Case: M/s Continental India Private Limited Vs. General Manager Northern Railway

appearing on behalf of the respondent is not in a position to dispute that after the invocation of the arbitration clause, the General Manager/Railway failed to appoint the sole arbitrator in terms of the agreement. He is also not in a position to satisfy the Court as to how the General Conditions of Contract shall be applicable with respect to the agreement between the parties which has been entered into much prior to the GCC coming into force i.e., July, 2020 and that neither is there any reference to the GCC in the original agreement nor the GCC has been signed by the parties. Therefore, he is unable to support the impugned judgment and order passed by the High Court directing to constitute an Arbitral Tribunal as per clause 64(3)(b) of the GCC. 5. We have heard the learned counsel appearing on behalf of the respective parties at length. 6. It is not in dispute that the parties to the agreement agreed to resolve the dispute as per clause 32 of the original agreement which reads as under: ¬ 32. Arbitration. (a) In the event of any question, dispute or difference arising under or in connection with this Agreement (except as to matters the decision of which is specially provided for by this Agreement) the same shall be referred to the sole arbitration of a person appointed to be the arbitrator, by the General Manager or the Railway. It will be no objection if the arbitrator is a Government servant, that he had to deal with matters to which the Agreement relates or that in the course of his duties as a Government servant he has expressed views on all or any of the matters in dispute or difference. The Award of the arbitrator shall be final and binding on the parties to this Agreement. Provided always that the decision of the General Manager of the Railway as to the disputes which fell within the excepted matters referred to above shall be final and binding on the parties hereto and such decision of the General Manager shall not be called in question before the arbitrator by either of the parties hereto. (b) In the event of the arbitrator dying, neglecting or refusing to act, or resigning or being unable to act for any reason, or his award being set aside by the Court for any reason it shall be lawful for the authority appointing the arbitrator to appoint another arbitrator in place of the outgoing arbitrator in the manner aforesaid. (c) It is further a term of this Agreement that no person other than the person appointed by the authority as aforesaid should act as arbitrator and that if for any reason that is not possible, the matter is not be referred to arbitration at all. ……… The appellant and the respondent being signatories to the agreement are bound by the aforesaid arbitration clause/arbitration agreement. As the dispute arose between the parties, the appellant invoked the arbitration clause in terms of the agreement. However, the respondent – General Manager/Railway failed to appoint the arbitrator in terms of clause 32, reproduced hereinabove. That thereafter, the appellant herein approached the High Court for appointment of the sole arbitrator in exercise of powers under Section 11(6) of the Act. Once the dispute has arisen between the parties and despite invocation of the arbitration clause in terms of the agreement no arbitrator is appointed, it can be said that the authority has forfeited its right to appoint the arbitrator in terms of the arbitration agreement and thereafter the arbitrator has to be appointed under Section 11(6) of the Act. 6.1 At this stage, the decision of this court in the case of Deep Trading Company (supra) is required to be referred to. In the said decision it is observed and held that once an arbitrator is not appointed as per the agreed procedure within stipulated time, right of the party concerned to appoint an arbitrator is forfeited and therefore, Chief Justice ought to have appointed an arbitrator under Section 11(6) of the Act. In the said decision the Corporation therein appointed the arbitrator as per the agreed procedure during pendency of the proceedings under Section 11(6) of the Act and to that it is observed and held that appointment of arbitrator by the Corporation during pendency of the proceedings under Section 11(6) of the Act was of no consequence, as failing to appoint an arbitrator within the prescribed time, the Corporation had lost its right to appoint an arbitrator. 6.2 In the present case also, the respondent failed to appoint an arbitrator as per the agreed procedure and in terms of the agreement. Therefore, the respondent forfeited its right to appoint an arbitrator in terms of the agreement and therefore the appellant was justified in filing the application before the High Court for appointment of a sole arbitrator in exercise of powers under Section 11(6) of the Act. The Chief Justice or his nominee thus was required to appoint the arbitrator under Section 11(6) of the Act. 7. By the impugned judgment and order and while allowing the application under Section 11(6) of the Act instead of appointing the arbitrator in exercise of powers under Section 11(6) of the Act, the High Court has directed to constitute an Arbitral Tribunal in terms of clause 64(3)(b) of the GCC. It is not in dispute that neither the GCC was signed by the parties nor the GCC was made part of the agreement between the parties. There is no reference to the GCC in the main agreement entered into between the parties. Even as per communication dated 16.07.2020, the GCC, July 2020 shall be applicable to works contract of Indian Railways with prospective effect. Therefore, the parties are not governed by the GCC at all. Therefore, the High Court has committed a serious error in directing to constitute an Arbitral Tribunal in terms of the provisions of the GCC, which are not binding to the parties.

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

Explanation:
0[ds]The appellant and the respondent being signatories to the agreement are bound by the aforesaid arbitration clause/arbitration agreement. As the dispute arose between the parties, the appellant invoked the arbitration clause in terms of the agreement. However, the respondent – General Manager/Railway failed to appoint the arbitrator in terms of clause 32, reproduced hereinabove. That thereafter, the appellant herein approached the High Court for appointment of the sole arbitrator in exercise of powers under Section 11(6) of the Act. Once the dispute has arisen between the parties and despite invocation of the arbitration clause in terms of the agreement no arbitrator is appointed, it can be said that the authority has forfeited its right to appoint the arbitrator in terms of the arbitration agreement and thereafter the arbitrator has to be appointed under Section 11(6) of the Act.6.1 At this stage, the decision of this court in the case of Deep Trading Company (supra) is required to be referred to. In the said decision it is observed and held that once an arbitrator is not appointed as per the agreed procedure within stipulated time, right of the party concerned to appoint an arbitrator is forfeited and therefore, Chief Justice ought to have appointed an arbitrator under Section 11(6) of the Act. In the said decision the Corporation therein appointed the arbitrator as per the agreed procedure during pendency of the proceedings under Section 11(6) of the Act and to that it is observed and held that appointment of arbitrator by the Corporation during pendency of the proceedings under Section 11(6) of the Act was of no consequence, as failing to appoint an arbitrator within the prescribed time, the Corporation had lost its right to appoint an arbitrator.6.2 In the present case also, the respondent failed to appoint an arbitrator as per the agreed procedure and in terms of the agreement. Therefore, the respondent forfeited its right to appoint an arbitrator in terms of the agreement and therefore the appellant was justified in filing the application before the High Court for appointment of a sole arbitrator in exercise of powers under Section 11(6) of the Act. The Chief Justice or his nominee thus was required to appoint the arbitrator under Section 11(6) of the Act.7. By the impugned judgment and order and while allowing the application under Section 11(6) of the Act instead of appointing the arbitrator in exercise of powers under Section 11(6) of the Act, the High Court has directed to constitute an Arbitral Tribunal in terms of clause 64(3)(b) of the GCC. It is not in dispute that neither the GCC was signed by the parties nor the GCC was made part of the agreement between the parties. There is no reference to the GCC in the main agreement entered into between the parties. Even as per communication dated 16.07.2020, the GCC, July 2020 shall be applicable to works contract of Indian Railways with prospective effect. Therefore, the parties are not governed by the GCC at all. Therefore, the High Court has committed a serious error in directing to constitute an Arbitral Tribunal in terms of the provisions of the GCC, which are not binding to the parties.