Delhi High Court
Jhajharia Nirman Ltd vs South Western Railways Through Dy. … on 7 October, 2024
Author: Sachin Datta
Bench: Sachin Datta
$~6& 7
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 07.10.2024
+ ARB.P. 1493/2024
(6) JHAJHARIA NIRMAN LTD. .....Petitioner
Through: Mr. Ashish Dholakia, Sr. Adv.
alongwith Mr. Rakesh Kumar, Ms.
Preeti Kashyap, Mr. Ankit Sharma,
Mr. Varun Pandit, Mr. Yash Dhaway
and Mr. Yash Tiwari, Advocates.
versus
SOUTH WESTERN RAILWAYS
THROUGH DY. CHIEF ENGINEER/IV CONSTRUCTION
.....Respondent
Through: Mr. Anurag Ahluwalia, CGSC
alongwith Mr. Tarveen Singh Nanda,
GP.
+ O.M.P.(I) (COMM.) 280/2024, I.A. 37645/2024, I.A. 40582/2024
I.A. 41040/2024
(7) JHAJHARIA NIRMAN LTD. .....Petitioner
Through: Mr. Ashish Dholakia, Sr. Adv.
alongwith Mr. Rakesh Kumar, Ms.
Preeti Kashyap, Mr. Ankit Sharma,
Mr. Varun Pandit, Mr. Yash Dhaway
and Mr. Yash Tiwari, Advocates.
versus
UNION OF INDIA THROUGH
MINISTRY OF RAILWAYS & ANR. .....Respondents
Through: Mr. Anurag Ahluwalia, CGSC
alongwith Mr. Tarveen Singh Nanda,
GP.
CORAM:
HON'BLE MR. JUSTICE SACHIN DATTA
SACHIN DATTA, J. (Oral)
Signature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 1 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
ARB.P. 1493/2024
1. The present petition under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the A&C Act) seeks the
appointment of a sole arbitrator to adjudicate the disputes between the
parties.
2. The disputes between the parties have arisen in the context of a
Contract awarded by the respondent to the petitioner for laying down the
railway line of 39.906 km from Penukonda to Dharmavaram (Andhra
Pradesh), including telecommunication and electrical works. A Request for
Proposal (RFP) for the said work was issued on 26.08.2022, pursuant to
which the petitioner participated in the tender process and emerged as the
lowest bidder.
3. Consequently, a letter of acceptance dated 19.01.2023 was issued in
favour of the petitioner, followed by a Contract Agreement dated
05.05.2023.
4. The completion period under the aforesaid Contract was 608 days and
four milestones were prescribed under the Contract.
5. The petitioner submitted numerous bank guarantees to the respondent
in terms of the relevant Contract conditions. It has been submitted that in
terms of the Contract, the respondent was to provide technical drawings/
documents/ land with respect to the execution of the work. However, the
respondent was at default in this regard, and in providing timely site
clearance to the petitioner. Resultantly, delays were occasioned.
6. It is also the case of the petitioner that numerous clauses of the
Signature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 2 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
Contract were violated/ breached by the respondent and the requisite time
extensions were also not provided in a timely manner.
7. The disputes/differences between the parties aggravated when the
respondent allegedly sought to impose penalty on the petitioner and also
withheld significant amounts from the RA Bills raised by the petitioner on
the respondent.
8. The Contract between the parties contains a dispute resolution clause
which reads as under:-
“ARTICLE 24
DISPUTE RESOLUTION
24.1 Conciliation of Disputes
24.1.1 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 Contractor to the
“Authority” through “Notice of Dispute” provided that no such notice
shall be served later than 30 days after the date of issue of Completion
Certificate by the Authority Engineer. Authority shall, within 30 days
after receipt of the Contractor’s “Notice of Dispute”, notify the name of
conciliator(s) to the Contractor. In case Authority fails to fix Conciliator
within 30 days, Contractor shall be free to approach Dispute
Adjudication Board (DAB) for adjudication of Dispute.
24.1.2 The Conciliator(s) shall assist the parties to reach an amicable
settlement in an independent and impartial manner within the terms of
contract. If the parties reach agreement on a settlement of the dispute,
they shall draw up and sign a written settlement agreement duly signed
by Authority Engineer, Contractor and conciliator(s). When the
settlement agreement is signed, it shall be final and binding on the
parties. The conciliators shall be paid fee as fixed by Ministry of
Railways time to time, which shall be shared equally by the parties.
24.1.3 The parties shall not initiate, during the conciliation proceedings,
any reference to DAB or arbitral or judicial proceedings in respect of a
dispute that is the subject matter of the conciliation proceedings.
24.1.4 The conciliation shall be carried out as per ‘The Arbitration and
Signature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 3 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
Conciliation Act, 1996′ and the proceedings may be terminated as per
Section 76 of the above Act.
24.2 Dispute Adjudication Board (DAB)
24.2.1 A dispute/s if not settled through conciliation, shall be referred to
DAB. The DAB shall consist of a panel of three Retired Railway Officers
not below senior administrative grade (SAG). The DAB shall be formed
within 90 days of signing of Contract Agreement. For this purpose, the
Authority will maintain a panel of DAB members. The complete panel,
which shall not be less than five members, shall be sent by Authority to
the Contractor to nominate one member of the DAB from the panel as
Contractor’s nominee within two weeks of receipt of the panel. On
receipt of Contractor’s nominee, the Authority shall nominate one
member from the same panel as Authority’s nominee for the DAB. Both
above nominees shall jointly select presiding member of the DAB from
the same panel.
24.2.2 The appointment of DAB shall be effectuated by way of a tri-
partite agreement among the Authority, Contractor and the respective
DAB members. The terms of the remuneration of each member shall be
as fixed by Ministry of Railways from time to time. Each party shall be
responsible for paying one-half of this remuneration.
24.2.3 If one or more of the members appointed refuses to act as DAB
member, or is unable or unwilling to perform his functions as DAB
member for any reason whatsoever or dies or in the opinion of the
Authority fails to act without undue delay, the parties shall terminate the
mandate of such DAB member and thereupon new DAB member shall be
appointed in the same manner, as the outgoing DAB member had been
appointed.
24.2.4 The appointment of any member may be terminated by mutual
agreement of both Parties, but not by the Authority or the Contractor
acting alone. Unless otherwise agreed by both the Parties, the
appointment of the DAB (including each member) shall expire upon
expiry of this Contract Agreement.
24.2.5 Before start of DAB proceedings, each DAB member shall give the
following certificate to the Authority and the Contractor: “I have no any
past or present relationship in relation to the subject matter in dispute,
whether financial, business, professional or other kind. Further, I have
no any past or present relationship with or interest in any of the parties
whether financial, business, professional or other kind, which is likely toSignature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 4 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
give rise to justifiable doubts as to my independence or impartiality.”
24.2.6 DAB proceedings shall be conducted as decided by the DAB. The
DAB shall give its decision within 90 days of a Dispute referred to it by
any of the Parties, duly recording the reasons before arriving at the
decision. The DAB shall decide the issue within terms and conditions of
the contract. This time limit shall be extendable subject to the Parties
mutual agreement.
24.2.7 The DAB decision shall not be binding on both the Parties. In case
any party is not satisfied by the decision of DAB, then the aggrieved
party may approach Standing Arbitral Tribunal for arbitration
proceedings. However, even if the aggrieved party had proceeded for
Arbitration as per provisions of this agreement, 75% of award amount,
pending adjudication by Standing Arbitral Tribunal/Court of Law, shall
be made by party to other party, In case payment is to be made by
Authority to Contractor, the terms & conditions as incorporated in the
Ministry of Railways letter No. 2016/CEC/CT/ARB/3(NITI Aayog)/Pt.
dated 08thMar,2017 as amended time to time shall be followed. However,
in case Contractor has to pay to the Authority, then 75% of the award
amount shall be deducted by the Authority from the running bills or other
dues of the Contractor, pending adjudication by Standing Arbitral
Tribunal/Court of Law.
24.2.8 No dispute shall be referred to Standing Arbitral Tribunal unless
the same has been referred to DAB for adjudication. However, in case
DAB is not formed, due to any reason, the disputes can be directly
referred to Standing Arbitral tribunal to adjudicate the dispute.
24.2.9 In the specific cases of any misconduct by any of the members of
the DAB, the parties shall have the right to specifically bring it to the
notice of the DAB such conduct, through a statement filed with necessary
documents in proof of such misconduct and the DAB, after taking
NOTICE of such conduct initiate the replacement of the member
concerned in the same manner the member to be replaced was appointed.
24.2.10 Once the decision is given by DAB, DAB cannot review the
decision at its own or on the request of one party, unless both parties
agree for review of decision by DAB.
24.2.11 In case DAB decision is not challenged by either party within
180 days of receipt of decision of DAB, the decision shall be considered
as final and Parties would be barred for referring the same to Standing
Arbitral Tribunal for adjudication.
Signature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 5 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
24.2.12 The obligation of the Authority and the Contactor shall not be
altered by reasons of issue being or under reference to DAB.
24.2.13 The DAB shall conduct the proceedings at [Delhi] or any other
convenient venue which shall be decided by DAB in consultations with
parties.
24.2.14 It is a term of this contract that the Parties shall not approach
any Court of Law for settlement of such disputes or differences unless an
attempt has first been made by the parties to settle such disputes or
differences through DAB and Standing Arbitral Tribunal.
24.3 Standing Arbitral Tribunal
24.3.1 The arbitration proceedings shall be conducted as per “The
Arbitration and Conciliation Act, 1996”. The Arbitral Tribunal shall
consist of a panel of three Retired Railway Officers not below senior
administrative Grade (SAG). The Standing Arbitral Tribunal shall be
formed within 90 days of signing of Contract document. For this purpose,
the Authority shall maintain a panel of arbitrators. The complete pane1,
which shall not be less than five members, shall be sent by Authority to
the Contractor to nominate one arbitrator from the panel as Contractor’s
nominee within two weeks of receipt of the panel On receipt of
Contractor’s nominee, the Authority shall appoint above contractor’s
nominee as well as another from the same panel as Authority’s nominee
as arbitrators, Both above arbitrators shall jointly select presiding
arbitrator from the same panel.
24.3.2 If the Contractor fails to select the contractor’s nominee from the
panel within two weeks of the receipt of the said panel, the Authority
shall, after giving one more opportunity to contractor to nominate one as
contractor’s nominee within, next two weeks, appoint two arbitrators
from the same panel. Both above arbitrators shall jointly select presiding
arbitrator from the same panel.
24.3.3 If one or more of the Arbitrators appointed refuses to act as
Arbitrator, withdraws from his office as Arbitrator, or vacates his office
or is unable or unwilling to perform his functions as Arbitrator for any
reason whatsoever or dies or in the opinion of the Authority fails to act
without undue delay, the parties shall terminate the mandate of such
arbitrator and thereupon new arbitrator shall be appointed in the same
manner, as the outgoing arbitrator had been appointed.
24.3.4 Before start of arbitration proceedings, each appointed arbitrator
shall give the following certificate to the Authority and the Contractor:
Signature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 6 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
“I have no any past or present relationship in relation to the subject
matter in dispute, whether financial, business, professional or other kind.
Further, I have no any past or present relationship with or interest in any
of the parties whether financial, business, professional or other kind,
which is likely to give rise to justifiable doubts as to my independence or
impartiality in terms of The Arbitration and Conciliation Act, 1996.”
24.3.5 In the specific cases of any misconduct by any of the members of
the TRIBUNAL, the parties shall have the right to specifically bring it to
the notice of the TRIBUNAL such conduct, through a statement filed with
necessary documents in proof of such misconduct and the TRIBUNAL,
after taking NOTICE of such conduct initiate the replacement of the
member concerned, in the same manner the member to be replaced was
appointed.
24.3.6 Each party has to prepare and furnish to Standing Arbitral
Tribunal and other party, once in a every six months, an account giving
full and detailed particulars of all claims, which even after decision of
DAB are unsettled, to which the parties may consider themselves entitled
to during the last preceding six months. If any dispute has arisen as
regards execution of the works under the contract, while submitting the
said half yearly claims, the parties shall give full particulars of such
dispute in the said submission. After signing Contract agreement, within
6 months, the parties shall submit all the claims from date of award of
contract in first submission of claims.
24.3.7 The said communication will be the reference of the dispute to the
ARBITRAL TRIBUNAL appointed under the present agreement.
24.3.8 The parties shall submit all the relevant documents in support of
their claims and the reasons for raising the dispute to the TRIBUNAL.
24.3.9 The said claims of the parties so referred to ARBITRAL
TRIBUNAL so far it relates to the disputed claims, shall be treated as
Statement of Claims of the parties and the ARBITRAL TRIBUNAL shall
call upon the other party to submit its reply. The ARBITRAL TRIBUNAL
after giving an opportunity of being heard to both the parties, decide the
dispute within a period of Four months from the date of communication
of the dispute under clause 24.3.6 above. The Arbitral Tribunal will pass
a reasoned award in writing, while deciding the Dispute, Once the award
is declared, the Arbitral Tribunal cannot review the same except what is
permissible in terms of provisions contained in Arbitration and
Conciliation Act. The parties shall be entitled to the remedies under the
Arbitration and Conciliation Act1996 or any amendment thereof.
Signature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 7 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
24.3.10 The parties agree that all the claims of any nature whatsoever,
which the parties may have in respect of the work of the preceding six
months, should be made in the said Statements of half yearly claims. If
the parties do not raise the claim, if any, arising from the work done in
the preceding six months in the statement of half yearly claim, to
Standing Arbitral Tribunal, the parties shall be deemed to have waived
and given up the claims. The ARBITRAL TRIBUNAL shall not entertain
such disputes, which have not been raised in the statement of half yearly
Claim before the Standing Arbitral Tribunal and such claims will stand
excluded from the scope of arbitration and beyond the terms of reference
to the ARBITRAL TRIBUNAL.
24.3.11 The parties agree that where the Arbitral award is for payment
of money, no interest shall be payable on the whole or any part of the
money for any period till the date on which the award is made.
24.3.12 The obligation of the Authority and the Contactor shall not be
altered by reasons of arbitration being conducted during the progress of
work. Neither party shall be suspended the work on account of
arbitration and payments to the contractor shall continue to be made in
terms of the contract and /or as awarded (except when Award is
challenged in the Court in which case the payments would be as per the
court’s orders )
24.3.13 The ARBITRAL TRIBUNAL shall remain in force during the
entire period the PRINCIPAL CONTRACT is in force and until the
closure of the PRINCIPALCONTRACT with the final no claim
certificate, which will be filed with ARBITRAL TRIBUNAL.
24.3.14 The Arbitral Tribunal shall conduct the Arbitration proceedings
at [Delhi] or any other convenient venue which shall be decided by
Tribunal in consultation with both parties.
24.3.15 The cost of arbitration shall be borne equally by the respective
parties. The cost shall inter-alia include fee of the arbitrators as per the
rates fixed by the Indian Railways from time to time.
24.3.16 It is a term of this contract that the Contractor shall not
approach any Court of Law for settlement of such disputes or differences
unless an attempt has first been made by the parties to settle such
disputes or differences through conciliation, DAB and Standing Arbitral
Tribunal.
24.3.17 Even in case arbitration award is challenged by a party in the
Court of Law, 75% of award amount, pending adjudication by Court of
Signature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 8 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
Law, shall be made by party to other party. In case payment is to be
made by Authority to Contractor, the terms &conditions as incorporated
in the Ministry of Railways letter No. 2016/CE(I)/CT/ARB/3(NITI
Aayog)/Pt, dated 08thMar, 2017 as amended time to time shall be
followed. However, in case Contractor has to pay to the Authority,
then75% of the award amount shall be deducted by the Authority from
the running bills or other dues of the Contractor, pending adjudication
by Court of Law.
24.3.18 The contract shall be governed by the law for the time being in
force in the Republic of India. In case of any disputes/differences
resulting in court Cases between Contractor & Authority, the jurisdiction
shall be of Courts at [Delhi]Only”
9. Disputes having arisen between the parties, a “Notice of Dispute” was
issued by the petitioner vide communication dated 27.07.2024. In terms of
the prescription in the dispute resolution clause, the respondent was
requested to appoint a conciliator to resolve the disputes between the parties.
The respondent sent a communication dated 09.08.2024 to the petitioner
stating as under :-
“SOUTH WESTERN RAILWAY
W.148/ ARB/BNC/06/24-25 Office of the Chief Administrative
Officer Construction, Cantonment.
Millers Road, Bangalore – 560 001
August 9, 2024
M/s. Jhajharia Nirman Ltd.
Jhajhari Mansion, Jagmal Block,
Bilaspur, Chattisgarh, 495001
Mail Id- [email protected]
Sub: Construction of Electrified Double line track between
Penukondo Junction (Km. 136.694) to Dharmavaram (Km. 176.600)
including Telecommunication &Electrical Works EPC Tender No PKD-
DMM-EPC LOA dt. 19/01/2023
Ref: (1) GM/SWR/UBL Letter No. G/ A-29/2023/DAB (E 99771 &
GB (ARBT)/ 26/2023 dt. 14/12/2023.
(2) This office letter of even number dt. 01/02/2024
******
As per the provisions in the Contract Agreement. Panels of SAT –
Signature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 9 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
Standing Arbitration Tribunal and DAB – Dispute Adjudication Board
have been formed by the Competent Authority vide letter dt. 14/12/2023.
Copy of the same was forwarded vide this office letter of even number dt.
01/02/2024 to resolve/ address the disputes between the Contractor and
Railways, if any.
As per the letter dt. 14/12/2023 from GM/SWR/UBL for DAB &
SAT – on receipt of Contractor’s nominee, the Chief Engineer shall
nominate one member from the same panel as Railway nominee for the
DAB/SAT for EPC Works and process further as per LOA/Contract
Agreement.
In view of the above, your nominee from the DAB/SAT Panel may
be chosen and forwarded to this office for further necessary action
please.
Sd/-
B. V. Baraskar
Chief Materials Manager
Construction/Contonment/SWR”
10. The above letter was responded to by the petitioner on 20.08.2024
stating as follows:-
“Jhajharia Nirman Limited
JNL/PKD-DMM/23-24/DAB&SAT/01 Date: 20.08.2024
To
Chief Materials Manager
South Western Railway
BangaloreThrough Authority Engineer (DyCE/IV/BNC)
Subject: Nominee from DAB & SAT Panel
Ref.:
1. Letter No: W.148/ARB/BNC/DAB dated 01.02.2024.
2. Letter No: W.148/ARB/BNC/06/24-25 dated
09.08.2024.
Signature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 10 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
Dear Sir,
With reference to the above-mentioned letters, we are hereby
nominating the followingmember from the Panel list provided by your
office.
1. For DAB Panel (Dispute Adjudication Board) – Shri. BP Khare,
RetdGM/DLW/Varanasi
2. For SAT Panel (Standing Arbitration Tribunal) – Shri. Ajay
Kumar Lal, RetdPFA&CAO/NRThanking you in anticipation,
For, Jhajharia Nirman LimitedDirector
Copy to:
1. Authority (CE/C-II/BNC) for information please.”
11. In view of the emergent situation created on account of the disputes
between the parties, particularly on account of the alleged withholding of the
RA Bills raised by the petitioner, a communication dated 30.08.2024 was
addressed by the petitioner to the Authority Engineer of the respondent
stating as under:-
“……
As per Article 24 of our contract agreement, Vide clause 24.1 “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 Contractor to the “Authority” through
“Notice of Dispute” provided that no such notice shall be served later
than 30 days after the date of issue of Completion Certificate by the
Authority Engineer. Authority shall, within 30 days after receipt of the
Contractor’s “Notice of Dispute”, notify the name of conciliator(s) to the
Contractor. In case Authority fails to fix Conciliator within 30 days,
Contractor shall be free to approach Dispute Adjudication Board (DAB)
for adjudication of Dispute.” It is clear that after request made on
27.07.2024, name of conciliator has not been communicated to us even
after 33 days.
We would also like to bring to your attention that as per clause 24.2.1″A
dispute/s if not settled through conciliation, shall be referred to DAB.
The DAB shall consist of a panel of three Retired Railway Officers not
below senior administrative grade (SAG). The DAB shall be formedSignature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 11 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
within 90 days of signing of Contract Agreement.” And as per clause
24.2.8″No dispute shall be referred to Standing Arbitral Tribunal unless
the same has been referred to DAB for adjudication. However, in case
DAB is not formed due to any reason, the disputes can be directly
referred to Standing Arbitral Tribunal to adjudicate the dispute.”
Referring to clauses 24.2.1 and 24.2.8, it is clear that the Dispute
Adjudication Board (DAB) was supposed to be established within 90
days following the contract agreement, specifically by August 3, 2023.
However, for any number of reasons best known to the Authority, this has
not occurred. Therefore, according to clause 24.2.8, the contractor has
the right to approach the Standing Arbitral Tribunal instead of
proceeding with DAB proceedings.
In light of this clause, we kindly request the establishment of a SAT
Panel, and since the panel of the given 5 members does not fulfill the
criteria as laid down by the Hon’ble Supreme Court, we request you to
provide us a broader panel in terms of the said law or we can proceed to
appoint our nominee, so as to proceed urgently with the constitution of
the 3 Member Arbitral Tribunal.
We would also like to highlight, as per clause 24.3.12 “The obligation of
the Authority and the Contactor shall not be altered by reasons of
arbitration being conducted during the progress of work. Neither party
shall be suspended the work on account of arbitration and payments to
the contractor shall continue to be made in terms of the contract and /or
as awarded (except when Award is challenged in the Court in which case
the payments would be as per the court’s orders).”
In accordance with clause 24.3.12, it is clear that payments are required
to be disbursed to the contractor during the Tribunal proceedings.
Therefore, we kindly ask that you notify the Accounts department of
BNC/SWR, enabling us to submit our invoices and facilitate the release
of payment.
Given that the project is currently in a critical phase and our payments
have been suspended due to your unilateral decision, we are finding it
increasingly challenging to maintain operations. We kindly request your
prompt action in appointing the Arbitral Tribunal for early effective
adjudication of the dispute and also furthermore advising AFA/BNC on
the release of payments for the invoices that will be submitted. Pl note for
full disclosure, we have filed proceedings before the Hon’ble Delhi High
Court as well, which your good self is well aware and duly represented.”
12. No response to the said communication was sent by the respondent to
Signature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 12 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
the petitioner.
13. In the above backdrop, the present petition has been filed by the
petitioner seeking appointment of a sole arbitrator to adjudicate the disputes
between the parties.
14. Mr. Anurag Ahluwalia, learned standing counsel for the respondent
has sought to oppose the present petition on the following grounds :-
i. It is submitted that the present petition is not maintainable inasmuch
as the petitioner has filed the same without taking the mandatory pre-
requisites prior to invocation of the arbitration i.e. reference of the
matter to Conciliator and thereafter to the Dispute Adjudication Board
(DAB) to resolve the disputes.
ii. It is also submitted that constitution of the arbitral tribunal has to be in
accord with the prescription of the Contract and it is not permitted to
deviate therefrom. In this regard, he relies upon the judgment of the
Supreme Court in the case of Central Organization for Railway
Electrification v. ECI-SPIC-SMO-MCML (JV) a Joint Venture
Company (2020) 14 SCC 712.
15. Having considered the rival contention of the respective counsel, I
find no impediment in constituting an arbitral tribunal to adjudicate the
disputes between the parties.
16. As regards, the first objection that the petitioner be compelled to
participate in conciliation and in proceedings before DAB before referring
the dispute to arbitration, it is notable that the petitioner requested for
appointment of a conciliator vide letter dated 27.07.2024, in terms of the
relevant provisions in the Contract. The concerned Authority of the
respondent was obliged to notify the petitioner of the name of the conciliator
Signature Not Verified
Digitally Signed ARB.P. 1493/2024 & O.M.P.(I) (COMM.) 280/2024 Page 13 of 22
By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
within 30 days. The same was admittedly not done, although the Conciliator
is stated to have been nominated belatedly after the disputes between the
parties had escalated further to a significant extent.
17. Further, the constitution of the DAB in the present case was belated
and not within the timeframe stipulated in the Contract Agreement. In terms
of the Contract, the DAB was to be formed within the 90 days of signing of
the contract agreement. Admittedly, the same was not done.
18. In numerous judicial precedents, this Court has taken the view that
any pre-condition in an arbitration agreement obliging one of the contracting
parties to either exhaust the pre-arbitral amicable resolution avenues or to
take recourse to Conciliation are directory and not mandatory.
19. In this regard, reference may be made to Oasis Projects
Ltd. v. National Highway & Infrastructure Development Corporation
Limited(2023) 1 HCC (Del) 525, wherein the Court has observed as under:
“12. The primary issue to be decided in the present petition is,
therefore, as to whether it was mandatory for the petitioner to
resort to the conciliation process by the Committee before
invoking arbitration. Though Article 26.2 clearly states that
before resorting to arbitration, the parties agree to explore
conciliation by the Committee, in my opinion, the same cannot
be held to be mandatory in nature. It needs no emphasis that
conciliation as a dispute resolution mechanism must be
encouraged and should be one of the first endeavours of the
parties when a dispute arises between them. However, having
said that, conciliation expresses a broad notion of a voluntary
process, controlled by the parties and conducted with the
assistance of a neutral third person or persons. It can be
terminated by the parties at any time as per their free will.
Therefore, while interpreting Article 26.2, the basic concept of
conciliation would have to be kept in mind.”
[Emphasis supplied]
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By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39
20. In Kunwar Narayana v. Ozone Overseas Pvt. Ltd 2021:DHC:496, the
Court has made the following observations:
“5. Ms. Pahwa, learned Counsel for the respondents submitted
that her only objection, to the petition, was that the petitioner
has not exhausted the avenue of amicable resolution,
contemplated by Clause 12 of the Share Buyback Agreement. I
am not inclined to agree with this submission. The recital of
facts, as set out in the petition, indicate that efforts at trying to
resolve the disputes, amicably were made, but did not succeed.
Even otherwise, the Supreme Court in Demarara Distilleries
Pvt. Ltd. v. Demerara Distilleries Ltd. and this Court, in its
judgment in Ravindra Kumar Verma v. BPTP Ltd., opined that
relegation of the parties to the avenue of amicable resolution,
when the Court is moved under Section 11(6) of the 1996 Act,
would be unjustified, where such relegation would merely be in
the nature of an empty formality. The arbitration clause in the
present case does not envisage any formal regimen or protocol
for amicable resolution, such as issuance of a notice in that
regard and completion of any stipulated time period thereafter,
before which arbitral proceedings could be invoked. In the
absence of any such stipulation, I am of the opinion, following
the law laid down in Demarara Distilleries Pvt. Ltd. and
Ravindra Kumar Verma v. BPTP Ltd. nothing worthwhile would
be achieved, by relegating the parties to explore any avenue of
amicable resolution. Besides, the appointment of an arbitrator
by this Court would not act as an impediment in the parties
resolving their disputes amicably, should it be possible at any
point of time.”
21. This Court in Subhash Infraengineers (P) Ltd. v. NTPC Ltd. 2023
SCC OnLine Del 2177 has held as under:–
“21. In this regard, it is relevant to note that in terms of Section
62(3) of the Act, it is open for a party to reject the invitation to
conciliate. Further, in terms of Section 76 of the Act, the
conciliation proceedings can be terminated by a written
declaration of a party and there is no legal bar in this regard. In
the present case, Clause 7.2.5 of the GCC expressly provides
that “parties are free to terminate Conciliation proceedings atSignature Not Verified
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any stage as provided under the Arbitration and Conciliation
Act, 1996.”
***
28. In the present case, the clause/pre arbitral mechanism
contemplates mutual consultation followed by conciliation. As
noticed in Abhi Engg. and Oasis Projects, conciliation is a
voluntary process and once a party has opted out of
conciliation, it cannot be said that the said party cannot take
recourse to dispute resolution through arbitration.”
22. Also, given that the disputes between the parties require urgent
adjudication, it would be wholly untenable to compel the parties to go
through the motions of conciliation / DAB proceedings before referring the
disputes to arbitration. This Court in Pele Khezhie v. National Highways
and Infrastructure Development Corporation Limited 2023 SCC OnLine
Del 5320, while relying upon the aforementioned judgments has made the
following observations:
12. In the present case, grave urgency has been expressed by the
petitioner in seeking reference of the disputes to the arbitration
inasmuch the respondent has issued a notice of intention to terminate
the contract. In the circumstances, in view of the urgent adjudication
sought by the petitioner, it would be unwarranted to relegate the
petitioner to conciliation. As held in Oasis Projects (supra)
and Subhash Infraengineers (supra), Section 77 of the A&C Act itself
contemplates that notwithstanding any conciliation proceedings, it is
open to a party to initiate arbitration proceedings where such
proceedings are necessary for preserving its rights.
13. As such, there is no merit in the contentions raised by learned
counsel for the respondent that it is not open to the petitioner to seek
arbitration till the conciliation process, contemplated in Article 26.2
(supra) is exhausted.”
(Emphasis supplied)
23. As such, this Court finds no merit in the first objection raised by the
learned counsel for the respondent.
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By:KAMLA RAWAT
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17:09:39
24. Even as regards the second objection, it is notable that this Court has
had occasion to consider the arbitration agreement involving an appointment
procedure similar to the one prescribed in the present case.The arbitration
Clause in the present matter stipulates that the Arbitral Tribunal will consist
of three retired railway officers of at least Senior Administrative Grade
(SAG)and the Authority will maintain a panel of at least five arbitrators. The
panel will be sent to the contractor, who must choose one arbitrator as their
nominee within two weeks. The Authority will then appoint the contractor’s
nominee and another from the same panel as its own nominee. These two
arbitrators will jointly select a presiding arbitrator from the same panel.
Further, it is provided that the contractor does not select a nominee within
the given two weeks, the Authority will give an additional two weeks. If the
contractor still fails to nominate, the Authority will appoint two arbitrators
from the panel, and they will jointly select the presiding arbitrator.
25. It has been held in a catena of judgments that the above mentioned
appointment procedure does not meet with the requirement of law. In Margo
Networks Pvt. Ltd. & Anr. v. Railtel Corporation of India Ltd.,
2023:DHC:4596, it was held as under :
(i) In the context of appointment procedure contemplating
appointment out of panel of arbitrators maintained by one of the
contracting parties, it is mandatory that the panel should be sufficiently
broad-based, failing which the appointment procedure does not meet
with the requirements of law. Referring Voestalpine Schienen Gmbh
vs. Delhi Metro Rail Corporation Ltd, (2017) 4 SCC 665, it was held
that an arbitrator panel must be broad-based, and not restrictive. This
requirement was found to be not fulfilled where the panel comprisedSignature Not Verified
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solely of ex-employees of a party.
(ii) A valid appointment procedure must be balanced and not
confer excessive say or authority on one of the parties to the arbitration,
as regards constitution of the arbitral tribunal. An appointment
procedure which contemplates that one party appoints two out of three
members of the arbitral tribunal, the appointment procedure
contravenes this requirement.
26. The relevant observations made by this Court in Margo Networks
Pvt. Ltd. (supra)are as follows –
“35. Thus, in an appointment procedure involving appointment from a
panel made by one of the contracting parties, it is mandatory for the
panel to be sufficiently broad based, in conformity with the principle laid
down in Voestalpine (supra), failing which, it would be incumbent on the
Court, while exercising jurisdiction under Section 11, to constitute an
independent and impartial Arbitral Tribunal as mandated in TRF (supra)
and Perkins (supra). The judgement of the Supreme Court in CORE does
not alter the position in this regard.
36. In the facts of the present case, applying the principles laid down in
Voestalpine (supra) and in view of the aforesaid judgments of this Court,
including in L&T Hydrocarbon Engineering Limited (supra), it is evident
that the panel offered by the respondent to the petitioner in the present
case is restrictive and not broadbased. The same adversely impinges
upon the validity of the appointment procedure contained in clause
3.37 (supra), and necessitates that an independent Arbitral Tribunal be
constituted by this Court.
37. This brings us to the next issue that arises in the context of the
arbitration clause in the present case, viz. whether “counter balancing”
is achieved in a situation where one of the parties has a right to choose
an arbitrator from a panel whereas 2/3rd of the members of the arbitral
tribunal are appointed by the other party.
***
42. …. The “counter balancing” as contemplated in Perkins (supra)
cannot be said to have been achieved in a situation where one of the
parties has a right to choose an arbitrator from a panel and where the
remaining (2 out of 3) arbitrators are appointed by the other party.”
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27. The observations made in Margo Networks Pvt. Ltd. (Supra) have
been further referred by this Court in Taleda Square Private Limited v. Rail
Land Development Authority2023 SCC OnLine Del 6321, Kalyan Toll
Infrastructure Ltd v. Union of India and Others 2024 SCC OnLine Del
1525and Techno Compact Builders through Mr. Zulfiquar Ali, Sole
Proprietor v. RAILTEL Corporation of India Limited, 2024 SCC OnLine
Del 2166.
28. Consequently, in terms of the said judgment in Margo Networks Pvt.
Ltd. (Supra) and other judgments of the Co-ordinate Bench of this Court, it
is incumbent on this Court to appoint an independent arbitral tribunal to
adjudicate the disputes between the parties. In this regard, reference may be
made to S.N. Naik & Brothers v. Union of India 2024 SCC OnLine Bom
995, wherein, it has been observed as under :-
“18. Thus, in the case of CORE (supra), the Hon’ble Supreme Court has
applied the above clause 64(3)(b)(ii) and held that the High Court could
have not appointed independent sole arbitrator. However, in the case of
CORE (supra)as discussed hereinafter, the Hon’ble Supreme Court was
not called upon to decide whether clause 64(3)(b)(ii) is in confirmity of
principles laid down in TRF (supra) i.e. whether the arbitral panel is
broad based and in Perkins (supra), more particularly, whether the
counter balance is achieved in appointing the arbitral panel. The
Hon’ble Supreme Court in the case of CORE (supra) has not whittled
down the principles laid down in TRF and Perkins (supra). The issues
answered in the judgment of CORE (supra) are, whether the retired
railway officers are eligible to be appointed as arbitrators and whether
the General Manager is eligible to nominate the arbitrators.
19 In Tantia Constructions (supra) the Hon’ble Supreme Court has
doubted the view taken in the case of CORE (supra) observing that once
the appointing authority itself is incapcity from referring the matter to
arbitrator it does not follow that notwithstanding this yet appointments
may be valid depending upon the facts of the case. However, CORE
(supra), has not dealt with the issue of counter balance achieved in terms
of Perkins (supra). As such, the law laid down in the judgment of CORE
(supra) is limited to the issues answered in CORE (supra). The same isSignature Not Verified
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the view taken by the Delhi High Court in the below discussed judgments.
xxx xxx xxx
23. I am in respectful agreement with the view expressed by the Delhi
High Court in the case of Gangotri (supra) and Ganesh Engineering
(supra) that the judgment of CORE (supra) of the Hon’ble Supreme
Court does not deal with the issue, whether the arbitral panel appointed
is broad based in confirmity with voelstapine (supra) and whether the
counter balancing is achieved as laid down in Perkins (supra). Coming
to the facts of the present case, 2/3 arbitral panel is appointed by the
respondent so also for the 3rd member of the arbitral tribunal 4 names
are suggested by the respondent from which the petitioner is required to
choose 2 names and from the 2 names chosen by the petitioner, the
respondent will appoint one. Thus, the respondent has a complete say in
the appointment of the tribunal.
24. Having considered the law on the subject the question as raised at
para 8(1) can be answered as under:-
Clause 64(3)(b)(ii) of the General Conditions of Contract provides
for unilateral appointment of arbitral tribunal at the hands of one of the
parties and, thus, is in violation of the principles laid down in
Voestalpine (supra), TRF (supra) and Perkins (supra) and also in
violation of the law laid down in the case of Lombard (supra) and the
said clause is ex-faice invalid and the tribunal constituted thereunder is
non-est and void ab initio.
xxx xxx xxx
29. In view of this, in exercise of the powers under section 11(6) of the
Arbitration Act, I appoints Hon’ble Shri Naresh H. Patil (Retired Chief
Justice, Bombay High Court) as sole arbitrator in the matter to decide
the disputes arising between the parties in terms of agreement dated
23.09.2019. The sole arbitrator’s fees shall be governed by the Bombay
High Court (Fee Payable to Arbitrators) Rules, 2018.”
29. Also, a Coordinate Bench of this Court in M/S Twenty-Four Secure
Services Pvt. Ltd. v. M/S Competent Automobiles Company Limited
2024/DHC/4601,observed as under :-
“22. In Union of India (UOI) vs. Singh Builders Syndicate (2009) 4 SCC
523 the High Court rejected the contention on behalf of the Government
that the Court was not vested with any powers to appoint a SoleSignature Not Verified
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Arbitrator in distinction to the Arbitration Agreement which provided for
the Tribunal of three members. The Apex Court upheld the order of this
Court appointing a Sole Arbitrator by observing that the appointment of
the Sole Arbitrator was valid.
23. In view of the submissions made as well as Clause 7 of the Services
Agreement dated 16.08.2021 which provides for arbitration and the
petitioner has raised the arbitrable disputes and without prejudice to the
rights and contentions of the parties, the present petition is allowed….. .”
30. Accordingly, this Court finds no impediment in appointing a sole
arbitrator to adjudicate the disputes between the parties.
31. Accordingly, Mr. Justice (Retd.) Pradeep Nandrajog, Former Chief
Justice, Bombay High Court (Mobile No.:9818000130), is appointed as the
Sole Arbitrator to adjudicate the disputes between the parties.
32. The respondent shall be entitled to raise preliminary objections as
regards jurisdiction/arbitrability, which shall be decided by the learned
arbitrator, in accordance with law.
33. The learned Sole Arbitrator may proceed with the arbitration
proceedings subject to furnishing to the parties requisite disclosures as
required under Section 12 of the A&C Act.
34. The learned Sole Arbitrator shall be entitled to fee in accordance with
Fourth Schedule to the A&C Act; or as may otherwise be agreed to between
the parties and the learned Sole Arbitrator.
35. The parties shall share the arbitrator’s fee and arbitral costs, equally.
36. All rights and contentions of the parties in relation to the
claims/counter-claims are kept open, to be decided by the learned Arbitrator
on their merits, in accordance with law.
37. Needless to say, nothing in this order shall be construed as an
expression of this court on the merits of the case.
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38. The present petition stands disposed of in the above terms.
O.M.P.(I) (COMM.) 280/2024
39. This is a petition under Section 9 of the A&C Act seeking urgent
interim orders.
40. It is averred in the petition that an emergent situation has been created
on account of actions of the respondents in imposing unreasonable penalty
on the petitioner and withholding excessive amounts from the RA Bills
raised by the respondents.
41. It is submitted by the learned senior counsel for the petitioner that the
same is having a crippling impact on the petitioner and on the work in
question, necessitating urgent interim orders.
42. Since a learned sole arbitrator has been appointed to adjudicate the
disputes between the parties, it would be apposite if the present petition
under Section 9 of the A&C Act is treated as an application under Section
17 of the A&C Act and accordingly dealt with by the learned sole
Arbitrator. It is directed accordingly.
43. In view of the urgency emphasized by the learned senior counsel, the
petitioner shall be at liberty to request the learned sole Arbitrator for
expeditious consideration thereof.
44. The present petition is disposed of with the aforesaid directions. The
pending applications are also disposed of.
SACHIN DATTA, J
OCTOBER 7, 2024
r, sv
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By:KAMLA RAWAT
Signing Date:13.10.2024
17:09:39