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IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN
AT JODHPUR
JUDGMENT
Anand Bhatia vs. The Union of India
S.B.Civil Misc. Application (Arbitration) No.66/2006
under section 11 (8) of the Arbitration and
Reconciliation Act, 1996.
DATE OF JUDGMENT :: 18.12.2008
PRESENT
HON'BLE MR.JUSTICE MANAK MOHTA
Mr.H.R.Soni for the petitioner.
Mr.Kamal Dave for the respondent.
BY THE COURT :
The instant Civil Misc. Application is being filed for the
appointment of the arbitrator to adjudicate the claim of the
applicant under sections 12,13,14,15 read with section 11 (8)
of the Arbitration Act 1996 (hereinafter referred to as the Act
of 1996′).
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The brief facts of the case for the just disposal of this
application are that from the perusal of the record it reveals
that an agreement was entered into between the Union of
India and the appellant on 23rd October 1991 regarding
supply from AQG Quarry 30,000 cubic meter of 65 mm gauge
ballast to the Northern Railway specification and stacking
on the railway land at Pokaran Railway Station, then loading
into railway wagons at Pokaran Railway Station . Copy of the
said agreement was annexed as Annx.5. It was further
submitted that under the said contract the Railway Authority
used to assign the vacant lands for stacking the ballast and
then further railway authority was duty bound to provide DMT
( Special Train ) for lifting stacked ballast . The contractor was
to stack ballast at the specified land / plots to be allotted by
Railway for the purpose of stacking, and further within the
contract period Railway was to provide DMT so that the
material already stacked may be removed and contractor may
further stack the material by following same process.
It was submitted that the material so required was to be
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stacked near the Railway land only and it was to be stacked
in huge quantity only on the specified land /plot demarcated
for this purpose but the Railway was not having much more
land/plots demarcated, the supply which was agreed, that was
30,000 cubic meter, was to be stacked as per the terms of the
contract but then the precondition for the purpose of the work
on the part of the Railway was that the railway was to supply
the DMT for lifting already stacked ballast by employing huge
quantity of labour and expanding huge amount of money for
bringing the trucks, stack all the plots allotted to him but then
within the stipulated time the railway could not supply the
requisite number of DMT and in absence of the same, the plot
already stacked could not be cleared and as per the clear
terms of the contract, unless and until the already stacked
material is cleared, the applicant could not have stacked the
other round of the ballast. It was further submitted that the
applicant performed his part to the best of his ability and still
made several demands to supply him DMT, so as to clear the
already stacked plots by lifting the stacked material, but all
efforts of the applicant could not be materialised as the railway
did not provide him DMT in time.
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In this respect, it was further submitted that numerous
representations were made on behalf of the applicant. The
applicant has nowhere shown his inability to perform the work
in the contract period and after expiry of the contract period,
the applicant was not in a position to perform the work because
of escalation and high rise of labour cost, transportation
charges and royalty etc. It was submitted that the railway
authority, without considering the factual position, unilaterally
without authority, wrongfully forfeited the security amount of
the applicant and also imposed penalty on the applicant . It
was alleged that the railway authority was not authorised to
impose penalty . On the basis of the aforesaid submissions , it
was submitted that thus there arose a valid referable dispute
with regard to said contract. It was also submitted that as per
terms of the contract and as per agreed general conditions of
the contract , all disputes with regard to contract was to be
adjudicated by arbitral proceedings. The applicant in that
respect moved the authority. The applicant in his application
submitted the valuation of the dispute amount to be Rs.50lacs
plus interest @ 24% per annum from the date the amount
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became due to the applicant.
It was submitted that as per provisions of General
Conditions of Contract the dispute was referable for
adjudication to two arbitrators. It was further submitted in the
application that the railway authority, without caring the
relevant provisions , proceeded in an arbitrary manner. As per
agreed terms and conditions, out of the two arbitrators one
would be appointed by Railway authority and one of them
would be nominee of the party and they will further appoint
umpire. But the railway authority did not proceed as per true
spirit of the terms and appointed sole arbitrator namely
Rashmi Chawala. Thereafter, the petitioner submitted an
application for the appointment of the arbitrator as per agreed
terms, on which orders were passed to appoint arbitrator in
accordance with clause 64 of General Conditions of
(Regulations and Instructions for Tenderers and Standard
Forms ) Contract. It is further revealed that thereafter two
arbitrators were appointed. Rashmi Goyal was nominated as
Railway nominee and B.K. Gupta, Dy.CE/C/Ju.II Northern
Railway, Jodhpur was nominated as contractor’s nominee on
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the suggestion of the applicant. In this connection reference
was made to Annx.1. It was further contended that these
nominated arbitrators, in fact, never entered into reference.
It was also submitted that one of the arbitrator
B.K.Gupta, the nominee on the part of the contractor, lodged
an FIR against the applicant before the RPE that the applicant
had committed theft of the railway property, which he was
required to transport under another contract agreement with
Railway . It was submitted that on that FIR, RPF authorities
filed a complaint in the shape of charge sheet against the
applicant petitioner. The petitioner was falsely implicated in
that criminal case and ultimately case was decided in his favour
by the learned Addl.Sessions Judge No.1, Jodhpur in regular
criminal case No.06/2005 decided on 26.09.2005. A copy of
the said judgment was annexed as Annx.2. It was further
submitted that thus, the action of B.K.Gupta was contrary to
applicant’s interest, therefore, he moved this Court under
section 11 (6) of the Arbitration Act to appoint Arbitrator. In the
meantime, the Railway authority also unilaterally changed
their nominee and in place of Rashmi Goyal , they appointed
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Smt.Neelam Sanghi. In this respect, Annx.3 was annexed. It
was again submitted that despite change of nominated
arbitrator by the Railways, the arbitrators never entered into
reference. The application was registered as Civil misc.
Arbitration Application No.22/2003. The railway authority,
without filing any detailed reply, submitted that the arbitrator
has been appointed. Therefore, the application was dismissed
as infructuous. The copy of the order passed was annexed
as Annx.4. It was submitted that the position remained as it
was. The arbitrators appointed long back vide order dated
20.06.95 and further modified by order dated 06.03.2000 have
still not entered into reference, though the dispute was to be
decided within a period of four months, that had expired long
back and, thereafter, they were not authorised to pass any
award. In these circumstances, the present application was
filed.
It was further submitted that, before filing the said
application, several representations and requests were made
for reference. Thus, , the railway authority got adequate notice
by judicial proceedings continued between the parties. It was
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also submitted in the petition that several letters / notices were
given to the arbitrators nominated by the railway but they
were received back with the note that the addressee has left
the place without address , some of them were placed with
application. Thus, it was also submitted that the applicant
made maximum efforts to materialise the arbitration
proceedings and to get the dispute adjudicated but everything
went in vain. Therefore, submitting this application, a prayer
was made to appoint an independent and sole arbitrator.
Notice of this application was given to the respondents.
The Railway Authority denied the allegations made in the
application and filed a detailed reply mainly alleging therein
that the arbitrators have already been appointed. Further,it was
submitted that the matter was previously heard by the court
on the said allegations and the application was rejected vide
order dated 12.09.03. Therefore, for the same relief, second
application is not maintainable and is hit by the principles of
resjudicata. Along with the reply, the learned counsel also
placed the order of this court dated 12.09.03. It was also
submitted that by way of this application, in fact the appellant
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was to get removal of the nominated arbitrators. For that he
should have moved the civil court. Thus, by way of present
application he is not entitled for any relief and prayer was
made to dismiss the application.
It is further revealed from the record that to counter the
allegations made in the reply by the railway authority, petitioner
filed an additional affidavit along with relevant documents. It
was submitted in the affidavit reiterating the earlier ground that
the petitioner applied to the authority for copies of certain
letters written by the Railway authority to the arbitrators
under Right to Information Act, which were lying in the office
file of Railway and in pursuance of that, certain copies of the
letters were supplied . In the affidavit he submitted the details
of letters, on the basis of copies supplied by the Railways and
submitted that a letter dated 15/18.12.95 was issued from the
office of G.M. Railways, intimating the arbitrators that an
award was required to be made within a period of four months,
after entering into reference. Further, intimating them that if
the claimant is delaying then to proceed exparte. Copy of
letter Anx. 14 was placed in this respect. Letter dated
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04.06.99 , Annx.15, was issued for finalisation of the arbitration
case . A letter dated 06.03.2000 again issued by the Office of
the G.M. Railways to nominated arbitrator Neelam Sanghi ,
requesting her to enter into arbitration, Annx. 16 was
produced in this respect. Letter dated 16.08.00 was sent by
one of the arbitrator Mr.B.K.Gupta replying to G.M., Railways
that after the expiry of four months, arbitrator has no power to
pass award and informed to make a request before the court
for extension of time. Copy of this letter was produced, marked
as Annx.17. Letter dated 29.03.04 issued from the office of the
Senior Divisional Engineer NW. Railways, addressed to
Dy.CME, NW Railways, Jaipur, intimating that till today he has
not received any notice of arbitration proceedings from Neelam
Sanghi and B.K.Gupta. Copy of this letter is marked as
Annx.19, similar type of letter dated 27.06.05, marked as
Annx.20. In the affidavit he further submitted that one of the
arbitrator B.K.Gupta has already been relieved after transfer
from the Railway Coach Factory but the Railway authority did
not supply the correct address. In this respect he also filed
Annx.21 to 24.
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Thereafter, arguments were heard and perused the
pleadings of parties as well as record of the case.
During the course of arguments, learned counsel for the
petitioner further reiterated the contentions placed by way of
application and again stressed that the matter is pending for
the last 15 years without any adjudication. The dispute of the
appellant is genuine, the railway authority proceeded arbitrarily
and thereby the applicant has suffered a huge loss by their
inaction. His security money has been forfeited and for his no
fault he has been penalised. It was urged that due to
arbitration clause , he is not entitled to approach directly to the
civil courts. The nominated arbitrators have never entered into
arbitration proceedings, therefore, now the railway authority
has waived his right to appoint new arbitrators, thus, in the
given circumstances, the sole independent arbitrator is
required be appointed. It was also submitted that the railway
now cannot take shelter of clause rule 64 of the General
Conditions of Contract . The nominated arbitrators by the
railway are not ready to proceed in arbitral proceedings and
they never entered into reference, they never issued any
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notice of reference and now they are not competent to pass
award as arbitrators.
During the course of arguments, he drew my attention
towards the letter supplied by the Railway Authority on his
request under the Right of Information Act and again on the
strength of those letters, submitted that it is established from
their own record that the arbitrates have never entered into
arbitral proceedings. The prescribed time for passing the award
has expired long back , one of the arbitrators himself has
shown his incapacity to pass an award as it is disclosed from
the letter given by B.K.Gupta dated 25.09.00, annx.18. In these
circumstances, no arbitral proceeding is legally pending
before the Arbitrators, therefore, it was again stressed that an
independent sole arbitrator may be appointed and prayed that
the application may be allowed.
In support of his contentions, he also cited judgments
given in cases of Krishan Lal vs. Haryana S.A.M. Board[ AIR
1986 P&H 376], VIP Industries Ltd. v. Saboo Sodium
Chloro Ltd. & Anr. [AIR 2008 (NOC) 1449 (Raj.) 439], Murari
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Lal Khandelwal vs. Rajasthan State Seeds Corporation &
Ors. [AIR 2008 Rajasthan 108], Mahipatlal Patel vs. Chief
Engineer & Anr. (Civil Appeal No.2350/2008), and Citibank
N.A. Vs. TLC Marketing PLC & Anr. [AIR 2008 SC, 118].
On the contrary, learned counsel for the railways refuted
the contentions and submitted that the present petition is not
sustainable, as already on the same relief application filed
earlier has been dismissed. Further, for the removal of the
arbitrator the present application is not maintainable . It was
also submitted that as per terms of the contract under the
General Conditions of Contract (Regulations and instructions
for tenderers and Standard Forms of Contract, as per clause
64 no independent arbitrator can be appointed. Only gazetted
Railway Officer could be appointed as arbitrator. The learned
counsel drew my attention towards the said clause and further
made submission that the application is not entertainable in its
present form and prayed that it may be dismissed. In support of
his contention he placed reliance on the provisions of General
Conditions of Contract.
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I have considered the rival submissions and keeping in
mind the contentions raised by the learned counsel for the
parties, perused the record.
From the perusal of the record, as well as the
contentions placed during the course or arguments, it is made
clear that a contract was entered into between the parties on
23.10.91 regarding supply of AQG Quarry 30,000 cubic meter
of 65 mm gauge ballast to the Northern Railway. It was also
agreed that supply were to be made according to specification
and strictly according to the terms of the contract. It is alleged
by the petitioner that specific land was to be provided by the
Railway Authority where the relevant material could be
stacked. Further, as per the terms of the contract, DMT
(special trains) for lifting the stacked ballasts,were to be
provided by Railway authority. It is alleged by the petitioner that
that railway did not discharge their obligation and due to
inaction on the part of the railways, he could not perform the
contract in time. He has further alleged that the railway
authority, without considering the factual aspect, had
proceeded to forfeit the security money and imposed
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penalty. Thus, there was dispute between parties with regard to
terms of the contract. It is also not disputed by the parties that
as per the terms of the contract, and as per agreed clause
mentioned in the relevant general condition of the contract that
in case of any dispute with regard to the contract between the
parties, the matter will be resolved through arbitral
proceedings.
It is revealed from the record that the petitioner has time
and again moved the authority in this respect and the railway
authority, after a long exchange of communication and with
the intervention of the court , two arbitrators Neelam Sahini
and B.K.Gupta were appointed. But it is further revealed from
the record that they have not entered into arbitral proceedings.
This fact is established from the document filed by the
appellant , among them some of the letters are of the G.M.,
Railways which has not been disputed by Railway authority
despite sufficient time. From the perusal of these letters,
some of them of recent time, I am satisfied that the arbitrators
had never entered into arbitral proceedings. There are serious
allegations against B.K.Gupta , nominated arbitrator on the part
of the applicant . Looking to the serious allegations, it is not
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desirable to continue him as arbitrator and B.K.Gupta himself
has shown his inability to pass the award on the pretext that
time has expired. With regard to other arbitrator Neelam
Sanghi, despite efforts, no response from her side is received
by Railway, as well as to petitioner , even her address is not
traceable and Railway authority has said nothing about her.
In this respect, the authorities cited by the learned
counsel for the petitioner’s side are also relevant. In the VIP
Industries’ case (supra) where grounds of reasonable
apprehension about impartiality of arbitrator, it was observed
that the High Court can exercise powers under Section 11 (6)
to appoint arbitrator after removing nominated arbitrator. In
Murari Lal Khandelwal’s case (supra) where there were
allegations against arbitrator of biasness, independent
arbitrator was appointed. In Krishan Lal ‘s case (supra), the
appointed arbitrator was transferred after reference of dispute.
It was held that where the arbitrator appointed by designation,
arbitrator so appointed is divested of jurisdiction in the matter.
I have also considered the contentions raised by the
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learned counsel for the respondent . But looking to the facts
and circumstances of the case, as the appointed arbitrators
have not entered into arbitral proceedings, thus the contentions
are not sustainable. I have also considered the contentions
raised by the respondent that the matter was previously heard,
but the present application is based on the changed
circumstances. Therefore, the previous proceeding has no bar
to appoint independent arbitrator. I have also considered the
other contentions. The railway authority got appropriate time
and notice to proceed with the matter, but they failed to take
appropriate action and they remained in active on their part.
Thus, the contentions placed with regard to clause 64 of
General Conditions are also having no force.
In these circumstances, there is no option except to
appoint independent arbitrator. On the basis of aforesaid
discussions, the application filed by the petitioner is allowed
and Mr.S.R.Sharma , District & Sessions Judge (Rtd.) is
appointed as arbitrator both the appointed arbitrators will not
have any authority to pass any award. Application filed by
petitioner stands allowed.
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The parties are entitled to file their claim and counter
claim before the arbitrator and the arbitrator will decide the
same in accordance with law. Rs.10,000/- is fixed as initial
expenses towards the arbitral proceedings, so that the
arbitration proceedings may start. This amount will be borne by
the petitioner and this amount will be adjustable from the final
charges determined by the arbitrator. Fee of the arbitrator and
other expenses of the arbitration proceedings will be
determined by the arbitrator himself. That will be borne by both
the parties equally. The appointed arbitrator be intimated
accordingly.
A copy of this order may also be sent to the District
Judges, Jaisalmer and Jodhpur, with a direction that if any
accommodation and infrastructure is demanded by the
Arbitrator for arbitral proceedings, that may be provided to
the Arbitrator.
(MANAK MOHTA), J.
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