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2009 DIGILAW 5033 (MAD)

Malu Sleepers Ltd. , (Formerly Malu Sleepers Private Limited), rep by its Managing Director, Bangalore v. Union of India, rep. By the General Manager, Southern Railway & Another.

2009-11-20

H.L.GOKHALE

body2009
Judgment : Heard Mr. A.L. Somayaji, learned senior counsel appearing on behalf of Mr. Amalraj S. Penikilapatti in support of his petition. Mr. V.G. Suresh Kumar, learned Counsel appears for the respondents. The petition is filed for appointment of an Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. 2. The petitioner entered into an agreement with the respondents for manufacturing and supplying 5,00,000 Pre-Stressed Concrete Sleepers. The petitioner manufactured and supplied the sleepers to the respondents and payment was also made, but there was a dispute regarding the escalation in the prices of raw materials required for the manufacture of those sleepers. The petitioners submitted the escalation bills, but they were pending for a long time. That led to arbitration between the parties. An award was passed, but that was aside by consent and now appointment of Arbitrator is again sought for, in terms Clause 2900 of the Indian Railway Standard Conditions of Contract, which are the condition read into all such agreements. The said clause reads as follows: “2900. Arbitration (a) In the event of any question, dispute difference arising under these conditions any special conditions of contract, or connection with this contract (except as to any matters the decision of which is specifically provided for by these special conditions) the same shall be referred to the sole arbitration of a Gazetted Railway Officer appointed to be the arbitrator, by the General Manger in the Case of contract entered into by the Zonal Railways and Production Units; by any Member of the Railway Broad, in the case of contracts entered into by the Railway Board and by the Head of the Organization in respect of contracts entered into by the other Organizations under the Ministry of Railways. The Gazetted Railway Officer to be appointed as arbitrator however will not be one of those who had an opportunity to deal with the matters to which the contract relates or who in the course of their duties as railway servant have expressed views on all or any of the matters under dispute or difference. The award of the arbitrator shall be final and binding on the parties to this contract.” The case of the petitioners is that in view of the earlier award having been set aside on 18. 2008, a notice to appoint an arbitrator-dated 1. 2009 was served on the respondent on 1. The award of the arbitrator shall be final and binding on the parties to this contract.” The case of the petitioners is that in view of the earlier award having been set aside on 18. 2008, a notice to appoint an arbitrator-dated 1. 2009 was served on the respondent on 1. 2009 and since there was no immediate response thereto, the present petition was filed on 12. 2009. The petition was admitted on 20.3.2009 and notice was issued to the respondents. 3. On 14. 2009, the respondents have proceeded to appoint Mr. Rajendra Prasad, Chief Engineer presently posted at the Integral Coach Factory, Chennai, as the Arbitrator to settle the dispute in question. In view thereof, according to the respondents, they have effected the appointment as required. It is submitted on behalf of the respondents that the dispute in this case is between the petitioner and the Chief Engineer, Southern Railways, whereas, the person appointed as Arbitrator is a Gazetted Railway Officer holding an altogether different position. He has nothing to do with the contract entered into between the parties which is under consideration and being an independent and impartial person, he has been appointed as an arbitrator in this case. 4. As against this, the submission of the petitioner is that the appointment of the Arbitrator was not done within a period of thirty days and hence, following the judgments in Datar Switchgears Ltd. V. Tata Finance Ltd., (2000) 8 SCC 151 , Punj Lloyd Ltd v. Petronet MHB Ltd., (2006) 2 SCC 638 and Union of India v. Bharat Battery Manufacturing Co., (2007) 6 MLJ 719: (2007) 5 Supreme 934 , the respondents have forfeited their right to appoint an Arbitrator in terms of the arbitration clause contained in the agreement. It is submitted that the right of a party to appoint an Arbitrator under the clause of an agreement ceases once a petition under Section 11(6) of the Act is filed and therefore, an appropriate person with judicial training should be appointed as an Arbitrator in this matter. 5. As against these judgments relied upon by the learned senior counsel for the petitioner, we have another judgment of the Apex Court in the case of Ace Pipeline Contracts (P) Ltd. V. Bharat Petroleum Corporation Ltd., (2007) 5 SCC 304 : (2007) 6 MLJ 346. 5. As against these judgments relied upon by the learned senior counsel for the petitioner, we have another judgment of the Apex Court in the case of Ace Pipeline Contracts (P) Ltd. V. Bharat Petroleum Corporation Ltd., (2007) 5 SCC 304 : (2007) 6 MLJ 346. The earlier judgments in Datar Switchgears Ltd. V. Tata Finance Ltd. (supra) and Punj Lloyd Ltd v. Petronet MHB Ltd. (supra) have been considered in this judgment and another Bench of two judges has contraring to Union of India v. Bharat Battery Manufacturing Co., (supra) taken a view that once a party has entered into an agreement with eyes wide open, it cannot wriggle out of the situation on the claim that the designated person being an officer of the other side by itself would not be an impartial or an objective officer. The Court also held that the appointing authority under the arbitration agreement does not automatically forfeit the right to make an appointment in such a case. The Court further held that the limitation period of thirty days is available only under Section 11(4) and (5) and cannot be invoked under Section 11(6) of the Act. 6. In viewof these divergent opinions, a three judges Bench of the Supreme Court, in the case of Northern Railway Administration, Ministry of Railway V. Patel Engineering Company Limited, (2008) 10 SCC 240 : (2008) 7 MLJ 1240, Again went into the question and what the Court has observed in paragraphs 11 and 12 is material for our purpose. These two paragraphs read as follows at P.1244 of MLJ: “11. The crucial expression in sub-section (6) is a party may request the Chief Justice or any person or institution designated by him to take the necessary measure (emphasis supplied). This expression has to be read along with requirement in sub-section (8)that the Chief Justice or the person or an institution designed by him in appointing an arbitrator shall have due regard to the two cumulative conditions relating to qualifications and other considerations as are likely to secure the appointment of an independent and impartial arbitrator. 12. A bare reading of the scheme of Section 11 shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. 12. A bare reading of the scheme of Section 11 shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. The Court must first ensure that the remedies provided for are exhausted. It is true as contended by Mr.Desai, that it is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations.” 7. Mr. A.L.Somayaji, learned senior counsel appearing for the petitioner has drawn our attention to another judgment of the Apex Court in Union of India V. Singh Builders Syndicate, (2009) 4 SCC 523 : (2009) 4 MLJ 144, where, as in the of Northern Railway Administration, Ministry of Railway V. Patel Engineering Company Limited (supra) and where the General Manager of the Railways repeatedly furnished panels containing names of officers who were due for transfer in the near future, the Court held that, that was an exceptional case which required appointment of an officer otherwise than as provided under the agreement. What the Court has observed in paragraph 3 of this judgment is relevant for our purpose and it is quoted hereunder at p.145 of MLJ: ”3. It is true that the Arbitral Tribunal should be constituted in the manner laid down in the arbitration agreement. Provisions for arbitration in contracts entered by Governments, statutory authorities, and government companies, invariably require that the arbitrators should be their own serving officers, Such a provision has to be given effect, subject to requirements of independence and impartiality. But there can be exceptions and this case which has a chequered history, falls under such exceptions. 8. Provisions for arbitration in contracts entered by Governments, statutory authorities, and government companies, invariably require that the arbitrators should be their own serving officers, Such a provision has to be given effect, subject to requirements of independence and impartiality. But there can be exceptions and this case which has a chequered history, falls under such exceptions. 8. In view of what is stated above, it is clear that, as held by the three Judge Bench in Northern Railway Administration, Ministry of Railway V. Patel Engineering Company Limited (supra) a bare reading of the scheme of Section 11 of the Act shows that the emphasis is on of the terms of the agreement being adhered to and/or given effect to as closely as possible, Similarly, as held in Union of India V. Singh Builders Syndicate (supra) in paragraph 3, a provision in the agreement has to be given effect Subject to the requirement of independence and impartiality. There can, however, be exceptions depending upon the facts, as was held in Union of India V. Singh Builders Syndicate (supra). 9. In the present case, Mr. A.L. Somayaji, learned senior counsel appearing for the Petitioner submitted that since the earlier arbitration had failed, this was a case where now a resort once again to a railway official should be avoided. 10. What has to be noted is that the earlier award was set aside by the agreement of both the parties. Merely on that ground, in my view, it will not be proper to depart from what agreed upon by the parties, provided the officer appointed as Arbitrator is an independent and impartial officer. Inasmuch as the Arbitrator appointed by the Railways is the Chief engineer of the Integral Coach Factory, in which position he has no reason to be connected with the dispute between the petitioner and the respondents, he can be said to be an independent and impartial officer, though he is an officer working in the Railways. For all the reasons stated above, in my view, there is no need to appoint a person other than the one which is provided for in the arbitration agreement and which has been done by the respondents. This original petition is accordingly disposed of. The officer concerned is requested to finalise the proceedings within a period of four months as requested by the learned senior counsel appearing for the petitioner.