NORTH EASTERN RAILWAY & Ors. v. TRIPPLE ENGINEERING WORKS

A appeal was whether the High Court was right in traveling beyond the framework of clause 64(3)(a)(ii) and (iii) of the General conditions of contract and in appointing a retired Chief Justice as arbitrator. Dismissing the appeal, the Court B HELD 1. The provisions of the General Conditions of Contract showed that the panel of arbitrators as per the agreement between the parties necessarily has to be Gazetted Railway Officers; any vacancy in the panel of c arbitrators has to be filled up in the same manner in which the initial panel is req&Mred to be constituted. [Para 4) [1150- C-D]

#2. The "classical notion'' that the High Court while exercising its power' under Section 11 of the Arbitration & D Conciliation Act, 1996 must appoint the arbitrator as per the contract between the parties saw a significant erosion in *Ace Pipeline Contracts case wherein this Court had taken the view that though the contract between the parties must be adhered to, deviations therefrom in exceptional E circumstances would be permissible. A more significant development had come in a decision that followed soon thereafter in **Bharat Battery Manufacturer case wherein it was held that once an aggrieved party files an application under Section·11 (6) of the Act to the High Court, the opposite F party would lose its right of appointment of the arbitrator(s) as per the tenns of the contract The implication that the Court would be free to deviate from the terms of the contract is obvious. The apparent dichotomy in *Ace Pipeline Contracts and **Bharat Battery Manufacturerwas reconciled by a three judges bench of this Court in ***Northern Railway G Administration where the jurisdiction of the High Court under Section 11 (6) of the Act was sought to· be emphasized by taking into account the expression "to take the necessary measure" appearing in sub-section (6) of Section 11 and by further laying down that the said expression has to be read H NORTH EASTERN RAILWAY v. TRIPPLE ENGINEERING WORKS 1145 alongwith the requirement of sub-section (8) of Section 11 of A 1the Act. In ****Singh Builders Syndicate, the appointment of a retired judge contrary to the agreement requiring 'appointment of specified officers was held to be valid on the ground that the arbitration proceedings had not concluded for over a decade making a mockery of the process. This B Court has suggested therein that the government, statutory authorities and government companies should consider phasing out arbitration clauses providing for appointment of serving officers and encourage professionalism in arbitration. [paras 5, 6) [1150-E-G; 1151-A-C, G; 1152-A-B] C *Ace Pipeline Contracts (P) Ltd. Vs. Bharat Petroleum Corporation Ltd. (2007) 5 SCC 304; **Union of India Vs. Bharat Battery Manufacturing Co. (P) Ltd. (2007) 7 SCC 684; ***Northern Railway Administration, Ministry of Railway, New Delhi Vs. Patel Engineering Company Limited (2008) 10 SCC 240; ****Union of D India Vs. Singh Builders Syndicate (2009) 4 SCC 523; Punj Lloyd Ltd. Vs. Petronet MHB Ltd. (2006) 2 SCC 638- relied on.

#3. The theory of forfeiture of the rights of a party under the agreement to appoint its arbitrator once the proceedings under Section 11 (6) of the Act had commenced came to be even more formally embedded in *****Deep Trading Company subject, of course, to the provisions of Section 11 (8), which provision in any event was held in ***Northern Railway , Administration not to be mandatory, but only embodying a requirement of keeping the same in view at the time of F exercise of jurisdiction under Section 11 (6) of the Act. [Para 7] [1152-D-E) E