CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION v. M/S ECI-SPIC-SMO-MCML (JV)

Judgment

1234 SUPREME COURT REPORTS [2019] 16 S.C.R. 1234 [2019] 16 S.C.R. A B C D E F G H CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION v. M/S ECI-SPIC-SMO-MCML (JV) A JOINT VENTURE COMPANY (Civil Appeal Nos. 9486-9487 of 2019) DECEMBER 17, 2019 [R. BANUMATHI, A. S. BOPANNA AND HRISHIKESH ROY, JJ.] Arbitration and Conciliation Act, 1996: s.11(6) – Application under – Seeking appointment of sole arbitrator – High Court appointed a sole Arbitrator – Appeal to Supreme Court – Held: High Court was not justified in appointing an independent sole arbitrator ignoring Clauses 64(3)(a)(ii) and 64(3)(b) of General Conditions of Contract whereby it was specifically provided that Arbitral Tribunal would consist of three arbitrators from out of the panel of serving or retired Railway Officers – The appointment of the Arbitrators should have been in terms of the agreement between the parties. Allowing the appeals, the Court HELD: 1.1 Clause 64 of the General Conditions of Contract (GCC) deals with the procedure for resolution of the disputes and provides for “Demand for arbitration” and appointment of the arbitrators. After coming into force of Arbitration and Conciliation (Amendment) Act, 2015, the Government of India, Ministry of Railways made a modification to Clause 64 of the General Conditions of Contract and the Railway Board issued a notification dated 16.11.2016 in this regard. The modified Clause 64(3)(a)(i) (where applicability of Section 12(5) of the Arbitration and Conciliation Act, 1996 has been waived off inter alia provided that in case where the total value of all claims in question added together does not exceed rupees one crore, the arbitral tribunal shall consist of a sole arbitrator who shall be a Gazetted Officer of Railways not below JA Grade nominated by the General Manager. In terms of Clause 1234 CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S ECI-SPIC-SMO-MCML (JV) 1235 64(3)(a)(i), the sole arbitrator shall be appointed within sixty days from the day when a written and valid demand for arbitration is received by the General Manager. In the present case, since the value of the work contract is worth more than Rs.165 crores, Clause 64(3)(a)(i) is not applicable. Clause 64(3)(a)(ii) of GCC deals with cases not covered by Clause 64(3)(a)(i) where applicability of Section 12(5) of the Act has been waived off. [Paras 15-17] [1245-A-G-H; 1246-A-B]

1.2 Clause 64(3)(b) of GCC deals with appointment of arbitrator where applicability of Section 12(5) of the Act has not been waived off. The modified Clause 64(3)(b) inter alia provided that the arbitral tribunal shall consist of a panel of three retired railway officers not below the rank of SAO officer as arbitrator. For this purpose, the Railway will send a panel of at least four names of retired railway officer(s) empanelled. The contractor will be asked to suggest to the General Manager at least two names out of the panel for appointment as the contractor’s nominee and the General Manager shall appoint at least one out of them as the contractor’s nominee. The General Manager will also simultaneously appoint the balance number of arbitrators from the panel or from outside the panel. [Para 18] [1246-F-H]

1.3 After coming into force of the Arbitration and Conciliation (Amendment) Act, 2015, when Clause 64 of the General Conditions of Contract was modified inter alia providing for constitution of Arbitral Tribunal consisting of three arbitrators either serving or retired railway officers, the High Court is not justified in appointing an independent sole arbitrator without resorting to the procedure for appointment of the arbitrator as prescribed under Clause 64(3)(b) of the General Conditions of Contract. [Para 19] [1247-E-F]

1.4 Even in the application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, the respondent prayed for appointment of a sole arbitrator in terms of Clause 1.2.54(b)(i) of the Tender Agreement/Clause 64 of the General Conditions of Contract for adjudicating the disputes which have arisen between the parties. The respondent itself sought for appointment of arbitrator in terms of Clause 64 of the General Conditions of Contract. As the value of the work contract was A B C D E F G H 1236 SUPREME COURT REPORTS [2019] 16 S.C.R. A B C D E F G H worth more than Rs.165 crores, the dispute can be resolved only by a panel of three arbitrators in terms of Clause 64(3)(b) of the General Conditions of Contract. The respondent was not right in seeking for appointment of a sole arbitrator in terms of Clause 1.2.54(b)(i) of the Tender Agreement/Clause 64 of the General Conditions of Contract. [Para 20] [1247-G-H; 1248-A] Union of India v. Parmar Construction Company (2019) SCC Online SC 442 ; Union of India v. Pradeep Vinod Construction Company (2019) SCC Online SC 1467 ; Government of Haryana PWD Haryana (B and R) Branch v. G.F. Toll Road Private Limited and Others (2019) 3 SCC 505 : [2019] 1 SCR 270 – relied on.