Case: UNION OF INDIA Vs. PRADEEP VINOD CONSTRUCTION CO

504, Union of India and another v. V.S. Engineering (P) Ltd. (2006) 13 SCC 240 , Union of India v. Singh Builders Syndicate (2009) 4 SCC 523 and in a catena of judgments, the court held that whenever the agreement specifically provides for appointment of named arbitrators, the appointment of arbitrator should be in terms of the contract. After referring to M.P. Gupta, in V.S. Engineering, it was held as under:- 3. The learned Additional Solicitor General appearing for the appellant Union of India has pointed out that as per clauses 63 and 64 of the General Conditions of Contract, this Court in no uncertain terms has held that the Arbitral Tribunal has to be constituted as per the General Conditions of Contract, the High Court should not interfere under Section 11 of the Act and the High Court should accept the Arbitral Tribunal appointed by the General Manager, Railways. In this connection, the learned ASG invited our attention to a decision of this Court directly bearing on the subject in Union of India v. M.P. Gupta (2004) 10 SCC 504 wherein a similar question with regard to appointment of the Arbitral Tribunal for the Railways with reference to clause 64 of the General Conditions of Contract came up before this Court and this Court held that where two gazetted railway officers are appointed as the Arbitral Tribunal, the High Court should not appoint a retired Judge of the High Court as a sole arbitrator and the appointment of sole arbitrator was set aside. The conditions of clauses 63 and 64 of the General Conditions of Contract are almost analogous to the one we have in our hand. In that case also relying on clause 64 of the contract a three-Judge Bench presided over by the Chief Justice of India observed as follows: (SCC p. 505, para 4)?4. In view of the express provision contained therein that two gazetted railway officers shall be appointed as arbitrators, Justice P.K. Bahri could not be appointed by the High Court as the sole arbitrator. On this short ground alone, the judgment and order under challenge to the extent it appoints Justice P.K. Bahri as sole arbitrator is set aside. Within 30 days from today, the appellants herein shall appoint two gazetted railway officers as arbitrators. The two newly appointed arbitrators shall enter into reference within a period of another one month and thereafter the arbitrators shall make their award within a period of three months.? The court, however observed in para (6) that in the case of public institutions which are slow in responding to the request made by the contractor for appointment of an arbitrator, the power of the High Court to appoint an arbitrator under Section 11 is not taken away. The failure of the authorities in appointing an arbitrator and when the contractor approached the court for appointment of an arbitrator under Section 11 of the Act, it will then be in the discretion of the Chief Justice/designated Judge to appoint a railway officer as per the contract or a High Court Judge. 15. Considering the various matters of railway contracts and setting aside the appointment of independent arbitrators, after referring to M.P. Gupta and V.S. Engineering and other judgments, in Parmar Construction Company, this Court set aside the appointment of the independent arbitrator and directed the General Manager of the Railways to appoint arbitrator in terms of Clause 64(3) of the agreement. In paras (44) and (45), this Court held as under:- ?44. To conclude, in our considered view, the High Court was not justified in appointing an independent arbitrator without resorting to the procedure for appointment of an arbitrator which has been prescribed under Clause 64(3) of the contract under the inbuilt mechanism as agreed by the parties. 45. Consequently, the orders passed by the High Court are quashed and set aside. The Appellants are directed to appoint the arbitrator in terms of Clause 64(3) of the agreement within a period of one month from today under intimation to each of the Respondents/contractors and since sufficient time has been consumed, at the first stage itself, in the appointment of an arbitrator and majority of the Respondents being the petty contractors, the statement of claim be furnished by each of the Respondents within four weeks thereafter and the arbitrator may decide the claim after affording opportunity of hearing to the parties expeditiously without being influenced/inhibited by the observations made independently in accordance with law.? The ratio of the above decision squarely applies to the case in hand. When the agreement specifically provides for appointment of named arbitrators, the appointment should be in terms of the agreement. The High Court, in our view, was not right in appointing an independent arbitrator ignoring Clause 64 of the General Conditions of Contract. 16. Insofar as the plea of the appellant that there was settlement of final bill/issuance of ?No Claim? letter, the learned counsel for the appellant has drawn our attention on Clause 43(2) – Signing of the ?No Claim? Certificate and submitted that as per Clause 43(2), the contractor signs a ?No Claim? certificate in favour of the railway in the prescribed format after the work is finally measured up and the contractor shall be debarred from disputing the correctness of the items covered under the ?No Claim? certificate or demanding a clearance to arbitration in respect thereof. On behalf of the respondent, it has been seriously disputed that issuance of ?No Claim? certificate as to the supplementary agreement recording accord and satisfaction as on 06.05.2014 (CA No.6400/2016) and issuance of ?No Claim? certificate on 28.08.2014 (CA No.6420/2016) that they were issued under compulsion and due to undue influence by the railway authorities. We are not inclined to go into the merits of the contention of the parties. It is for the arbitrator to consider the claim of the respondent(s) and the stand of the appellant-railways. This contention raised by the parties are left open to be raised before the arbitrator.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]10. The respondent(s) are registered contractors with the Railways and they are claiming certain payments on account of the work entrusted to them. The request of the respondent(s) for appointment of arbitrator invoking Clause 64 of the contract was declined by the Railways stating that their claims have been settled and the respondent(s) have issued ?No Claim? certificate and executed supplementary agreement recording ?accord and satisfaction? and hence, the matter is not referable to arbitration. Admittedly, the request for referring the dispute was made much prior to the Amendment Act, 2015 which came into force w.e.f. 23.10.2015. Since the request for appointment of arbitrator was made much prior to the Amendment Act, 2015 (w.e.f. 23.10.2015), the provision of the Amended Act, 2015 shall not apply to the arbitral proceedings in terms of Section 21 of the Act unless the parties otherwise agree. As rightlypointed out by the learned counsel for the appellant, the request by the respondent(s)- contractors is to be examined in accordance with the Principal Act, 1996 without taking resort to the Amendment Act, 2015.The ratio of the above decision squarely applies to the case in hand. When the agreement specifically provides for appointment of named arbitrators, the appointment should be in terms of the agreement. The High Court, in our view, was not right in appointing an independent arbitrator ignoring Clause 64 of the General Conditions of ContractWe are not inclined to go into the merits of the contention of the parties. It is for the arbitrator to consider the claim of the respondent(s) and the stand of the appellant-railways. This contention raised by the parties are left open to be raised before the arbitrator.