PIUS C. KURIAKOSE v. M/s.V.S.Engineering (P) Ltd. (AIR 2007 SC 285)and in Union of India & Anr.

PIUS C. KURIAKOSE, J...........................................................Arbitration Request No.53 OF 2004...........................................................DATED THIS THE 4TH JUNE, 2007

O R D E RThis request for appointment of an independent arbitrator forsettling the disputes between the parties M/s.Sree DhanyaConstruction Company and the Southern Railway relating to executionof the work of

Doubling of Track between Shornur and Mangalore –Mangalore Thanur Section – Earth working in forming embankmentand cutting, Construction of minor bridges, retaining wall, masonrydrains etc. between Pattambi (exit) and Karakkad (exit) stations

ismade under sub-sections (5) and (6) of Section 11 of the Arbitrationand Conciliation Act, 1996 on the ground that the 2nd respondent-General Manager, Southern Railway who is the appointing authorityvested with power to appoint arbitrator in terms of the agreement hasfailed to exercise such power within the prescribed period and henceforfeited his right to do so. Annexure-A4 is attested true copy of thearbitration clause in the agreement. Annexure-A1 is copy of the letterdated 11.2.2004 by which the arbitration clause was invoked and theclaims of the applicant were intimated to the respondents. Annexure-A2 is copy of the letter dated 26.6.2004 sent by the applicant to the AR.N0.53 OF 2004-2-2nd respondent when it was found that there was no response to Annexure-A1 in spite of elapse of months. It is pointed out that as perthe terms of the agreement, after the expiry of 120 days but within180 days of Annexure-A1, the applicant is entitled to seek forappointment of arbitrator. Annexure-A3 is the postalacknowledgment receipt pertaining to Annexure-A2. The applicantsubmits that the appointing authority failed to exercise the powerunder the agreement in spite of Annexure-A2 within thirty days.

A counter affidavit has been filed on behalf of therespondents wherein Clauses 63 and 64 of the General Conditions of Contract (GCC) are specifically referred to and it is stated that the 2ndrespondent has nominated a panel of 4 Gazetted Officers as per theabove Clauses. Annexure-R1 is copy of the letter dated 19.10.2006issued to the applicant in that regard. It is contended that theapplicant has to choose two names out of the above four included inthe panel and the Railways shall appoint one out of the applicant'snominee and will appoint the balance number of arbitrators in terms of Clause 64(3(a)(ii) of the GCC.

I have heard the submissions of Sri.K.L.Varghese, learned AR.N0.53 OF 2004-3-counsel for the applicant and Sri. Alexander Thomas, learned StandingCounsel for the Railways.

Sri. Alexander Thomas would submit that since the conditionsof the contract between the parties provide that Gazetted Officers ofthe Railways themselves shall be arbitrators, this Court will not bejustified in appointing anybody other than them as arbitrators. TheStanding Counsel relied on the judgment of the Supreme court in Union of India v. M/s.V.S.Engineering (P) Ltd. (AIR 2007 SC 285)and in Union of India and another v. M.P.Gupta [2004) 10 SCC504]. Sri. Alexander Thomas also placed before me copy of the orderof this Court in A.R.No.6 of 2007 wherein this Court appointed threepersons from the panel submitted by the Standing Counsel for the Railways in a similar dispute as arbitrators.

The issue is whether the 2nd respondent having failed toexercise the power to appoint arbitrators within 30 days of Annexure-A2 is entitled now, after the contractor has moved the Court, to insistthat the choice of the arbitrator shall be theirs and the issueaccordingly has to be answered in the negative.

A Full Bench of this Court answering a reference which was AR.N0.53 OF 2004-4-necessitated in view of a conflict between judgments of DivisionBenches in Divisional Railway Manager v. West Coast Agencies(2005 (2) KLT 734) and National Thermal Power Corporation Ltd.v. Raghul Constructions (P) Ltd. (2005 (1) KLT 763) over the issueas to whether the Railways will have the right to appoint an arbitratorby virtue of Clauses 63 and 64 of GCC after the institution ofarbitration request by the contractor before the High Court, held, approving the decision in Divisional Railway Manager's case (2005(2) KLT 734), that the Railways will not have the authority once the Chief Justice is moved by the contractor under Section 11 of the Act. Ihad occasion to consider this issue in detail in my common order inA.R.Nos.36, 37 and 38 of 2005 to which also the Railways was a party. In fact, para.5 of the judgment in Union of India v.M/s.V.S.Engineering (P) Ltd. (AIR 2007 SC 285) itself reiteratesthe position.

At any rate, I do not think that any prejudice whatsoever willbe occasioned to the parties by appointing a retired Judge of this Courtknown for his integrity.

The result is that the Arbitration Request will stand allowed. AR.N0.53 OF 2004-5-Mr.Justice M.M.Pareed Pillay, Former Chief Justice of this Court isappointed as Arbitrator. He will adjudicate on all the claims which aresubject-matter of Annexures-A1 and A2. The Arbitrator willcommence the proceedings early and pass award at his earliest.tgl/-(PIUS C. KURIAKOSE, JUDGE) AR.N0.53 OF 2004-6-