Mr. Rajiv Nayar, Sr. Advocate with Mr. Naveen Chawla, Advocate v. RAIL VIKAS NIGAM LIMITED

Judgment

1. Conciliation Act, 19962, for reference of the disputes, stated to have arisen between the petitioners on the one hand and the respondent on the other, to arbitration. 1 11. Appointment of arbitrators- (6) a person, including an institution, fails to perform any function entrusted to a party fails to act as required under that procedure; or the parties, or the two appointed arbitrators, fail to reach an agreement Where, under an appointment procedure agreed upon by the parties,— (a) (b) expected of them under that procedure; or (c) him or it under that procedure, [the appointment shall be made, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be] to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. 2 “the 1996 Act” hereinafter ARB.P. 432/2024 Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 Rival Pleadings Case of the Petitioners

2. The petitioners set up the following case, to support the prayer for reference of the disputes to arbitration: (i) Petitioner 1, Tata Projects-Kalindee (JV)3 is an unincorporated joint venture between Petitioner 2 Tata Projects Ltd.4 and Petitioner 3 Kalindee Rail Nirman (Engineers) Ltd.5 TPL is the lead partner of the JV. (ii) The respondent Rail Vikas Nigam Limited6 is a 100% owned Public Sector Undertaking of the Ministry of Railways. (iii) On 27 July 2016, RVNL floated a tender for carrying out railway electrification works in North-East India. The JV participated and submitted its bid on 3 October 2016. It was declared the most successful bidder and was awarded the contract on 27 January 2017. The contract included railway electrification of a section of the Alipurduar Division of the North-East Frontier Railway. The project was of 36 months’ duration from the date of commencement. The date of commencement was reckoned as the date of receipt of the letter of acceptance (31 January 2017) and an added 42 days, which 3 “the JV” hereinafter 4 “TPL” hereinafter 5 “KRNEL” hereinafter 6 “RVNL” hereinafter ARB.P. 432/2024 Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 worked out to 14 March 2017. (iv) On 23 May 2017, a formal Contract Agreement7 was executed between the JV and RVNL. As per the General Conditions of Contract8 contained in the CA, the contract was to be completed by 14 March 2020, i.e. three years from the date of commencement. The relevant clauses of the GCC are reproduced thus: “20. Claims, Disputes and Arbitration *****

20.2 Amicable Settlement: In case any dispute between the Engineer and the Contractor for which claim has already been made by the contractor, remains unresolved, the Contractor shall, then, give notice of dissatisfaction and intention to commence arbitration to the Employer duly specifying the subject of the dispute or difference as also the amount of claim item wise. The Parties shall make attempts to settle the dispute amicably before the commencement of arbitration. However, unless both Parties agree otherwise, demand for arbitration may be made by the contractor after ninety days from the day on which a notice of dissatisfaction and intention to commence arbitration was given, even if no attempt at amicable settlement has been made.

20.3 Arbitration: Any dispute, in respect of which amicable settlement has not been reached, arising between the Employer and the Domestic or Foreign Contractor related to any matter arising out of or connected with this contract, then the contractor, after 90 days but within 150 days from the day on which a notice of dissatisfaction and intention to commence arbitration was given under GCC 20.2, shall be entitled to demand in writing that the dispute or difference be referred to arbitration. Only such dispute(s) or difference(s) in respect of which 7 “CA” hereinafter 8 “GCC” hereinafter ARB.P. 432/2024 Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 the demand had been made for amicable settlement under GCC 20.2 but could not be settled together with counter claims or set off, given by the Employer, shall be referred to arbitration and other matters shall not be included in the reference. The Arbitration proceedings shall be assumed to have commenced from the day, a written and valid demand for arbitration is received by Chairman and Managing Director, Rail Vikas Nigam Limited, New Delhi (CMD/RVNL). The disputes so referred to arbitration shall be settled in accordance with the Indian Arbitration & Conciliation Act, 1996 and any statutory modification or re-enactment thereof.

Further, it is agreed between the parties as under:

20.3.1 Number of Arbitrators: shall consist of: The arbitral tribunal (i) Sole Arbitrator in cases where the total value of all claims in question added together does not exceed ₹ 50 Lakhs. (ii) 3 (Three) arbitrators in all other cases.

20.3.2 Procedure for Appointment of Arbitrators: The arbitrators shall be appointed as per following procedure: (i) In case of Sole Arbitrator: CMD/RVNL shall appoint any working officer of RVNL not below the rank of AGM within 60 days from the day when a written and valid demand for arbitration is received by CMD/RVNL. (ii) In case of 3 Arbitrators: (a) Within 60 days from the day when a written and valid demand for arbitration is received by CMD/RVNL, the Employer will forward a panel of 3 names to the contractor. The contractor will then give his consent for any one name out of the panel to be appointed as one of the Arbitrators within 30 days of dispatch of the request by the Employer. Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 ARB.P. 432/2024 Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 (b) Employer will decide the second Arbitrator, CMD/RVNL shall appoint the two Arbitrators, including the name of one Arbitrator for whom consent was given by the contractor, within 30 days from the receipt of the consent for one name of the Arbitrator from the contractor. In case the contractor fails to give his consent within 30 days of dispatch of the request of the Employer then CMD/RVNL shall nominate both the Arbitrators from the panel. The third Arbitrator shall be chosen (c) by the two Arbitrators so appointed by the parties and shall act as Presiding Arbitrator. In case of failure of the two Arbitrators appointed by the parties to reach upon consensus within a period of 30 days from the Arbitrators appointment subsequently appointed, then, upon request of either or both parties, presiding Arbitrator shall be appointed by the Chairman and Managing Director, Rall Vikas Nigam Limited, New Delhi, (iii) 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 dies or in the opinion of the CMD/RVNL fails to act without undue delay, the CMD/RVNL shall appoint new arbitrator/arbitrators to act in his/their place except in case of new Presiding Arbitrator who shall be chosen following the same procedure as mentioned in para (ii)(c) above. Such re-constituted Tribunal may, at its discretion, proceed with the reference from the the previous stage at which arbitrator(s). left by it was

20.3.3 Qualification and Experience of Arbitrators: The arbitrators shall have minimum qualification and experience as under: to be appointed In case of Sole Arbitrator; Arbitrator shall be a working officer of RVNL (not below Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 ARB.P. 432/2024 Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 the rank of AGM) In case of 3 Arbitrators; Arbitrators shall be retired officers (retired not below the HAG level in Railways or Director/CMD/MD in a Schedule ‘A’ PSU, age not exceeding 70 years and in reasonably good mental and physical fitness) of Engineering Services of Indian Railways or Indian Railway in Contract Accounts Service having Management of construction contracts. experience No person other than the persons appointed as per above procedure and having above qualification and experience shall act as Arbitrator.” (v) According to the petitioners, execution of the project was delayed owing to causes attributable to RVNL and beyond the reach of the petitioners. Ultimately, the contract could be completed only after a delay of 1341 days, which, according to the petitioners, is attributable to RVNL. (vi) Vide letter dated 11 March 2023, addressed by the JV to RVNL, a claim of ₹ 71,48,19,223/- was raised by the JV towards additional expenses incurred under various heads of the CA and RVNL was called upon to release the said payment. RVNL, vide response dated 5 April 2023, repudiated the claim of JV. Thus, it is contended, disputes arose between the parties. (vii) A further letter of demand was raised by the JV on RVNL on 26 April 2023. This letter again required RVNL to approve the claims submitted earlier by letter dated 11 March

2023. The claims of the JV were once again repudiated by RVNL by letter dated 16 May 2023. ARB.P. 432/2024 Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 (viii) On 2 June 2023, the JV issued a notice to RVNL under Clause 20.2 of the GCC. The letter reiterated the various claims of the JV against RVNL and alleged the repudiation of the said claims by RVNL to be illegal and without application of mind. The letter, therefore, claimed to have been issued under Clause

20.2 and also purported to be a notice intending reference of the disputes between the parties to arbitration. Paras 1 and 7 of the said letter merit reproduction, thus: “1. We are writing to you under clause 20.2 of the contract notifying the contractor's dissatisfaction and intention to commence arbitration on the following long contractual issues:- Claim towards Damages due to Prolongation i) of Contract. ii) Price adjustment claim. iii) Claim of compensation for price adjustment on account of increase in basic wages of labour under adjustment for changes in legislation. Release/ Refund of Various Withheld iv) Amounts/ Recoveries made from the payments due to the Contractor. Claim on account of difference in rates of v) the pile foundation. vi) Claim of interest on delayed payments ***** Accordingly, the present claim is being made 7. before RVNL under Clause 20.2 of the Terms of the Contract. Under Clause 20.2, the determination has to be made within a period of 90 days.” ARB.P. 432/2024 Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 (ix) Vide letter dated 1 September 2023, addressed to the JV, RVNL once again repudiated all the claims of the JV. On the other hand, alleged RVNL, the delay in completion of the contract was entirely attributable to the JV. The response did not, however, address the issue of reference of the disputes to arbitration, suggested in the letter dated 2 June 2023. (x) On 9 October 2023, RVNL wrote to the JV, raising a demand of ₹ 2,12,04,921.35. In the event of failure, on the part of the JV, to deposit the said amount, RVNL threatened to encash the performance bank guarantees submitted by the JV. (xi) On 10 October 2023, a formal notice under Section 219 of the 1996 Act was issued by the JV, through Counsel, to RVNL. The letter once again reiterated the claims of the JV against RVNL and concluded, in paras 7 to 14, thus: “7. Accordingly, as per the dispute resolution process stated in clause 20.2 of the GCC, the JV vide its letter dated 2.6.2023 issued notice of dissatisfaction and requested for commencement of arbitration. In the said notice the JV reiterated its claims on the following contractual issues: Claim towards Damages due to Prolongation i) of Contract. ii) Price adjustment claim. iii) Claim of compensation for price adjustment on account of increase in basic wages of labour under adjustment for changes in legislation. 9 21. Commencement of arbitral proceedings. – Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. ARB.P. 432/2024 Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 iv) Release/ Refund of Various Withheld Amounts/ Recoveries made from the payments due to the Contractor. Claim on account of difference in rates of v) the pile foundation. vi) Claim of interest on delayed payments RVNL, vide its response dated 01.9.2023, to the 8. above letter of the JV, again rejected all the claims of the JV, leaving no options for the JV but to invoke clause 20.3 of the GCC requesting for reference of the dispute to Arbitration.

9. It is stated that as per clause 20.3.2 of the GCC, RVNL has retained the right to appoint the panel of Arbitrators. Perusal of clauses 20.3.2 (ii) a to c of the GCC clearly shows that power for appointment of the arbitrators is vested with RVNL and the appointment of the arbitrator has to be from the panel of RVNL. Relevant clauses of GCC are reproduced as under: Clause 20.3.2(ii)(a) states as follows: “Within 60 days from the day when a written and valid demand received by for arbitration CMD.RVNL, the Employer will forward a panel of 3 names to the contractor. The contractor will then give his consent for any one name out of the panel to be appointed as one of the Arbitrators within 30 days of dispatch of the request by the Employer.” Clause 20.3.2(ii)(b) reads as follows: “Employer will decide the second arbitrator, CME/RNVL shall appoint the two arbitrators, including the name of one Arbitrator for whom consent was given by the contractor, within 30 days from the receipt of the consent for one name of the Arbitrator from the contractor. In case the contractor fails to give his consent within 30 days of dispatch of the request of the Employer then CMD/RVNL shall nominate both the Arbitrators from the panel.” Clause 20.3.2(iii)(c) Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 ARB.P. 432/2024 Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 “The third Arbitrator shall be chosen by the two Arbitrators so appointed by the parties and shall act as Presiding Arbitrator. In case of failure of the two Arbitrators appointed by the parties to reach upon consensus within a period of 30 days from the subsequently appointment of appointed, then upon the request of either or both parties, appointment by the Chairman and Managing Director, Rail Vikas Nigam Limited, New Delhi.” the Presiding Arbitrator the Arbitrators

10. Further clause 20.3.3 of qualifications of the Arbitrators as follows: the GCC states the HAG in Railways “Arbitrators shall be retired officers (retired not Director/CMDIMD in a schedule "A" PSU age not exceeding 70 years and in reasonably good mental and physical fitness) of Engineering Services of Indian Railways or Indian Railway Accounts Service having experience in Contract Management of construction contracts. No person other than the persons appointed as per above procedure and having above qualification and experience shall act as Arbitrator.

11. It is stated that your above procedure as per clause 20.3 of the GCC is against the amended Arbitration and Conciliation Act, 1996, that has been in effect from 23.10.2015, as per which the arbitrators to be nominated to the arbitral tribunal must not fall under any of the categories mentioned in Schedule V read with Explanation 1 to Section 12 (1) and Schedule VII read with Section 12 (5). Accordingly, a person who is an officer of the Railway or in any manner be connected or associated with the Railway is ineligible to be appointed as an arbitrator in the present dispute. Accordingly, the provision of the Contract in so far as it provides for appointment of retired Railway officers to be arbitrator is invalid. The Parties will thus have to proceed as per the Arbitration and Conciliation Act, 1996.

12. Accordingly, the JV appoints Justice (Retd) G.S. Sistani, former judge of the Delhi High Court as its nominee Arbitrator. RVNL may appoint its nominee arbitrator in line with the provisions of the amended Arbitration and Conciliation Act, 1996 within 30days from the receipt of this notice. You may note that the Arbitrator Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 ARB.P. 432/2024 Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 to be appointed by RVNL cannot be part of the prohibited category as per the provisions of the Act. Thereafter, the two arbitrators so appointed will appoint the Presiding Arbitrator to form the arbitration tribunal. In case you fail to appoint arbitrator on your behalf 13. within 30 days of the receipt of this letter, JV would be constrained to seek to approach appointment of arbitrator on your behalf. the Hon'ble Court

14. JV is reserving its right to raise any further or additional claims before the Tribunal, apart from the claims stated in para 6 above, that it may have arising from the present Contract. The present notice is issued without prejudice to such other & further claims.” (xii) On 16 October 2023, RVNL wrote to the JV granting extension of time up to 15 November 2023 for submission of the final bill by the JV. The claims of the JV against RVNL, as raised in the communications already cited supra, were once again repudiated.

3. It is in these circumstances that the petitioners have instituted the present petition before this Court under Section 11(6) of the 1996 Act, asserting that, by failing to respond to Section 21 notice dated 10 October 2023 supra issued by the JV, RVNL had forfeited its right to appoint its arbitrator and that, therefore, the mantle fell on this Court to appoint the arbitrator on behalf of RVNL. Accordingly, the petition exhorts the Court to appoint a nominee arbitrator for RVNL. Reply by the respondent

4. The Respondent, in its counter-affidavit, has advanced the following submissions: ARB.P. 432/2024 Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 (i) TPL and KRNEL have no privity of contract with the Respondent, and there is no arbitration agreement between them. As such, TPL and KRNEL cannot maintain the present petition. (ii) Clause 20.2 of the GCC, which requires an attempt at amicable settlement of the dispute before invocation of arbitration, has not been exhausted. It was not open to the JV to invoke arbitration without exhausting Clause 20.2. For this reason, too, the present petition is not maintainable. (iii) The invocation of arbitration was also contrary to the terms of the CA. The CA did not empower either party to nominate its arbitrator and call on the other party to do likewise. The notice invoking arbitration had merely invoke arbitration, and could not suggest the name of an arbitrator. (iv) The arbitrator suggested by the JV in its Section 21 notice did not possess the requisite qualifications envisaged in Clause 20.3.3 of the GCC. For these reasons, the counter-affidavit filed by the Respondent prays that the present petition be dismissed. Rejoinder by the petitioners In rejoinder, the petitioners contend that RVNL, having failed

5. Signature Not Verified Digitally Signed By:AJIT KUMAR Signing Date:21.05.2025 12:15:28 ARB.P. 432/2024 Signature Not Verified Digitally Signed By:CHANDRASHEKHARAN HARI SHANKAR Signing Date:21.05.2025 12:14:48 to appoint an arbitrator in response to the Section 21 notice issued by the petitioner, had forfeited its right to do so, and the task of appointing an arbitrator now fell on this Court. Reliance has been placed, for this purpose, on the judgments of the Supreme Court in Bharat Sanchar Nigam Ltd v Motorola India (P) Ltd10, Datar Switchgear v Tata Finance Ltd11 and Deep Trading Co. v Indian Oil Corporation12. Insofar as the contention of absence of any privity of contract between RVNL and TPL or KRNEL is concerned, it is contended that the JV is an unincorporated joint-venture of TPL and KRNEL and that they had jointly bid in response to the invitation for tender issued by RVNL. Effectively, therefore, it is submitted that all petitioners are aggrieved and are entitled to maintain a joint petition.

6. It is further submitted that there has been no breach, by the petitioners, in following the pre-arbitral procedure envisaged in the CA. Once the Engineer of RVNL had rejected the claims put forth by the JV, the JV issued letter dated 2 June 2023 under Clause 20.2 of the GCC, notifying the intention to commence arbitration. The claims were once again repudiated by RVNL vide letter dated 5 April 2023 and, later, 1 September 2023. This left the JV with no option but to issue a notice invoking arbitration under Clause 20.3 of the GCC.

7. The petitioners further contended that the provision for constitution of the arbitral tribunal, as envisaged in Clause 20.3.2 of the GCC is contrary to the provisions of the 1996 Act which does not