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Jharkhand High Court · body

2017 DIGILAW 234 (JHR)

Modi Projects Limited v. Eastern Central Railways

2017-02-03

D.N.PATEL

body2017
ORDER : This arbitration application has been preferred under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator. 2. Counsel appearing for the applicant submitted that Arbitration Clause 64(1) (i)-Demand of Arbitration was invoked for the appointment of arbitrator on 16th January, 2015. 3. A panel of three arbitrators was appointed on 1st/2nd July, 2015, who were the employees of the respondents. The Presiding Arbitrator was Mr. Virendra Kumar. It is further submitted by the counsel for the applicant that the claim of the applicant was filed, but, no date of hearing was given by Mr. Virendra Kumar, who was the Presiding Arbitrator, for eight long months and thereafter, a letter dated 2nd March, 2016 was written by the applicant which is Annexure-8 to the memo of this arbitration application, for commencing of the arbitration proceeding. It is also submitted that the respondent- Railway authority has also written a letter dated 28/29th March, 2016 (Annexure-9 to the memo of this arbitration application) to Mr. Virendra Kumar, learned Arbitrator as to why a date has not been given and a request was also made to expedite and conclude the arbitration proceeding. 4. Counsel appearing for the applicant submitted that whenever Railway employees are appointed as arbitrators there is a gross delay on their part to decide the dispute. Either they are inactive or retiring or transferred. It is further submitted by the counsel for the applicant that after filing of this arbitration application under section 11(6) of the Arbitration and Conciliation Act, 1996, now, the respondents in the month of January, 2017, are offering few names to be appointed as arbitrators. Counsel for the applicant further submitted that again the respondents want to appoint employees of the Railway authorities as arbitrator. It has been prayed by the counsel for the applicant that instead of that let there be an independent arbitrator appointed by this court because enough delay has already been caused by the employees of the respondents who were arbitrators from 2016 onwards. 4.1 Counsel for the applicant relied upon the decision rendered by the Hon’ble Supreme Court in Datar Switchgear vs. Tata Finance Ltd. & Anr. reported in 2001 (1) JCR 83 (SC) (2000) 8 SCC 151 . 4.1 Counsel for the applicant relied upon the decision rendered by the Hon’ble Supreme Court in Datar Switchgear vs. Tata Finance Ltd. & Anr. reported in 2001 (1) JCR 83 (SC) (2000) 8 SCC 151 . On the basis of the aforesaid decision, it is submitted by the counsel for the applicant that whenever the employees of the respondents are appointed arbitrators and they are not deciding the dispute because of their own lethargic approach or due to their transfer or retirement, in such eventualities, the court has all power, jurisdiction and authority to appoint arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. Even otherwise also, in view of the amendment in the Arbitration and Conciliation Act, 1996-Section 12 to be read with 5th Schedule the employees of one of the parties to the arbitration proceeding cannot be appointed as arbitrator. Therefore, whenever there is a gross delay on the part of the respondents’ employees, who are appointed as arbitrators, in deciding the dispute between the parties because of their retirement or transfer, this court can always appoint retired Hon'ble Judge of this court as arbitrator on the basis of principles of default procedure as pointed out in the aforesaid decision by Hon'ble the Supreme Court. 5. Counsel appearing for the respondents submitted that there is no delay on the part of the respondents in appointing the arbitrators. A panel of arbitrators constituted of three employees of the respondents, was appointed on 1st/2nd July, 2015. One of them was Mr. Virendra Kumar who retired in the month of July, 2016 and now again in the month of January, 2017 names have been placed before this applicant so that finally a panel of arbitrators can be appointed. Therefore, aforesaid decision cited by the counsel for the applicant is not applicable to the facts of the present case. 6. Counsel appearing for the respondents has relied upon following decisions: (a) YASHWITH CONSTRUCTIONS (P) LTD. versus SIMPLEX CONCRETE PILES INDIA LTD. AND ANOTHER. reported in (2006) 6 SCC 204 (b) Union of India & Anr. Versus Premco-DKSPL (JV) & Ors. reported in 2016(4) JCR 60 (SC). 6. Counsel appearing for the respondents has relied upon following decisions: (a) YASHWITH CONSTRUCTIONS (P) LTD. versus SIMPLEX CONCRETE PILES INDIA LTD. AND ANOTHER. reported in (2006) 6 SCC 204 (b) Union of India & Anr. Versus Premco-DKSPL (JV) & Ors. reported in 2016(4) JCR 60 (SC). In the light of the following two decisions, it is submitted by the counsel for the respondents, that a fresh panel of arbitrator may be allowed to be appointed by the respondents and they may be directed to complete the arbitration within a time bound schedule. It is also submitted that since this is a case prior to October, 2015 and hence, aforesaid amendment in the Arbitration and Conciliation Act, 1996 is not applicable to it. REASONS: 7. Having heard counsel appearing for both sides and looking to the facts and circumstances of the case, it appears that the Arbitration Clause 64(1) (i)-Demand of Arbitration was invoked for the appointment of arbitrator on 16th January, 2015 (Annexure 2 to the memo of this arbitration application). After six months, a panel of arbitrators, who are the employees of the respondents, was appointed on 1st/2nd July, 2015 by the respondents. Mr. Virendra Kumar was appointed the Presiding Arbitrator. It appears that whenever employees are appointed as arbitrators, the arbitration proceeding gets delayed as they are also doing some other administrative work and are not full time arbitrators. This is the inherent difficulty with employee-arbitrators. Otherwise also, high ranking administrative officers of the railway are over burdened with work and arbitration is considered as an additional work and hence, there bound to be delay on their part. This case is also no exception to this rule. The applicant has already filed his claim before the panel of arbitrators and has waited for the date to be given by Mr. Virendra Kumar, who is the Presiding Arbitrator, but, as stated hereinabove, Railway employees are already over burdened with their own work and therefore, Arbitration Proceedings are conducted slowly and with a lethargic approach. In the present case, for eight long months no date was given by Mr. V. Kumar, who is the Presiding Arbitrator. This is the approach of the panel of employees appointed as arbitrators. A letter dated 2nd March, 20 16 was written by this applicant, which is Annexure 8 to the memo of this arbitration application, with all request to Mr. V. Kumar, who is the Presiding Arbitrator. This is the approach of the panel of employees appointed as arbitrators. A letter dated 2nd March, 20 16 was written by this applicant, which is Annexure 8 to the memo of this arbitration application, with all request to Mr. Virendra Kumar to give a date for arbitration. Even Railway authorities also written a letter dated 28/29th March, 2016 (Annexure-9 to the memo of this arbitration application) to start the hearing of the arbitration proceeding but the panel of arbitrators must be burdened with other urgent duties of the Railways and Arbitration Proceeding, for them, is not a primary, but, a secondary matter to be decided. Therefore, no hearing took place and Mr. V. Kumar, Presiding Arbitrator retired on 31st July, 2016 and the panel is to be reshuffled. Again for several months nothing has been done by the respondents. Under this circumstances, this applicant has to approach this court under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of an independent Arbitrator. 7.1 It has been held by the Hon'ble Supreme court in Datar Switchgear vs. Tata Finance Ltd. & Anr. reported in 2001 (1) JCR 83 (SC) (2000) 8 SCC 151 at paragraph no.19 as under: “19. So far as cases falling under Section 11(6) are concerned-such as the one before us-no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11(4) and Section 11(5) of the Act. In our view, therefore, so far as Section 11(6) 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 appoint 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. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an arbitrator under Section 11(6) is forfeited.,” In view of the aforesaid decision, after filing of this application, intent of the respondents of appointing a panel of arbitrators is of no use to the respondents 8. Even otherwise also, It has been held by Hon'ble the Apex Court in UNION OF INDIA v. SINGH BUILDERS SYNDICATE reported in (2009) 4 SCC 523 , in Paragraph numbers 15 and 19 as under: “15. The object of the alternative dispute resolution process of arbitration is to have expeditious and effective disposal of the disputes through a private forum of the parties' choice. If the Arbitral Tribunal consists of serving officers of one of the parties to the dispute, as members in terms of the arbitration agreement, and such tribunal is made nonfunctional on account of the action or inaction or delay of such party, either by frequent transfers of such members of the Arbitral Tribunal or by failing to take steps expeditiously to replace the arbitrators in terms of the arbitration agreement, the Chief Justice or his designate, required to exercise power under Section 11 of the Act, can step in and pass appropriate orders. 19. The delays and frequent changes in the Arbitral Tribunal make a mockery of the process of arbitration. Having regard to this factual background, we are of the view that the appointment of a retired Judge of the Delhi High Court as sole arbitrator does not call for interference in exercise of jurisdiction under Article 136 of the Constitution of India” (Emphasis supplied) 9. It has been held by the Hon'ble Apex Court in UNION OF INDIA AND OTHERS vs. UTTAR PRADESH STATE BRIDGE CORPORATIO LIMITED, reported in (2015) 2 SCC, page 52, at Paragraph numbers 16, 19 and 20 as under: “16. First and paramount principle of the first pillar is “fair”, speedy and inexpensive trial by an Arbitral Tribunal”. Unnecessary delay or expense would frustrate the very purpose of arbitration. Interestingly, the second principle which is recognised in the Act is the party autonomy in the choice of procedure. First and paramount principle of the first pillar is “fair”, speedy and inexpensive trial by an Arbitral Tribunal”. Unnecessary delay or expense would frustrate the very purpose of arbitration. Interestingly, the second principle which is recognised in the Act is the party autonomy in the choice of procedure. This means that if a particular procedure is prescribed in the arbitration agreement which parties have agreed to, that has to be generally resorted to. It is because of this reason, as a normal practice, the court will insist the parties to adhere to the procedure to which they have agreed upon. This would apply even while making the appointment of substitute arbitrator and the general rule is that such an appointment of a substitute arbitrator should also be done in accordance with the provisions of the original agreement applicable to the appointment of the arbitrator at the initial stage. [See Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd.] However, this principle of party autonomy in the choice of procedure has been deviated from in those cases where one of the parties have committed default by not acting in accordance with the procedure prescribed. Many such instances were this course of action is taken and the Court appoint the arbitrator when the persona designata has failed to act, are taken note of in paras 6 and 7 of Tripple Engg. Works. We are conscious of the fact that these were the cases where appointment of the independent arbitrator made by the Court in exercise of powers under Section 11 of the account of “default procedure”. We are, in the present case, concerned with the constitution of substitute Arbitral Tribunal where earlier Arbitral Tribunal has failed to perform. However, the above principle of default procedure is extended by this Court in such cases as well as is clear from the judgment in Singh Builders Syndicate” 17. in the case of contracts between government corporations/State-owned companies with private parties/contractors, the terms of the agreement are usually drawn by the government company or public sector undertakings. Government contracts have broadly two kinds of arbitration clauses, first where a named officer is to act as sole arbitrator; and second, where a senior officer like a Managing Director, nominates a designated officer to act as the sole arbitrator. Government contracts have broadly two kinds of arbitration clauses, first where a named officer is to act as sole arbitrator; and second, where a senior officer like a Managing Director, nominates a designated officer to act as the sole arbitrator. No doubt, such clauses which give the Government a dominant position to constitute the Arbitral Tribunal are held to be valid. At the same time, it also casts an onerous and responsible duty upon the persona disignata to appoint such persons/officers as the arbitrators who are not only able to function independently and impartially, but are in a position to devote adequate time in conducting the arbitration. If the Government has nominated those officers as arbitrators who are not able to devote time to the arbitration proceedings or become incapable of acting as arbitrators because of frequent transfers, etc., then the principle of “default procedure” at least in the cases where Government has assumed the role of appointment of arbitrators to itself, has to be applied in the case of substitute arbitrators as well and the Court will step in to appoint the arbitrator by keeping aside the procedure which is agreed to between the parties. However, it will depend upon the facts of a particular case as to whether such a course of action should be taken or not. What we emphasis is that Court is not powerless in this regard. 19. The appointment of the arbitrator by the Court, of its own choice, departing from the arbitration clause, is therefore not unknown and has become an acceptable proposition of law which can be termed as a legal principle which has come to be established by a series of judgments of this Court. Reasons for debating such a course of action are not far to seek and already taken note of above. 20. In the present case, we find the fact situation almost same as in Tripple Engg. Works and Singh Builders Syndicate. If the contention of the appellant is allowed, it would amount to giving premium to the appellant for the fault of the Arbitral Tribunal's members who were appointed by none else but by the appellant itself. As pointed above, the appellant has not questioned the order of the High Court insofar as it has terminated the mandate of the earlier Arbitral Tribunal because of their inability to perform the task assigned to them. As pointed above, the appellant has not questioned the order of the High Court insofar as it has terminated the mandate of the earlier Arbitral Tribunal because of their inability to perform the task assigned to them. In such a situation, leaving the respondent at the mercy of the appellant thereby giving the power to the appellant to constitute another Arbitral Tribunal would amount to adding insult to the serious injury already suffered by the respondent because of non-conclusion of the arbitral proceedings even when the dispute was raised in the year 2007. In case, the cherished and benevolent purpose and objective of speedy resolution of the disputes by arbitral proceedings is to be accomplished, it becomes the bounden duty of the persona designata to appoint such arbitrators who have sufficient time at their disposal to attend to this task assigned to them and to conclude the arbitral proceedings in a speedy manner. It is a common sight that the officers who are awfully busy in their other routine functions, because of their status and position, are made arbitrators. For them, discharge of their other duties assumes more importance (and actually so) and their role as the arbitrators takes a back seat. This kind of behaviour showing casual approach in arbitration cases is anathema to the very genesis of arbitration. Therefore, where the Government assumes the authority and power to itself, in one-sided arbitration clause, to appoint the arbitrators in the case of disputes, it should be more vigilant and more responsible in chossing the arbitrators who are in a position to conduct the arbitral proceedings in an efficient manner, without compromising with their other duties. Time has come when the appointing authorities have to take call on such aspects failing which (as in the instant case), Court are not powerless to remedy such situations by springing into action exercising their powers as contained in Section 11 of the Act to constitute an Arbitral Tribunal, so that interest of the other side is equally protected. (Emphasis supplied) 9.1 In view of the aforesaid decisions, whenever the employees of the respondents are appointed as arbitrator, their retirement or transfer causes enormous difficulty. Unnecessary delay or expense, frustrate the very purpose of arbitration. An arbitrator, who is a privately chosen judge, is appointed so that at the earliest the dispute may be decided. 10. (Emphasis supplied) 9.1 In view of the aforesaid decisions, whenever the employees of the respondents are appointed as arbitrator, their retirement or transfer causes enormous difficulty. Unnecessary delay or expense, frustrate the very purpose of arbitration. An arbitrator, who is a privately chosen judge, is appointed so that at the earliest the dispute may be decided. 10. Further, very purpose of the arbitration would furstrate if there is no speed, in deciding the dispute by the Arbitrator, as in the present case, where railway employees, who are appointed as arbitrators, consider duty of the railways as their primary work and deciding the arbitration proceeding as secondary which is apparent from the fact that they are lethargically giving dates of hearing as stated herein above. In the facts of the present case, following points make it clear that the arbitrators appointed by the respondents are delaying the proceeding: (a) The Arbitration clause was invoked on 16th January, 2015, but panel of arbitrators were appointed on 1st July, 2015–Delay started from this point. (b) The Railway Authorities appointed Mr. Virendra Kumar Presiding Arbitrator fully knowing the fact that his date of retirement is very close and therefore, it appears that expeditious conclusion of the arbitration proceeding was not a primary concern for the respondents. The Railway authorities should have kept in mind that those who are going to retire very soon, should not have been appointed as arbitrators. (c) After filing of claim by the applicant, for eight long months, employee of the respondents, who are the arbitrators, gave no date of hearing. (d) Applicant was compelled to write a letter dated 2nd March, 2016 (Annexure 8 to the memo of this application) to the arbitrator to give a date of hearing. (e) Even Railway Authorities have written a letter dated 29th March, 2016 (Annexure-9 to the memo of this arbitration application) to the panel of arbitrators to give the date of hearing. Thus, it appears that the approach of the employees of the respondents, who are appointed as arbitrators, is absolutely lethargic because they are already burdened with the duties of the Railway Authorities and for them arbitration proceeding is an additional burden and hence, they are very slow. Thus, it appears that the approach of the employees of the respondents, who are appointed as arbitrators, is absolutely lethargic because they are already burdened with the duties of the Railway Authorities and for them arbitration proceeding is an additional burden and hence, they are very slow. To overcome these difficulties, an amendment has been brought to Section 12 to be read with new 5th Schedule of the Arbitration and Conciliation Act, 1996 which makes arbitration more impartial and independent and Section 29-A has also been inserted in the said Act, which envisages to provide for time bound conclusion of arbitration. This amendment has been brought into force with effect from 23rd October, 2015. 11. However, even if this amended version of the Act, 1996 is not applicable in the facts of the present case, this court has all power, jurisdiction and authority to appoint a retired Hon'ble Judge of this court as an independent Arbitrator looking to the decisions rendered by Hon'ble Supreme Court in UNION OF INDIA v. SINGH BUILDERS SYNDICATE reported in (2009) 4 SCC 523 and UNION OF INDIA AND OTHERS vs. UTTAR PRADESH STATE BRIDGE CORPORATION LIMITED, reported in (2015) 2 SCC 52 . Therefore, as a cumulative effect of the aforesaid facts, reasons and judicial pronouncements, I, hereby, appoint retired Hon'ble Mr. Justice Amareshwar Sahay as the learned Arbitrator to decide the dispute between the parties to this application as stated in the memo of this arbitration application 12. Registrar General of this court is, hereby, directed to send copy of this arbitration application along with all the annexures to the learned arbitrator appointed by this court. 13. It is expected that the arbitration proceeding will be complete as early as possible, preferably within six months from the date of its commencement. 14. We also direct the respondents and earlier panel of arbitrators to transfer all the papers, relating to the arbitration, to the learned Arbitrator appointed by this court, viz. Hon'ble Mr. Justice Amareshwar Sahay, retired Judge of this Court, so that arbitration proceeding can be initiated and be completed at the earliest. 15. Both the parties to this arbitration application shall cooperate before the learned arbitrator and will not ask for unnecessary adjounments so that dispute between the parties is resolved expeditiously. 16. This arbitration application is allowed and disposed of in view of the aforesaid directions.