M/S Abdul Gaffur Ahmad Noor v. General Manager Northern Railways

1. GENERAL MANAGER NORTHERN RAILWAYS NORTHERN RAILWAY, HEAD QUARTER, BARODA HOUSE, NEW DELHI.

2. THE SR.

DIVISIONAL COMMERCIAL MANAGER NORTHERN RAILWAY, MORADABAD, U.P..... RESPONDENTS Through: Ms.Arunima Dwivedi and Mr.Sainyam Bhardwaj, Advocates.

KUMAR KAURAV HON'BLE MR.

JUSTICE PURUSHAINDRA KUMAR KAURAV JUDGEMENT PURUSHAINDRA KUMAR KAURAV, J. (ORAL)

1. The present petition has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (the 1996 Act) by the petitioner, seeking appointment of an Arbitrator, to adjudicate upon the disputes that have arisen between the parties under the License Agreement dated 10.03.2008.

2. The facts of the case would indicate that The Applicant is a sole proprietorship firm operating under the name and style of M/s Abdul Gaffur Ahmad Noor, recognized by the Railway Administration as a licensed catering and vending contractor at Laksar Railway Station for several decades. The Applicant was granted licenses for two catering stalls, and the last formal agreement was executed on 10.03.2008. Since then, the Railway Administration continued to grant periodic renewals without entering into any new agreements. The Applicant has consistently complied with all license fee payments without default. However, after the issuance of a new Catering Policy in 2017 and subsequent Railway Board circulars, the Applicant and similarly situated vendors were arbitrarily subjected to restrictions on the number of stalls they could retain, in violation of settled Supreme Court rulings. These actions led to multiple writ petitions, including W.P. (C) No. 13154 of 2018, where the High Court granted interim protection and later, on 30.01.2025, directed the Applicant to seek arbitration under Clause 39 of the license agreement.

3. Pursuant to that order, the Applicant invoked the arbitration clause and issued a notice dated 05.03.2025, proposing the appointment of an independent arbitrator. However, no mutual appointment could be reached as the Railway Administration insisted on appointing its own General Manager as arbitrator, which the Applicant objected to, citing Section 12(5) of the Arbitration and Conciliation Act, 1996. The core dispute arises from the Railway Administration’s unilateral and retrospective enhancement of the annual license fee from Rs. 1,00,100/- to Rs. 2,77,752/-, which the Applicant contends is arbitrary, illegal, and contrary to existing policy and judicial directions. The Applicant, therefore, seeks the appointment of an independent arbitrator by this Court for adjudication of the dispute under the Arbitration and Conciliation Act, 1996, with the value of the subject matter being Rs. 2,77,752/- per annum.

4. During the course of arguments, learned counsel appearing on behalf of the respondents contends that she has no objection if the Arbitrator is appointed. However, liberty is granted to her to raise all objections.

5. The Court takes note of Clause 39 of License Agreement dated 10.03.2008, which reads as under:-

Manager, Northern Railway, for the time being, or in case his designation is changed or his office is abolished to the sole arbitration or the officer who for the time being is entrusted whether or not in addition to other function, with the functions of the General Manager, Northern Railway, by whatever designation such officer may be called (hereinafter referred to as the said officer) and if the General Manager for the time being of the Northern Railway or the said officer is unable or unwilling to act, to the sole arbitration of some other person appointed by the General Manager of the said officer. It will be no objection to any such appointment, that the arbitrator so appointed as a Government Servant that he had to deal with the matters to which this agreement relates and that in the course of his duties as such Government Servant he has expressed view on all or any of the matters in dispute or difference. The ward of the arbitrator so appointed shall be final and binding on the parties hereto.”

6. The law with respect to the scope and standard of judicial scrutiny under Section 11(6) of the Act has been fairly well settled. This Court in Pradhaan Air Express Pvt Ltd v. Air Works India Engineering Pvt Ltd[1], as well, has extensively dealt with the scope of interference at the stage of Section 11. Furthermore, this Court, recently, in Axis Finance Limited Vs. Mr. Agam Ishwar Trimbak[2] has held that the scope of inquiry under Section 11 of the Act has been limited to a prima facie examination of the existence of an arbitration agreement. Further, it was also reiterated that the Objections relating to the arbitrability of disputes are not to be entertained by a referral Court acting under Section 8 or 11 of the Act. The relevant extract of the aforesaid decision reads as under: -

19. In In Re: Interplay, the Supreme Court confined the analysis under Section 11 of the Act to the existence of an arbitration agreement and under Section 8 of the Act to the existence and validity of an arbitration 2025 SCC OnLine Del 3022 2025:DHC:7477 agreement. Under both the provisions, examination was to be made at the touchstone of Section 7 of the Act. Further, issues pertaining to the arbitrability of the dispute fell outside the scope of both Section 11(6A) and Section 8 of the Act. The material part of the judgement of the Supreme Court in In Re: Interplay reads as under:

164. The 2015 Amendment Act has laid down different parameters for judicial review under Section 8 and Section 11. Where Section 8 requires the referral Court to look into the prima facie existence of a valid arbitration agreement. Section 11 confines the Court’s jurisdiction to the examination of the existence of an arbitration agreement. Although the object and purpose behind both Sections 8 and 11 is to compel parties to abide by their contractual understanding, the scope of power of the referral Courts under the said provisions is intended to be different. The same is also evident from the fact that Section 37 of the Arbitration Act allows an appeal from the order of an arbitral tribunal refusing to refer the parties to arbitration under Section 8, but not from Section 11. Thus, the 2015 Amendment Act has legislatively overruled the dictum of Patel Engineering (supra) where it was held that Section 8 and Section 11 are complementary in nature. Accordingly, the two provisions cannot be read as laying down a similar standard. 165. 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 Duro Felguera (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 7Similarly, 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.