Union Of India vs M/S. Singh Builders Syndicate

4. Let us refer to the facts briefly. The respondent made a request for arbitration in the year 1999. As the appellant failed to take necessary steps as mandated by clause 64, the respondent filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 (`Act' for short) in AA No. 202/2000. In pursuance of the directions issued on 11.11.2002 by the designate of the Chief Justice of the Delhi High Court, an Arbitral Tribunal was constituted in terms of clause 64, consisting of Shri 3 A.K. Mishra, (Chief Engineer/TPS) nominated by the contractor, Shri S.P. Virdi (Dy.F.A. & CEO) nominated by the appellant, and Shri H.K. Jaggi (Chief Bridge Engineer) as the Umpire. But even before the proceedings could commence before the Arbitral Tribunal, Shri A.K. Mishra, one of the Arbitrators, was transferred and consequently he tendered resignation in May, 2004. As the appellant failed to provide a fresh panel to enable the respondent to make a fresh nomination, the respondent again approached the High Court by filing AA No.240/2004. A fresh panel was made available thereafter from which the respondent nominated Shri Ashok Gupta as its Arbitrator. Hardly after one sitting of the Arbitral Tribunal, Shri Ashok Gupta was also transferred and he tendered his resignation on 21.7.2005. As appellant again failed to take steps for filling the vacancy, the respondent approached the Court again by filing IA No. 6511/2005 in AA 240/2004. In pursuance of an order dated 24.8.2005 passed by the High Court, again a panel was made available and the respondent made its choice on 9.9.2005. As no steps were taken in pursuance of it by the appellant, the respondent sent a reminder on 14.10.2005. There was no response. In this background, the respondent again approached the High Court on 10.11.2005 in Arb. Petn. No. 256/2005 for appointment of an independent 4 sole arbitrator. During the pendency of the said petition, the General Manager of Northern Railways appointed Sri Ved Pal as the contractor's nominee arbitrator on 22.11.2005.

5. The High Court was of the view that no useful purpose will be served by again reconstituting a Three Member Arbitral Tribunal in accordance with clause 64. The High Court found that the matter has been pending from 1999 when the respondent first made the request for reference to Arbitration and that the cumbersome process of constituting an Arbitral Tribunal in terms of the Arbitration agreement and the delays on the part of Railways in complying with the provisions of the arbitration agreement, led to the arbitration becoming virtually a non-starter. Therefore, the High Court allowed the petition on 27.3.2006 and appointed Justice Jaspal Singh, a retired Judge of the Delhi High Court as the arbitrator. Justice Jaspal Singh recused himself and the High Court on 19.7.2006, appointed Justice R.C. Chopra, another retired Judge of the Delhi High Court as the arbitrator.

10. Another aspect referred to by the appellant, however requires serious consideration. When the arbitration is by a Tribunal consisting of serving officers, the cost of arbitration is very low. On the other hand, the cost of arbitration can be high if the Arbitral Tribunal consists of retired Judge/s. When a retired Judge is appointed as Arbitrator in place of serving officers, the government is forced to bear the high cost of Arbitration by way of private arbitrator's fee even though it had not consented for the appointment of such non-technical non-serving persons as Arbitrator/s. There is no doubt a prevalent opinion that the cost of arbitration becomes very high in many cases where retired Judge/s are Arbitrators. The large number of sittings and charging of very high fees per 9 sitting, with several add-ons, without any ceiling, have many a time resulted in the cost of arbitration approaching or even exceeding the amount involved in the dispute or the amount of the award. When an arbitrator is appointed by a court without indicating fees, either both parties or at least one party is at a disadvantage. Firstly, the parties feel constrained to agree to whatever fees is suggested by the Arbitrator, even if it is high or beyond their capacity. Secondly, if a high fee is claimed by the Arbitrator and one party agrees to pay such fee, the other party, who is unable to afford such fee or reluctant to pay such high fee, is put to an embarrassing position. He will not be in a position to express his reservation or objection to the high fee, owing to an apprehension that refusal by him to agree for the fee suggested by the arbitrator, may prejudice his case or create a bias in favour of the other party who readily agreed to pay the high fee. It is necessary to find an urgent solution for this problem to save arbitration from the arbitration cost. Institutional arbitration has provided a solution as the Arbitrators' fees is not fixed by the Arbitrators themselves on case to case basis, but is governed by a uniform rate prescribed by the institution under whose aegis the Arbitration is held. Another solution is for the 10 court to fix the fees at the time of appointing the arbitrator, with the consent of parties, if necessary in consultation with the arbitrator concerned. Third is for the retired Judges offering to serve as Arbitrators, to indicate their fee structure to the Registry of the respective High Court so that the parties will have the choice of selecting an Arbitrator whose fees are in their `range' having regard to the stakes involved. What is found to be objectionable is parties being forced to go to an arbitrator appointed by the court and then being forced to agree for a fee fixed by such Arbitrator. It is unfortunate that delays, high cost, frequent and sometimes unwarranted judicial interruptions at different stages are seriously hampering the growth of arbitration as an effective dispute resolution process. Delay and high cost are two areas where the Arbitrators by self regulation can bring about marked improvement.

13. In view of the above, the appeal is dismissed.

_________________J [R. V. Raveendran] _________________J [H.L. Dattu] New Delhi;

February 26, 2009.