Delhi High Court

M/S. M.V. Omni Projects (India) Ltd. vs Union Of India, Through Dy. Chief ... on 4 October, 2024

Author:
Sachin Datta

Bench:
Sachin Datta

$~1

* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 04.10.2024
+ ARB.P. 703/2023
M/S. M.V. OMNI PROJECTS (INDIA) LTD. .....Petitioner

Through: Mr. Subodh Kr. Pathak and Mr.
Akash Swami, Advocates.

versus

UNION OF INDIA, THROUGH DY.
CHIEF ENGINEER/CONST.-II/NORTHERN RAILWAY

.....Respondent
Through: Mr. Ruchir Mishra, Mr. Sanjiv Kumar
Saxena, Mr. Mukesh Kumar Tiwari
and Ms. Poonam Shukla, Advocates.

CORAM:
HON'BLE MR. JUSTICE SACHIN DATTA

SACHIN DATTA, J. (Oral)

1. The present petition under
Section 11(6)
of the Arbitration and
Conciliation Act, 1996, seeks the constitution of an Arbitral Tribunal to
adjudicate the disputes between the parties.

2. Disputes between the parties have arisen in the context of a Contract
Agreement bearing No.804-A/Cs/Dy.C.E./C-II-LKO dated 16.06.2016
entered into between the parties, concerning "Phaphamau-Allahabad
Section: Balance earth work in embankment & cutting including mechanical
compaction using vibrating roller, laying and compaction of blanketing as

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By:KAMLA RAWAT

Signing Date:13.10.2024

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per RDSO guidelines for heavy axle load etc. between Km. 144.05 to
Km.156.95 (i.e., Phaphamau Railway Station including yard and Allahabad
Railway Station excluding yard) in connection with doubling between
Phaphamau-Allahabad Section of Lucknow division. (CA No. 74-
W/1/1/WA/Misc/LKO dated 16.06.2016)".

3. The relevant contract conditions between the parties contain the
following provisions for dispute resolution:

"63. Matters finally determined by the Railway - All disputes and
differences of any kind whatsoever arising out of or in connection with
the contract, whether during the progress of the work or after its
completion and whether before or after the determination of the
contract, shall be referred by the contractor to the GM and the GM
shall within 120 days after receipt of the contractor's representation
make and notify decisions on all matters referred to by the contractor
in writing provided that matters for which provision has been made in
clauses 8, 18, 22(5), 39, 43(2), 45(a), 55, 55-A(5), 57, 57A,61(1),
61(2) and 62(1) to (xiii) (B) of General Conditions of contract or in
any clause of the special conditions of the contract shall be deemed as
'excepted matters' (matters not arbitrable) and decisions of the
Railway authority, thereon shall be final and binding on the
contractor; provided further that 'excepted matters' shall stand
specifically excluded from the purview of the arbitration clause.

64 (1) (i) - Demand for Arbitration

In the event of any dispute or difference between the parties hereto as
to the construction or operation of this contract, or the respective
rights and liabilities of the parties on any matter in question, dispute
or difference on any account or as to the withholding by the Railway
of any certificate to which the contractor may claim to be entitled to,
or if the Railway fails to make a decision within 120 days, then and in
any such case, but except in any of the "excepted matters" referred to
in Clause 63 of these conditions, the contractor, after 120 days but
within 180 days of his presenting his final claim on disputed matters
shall demand in writing that the dispute or difference be referred to
arbitration.

64 (1) (ii) - The demand for arbitration shall specify the matters which
are in question, or subject of the dispute or difference as also the
amount of claim item wise. Only such dispute(s) or difference(s) in

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respect of which the demand has been made, together with counter
claims or set off, given by the Railway, shall be referred to arbitration
and other matters shall not be included in the reference.

64 (1) (ii) - (a) The Arbitration proceedings shall be assumed to have
commenced from the day, a written and valid demand for arbitration
is received by the Railway.

(b) The claimant shall submit his claim stating the facts supporting the
claims along with all the relevant documents and the relief or remedy
sought against each claim within a period of 30 days from the date of
appointment of the Arbitral Tribunal.

(c) The Railway shall submit its defence statement and counter
claim(s), if any, within a period of 60 days of receipt of copy of claims
from Tribunal thereafter, unless otherwise extension has been granted
by Tribunal.

(d) The place of arbitration would be within the geographical limits of
the Division of the Railway where the cause of action arose or the
Headquarters of the concerned Railway or any other place with the
written consent of both the parties.

64 (1) (iii) - No new claim shall be added during proceedings by
either party. However, a party may amend or supplement the original
claim or defence thereof during the course of arbitration proceedings
subject to acceptance by Tribunal having due regard to the delay in
making it.

64 (1) (iv) - If the contractor(s) does/do not prefer his/their specific
and final claims in writing, within a period of 90 days of receiving the
intimation from the Railways that the final bill is ready for payment,
he/they will be deemed to have waived his/their claim(s) and the
Railway shall be discharged and released of all liabilities under the
contract in respect of these claims.

64 (2) - Obligation During Pendancy of Arbitration - Work under the
contract shall, unless otherwise directed by the Engineer, continue
during the arbitration proceedings, and no payment due or payable by
the Railway shall be withheld on account of such proceedings,
provided, however, it shall be open for Arbitral Tribunal to consider
and decide whether or not such work should continue during
arbitration proceedings.

64 (3) (a) (i) - In cases where the total value of all claims in question
added together does not exceed Rs.10,00,000/- (Rupees ten lakhs

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By:KAMLA RAWAT

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only), the Arbitral tribunal shall consist of a sole arbitrator who shall
be a gazetted officer of Railway not below JA grade, nominated by the
General Manager. The sole arbitrator shall be appointed within 60
days from the day when a written and valid demand for arbitration is
received by GM.

64 (3) (a) (ii) - In cases not covered by the clause 64(3) (a)(i), the
Arbitral Tribunal shall consist of a Panel of three Gazetted Rly.
Officers not below JA grade or 2 Railway Gazetted Officers not below
JA Grade and a retired Railway Officer, retired not below the rank of
SAG Officer, as the arbitrators. For this purpose, the Railway will
send a panel of more than 3 names of Gazetted Rly. Officers of one or
more departments of the Rly. which may also include the name(s) of
retired Railway Officer(s) empanelled to work as Railway Arbitrator
to the contractor within 60 days from the day when a written and valid
demand for arbitration is received by the GM. Contractor will be
asked to suggest to General Manager at least 2 names out of the panel
for appointment as contractor's nominee within 30 days from the date
of dispatch of the request by Railway. The General Manager shall
appoint at least one out of them as the contractor's nominee and will,
also simultaneously appoint the balance number of arbitrators either
from the panel or from outside the panel, duly indicating the
'presiding arbitrator' from amongst the 3 arbitrators so appointed.
GM shall complete this exercise of appointing the Arbitral Tribunal
within 30 days from the receipt of thenames of contractor's nominees.
While nominating the arbitrators it will be necessary to ensure that
one of them is from the Accounts department. An officer of Selection
Grade of the Accounts Department shall be considered of equal status
to the officers in SA grade of other departments of the Railway for the
purpose of appointment of arbitrator.

64 (3) (a) (iii) - If one or more of the arbitrators appointed as above
refuses to act as arbitrator, withdraws from his office as arbitrator, or
vacates his/their office/offices or is/are unable or unwilling to perform
his functions as arbitrator for any reason whatsoever or dies or in the
opinion of the General Manager fails to act without undue delay, the
General Manager shall appoint new arbitrator/arbitrators to act in
his/their place in the same manner in which the earlier
arbitrator/arbitrators had been appointed. Such re-constituted
Tribunal may, at its discretion, proceed with the reference from the
stage at which it was left by the previous arbitrator (s).

64 (3) (a) (iv) - The Arbitral Tribunal shall have power to call for
such evidence by way of affidavits or otherwise as the Arbitral
Tribunal shall think proper, and it shall be the duty of the parties

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By:KAMLA RAWAT

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hereto to do or cause to be done all such things as may be necessary
to enable the Arbitral Tribunal to make the award without any delay.
The Arbitral Tribunal should record day to-day proceedings. The
proceedings shall normally be conducted on the basis of documents
and written statements.

64 (3) (a) (v) - While appointing arbitrator(s) under sub-clause (i), (ii)
& (iii) above, due care shall be taken that he/they is/are not the
one/those who had an opportunity to deal with the matters to which
the contract relates or who in the course of his/their duties as Railway
servant(s) expressed views on all or any of the matters under dispute
or differences. The proceedings of the Arbitral Tribunal or the award
made by such Tribunal will, however, not be invalid merely for the
reason that one or more arbitrator had, in the course of his service,
opportunity to deal with the matters to which the contract relates or
who in the course of his/their duties expressed views on all or any of
the matters under dispute.

64 (3) (b) (i) - The arbitral award shall state item wise, the sum and
reasons upon which it is based. The analysis and reasons shall be
detailed enough so that the award could be inferred there from.

64 (3) (b) (ii) - A party may apply for corrections of any
computational errors, any typographical or clerical errors or any
other error of similar nature occurring in the award and
interpretation of a specific point of award to tribunal within 60 days
of receipt of the award.

64 (3) (b) (iii) - A party may apply to tribunal within 60 days of
receipt of award to make an additional award as to claims presented
in the arbitral proceedings but omitted from the arbitral award.

64(4) In case of the Tribunal, comprising of three Members, any
ruling or award shall be made by a majority of Members of Tribunal.
In the absence of such a majority, the views of the Presiding
Arbitrator shall prevail.

64(5) Where the arbitral award is for the payment of money, no
interest shall be payable on whole or any part of the money for any
period till the date on which the award is made.

64(6) The cost of arbitration shall be borne by the respective parties.
The cost shall inter-alia include fee of the arbitrator(s), as per the
rates fixed by the Railway Board from time to time and the fee shall be
borne equally by both the parties. Further, the fee payable to the

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By:KAMLA RAWAT

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arbitrator(s) would be governed by the instructions issued on the
subject by Railway Board from time to time irrespective of the fact
whether the arbitrator(s) is/ are appointed by the Railway
Administration or by the court of law unless specifically directed by
Hon'ble court otherwise on the matter.

64(7): Subject to the provisions of the aforesaid
Arbitration and
Conciliation Act
1996 and the rules there under and any statutory
modifications thereof shall apply to the arbitration proceedings under
this clause."

4. Disputes have arisen between the parties on account of the alleged
hindrances faced by the petitioner during the execution of work such as
delayed execution of LHS Bridges by other agencies, delayed Ganga Bridge
work by other agencies, delayed relocation of cable junction boxes, non-
removable of other existing hindering structures, non-availability of
blanketing material, additional tax burden owing to implementation of GST
and eventually arbitrary and malafide termination of the contract by the
respondent on 31.12.2018.

5. The petitioner invoked the Dispute Resolution Clause vide
communication dated 30.09.2022. In the said communication, while setting
out the grievances of the petitioner and the claims sought to be raised by the
petitioner upon the respondent, it was inter-alia sought as under:

"Also, as per modified clause 64 of GCC-2014, the Company is
submitting herewith duly signed Annexure-XV of modified clause 64 of
GCC-2014. The Company further request Railways to refer the
dispute to the independent arbitrator, who shall be appointed with the
mutual consent of both the parties."

6. In response, the respondent addressed a communication dated
15.03.2023 to the petitioner, inter-alia, stating:

"Reference above, the General Manager, Northern Railways, Baroda
House, New Delhi has nominated a panel of following four Retired
Gazetted officers to suggest at least two names out of panel by you so

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By:KAMLA RAWAT

Signing Date:13.10.2024

16:15:55

that G.M. will nominate one out of them to act as
Arbitrator/Contractor's nominee. In above referred Arbitration case:

1. Shri Arunendera Kumar, Retd. CRB/Railway Board

2. Shri Alok Ranjan, AM/CE, Railway Board

3. Ms. Saroj Rajware, Retd. AM/Budger, Railway Board

4. Shri Anirudh Jain, Retd. AM/Works, Railway Board

It is therefore requested to suggest at least two names out of the above
panel within 15 days positively, so that further action can be taken
into the matter accordingly."

7. The petitioner vide communication dated 29.03.2023 stated that the
aforesaid suggestion of the respondent, and the appointment procedure
sought to be followed was not in accordance with the judgments of Supreme
Court in
TRF Limited v. Energo Engineering Projects Ltd.
(
2017) 8 SCC
377, Bharat Broadband Network Limited v. United Telecoms Limited
SCC OnLine SC 547 and Delhi High Court judgment in
Gangotri
Enterprises vs. General Manager, Northern Railway
(2022) DHC 004520.
The petitioner accordingly suggested the names of three persons, one of
whom could act as the petitioner's nominee. The petitioner also requested
that one of the persons named by the respondent in its communication dated
15.03.2023 not be appointed as a co-arbitrator or a presiding arbitrator since
the said person was already acting as the presiding arbitrator/co-arbitrator in
three other railway arbitrations. Finally, it was stated in the communication
dated 29.03.2023 that "in case this is not acceptable to you, we will be
constrained to take legal action as per
section 11
of Indian Arbitration and
Conciliation Act, 1996".

8. Instead of paying heed to and responding to the petitioner's
communication dated 29.03.2023, the respondent addressed another
communication dated 10.04.2023, reproducing the contents of its earlier

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By:KAMLA RAWAT

Signing Date:13.10.2024

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communication dated 15.03.2023 verbatim. In response, the petitioner
addressed a communication dated 11.05.2023, suggesting the names of its
nominee arbitrators as per the appointment procedure insisted upon by the
respondent.

9. Subsequently, the arbitral tribunal came to be constituted, and the
same was intimated to the petitioner vide communicated dated 24.05.2023,
which inter-alia records as under:

"The General Manager, Northern Railway, Baroda House, New Delhi
appointed the Arbitral Tribunal consisting of following members, to
settle the disputes arising out of the subject contract."

10. It is also notable that while constituting the arbitral tribunal, the
respondent did not refer all of the claims sought to be raised by the
petitioner to arbitration; some of the claims were excluded from the purview
of arbitration. This was ostensibly on the basis that the said claims fell
within the "scope of excepted matters".

11. In the circumstances, the present petition has been filed by the
petitioner seeking constitution of an independent arbitral tribunal. Although
the prayer in the present petition, as initially framed, raises a grievance as
regards exclusion of certain claims from the purview of arbitration and seeks
reference of the said claims to the arbitral tribunal as already constituted,
during the course of arguments learned counsel for the petitioner has
strenuously contended that the procedure envisaged under Clause 63 and
Clause 64 of GCC is not a valid appointment procedure, and therefore an
independent arbitral tribunal is required to be constituted to adjudicate the
disputes between the parties.

12. Vide order dated 25.08.2023, this Court recorded the contention of

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By:KAMLA RAWAT

Signing Date:13.10.2024

16:15:55

learned counsel for the petitioner as under:

"Learned counsel for the petitioner submits that the arbitration
agreement, as incorporated in Clause 64 of the Indian Railway
General Conditions of Contract, 1999, enables the respondent to
appoint a panel of three Gazetted railway Officers as members of the
Arbitral Tribunal. He submits that the same is not in consonance with
law and is inoperable in view of the judgment of this Court in
Margo
Networks Pvt. Ltd. Vs. Railtel Corporation of India Ltd.
(2023 SCC
OnLine Del 3906).

It is further submitted that the petitioner raised serious objection/s to
the constitution of the arbitral tribunal, as constituted vide
communication dated 24.05.2023. It is submitted that an independent
arbitral tribunal is required to be constituted to adjudicate the dispute
between the parties in view of the settled legal position in a catena of
cases.

In the circumstances, the petitioner does not press Prayer A in the
present petition; and seeks that an independent arbitral tribunal be
constituted to adjudicate all the claims of the petitioner."

13. Subsequently, an affidavit dated 29.04.2024 has also come to be filed
on behalf of the petitioner in these proceedings wherein it has been, inter-
alia, stated as under:

"4. That I say, by way of the instant petition I pray to this Hon'ble court for
appointment of the independent arbitral tribunal for adjudication of the
disputes as detailed out in the instant petition rather than referring the claims
to the existing arbitral tribunal which is constituted against principles of law.

5. That I say, my Ld. Counsel upon my instruction has maintained the same
stand before the Hon'ble Court which finds mentioned in the order dated
25.08.2023 as passed by this Hon'ble Court in the instant petition. Copy of
the order dated 25.08.2023 as passed by this Hon'ble Court in the instant
petition is being annexed herewith and marked as Document-2."

14. Learned counsel for the petitioner submits that Clause-63 and Clause-
64 of the GCC have been the subject matter of examination in numerous
judicial pronouncements. It has been held that the procedure contemplated
therein for constituting a tribunal does not meet the requirements of law.

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By:KAMLA RAWAT

Signing Date:13.10.2024

16:15:55

Consequently, while dealing with the petition under
Section 11
of the
Arbitration and Conciliation Act, 1996, this Court and also several other
High Courts have appointed independent Arbitral Tribunals in identical
context.

15.
In this regard, reliance has been placed on the judgments in the case
of
Margo Networks Pvt. Ltd. &Anr. v. Railtel Corporation of India Ltd.
,
2023:DHC:4596 and Gangotri Enterprises Ltd. v. General Manager
Northern Railway (Supra).

16. On the contrary, learned counsel for the respondent has contended
that the arbitral tribunal having already been constituted, there is no
occasion for this Court to substitute/appoint another tribunal to adjudicate
the disputes between the parties. Further, it is contended that the respondent
has not referred certain claims to arbitration since the same fall in the
category of 'excepted matters'. Learned counsel for the respondent has
relied upon the cases of M/s
Emaar India Ltd. v. Tarun Aggarwal Projects
LLP &Anr.
SCC OnLine SC 1328, Mitra Guha Builders (India)
Company v. Oil and Natural Gas Corporation Limited
(
2020) 3 SCC 222
and General Manager, Northern Railway & Anr. v. Sarvesh Chopra

(2002) 4 SCC 45, to justify the same.

REASONS AND CONCLUSION:

17. At the outset, it is noted that this Court has had occasion to examine
the validity of the procedure for appointment/constitution of an arbitral
tribunal in the backdrop of contractual stipulations identical to those in the
present case.

18.
In the case of
Margo Networks Pvt. Ltd.
(Supra), it has been held

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By:KAMLA RAWAT

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16:15:55

that:

(i) In the context of appointment procedure contemplating
appointment out of panel of arbitrators maintained by one of the
contracting parties, it is mandatory that the panel should be sufficiently
broad-based, failing which the appointment procedure does not meet
with the requirements of law, and in such a situation an independent
arbitral tribunal is required to be appointed by this Court.
Referring to
Voestalpine Schienen Gmbh vs. Delhi Metro Rail Corporation
Ltd
, (2017) 4 SCC 665, held that an arbitrator panel must be broad-

based and not restrictive. This requirement was not fulfilled when the
panel was comprised solely of ex-employees of a party.

(ii) A valid appointment procedure must be balanced and not
confer excessive say or authority on one of the parties to the arbitration
regarding the constitution of the arbitral tribunal. An appointment
procedure that contemplates that one party appoints two out of three
members of the arbitral tribunal contravenes this requirement.

19. In the present case, the procedure contemplated under Clauses 63 and
64 for appointing/constituting an arbitral tribunal is also vulnerable on both
the above counts.

20. The relevant observations made by this Court in
Margo Networks
Pvt. Ltd.
(Supra) are as follows:

"35. Thus, in an appointment procedure involving appointment from a
panel made by one of the contracting parties, it is mandatory for the
panel to be sufficiently broad based, in conformity with the principle

laid down in

Voestalpine
(supra), failing which, it would be incumbent
on the Court, while exercising jurisdiction under
Section 11
, to
constitute an independent and impartial Arbitral Tribunal as
mandated in
TRF
(supra) and Perkins (supra). The judgement of the
Supreme Court in CORE does not alter the position in this regard.

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By:KAMLA RAWAT

Signing Date:13.10.2024

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36.
In the facts of the present case, applying the principles laid down
in
Voestalpine
(supra) and in view of the aforesaid judgments of this
Court, including in
L&T Hydrocarbon Engineering Limited
(supra), it
is evident that the panel offered by the respondent to the petitioner in
the present case is restrictive and not broadbased. The same
adversely impinges upon the validity of the appointment procedure
contained in clause 3.37 (supra), and necessitates that an
independent Arbitral Tribunal be constituted by this Court.

37. This brings us to the next issue that arises in the context of the
arbitration clause in the present case, viz. whether "counter
balancing" is achieved in a situation where one of the parties has a
right to choose an arbitrator from a panel whereas 2/3rd of the
members of the arbitral tribunal are appointed by the other party.

***

42. .... The "counter balancing" as contemplated in Perkins (supra)
cannot be said to have been achieved in a situation where one of the
parties has a right to choose an arbitrator from a panel and where
the remaining (2 out of 3) arbitrators are appointed by the other
party."

21. The observations made in
Margo Networks Pvt. Ltd.
(Supra) have
been referred with approval by this Court in
Taleda Square Private Limited
v. Rail Land Development Authority
2023 SCC OnLine Del 6321, Kalyan
Toll Infrastructure Ltd v. Union of India and Others 2024 SCC OnLine
Del 1525 and Techno Compact Builders through Mr. Zulfiquar Ali, Sole
Proprietor v. RAILTEL Corporation of India Limited, 2024 SCC OnLine
Del 2166.

22. Consequently, in terms of the said judgment in
Margo Networks Pvt.
Ltd.
(Supra) and other judgments of the Coordinate Bench of this Court, it is
incumbent on this Court to appoint an independent arbitral tribunal to
adjudicate the disputes between the parties.

23. Learned counsel for the petitioner has also drawn attention to the fact
that in identical context, this Court, having found that the appointment

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By:KAMLA RAWAT

Signing Date:13.10.2024

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procedure did not meet the requirements of law, appointed a Sole Arbitrator
to adjudicate the disputes between the parties.
In this regard, reference may
be made to
S.N. Naik & Brothers v. Union of India
2024 SCC OnLine
Bom 995, wherein, it has been observed as under :-

"18. Thus, in the case of CORE (supra), the Hon'ble Supreme Court has
applied the above clause 64(3)(b)(ii) and held that the High Court could
have not appointed independent sole arbitrator.
However, in the case of
CORE (supra)as discussed hereinafter, the Hon'ble Supreme Court was
not called upon to decide whether clause 64(3)(b)(ii) is in confirmity of
principles laid down in
TRF
(supra) i.e. whether the arbitral panel is
broad based and in Perkins (supra), more particularly, whether the
counter balance is achieved in appointing the arbitral panel.

The
Hon'ble Supreme Court in the case of CORE (supra) has not whittled
down the principles laid down in
TRF and Perkins
(supra).
The issues
answered in the judgment of CORE (supra) are, whether the retired
railway officers are eligible to be appointed as arbitrators and whether
the General Manager is eligible to nominate the arbitrators.

19 In Tantia Constructions (supra) the Hon'ble Supreme Court has
doubted the view taken in the case of CORE (supra) observing that once
the appointing authority itself is incapcity from referring the matter to
arbitrator it does not follow that notwithstanding this yet appointments
may be valid depending upon the facts of the case. However, CORE
(supra), has not dealt with the issue of counter balance achieved in terms
of Perkins (supra). As such, the law laid down in the judgment of CORE
(supra) is limited to the issues answered in CORE (supra). The same is
the view taken by the Delhi High Court in the below discussed judgments.

xxx xxx xxx

23. I am in respectful agreement with the view expressed by the Delhi
High Court in the case of
Gangotri
(supra) and
Ganesh Engineering

(supra) that the judgment of CORE (supra) of the Hon'ble Supreme
Court does not deal with the issue, whether the arbitral panel appointed
is broad based in confirmity with voelstapine (supra) and whether the
counter balancing is achieved as laid down in Perkins (supra). Coming
to the facts of the present case, 2/3 arbitral panel is appointed by the
respondent so also for the 3rd member of the arbitral tribunal 4 names
are suggested by the respondent from which the petitioner is required to
choose 2 names and from the 2 names chosen by the petitioner, the
respondent will appoint one. Thus, the respondent has a complete say in
the appointment of the tribunal.

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By:KAMLA RAWAT

Signing Date:13.10.2024

16:15:55

24. Having considered the law on the subject the question as raised at
para 8(1) can be answered as under:-

Clause 64(3)(b)(ii) of the General Conditions of Contract provides
for unilateral appointment of arbitral tribunal at the hands of one of the
parties and, thus, is in violation of the principles laid down in

Voestalpine
(supra),
TRF
(supra) and Perkins (supra) and also in
violation of the law laid down in the case of Lombard (supra) and the
said clause is ex-faice invalid and the tribunal constituted thereunder is
non-est and void ab initio.

xxx xxx xxx

29. In view of this, in exercise of the powers under
section 11(6)
of the
Arbitration Act, I appoints Hon'ble Shri Naresh H. Patil (Retired Chief
Justice, Bombay High Court) as sole arbitrator in the matter to decide
the disputes arising between the parties in terms of agreement dated
23.09.2019. The sole arbitrator's fees shall be governed by the Bombay
High Court (Fee Payable to Arbitrators) Rules, 2018."

24. Also, a Coordinate Bench of this Court in M/S Twenty-Four Secure
Services Pvt. Ltd. v. M/S Competent Automobiles Company Limited
2024/DHC/4601, observed as under -

"22.
In
Union of India (UOI) vs. Singh Builders Syndicate
(2009) 4 SCC
523, the High Court rejected the contention on behalf of the Government
that the Court was not vested with any powers to appoint a Sole
Arbitrator in distinction to the Arbitration Agreement which provided for
the Tribunal of three members. The Apex Court upheld the order of this
Court appointing a Sole Arbitrator by observing that the appointment of
the Sole Arbitrator was valid.

23. In view of the submissions made as well as Clause 7 of the Services
Agreement dated 16.08.2021 which provides for arbitration and the
petitioner has raised the arbitrable disputes and without prejudice to the
rights and contentions of the parties, the present petition is allowed.... "

25. There is also no merit in the contention that the present petition is not
maintainable because an arbitral tribunal already stands constituted in terms
of the contractual provisions. It has been consistently held in a series of

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judgments that where the appointment procedure is invalid, any proceedings
before an improperly constituted arbitral tribunal are non-est, and the same
would not preclude this Court from exercising jurisdiction under
Section 11

of the A&C Act, 1996.

26.
In
J. S. R. Constructions v. National Highways Authority of India
and Anr.
, 2023: DHC: 8641, this Court has observed as under -

"19. In answer to question (ii), this Court finds that the present petition
is maintainable. There is no merit in the argument of the respondents that
since an Arbitral Tribunal has been constituted to adjudicate the disputes
between the parties, the present petition is not maintainable. In Perkins
(supra), the Supreme Court in exercise of the powers under
Section 11(6)

of the A&C Act, appointed a Sole Arbitrator, even when appointment of
an Arbitrator was already made; the Supreme Court, inter-alia, held as
under:

"26. The further question that arises is whether the power can be
exercised by this Court under
Section 11
of the Act when the
appointment of an arbitrator has already been made by the
respondent and whether the appellant should be left to raise
challenge at an appropriate stage in terms of remedies available
in law. Similar controversy was gone into by a Designated Judge
of this Court in Walter Bau AG and the discussion on the point
was as under : (SCC pp. 805-06, paras 9-10)
"9. While it is correct that in Antrix and Pricol Ltd., it was
opined by this Court that after appointment of an arbitrator
is made, the remedy of the aggrieved party is not under

Section 11(6)
but such remedy lies elsewhere and under
different provisions of the
Arbitration Act
(
Sections 12
and

13), the context in which the aforesaid view was expressed
cannot be lost sight of. In Antrix, appointment of the
arbitrator, as per the ICC Rules, was as per the alternative
procedure agreed upon, whereas in Pricol Ltd., the party
which had filed the application under
Section 11(6)
of the
Arbitration Act had already submitted to the jurisdiction of
the arbitrator. In the present case, the situation is
otherwise.

10. Unless the appointment of the arbitrator is ex facie valid
and such appointment satisfies the Court exercising
jurisdiction under
Section 11(6)
of the Arbitration Act,

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acceptance of such appointment as a fait accompli to debar
the jurisdiction under
Section 11(6)
cannot be
countenanced in law. In the present case, the agreed upon
procedure between the parties contemplated the
appointment of the arbitrator by the second party within 30
days of receipt of a notice from the first party. While the
decision in Datar Switchgears Ltd. may have introduced
some flexibility in the timeframe agreed upon by the parties
by extending it till a point of time anterior to the filing of the
application under
Section 11(6)
of the Arbitration Act, it
cannot be lost sight of that in the present case the
appointment of Shri Justice A.D. Mane is clearly contrary
to the provisions of the Rules governing the appointment of
arbitrators by Icadr, which the parties had agreed to abide
by in the matter of such appointment. The option given to
the respondent Corporation to go beyond the panel
submitted by Icadr and to appoint any person of its choice
was clearly not in the contemplation of the parties. If that
be so, obviously, the appointment of Shri Justice A.D. Mane
is non est in law. Such an appointment, therefore, will not
inhibit the exercise of jurisdiction by this Court under

Section 11(6)
of the Arbitration Act. It cannot, therefore, be
held that the present proceeding is not maintainable in law.

The appointment of Shri Justice A.D. Mane made beyond 30
days of the receipt of notice by the petitioner, though may
appear to be in conformity with the law laid down in Datar
Switchgears Ltd., is clearly contrary to the agreed
procedure which required the appointment made by the
respondent Corporation to be from the panel submitted by
Icadr. The said appointment, therefore, is clearly invalid in
law."

27. It may be noted here that the aforesaid view of the Designated
Judge in Walter Bau AG was pressed into service on behalf of the
appellant in TRF Ltd. and the opinion expressed by the Designated
Judge was found to be in consonance with the binding authorities
of this Court. It was observed : (
TRF
case, SCC p. 397, paras 32-

33)

"32. Mr Sundaram, learned Senior Counsel for the appellant
has also drawn inspiration from the judgment passed by the
Designated Judge of this Court in Walter Bau AG, where the
learned Judge, after referring to Antrix Corpn. Ltd.,
distinguished the same and also distinguished the authority in

Pricol Ltd. v. Johnson Controls Enterprise Ltd.
and came to

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hold that : (Walter Bau AG case, SCC p. 806, para 10)

10. Unless the appointment of the arbitrator is ex facie valid
and such appointment satisfies the Court exercising
jurisdiction under
Section 11(6)
of the Arbitration Act,
acceptance of such appointment as a fait accompli to debar
the jurisdiction under
Section 11(6)
cannot be
countenanced in law....‟

33. We may immediately state that the opinion expressed in the
aforesaid case is in consonance with the binding authorities we
have referred to hereinbefore."

28. In TRF Ltd., the Managing Director of the respondent had
nominated a former Judge of this Court as sole arbitrator in
terms of the aforesaid Clause 33(d), after which the appellant had
preferred an application under
Section 11(5)
read with
Section
11(6)
of the Act. The plea was rejected by the High Court and the
appeal therefrom on the issue whether the Managing Director
could nominate an arbitrator was decided in favour of the
appellant as stated hereinabove. As regards the issue about fresh
appointment, this Court remanded the matter to the High Court
for fresh consideration as is discernible from para 55 of the
judgment. In the light of these authorities there is no hindrance in
entertaining the instant application preferred by the applicants.

xxx xxx xxx

30. In the aforesaid circumstances, in our view a case is made out
to entertain the instant application preferred by the applicants.
We, therefore, accept the application, annul the effect of the letter
dated 30-7- 2019 issued by the respondent and of the appointment
of the arbitrator...."

20.
In
BVSR-KVR v. Rail Vikas Nigam Ltd.
, 2020 SCC OnLine Del 456
this Court has held as under:

"26. Having heard the learned counsel for the parties, the foremost
issue, which has arisen for consideration is whether, as submitted
by Mr. Seth, this petition is not maintainable as there is already an
Arbitral Tribunal in place.

xxx xxx xxx

33. Mr. Seth has also relied upon the judgment of the Supreme
Court in
Grid Corpn. of Orissa Ltd.
(supra) to contend that once
Arbitral Tribunal has come into existence a petition under Section

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11(6) of the Act was not an appropriate remedy and it was upon for
the party to raise objections as to the constitution and jurisdiction
of the Arbitral Tribunal itself under the provisions of the Act.

34. Similarly, he had also relied upon the judgment of this Court in

Newton Engineering & Chemicals
(supra) to contend that there
was no provision under the Act empowering the Court to terminate
the mandate of the Arbitrator appointed in terms of the agreement
between the parties and the remedy to any challenge against the
appointment of Arbitrator was under
Section 13
of the Arbitration
and Conciliation Act before the Arbitrator.
I am not in agreement
with the submissions made by Mr. Seth by relying upon aforesaid
two judgments for the simple reason that in Perkins Eastman
Architects DPC (supra), the Supreme Court while dealing with an
application under
Section 11(6)
read with
Section 11(12)(a)
of the
Act of 1996 held that as per the scheme of
Section 11
of the Act, if
there are justifiable doubts as to the independence and impartiality
of the persons nominated, and if other circumstances warrant
appointment of an independent Arbitrator by ignoring the
procedure prescribed, such appointment can be made by the Court.

35. If that be so, there is no impediment for this Court to appoint an
independent Arbitrator for adjudicating the dispute and difference
between the parties...."

21. In view of the aforesaid, there is no impediment in entertaining the
present petition. This Court therefore annuls the effect of the letter dated
12.07.2023 issued by the respondent no.1; and the letter dated
19.07.2023 issued by the presiding arbitrator, whereby it was purported
to be informed that the Arbitral Tribunal stood constituted."

27. A Division Bench of this Court in
Kotak Mahindra Bank Ltd. v.
Narendra Kumar Prajapat
, 2023 SCC OnLine Del 3148, has also held that
an arbitral tribunal, which inherently lacks jurisdiction, cannot validly
conduct any arbitral proceedings. It was observed therein as under:

"4.
In
TRF Ltd. v. Energo Engineering Projects Ltd.
, (2017) 8 SCC
377, the Supreme Court held that once the Arbitrator has become
ineligible by operation of law, he cannot nominate another as an
arbitrator.

In
Perkins Eastman Architects DPC v. HSCC (India)
Ltd.
, (2020) 20 SCC 760, the Supreme Court, following the earlier
decision in
TRF Ltd.
(supra), held that the Chairman-cum-Managing

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Director of a party was ineligible to appoint an arbitrator.

Following
the aforesaid decisions, this court in
Proddatur Cable TV Digi
Services v. Siti Cable Network Limited
, (2020) 267 DLT 51 held that it
is not permissible for a party to unilaterally appoint an arbitrator
without the consent of the other party(ies). It is important to note that
the aforesaid decisions were rendered in the context of
Section 12(5)

of the A&C Act.

***

14. This Court finds no infirmity with the aforesaid view. A person
who is ineligible to act an Arbitrator, lacks the inherent jurisdiction to
render an Arbitral Award under the A&C Act. It is trite law that a
decision, by any authority, which lacks inherent jurisdiction to make
such a decision, cannot be considered as valid. Thus, clearly, such an
impugned award cannot be enforced."

28. There is also no merit in the respondent's contention that certain
claims are not liable to be referred to arbitration because they fall within the
scope of excepted matters. Whether or not any particular claim is precluded
from arbitration on account of being an excepted matter is an aspect that can
be gone into by a duly constituted arbitral tribunal. Reference in this regard
is apposite to
N.K. Sharma v. General Manager Northern Railway
SCC OnLine Del 7576 wherein it was observed as under -

"This Court has also perused the invocation letter dated 01.06.2022
and prima facie, none of the claims raised therein falls within
'excepted matters'. However, this aspect would require an in depth
examination of the factual matrix which can be done by a duly
constituted Arbitral Tribunal, as contemplated in the judgment of the
Supreme Court in
Vidya Drolia v. Durga Trading Corpn.
, (2021) 2
SCC 1."

29. Also, in Interplay between Arbitration Agreements under the

Arbitration & Conciliation Act, 1996
& the
Indian Stamp Act, 1899
, In re,
2023 SCC OnLine SC 1666, the Supreme Court has reiterated that the scope
of inquiry in a petition under
Section 11
of the A&C is limited to
examination of the existence of an arbitration agreement. It has been

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observed therein as follows:

"G. The doctrine of competence-competence

...

162. The legislature confined the scope of reference under
Section
11(6A)
to the examination of the existence of an arbitration
agreement. The use of the term "examination" in itself connotes that
the scope of the power is limited to a prima facie determination. Since
the Arbitration Act is a self-contained code, the requirement of
"existence" of an arbitration agreement draws effect from
Section 7

of the Arbitration Act. In DuroFelguera (supra), this Court held that
the referral courts only need to consider one aspect to determine the
existence of an arbitration agreement - whether the underlying
contract contains an arbitration agreement which provides for
arbitration pertaining to the disputes which have arisen between the
parties to the agreement. Therefore, the scope of examination under

Section 11(6A)
should be confined to the existence of an arbitration
agreement on the basis of
Section 7
. Similarly, the validity of an
arbitration agreement, in view of
Section 7
, should be restricted to the
requirement of formal validity such as the requirement that the
agreement be in writing. This interpretation also gives true effect to
the doctrine of competence-competence by leaving the issue of
substantive existence and validity of an arbitration agreement to be
decided by arbitral tribunal under
Section 16
.
We accordingly clarify
the position of law laid down in
Vidya Drolia
(supra) in the context of

Section 8
and
Section 11
of the Arbitration Act.

163. The burden of proving the existence of arbitration agreement
generally lies on the party seeking to rely on such agreement. In
jurisdictions such as India, which accept the doctrine of competence-
competence, only prima facie proof of the existence of an arbitration
agreement must be adduced before the referral court. The referral
court is not the appropriate forum to conduct a mini-trial by allowing
the parties to adduce the evidence in regard to the existence or
validity of an arbitration agreement. The determination of the
existence and validity of an arbitration agreement on the basis of
evidence ought to be left to the arbitral tribunal. This position of law
can also be gauged from the plain language of the statute."

30. In the recent case of SBI General Insurance Co. Ltd. v. Krish
Spinning, 2024 INSC 532, the Supreme Court has clarified that at the stage

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of appointing an arbitrator, the Court's role is limited to determining the
prima facie existence of an arbitration agreement, and "nothing else". It was
observed therein as follows:

"113. Referring to the Statement of Objects and Reasons of the Arbitration
and Conciliation (Amendment) Act, 2015, it was observed in In Re:

Interplay (supra) that the High Court and the Supreme Court at the stage
of appointment of arbitrator shall examine the existence of a prima facie
arbitration agreement and not any other issues. The relevant observations
are extracted hereinbelow:

"209. The above extract indicates that the Supreme Court or
High Court at the stage of the appointment of an arbitrator
shall "examine the existence of a prima facie arbitration
agreement and not other issues". These other issues not only
pertain to the validity of the arbitration agreement, but also
include any other issues which are a consequence of
unnecessary judicial interference in the arbitration
proceedings. Accordingly, the "other issues" also include
examination and impounding of an unstamped instrument by the
referral court at the
Section 8
or
Section 11
stage. The process
of examination, impounding, and dealing with an unstamped
instrument under the
Stamp Act
is not a timebound process, and
therefore does not align with the stated goal of the
Arbitration
Act
to ensure expeditious and time-bound appointment of
arbitrators. [...]"

(Emphasis supplied)

114. In view of the observations made by this Court in In Re. Interplay, it
is clear that the scope of enquiry at the stage of appointment of arbitrator
is limited to the scrutiny of prima facie existence of the arbitration
agreement, and nothing else. For this reason, we find it difficult to hold
that the observations made in Vidya Drolia and adopted in
NTPC v. SPML
Infra Ltd.
that the jurisdiction of the referral court when dealing with the
issue of "accord and satisfaction" under
Section 11
extends to weeding
out ex-facie non-arbitrable and frivolous disputes would continue to apply
despite the subsequent decision in In Re. Interplay."

123. The power available to the referral courts has to be construed in the
light of the fact that no right to appeal is available against any order
passed by the referral court under
Section 11
for either appointing or
refusing to appoint an arbitrator. Thus, by delving into the domain of the
arbitral tribunal at the nascent stage of
Section 11
, the referral courts also

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run the risk of leaving the claimant in a situation wherein it does not have
any forum to approach for the adjudication of its claims, if it
Section 11

application is rejected."

31. Thus, it is not open for the respondent to resist arbitration based on
their assertion that some of the claim/s fall within the scope of "expected
matters". However, the respondent would be well within its right to move an
appropriate application under
Section 16
of the Arbitration and Conciliation
Act, 1996, raising appropriate objections in this regard.

32. Consequently, in view of the aforesaid facts and circumstances and
the legal position as noted hereinabove, it is incumbent on this Court to
appoint an independent arbitral tribunal to adjudicate the disputes between
the parties.

33. Accordingly, Mr. Justice (Retd.) Dinesh Maheshwari, Former Judge,
Supreme Court of India (Mobile No.:9485006617) is appointed as the Sole
Arbitrator to adjudicate the disputes between the parties.

34. It is clarified that the respondent shall be entitled to raise appropriate
jurisdictional objections/move application under
Section 16
of the
Arbitration and Conciliation Act, 1996, inter-alia, on the ground that the
claim/s sought to be raised fall within the scope of excepted matters.
Needless to say, in the event of any such application being filed, the same
shall be dealt with and adjudicated upon by the learned Sole Arbitrator in
accordance with law. It is made clear that this Court has not expressed any
opinion with regard thereto.

35. The learned Sole Arbitrator may proceed with the arbitration
proceedings subject to furnishing to the parties requisite disclosures as
required under
Section 12
of the A&C Act.

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36. The learned Sole Arbitrator shall be entitled to fee in accordance with
Fourth Schedule to the A&C Act; or as may otherwise be agreed to between
the parties and the learned Sole Arbitrator.

37. The parties shall share the arbitrator's fee and arbitral costs, equally.

38. All rights and contentions of the parties in relation to the
claims/counter-claims are kept open, to be decided by the learned Arbitrator
on their merits, in accordance with law.

39. Needless to say, nothing in this order shall be construed as an
expression of opinion of this Court on the merits of the case.

40. The present petition stands disposed of in the above terms.

SACHIN DATTA, J
OCTOBER 4, 2024/cl, sv

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