{"id":223891,"date":"2009-02-26T00:00:00","date_gmt":"2009-02-25T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/union-of-india-vs-ms-singh-builders-syndicate-on-26-february-2009"},"modified":"2017-11-03T16:13:05","modified_gmt":"2017-11-03T10:43:05","slug":"union-of-india-vs-ms-singh-builders-syndicate-on-26-february-2009","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/union-of-india-vs-ms-singh-builders-syndicate-on-26-february-2009","title":{"rendered":"Union Of India vs M\/S. Singh Builders Syndicate on 26 February, 2009"},"content":{"rendered":"<div class=\"docsource_main\">Supreme Court of India<\/div>\n<div class=\"doc_title\">Union Of India vs M\/S. Singh Builders Syndicate on 26 February, 2009<\/div>\n<div class=\"doc_author\">Author: R.V.Raveendran<\/div>\n<div class=\"doc_bench\">Bench: R.V. Raveendran, H.L. Dattu<\/div>\n<pre>                                                                       Reportable\n\n                    IN THE SUPREME COURT OF INDIA\n\n                    CIVIL APPELLATE JURISDICTION\n\n                    CIVIL APPEAL NO. 3632 OF 2007\n\n\n\nUNION OF INDIA                                   ....... APPELLANT (s)\n\nVs.\n\nM\/S. SINGH BUILDERS SYNDICATE             ....... RESPONDENT (s)\n\n\n\n\n                              O R D E R\n<\/pre>\n<p>R.V.Raveendran, J.\n<\/p>\n<\/p>\n<p>       The appellant challenges the order of the Delhi High<\/p>\n<p>Court dated 27.3.2006 appointing a Retired Judge of the<\/p>\n<p>High   Court   as   sole   Arbitrator   to   decide   the   disputes<\/p>\n<p>arising in respect of a construction contract between the<\/p>\n<p>Northern Railways (appellant) and the respondent.<\/p>\n<p>2.     The appellant contends the appointment of arbitrators<\/p>\n<p>should be only in accordance with Clause 64 of the general<\/p>\n<p>terms and conditions contract which requires two serving<\/p>\n<p>Gazetted Railway officers of equal status being appointed<br \/>\n<span class=\"hidden_text\">                                       2<\/span><\/p>\n<p>as Arbitrators, one by the contractor from a panel made<\/p>\n<p>available by the General Manager of Northern Railways and<\/p>\n<p>the other by the Northern Railways, and the two arbitrators<\/p>\n<p>so appointed, in turn appointing an Umpire.<\/p>\n<p>3.    It   is    true     that   the       Arbitral        Tribunal    should     be<\/p>\n<p>constituted      in     the   manner   laid     down       in   the   Arbitration<\/p>\n<p>agreement. Provisions for arbitration in contracts entered<\/p>\n<p>by    governments,        statutory        authorities,         and   government<\/p>\n<p>companies, invariably require that the Arbitrators should<\/p>\n<p>be their own serving officers. Such a provision has to be<\/p>\n<p>given effect, subject to requirements of independence and<\/p>\n<p>impartiality. But there can be exceptions and this case<\/p>\n<p>which has a chequered history, falls under such exceptions.<\/p>\n<p>4.    Let us refer to the facts briefly. The respondent made<\/p>\n<p>a    request     for    arbitration        in   the    year      1999.    As     the<\/p>\n<p>appellant failed to take necessary steps as mandated by<\/p>\n<p>clause     64,    the    respondent        filed      an    application        under<\/p>\n<p>Section 11 of the Arbitration and Conciliation Act, 1996<\/p>\n<p>(`Act&#8217; for short) in AA No. 202\/2000. In pursuance of the<\/p>\n<p>directions issued on 11.11.2002 by the designate of the<\/p>\n<p>Chief Justice of the Delhi High Court, an Arbitral Tribunal<\/p>\n<p>was constituted in terms of clause 64, consisting of Shri<br \/>\n<span class=\"hidden_text\">                                          3<\/span><\/p>\n<p>A.K.    Mishra,       (Chief        Engineer\/TPS)           nominated     by     the<\/p>\n<p>contractor, Shri S.P. Virdi (Dy.F.A. &amp; CEO) nominated by<\/p>\n<p>the appellant, and Shri H.K. Jaggi (Chief Bridge Engineer)<\/p>\n<p>as    the   Umpire.        But    even     before     the     proceedings       could<\/p>\n<p>commence before the Arbitral Tribunal, Shri A.K. Mishra,<\/p>\n<p>one of the Arbitrators, was transferred and consequently he<\/p>\n<p>tendered resignation in May, 2004. As the appellant failed<\/p>\n<p>to provide a fresh panel to enable the respondent to make a<\/p>\n<p>fresh nomination, the respondent again approached the High<\/p>\n<p>Court by filing AA No.240\/2004.                     A fresh panel was made<\/p>\n<p>available    thereafter           from    which   the   respondent       nominated<\/p>\n<p>Shri    Ashok      Gupta     as    its     Arbitrator.        Hardly    after     one<\/p>\n<p>sitting of the Arbitral Tribunal, Shri Ashok Gupta was also<\/p>\n<p>transferred and he tendered his resignation on 21.7.2005.<\/p>\n<p>As appellant again failed to take steps for filling the<\/p>\n<p>vacancy,     the     respondent          approached     the     Court    again    by<\/p>\n<p>filing IA No. 6511\/2005 in AA 240\/2004.                      In pursuance of an<\/p>\n<p>order dated 24.8.2005 passed by the High Court, again a<\/p>\n<p>panel was made available and the respondent made its choice<\/p>\n<p>on 9.9.2005.        As no steps were taken in pursuance of it by<\/p>\n<p>the    appellant,          the     respondent       sent       a   reminder       on<\/p>\n<p>14.10.2005.        There was no response. In this background, the<\/p>\n<p>respondent again approached the High Court on 10.11.2005 in<\/p>\n<p>Arb. Petn. No. 256\/2005 for appointment of an independent<br \/>\n<span class=\"hidden_text\">                                        4<\/span><\/p>\n<p>sole arbitrator.         During the pendency of the said petition,<\/p>\n<p>the General Manager of Northern Railways appointed Sri Ved<\/p>\n<p>Pal as the contractor&#8217;s nominee arbitrator on 22.11.2005.<\/p>\n<p>5.     The High Court was of the view that no useful purpose<\/p>\n<p>will    be    served    by     again    reconstituting            a     Three    Member<\/p>\n<p>Arbitral Tribunal in accordance with clause 64.                                The High<\/p>\n<p>Court found that the matter has been pending from 1999 when<\/p>\n<p>the    respondent      first    made    the     request          for    reference     to<\/p>\n<p>Arbitration and that the cumbersome process of constituting<\/p>\n<p>an Arbitral Tribunal in terms of the Arbitration agreement<\/p>\n<p>and the delays on the part of Railways in complying with<\/p>\n<p>the provisions of the arbitration agreement, led to the<\/p>\n<p>arbitration becoming virtually a non-starter.                              Therefore,<\/p>\n<p>the    High    Court     allowed       the    petition       on        27.3.2006     and<\/p>\n<p>appointed      Justice    Jaspal       Singh,       a    retired       Judge    of   the<\/p>\n<p>Delhi High Court as the arbitrator. Justice Jaspal Singh<\/p>\n<p>recused himself and the High Court on 19.7.2006, appointed<\/p>\n<p>Justice R.C. Chopra, another retired Judge of the Delhi<\/p>\n<p>High Court as the arbitrator.\n<\/p>\n<\/p>\n<p>6.     The said order is challenged in this appeal by special<\/p>\n<p>leave.    On   6.11.2006,        this       Court       stayed    the    arbitration<\/p>\n<p>proceedings before the sole Arbitrator. The question that<br \/>\n<span class=\"hidden_text\">                                            5<\/span><\/p>\n<p>arises for consideration in this appeal by special leave is<\/p>\n<p>whether the appointment of a the retired Judge of the High<\/p>\n<p>Court   as     sole     Arbitrator          should     be     set    aside     and    an<\/p>\n<p>Arbitral Tribunal should again be constituted in the manner<\/p>\n<p>provided in terms of clause 64.\n<\/p>\n<\/p>\n<p>7.   Dealing         with     a     matter        arising     from    the    old     Act<\/p>\n<p>(Arbitration Act, 1940), this Court, in <a href=\"\/doc\/853296\/\">Union of India v.<\/p>\n<p>M.P.Gupta<\/a> [2004 (10) SCC 504], held that appointment of a<\/p>\n<p>retired      Judge    as     sole    Arbitrator        contrary       to    clause    64<\/p>\n<p>(which requiring            serving    Gazetted        Railway       Officers      being<\/p>\n<p>appointed) was impermissible. The position after the new<\/p>\n<p>Act came into force, is different, as explained by this<\/p>\n<p>Court     in   <a href=\"\/doc\/1118593\/\">Northern           Railway        Administration,       Ministry      of<\/p>\n<p>Railway, New Delhi v. Patel Engineering Company Ltd.<\/a> [2008<\/p>\n<p>(11) SCALE 500].             This Court held that the appointment of<\/p>\n<p>arbitrator\/s         named    in     the        arbitration    agreement       is    not<\/p>\n<p>mandatory or a must, but the emphasis should be on the<\/p>\n<p>terms   of     the    arbitration          agreement        being    adhered    and\/or<\/p>\n<p>given effect, as closely as possible. It was further held<\/p>\n<p>that the Chief Justice or his designate should first ensure<\/p>\n<p>that the remedies provided under the arbitration agreement<\/p>\n<p>are exhausted, but at the same time also ensure that the<\/p>\n<p>twin requirements of sub-section (8) of section 11 of the<br \/>\n<span class=\"hidden_text\">                                              6<\/span><\/p>\n<p>Act are kept in view. This would mean that invariably the<\/p>\n<p>court should first appoint the Arbitrators in the manner<\/p>\n<p>provided for in the arbitration agreement. But where the<\/p>\n<p>independence           and        impartiality              of         the      Arbitrator\/s<\/p>\n<p>appointed\/nominated in terms of the arbitration agreement<\/p>\n<p>is in doubt, or where the Arbitral Tribunal appointed in<\/p>\n<p>the manner provided in the arbitration agreement has not<\/p>\n<p>functioned        and     it        becomes         necessary            to     make     fresh<\/p>\n<p>appointment,       the       Chief      Justice       or     his       designate        is   not<\/p>\n<p>powerless to make appropriate alternative arrangements to<\/p>\n<p>give effect to the provision for arbitration.<\/p>\n<p>8.   The     object          of     the      alternative              dispute        resolution<\/p>\n<p>process of arbitration is to have expeditious and effective<\/p>\n<p>disposal     of    the        disputes            through        a     private       forum    of<\/p>\n<p>parties&#8217;   choice.             If      the    Arbitral       Tribunal           consists      of<\/p>\n<p>serving officers of one of the parties to the dispute, as<\/p>\n<p>members in terms of the arbitration agreement, and such<\/p>\n<p>Tribunal is made non-functional on account of the action or<\/p>\n<p>inaction     or    delay          of    such        party,           either     by    frequent<\/p>\n<p>transfers of such members of the Arbitral Tribunal or by<\/p>\n<p>failing    to      take        steps         expeditiously              to     replace       the<\/p>\n<p>arbitrators       in    terms          of    the    Arbitration              Agreement,      the<\/p>\n<p>Chief Justice or his designate, required to exercise power<br \/>\n<span class=\"hidden_text\">                                           7<\/span><\/p>\n<p>under     section       11   of     the        Act,     can    step       in     and    pass<\/p>\n<p>appropriate orders. We fail to understand why the General<\/p>\n<p>Manager     of       the     Railways          repeatedly          furnished           panels<\/p>\n<p>containing names of officers who were due for transfer in<\/p>\n<p>the near future.              We are conscious of the fact that a<\/p>\n<p>serving officer is transferred on account of exigencies of<\/p>\n<p>service and transfer policy of the employer and that merely<\/p>\n<p>because     an       employee       is    appointed           as    arbitrator,          his<\/p>\n<p>transfer cannot be avoided or postponed.                                But an effort<\/p>\n<p>should be made to ensure that officers who are likely to<\/p>\n<p>remain     in    a    particular          place       are     alone       appointed       as<\/p>\n<p>Arbitrators and that the Arbitral Tribunal consisting of<\/p>\n<p>serving     officers,           decides         the      matter         expeditiously.<\/p>\n<p>Constituting Arbitral Tribunals with serving officers from<\/p>\n<p>different far away places should be avoided. There can be<\/p>\n<p>no hard and fast rule, but there should be a conscious<\/p>\n<p>effort    to     ensure      that    Arbitral          Tribunal       is       constituted<\/p>\n<p>promptly and arbitration does not drag on for years and<\/p>\n<p>decades.\n<\/p>\n<\/p>\n<p>9.   As noticed above, the matter has now been pending for<\/p>\n<p>nearly     ten    years      from        the     date       when    the        demand    for<\/p>\n<p>arbitration       was      first    made       with     virtually         no     progress.<\/p>\n<p>Having    regard      to     the    passage       of     time,     if      the    Arbitral<br \/>\n<span class=\"hidden_text\">                                          8<\/span><\/p>\n<p>Tribunal has to be reconstituted in terms of clause 64,<\/p>\n<p>there may be a need to change even the other two members of<\/p>\n<p>the   Tribunal.         The    delays         and    frequent        changes        in     the<\/p>\n<p>Arbitral       Tribunal       make    a       mockery         of    the     process        of<\/p>\n<p>arbitration.        Having regard to this factual background, we<\/p>\n<p>are of the view that the appointment of a retired Judge of<\/p>\n<p>the Delhi High Court as sole Arbitrator does not call for<\/p>\n<p>interference in exercise of jurisdiction under Article 136<\/p>\n<p>of the Constitution of India.\n<\/p>\n<\/p>\n<p>10.   Another aspect referred to by the appellant, however<\/p>\n<p>requires serious consideration. When the arbitration is by<\/p>\n<p>a   Tribunal      consisting     of       serving        officers,         the      cost   of<\/p>\n<p>arbitration is very low. On the other hand, the cost of<\/p>\n<p>arbitration can be high if the Arbitral Tribunal consists<\/p>\n<p>of retired Judge\/s. When a retired Judge is appointed as<\/p>\n<p>Arbitrator in place of serving officers, the government is<\/p>\n<p>forced    to     bear   the    high    cost         of   Arbitration           by   way    of<\/p>\n<p>private arbitrator&#8217;s fee even though it had not consented<\/p>\n<p>for   the      appointment       of    such         non-technical           non-serving<\/p>\n<p>persons     as    Arbitrator\/s.        There        is    no       doubt   a     prevalent<\/p>\n<p>opinion that the cost of arbitration becomes very high in<\/p>\n<p>many cases where retired Judge\/s are Arbitrators. The large<\/p>\n<p>number    of     sittings     and     charging           of   very    high       fees      per<br \/>\n<span class=\"hidden_text\">                                        9<\/span><\/p>\n<p>sitting, with several add-ons, without any ceiling, have<\/p>\n<p>many a time resulted in the cost of arbitration approaching<\/p>\n<p>or even exceeding the amount involved in the dispute or the<\/p>\n<p>amount of the award. When an arbitrator is appointed by a<\/p>\n<p>court without indicating fees, either both parties or at<\/p>\n<p>least one party is at a disadvantage. Firstly, the parties<\/p>\n<p>feel constrained to agree to whatever fees is suggested by<\/p>\n<p>the   Arbitrator,        even     if    it     is     high      or     beyond     their<\/p>\n<p>capacity.       Secondly,    if    a        high    fee    is     claimed       by    the<\/p>\n<p>Arbitrator and one party agrees to pay such fee, the other<\/p>\n<p>party, who is unable to afford such fee or reluctant to pay<\/p>\n<p>such high fee, is put to an embarrassing position. He will<\/p>\n<p>not   be    in    a    position        to    express       his       reservation       or<\/p>\n<p>objection to the high fee, owing to an apprehension that<\/p>\n<p>refusal    by    him    to   agree      for    the    fee       suggested        by   the<\/p>\n<p>arbitrator,      may    prejudice       his    case       or    create    a   bias     in<\/p>\n<p>favour of the other party who readily agreed to pay the<\/p>\n<p>high fee. It is necessary to find an urgent solution for<\/p>\n<p>this problem to save arbitration from the arbitration cost.<\/p>\n<p>Institutional arbitration has provided a solution as the<\/p>\n<p>Arbitrators&#8217;          fees   is    not        fixed       by     the     Arbitrators<\/p>\n<p>themselves on case to case basis, but is governed by a<\/p>\n<p>uniform    rate       prescribed       by    the    institution          under    whose<\/p>\n<p>aegis the Arbitration is held. Another solution is for the<br \/>\n<span class=\"hidden_text\">                                            10<\/span><\/p>\n<p>court   to    fix    the       fees    at        the    time      of   appointing     the<\/p>\n<p>arbitrator, with the consent of parties, if necessary in<\/p>\n<p>consultation with the arbitrator concerned. Third is for<\/p>\n<p>the retired Judges offering to serve as Arbitrators, to<\/p>\n<p>indicate     their       fee     structure             to   the    Registry     of    the<\/p>\n<p>respective High Court so that the parties will have the<\/p>\n<p>choice of selecting an Arbitrator whose fees are in their<\/p>\n<p>`range&#8217; having regard to the stakes involved. What is found<\/p>\n<p>to be objectionable is parties being forced to go to an<\/p>\n<p>arbitrator appointed by the court and then being forced to<\/p>\n<p>agree for a fee fixed by such Arbitrator. It is unfortunate<\/p>\n<p>that delays, high cost, frequent and sometimes unwarranted<\/p>\n<p>judicial     interruptions        at        different        stages     are   seriously<\/p>\n<p>hampering the growth of arbitration as an effective dispute<\/p>\n<p>resolution process. Delay and high cost are two areas where<\/p>\n<p>the Arbitrators by self regulation can bring about marked<\/p>\n<p>improvement.\n<\/p>\n<\/p>\n<p>11.   We find that a provision for serving officers of one<\/p>\n<p>party      being     appointed              as     arbitrator\/s          brings       out<\/p>\n<p>considerable resistance from the other party, when disputes<\/p>\n<p>arise. Having regard to the emphasis on independence and<\/p>\n<p>impartiality        in     the        new        Act,       government,       statutory<\/p>\n<p>authorities        and    government             companies         should     think    of<br \/>\n<span class=\"hidden_text\">                              11<\/span><\/p>\n<p>phasing   out   arbitration   clauses   providing   for   serving<\/p>\n<p>officers and encourage professionalism in arbitration.<\/p>\n<p>12.   As far as this case is concerned, we do not propose to<\/p>\n<p>issue any directions in regard to the fees, as the High<\/p>\n<p>Court has fixed the fee at Rs.10,000\/- per hearing subject<\/p>\n<p>to a maximum of Rs.150,000\/- plus clerkage, to be shared<\/p>\n<p>equally by the parties.\n<\/p>\n<\/p>\n<p>13.   In view of the above, the appeal is dismissed.<\/p>\n<p>                                              _________________J<br \/>\n                                              [R. V. Raveendran]<\/p>\n<p>                                              _________________J<br \/>\n                                               [H.L. Dattu]<br \/>\nNew Delhi;\n<\/p>\n<p>February 26, 2009.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Supreme Court of India Union Of India vs M\/S. Singh Builders Syndicate on 26 February, 2009 Author: R.V.Raveendran Bench: R.V. Raveendran, H.L. Dattu Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3632 OF 2007 UNION OF INDIA &#8230;&#8230;. APPELLANT (s) Vs. M\/S. SINGH BUILDERS SYNDICATE &#8230;&#8230;. RESPONDENT (s) O R [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-223891","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Union Of India vs M\/S. 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