M/s Continental India Private Limited Versus General Manager Northern Railway

M/s Continental India Private Limited Versus General Manager Northern Railway


Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


NON­REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.  4829 OF 2022
M/s Continental India Private Limited       …Appellant(s)
Versus
General Manager Northern Railway    …Respondent(s)
J U D G M E N T
M.R. SHAH, J.
1. Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment and order dated 15.09.2021 passed by the High
Court of Judicature at Allahabad in Arbitration Application
No. 15 of 2021, by which, while allowing the application
under Section 11(6) of the Arbitration and Conciliation Act,
1996   (hereinafter   referred   to   as   the   “Act”)   filed   by   the
appellant herein – original applicant, the High Court has
directed respondent herein to send a fresh panel of four
1
retired officers in terms of clause 64(3)(b) of the General
Conditions   of   Contract   (hereinafter   referred   to   as   the
“GCC”)   and   thereafter,   the   appellant   herein   –   original
applicant shall select two from the four suggested names
and thereafter the respondent shall constitute the Arbitral
Tribunal in terms of clause 64(3)(b) of the GCC, the original
applicant has preferred the present appeal. 
2. That the appellant and respondent herein entered into a
contract/agreement which contains the arbitration clause.
As per clause 32 of the agreement, in the event of any
question,   dispute   or   difference   arising   under   or   in
connection with agreement, the same shall be referred to
the   sole   arbitration   of   a   person   appointed   to   be   the
arbitrator,   by   the   General   Manager   of   the   Railway.   A
request/prayer was made by the appellant herein – original
applicant to appoint an arbitrator in terms of clause 32 of
the   agreement.   However,   the   General   Manager/Railway
failed to appoint an arbitrator as provided under clause 32
of the agreement. Therefore, the appellant herein – original
applicant filed the application before the High Court under
Section 11(6) of the Act and requested to appoint a sole
2
arbitrator. Though, the High Court has observed that the
respondent   has   failed   to   appoint   an   arbitrator   despite
raising   the   demand   of   appointing   an   arbitrator,   the
application   was   hence   liable   to   succeed.   However,
thereafter   instead   of   appointing   the   sole   arbitrator   in
exercise of powers under Section 11(6) of the Act, the High
Court has directed to appoint an arbitrator in terms of
clause   64(3)(b)   of   the   GCC.   Feeling   aggrieved   and
dissatisfied with the impugned judgment and order passed
by the High Court in not appointing the sole arbitrator and
instead directing the parties to appoint the arbitrator as
per the GCC, the original applicant before the High Court
has preferred the present appeal.       
3. Shri Ramesh Singh, learned Senior Advocate appearing on
behalf of the appellant herein has vehemently submitted
that the High Court has committed a serious error in not
appointing the sole arbitrator in exercise of powers vested
under Section 11(6) of the Act.
3.1 It   is   submitted   that   the   parties   to   the   agreement   are
governed by the arbitration agreement/clause in terms of
the clause 32 of the agreement. It is submitted that despite
3
invocation   of   the   arbitration   clause   in   terms   of   the
agreement the respondent failed to appoint an arbitrator. It
is contended that therefore the respondent forfeited its right
to appoint an arbitrator under the agreement and therefore,
the High Court was required to appoint a sole arbitrator in
exercise of powers under Section 11(6) of the Act. Reliance
is placed on the decision of this Court in the case of Deep
Trading Company vs. Indian Oil Corporation and Others;
(2013) 4 SCC 35.
3.2 It   is   further   submitted   by   Shri   Ramesh   Singh,   learned
Senior   Advocate   appearing   on   behalf   of   the   appellant   –
original applicant that the High Court has seriously erred in
directing the parties to appoint the arbitrator in terms of
clause 64(3)(b) of the GCC. 
3.3 It   is   contended   that   in   the   present   case   the   General
Conditions   of   Contract   is   not   applicable   at   all   on   the
grounds inter­alia that (i) neither the GCC has been signed
by   the   parties   nor   the   governing   agreement   makes   any
reference   to   the   GCC;   (ii)   the   parties   to   the   original
agreement are neither signatory to the GCC nor the GCC is
4
made part of the original agreement entered into between
the   parties;   (iii)   even   as   per   the   communication   dated
16.07.2020,   the   GCC,   July   2020   shall   be   applicable   to
works contracts on Indian Railways with prospective effect.
It is submitted that therefore the High Court has seriously
erred in directing to constitute an Arbitral Tribunal as per
clause 64(3)(b) of the GCC. 
4. Shri K.M. Nataraj, learned ASG appearing on behalf of the
respondent is not in a position to dispute that after the
invocation   of   the   arbitration   clause,   the   General
Manager/Railway failed to appoint the sole arbitrator in
terms of the agreement. He is also not in a position to
satisfy   the   Court   as   to   how   the   General   Conditions   of
Contract shall be applicable with respect to the agreement
between the parties which has been entered into much
prior to the GCC coming into force i.e., July, 2020 and that
neither is there any reference to the GCC  in the original
agreement nor the GCC has been signed by the parties.
Therefore, he is unable to support the impugned judgment
and order passed by the High Court directing to constitute
an Arbitral Tribunal as per clause 64(3)(b) of the GCC. 
5
5. We have heard the learned counsel appearing on behalf of
the respective parties at length. 
6. It is not in dispute that the parties to the agreement agreed
to   resolve  the   dispute   as   per   clause   32   of   the   original
agreement which reads as under: ­ 
“32. Arbitration. 
(a)  In   the   event   of   any   question,   dispute   or
difference   arising   under   or   in   connection   with   this
Agreement (except as to matters the decision of which
is specially provided for by this Agreement) the same
shall be referred to the sole arbitration of a person
appointed to be the arbitrator, by the General Manager
or the Railway. It will be no objection if the arbitrator
is a Government servant, that he had to deal with
matters to which the Agreement relates or that in the
course of his duties as a Government servant he has
expressed views on all or any of the matters in dispute
or difference. The Award of the arbitrator shall be final
and binding on the parties to this Agreement. 
Provided always that the decision of the General
Manager of the Railway as to the disputes which fell
within the “excepted matters” referred to above shall
be final and binding on the parties hereto and such
decision of the General Manager shall not be called in
question before the arbitrator by either of the parties
hereto. 
(b) In the event of the arbitrator dying, neglecting or
refusing to act, or resigning or being unable to act for
any reason, or his award being set aside by the Court
for   any   reason   it   shall   be   lawful   for   the   authority
appointing the arbitrator to appoint another arbitrator
in   place   of   the   outgoing   arbitrator   in   the   manner
aforesaid. 
(c) It is further a term of this Agreement that no
person   other   than   the   person   appointed   by   the
authority  as aforesaid should  act  as arbitrator  and
6
that if for any reason that is not possible, the matter is
not be referred to arbitration at all. 
………”      
The appellant and the respondent being signatories to
the   agreement   are   bound   by   the   aforesaid   arbitration
clause/arbitration   agreement.   As   the   dispute   arose
between the parties, the appellant invoked the arbitration
clause in terms of the agreement. However, the respondent
– General Manager/Railway failed to appoint the arbitrator
in   terms   of   clause   32,   reproduced   hereinabove.   That
thereafter, the appellant herein approached the High Court
for appointment of the sole arbitrator in exercise of powers
under Section 11(6) of the Act. Once the dispute has arisen
between   the   parties   and   despite   invocation   of   the
arbitration clause in terms of the agreement no arbitrator
is appointed, it can be said that the authority has forfeited
its right to appoint the arbitrator in terms of the arbitration
agreement   and   thereafter   the   arbitrator   has   to   be
appointed under Section 11(6) of the Act. 
6.1 At this stage, the decision of this court in the case of Deep
Trading Company (supra) is required to be referred to. In
7
the   said   decision   it   is   observed   and   held   that   once   an
arbitrator   is   not   appointed   as   per   the   agreed   procedure
within   stipulated   time,   right   of   the   party   concerned   to
appoint an arbitrator is forfeited and therefore, Chief Justice
ought to have appointed an arbitrator under Section 11(6) of
the   Act.   In   the   said   decision   the   Corporation   therein
appointed the arbitrator as per the agreed procedure during
pendency of the proceedings under Section 11(6) of the Act
and to that it is observed and held that appointment of
arbitrator   by   the   Corporation   during   pendency   of   the
proceedings   under   Section   11(6)   of   the   Act   was   of   no
consequence, as failing to appoint an arbitrator within the
prescribed time, the Corporation had lost its right to appoint
an arbitrator.
6.2 In the present case also, the respondent failed to appoint an
arbitrator as per the agreed procedure and in terms of the
agreement. Therefore, the respondent forfeited its right to
appoint   an   arbitrator   in   terms   of   the   agreement   and
therefore the appellant was justified in filing the application
before the High Court for appointment of a sole arbitrator in
exercise of powers under Section 11(6) of the Act. The Chief
8
Justice or his nominee thus was required to appoint the
arbitrator under Section 11(6) of the Act. 
7. By the impugned judgment and order and while allowing
the application under Section 11(6) of the Act instead of
appointing   the   arbitrator   in   exercise   of   powers   under
Section 11(6) of the Act, the High Court has directed to
constitute an Arbitral Tribunal in terms of clause 64(3)(b) of
the GCC. It is not in dispute that neither the GCC was
signed by the parties nor the GCC was made part of the
agreement between the parties. There is no reference to the
GCC   in   the   main   agreement   entered   into   between   the
parties. Even as per communication dated 16.07.2020, the
GCC, July 2020 shall be applicable to works contract of
Indian   Railways   with   prospective   effect.   Therefore,   the
parties are not governed by the GCC at all. Therefore, the
High Court has committed a serious error in directing to
constitute an Arbitral Tribunal in terms of the provisions of
the GCC, which are not binding to the parties. 
8. In view of the above and for the reasons stated above the
impugned judgment and order passed by the High Court to
the extent directing to constitute an Arbitral Tribunal in
9
terms of clause 64(3)(b) of the GCC is unsustainable and
deserves to be quashed and set aside and is accordingly
quashed and set aside. The Chief Justice or his nominee
was   required   to   appoint   a   sole   arbitrator/arbitrator   in
exercise of powers under Section 11(6) of the Act. The High
Court has failed to appoint the sole arbitrator in exercise of
powers under Section 11(6) of the Act. Therefore, as such
the matter is required to be remanded to the High Court for
appointment   of   a   sole   arbitrator.   However,   instead   of
remanding the matter to the High Court and to avoid any
further   delay,   with   the   consent   of   the   learned   counsel
appearing on behalf of the respective parties, we appoint
Smt. Justice R. Banumathi, Former Judge of this Court, as
a   sole   arbitrator   to   adjudicate   and   resolve   the   dispute
between   the   parties.   The   present   appeal   is   accordingly
allowed. No costs.    
………………………………….J.
[M.R. SHAH]
NEW DELHI; ………………………………….J.
July 27, 2022 [B.V. NAGARATHNA]
10

Comments

Popular posts from this blog

100 Questions on Indian Constitution for UPSC 2020 Pre Exam

संविधान की प्रमुख विशेषताओं का उल्लेख | Characteristics of the Constitution of India

भारतीय संविधान से संबंधित 100 महत्वपूर्ण प्रश्न उतर