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2021 DIGILAW 216 (MP)

Asha Jain v. Union of India

2021-02-24

SUBODH ABHYANKAR

body2021
ORDER : Subodh Abhyankar, J. 1. This is an application filed under Section 11 (6) of the Arbitration & Conciliation Act, 1996 (herein after referred to as the Act) for appointment of an Arbitrator to adjudicate the dispute between the parties. 2. The sole question which falls for consideration of this Court is whether the General Manager of the respondent, Union of India, West Central Railway can appoint an Arbitrator in terms of the arbitration clause, after the amendment in Section 12 (6) of the Act as per the Amendment Act of 2015 of the Act. 3. In brief, the facts of the case are that the applicant Smt. Asha Jain is the proprietary of M/s. D.K. Steels, an approved vendor for manufacture and supply of Composite Grooved Rubber Sole Plates (herein after referred to as CGRSP). Applicant is also duly approved by the Research Design & Standard Organization for supply of CGRSP to the Indian Railways. The respondent is the West Central Railway. 4. The case of the applicant is that in an e-tender floated on 8th February, 2013 by the respondent for manufacture and supply of Composite Grooved Rubber Sole Plate for 60 kilograms rail DRG, as per IRS specification for CGRSP for placing beneath rails. E-tender value as specified in the tender document was of Rs. 5,85,96,363/- (rupees five crore eighty five lakh ninety six thousand three hundred sixty three) and the completion period of the said work was eight months. It is not disputed that after some negotiation, the bid as submitted by the applicant was accepted by the respondent. 5. It is not disputed between the parties that in execution of the aforesaid works order, a dispute has arisen between them in respect of deduction of Rs. 34,42,337/- (rupees thirty four lakhs forty two thousand three hundred thirty seven) from the petitioner's different bills by the respondent. Thus, the petitioner is claiming the aforesaid sum along with interest from the respondent. To settle the dispute, the applicant has already resorted to the arbitration clause No. 2900 of the existing Indian Railways Standards Conditions of Contract, wherein it is provided that such dispute should be adjudicated by an Arbitrator to be appointed by the General Manager of the Indian Railways. 6. To settle the dispute, the applicant has already resorted to the arbitration clause No. 2900 of the existing Indian Railways Standards Conditions of Contract, wherein it is provided that such dispute should be adjudicated by an Arbitrator to be appointed by the General Manager of the Indian Railways. 6. The contention of the applicant is that the Act stood amended with effect from 23rd October, 2015 and as per the new Amended Act of 2015, the respondent cannot now appoint a departmental arbitrator and procedure as laid down under the new Amendment Act has to be strictly followed. In view of the same, the applicant also issued a notice through its advocate on 5th December 2016 and proposed the name of Hon'ble Justice (Retired) Shri Alok Chakraborty of Calcutta High Court as an Arbitrator to adjudicate the dispute and claims of the parties but the said nomination was rejected by the respondent vide their letter dated 16th January, 2017. 7. Applicant's contention is that after the issuance of the letter dated 5th December, 2016, the respondent had revised the clause 2900 of the Indian Railway Standard Conditions of Contract vide its memo dated 16th February, 2017 in order to appoint an Arbitrator of their own choice. 8. Counsel for the applicant has vehemently argued before this court that a Retired Railway Officer cannot be appointed as the Sole Arbitrator to adjudicate the dispute between the parties, as the appointment of such Arbitrator would be contrary to the Act. 9. In support of his contention, Shri Satish Agrawal, learned counsel for the applicant has relied upon a decision rendered by the Hon'ble Supreme Court in the case of Perkins Eastman Architects DPC and another v. HSCC (India) Limited in Arbitration Application No. 32 of 2019 dated 26th of November 2019. 10. A reply to the aforesaid application has also been filed by the respondent Railways, refuting the averments made in the application under section 11 (6) of the Act and further stating that the arbitration clause has already been amended by the respondent in terms of the Amendment Act of 2015. It is further stated that in fact, an Arbitrator has already been appointed by the General Manager of the Railways who, after initiating the arbitration proceedings, has, vide his letter dated 22nd July, 2018, already terminated the proceedings as the applicant failed to appear before him. It is further stated that in fact, an Arbitrator has already been appointed by the General Manager of the Railways who, after initiating the arbitration proceedings, has, vide his letter dated 22nd July, 2018, already terminated the proceedings as the applicant failed to appear before him. The relevant documents relating to the same have also been placed on record. Thus, it is submitted that Shri Sudhir Kumar IRS Retired CCRS/Lucknow, who was appointed as the sole Arbitrator was competent to adjudicate the dispute between the parties, the intimation regarding which was already sent to the applicant on 8th February, 2018. 11. Shri Atul Choudhary, learned counsel for the respondent has submitted that after the amendment in the year 2015, the respondent has already amended the arbitration clause and now the General Manager is fully competent to appoint an Arbitrator on behalf of the Railways. 12. In support of his contention, Shri Choudhary has also relied upon a decision rendered by Supreme Court in the case of Central Organization for Railway Electrification v. ECI-SPIC-SMO-MCML (Joint Venture) A Joint Venture Company in Civil Appeal No. 9486-9487 of 2019 decided on 17th December 2019. 13. Shri Choudhary has also submitted that the Supreme Court in the said judgment has already considered the earlier decision rendered by the Supreme Court in the case of Perkins Eastman Architects DPC and another v. HSCC (India) Limited (Supra) as cited by the learned counsel for the applicant. Thus, it is submitted that no case for appointment of Arbitrator is made out; and it is prayed that the application being misconceived is liable to be dismissed. 14. Heard learned counsel for the parties and perused the record. 15. Since the dispute between the parties in this application is whether the respondent railways can appoint an Arbitrator in terms of Clause Number 2400 of the agreement after the amendment in the Act, in the year 2015, particularly in Section 12 (5) of the Act, it would be expedient to refer to the arbitration clauses, both pre and post amendment of 2015, as provided in the contract. The same read as under:- "Changes in Indian Railways Standard Conditions of Contract (Supply contract), 1997 – (Clause 2900) Clause No. Existing Clause Revised Clause No. Revised Clause 2900 (a) In the event of any question, dispute or difference arising under these conditions of contract, or in connection with this contract (except as to any matters the decision of which is specially provided for by these or the special conditions) the same shall be referred to the sole arbitration of a Gazetted Railway Officer appointed to be the arbitrator, by the General Manager in the case of contracts entered into by the Zonal Railways and Production Units; by any Member of 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. 2900 (a) (i) 2900 (a) (ii) In the event of any question, dispute or difference arising under these conditions or any special conditions of contract, or in connection with this contract [except as to any matters the decision of which is specially provided for by these or the special conditions, i.e. excepted matters (non-arbitrable)] the same shall be referred to the sole arbitration of an Arbitrator in terms of the Arbitration and Conciliation Act, 1996 as amended by Arbitration and Conciliation (Amendment) Act, 2015. Arbitrator shall be a person possessing qualifications laid down in para 2900 (a) (ii) and shall be appointed by the General Manager in the case of contracts entered into by the Zonal Railways and Production Units; by any Member of the Railway Board / Director General (Railway Stores), 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 Organization under the Ministry of Railways. Qualification for appointment as Sole Arbitrator: (a) Retired Railway Officer not below SAG level 3 years after his date of retirement. Qualification for appointment as Sole Arbitrator: (a) Retired Railway Officer not below SAG level 3 years after his date of retirement. (b) Age of Arbitrator at the time of appointment shall not exceed 70 years. So far as Section 12 (5) of the Act is concerned, the same reads as under:- "12. Grounds for challenge.- (5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator: Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing." It is apparent from the proviso appended to Sub-Section (5) of Section 12 of the Act that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing. 16. On close scrutiny of the application, it is found that nowhere in its pleadings the applicant has raised a ground that it did not agree to the aforesaid amended conditions of the agreement. On the contrary, their averments in respect of the amendment in the arbitration clause in para 28 and 29 of the application are here under:- "28. After the issuance of the letter dated 05.12.2016, the respondent had revised the clause 2900 of the Indian Railway Standard Condition of Contract vide its memo bearing No. 97/RS (G)/779/2 dated 16.02.2017, a copy whereof is annexed hereto and marked as Annexure "Y". 29. The petitioner states that even the revised clause 2900 of the Indian Railway Standard Conditions of Contract is not in accordance with the Arbitration and Conciliation Act, 1996 as amended and as such a retired Railway Officer cannot be appointed as the Sole Arbitrator to adjudicate the dispute as such appointment of such Arbitrator would be contrary to the Act." 17. Thus, it is clear that the applicant has not raised any objection at all regarding amendment in the arbitration clause post 2015 Amendment of the Act. It is also found that the applicant has not filed any rejoinder to the reply filed by respondent wherein they have stated that they have already appointed an Arbitrator who has terminated the arbitration proceedings on account of non-participation of the applicant. It is also found that the applicant has not filed any rejoinder to the reply filed by respondent wherein they have stated that they have already appointed an Arbitrator who has terminated the arbitration proceedings on account of non-participation of the applicant. Thus, in these peculiar circumstances, when the applicant himself has not come out with a case that it did not agree to the amendment made by the respondent in the amendment in the arbitration agreement subsequent to the dispute having arisen between the parties, this Court has no option but to hold that the applicant, by its very conduct, has already waived the applicability of Sub-Section (5) of Section 12 of the Act. 18. So far as the decisions as relied upon by the learned counsel for the parties are concerned, in the case of Central Organization for Railway Electrification (supra) and Perkins Eastman Architect and other (supra) both are not relevant and are distinguishable. Both these judgments lay down the propositions in respect of the applicability of an arbitration clause when it is not amended post Amendment of 2015, and in the facts and circumstances of the present case and are of no avail to the parties concerned as this Court has already come to a conclusion that the parties have already waived the applicability of Sub-Section (5) of Section 12 of the Act by amending arbitration clause post the Amendment of 2015 in the Act of 1996. In view of the same in the considered opinion of this Court, the respondent General Manager of the Railways is well within his right to appoint an Arbitrator. 19. This Court also find that the said Arbitrator appointed by the respondent Mr. Sudhir Kumar, Chief Commissioner of Railway (Retired) has already informed the applicant vide his letter dated 22nd July, 2018 that the arbitration proceedings at present are discharged on account of non-submission of the statement of claim by the applicant. It is also found that before the aforesaid letter could be sent to the applicant, they had already approached this Court on 12th February, 2018 by filing this application for appointment of Arbitrator. It is also found that before the aforesaid letter could be sent to the applicant, they had already approached this Court on 12th February, 2018 by filing this application for appointment of Arbitrator. Thus, this Court is of the opinion that as the applicant was already litigating its case before this Court, their absence before the Arbitrator cannot be said to be unjustified or without bona fide, and hence, it would also be expedient that the applicant be given an opportunity to make its claim before the Arbitrator and get an order on the merits of the case. 20. In view of the same, although the present application is hereby dismissed, however, the applicant is at liberty to submit its claim before the Arbitrator Shri Sudhir Kumar within a further period of one month from the date of receipt of certified copy of this order and if such a claim is filed by the applicant, the same shall be decided by Shri Sudhir Kumar, the arbitrator in accordance with law by a reasoned and speaking order, as expeditiously as possible. 21. With the aforesaid directions, the application stands disposed of.