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2008 DIGILAW 243 (ORI)

Budhraja Mining and Construction Ltd. , Bhubaneswar v. Union of India

2008-03-25

ASOK KUMAR GANGULY

body2008
Judgement A. K. GANGULY, C.J. :- This application under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'said Act') was filed on 3-2-2006 praying for appointment of an Arbitrator. 2. In this connection, the arbitration clause is as follows : "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 Rly. Officers not below JA grade, 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. 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. (iii) If one or more of the arbitrators appointed as above refused to act as arbitrators, 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). (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. (v) While appointing arbitrator (s) under sub-clauses (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 relates 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." It may be noted here that case is not covered under clause 64.(3)(a)(i) of the Agreement in view of the fact that the claims exceed Rs. 10 lakhs. 3. A notice dated 4-10-2005 demanding arbitration was served by the petitioner on the General Manager, East Coast Railway. In the said notice the opposite party was called upon to appoint arbitrators for adjudication of the disputes and differences that have arisen between the parties within thirty days from the date of service of that notice in terms of the arbitration clause contained in the General Conditions of Contract. By a letter dated 7-10-2005 the opposite parties acknowledged the receipt of the notice and stated that papers are called for from the department for looking into the matter. Then the opposite parties by their reply dated 25-11-2005 purported to act in terms of para 64(3)(a)(ii) of General Conditions of Contract and a panel of four names was suggested and the petitioner was requested to nominate at least two names out of that panel within 30 days i.e. by 24-12-2005, from which the General Manager was to appoint one as the nominee of the petitioner and failing which all the names appearing in the panel will be presumed as the petitioner's nominees. Thereafter, the petitioner by a letter dated 21-12-2005 replied saying that Mr. P. Mohanty, F. A. and C. A. O. /Bhubaneswar, who has been dealing with the present work cannot be accepted by the petitioner as he will not be able to do justice between the parties. Thereafter, the petitioner by a letter dated 21-12-2005 replied saying that Mr. P. Mohanty, F. A. and C. A. O. /Bhubaneswar, who has been dealing with the present work cannot be accepted by the petitioner as he will not be able to do justice between the parties. It was also stated that similarly the names of three other persons indicated are also well connected with the same organization under which the work comes and as such are part of the Bhubaneswar Division to which the work and the disputes relate and cannot do justice between the parties. So the petitioner's stand was that the names given by the opposite parties are not acceptable. 4. Then opposite parties gave a reply on 9-1-2006 wherein it was stated that Mr. P. Mohanty will not deal with the matter and the petitioner was directed to nominate at least two other names from the panel which was sent to the petitioner vide letter dated 25-11-2005 within 10 days i.e. by 19-1-2006 and from which the General Manager will appoint one as the nominee of the petitioner, failing which all the names appearing in the panel will be presumed as the petitioner's nominee. Thereafter the petitioner, however, did not suggest any name and this petition was filed before this Court on 3-2-2006 and by an order dated 21-4-2006 the then Hon'ble Chief Justice stayed all further proceedings before the Arbitrator appointed under Annexure-1 to the Misc. Case No. 8 of 2006. 5. In paragraph 10 at page 6 of the counter affidavit which has been filed by the opposite parties it has been stated that the letter of the petitioner requesting appointment of the Arbitrator given on 4-10-2005 was received by the opposite parties on 7-10-2005 and thereafter within sixty days the General Manager by his letter dated 25-11-2005 gave a list of four names out of which the petitioner was to suggest the names. But the petitioner did not suggest the names within time. He was called upon to give his suggestion within thirty days from the date he received the list of names. According to the opposite parties, the petitioner raised various unnecessary objections about one of names in the list of four names. But the petitioner did not suggest the names within time. He was called upon to give his suggestion within thirty days from the date he received the list of names. According to the opposite parties, the petitioner raised various unnecessary objections about one of names in the list of four names. The opposite parties further stated that in order to accommodate the suggestion of the petitioner the opposite parties by their letter dated 9-1-2006 made it clear that Shri P. Mohanty will not deal with the present case. 6. Now the question is whether in the aforesaid facts of the case this Court can appoint an Arbitrator under Section 11 of the Arbitration and Conciliation Act. Here the arbitration procedure has been provided in the General Conditions of Contract. The parties have agreed to the said procedure for appointing Arbitrator. It cannot be said that there is any violation in the procedure inasmuch as the panel of four names have been suggested by the General Manager within a reasonable time. Therefore, a case for appointment of Arbitrator under Section 11 is not made out. 7. Learned counsel for the petitioner has relied on Clause 64(3)(a)(v) of the General Conditions of Contract wherein it has been stated that while appointing arbitrator(s) due care shall be taken that he/they is/are not the one of those who had an opportunity to deal with the matters to which the contract relates 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. 8. Relying on the said Clause, learned counsel has urged that in the instant case the said stipulation in the arbitration agreement has not been followed. In support of such contention, learned counsel relied on a number of decisions. Reliance was first placed on a judgment of the Allahabad High Court in the case of Fertilizer Corporation of India Limited v. M/s. Domestic Engineering Installation, reported in AIR 1970 Allahabad 31. Reliance was also placed on a single Bench decision of this Court in the case of State of Orissa and another v. M/s. Modern Construction Co., reported in AIR 1972 Orissa 219. Reliance was also placed on a judgment of the Supreme Court in the case of Nandyal Co-op. Reliance was also placed on a single Bench decision of this Court in the case of State of Orissa and another v. M/s. Modern Construction Co., reported in AIR 1972 Orissa 219. Reliance was also placed on a judgment of the Supreme Court in the case of Nandyal Co-op. Spinning Mills Ltd. v. K. V. Mohan Rao, reported in (1993) 2 SCC 654 : (1993 AIR SCW 2260). All these judgments are on the question that in a case if the arbitrator is biased the Court has the power to remove the arbitrator. All these cases were decided considering the provisions of the Arbitration Act, 1940. 9. In the present Act, Section 16 takes care of the situation and under Section 16 of the Act, the question of jurisdiction can be raised before the Arbitral Tribunal and the Arbitral Tribunal is competent to decide on the same. Then if the Arbitral Tribunal overrules the objection and passes the award the same question can be a ground for setting aside the award under Section 34 of the Act. So the decision under the 1940 Act are not of much help. 10. However, considering the facts and circumstances of the instant case, this Court directs that the officer against whom objection has been raised may not be included in the Arbitral Tribunal and the Railways are directed to replace him by another suitable officer. After the officer against whom objection has been raised is replaced by the Railways, arbitration should proceed before the reconstituted Arbitral Tribunal. But in the facts and circumstances of this case, no case is made out under Section 11 of the said Act for appointment of an Arbitrator by the Chief Justice. 11. The petition under Section 11 is disposed of with the above direction. There shall be no order as to costs. Order accordingly.