ORDER This application has been taken out by M/s. Shri Patil Enterprises, represented by its Proprietor Marularadhya Patil under Section 11(6) (of the Arbitration and Conciliation Act, 1996 read with the Scheme for Appointment of Arbitrators seeking appointment of arbitrator for resolution of the disputes relating to the execution of work under letter of acceptance No. CW/148/WV/N/749/07/0T, dated 31-3-2008. 2. The averments, in the application, in brief, are:- (a) The applicant is a railway contractor. The applicant, by letter dated 7-12-2007, offered to supply stacking 50 mm gauge machines crushed stone ballast and loading the ballast by mechnical means into Railway Wagons by hoppers (quantity. 1,00,000 Cu.) The Divisional Engineer (North) has informed the acceptance of the applicant's offer at a value of Rs. 5,76,00,000/- The period stipulated for completion of work is fifteen months from the date of issue of letter of acceptance. The applicant has to deposit an amount of Rs. 20,80,000/- after adjusting the EMD amount of Rs. 8,00,000/-. Ten percent (10%) of the gross bill value has to be deducted from the applicant's running bills till the entire SD amount is made up. The applicant was requested to submit an irrevocable bank guarantee for Rs. 28,80,000/- for satisfactory performance of the work valid up to the expiry of maintenance period, within fifteen days from the date of issue of acceptance letter. Unit! a format agreement is executed acceptance of the tender shall constitute a binding contract between the applicant and railway administration subject to modification as per the mutual agreement in terms of Item No.4 of the applicant's tender. The applicant received the acceptance letter and thereafter, the applicant on receipt of the acceptance letter, agreed to perform his part of the contract on 13-9-2009 (sic. 2008). There is a delay of 9 months in conveying the acceptance of the offer made by the applicant. During this nine months period, the local costs and the ballast have been increased by about Rs. 100/- per cubic metre. (b) The respondent No.3 issued reminder to the applicant on 8-9-2008. The applicant requested the third respondent to give three months time for mobilization of assets and machinery to the place of work. However, respondent No.3 refused to give any time for mobilization of assets and machinery. The applicant is ready and willing to perform his part of contract provided the respondents permit the variation clause to be operated. The applicant requested the third respondent to give three months time for mobilization of assets and machinery to the place of work. However, respondent No.3 refused to give any time for mobilization of assets and machinery. The applicant is ready and willing to perform his part of contract provided the respondents permit the variation clause to be operated. The applicant made repeated requests for grant of time for mobilization of assets and machinery. The third respondent issued notice granting 48 hours and ultimately, terminated the tender of the applicant on 26-11-2008. Termination of tender by the third respondent without allowing time to the applicant for mobilization of assets and machinery is illegal, unjust and against the principles of natural justice. The third respondent issued letter No. CW/148/WV/N/749/07/0T, dated 5-12-2008 directing all the concerned Engineers to recover an amount of Rs. 28,80,000/- towards performance guarantee of the contract from any bills/security deposit or EMD money in their hands available for payment, thereby, the applicant sustained substantial loss. Pursuant to the instructions issued by the third respondent, the concerned Engineers have started deducting the amounts from the bills/security deposit/ EMD money in their hands available for payment to the applicant. (c) The applicant submitted representation to the respondents to refer the dispute to arbitration tribunal as provided under Rules 63 and 64 of the General Conditions of Contract. The respondents rejected the request made by the applicant under letter dated 10-7-2009. Hence, this application seeking the relief stated supra. 3. Notice to the respondents came to be ordered on 24-2-2010. The respondents entered appearance and filed counter affidavit. D. Subrahmanyam, Senior Divisional Engineer (North), Secunderabad has sworn to the affidavit filed on behalf of the respondents. 4. The counter affidavit, in brief, is as follows:- (a) Award of work that "supply and stacking of 50 mm gauge machine crushed stone ballast at Hasanparthi Depot is not disputed. The value of the contract is Rs. 5,76,00,000/- and period stipulated for completion of the work is 15 months from the date of issue of acceptance letter. The applicant failed to execute/perform the agreement, despite issue of notices on 8-9-2008, 22-9-2008, 6-10-2008, 17-10-2008 and 12-11-2008 and ultimately, the contract came to be terminated on 26-11-2008. The applicant has not submitted ballast samples to P.W.1/N/KZ]. 5,76,00,000/- and period stipulated for completion of the work is 15 months from the date of issue of acceptance letter. The applicant failed to execute/perform the agreement, despite issue of notices on 8-9-2008, 22-9-2008, 6-10-2008, 17-10-2008 and 12-11-2008 and ultimately, the contract came to be terminated on 26-11-2008. The applicant has not submitted ballast samples to P.W.1/N/KZ]. The ballast is vital component for the maintenance of track and most of the track work was being affected by not commencing the supply of ballast, as assured by the applicant, vide letter dated 30-9-2008. The applicant is a new entrant to Secunderabad division. The, applicant has been awarded supply of ballast agreements in Kurgunta & Hasanparthi in Secunderabad division and Falaknuma in Hyderabad division. After giving several notices and sufficient time and opportunity to the applicant for execution of the contract/performance of the contract, the respondents terminated the contract as per Clause 62 of the General Conditions of the Contract, vide letter dated 26-11-2008 forfeiting the security deposit and Earnest Money Deposit. (b) The third respondent issued a letter dated 5-12-2008 wherein an amount of Rs. 28,80,000/- towards performance guarantee was directed to be recovered from the bills/security deposit and EMD available in their respective divisions. An amount of Rs. 7,20,000/- was already deducted from the CC2 Bill No. 396/RW, dated 2-2-2009. The contract was terminated under Clause 62 of the General Conditions of Contract for default of the petitioner to take up the work. Since the contract was terminated under Section 62 of the GCC, it becomes "an excepted matter" and therefore, reference to arbitration cannot be made in view of the specific prohibition under Clause 63 of G.C.C. Even in cases disputes are to be referred to the arbitrator, the same are required to be referred to the Railway Arbitrator as per Clause 64(1)(i) of the General Conditions of the Contract. 5. The applicant filed reply affidavit. It is stated in the reply affidavit that invocation of clause 62 of the General Conditions of contract was itself illegal and the same was invoked at a premature stage. The applicant completed the work pertaining to Kurgunta depot. However, the respondents have appropriated the bill amount towards the performance guarantee illegally relatable to the present contract. The respondents terminated the contract to accommodate their interested agency. The applicant completed the work pertaining to Kurgunta depot. However, the respondents have appropriated the bill amount towards the performance guarantee illegally relatable to the present contract. The respondents terminated the contract to accommodate their interested agency. For better appreciation, I may refer paras 13 to 15 of the reply affidavit, which read as hereunder:- "13. It is submitted that the averment in para 13 and 14 of the counter affidavit are hereby denied. As it is a fact on record that the applicant has submitted representation dated 13-9-2008, 30-9-2008, 1-10-2008 and 14-10-2008, however none of these representations were considered by the respondents. I submit that the Respondents were intending to accommodate some other agency and for that purpose they have issued 1st reminder within 8 days only. Such issuance of reminder within 8 days period shows their malafide intention to do something abnormal. Thereafter, a chain of representations have been made but no heed was paid by any of them. The tender which was terminated for no fault of the Applicant, how an amount towards performance guarantee can be recovered from the contract work of Kurtgunta. As a matter of rule when contract has been terminated with no fault of the Applicant, he is entitled to variation clause. 14. In respect of para 15 of the counter affidavit of the respondents. I submit that the rejection of the request for referring matter to Arbitrators and invoking clause 62 of Gee thereby treating it as an excepted matter is unilateral act having no background of Natural Justice. Therefore, the termination so issued is illegal. 15. In respect of para 16 of the counter affidavit of the respondents, I submit that as mentioned in para 16 of the counter affidavit and the alternative suggested therein by the respondents, the Hon'ble Court may be pleased to direct the General Manager, South Central Railway, Secunderabad to appoint a Railway Arbitrator as per clause 64 (l)(i) of the general conditions of the contract for adjudication of claims/disputes. As mentioned in this para the Hon'ble may be pleased to accept the alternative suggestion given by the Respondents" . 6. Heard learned counsel appearing for the applicant and learned Standing Counsel appearing for the respondents. 7. As mentioned in this para the Hon'ble may be pleased to accept the alternative suggestion given by the Respondents" . 6. Heard learned counsel appearing for the applicant and learned Standing Counsel appearing for the respondents. 7. Learned counsel appearing for the applicant submits that the applicant has submitted his tender on 7-12-2007 and whereas, the acceptance letter came to be communicated by the respondents to the applicant on 31-8-2008, i.e., after a gap of about nine months and during this nine months period, the local valuation of the ballast has been increased by about 100% per cubic metre. The 2nd respondent having taken such a long period in communicating their acceptance is not justified in not granting three months for mobilization of assets and machinery to the place of work. He would also contend that the 2nd respondent, without considering the difficulties faced by the applicant in mobilization of assets and machinery to the place of work, proceeded to terminate the contract with the sole object of accommodating the person of his choice. Had the representation submitted by the applicant on 13-9-2008, 30-9-2008 and 14-10-2008 been considered favourably, the applicant would have taken up the work and completed the same within the stipulated period from the date of commencement of the work. In nutshell, the contention of the counsel is that the termination of the contract by the 2nd respondent is in defiance to the rules in vogue and without proper application of mind. Learned counsel refers para (11) of the arbitration claim submitted before the respondents to point out the disputes that are required to be resolved by taking recourse to the arbitration clause in the General Conditions of Contract. 8. Learned Standing Counsel appearing for the respondents contends that the contract came to be terminated as per Clause 62 of the General Conditions of Contract and the said termination is not arbitraral since the same is an 'excepted matter' as provided under Clause 63 of the General Conditions of Contract. 8. Learned Standing Counsel appearing for the respondents contends that the contract came to be terminated as per Clause 62 of the General Conditions of Contract and the said termination is not arbitraral since the same is an 'excepted matter' as provided under Clause 63 of the General Conditions of Contract. He would also contend that even assuming without admitting for arguments sake that in case the Court comes to the conclusion that the arbitration application is maintainable; the claims allegedly made by the applicant are required to be referred to a Departmental arbitrator as per Clause 64(1) of the General Conditions of Contract by directing the General Manager, South Central Railway, Secunderabad to appoint a Railway Arbitrator/Arbitrators for adjudication of claims/disputes. In support of his submissions, reliance has been placed on the decisions of Supreme Court in General Manager, Northern Railway v. Sarvesh Chopra (1) (2002) 4 SCC 45 , Union of India v. M.P. Gupta (2) (2004) 10 SCC 504 and Union of India v. Krishna Kumar (3) 2010 (6) SCJ 35 and the decision of a Division Bench Judgment of this court in M. Venkata Rao v, Union of India (4) 200S (2) ALT 369 (DB). 9. The request of the applicant to refer the claim for arbitration came to be rejected by the 2nd respondent under letter dated 10-7-2009 on the ground that he contractor has committed breach of contract under Clause 62 of the General Conditions of Contract. Even the termination notice indicates that the contract came to be terminated by invoking Clause 62 of the General Conditions of Contract. For better appreciation, I may refer the relevant portion of the termination notice dated 26-11-2008, which reads as hereunder:- "The subject contract work was awarded to you, vide' this office acceptance letter dt. 31-8-2008, cited under reference (1) with a completion period of 15 months. As it can be seen from the above, in spite of issuing several notices, you have neither come forward to execute the agreement, duly paying the Performance Guarantee, to show the sincerity of taking up the work, nor made any effort to mobillise labour and materials to commence the work till date. As it can be seen from the above, in spite of issuing several notices, you have neither come forward to execute the agreement, duly paying the Performance Guarantee, to show the sincerity of taking up the work, nor made any effort to mobillise labour and materials to commence the work till date. It has also been reported vide ADEN/ROM's letter cited under reference (8) that, there is no collection of ballast so far either in Zone 'B' which is initially allotted to you or in Zone 'A' which is also vacant since 14-10-08. You were also asked to give the source of the ballast depot, which has not been done till date. In your letter dt. 21-10-08, you have mentioned that ballast samples were given to Sri Narayan Rao, P.W.1/N/ SC, instead of P.W.1/N/KZJ (wrongly quoted by you). It was confirmed from ADEN/RDM & SSE/P.Way/N/KZj, that no ballast samples were collected in HSP depot. Inspite of stressing that the ballast is a vital component for the maintenance of track and most of the track work being affected by not commencing the supply of the ballast, you have failed to do the same in spite of assuring that you would start commencing the supply by 15-10-2008, vide your letter cited under reference (5). Moreover, large number of track renewals are in progress including PQRS work between PDPL-KRMR section to introduce CC+6+2 loadings without required 4000 m 3 of ballast. Most of the track works get effected due to ballast deficiencies in the section. You have failed to abide by the instructions issued vide this office acceptance letter cited above, wherein you were advised to submit PG within 14 days and failed to submit the ballast from the proposed source. In view of the above, the contract is terminated with immediate effect in terms of Clause 62 of General Conditions of Contract. It may please be noted that your SD/EMD deposit stands forfeited". It is explicit from the above-referred termination order that the 2nd respondent terminated the contract by invoking clause 62 of the General Conditions of Contract. 10. The issue that calls for adjudication is: Whether the dispute relating to termination of contract under Clause (62) of the General Conditions of Contract is an 'excepted matter' as provided under Clause (63) of the General Conditions of Contract'? 11. 10. The issue that calls for adjudication is: Whether the dispute relating to termination of contract under Clause (62) of the General Conditions of Contract is an 'excepted matter' as provided under Clause (63) of the General Conditions of Contract'? 11. It is no more in dispute that once the dispute between the parties comes within the purview of an 'excepted matter', question of appointing arbitrator for adjudication of the said dispute does not arise. It has been held by the Supreme Court in General Manager, Northern Railway v. Sarvesh Chopra (1 supra) that when once the dispute is covered by excepted matters, it would be an exercise in futility to refer for adjudication by the arbitrator. In Union of India v. M.P. Gupta (2 supra), the Supreme Court held that in case an agreement provides for adjudication of the disputes by two gazetted railway officers of equal status, no person other than the gazetted railway officers can be appointed as arbitrator. In Union of India v. Krishna Kumar (3 supra), the Supreme Court followed the proposition of law laid down in the M.P. Gupta's case (2 supra). Para 7 of the cited judgment (3 supra) needs to be noted and it is thus:- "With regard to the interpretation of the Clause 64 of the agreement the three Judge Bench of this Court examined the same clause which is involved in the present case in Union of India and another v. M.P. Gupta (2004) 10 SCC 504 and has held in paragraph 4 of judgment as under: "4. In view of the express provision contained therein that two gazetted railway officers shall be appointed as arbitrators. Justice P.K. Bahri could not be appointed by the High Court as the Sole Arbitrator. On this short ground alone, the judgment and order under challenge to the extent it appoints Justice P.K. Bahri as sole arbitrator is set aside. Within 30 days from today the appellants herein shall appoint two gazetted railway officers as arbitrators. The two newly appointed arbitrators shall enter into reference within a period of another one month and thereafter the arbitrators shall make their award within a period of three months." 12. In Union of India v. South Central Railway case (sic. Within 30 days from today the appellants herein shall appoint two gazetted railway officers as arbitrators. The two newly appointed arbitrators shall enter into reference within a period of another one month and thereafter the arbitrators shall make their award within a period of three months." 12. In Union of India v. South Central Railway case (sic. M. Venkata Rao v. Union of India case) (4 supra), a Division Bench of this Court held that when the Department terminated the contract by invoking Clause 61 (1) of the General Conditions of the contract, it becomes an excepted matter to determine as to the validity of the termination. As I stated supra, the 2nd respondent terminated the contract by invoking Clause 62 of the General Conditions of Contract. The issue is whether the termination of contract by invoking Clause 62 can be referred to an arbitrator? 13. It is the plea of the respondents that termination of contract under Clause (62) is an 'excepted matter' and therefore, the applicant cannot plead for appointment of an arbitrator to resolve the dispute. I deem it appropriate to refer Clause (63) of the General Conditions of contract, which reads as hereunder:- "Settlement of Disputes 63. Matters finally determined by the Railway:- All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the work or after its completion and whether before or after the determination of the contract shall be referred by the Contract to the Railway and the Railway shall within 120 days after receipt of the contract's representation made and notify decision on all matters for which provision has been made in Clauses 8(a), 18, 22(5), 39, 43(2), 45(a), 55, 55-A(5), 57, 57 A, 61(1), 61(2) and 62(1)(b) of General Conditions of the contract or in any clause of the special conditions of the contract shall be deemed as 'excepted matters' shall stand specifically excluded from the purview of the arbitration clause and not referred to arbitration." 14. A plain reading of Clause 63 of the General Conditions of Contract shows that it consists of three parts. A plain reading of Clause 63 of the General Conditions of Contract shows that it consists of three parts. Firstly, it is an arbitration agreement requiring all disputes and differences of any kind whatsoever arising out of or in connection with the contract to be referred for adjudication by arbitration, by the railways, on a demand being made by the Contractor through a representation in that regard. Secondly, this agreement is qualified by a proviso, which deals with 'excepted matters'. 'Excepted maters' are divided into two categories: (i) matters for which provision has been made in specified clauses of the general conditions, and (ii) matters covered by any clauses of the special conditions of the contract. Thirdly, the third part of the clause is a further proviso, having an overriding effect on the earlier parts of the clause, that all 'excepted matters' shall stand specifically excluded from the purview of the arbitration clause and hence shall not be referred to arbitration. 15. Termination of contract under clause 62 of the General Conditions of Contract comes within the purview of the 'excepted matters'. When once the termination of contract comes within the purview of 'excepted matters', question of appointment of arbitrator does not arise. 16. In the result, I find that the arbitration application is not maintainable and accordingly, the same is hereby dismissed.