B. SUDERSHAN REDDY, J, J. ( 1 ) THE Union of India represented by the General Manager, South Central Railway, secunderabad and two others invoked the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India challenging the order dated 19-8-2002 made by the learned designated Judge in Arbitration Application No. 28 of 2002 appointing the second respondent herein as sole arbitrator to resolve the disputes and claims raised by the first respondent herein, on various grounds. Before we proceed to consider as to whether the impugned order suffers from any legal infirmities requiring our interference in the matter, it is just and necessary to notice the relevant facts leading to filing of this writ petition: the first respondent herein was awarded a contract by the petitioners-Railways for the work of "33/ws/98, Renigunta - Repairs to Jumbo Rake siding and Goods shed circulating area and their approach road" vide acceptance letter no. G/w/496/tc/sw/4158, dated 11-9-1998. The value of the contract was rs. 12,79,677/- and the work was required to be completed within a period of six months. The first respondent entered into the requisite agreement with the petitioners-Railways on 28-1-1999. ( 2 ) THE case set up by the first respondent is that during the course of execution of the work he faced certain difficulties, which he brought to the notice of the petitioners-railways by way of letters. The first respondent could not complete the work due to problems faced by him even though the contract period was extended by the petitioners-railways. Ultimately, the petitioners herein terminated the contract of the first respondent on 25-10-1999. The first respondent claims to have requested the petitioners through several letters requesting them to appoint an arbitrator to resolve the disputes raised by him in connection with the work earlier entrusted to him under the agreement referred to hereinabove. ( 3 ) THE first respondent vide letter dated 12-7-2000 requested the second petitioner to refer the matter for arbitration in terms of Clause 64 of General Conditions of Contract and accordingly gave the list of his claims. Having waited for response of the petitioners herein, the first respondent got issued a legal notice dated 17-11-2000 to the first petitioner-General Manager and others to refer the claim for arbitration as per Clause 64 of the General Conditions of contract.
Having waited for response of the petitioners herein, the first respondent got issued a legal notice dated 17-11-2000 to the first petitioner-General Manager and others to refer the claim for arbitration as per Clause 64 of the General Conditions of contract. It may not be necessary to notice further details in this regard except to notice that the Railways by its letter dated 13-6-2001 requested the first respondent to select two names out of the panel of four Railway Officers, whose details are stated in the said letter. The first respondent by his letter dated 18-6-2001 addressed to the first petitioner-General Manager stated that he has chosen one A. Venkat Reddy as his nominee and accordingly requested the railways to accept the same to constitute Arbitral Tribunal. The Railways vide its letter dated 17-8-2001 constituted Arbitral Tribunal with the Presiding arbitrator and two joint arbitrators for adjudication of the claims. On 27-8-2001 one of the joint arbitrators, by name Sanjeev Agarwal, addressed a letter to the Deputy General Manager, South Central Railway to nominate somebody else in his place on the ground that he is having already eight cases wherein he is acting either as sole arbitrator or joint arbitrator and it would not be possible for him to function as a member of the Arbitral Tribunal in this case. By letter dated 10-9-2001, A. Venkat Reddy, another joint arbitrator of Arbitral tribunal also addressed the Deputy General Manager to nominate another joint arbitrator in his place on the ground that he was a member of the Tender committee, which finalises the very tenders out of which the present dispute arises. He expressed his inability to function as joint arbitrator in the matter. In such view of the matter, the Railways by letter dated 13-12-2001 required the first respondent herein to select "up to two officers" from out of the panel of the officers suggested by them. In response, the first respondent vide his letter dated 27-12-2001 duly informed the General Manager that he had chosen one E. V. Krishna Reddy as his arbitrator in the place of A. Venkat Reddy and accordingly requested to take further necessary action in the matter.
In response, the first respondent vide his letter dated 27-12-2001 duly informed the General Manager that he had chosen one E. V. Krishna Reddy as his arbitrator in the place of A. Venkat Reddy and accordingly requested to take further necessary action in the matter. The railways vide its letter dated 1-3-2002, in partial modification of the appointment letter dated 17-8-2001, appointed one C. Chandra Sekhara Sastry and e. V. Krishna Reddy, as joint arbitrators in the place of Sanjeev Agarwal and a. Venkat Reddy respectively to adjudicate the claims preferred by the first respondent along with Mohanlal as presiding arbitrator. Both the said C. Chandra sekhara Sastry and E. V. Krishna Reddy conveyed their acceptance vide their letters dated 11-7-2002 and 5-3-2002 respectively. That even before such conveyance of their acceptance, the first respondent got issued a legal notice dated 27-3-2002 requesting the petitioners herein to constitute a proper tribunal within 15 days from the date of receipt of the said notice. Since the origin for whole of the dispute centers around and emanates from the said legal notice, we consider it appropriate to notice the same: mrs. Padmavathi Vemulapalli, advocate Hyderabad. Sainadh Co. /arb/01 march 27, 2002r. P. A. D. The General Manager south Central Railway rail Nilayam secunderabad - 500 071. Sir, sub: Constitution of arbitral tribunal ref: 1. Agreement No. 14/sw/gtl/99 dated 28-1-1999 2. Your Letter No. W. 148/g/arb/snac. 14. S dated 17-3-2001 3. Presiding Arbitrator s Letter No. MLB/jt. ARB/ii/sai dated 28-09-2001. With reference to the above, under instructions from our clients M/s. Sainadh company, Vijayawada you are addressed as under. Upon a request made by our client an arbitral tribunal was constituted on 17-08-2001 vide reference 2nd cited. Thereafter vide reference 3rd cited our clients were called upon to file their claims statement. When our clients sought to file the claims statement they were told that the arbitrators constituted who gave their consent earlier are not interested to proceed with the matter and our clients should wait for some more time. For some reason or the other the arbitral tribunal is being changed and no tribunal exists on date. You are hereby called upon to constitute the proper tribunal within FIFTEEN (15) days from the date of receipt of this notice failing which our clients would be constrained to proceed in terms of Section 11 (6) of Arbitration and conciliation Act, 1996.
You are hereby called upon to constitute the proper tribunal within FIFTEEN (15) days from the date of receipt of this notice failing which our clients would be constrained to proceed in terms of Section 11 (6) of Arbitration and conciliation Act, 1996. Thanking you, yours truly, sd/-, (Padmavathi Vemulapalli) ( 4 ) THE Presiding Arbitrator vide letter dated 12-7-2002 informed the petitioners as well as the first respondent herein that the constitution of arbitral tribunal is complete and the arbitral Tribunal is duty bound to ask the claimant to submit the statement of claims, so as to proceed further in the matter. The first respondent herein was accordingly advised to submit the statement of claims duly serving a copy on other side by 29-7-2002. We are required to notice that the first respondent herein filed Arbitration application No. 28 of 2002 on 7-6-2002 itself seeking appointment of an independent arbitrator for adjudication of disputes. The letter of the presiding Arbitrator dated 12-7-2002 informing all the concerned about the constitution of the arbitral tribunal is subsequent to that of the Arbitration application filed by the first respondent. It was under those circumstances, the first respondent urged before the learned designated Judge that even though the petitioners vide their letter dated 17-8-2001 informed him that they have constituted arbitral tribunal for resolution of the disputes, no such arbitral tribunal came into lawful existence since the petitioners herein have changed the composition of arbitral tribunal on three occasions. The very letter dated 11-7-2002 of C. Chandra Sekhara sastry, Sr. DESTE/m/gtl giving his acceptance to be the joint arbitrator is subsequent to the application filed by the first respondent seeking appointment of an independent arbitrator. We have already noticed that the Arbitration application was filed as early as on 7-6-2002. ( 5 ) THE learned designated Judge having noticed the rival contentions appointed the second respondent herein as sole arbitrator to resolve the disputes and claims raised by the first respondent. The learned Judge found that no proper arbitral tribunal was constituted by the petitioners herein immediately upon receiving the legal notice sent by the first respondent on 27-3-2002 and the very fact that the petitioners have kept quiet till the application has been filed by the first respondent on 7-6-2002 amounts to inaction and refusal on their part to appoint the arbitral tribunal.
The arbitral tribunal constituted by the petitioners after filing the present application is of no consequence in the eye of law. ( 6 ) THE short question that falls for consideration is as to whether the impugned order suffers from any error apparent on the face of the record requiring our interference? Whether the order of the learned designated Judge is vitiated? the learned Standing Counsel for the petitioners-Railways contended that the arbitral tribunal entered the reference as early as on 20-8-2001 and the first respondent submitted himself to the proceedings before the arbitral tribunal by depositing an amount of Rs. 1,000/- on 10-12-2001 towards expenditure of correspondence, arbitration fee, stationery etc. , as demanded by the arbitral tribunal on 28-9-2001 and in such view of the matter it is not open to the first respondent to file the present application for appointment of independent arbitrator by invoking Section 11 (6) of the Arbitration and Conciliation Act, 1996 (for short the Act ). The sum and substance of the contention was that the arbitral tribunal already constituted continues to be in existence and the right of the first respondent under Section 11 (6) of the Act got automatically forfeited since the petitioners have already constituted an arbitral tribunal. The learned Standing Counsel for the petitioners-railways relied upon a Division bench decision of this Court in National Buildings Construction Corporation ltd. , v. M. V. V. Sathyanarayana1 in support of his submission that the first respondent herein could not have invoked the procedure provided for under section 11 (6) of the Act since the arbitral tribunal was already constituted as is required in terms of the agreement entered by and between the parties. The said judgment, in our considered opinion, in no manner supports the case and the point urged for and on behalf of the petitioners-railways. In the said case, arbitrator was appointed by the petitioner therein on 4-5-2001 within thirty days from the date of receipt of notice dated 14-4-2001 invoking the arbitration clause by the contractor. Again the arbitrator was duly changed at the instance of the respondent therein. The arbitrator was appointed much before that order under Section 11 (6) of the Act. The petitioner therein had duly replaced the first arbitrator on 9-7-2001 by acting upon the request of the respondent s letters dated 8-5-2001 and 18-6-2001.
Again the arbitrator was duly changed at the instance of the respondent therein. The arbitrator was appointed much before that order under Section 11 (6) of the Act. The petitioner therein had duly replaced the first arbitrator on 9-7-2001 by acting upon the request of the respondent s letters dated 8-5-2001 and 18-6-2001. It is under those circumstances, the court took the view that "right to appoint an arbitrator cannot be held to have been waived/ceased on mere filing of the application under Section 11 (6) on 9-7-2001. " in Datar Switchgears Ltd. , v. Tata Finance Ltd. ,2, the Supreme Court while interpreting Section 11 (6) of the Act held:"as far as Section 11 (6) of the Arbitration and Conciliation Act, 1996 is concerned if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court under Section 11, that would be sufficient. Only then the right of the opposite party ceases. " (Emphasis is of ours ). It is further observed:"when parties have entered into a contract and settled on a procedure, due importance has to be given to such procedure. Even though rigor of the doctrine of "freedom of contract" has been whittled down by various labour and social welfare legislation, still the court has to respect the terms of the contract entered into by parties and endeavour to give importance and effect to it. When the party has not disputed the arbitration clause, normally he is bound by it and obliged to comply with the procedure laid down under the said clause.
When the party has not disputed the arbitration clause, normally he is bound by it and obliged to comply with the procedure laid down under the said clause. "in Grid Corporation of Orissa Ltd. , v. AES Corporation3, the Supreme Court observed:"in Konkan Railway Corporation Ltd. , and another v. Rani Construction Pvt. Ltd. , (2002) 2 SCC 388 it has been held (vide para 21) that in spite of an appointment having been made by the Chief Justice or his designate an objection as to the constitution of the arbitral tribunal being improper or without jurisdiction is capable of being raised before the arbitral tribunal itself under Section 16 of the Act, for an objection not only as to the width of jurisdiction but also one going to the very root of its jurisdiction is entertainable by the arbitral tribunal under Section 16. That being so assuming without holding that there is any substance in the plea of the petitioners it is open for them to raise the same before the arbitral tribunal. Once the arbitral tribunal has come into existence, as it has in my opinion in the facts and circumstances of the case, a petition under Section 11 (6) of the Act is not an appropriate remedy which the petitioners have chosen. None of the grounds contemplated by clauses (a), (b) and (c) of sub-section (6) of Section 11 exists. There is no deficiency in the constitution of the arbitral tribunal attributable to any of the parties or the arbitrators. There is no occasion for filing a request petition under Section 11 (6) of the Act. " (Emphasis is of ours ). ( 7 ) THE question that falls for consideration is as to whether there was any arbitral tribunal constituted by 7-6-2002 when the first respondent filed the present arbitration application under Section 11 (6) of the Act?
There is no occasion for filing a request petition under Section 11 (6) of the Act. " (Emphasis is of ours ). ( 7 ) THE question that falls for consideration is as to whether there was any arbitral tribunal constituted by 7-6-2002 when the first respondent filed the present arbitration application under Section 11 (6) of the Act? it would be apposite to notice the relevant clauses in Clause 64 of the General conditions of Contract, which provide for Demand for Arbitration: 64 (1) (i) - In the event of any dispute or difference between the parties hereinto 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 (1) (ii) - The demand for arbitration shall specify the matters which are in question or subject of the dispute or difference as also the 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 shall be referred to arbitration and other matters shall not be included in the reference. 64 (1) (ii) (a) - The arbitration proceeding shall be assumed to have commenced from the day, a written and valid demand for arbitration is received by the railway. 64 (3) (a) (i) - In cases where the total value of all claims in Question added together does not exceed Rupees 10,00,000/- (Rupees Ten Lacs Only), the Arbitral tribunal consist of a sole Arbitrator who shall be either the General Manager or gazetted Officer of Railways not below the grade of JA grade nominated by the general Manager in that behalf. The sole Arbitrator shall be appointed within 60 days from the day when a written and valid demand for Arbitration is received by Railway.
The sole Arbitrator shall be appointed within 60 days from the day when a written and valid demand for Arbitration is received by Railway. 64 (3) (a) (ii) - In cases not covered by clause 64 (3) (a) (i), the Arbitral tribunal shall consist of a panel of three Gazetted Railway Officers not below ja grade, as the Arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway Officers of one or more departments of the Railway to the Contractor who will be asked to suggest to General Manager up to 2 names out of the panel for appointment as Contractor s nominee. 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. 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 Railways for the purpose of appointment of Arbitrators. 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 reconstituted Tribunal may, at its direction, proceed with the reference from the stage at which it was left by the previous arbitrator (s ). It is no doubt true that a bare perusal of the clauses referred to hereinabove reveals that the General Manager is authorised to appoint new arbitrator (s) to act as arbitrator (s) in case one or more of the arbitrators appointed refuses to act as arbitrator or 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 whatsoever reason.
The reconstituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator (s ). Therefore, the decision of the General Manager in replacing two of the arbitrators for the reasons already referred to hereinabove and in reconstituting the arbitral tribunal itself does not suffer from any infirmity. The reconstituted Tribunal may, in its discretion, have proceeded with the reference. In such eventuality, the application under Section 11 (6) of the Act would not be maintainable as no cause of action arises for appointment of arbitrator by the designated Judge in purported exercise of power under Section 11 (6) of the Act. ( 8 ) THE arbitral tribunal that existed as on 28-9-2001 and to whose jurisdiction the first respondent submitted his reference vide letter dated 10-12-2001 did not exist for a long time. That on 27-8-2001 itself one of the joint arbitrators by name Sanjeev Agarwal had withdrawn from the arbitral tribunal. On 10-9-2001 another joint arbitrator by name A. Venkat Reddy, chosen by the first respondent, had also withdrawn from the arbitral tribunal. The reconstituted arbitral tribunal with inclusion of C. Chandra Sekhara Sastry came into existence at the most on 11-7-2002 when the said Chandra Sekhara Sastry addressed a letter to the general Manager giving his acceptance to be a joint arbitrator, but by that time the first respondent had already filed Arbitration Application No. 28 of 2002 for appointment of arbitrator on 7-6-2002 for adjudication of disputes. It is thus clear that there was no arbitral tribunal as on 7-6-2002 on which date the first respondent filed the arbitration application seeking appointment of arbitrator. The arbitral tribunal constituted in accordance with Clause 64 referred to hereinabove undergone many changes from time to time. Finally, the reconstituted arbitral tribunal came into existence only on 11-7-2002 and much subsequent to filing of application by the first respondent seeking appointment of the sole arbitrator. In the circumstances, we hold that the application filed by the first respondent herein seeking appointment of arbitrator is maintainable in law. The learned designated Judge did not commit any error in appointing the arbitrator as prayed for by the first respondent.
In the circumstances, we hold that the application filed by the first respondent herein seeking appointment of arbitrator is maintainable in law. The learned designated Judge did not commit any error in appointing the arbitrator as prayed for by the first respondent. The impugned order does not suffer from any legal infirmity requiring our interference in exercise of our judicial review jurisdiction, the parameters of which themselves are limited to judicially review the orders passed by the Chief Justice or the designated Judge, as the case may be, in exercise of the power under Section 11 (6) of the Act. The writ petition fails and shall accordingly stand dismissed. No order as to costs.