M/S SRIRAM CABLES PVT. LTD. v. UNION OF INDIA

1. This is a petition under Section 11(6) of the Arbitration and Conciliation Act 1996[1] for reference of the dispute between the parties to arbitration.

2. The petitioner was appointed by the respondent Central Organisation for Railways Electrification, for supply of certain material for use in the railways.

3. The parties were governed by the General Conditions of Contract (GCC) which apply across the board to contract between the Contractor and the Railways.

4. Clause 9 of the GCC envisages resolution of the dispute by arbitration and reads thus: “9. Arbitration a) In the event of any question, dispute or difference arising under these conditions or any special conditions of contract, or in connection with this contract (except as to any matters the decision of which is specially provided for by these of the special conditions) the same shall be referred to the sole arbitration of a Gazetted Railway Officer appointed to be the arbitrator, by the General Manager in the case of contracts entered into by the Zonal Railways and Production Units, by any Member of the Railway Board in the case of contracts entered into by the Railway Board and by the Head of the Organization in respect of the contract entered into by the other Organisations under the Ministry of Railways. The Gazetted Railway officer to be appointed as arbitrator however will not be one of those who had an opportunity to deal with the matters to which the contract relates or who in the course of their- duties as railway servant have expressed views on all or any of the matters under dispute or difference. Toe award of the arbitrator shall be final and binding on the parties to this contract. 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 contract 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 to be referred to arbitration at all. d) The arbitrator may from time-to-time with the consent of all the parties to the contract enlarge the time for making the award. e) Upon every end any such reference, the assessment of the cost incidental to the reference and award respectively shall be in the discretion of arbitrator f) Subject as aforesaid Arbitration and Conciliation Act 1996 and the rules there under and any statutory modifications thereof “the 1996 Act” hereinafter for the time being in force shall be deemed to apply to the arbitration proceedings under this clause. g) The venue of arbitration shall be the place from which the acceptance note (Supply Order) is issued or such other place as the arbitrator at his discretion may determine. h) In this clause the authority, to appoint the arbitrator includes, if there be no such authority, the officer, who is, for the time being discharging the functions of that authority, whether in addition to other functions or otherwise.”

5. Though Clause 9(a) contemplates the arbitrator being appointed by the General Manager or member of the Railway Board, the said clause is not workable in view of the judgment of the Supreme Court in Perkins Eastman Architects v HSCC India[2] read with Section 12(5) of the 1996 Act.

6. Disputes between the parties having arisen, the petitioner addressed a notice on 18 May 2017 to the respondent, seeking reference of the disputes to arbitration.

7. The concluding paragraph of the said notice reads thus: “You are, therefore, requested to kindly refund a sum of Rs.2,05,40,091/- alongwith interest @ 18% per annum to us which you have illegally encashed as bank guarantee without any basis or claim, within two weeks of the receipt of this letter and/or otherwise appoint an Arbitrator as per the terms and conditions of the purchase order.”

8. On receiving the aforesaid notice, the respondent proceeded to appoint a sole arbitrator to arbitrate on the dispute.

9. The learned arbitrator rendered the award on 23 April 2018. The petitioner challenged the award under Section 34 of the 1996 Act before a coordinate Bench of this Court in OMP (Comm) 447/2018. By judgment dated 22 April 2024, the coordinate Bench allowed the said objection on the ground that the arbitrator had been unilaterally appointed, which was impermissible in law.

10. The award dated 23 April 2018 was, therefore, set aside with liberty to the parties to seek appropriate remedies under the law for redressing their disputes.

11. The petitioner has now reapproached the Court under Section 11(6) of the 1996 Act for appointing a fresh arbitrator.

12. Mr. Amit Gupta, learned Counsel for the respondent submits that the present petition is not maintainable unless the petitioner issues a fresh notice under Section 21 of the 1996 Act to the respondent.

13. Mr. Ankit A. Shah, learned Counsel for the petitioner, on the other hand, placed reliance on the decision of a learned Single Judge of the High Court of Bombay in Kirloskar Pneumatic Company Ltd v Kataria Sales Corporation[3], which holds that once a Section 21 notice was issued prior to the entering on reference of the earlier arbitrator and the arbitral award is set aside on the ground that the arbitrator was unilaterally appointed, no fresh Section 21 notice is required to be 2024 SCC OnLine Bom 941 issued before a fresh arbitrator is appointed.

14. There can be no cavil with this proposition as the 1996 Act does not envisage repeated notices under Section 21. In the present case the notice dated 18 May 2017 was clearly a notice under Section 21 of the 1996 Act inviting the respondent to refer the dispute to arbitration. That being so, no fresh notice under Section 21 is required to be issued by the petitioner.

15. The objection of the respondent in that regard cannot sustain and is accordingly rejected.