1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR J U D G M E N T Anand Bhatia vs. The Union of India S.B.Civil Misc. Application (Arbitration) No.66/2006 under section 11 (8) of the Arbitration and Reconciliation Act, 1996. DATE OF JUDGMENT :: 18.12.2008 PRESENT HON'BLE MR.JUSTICE MANAK MOHTA Mr.H.R.Soni for the petitioner. Mr.Kamal Dave for the respondent. BY THE COURT : The instant Civil Misc. Application is being filed for the appointment of the arbitrator to adjudicate the claim of the applicant under sections 12,13,14,15 read with section 11 (8) of the Arbitration Act 1996 (hereinafter referred to as the Act of 1996'). 2 The brief facts of the case for the just disposal of this application are that from the perusal of the record it reveals that an agreement was entered into between the Union of India and the appellant on 23rd October 1991 regarding supply from AQG Quarry 30,000 cubic meter of 65 mm gauge ballast to the Northern Railway specification and stacking on the railway land at Pokaran Railway Station, then loading into railway wagons at Pokaran Railway Station . Copy of the said agreement was annexed as Annx.5. It was further submitted that under the said contract the Railway Authority used to assign the vacant lands for stacking the ballast and then further railway authority was duty bound to provide DMT ( Special Train ) for lifting stacked ballast . The contractor was to stack ballast at the specified land / plots to be allotted by Railway for the purpose of stacking, and further within the contract period Railway was to provide DMT so that the material already stacked may be removed and contractor may further stack the material by following same process. It was submitted that the material so required was to be 3 stacked near the Railway land only and it was to be stacked in huge quantity only on the specified land /plot demarcated for this purpose but the Railway was not having much more land/plots demarcated, the supply which was agreed, that was 30,000 cubic meter, was to be stacked as per the terms of the contract but then the precondition for the purpose of the work on the part of the Railway was that the railway was to supply the DMT for lifting already stacked ballast by employing huge quantity of labour and expanding huge amount of money for bringing the trucks, stack all the plots allotted to him but then within the stipulated time the railway could not supply the requisite number of DMT and in absence of the same, the plot already stacked could not be cleared and as per the clear terms of the contract, unless and until the already stacked material is cleared, the applicant could not have stacked the other round of the ballast. It was further submitted that the applicant performed his part to the best of his ability and still made several demands to supply him DMT, so as to clear the already stacked plots by lifting the stacked material, but all efforts of the applicant could not be materialised as the railway did not provide him DMT in time. 4 In this respect, it was further submitted that numerous representations were made on behalf of the applicant. The applicant has nowhere shown his inability to perform the work in the contract period and after expiry of the contract period, the applicant was not in a position to perform the work because of escalation and high rise of labour cost, transportation charges and royalty etc. It was submitted that the railway authority, without considering the factual position, unilaterally without authority, wrongfully forfeited the security amount of the applicant and also imposed penalty on the applicant . It was alleged that the railway authority was not authorised to impose penalty . On the basis of the aforesaid submissions , it was submitted that thus there arose a valid referable dispute with regard to said contract. It was also submitted that as per terms of the contract and as per agreed general conditions of the contract , all disputes with regard to contract was to be adjudicated by arbitral proceedings. The applicant in that respect moved the authority. The applicant in his application submitted the valuation of the dispute amount to be Rs.50lacs plus interest @ 24% per annum from the date the amount 5 became due to the applicant. It was submitted that as per provisions of General Conditions of Contract the dispute was referable for adjudication to two arbitrators. It was further submitted in the application that the railway authority, without caring the relevant provisions , proceeded in an arbitrary manner. As per agreed terms and conditions, out of the two arbitrators one would be appointed by Railway authority and one of them would be nominee of the party and they will further appoint umpire. But the railway authority did not proceed as per true spirit of the terms and appointed sole arbitrator namely Rashmi Chawala. Thereafter, the petitioner submitted an application for the appointment of the arbitrator as per agreed terms, on which orders were passed to appoint arbitrator in accordance with clause 64 of General Conditions of (Regulations and Instructions for Tenderers and Standard Forms ) Contract. It is further revealed that thereafter two arbitrators were appointed. Rashmi Goyal was nominated as Railway nominee and B.K. Gupta, Dy.CE/C/Ju.II Northern Railway, Jodhpur was nominated as contractor's nominee on 6 the suggestion of the applicant. In this connection reference was made to Annx.1. It was further contended that these nominated arbitrators, in fact, never entered into reference. It was also submitted that one of the arbitrator B.K.Gupta, the nominee on the part of the contractor, lodged an FIR against the applicant before the RPE that the applicant had committed theft of the railway property, which he was required to transport under another contract agreement with Railway . It was submitted that on that FIR, RPF authorities filed a complaint in the shape of charge sheet against the applicant petitioner. The petitioner was falsely implicated in that criminal case and ultimately case was decided in his favour by the learned Addl.Sessions Judge No.1, Jodhpur in regular criminal case No.06/2005 decided on 26.09.2005. A copy of the said judgment was annexed as Annx.2. It was further submitted that thus, the action of B.K.Gupta was contrary to applicant's interest, therefore, he moved this Court under section 11 (6) of the Arbitration Act to appoint Arbitrator. In the meantime, the Railway authority also unilaterally changed their nominee and in place of Rashmi Goyal , they appointed 7 Smt.Neelam Sanghi. In this respect, Annx.3 was annexed. It was again submitted that despite change of nominated arbitrator by the Railways, the arbitrators never entered into reference. The application was registered as Civil misc. Arbitration Application No.22/2003. The railway authority, without filing any detailed reply, submitted that the arbitrator has been appointed. Therefore, the application was dismissed as infructuous. The copy of the order passed was annexed as Annx.4. It was submitted that the position remained as it was. The arbitrators appointed long back vide order dated 20.06.95 and further modified by order dated 06.03.2000 have still not entered into reference, though the dispute was to be decided within a period of four months, that had expired long back and, thereafter, they were not authorised to pass any award. In these circumstances, the present application was filed. It was further submitted that, before filing the said application, several representations and requests were made for reference. Thus, , the railway authority got adequate notice by judicial proceedings continued between the parties. It was 8 also submitted in the petition that several letters / notices were given to the arbitrators nominated by the railway but they were received back with the note that the addressee has left the place without address , some of them were placed with application. Thus, it was also submitted that the applicant made maximum efforts to materialise the arbitration proceedings and to get the dispute adjudicated but everything went in vain. Therefore, submitting this application, a prayer was made to appoint an independent and sole arbitrator. Notice of this application was given to the respondents. The Railway Authority denied the allegations made in the application and filed a detailed reply mainly alleging therein that the arbitrators have already been appointed. Further,it was submitted that the matter was previously heard by the court on the said allegations and the application was rejected vide order dated 12.09.03. Therefore, for the same relief, second application is not maintainable and is hit by the principles of resjudicata. Along with the reply, the learned counsel also placed the order of this court dated 12.09.03. It was also submitted that by way of this application, in fact the appellant 9 was to get removal of the nominated arbitrators. For that he should have moved the civil court. Thus, by way of present application he is not entitled for any relief and prayer was made to dismiss the application. It is further revealed from the record that to counter the allegations made in the reply by the railway authority, petitioner filed an additional affidavit along with relevant documents. It was submitted in the affidavit reiterating the earlier ground that the petitioner applied to the authority for copies of certain letters written by the Railway authority to the arbitrators under Right to Information Act, which were lying in the office file of Railway and in pursuance of that, certain copies of the letters were supplied . In the affidavit he submitted the details of letters, on the basis of copies supplied by the Railways and submitted that a letter dated 15/18.12.95 was issued from the office of G.M. Railways, intimating the arbitrators that an award was required to be made within a period of four months, after entering into reference. Further, intimating them that if the claimant is delaying then to proceed exparte. Copy of letter Anx. 14 was placed in this respect. Letter dated 10 04.06.99 , Annx.15, was issued for finalisation of the arbitration case . A letter dated 06.03.2000 again issued by the Office of the G.M. Railways to nominated arbitrator Neelam Sanghi , requesting her to enter into arbitration, Annx. 16 was produced in this respect. Letter dated 16.08.00 was sent by one of the arbitrator Mr.B.K.Gupta replying to G.M., Railways that after the expiry of four months, arbitrator has no power to pass award and informed to make a request before the court for extension of time. Copy of this letter was produced, marked as Annx.17. Letter dated 29.03.04 issued from the office of the Senior Divisional Engineer NW. Railways, addressed to Dy.CME, NW Railways, Jaipur, intimating that till today he has not received any notice of arbitration proceedings from Neelam Sanghi and B.K.Gupta. Copy of this letter is marked as Annx.19, similar type of letter dated 27.06.05, marked as Annx.20. In the affidavit he further submitted that one of the arbitrator B.K.Gupta has already been relieved after transfer from the Railway Coach Factory but the Railway authority did not supply the correct address. In this respect he also filed Annx.21 to 24. 11 Thereafter, arguments were heard and perused the pleadings of parties as well as record of the case. During the course of arguments, learned counsel for the petitioner further reiterated the contentions placed by way of application and again stressed that the matter is pending for the last 15 years without any adjudication. The dispute of the appellant is genuine, the railway authority proceeded arbitrarily and thereby the applicant has suffered a huge loss by their inaction. His security money has been forfeited and for his no fault he has been penalised. It was urged that due to arbitration clause , he is not entitled to approach directly to the civil courts. The nominated arbitrators have never entered into arbitration proceedings, therefore, now the railway authority has waived his right to appoint new arbitrators, thus, in the given circumstances, the sole independent arbitrator is required be appointed. It was also submitted that the railway now cannot take shelter of clause rule 64 of the General Conditions of Contract . The nominated arbitrators by the railway are not ready to proceed in arbitral proceedings and they never entered into reference, they never issued any 12 notice of reference and now they are not competent to pass award as arbitrators. During the course of arguments, he drew my attention towards the letter supplied by the Railway Authority on his request under the Right of Information Act and again on the strength of those letters, submitted that it is established from their own record that the arbitrates have never entered into arbitral proceedings. The prescribed time for passing the award has expired long back , one of the arbitrators himself has shown his incapacity to pass an award as it is disclosed from the letter given by B.K.Gupta dated 25.09.00, annx.18. In these circumstances, no arbitral proceeding is legally pending before the Arbitrators, therefore, it was again stressed that an independent sole arbitrator may be appointed and prayed that the application may be allowed. In support of his contentions, he also cited judgments given in cases of Krishan Lal vs. Haryana S.A.M. Board[ AIR 1986 P&H 376], VIP Industries Ltd. v. Saboo Sodium Chloro Ltd. & Anr. [AIR 2008 (NOC) 1449 (Raj.) 439], Murari 13 Lal Khandelwal vs. Rajasthan State Seeds Corporation & Ors. [AIR 2008 Rajasthan 108], Mahipatlal Patel vs. Chief Engineer & Anr. (Civil Appeal No.2350/2008), and Citibank N.A. Vs. TLC Marketing PLC & Anr. [AIR 2008 SC, 118]. On the contrary, learned counsel for the railways refuted the contentions and submitted that the present petition is not sustainable, as already on the same relief application filed earlier has been dismissed. Further, for the removal of the arbitrator the present application is not maintainable . It was also submitted that as per terms of the contract under the General Conditions of Contract (Regulations and instructions for tenderers and Standard Forms of Contract, as per clause 64 no independent arbitrator can be appointed. Only gazetted Railway Officer could be appointed as arbitrator. The learned counsel drew my attention towards the said clause and further made submission that the application is not entertainable in its present form and prayed that it may be dismissed. In support of his contention he placed reliance on the provisions of General Conditions of Contract. 14 I have considered the rival submissions and keeping in mind the contentions raised by the learned counsel for the parties, perused the record. From the perusal of the record, as well as the contentions placed during the course or arguments, it is made clear that a contract was entered into between the parties on 23.10.91 regarding supply of AQG Quarry 30,000 cubic meter of 65 mm gauge ballast to the Northern Railway. It was also agreed that supply were to be made according to specification and strictly according to the terms of the contract. It is alleged by the petitioner that specific land was to be provided by the Railway Authority where the relevant material could be stacked. Further, as per the terms of the contract, DMT (special trains) for lifting the stacked ballasts,were to be provided by Railway authority. It is alleged by the petitioner that that railway did not discharge their obligation and due to inaction on the part of the railways, he could not perform the contract in time. He has further alleged that the railway authority, without considering the factual aspect, had proceeded to forfeit the security money and imposed 15 penalty. Thus, there was dispute between parties with regard to terms of the contract. It is also not disputed by the parties that as per the terms of the contract, and as per agreed clause mentioned in the relevant general condition of the contract that in case of any dispute with regard to the contract between the parties, the matter will be resolved through arbitral proceedings. It is revealed from the record that the petitioner has time and again moved the authority in this respect and the railway authority, after a long exchange of communication and with the intervention of the court , two arbitrators Neelam Sahini and B.K.Gupta were appointed. But it is further revealed from the record that they have not entered into arbitral proceedings. This fact is established from the document filed by the appellant , among them some of the letters are of the G.M., Railways which has not been disputed by Railway authority despite sufficient time. From the perusal of these letters, some of them of recent time, I am satisfied that the arbitrators had never entered into arbitral proceedings. There are serious allegations against B.K.Gupta , nominated arbitrator on the part of the applicant . Looking to the serious allegations, it is not 16 desirable to continue him as arbitrator and B.K.Gupta himself has shown his inability to pass the award on the pretext that time has expired. With regard to other arbitrator Neelam Sanghi, despite efforts, no response from her side is received by Railway, as well as to petitioner , even her address is not traceable and Railway authority has said nothing about her. In this respect, the authorities cited by the learned counsel for the petitioner's side are also relevant. In the VIP Industries' case (supra) where grounds of reasonable apprehension about impartiality of arbitrator, it was observed that the High Court can exercise powers under Section 11 (6) to appoint arbitrator after removing nominated arbitrator. In Murari Lal Khandelwal's case (supra) where there were allegations against arbitrator of biasness, independent arbitrator was appointed. In Krishan Lal 's case (supra), the appointed arbitrator was transferred after reference of dispute. It was held that where the arbitrator appointed by designation, arbitrator so appointed is divested of jurisdiction in the matter. I have also considered the contentions raised by the 17 learned counsel for the respondent . But looking to the facts and circumstances of the case, as the appointed arbitrators have not entered into arbitral proceedings, thus the contentions are not sustainable. I have also considered the contentions raised by the respondent that the matter was previously heard, but the present application is based on the changed circumstances. Therefore, the previous proceeding has no bar to appoint independent arbitrator. I have also considered the other contentions. The railway authority got appropriate time and notice to proceed with the matter, but they failed to take appropriate action and they remained in active on their part. Thus, the contentions placed with regard to clause 64 of General Conditions are also having no force. In these circumstances, there is no option except to appoint independent arbitrator. On the basis of aforesaid discussions, the application filed by the petitioner is allowed and Mr.S.R.Sharma , District & Sessions Judge (Rtd.) is appointed as arbitrator both the appointed arbitrators will not have any authority to pass any award. Application filed by petitioner stands allowed. 18 The parties are entitled to file their claim and counter claim before the arbitrator and the arbitrator will decide the same in accordance with law. Rs.10,000/- is fixed as initial expenses towards the arbitral proceedings, so that the arbitration proceedings may start. This amount will be borne by the petitioner and this amount will be adjustable from the final charges determined by the arbitrator. Fee of the arbitrator and other expenses of the arbitration proceedings will be determined by the arbitrator himself. That will be borne by both the parties equally. The appointed arbitrator be intimated accordingly. A copy of this order may also be sent to the District Judges, Jaisalmer and Jodhpur, with a direction that if any accommodation and infrastructure is demanded by the Arbitrator for arbitral proceedings, that may be provided to the Arbitrator. (MANAK MOHTA), J. l.george