M/S S S Builders v. Union Of India

$~28 * IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of Decision : 27.09.2024 + ARB.P. 1512/2024 M/S S S BUILDERS .....Petitioner Through:

Mr. Ashok Singh, Adv.

versus UNION OF INDIA .....Respondent Through:

Mr. Vineet Dhanda, CGSC for UOI.

Mr. Tanveer Ahmed Ansari, SPC and Mr. Hilal Haider, GP for UOI (through v/c).

CORAM:

HON'BLE MR. JUSTICE SACHIN DATTA SACHIN DATTA, J. (Oral) IA No.40619/2024 (Exemption) 1.

Allowed, subject to all just exceptions.

2.

Application stands disposed of.

ARB.P. 1512/2024 3.

The present petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeks appointment of an independent Sole Arbitrator to adjudicate the disputes that have arisen between the parties. 4.

Disputes have arisen between the parties in the context of a workcontract pertaining to "Provision of 6.10 Mtr. wide FOB (Total Length 41.00 Mtr.) at Rajlu Garhi Station in connection with yard remolding work of CONCOR siding".

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5.

It is submitted that the petitioner had made arrangements for execution of the work in right earnest, but work could not be completed within the schedule stipulated in the contract due to alleged breaches on the part of the respondent.

6.

It is further submitted that the petitioner was not handed over a proper working site nor the necessary approved General Arrangement Drawings (GAD). It is alleged that requisite payments were also not made in a timely manner. It is further submitted that in the absence of a Price Adjustment Clause in the contract, the petitioner had to incur additional expenses on account of the delay in work. It is also the case of the petitioner that during the course of execution of the contract, it was required to deploy additional/extra equipments and machinery.

7.

In the aforesaid facts, the petitioner made a request for release of payments to the respondent by a letter dated 29.07.2023. However, disputes regarding the monetary entitlement of the petitioners having persisted and festered during the currency of the contract, the petitioner invoked the arbitration clause and issued a letter dated 03.08.2024. Vide the said letter, while setting out the pending claims of the petitioner, the respondent requested to appoint an independent arbitrator in terms of the applicable general conditions of the contract.

8.

Admittedly, the general conditions of contract contain an arbitration clause, incorporating an arbitration agreement in the following terms: "64.(1): Demand for Arbitration:

64.(1)(i): In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter ARB.P. 1512/2024 Page 2 of 10

in question, dispute or difference on any account or as to the withholding by the Railway of any certificate to which the Contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of-the "excepted matters" referred to in Clause 63.1 of these Conditions, the Contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters shall demand in writing that the dispute or difference be referred to arbitration.

64.(1)(ii)(a): The demand for arbitration shall specify the matters which are in question, or subject of the dispute or difference as also the amount of claim item-wise. Only such dispute or difference, in respect of which the demand has been made, together with counter claims or set off, given by the Railway, shall be referred to arbitration and other matters shall not be included in the reference.

64.(1)(ii)(b): The parties may waive off the applicability of SubSection 12(5) of Arbitration and Conciliation (Amendment) Act 2015, if they agree for such waiver in writing, after dispute having arisen between them, in the format given under Annexure XV of these conditions.

64.(1)(iii)(a): The Arbitration proceedings shall be assumed to have commenced from the day, a written and valid demand for arbitration is received by the Railway.

64.(1)(iii)(b): The claimant shall submit his claims stating the facts supporting the claims alongwith all the relevant documents and the relief or remedy sought against each claim within a period of 30 days from the date of appointment of the Arbitral Tribunal. 64.(1)(iii)(c): The Railway shall submit its defence statement and counter claim(s), if any, within a period of 60 days of receipt of copy of claims from Tribunal, unless otherwise extension has been granted by Tribunal.

64.(1)(iii)(d): Place of Arbitration: The place of arbitration would be within the geographical limits of the Division of the Railway ARB.P. 1512/2024 Page 3 of 10

where the cause of action arose or the Headquarters of the concerned Railway or any other place with the written consent of both the parties.

64.1(iv):No new claim shall be added during proceedings by either-party. However, a party may amend or supplement the original claim or defense thereof during the course of arbitration proceedings subject to acceptance by Tribunal having due regard to the delay in making it.

64.(1)(v): If the Contractor(s) does/do not prefer his/their specific and final claims in writings within a period of 90 days of receiving the intimation from the Railways that the final bill is ready for payment, he/they will be deemed to have waived his/their claim(s) and the Railway shall be discharged and released of all liabilities under the contract in respect of these claims. 64.(2): Obligation During Pendency of Arbitration: Work under the contract shall, unless otherwise directed by the Engineer, continue during the arbitration proceedings, and no payment due or payable by the Railway shall be withheld on account of such proceedings, provided, however, it shall be open for Arbitral Tribunal to consider and decide whether or not such work should continue during arbitration proceedings.

64.(3): Appointment of Arbitrator:

64.(3)(a): Appointment of Arbitrator where applicability of section 12 (5) of Arbitration and Conciliation Act has been waived off:

64.(3)(a)(i): In cases where the total value of all claims in question added together does not exceed ₹1,00,00,000/- (Rupees One Crore), the Arbitral Tribunal shall consist of a Sole Arbitrator who shall be a Gazetted Officer of Railway not below Junior Administrative Grade, nominated by the General Manager. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by General Manager.

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64.(3)(a)(ii): In cases not covered by the Clause 64(3)(a)(i), the Arbitral Tribunal shall consistof a panel of three Gazetted Railway Officers not below Junior Administrative Grade and or 2 Railway Gazetted Officers not below Junior Administrative Grade and a retired Railway Officer, retired not below the rank of Senior Administrative Grade Officer, as the arbitrators. For this purpose, the Railway will send a panel of at least four (4) names of Gazetted Railway Officers of one or more departments of the Railway which may also include the name(s) of retired Railway Officer(s) empanelled to work as Railway Arbitrator to the Contractor within60 days from the day when a written and valid demand for arbitration is received by the General Manager.

Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as Contractor's nominee within 30 days from the date of dispatch of the request by Railway. The General Manager shall appoint at least one out of them as the Contractor's nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the 'presiding arbitrator' from amongst the3 arbitrators so appointed. General Manager shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of Contractor's nominees. While nominating the arbitrators, it will be necessary to ensure that one of them is from the Accounts Department.

An officer of Selection Grade of the Accounts Department shall beconsidered of equal status to the officers in Senior Administrative Grade of other departments of the Railway for the purpose of appointment of arbitrator.

64:3.(a)(iii): The serving railway officer working in arbitral tribunal in the ongoing arbitration as per clause 64.(3)(a)(i) and clause cases 64.(3)(a)(ii) above, can continue as arbitrator in the tribunal even after his retirement.

64.(3)(b): Appointment of Arbitrator where applicability of Section 12 (5) of Arbitration and Conciliation Act has not been waived off:

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(i) In cases where the total value of all claims in question added together does not exceed 50,00,000/- (Rupees Fifty Lakh), the Arbitral Tribunal shall consist of a Retired Railway Officer, retired not below the rank of Senior Administrative Grade Officer, as the arbitrator. For this purpose, the Railway will send a panel of at least four (4) names of retired Railway Officer(s) empanelled to work as Railway Arbitrator duly indicating their retirement dates to the Contractor within 60 days from the day when a written and valid demand for arbitration is received by the General Manager. Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as arbitrator within 30 days from the date of dispatch of the request by Railway. The General Manager shall appoint at least one out of them as the arbitrator.

(ii) In cases where the total value of all claims in question added together exceed Rs.50,00,000/-(Rupees Fifty Lakh), the Arbitral Tribunal shall consist of a Panel of three (3) retired Railway Officer, retired not below the rank of Senior Administrative Grade Officer, as the arbitrators. For this purpose, the Railway will send a panel of at least four (4) names of retired Railway Officer(s) empanelled to work as Railway Arbitrator duly indicating their retirement date to the Contractor within 60 days from the day when a written and valid demand for arbitration is received by the General Manager.

Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as Contractor's nominee within 30 days from the date of dispatch of the request by Railway. The General Manager shall appoint at least one out of them as the Contractor's nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the 'Presiding Arbitrator' from amongst the 3arbitrators so appointed. General Manager shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of Contractor's nominees. While nominating the arbitrators, it will be necessary to ensure that one of them has served in the Accounts Department. ARB.P. 1512/2024 Page 6 of 10

64.(3)(c)(i): If one or more of the arbitrators appointed as above refuses to act as arbitrator withdraws from his office as arbitrator, or vacates his/their office/offices or is/are unable or unwilling to perform his functions as arbitrator for any reason whatsoever or is/are unable or dies or in the opinion of the General Manager fails to act without undue delay, the General Manager shall appoint new arbitrator/arbitrators to act in his/their place in the same manner in which the earlier arbitrator/arbitrators had been appointed. Such re-constituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator (s).

64.(3)(c)(ii): (a) The Arbitral Tribunal shall have power to call for such evidence by way of affidavits or otherwise as the Arbitral Tribunal shall think proper, and it shall be the duty of theparties hereto to do or cause to be done all such things as may be necessary to enable the Arbitral Tribunal to make the award without any delay. The proceedings shall normally be conducted on the basis of documents and written statements.

(b) Before proceeding into the merits of any dispute, the Arbitral Tribunal shall first decide and pass its orders over any plea submitted/objections raised by any party, if any, regarding appointment of Arbitral Tribunal, validity of arbitration agreement, jurisdiction and scope of the Tribunal to deal with the dispute (s) submitted to arbitration, applicability of time limitation to any dispute, any violation of agreed procedure regarding conduct of the arbitral proceedings or plea for interim measures of protection and record its orders in day to day proceedings. A copy of the proceedings duly signed by all the members of tribunal should be provided to both the parties.

64.3(c)(iii): (i) Qualification of Arbitrator (s): (a) Serving Gazetted Railway Officers of not below JA Grade level. (b) Retired Railway Officers not below SA Grade level, one year after his date of retirement.

(c) Age of arbitrator at the time of appointment shall be below 70 ARB.P. 1512/2024 Page 7 of 10

years.

(ii) An arbitrator may be appointed notwithstanding the total number of arbitration cases which he has been appointed in the past.

(iii) While appointing arbitrator(s) under Sub-Clause 64.(3)(a)(i), 64.(3)(a)(ii), 64.(3)(b)(i) &64.(3)(b)(n) above, due care shall be taken that he/they is/are not the one/those who had an opportunity to deal with the matters to which the contract relates or who in the course of his/their duties as Railway servant(s) expressed views on all or any of the matters under dispute or-differences. A certification to this effect as per annexure- XVI shall be taken from Arbitrators-also. The proceedings of the Arbitral tribunal or the award made by such Tribunal will, however, not be invalid merely for the reason that one or more arbitrator had, in the course of his service, opportunity to deal with the matters to which the contract relates' or who m the course of his/their duties expressed views on all or any of the matters under dispute.

64.(3)(d)(i): The arbitral award shall state item wise, the sum and reasons upon which it is The analysis and reasons shall be detailed enough so that the award could be inferred therefrom. 64.(3)(d)(ii): A party may apply for correction of any computational errors, any typographical or clerical errors or any other error of similar nature occurring in the award of a Tribunal and interpretation of a specific point of award to Tribunal within 60 days of receipt of the award.

64.(3)(d)(iii): A party may apply to Tribunal within 60 days of receipt of award to make an additional award as to claims presented in the arbitral proceedings but omitted from the arbitral award.

64.(4): In case of the Tribunal, comprising of three members, any ruling on award shall be made by a majority of members of Tribunal. In the absence of such a majority, the views of the Presiding Arbitrator shall prevail.

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64.(5): Where the arbitral award is for the payment of money, no interest shall be payable on whole or any part of the money for any period till the date on which the award is made. 64.(6): The cost of arbitration shall be borne by the respective parties. The cost shall inter-alia include fee of the arbitrators), as per the rates fixed by Railway Board from time to time and the fee shall be borne equally by both the parties, provided parties sign an agreement in the format given at Annexure XV to these condition after/ while referring these disputes to Arbitration.

Further, the fee payable to the arbitrator(s) would be governed by the instructions issued on the subject by Railway Board from time to time irrespective of the fact whether the arbitrator(s) is/are appointed by the Railway Administration or by the court of law unless specifically directed by Hon'ble court otherwise on the matter. 64.(7): Subject to the provisions of the aforesaid Arbitration and Conciliation Act 1996 and the rules thereunder and relevant para of General Conditions of Contract (GCC) and any statutory modifications thereof shall apply to the appointment of arbitrators and arbitration proceedings under this Clause." 9.

A similar arbitration agreement has been construed by this Court in Margo Networks (P) Ltd. v. Railtel Corpn. of India Ltd., 2023 SCC OnLine Del 3906, and it has been held that the appointment procedure contemplated thereunder does not meet the requirements under law since it is skewed in favour of one of the contracting parties. It has been held that in such cases, it is incumbent on this Court to appoint an independent arbitrator to adjudicate the disputes between the parties. 10.

Learned counsel for the respondent, who appears on advance notice fairly submits that an independent arbitrator be appointed by this Court to adjudicate the disputes between the parties.

11.

Accordingly, Mr.

Ganesh Khemka, Advocate (Mob.

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No.:9463441118) is appointed as the Sole Arbitrator to adjudicate the disputes between the parties.

12.

The respondent shall be entitled to raise appropriate jurisdictional objections, if any, which shall be duly considered and adjudicated by the arbitrator, in accordance with law.

13.

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.

14.

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.

15.

The parties shall share the arbitrator's fee and arbitral costs, equally. 16.

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.

17.

Needless to say, nothing in this order shall be construed as an expression of this court on the merits of the case. 18.

The present petition stands disposed of in the above terms. SACHIN DATTA, J SEPTEMBER 27, 2024/cl ARB.P. 1512/2024 Page 10 of