 33 of 1999. Incidentally, it appears that the prayer in the said application was that a sole arbitrator be appointed by this Court to adjudicate upon all the nine claims made by the applicant herein. Incidentally, it appears that the prayer in the said application was that a sole arbitrator be appointed by this Court to adjudicate upon all the nine claims made by the applicant herein. However, this Court, by an order dated 20-12-1999 disposed of the said application declining to exercise its authority under Section 11 (6) of the Act to appoint a sole arbitrator but directed the respondent-railways to refer the 9th claim of the applicant herein which had earlier been refused to be referred to arbitration by the respondent. It is also to be mentioned here that the one of the grounds raised by the respondents herein in the abovementioned AA 33 of 1999 is that in view of the fact that the arbitration agreement is of the year 1984, the provisions of the 1996 Act would have no application and it is only the Repealed Arbitration Act, 1940 which governs the situation. However, that objection of the respondent was negatived and the order became final. Therefore, for the purpose of resolving the present conflict between these two parties, I must proceed on the basis that it is only the 1996 Act, which applies to the facts of the case. ( 5 ) NOTWITHSTANDING the direction given by this Court on 20-12-1999, referred to earlier, directing the respondent-Railways to refer the 9th claim made by the applicant herein for arbitration, the respondent-Railways did not take such a reference for quite some time. Therefore, the present application came to be filed on 6-4-2000. ( 6 ) HOWEVER, the respondent-Railways, by communication dated 14-4-2000 referred the 9th claim of the applicant herein to the arbitrators for adjudication. Thereafter, the arbitrators entered upon the reference and by communication dated 28-6-2000 issued notice to both the parties calling upon them to take necessary steps in that regard, the details of which may not be necessary for the purpose of this order. ( 7 ) ADMITTEDLY, two arbitrators were chosen by the parties as agreed upon by them under the above-mentioned Clause 64 of the General Conditions of Contract long prior to the date of filing of the present application. As seen earlier, it is only an additional item which was directed to be referred to the said arbitrators by this Court on 20-12-1999. As seen earlier, it is only an additional item which was directed to be referred to the said arbitrators by this Court on 20-12-1999. No doubt, there is a delay on the part of the respondent-railways to make appropriate communication to the arbitrators referring the 9th claim of the applicant to the arbitrators pursuant to the orders of this Court dated 20-12-1999. It is an administrative delay which is explained by the respondent-railways and it cannot be said that the Arbitrators chosen by the parties failed to enter upon the reference within a reasonable time. However, Mr. Chowdary, the learned senior Counsel appearing for the applicant argued that the two arbitrators chosen by the parties have not nominated an Umpire as required under Clause 64 (3) (b) and have a failed to comply with the terms of the arbitration agreement between the parties and therefore there is a failure on the part of the arbitrators and hence it is open to the Court to appoint an Arbitrator of its choice. ( 8 ) IN support of his submission, Mr. Chowdary argued that under the scheme of the present enactment, the appointment of even number of arbitrators is prohibited and the number of arbitrators could only be an odd number in view of the language of Section 10 of the Act. As a proposition, there is no dispute with the statement made by the learned Counsel for the applicant. But on the language of the contract between the parties, I am of the opinion that the arbitration agreement provides for the appointment of 3 arbitrators, two chosen by the parties and the 3rd arbitrator called an umpire to be chosen by the Arbitrators chosen by the parties. ( 9 ) MR. Chowdary, the learned Counsel for the applicant submitted that in view of the language of Sub-section (3) of Section 11, where such party is required to appoint one arbitrator, the two arbitrators so chosen shall appoint a third arbitrator who shall act as a Presiding Arbitrator and as the Arbitrators chosen by the parties did not appoint the Presiding Arbitrator, there is a failure on the part of the Arbitrators chosen by the parties to act in accordance with law. However, Sub-section (3) opens with the following clause :"failing any agreement referred to in Sub-section (2 ). . . . . . However, Sub-section (3) opens with the following clause :"failing any agreement referred to in Sub-section (2 ). . . . . . " ( 10 ) THE Agreement referred to in Subsection (2) is an agreement on the procedure for the appointment of the Arbitrator/ Arbitrators. In other words, parties may agree upon the principle that disputes between the parties have to be resolved byway of arbitration and must provide further as to the method, manner and procedure by which the arbitrators have to be chosen and the chosen arbitrators are required to deal with the matter. But, it is also possible in case where the parties not only agree in principle to have the matter resolved by way of arbitration but also agree upon the named arbitrator or provide for a procedure by which the arbitrators are to be either appointed or identified. ( 11 ) IN my view the procedure contemplated under Sub-section (2) only deals with the procedure for the appointment or choice of the arbitrators. In the instant case, the parties have agreed upon a procedure by which the arbitrators are to be chosen. Sub-section (3) comes into operation only in a case where the parties in principle agree for the resolvation of the dispute by the arbitration and also agree to the limited extent of having three arbitrators without providing for anything further as to how the arbitration are to be identified. In my considered view, Sub-section (3) has no application to the facts of the present case. ( 12 ) THEN the only other question that remains to be considered is whether it is open for the applicant here into invoke Sub-section (6) and approach this Court seeking the appointment of an Arbitrator. ( 13 ) AS already noticed, the parties have agreed upon an appointment procedure of the arbitrators under Clause 64 of the General Conditions of Contract. The question is whether there is any violation of the agreed procedure to enable this Court to exercise its authority under Section 11 (6) of the Act. ( 14 ) MR. ( 13 ) AS already noticed, the parties have agreed upon an appointment procedure of the arbitrators under Clause 64 of the General Conditions of Contract. The question is whether there is any violation of the agreed procedure to enable this Court to exercise its authority under Section 11 (6) of the Act. ( 14 ) MR. Chowdary, the learned Counsel for the applicant vehemently argued that in view of the language of Clause 64 (c) (b) which mandates that the two of the chosen arbitrators shall nominate an Umpire before entering upon the reference and in view of the fact that though both the arbitrators were chosen by the parties, so far, the arbitrators have not nominated an Umpire, the arbitrators have failed to act in accordance with the agreement thereby attracting Section 11 (6) (b) of the Act. ( 15 ) ON the other hand, the learned standing Counsel for the respondent Sri Sanghi argued that in view of the language of Clause 64 (3) (a) (iii), the question of nomination of an umpire comes only when there is a difference of opinion between the two chosen arbitrators of the parties and as the arbitrators chosen by the parties have not reached any conclusion on the dispute, the question of difference of opinion does not arise at this stage and therefore they are under no obligation to nominate an Umpire at this stage and consequently there is no infraction of the provisions of Section 11 of the Act calling for interference by this Court. ( 16 ) THE relevant portions of Clause 64 (3) (a) (ii) and 3 (b) are already extracted. In my view the submission of the learned Counsel for the applicant is well founded for the reason that the learned Counsel for the respondent in making his submission ignored the last part of Clause 64 (3) (a) (ii) which stipulates that an umpire is to be appointed in the manner laid down in Clause 3 (b ). Therefore, the emphasis on the earlier part of the sentence that the Umpire is to be appointed only in the event of the difference of opinion between the two chosen arbitrators is excessive. No doubt, these clauses are little contradictory but it is the responsibility of the Court while dealing with such clauses to reconcile the conflict between such clauses and arrive at a reasonable conclusion. No doubt, these clauses are little contradictory but it is the responsibility of the Court while dealing with such clauses to reconcile the conflict between such clauses and arrive at a reasonable conclusion. I have no doubt that in view of the last part of Clause 64 (3) (a) (ii) and the language of Section 11 (3) that the Arbitrators chosen by the parties are required to nominate an umpire before entering upon the reference. ( 17 ) THEREFORE, from the language of the agreement between the parties and also from the scheme of the statute, I am of the opinion that the Arbitrators chosen by the parties should have nominated the umpire well before entering the reference. ( 18 ) ADMITTEDLY, in this case, on 7-12-1998 though arbitrators were chosen, they have not yet chosen an umpire so far. In the circumstances, the application is allowed as prayed for. ( 19 ) SRI Bayapu Reddy, a former Judge of this Court is appointed as the Arbitrator. The Arbitrator is at liberty to fix his remuneration in consultation with the parties.