IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE V.CHITAMBARESH MONDAY, THE 21ST DAY OF JULY 2014/30TH ASHADHA, 1936 AR.No. 20 of 2010 APPLICANT: COASTAL ENGINEERING, KONTHURUTHY, KOCHI-682 013, REPRESENTED BY ITS MANAGING PARTNER K.J.JOHN, AGED 46 YEARS, S/O.JOSEPH. BY ADVS.SRI.K.S.BABU SMT.K.B.SUJATHA SMT.M.K.ASWATHI OPPOSITE PARTIES: 1. SOUTHERN RAILWAY, HEAD QUARTERS OFFICE PARK TOWN, CHENNAI-600 003, REPRESENTED BY ITS GENERAL MANAGER. 2. UNION OF INDIA, MINISTRY OF RAILWAYS, REPRESENTED BY THE GENERAL MANAGER, SOUTHERN RAILWAY HEAD QUARTERS OFFICE PARK TOWN, CHENNAI-600 003. 3. CHIEF ADMINISTRATIVE OFFICER (CONSTRUCTION), SOUTHERN RAILWAY, EGMORE CHENNAI-600 008. 4. CHIEF ENGINEER(CONSTRUCTION),SOUTHERN RAILWAY, ERNAKULAM JUNCTION, KOCHI-16. 5. DEPUTY CHIEF ENGINEER(CONSTRUCTION), SOUTHERN RAILWAY, ERNAKULAM JUNCTION, KOCHI-682016. R1-R5 BY ADV. SRI.N.B.SUNIL NATH, SC, RAILWAYS BY ADV. SRI. C.S. DIAS, SC, RAILWAYS THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 21-07-2014, ALONG WITH A.R. NOS. 28/2013 & 63/2013, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: DCS AR.No. 20 of 2010 APPENDIX PETITIONER(S)' ANNEXURES :- ANNEXURE A1: COPY OF THE LETTER OF ACCEPTANCE ISSUED BY THE 4TH RESPONDENT ANNEXURE A2: COPY OF THE AGREEMENT NO. 17/CNTVC/2003 EXECUTED BETWEEN THE APPLICANT AND THE 4TH RESPONDENT ANNEXURE A3: COPY OF THE LETTER NO. W148/130/CN/TVC/ERMDLG DATED 01.04.2004 ANNEXURE A4: COPY OF THE LETTER DATED 16.6.2004 ISSUED BY THE APPLICANT TO THE 4TH RESPONDENT ANNEXURE A5: COPY OF THE LETTER DATED 11.08.2004 INFORMING EXTENSION OF THE CURRENCY OF AGREEMENT UNDER CLAUSE 17(2) OF THE GENERAL CONDITIONS OF CONTRACT ANNEXURE A6: COPY OF THE LETTER DATED 19.10.2004 ISSUED BY THE 4TH RESPONDENT TO THE APPLICANT ANNEXURE A7: COPY OF THE LETTER DATED 23.10.2004 ISSUED BY THE APPLICANT TO THE 4TH RESPONDENT ANNEXURE A8: COPY OF THE LETTER DATED 30.12.2004 ISSUED BY THE APPLICANT TO THE 4TH RESPONDENT ANNEXURE A9: COPY OF THE LETTER DATED 03.01.2005 ISSUED BY THE APPLICANT TO THE 4TH RESPONDENT ANNEXURE A10: COPY OF THE LETTER DATED 06.06.2005 ISSUED BY THE APPLICANT TO THE 4TH RESPONDENT ANNEXURE A11: COPY OF THE LETTER DATED 27.06.2005 ISSUED BY THE APPLICANT TO THE 4TH AND 5TH RESPONDENTS ANNEXURE A12: COPY OF THE LETTER DATED 28.08.2006 ISSUED BY THE APPLICANT TO THE 4TH RESPONDENT ANNEXURE A13: COPY OF THE LETTER DATED 3.10.2007 ISSUED BY THE 5TH RESPONDENT TO THE 4TH RESPONDENT ANNEXURE A14: COPY OF THE CLAIM LETTER DATED 29.01.2010 SUBMITTED BY THE APPLICANT TO THE RESPONDENTS ANNEXURE A15: COPY OF THE RECEIPT OF ACKNOWLEDGMENT OF THE 1ST RESPONDENT ANNEXURE A15(a): COPY OF THE RECEIPT OF ACKNOWLEDGMENT OF THE 3RD RESPONDENT DCS AR.No. 20 of 2010 ANNEXURE A15(b): COPY OF THE RECEIPT OF ACKNOWLEDGMENT OF THE 4TH RESPONDENT ANNEXURE A15(c): COPY OF THE RECEIPT OF ACKNOWLEDGMENT OF THE 5TH RESPONDENT ANNEXURE A16: COPY OF THE GENERAL CONDITIONS OF CONTRACT OF THE YEAR 2003 PAGES 1 AND PAGES 27 TO 29 RESPONDENT'S ANNEXURES :- ANNEXURE R5(a): COPY OF THE LETTER NO. G. 16/DGM/ARB/TVC-12 DATED 19.08.2010 ISSUED BY THE 1ST RESPONDENT ANNEXURE R5(b): COPY OF THE LETTER NO. W/148/CN/ERS/509 DATED 28.9.2004 ISSUED BY EXECUTIVE ENGINEER, CONSTRUCTION, ERNAKULAM ANNEXURE R5(c): COPY OF LETTER NO. 148/1/30/CN/TVC/EMDLG/FOB-TRTR DATED 19.10.2004 ISSUED BY 4TH RESPONDENT ANNEXURE R5(d): COPY OF THE AGREEMENT NO. 5/DCE/HQ/ERS/2007 DATED 9.5.2007 ANNEXURE R5(e): COPY OF LETTER NO.W.148/CN/TVC/EMDLG/FOB/TRTR DATED 15.10.2007 ISSUED BY 4TH RESPONDENT /TRUE COPY/ P.A. TO JUDGE DCS [ENTITY] & P.V. ASHA, JJ. - - - - - - - - - - - - - - - - - - - - - - - - - - A.R.Nos.20/2010, [SECTION]/2010 & 28/2013 - - - - - - - - - - - - - - - - - - - - - - - - - - DATEDTHIS THE 7TH DAYOF JULY, 2014 O R D E R
[ENTITY], J.
These Arbitration Requests have been referred to the Division Bench by the learned Single Judge. The respective applicants have filed the Arbitration Requests beyond 30 days from the demand, to appoint an Arbitrator and before the expiry of the period provided by the General Conditions of Contract. The common respondents are the General Manager, [ENTITY] and other Railway officials.
2. We will refer to the bare facts necessary for the disposal of the Arbitration Requests and [CASE NUMBER] is taken as the leading case. The respondents tendered the work, viz. "bulk right for commercial publicity for the notified area and media" at different railway stations under the [ENTITY], Kollam Junction, Ernakulam Junction and Thrissur Railway Stations. Exts.A1 to A3 are the agreements executed by the petitioner and the fourth respondent dated 26.10.2011. Clauses 26 and 27 are relevant in the context of the issues raised in these cases. Clause 26 is AR Nos.20/2010, [SECTION]/2010 & 28/2013 extracted below:
"In the event of any difference of opinion or dispute between the Railway Administration and the contractor as to the respective rights and obligations of the parties hereunder or to the true intentions of conditions, such difference of opinion shall be referred to the sole arbitrator who shall be a Gazetted Railway Officer appointed by the General Manager, [ENTITY], Chennai."
By the same, any dispute between the Railway Administration and the contractor with regard to the rights and obligations of the parties shall be referred for arbitration by a sole arbitrator. Clause 27 and its applicability has also arisen for consideration. Therefore, we extract the same:
"Except as otherwise provided herein any arrangements or agreement oral or written varying or supplementing this contract or any of the terms thereof shall be no effect and shall not be valid or binding or enforceable on the Government unless and until the same is endorsed on this contract or incorporated in a formal agreement in writing and signed by the parties hereto. These instructions and specification should be read in addition to the General Conditions of Contract."
Going by the same, the terms and conditions should be read in addition to the general conditions of the contract.
AR Nos.20/2010, [SECTION]/2010 & 28/2013
3. According to the petitioner, what is relevant is only clause 26 whereas the respondents have taken a stand that the relevant clauses contained in the general conditions of the contract concerning arbitration are also relevant.
4. In the counter affidavit filed by the respondents, the above contention has been taken. Annexure R4(7) contains the general conditions, viz. [SECTION] and [SECTION] which are extracted hereinbelow:
"63. Matters finally determined by the Railway - All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the work or after its completion and whether before or after the determination of the contract shall be referred by the contractor to the Railway and the Railway shall within 120 days after receipt of the contractor's representation make and notify decisions on all matters referred to by the contractor in writing provided that matters for which provision has been made in [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION] and [SECTION] of General Conditions of Contract or in any clause of the special conditions of the contract shall be deemed as 'excepted matters' and the decisions of the Railway authority, thereon shall be final and binding on the contractor provided further that 'excepted matters' shall stand AR Nos.20/2010, [SECTION]/2010 & 28/2013 specifically excluded from the purview of the arbitration clause and not be referred to arbitration.
[SECTION] - Demand for Arbitration -
In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the 'excepted matters' referred to in clause 63 of these conditions, the contractor, after 120 days but within [SECTION]0 days of his presenting his final claim on disputed matters, shall demand in writing that the dispute or difference be referred to arbitration."
Clause [SECTION] provides for a waiting period of 120 days from the date of raising the claim on disputed matters and the contractor can demand in writing that the dispute or difference be referred to arbitration.
5. Before the learned Single Judge, it was contended by the learned counsel for the petitioners that an arbitration request can be made after the expiry of 30 days, in the light of the decisions of the Apex Court in [PRECEDENT], AR Nos.20/2010, [SECTION]/2010 & 28/2013 [PRECEDENT], [ENTITY] Ltd. v. Petronet MHB Ltd. {[PRECEDENT]} and [PRECEDENT].
6. The respondents contended that the Arbitration Requests are premature, since they have been filed well before the expiry of the waiting period of 120 days specified in the General Conditions of Contract. They have relied upon the decision of a Division Bench of this Court in [PRECEDENT]. The learned Single Judge was of the view that the decision in National Thermal Power Corpn. Ltd.'s case (AIR 2005 Ker.
115) requires reconsideration in the light of the decision of the Apex Court in [PRECEDENT].
7. The following questions have been referred for consideration by the Division Bench:
"(a) Whether the General Conditions of Contract are only directory or mandatory or whether the 'waiting period' of 120 days mentioned AR Nos.20/2010, [SECTION]/2010 & 28/2013 in the General Conditions of Contract is part of procedure under [SECTION] of the [ACT] deserves consideration? and
(b) Whether Clause 26 of the agreement for contract (Annexure A1 in [CASE NUMBER]) will prevail over the General Conditions of Contract in the matter of appointment of Arbitrator?
8. We heard learned counsel for the petitioners Shri [ENTITY], Shri [ENTITY] and Smt. [ENTITY] and learned Standing Counsel for the Railways, Shri [ENTITY].
9. Shri [ENTITY], learned counsel for the petitioner in [CASE NUMBER] contended that the dictum laid down by the Apex Court in Datar Switchgears Ltd.'s case {[PRECEDENT]} has been affirmed in all the subsequent decisions, viz. Punj Lloyed Ltd.'s {[PRECEDENT]}, V.S.Engineering (P) Ltd.'s case {[PRECEDENT]}, [PRECEDENT] [PRECEDENT], [PRECEDENT] and Deep Trading Company's case {[PRECEDENT]. It is submitted that the principle that emerges from the above decisions is that even in case of an appointment coming under [SECTION] AR Nos.20/2010, [SECTION]/2010 & 28/2013 of the [ACT],even though the said section does not prescribe any period of 30 days, it must be implied that 30 days is a reasonable time for the purpose of the said section and thereafter the right to appoint is forfeited. The appointment has to be made before the party concerned files an application under [SECTION] of the Act seeking appointment of an Arbitrator.
10. Learned counsel for the petitioner also submitted that herein what is relevant is only clause 26 of the agreement Exts.A1 to A3 and the General Conditions of Contract are not applicable. Learned counsel therefore submitted that on that score also the request is perfectly maintainable and in these cases the appointment of an Arbitrator is only after the requests have been filed before the court and by the time the respondents have forfeited their right also. Therefore, an independent Arbitrator will have to be appointed.
11. Learned counsel for the petitioners in the connected cases supported the above argument.
12. It is further submitted that the decision of the Division Bench in AR Nos.20/2010, [SECTION]/2010 & 28/2013 National Thermal Power Corporation Ltd.'s case ([PRECEDENT] has not considered the above legal position. It is submitted that the view taken therein that the power of the Chief Justice is only to give effect to the appointment procedure so as to secure appointment of the arbitrator, will go against the view taken by the Apex Court in Datar Switchgears Ltd.'s case {[PRECEDENT]} as confirmed by the subsequent decisions. It is therefore submitted that the same is no longer good law.
13. Learned Standing Counsel for the Railways, Shri [ENTITY] submitted that the contention that only [SECTION] alone will apply as far as the reference of disputes for arbitration is concerned, is not correct. Going by Clause 27, the General Conditions of Contract are made applicable in addition to the stipulations made in the agreements. Those provisions, therefore, cannot be ignored. In that view of the matter, clearly there is an appointment procedure, going by Clause [SECTION] of the General Conditions of Contract. The waiting period provided in the said clause is therefore important. The parties to the agreement have agreed to the said condition and therefore the petitioners cannot turn round and contend for AR Nos.20/2010, [SECTION]/2010 & 28/2013 the position that the said clause is not applicable or binding on them. It is submitted, by relying upon the decision of this Court in [ENTITY] v. M/s. Indal Electromelts Ltd., Coimbatore and others (AIR 1999 Ker.
440), Bel House Associates (P) Ltd. v. General Manager, [ENTITY] (2001 KHC 148) and National Thermal Power Corporation Ltd.'s case ([PRECEDENT] that for the purpose of [SECTION] of the Act, the appointment procedure alone governs. The respondents will not lose their right to appoint an Arbitrator in terms of the procedure prescribed even after the expiry of 30 days, merely because the contractors have approached this Court by filing Arbitration Requests. It is submitted that the Apex Court has held in [PRECEDENT], The Iron and Steel Company Ltd. v. M/s. Tiwari Road Lines (AIR 2007 SC 20[SECTION]) and later in Indian Oil Corporation Ltd. And [PRECEDENT] that the clauses in an agreement executed between the parties are binding on the respective parties. They cannot be termed as void or unenforceable on any account.
AR Nos.20/2010, [SECTION]/2010 & 28/2013
14. We will now proceed to consider the arguments on both sides. [SECTION] of the [ACT] has come up for interpretation in all the decisions referred to by the learned counsel on both sides. We extract [SECTION] in full hereunder:
"11. Appointment of arbitrators- (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in sub-section (3) applies and-
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (5) Failing any agreement referred to in sub-section (2), in an arbitrator with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party AR Nos.20/2010, [SECTION]/2010 & 28/2013 from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(6) Where, under an appointment procedure agreed upon by the parties,-
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted by sub-section (4) or sub-
section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final.
(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to-
(a) any qualifications required of the arbitrator by the agreement of the parties; and
(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
AR Nos.20/2010, [SECTION]/2010 & 28/2013 (9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub-section (4) or [SECTION] or sub-section (6) to him.
(11) Where more than one request has been made under sub-section (4) or [SECTION] or sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to "Chief Justice" in those sub-section shall be construed as a reference to the "Chief Justice of India".
(b) Where the matters referred to in sub-sections (4), (5, (6), (7), (8) and (10) arise in any other arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of AR Nos.20/2010, [SECTION]/2010 & 28/2013 [SECTION] is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court." We will now come to the interpretation placed with regard to the right of a party to approach the court for appointment of an independent Arbitrator under [SECTION], in the judgments relied upon by the learned counsel for the petitioner.
15. In Datar Switchgears Ltd.'s case {[PRECEDENT]}, the scheme under [SECTION] of the Act was analysed in paragraphs 5 and 6. We extract paragraphs 5 and 6 hereinbelow:
"5. The [ACT] made certain drastic changes in the Law of Arbitration. This Act is codified in tune with the Model Law on International Commercial Arbitration as adopted by the United Nations Commission on International Trade Law (UNCITRAL). [SECTION] of the Act deals with the procedure for appointment of Arbitrator. [SECTION] says that the parties are free to agree to any procedure for appointing the Arbitrator. If only there is any failure of that procedure, the aggrieved party can invoke [SECTION], as the case may be. In the instant case, the Arbitration clause in the Lease Agreement contemplates appointment of a sole Arbitrator. If the parties fail to AR Nos.20/2010, [SECTION]/2010 & 28/2013 reach any agreement as referred to in sub-section (2), or if they fail to agree on the Arbitrator within thirty days from receipt of the request by one party, the Chief Justice can be moved for appointing an Arbitrator either under [SECTION] or [SECTION] of the Act.
6. [SECTION] can be invoked by a party who has requested the other party to appoint an Arbitrator and the latter fails to make any appointment within thirty days from the receipt of the notice . Admittedly, in the instant case, the appellant has not issued any notice to the 1st respondent seeking appointment of an Arbitrator. An application under [SECTION] can be filed when there is a failure of the procedure for appointment of Arbitrator. This failure of procedure can arise under different circumstances. It can be a case where a party who is bound to appoint an Arbitrator refuses to appoint the Arbitrator or where two appointed Arbitrators fail to appoint the third Arbitrator. If the appointment of Arbitrator or any function connected with such appointment is entrusted to any person or institution and such person or institution fails to discharge such function, the aggrieved party can approach the Chief Justice for appointment of Arbitrator."
It was argued by the learned counsel for the appellant therein that even AR Nos.20/2010, [SECTION]/2010 & 28/2013 though [SECTION] does not prescribe a period of 30 days, it must be implied that 30 days is a reasonable time for the purpose of [SECTION] of the Act and thereafter the right to appoint is forfeited. In paragraph [SECTION], after noting the above argument, the following question was raised:
"The question is whether in a case falling under [SECTION], the opposite party cannot appoint an arbitrator after the expiry of 30 days from the date of demand?"
In paragraph 19, the following dictum was laid down:
19. So far as cases falling under [SECTION] are concerned - such as the one before us - no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under [SECTION] and [SECTION] of the Act. In our view, therefore, so far as [SECTION] is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the Court under [SECTION], that would be sufficient. In other words, in cases arising under [SECTION], if the opposite party has not made an appointment within 30 days of demand, the right to make AR Nos.20/2010, [SECTION]/2010 & 28/2013 appointment is not forfeited but continues, but an appointment has to be made before the former files application under [SECTION] seeking appointment of an arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an arbitrator under [SECTION] is forfeited."
In the above paragraph, the Apex Court has noticed that a period of 30 days has been prescribed under [SECTION] and [SECTION] of the Act, but such period is not provided under [SECTION] of the Act. Therefore, the conclusions drawn are: (a) As far as [SECTION] is concerned, if one party demands the opposite party to appoint an Arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days; (b): If the opposite party makes an appointment even after 30 days of the demand but before the first party has moved the court under [SECTION], that would be sufficient; and (c): In cases arising under [SECTION], if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an AR Nos.20/2010, [SECTION]/2010 & 28/2013 appointment has to be made before the former files application under [SECTION] seeking appointment of an arbitrator. Only then the right of the opposite party ceases.
16. The above decision by a two Judge Bench of the Apex Court came up for consideration before a three Judge Bench in [ENTITY] Ltd.'s case {[PRECEDENT]}. After extracting paragraph 19 of the judgment in Datar Switchgears Ltd.'s case (supra), it was held in paragraph 6 that "the case at hand is squarely covered by the above said view of the law taken by this Court." Therefore, the dictum laid down therein has been affirmed.
17. The next important decision is V.S.Engineering (P) Ltd.'s case {[PRECEDENT]} by a two Judge Bench of the Apex Court. Therein, the same clauses, viz. [SECTION] and [SECTION] of the General Conditions of Contract have been considered by the Apex Court. The dictum laid down in Datar Switchgears Ltd.'s case (supra) has been referred to in paragraph 4 of the judgment. The Bench in paragraph 6 has held as follows:
"6. However, before parting with this case, we may also observe that Railways and Public Institutions are very slow in reacting to the request made by a contractor for appointment of the arbitrator. AR Nos.20/2010, [SECTION]/2010 & 28/2013 Therefore, in case appointment is not made in time on the request made by the contracting party, then in that case the power of the High Court to appoint arbitrator under [SECTION] of the Act will not be denuded. We cannot allow administrative authorities to sleep over the matter and leave the citizens without any remedy. Authorities shall be vigilant and their failure shall certainly give rise to cause to the affected party. In case, the General Manager, Railway does not appoint the arbitral tribunal after expiry of the notice of 30 days or before the party approaches the High Court, in that case, the High Court will be fully justified in appointing arbitrator under [SECTION] of the Act. It is the discretion of the High Court that they can appoint any railway officer or they can appoint any High Court Judge according to the given situation." (emphasis supplied by us)
[SECTION]. It is significant, therefore, to note the view taken therein that "in case the General Manager Railway does not appoint the arbitral tribunal after expiry of the notice of 30 days or before the party approaches the High Court, in that case, the High Court will be fully justified in appointing arbitrator under [SECTION] of the Act." Thus the views taken in the earlier decisions in Datar Switchgears Ltd.'s case (supra) and [ENTITY]'s case (supra) have been followed.
AR Nos.20/2010, [SECTION]/2010 & 28/2013
19. The very same provisions came up for consideration before the Apex Court in Bharat Sanchar Nigam Limited's case {[PRECEDENT] and we extract paragraph 7 wherein a similar view has been taken:
"7. A plain reading of [SECTION] of the Act would show that if one party demands appointment of an arbitrator and the other party does not appoint any Arbitrator within thirty days of such demand, the right to appointment at the instance of one of the parties does not get automatically forfeited. If the appellant makes an appointment even after thirty days of demand but the first party has not moved the Court under [SECTION], that action on the part of the appellant would be sufficient. In other words, in cases arising under [SECTION], if the respondent has not made an appointment within thirty days of demand, right to make an appointment of an arbitrator is not forfeited but continues, but such appointment shall be made before the other party files the application under [SECTION] seeking appointment of an arbitrator before the High Court. It is only then the right of the respondent ceases."
Their Lordships, in the above decision, have relied upon the earlier view taken in Datar Switchgears Ltd.'s case (supra) and [ENTITY]'s case (supra).
AR Nos.20/2010, [SECTION]/2010 & 28/2013
20. The next important decision is by a three Judge Bench of the Apex Court in Deep Trading Company's case {[PRECEDENT]. Paragraph 1 contains the questions considered, which are the following:
"Whether Respondent 1 has forfeited its right to appoint the arbitrator having not done so after the demand was made and till the appellant had moved the Court under [SECTION] and, if the answer is in the affirmative, whether the appointment of the arbitrator by Respondent 1 in the course of the proceedings under [SECTION] is of any legal consequence and the Chief Justice of the High Court ought to have exercised the jurisdiction and appointed an arbitrator?"
Going by the facts of the above case, the dealer called upon the Corporation by a written notice dated 9.8.2004 to refer the disputes to an arbitrator in accordance with the terms of Clause 29 of the agreement; the dealer made an application before the High Court under [SECTION] of the Act for appointment of the arbitrator on 6.12.2004 and the Corporation appointed the sole arbitrator on 28.12.2004 after the application under [SECTION] was already filed by the dealer.
21. In the above case, the judgments in Datar Switchgears Ltd.'s AR Nos.20/2010, [SECTION]/2010 & 28/2013 case (supra) and [ENTITY]'s case (supra) were relied upon by the learned Senior Counsel for the Appellant in support of the arguments. After referring to the dictum laid down in the two cases, viz. Datar Switchgears Ltd. (supra) and [ENTITY]. Ltd. (supra) in paragraphs 15 and 16, in paragraph 17 their Lordships have held as follows:
"We are in full agreement with the legal position stated by this Court in [PRECEDENT] and [PRECEDENT] which has also been followed in [ENTITY] Ltd. v. Petronet MHB Ltd. (2006) 2 SCC
638."
Finally, after referring to [SECTION] of the Act and the decision of the Apex Court in Patel Engineering Company Ltd.'s case {[PRECEDENT]}, it has been held as follows in paragraph [SECTION]:
"[SECTION] provides that Chief Justice or the designated person or institution, in appointing an arbitrator, shall have due regard to two aspects, (a) qualifications required of the arbitrator by the agreement of the parties; and (b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator. In [PRECEDENT], a three-Judge Bench of this Court considered the scheme of AR Nos.20/2010, [SECTION]/2010 & 28/2013 [SECTION]. Insofar as [SECTION] is concerned, this Court stated that appointment of the arbitrator or arbitrators named in the arbitration agreement is not a must, but while making the appointment the twin requirements mentioned therein have to be kept in view."
In paragraph 19, it was held that, the appointment made by the Corporation is of no consequence. It is profitable to extract the entire paragraph 20 which is given below:
"20. If we apply the legal position exposited by this Court in [PRECEDENT] to the admitted facts, it will be seen that the Corporation has forfeited its right to appoint the arbitrator. It is so for the reason that on 09.08.2004, the dealer called upon the Corporation to appoint the arbitrator in accordance with terms of Clause 29 of the agreement but that was not done till the dealer had made application under [SECTION] to the Chief Justice of the Allahabad High Court for appointment of the arbitrator. The appointment was made by the Corporation only during the pendency of the proceedings under [SECTION]. Such appointment by the Corporation after forfeiture of its right is of no consequence and has not disentitled the dealer to seek appointment of the arbitrator by the Chief Justice under [SECTION]. We AR Nos.20/2010, [SECTION]/2010 & 28/2013 answer the above questions accordingly."
Therefore, the dictum laid down in Datar Switchgear's Ltd. (supra) and [ENTITY]'s case (supra) has been fully affirmed by the three Judge Bench.
22. We will now come to the views taken by this Court in the three decisions relied upon by the learned Standing Counsel for the Railways. In [ENTITY]'s case ([PRECEDENT] the party approached the court under [SECTION] of the Act to appoint an arbitrator. The respondents objected to the same by contending that the arbitration request is not maintainable since the applicant has not complied with the procedure laid down in [SECTION] and [SECTION] of the agreement. In paragraph 6, the view taken by the learned Judge is that "when the parties to a contract agree to any special mode for resolution of the disputes arising out of the agreement, they are bound to comply with the mode prescribed under the agreement." It was held in paragraph 8 that [SECTION] and [SECTION] provide for certain preceding steps to be undertaken for arbitration and without resorting to those essential or preceding steps for arbitration, the arbitration clause cannot be enforced. Finally, it was held in paragraph 12 thus:
AR Nos.20/2010, [SECTION]/2010 & 28/2013 "Therefore, in view of the fact that the applicant has filed this arbitration request to appoint an arbitrator in accordance with the arbitration clause provided in Ext.P4 agreement without resorting to or complying with or exhausting the prerequisites for the enforcement of the arbitration clause provided in the agreement, the same is not maintainable as premature."
However, it was observed that "the said order will not preclude the applicant from enforcing the arbitration clause in the agreement after due compliance of the prerequisites for enforcing the arbitration clause provided in the agreement."
23. The next decision is by another learned Single Judge of this Court in Bel House Associates (P) Ltd.'s case (2001 KHC 148 = 2001 (1) KLT [SECTION]9). Therein also, the relief prayed for was for appointment of a sole independent arbitrator to adjudicate the dispute between the parties. The General Manager, [ENTITY] was the respondent and he relied upon [SECTION] and [SECTION] of the General Conditions of Contract. It was contended that in the light of the procedure laid down in the agreement, no independent arbitrator or arbitrators can be appointed. The learned Single Judge was of the following view:
AR Nos.20/2010, [SECTION]/2010 & 28/2013 "Hence, this Court cannot appoint an independent arbitrator as prayed for; but has only to implement the procedure agreed upon between the parties regarding the arbitration. Thus a direction has to be issued to implement the procedure for appointment as contemplated under Clause [SECTION] of the agreement." (para 6)
24. In National Thermal Power Corporation Ltd.'s case ([CASE NUMBER]) a similar view was taken by a Division Bench of this Court. The view taken in Bel House Engineering (P) Ltd.'s case (supra) was also approved. Therein, from paragraph 6 onwards the relevant provisions under [SECTION] of the Act have been analysed. The question apparently considered was whether, under [SECTION], the Chief Justice or the designate can make an appointment of an independent arbitrator or will have to enforce or compel the party to make the appointment in accordance with the agreed procedure. The importance of the agreed procedure was analysed in that context. Reliance was placed on a judgment of the Madhya Pradesh High Court in Subhash Projects and Marketing Ltd. v. Southern Coalfield Ltd. (1998 (Suppl.) Arb.L.R. 3[SECTION]) and the contrary view taken by the Andhra Pradesh High Court in Deepak AR Nos.20/2010, [SECTION]/2010 & 28/2013 Galvanising & Engg. Industries Ltd. v. Government of India (1997 (Suppl.)Arb.L.R. 635), by the Delhi High Court in [PRECEDENT] Bombay High Court in [PRECEDENT] was dissented from. Their Lordships further considered the interpretation to be given to the words "necessary measures" and "securing appointment" in [SECTION] and finally held in paragraphs 7 and 8 thus:
"7. [SECTION] deals with cases where there is an appointment procedure agreed to between the parties. If a party fails to act as required under that procedure, party may request the Chief Justice or any person or institution designated by him to take necessary measure for securing the appointment. So also, under sub-s.(4) of S. 11, if two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, then also the Chief Justice upon the request of a party or any person designated by him can make appointment. In [SECTION], the wording used is appointment by the Chief Justice, However, by [SECTION], the Chief Justice has to take necessary measure for securing the appointment. If the party fails to act as required under that AR Nos.20/2010, [SECTION]/2010 & 28/2013 procedure and if any party requests the Chief Justice or any person or institution designated by him to take the necessary measure, the Chief Justice or any person or institution has to take necessary measures for securing appointment. So also the parties or the two appointed arbitrators fail to reach an agreement expected of them under that procedure, a party may request the Chief Justice to take necessary measures for securing appointment. The expression "necessary measures" and the expression "securing appointment" are absent in a case where there is no agreed procedure. In a case where there is no agreed procedure the Chief Justice can make an appointment. In a case where there is agreed procedure the Chief Justice or the person or institution designated by him has to take necessary measures so as to secure appointment as per the agreed procedure. In our view, endeavour must be to give effect to that procedure and not to annihilate it. Only in cases where that endeavour to secure the appointment does not succeed, the Chief Justice or the person designated would go for an independent arbitrator.
8. Arbitration agreement itself is a contract and parties enter into solemn agreement agreeing on a procedure for appointing an arbitrator. The mere fact that a party has failed to follow that agreed procedure does not mean that the Chief Justice or th designated person shall not take any measure to give effect to the agreed AR Nos.20/2010, [SECTION]/2010 & 28/2013 procedure. Looking at the statutory provisions we may point out that the time limit of thirty days would apply to a party only in cases where the appointment procedure under [SECTION] applies, not where there is an appointment procedure agreed to between the parties under [SECTION]. The decision in Datar Switchgears Ltd.'s case supra, has been cited by the counsel for the respondent to contend that under [SECTION] the time limit of thirty days would apply and if a party fails to exercise that right the right to appoint ceases. We are of the view the said decision is in applicable to the facts of this case especially in the nature of the arbitration clause in this case."
The view taken by the Division Bench in the above case can be summarised thus:
"(a) [SECTION] deals with cases where there is an appointment procedure agreed to by the parties;
(b) In a case where there is agreed procedure, the Chief Justice or the person or institution designated by him, has to take necessary measures so as to secure appointment as per the agreed procedure;
(c) Only in cases where that endeavour to secure the appointment does not succeed, the Chief Justice or the person designated would go for an independent arbitrator; and
(d) The time limit of thirty days would apply to a party only in AR Nos.20/2010, [SECTION]/2010 & 28/2013 cases where the appointment procedure under [SECTION] applies, not where there is an appointment procedure agreed to between the parties under [SECTION]."
It is seen from the above judgment that the decision in Datar Switchgears Ltd.'s case {[PRECEDENT] has been distinguished on facts.
[SECTION]. [PRECEDENT] is a case where [SECTION] of the [ACT] was considered. Therein, clause [SECTION] of the General Conditions of Agreement provided for an arbitration procedure. The Court was moved under [SECTION], to appoint an arbitrator and accordingly a sole arbitrator was appointed. The Apex Court, after extracting Clause [SECTION], was of the view that in the light of the express provision contained therein that two gazetted railway officers shall be appointed as arbitrators, the appointment of the sole arbitrator by the High Court, is not justified. The said judgment was not one which considered [SECTION] of the [ACT].
26. How far the agreement between the parties will be binding, was the question considered by a two Judge Bench of the Apex Court in The Iron and Steel Company Ltd. v. M/s. Tiwari Road Lines (AIR 2007 SC AR Nos.20/2010, [SECTION]/2010 & 28/2013 20[SECTION]). Therein, the party approached the court under [SECTION] of the Act straightaway, even without taking any effort to have the dispute referred to the arbitrator in accordance with the terms agreed to. It is in that context the matter was examined by the Apex Court. After referring to the arbitration clause contained in Clause 13(1), their Lordships examined the scheme under [SECTION], in paragraph 8. It was held in paragraph 9 that "In the matter of settlement of dispute by arbitration, the agreement executed by the parties has to be given great importance and an agreed procedure for appointing the arbitrators has been placed on high pedestal and has to be given preference to any other mode for securing appointment of an arbitrator."
27. The next important decision is that of the Apex Court in Indian Oil Corporation Limited's case {[PRECEDENT] which is heavily relied upon by the learned Standing Counsel for the Railways. Paragraph 12 of the judgment shows that one of the questions which arose for consideration, therein is the following: "In what circumstances, the Chief Justice or his designate can ignore the appointment procedure or the named AR Nos.20/2010, [SECTION]/2010 & 28/2013 arbitrator in the arbitration agreement, to appoint an arbitrator of his choice?" The discussion on the same proceeds from paragraph 40 onwards. In paragraphs 41 and 42 the decisions of the Apex Court in [PRECEDENT] and [PRECEDENT] have been considered and the divergent views expressed therein have been referred to. In paragraph 43 the decision of the three Judge Bench in Northern Railway Admn.'s case {[PRECEDENT]} wherein the above two decisions came up for consideration, has been further referred to. In paragraph 48, the scope of [SECTION] of the Act contained in the scheme of appointment of arbitrator was summarised and we extract the same for easy reference:
"48 .In the light of the above discussion, the scope of [SECTION] of the Act containing the scheme of appointment of arbitrators may be summarised thus :
(i)Where the agreement provides for arbitration with three arbitrators (each party to appoint one arbitrator and the two appointed arbitrators to appoint a third arbitrator), in the event of a party failing to appoint an Arbitrator within 30 days AR Nos.20/2010, [SECTION]/2010 & 28/2013 from the receipt of a request from the other party (or the two nominated arbitrators failing to agree on the third arbitrator within 30 days from the date of the appointment), the Chief Justice or his designate will exercise power under [SECTION] of the Act.
(ii)Where the agreement provides for arbitration by a sole arbitrator and the parties have not agreed upon any appointment procedure, the Chief Justice or his designate will exercise power under [SECTION], if the parties fail to agree on the arbitration within thirty days from the receipt of a request by a party from the other party.
(iii)Where the arbitration agreement specifies the appointment procedure, then irrespective of whether the arbitration is by a sole arbitrator or by a three-member Tribunal, the Chief Justice or his designate will exercise power under [SECTION], if a party fails to act as required under the agreed procedure (or the parties or the two appointed arbitrators fail to reach an agreement expected of them under the agreed procedure or any person/institution fails to perform any function entrusted to him/it under that procedure).
(iv)While failure of the other party to act within 30 days will furnish a cause of action to the party seeking AR Nos.20/2010, [SECTION]/2010 & 28/2013 arbitration to approach the Chief Justice or his designate in cases falling under sub-sections (4) and (5), such a time-
bound requirement is not found in sub-section (6) of Section
11. The failure to act as per the agreed procedure within the time-limit prescribed by the arbitration agreement, or in the absence of any prescribed time-limit, within a reasonable time, will enable the aggrieved party to file a petition under [SECTION] of the Act.
(v) Where the appointment procedure has been agreed between the parties, but the cause of action for invoking the jurisdiction of the Chief Justice or his designate under clauses (a), (b) or (c) of sub-section (6) has not arisen, then the question of Chief Justice or his designate exercising power under sub-section (6) does not arise. The condition precedent for approaching the Chief Justice or his designate for taking necessary measures under sub-section (6) is that :
(i) a party failing to act as required under the agreed appointment procedure; or (ii) the parties (or the two appointed arbitrators),failing to reach an agreement expected of them under the agreed appointment procedure; or (iii) a person/institution who has been entrusted with any function under the agreed appointment procedure, failing to perform such function.
AR Nos.20/2010, [SECTION]/2010 & 28/2013
(vi) The Chief Justice or his designate while exercising power under [SECTION] shall endeavour to give effect to the appointment procedure prescribed in the arbitration clause.
(vii) If circumstances exist, giving rise to justifiable doubts as to the independence and impartiality of the person nominated, or if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, the Chief Justice or his designate may, for reasons to be recorded ignore the designated arbitrator and appoint someone else."
In [SECTION], it was noted that a time bound requirement of 30 days is not found in [SECTION], as envisaged in sub-sections (4) and (5) of the said Section. Accordingly it was held that the failure to act as per the agreed procedure within the time-limit prescribed by the arbitration agreement, or in the absence of any prescribed time-limit, within a reasonable time, will enable the aggrieved party to file a petition under [SECTION] of the Act. The learned Standing Counsel for the Railways heavily relied upon the above decision. It is submitted that herein, in the facts of this particular case, there is a time limit provided which was not AR Nos.20/2010, [SECTION]/2010 & 28/2013 over when the arbitration request was made.
28. In this context, we will also refer to another three Bench judgment of the Apex Court in Patel Engineering Company Ltd.'s case {[PRECEDENT]} which interpreted [SECTION] of the Act itself as well as the words "necessary measures" and "due regard" contained in [SECTION]. Therein, the matter was referred to a Larger Bench in the light of the different views expressed in the two decisions in ACE Pipeline Contracts (P) Ltd.'s case {[PRECEDENT]} and Bharat Battery Mfg. Co. (P) Ltd.'s case {[PRECEDENT]. After exhaustively referring to the scheme under [SECTION] of the Act, the Apex Court finally came to the following conclusions, in paragraphs 10,11 and 12:
"10. The crucial sub-sections are sub-sections (2), (3), (4), (5) and (6). Sub-sections (3) to (5) refer to cases where there is no agreed procedure. Sub-section (2) provides that subject to sub-section (6) the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. Sub-section (6) sets out the contingencies when party may request the Chief Justice or any person or institution designated by him to take necessary measures unless the agreement on the appointment procedure provides other means for AR Nos.20/2010, [SECTION]/2010 & 28/2013 securing the appointment. The contingencies contemplated in sub-
section (6) statutorily are (i) a party fails to act as required under agreed procedure or (ii) the parties or the two appointed arbitrators fail to reach an agreement expected of them under that procedure or
(iii) a person including an institution fails to perform any function entrusted to him or it under the procedure. In other words, the third contingency does not relate to the parties to the agreement or the appointed arbitrators.
11.The crucial expression in sub-section (6) is "a party may request the Chief Justice or any person or institution designated by him to take the necessary measures" (underlined for emphasis). This expression has to read along with requirement in sub-section (8) that the Chief Justice or the person or an institution designated by him in appointing an arbitrator shall have "due regard" to the two cumulative conditions relating to qualifications and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
12. A bare reading of the scheme of [SECTION] shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. The court must first ensure that the remedies provided for are exhausted. It is true as contended by Mr. [ENTITY], that it is not mandatory for the Chief Justice or any AR Nos.20/2010, [SECTION]/2010 & 28/2013 person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations."
Importantly, it was found in paragraph 11 that "the crucial expression in sub-section (6) that "a party may request the Chief Justice or any person or institution designated by him to take the necessary measures", will have to read along with requirement in sub-section (8) and it was held that "the Chief Justice or the person or an institution designated by him in appointing an arbitrator shall have "due regard" to the two cumulative conditions relating to qualifications and other considerations as are likely to secure the appointment of an independent and impartial arbitrator." In paragraph 13, the expressions "due regard" and "necessary" have been explained thus:
"13. The expression 'due regard' means that proper attention to several circumstances have been focused. The expression 'necessary' as a general rule can be broadly stated to be those things which are reasonably required to be done or legally ancillary to the accomplishment of the intended act. Necessary measures can be stated to be the reasonable steps required to be taken." AR Nos.20/2010, [SECTION]/2010 & 28/2013 [SECTION] considered therein is in the following terms:
"11(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to
(a) any qualifications required of the arbitrator by the agreement of the parties; and
(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator."
Finally, in paragraph 14 it has been further held as follows:
" It needs no reiteration that appointment of the arbitrator or arbitrators named in the arbitration agreement is not a must, but while making the appointment the twin requirements of [SECTION] have to be kept in view, considered and taken into account. If it is not done, the appointment becomes vulnerable."
29. A three Judge Bench of the Apex Court, in Deep Trading Company's case {[PRECEDENT] considered the above dictum in paragraph [SECTION], after referring to [SECTION].
30. We will summarise the crucial points decided in Patel Engineering Company Ltd.'s case {[PRECEDENT]}:
"(a) The crucial expression in [SECTION] is "a party may request the Chief Justice or any person or institution designated by him to AR Nos.20/2010, [SECTION]/2010 & 28/2013 take the necessary measures";
(b) This expression has to be read along with the requirement in sub-section (8) that the Chief Justice or the person or an institution designated by him in appointing an arbitrator shall have "due regard" to the two cumulative conditions relating to qualifications and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(c) The scheme of [SECTION] shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the court may ask to do what has not been done;
(d) The court must first ensure that the remedies provided for are exhausted;
(e) It is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations;
(f) The expression "due regard" means that proper attention to several circumstances have been focused and the expression "necessary" as a general rule can be broadly stated to be those things which are reasonably required to be done or legally ancillary to the accomplishment of the intended act;
(g) Necessary measures can be stated to be the reasonable steps AR Nos.20/2010, [SECTION]/2010 & 28/2013 required to be taken; and
(h) The appointment of the arbitrator or arbitrators named in the arbitration agreement is not a must, but while making the appointment, the twin requirements of [SECTION] have to be kept in view, considered and taken into account. If it is not done, the appointment becomes vulnerable."
31. We find from paragraph 14 of the above judgment that the Apex Court set aside the appointment made in each case and remitted the matter to the High Court to make fresh appointment keeping in view the parameters discussed.
32. Therefore, according to us, in the light of the view taken by the Apex Court in Patel Engineering Company Ltd.'s case {[PRECEDENT]}, the view taken by the Division Bench of this Court in NT.P.C.'s case ([PRECEDENT] has to be understood as superseded by the dictum laid down by the Apex Court. The issue is governed by the view taken in Patel Engineering Company Ltd.'s case's case (supra). Therefore, [SECTION] will have to be read along with [SECTION] also. We are of the view that the finding in paragraph 14 of the said judgment which we have quoted already, will govern as far as the situation envisaged under [SECTION] AR Nos.20/2010, [SECTION]/2010 & 28/2013 where an appointment procedure is agreed to by the parties.
33. Now, on the second aspect, viz. the applicability of 30 days period , the view taken by the Division Bench in N.T.P.C. Ltd.'s case ([PRECEDENT] in paragraph 7 is that the time limit of 30 days would apply to a party only in cases where the appointment procedure under [SECTION] applies, not where there is an appointment procedure agreed to between the parties under [SECTION]. As already discussed, as regards this aspect also, the consistent view taken by the Apex Court in Datar Switchgears Ltd.'s case {[PRECEDENT]}, V.S.Engineering (P) Ltd.'s case {[PRECEDENT]}, Punj Lloyed Ltd.'s case {[PRECEDENT]}, Bharat Sanchar Nigam Ltd.'s case {[PRECEDENT] and by the three-Judge Bench in Deep Trading Company's case {[PRECEDENT] will prevail. Therefore, it is now settled law that in cases arising under [SECTION], if the opposite party has not made an appointment within 30 days, the right to make appointment is not forfeited but continues but an appointment has to be made before the former files an application under [SECTION] seeking appointment of an arbitrator and only AR Nos.20/2010, [SECTION]/2010 & 28/2013 then the right of the opposite party ceases. The said view is binding on us. The conclusion therefore is that even though there is a waiting period covered by Clause [SECTION] of the General Conditions of Agreement, the right of the party to move the arbitration request is protected and if the appointment is made after the party moves the court, the same cannot survive.
34. Since the decision of the Apex Court in Indian Oil Corporation Ltd.'s case {[PRECEDENT] is by a Bench of two Judges, this Court is bound to follow the judgment of the three-Judge Bench of the Apex Court in Punj Lloyed Ltd.'s case {[PRECEDENT]} as well as Deep Trading Company's case {[PRECEDENT].
The first question referred to is answered as above.
35. The next question referred is whether Clause 26 of the agreement for contract will prevail over the General Conditions of Contract in the matter of appointment of Arbitrator. The validity of a clause in an arbitration agreement and whether it can be repudiated by a party, is one of the questions considered by the Apex Court in Indian Oil Corporation AR Nos.20/2010, [SECTION]/2010 & 28/2013 Ltd.'s case {[PRECEDENT]. Therein, in paragraph 14 the legal position has been explained thus:
"No party can say he will be bound by only one part of the agreement and not the other part, unless such other part is impossible of performance or is void being contrary to the provisions of the Act, and such part is severable from the remaining part of the agreement. The arbitration clause is a package which may provide for what disputes are arbitrable, at what stage the disputes are arbitrable, who should be the arbitrator, what should be the venue, what law would govern the parties etc. A party to the contract cannot claim the benefit of arbitration under the arbitration clause, but ignore the appointment procedure relating to the named Arbitrator contained in the arbitration clause."
Therefore, unless the objected part is impossible of performance or is void being contrary to the provisions of the Act, and such part is severable from the remaining part of the agreement, the other party cannot say that he will be only bound by one part of the agreement. Herein, clause 27 of the agreement Annexure A1 produced in [CASE NUMBER] clearly states that the clauses of the agreement will have to be read in addition to the conditions of AR Nos.20/2010, [SECTION]/2010 & 28/2013 the General Conditions of the Agreement. It is not the case of the petitioners that [SECTION] and [SECTION] are void or contrary to any provisions of the Act. Therefore, it cannot be said that the said clauses are not binding on the party concerned. It cannot also be said that the General Conditions of the Contract are only directory.
36. In the light of the binding decisions of the Apex Court which we have already quoted, it is not necessary to refer the entire matter for consideration by a Full Bench.
We therefore answer the questions referred to as above and the Arbitration Requests are sent back for consideration in accordance with the law laid down in the various decisions.
([ENTITY], JUDGE) ([ENTITY], JUDGE) kav/