O.M.P. (T) (COMM.)/111/2022 of PRADEEP VINOD CONSTRUCTION CO Vs UNION OF INDIA

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IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of Decision: 13.01.2023

+O.M.P. (T) (COMM.) 111/2022

PRADEEP VINOD CONSTRUCTION CO...... PetitionerThrough:Mr. S.W. Haider and Ms. PoojaDua, Advocates.

versus

UNION OF INDIA

..... RespondentsThrough:Ms. Archana Surve, GP withMr. Karan Sharma and Ms.Roopali, Advocates.Mr. Akshay Amritanshu, Mr.Samyak Jain and Mr. DivyanshSingh, Advocates.

CORAM:HON’BLE MR. JUSTICE PRATEEK JALAN

PRATEEK JALAN, J. (ORAL)

1.By way of this petition under Sections 14 and 15 of theArbitration and Conciliation Act, 1996 [“the Act”], the petitionerseeks termination of the mandate of the arbitral tribunal, which isadjudicating disputes between the parties under Contract Agreementdated 16.11.2010 for “Misc. works such as construction of Duty Hutsat L-Xings, water supply arrangements, provision of station nameboards, hand pumps, circulating area, lifting barriers, approach roads

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and other allied works between RE-ROK in c/w Rewari-Rohtak NewLine”.

2.The Contract Agreement contains an arbitration clause (Clause64 of the General Conditions of Contract), which contemplatesresolution of disputes by arbitration. It is provided that in claimsexceeding ₹10,00,000/-[1], the arbitral tribunal would consist of solearbitrator and in other cases, it would consist of three arbitrators. Theclause contemplates nomination of one of the members of the tribunalby the contractor from panel of Gazetted Railway Officers,forwarded to it by the respondent. The other two members of thetribunal are to be nominated by the respondent from the aforesaidpanel or otherwise.

3.Upon disputes arising between the parties, the petitioner firstapproached this Court for appointment of an arbitrator in ARB.P.168/2015 under Section 11 of the Act. This Court allowed the petitionby an order dated 15.05.2015. However, the aforesaid order was setaside by the Supreme Court vide judgment dated 14.11.2019 in CivilAppeal No. 6400/2016, holding as follows:-

“16. In the result, the impugned judgments dated15.05.2015 and 02.02.2015 of the High Court of Delhi inArbitration Petition No.168 of 2015 and ArbitrationPetition No.531 of 2014 are set aside and these appealsare allowed. The appellant is directed to appoint thearbitrator in terms of Clause 64(3) of the agreement

1 I am informed that this amount has since been raised to Rs. 1 Crore. However, the present caseundisputedly concerns claim in excess of Rs. 1 Crore.undisputedly concerns claim in excess of Rs. 1 Crore.

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within period of one month from today under intimationto the respondent(s)- contractors. As soon as thecommunication of the appointment of arbitrator is madeto the respondent(s), the statement of claim be filed by therespondent(s) within six weeks thereafter and the reply ofthe appellant to be filed within four weeks thereafter. Thearbitrator shall proceed with the matter in accordancewith law and decide the claim after affording sufficientopportunity of hearing to both parties expeditiouslypreferably within period of four months.”

4.The three-member arbitral tribunal was, thus, constituted by acommunication dated 24.06.2020 and then on 15.02.2021, in view ofone of the nominated members recusing himself.

5.The grievance of the petitioner is that the arbitral tribunal hasheld only one hearing on 05.10.2021 and no further hearings havetaken place. According to the petitioner, several requests have beenmade for the hearing to be resumed, but the arbitral tribunal has notdone so. It is in these circumstances that the present petition was filed.

6.Notice was issued on 17.11.2022 and the respondent wasgranted time to file an affidavit within two weeks. The respondent hasnot filed any affidavit in response.

7.Mr. S.W. Haider, learned counsel for the petitioner, points outthat, out of the three-member arbitral tribunal, two members-Mr. S.K.Sharma and Mr. Rakesh Sabharwal have since recused from theproceedings.

8.Mr. Akshay Amritanshu, learned counsel for the respondent,does not contest the position regarding recusal of two members of thearbitral tribunal and the delay in conduct of the proceedings.

9.In view of the fact that no proceedings in the arbitration havebeen held since 05.10.2021 and two members of the arbitral tribunalhave also recused themselves, the mandate of the arbitral tribunal isterminated.

10.As far as appointment of substitute tribunal is concerned, Mr.Amritanshu submits that further panel of four names has beenforwarded by the respondent to the petitioner from which thepetitioner is required to suggest two names, out of which the GeneralManager, Northern Railways, will appoint one as the contractor’snominee.

11.Mr. Haider objects to this procedure, relying upon judgmentof the Supreme Court in Ellora Paper Mills Limited vs. The State ofMadhya Pradesh[2]. He submits that the judgment of the Supreme Courtin Civil Appeal No. 6400 of 2016, was considered by the Court in thesaid decision and the Court, nevertheless, came to the conclusion thatthe unilateral appointment of an arbitral tribunal composed of officersof the government was contrary to the judgments of the Court.

12.The judgment of the Supreme Court in Ellora[3]emphasised theobjective of Section 12(5) of the Act to provide for neutrality ofarbitrators and objectivity of the arbitral tribunal. The Court, inter alia

2 (2022) 3 SCC 1.

3 Ibid.

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cited its decision in Jaipur Zila Dugdh Utpadak Sahkari SanghLimited vs. Ajay Sales & Suppliers[4], which in turn referred to severalearlier judgments of the Court, including Voestalpine Schienen GMBHvs. Delhi Metro Rail Corporation Limited[5], TRF Limited vs. EnergoEngineering Projects Limited[6], and Bharat Broadband NetworkLimited vs. United Telecoms Limited[7]. The Supreme Court, in Ellora[8],set aside the impugned judgment of the High Court and appointed aformer judge of the Supreme Court to act as an arbitrator to resolvethe disputes between the parties.

13.In Voestalpine[9], the Supreme Court permitted appointment of anarbitrator from broadbased panel to be suggested by one of theparties. The judgment of the Supreme Court in Central OrganisationFor Railway Electrification vs. ECI-SPIC-SMO-MCML (JV) JointVenture Company[10], on the other hand, suggests that the appointmentof an arbitrator from panel submitted by one of the parties is by itselfa valid procedure.

14.This Court, in two recent judgments, has had occasion toconsider the present legal position on this aspect. The judgment inGangotri Enterprises Ltd. vs. General Manager, Northern Railways[11],deals with clause very similar to the one with which we areconcerned. Northern Railways, which is the respondent in the present

4 2021 SCC OnLine SC 730.

5 (2017) 4 SCC 665.

6 (2017) 8 SCC 377.

7 (2019) 5 SCC 755.

8 Supra (note 2).

9 Supra (note 5).

10 (2020) 14 SCC 712.

11 2022 SCC Online Del 3556.

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case, was also the respondent in the said case. The Court held that thenomination of four-member panel by Northern Railways could notbe held to be broadbased panel in terms of the judgment inVoestalpine[12]and also rejected the argument of Northern Railways,basedonthejudgmentinCentralOrganisation[13].InL&THydrocarbonEngineeringLimitedvs.IndianOilCorporationLimited[14], also, this Court has come to similar conclusion, relyingupon Voestalpine[15]. In that case, both Voestalpine[16]and CentralOrganisation[17]were considered and it has been held that therespondent therein was not entitled to insist upon the nomination of anarbitrator from panel of five names.

15.Having regard to the aforesaid judgments, I am of the view thatthe Union of India’s insistence on appointment of the petitioner’snominee arbitrator from the panel of four names suggested by it, isimpermissible.

16.Learned counsel for the parties were asked to take instructionsas to whether the matter be referred to an arbitral tribunal of threemembers or whether they would be agreeable to reference to solearbitrator. Mr. Amritanshu submits that he has no instructions toconsent to appointment of sole arbitrator.

12 Supra (note 5).

13 Supra (note 10).14 2022 SCC Online Del 3587.

15 Supra (note 5).16 Ibid.17 Supra (note 10).16 Ibid.17 Supra (note 10).

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17.In view of the above, keeping in mind that the contractualstipulation in the present case is for appointment of three-membertribunal, the petition is disposed of with direction that the partiesmay nominate one member each of their choice to the arbitral tribunalwithin period of two weeks from today. The two members soappointed will be at liberty to appoint the presiding arbitrator,whereupon the arbitral tribunal will stand constituted.

18.I am informed that pleadings have been completed before theerstwhile arbitral tribunal. Learned counsel for the parties agree thatthe arbitral tribunal constituted in terms of this order may take up theproceedings from the position at which they were before the erstwhilearbitral tribunal. Parties will file copies of the pleadings, which werefiled before the erstwhile arbitral tribunal, before the newly appointedarbitral tribunal, which may take up the proceedings from that stage.

PRATEEK JALAN, J

JANUARY 13, 2023‘vp’/