1 S.B. CIVIL ARBITRATION APPLICATION NO.50/2005 M/s. Pannalal Construction Co. vs UOI & Ors DATE OF ORDER: 26.5.2009 HON'BLE MR. PRAKASH TATIA, J. Mr. Sunil A Vyas, for the petitioner. Mr. Ravi Bhansali, for the respondents. <><><> Heard learned counsel for the parties. The applicant-firm entered into a contract with railways for doing job described in the work contract vide agreement of the year 2002-03. The dispute arose between the parties and claims have been raised by the claimant against the respondent. The petitioner then served a notice upon the respondents to settle the dispute and also requested for appointing the arbitral tribunal as per the clauses made in the agreement. The respondents in reply to above notice stated that since applicant has signed a no claim certificate at the time of payment of final bills, therefore, request for appointment of arbitral tribunal cannot be considered. Then, the petitioner moved this application under Section 11 of the Act of 1996 stating therein that the respondents have failed to act as per the agreement by not referring the dispute to the arbitral tribunal. After hearing both the parties, this Court vide order dated 18th Sept., 2006 allowed the petitioner's application for 2 appointment of the arbitrator and appointed Arbitrator Shri Rajendra Bhansali, resident of A-2-1, Eldorado, Kashinath Dhuru Marg,Prabha Devi, Mubai to act as a sole arbitrator to adjudicate upon the dispute. The operative portion of the order dated 18th Sept., 2006 is as under: - “....In the facts and circumstances of the case, I deem it just and proper to appoint Shri Rajendra Bhansali, resident of A-201, Eldorado, Kashinath Dhuru Marg, Prabha Devi, Mubai, to act a sole arbitrator in this case to adjudicate upon the dispute. All the objections relating to maintainability of the claim as also jurisdiction of the arbitrator to adjudicate upon the dispute may be raised before the arbitrator. The cost of the arbitration and fees of the arbitrator shall be as determined by the arbitrator himself.” The respondents challenged the order of this Court dated 18th Sept., 2006 by preferring Special Leave to Appeal before the Hon'ble Supreme court, upon which leave was granted and Hon'ble Apex Court observed that High Court does not appear to have focussed on the requirement to have due regard to the qualifications required by the agreement or other considerations necessary to secure the appointment of an independent and impartial arbitrator. Hon'ble Apex Court further observed that it needs no reiteration that appointment of the arbitrator or arbitrators named in the arbitration agreement is not a must, but 3 while making the appointment the twin requirements of sub- section (8) of Section 11 have to be kept in view, considered and taken into account. If it is not done, the appointment becomes vulnerable. With these observations, the order passed by this Court dated 18th Sept., 2006 was set aside with the direction to the court to make afresh appointment keeping in view the matters indicated in the judgment of the Hon'ble Supreme Court dated 18th August, 2005. From the above facts, it is clear that the Hon'ble Apex court directed this Court to replace the arbitrator with the arbitrator who can be appointed as per the arbitration agreement. The relevant clause with respect to the appointment of the arbitrator are mentioned in clause 3 of the contract and relevant clause are 3(a)(i) to 3(a)(iii), which are as under: - “3 Arbitration -(a) (i) A sole Arbitrator who shall be General Manager or a Gazetted Railway Officer nominated by him in that behalf in case where the claim in question is below Rs.5,00,000/- (rupees five lakhs) and in case where the issue involved not of a complicated nature, the General Manager shall be sole judgment to decide whether or not the issue involved are or a complicated nature. (3)(a)(ii) Two Arbitrators who shall be Gazetted Railway Officers of equal status to be appointed in manner laid in clause 64(3)(b) for all claims of Rs.5,00,000/- (Rupees five lakhs) and above and for 4 all claims irrespective of the amount or value of such claims if the issue involved are of a complicated nature. The General Manager shall be the sole Judge to decide whether the issue involved are of a complicated nature or not. In the event of the two Arbitrators being divided in their opinions, the matter under disputes will be referred to an Umpire to be appointed in the manner laid down in clause 3(b) for his decision. (3)(a)(iii) It is a term of this contract that no person other than a gazetted Railway Officer should act as an Arbitrator/Umpire and if for any reason is not possible the matter is not to be referred to arbitration at all.” Since the claim of the petitioner is more than Rs. 5 lacs and the General Manager of the Railway alone can decide whether the dispute involved are of complicated nature or not, the arbitrator can be a General Manager or a Gazetted Railway Officer nominated by him and as per clause 3(a)(iii) no person other than a gazetted Railway Officer should act as an Arbitrator/Umpire and if for any reason is not possible the matter is not to be referred to arbitration at all. In view of the above reasons, the arbitration application is allowed and the General Manager of the Railway is directed to either act as a Sole Arbitrator or he may appoint the arbitrator who may be Gazetted Railway Officer nominated by the General Manager of the Railway in accordance with the clause (3) of the 5 contract. The arbitrator shall be appointed within a period of two months from the date of receipt of copy of this order by the General Manager of the Railway. The copy of this order may be sent to the General Manager by the learned counsel for the respondent as well as learned counsel for the petitioner. (PRAKASH TATIA), J. c.p.goyal/-