Voestalpine Schienen GmBH v. Delhi Metro Rail Corpora tion Ltd

south centrar Railway, office of the principal chief commercial Managar' First Floor, Commercial Branch' Rail Nilayam' Secunderabad-500025 Represented by the Deputy Chief Commercial Manager/FS' ...RESPONDENT Arbitration Apprication fired under section 1 1(6) of the Arbitration and Conciliation Act, 1966 R/w Scheme for Appointment of Arbitrator' 1996 for the reasons mentioned in the accompanying affidavit' praying that this Hon'ble Court may be Pleased to: (i) (ii) Allow the present Application and appoint the Sole Arbitrator to constituFthe Arbitral Tribunal for adjudication of all disputes between the PartLunder Clause 15 of the 2009 Agreement; Set aside the unilateral appointment of Shri Vijender Kumar Jain' Retd' pccM/Central Railway as sole arbitrator by the Respondent vide the letter dated 11 .1 1 '2022; I : I , { , : IANo: loF 2022 petition under Sec in the arridavit rreo in suJipoJrt';;ff#::::^HlJ H;;T:";:,:l:: stay a' further proceedings initiated by shri Vijender Kumar Jain, Retd. PCCM/centrar Rairway vide his retter dated 25.11 .2022, pending disposar of the present Arbitration Application. Counsel for the petitioner: M/s. Link Legal Advocates Counsel for the Respondent: Sri V. T. Kalyan The Court made the following: ORDER THE HONOURABLE SRI JUSTICE N'V' SHRAVAN KUMAR Arbitration A plication No,2 31 of 2022 ORDER Heardthelearnedcounselforthepartiesandwiththeirconsent this Arbitration Application is disposed of' 2. This Arbitration Application is filed under Section 11(6) of the Arbitration and Concilia[ion Act' 1996' read with scheme for Appointment and Arbitrato r' 1996 to (i) allow the present Application and appoint the Sole Arbitrator to constitule the Arbitral Tribunal for adjudication of a1l disputes between the parties under Clause 15 of the 2009 Agreement; (ii) set aside the unilateral appointment of Shri Vijender Kumar Jain, Retd ' PCCM/Central Railway as sole arbitrator by the resPondent vide the letter dated I 1'lI'2O22' are that the Applicant executed the 3. Brief facts of the case (hereinafter referred to as 'the 2009 agreement dated 03 08 2009 Agreement') with the respondent for transportation of Fly Ash in the Buik cement carrier wagon (BCCw) pursuant to the Liberarized Wagon Investment Scheme (LWIS) dated 15 04'2008' From the above agreement, a debit note was received on 1 1' 1 i '2019 for empty haulage I ' charges for financial year 2013-14 amounting to INR Rs'8'49 '56 '827 which was opposed by the Applicant vide letters dated 18' 11 2019 and 17.12.2O1g. The said opposition lowards empty haulage charges was arising out the agreed understanding between the parties captured in Clause 2.5 of the 2oo9 Agreement, rvherein it was agreed that no ) i I 2 I\.VSK, charges are leviable for empty haulage for movement of wagons between a nominated unloading and loading points ancl requested the respondent to withdraw the said debit notes Horvever, the said requests were not acceded by the respondent. Itr is submitted that such empt)' haulage charges are being unilaterally imposed by the respondent since 12.02.202 I and keeprng in view the long standing business relationship, the Applicant depositecl a sum of Rs.1,o7,o8,s67 /- under protest ror the period betw.cen 72.o2.202r to 19.O8.2O2I. Thereafter, communications were exchanged betn,een the Applicant and the respondent and thc respondent vicle its letter dated 76.11.2021 refusecl to refur_rd the aforesaicl charges, which is completely contrary to Clause 2.5 of thc 2009 Agrcemcnt.

4. It is lurther submitted that the respondent vide its letter dated 17.11.2022 informed the Applicant for unilateral nomination of Shri Vijender Kumar Jain, Retd . , pCCM / Central Raihvay as the soie Arbitrator for rvhich the Applicant made an objection vide retter dated 29'r7'2022 The said sore Arbitrator indicated his acce ptance vide his letter dated 20.11.2022 and vide notice dated 25.11.2f)22 informed the parties that thc Arbitral Tribunar has cnrcred inro rercrcncc with the issue of the said notice for which, the Applicant reiterated its objection vide letter dated 01.12.2022.

5. The learned counsel for the Applicant woulci submit that nomination or appointment of an Arbitrator by an interested party to the dispute w.hich will form subject matter of the arbitration is ex facie -.- ,/ , J wsr( J A.A. Nc.2aa ol 2e:22 letter dated 11'11'2022 has invalid. The respondent vide its for adjudication of disPutes nominated the said sole Arbitrator between the parties' Evidently' the said sole Arbitrator nominated by the respondent is an interested party to the dispute and will thus, have a dircct impact on [he said arbitration proceedings' It is further submitted that it is settlerl law that a party to Lhe agrecment would be disentitled to make any appointment of an Arbitrator on its own' Therefore, the unilateral appointment of the sole Arbitrator by the respondent vide letter dated 1 l'll'2)22 is non-est being in conflict with Section 12(5) read with Seventh Schedule of the Act and thus' void- ab initio. Thus, the Applicant hled the present Arbitratron Application seeking [o set aside the unilateral appointment of said sole Arbitrator and to appoint another sole Arbirrator for adjudication of lhe disputes, clatms, counterclaims of all parties arising out of the Agreement

6. On behalf of the respondent' while denying l:he averments made in the Arbitration Application' counter afirdavit has been filed' inter alia, stating that the appoinLment of retired employees as ArbiLrators on apprehension of bias cannot be assailed merely becauseanArbitratorisaretiredempioyeeofoneoftheparties. The learned counsel appearing for the respondent has reiterated 7. the counter averments and substantiated the claim of the respondent' 4 l l 4

8. For better appreciation of the case, it is pertinent to note the arbitration clause 15 of the Agreement 2009 reads as undcr: "15. ARBITRATION FOR SOLVING DISPUTE a) If any dispute or difference of any kind whatsoever arises among parties hereto in corrncction wirh or arising oui ol this agreeme nt partics hereto shall prompl lSr 2nd tn good faith negotiate u,ith a vrew to its amicable resolution and settlement b) In thc event no amicable re solution and settlement is rear:hed within a periocl of 9O clays lrom the clate of n hich d ispu te/ difference arose, a demand shall be made for arbitralion. The dispute/ difference or either party shall be referred to the arbitral tribunal appointed by General Manager, South Central Railu,ay, who shall bc Railway Gazcllcd Oflicer u.irhin 60 days from th, dor,, of request/demand. c) The Gazetted Raih.r,ay Officer to be appointcd as an Arbitrator, however, will not be one lhose who had an opporttrnity lo deal with lhc matter to rvhich the contract relates. d) It is a term of this agreement that in the event of Arbitrator to whom matter is originally relerred being transferred or vacating his offlce or being unable to act for any reasonr General Manager of this Railway shall appoint //// 5 iNSK' J L.A, flc.251 ol 2022 another person to act as arbitrator ln accordance with the terms of this agreement' e) The existence of any dispute or difference or the initiation or continuance of the arbitration or delaY shall not Postpone proceedings by parties of their respective performance obligations pursuant to the agreement' l') Parties agree that t he Arbitrator(s) shall dctermine and make an award as to the cost of the arbitration Proceedings " 9 ThelearnedcounselfbrLheApplicanthasplacedrelianceonthe following judicial pronouncements'

10. Central Organisation for Railway Electrification v' ECI-SPIC- SMO MCML (JV) a Joint Venture Company (Para 169) (2024 SCC Online SC 32 19); Lombardi Engineering Limited v' Uttarakhand Jal Vidyut Nigam Limited ((2024\ 4 SCC 341) (Paras 7' 85-86' 1O2); Glock Asia Pacific Limited v' Union of India ((2023) 8 SCC 26) (Paras 6, 2\,24J;JSW Steel Limited v' South Western Railway and Arrr. (2022 SCC Online SC 1973) (Paras 6-7); Union of India v' TantiaConstructionsLimited(2o2lSCConlineSC2Tl\ (Paras 1-2); Perkins Eastman Architects DPC & Anr' v' HSCC India Limited ((2O2O\ 20 SCC 760l (Paras 2'2' 2l' 3O); Central Organisation for Railway Electrificatiou v' ECI-SPIC-SMO MCML (.IV) a Joint Venture Company ((2020) 14 SCC 712) (Paras 17 '18' 36-38); tnrlJiiritea v' Energo Engineering Projects Limited (2O17) _/ 27 ' ,1 i I I i I l i . J :{ 6 IYVSK] 8 SCC 377 (paras g, S! (2OlZ); Voestalpine Schienen GmBH v. Delhi Metro Rail Corpora tion Ltd.. (2017) 4 SCC 665) (paras Z, 26 3B); Kamladityya Construction pvt. Ltd, v. RaiI Land O.r.top*.rrt Authority (2024 SCC Online Del 5182) (para 3; 19); Velji Ratna Sorathia Infra pvt. Ltd. v. Union of India and Ors. (MANU/MP/3424/2023 ) (paras 8_10); Knight Fraak (Indiaf pvt. Ltd. v. punjab Heritage and Tourism promotion Board (2O24 SCC Online P&H 528) (paras 6, 9); Globe Ground India private Limited Vs. Airports Authority of India and Ors. (MANU/TN/2 34312024) (Paras 53, 54, 9T); Govind Singh v. Satya Group private Limited (2023 SCC Onl-ine Dat 37) (paras 13, l7-18,2l);Babu LaI & Anr. v. Cholamandalam fnvestment and Finance Company Ltd. & Anr. (2023 scc online Del 22391(paras 6, 9, 11); sBI General Iasurance Co. Ltd. v. Krish Spinning (2024 SCC Online ---6 (zvz'? o\-u unLlne sc t 754) (Paras 93' r22).

11. In a recent judgment of the Hon,ble Suprme Court in the case of Central Organisation for Railway Electrificatio n l2t)24SCC Online SC 3219, decided on November 8, 2024), held as under: "J. Conclusion 17O. In view of conclude that: the above discussion, 17O.1. The principle of equal treatment of parties applies at ail stages of arbitration proceedings, including the stage of appointment of arbitrators; /' 7 A.A. fio 2sl 6t 2022

170.2. The Arbitratlon Act does not prohibit PSUs from empanelling potential arbitrators' However, an arbitration clause cannot mandate the other party to select its arbitrator from the panel curated bY PSUs; 170'3. A clause that allows one party to unilaterally appoint a sole arbitrator gives rise to justihable doubts as to the independence and impartiality of the arbitrator' Further' such a unilateral clause is exclusive and hinders equal participation of the other party in the appointment process of arbitrators;

170.4. In [hc appointment of a lhree-member panel, mandating the other party to select its arbitrator from a curated panel of potential arbitrators is agalnst the principle of equal treatment of parties ln this situation' there is no effective counterbalance because parties do not participate cqually in the process of appointing arbitrators The process of appointing arbitralors in CORE lCentrat Organisation for Railuay Electrificotion v. ECI SPrc'SMO-MCML (JV)' l2O2Ol 14 SCC 7121 is unequal and prejudiced in favour of the RarlwaYs; 17O.5. Unilateral appointment clauses in public-private contracts are violative of Article 14 of the Constitution; 17O.6. The principle of express warver contained under the proviso to Section 12(5) also applies to situations where the parties seek to waive the a-llegation of bias agarnst an arbitrator appointed unilatera-lly by one of the parties' After the disputes have ari'sen, the parties can 1 i l I I I I 1 i .) .: 8 rvsx, determine whether lhere is a necessity to waive the nemo juclex rule; and

170.7. The law laid down in the present reference u.ili apply prospectively to ar.bitrator appointments to be made after the dale of this judgment.'lhis dircction applics to thrce mcmbcr tribu nal s.

171. The reference is answered in thc above

172. Pcnding application(s), if an5,, sh:r1l stand disposed o[. "

12. In vierv of the above, it is clcar that unilatcrai appointment in public-private contracts are violative of Article 14 of the Constitution. In the instar-rt case, the core issue as contended bv thc Applicant is that the respondent has unilaterally nominated Lhe sole Arbitrator vide letter datcd 1 r.) l .2022, rvho is a retircd I?ailu.ay employee. Taking into considcra t ion of the above judicral pronouncement, unilateral appointment of the sole Arbitrator Shri Vrjender kumar Jain, Retd., PCCM/Central Railways as the sole Arbilrator is set aside and the disputes in the agreement dated o3.og.2oo9 shall have to be decided by the sole Arbitrator in viei.r, of the lau, lzrid down by the Hon'ble Supreme Court in the case of Central Organisation (supra).

13. Accordingly, the I{on,ble Sri Justicc C. praveen Kumar, Door No.a-2-293/82/NL/149_8, MLA & Mp Colony, Vijaya Co_operative Society, Road No.10-C, Jubilee Hills, Hyderabad _ 5OO 033 (phone 9 awsK' J A.A. No 231 of 2022 No.949139998a) is appointed as the sole Arbitrator 1e 1e56lvs the disputes be twe en the Partres T4 The parties shall appear before the said sole Arbitrator along with this order, who shall initiate arbitral proceedings and pass orders, in accordance with law

15. Accordingly, this Arbitration Application There shall be no order as to costs' 1S disposed of. Asa sequel, miscellaneous applications' if any pending' shall stand closed sd/-L lfllc#BlsrssH & ,,TRUE COPY" SEGTION OFFICER u:'#ffi #:{{ * c e n tre' 2 nd F roo r' M a h a ka I i c ave s ir",:}ji,trfi:FE;frfr"";rifvir#[l}i'f.3i,,J#if, H[,S]"f,lrf; :[E:,,.i:$ttd ff I] Xno ot5i :+titr*,fft-ilff shi:d:Hf ["''ft'ffi :'s'i$fr%::t'$?ffi One CC to M/s' Link Legal Advocates' Advocate IOPUCI one CC to Sri V T Kalyan' Advocate IOPUC] To, 1 2 3 4 5 6. Two CD CoPies VH/PSLw Bat ;-_1:*--- .,'i::t- ,.:. 2 2 sEP 2025 r, ,Ir. !" - .'.- lii -:{ '- '"''-.,..i'-'.,.-.{'. ./.'. ,, .;' HIGH COURT DATED: 11tOBt2O2S I t I I ORDER ARBAPPL.No.231 of 2022 DISPOSING OF ARBITRATION APPLICATION $*td YDr"s '-g|*^