Full Text
JUDGMENT
M.V. OMNI PROJECTS (INDIA) LTD. .....Petitioner
Through: Mr. Subodh Kr. Pathak, Mr. Amit Sinha, Mr. Pawan Kumar Sharma, Mr. Niraj Kumar, Advs.
RAILWAY & ANR. .....Respondent
Through: Mr. Ruchir Mishra, Sr. Panel Counsel with Mr. Rajkumar Maurya, GP with Mr. Sanjiv Kr. Saxena, Mr. Mukesh Shukla, Ms. Poonam Shukla, Ms. Reba Jena Mishra, Ms. Harshita Sharma, Advs.
1. Since both the parties are common in all the petitions and the reliefs sought are also identical, thepetitions are being decided by this common judgment.
2. These are petitions filed under section 14 of Arbitration and Conciliation Act, 1996 (“1996 Act”) seeking termination of the mandate of the present Arbitral Tribunal and appoint a Sole Arbitrator to adjudicate the disputes arising out of the Contract Agreement bearing No. 47-A/CS/Dy.C.E/C-III/LKO dated 17.06.2016, Contract Agreement bearing No. 43-A/CS/Dy.C.E/C-III/LKO dated 17.06.2016 and Contract Agreement bearing No. 42-A/CS/Dy.C.E/C-III/LKO dated 17.06.2016.
FACTUAL BACKGROUND
3. Brief facts are that the petitioner was awarded contractual work of construction. After some negotiations with respect to the rates for the work, the petitioner was awarded Letter of Intent/ Letter of Acceptance and thereafter, the parties entered into a Contract Agreement dated 17.06.2016.
4. Subsequently, on account of various disputes, the respondent terminated the Contract on 26.12.2018 in O.M.P. (T) (COMM.) 5/2025 and O.M.P. (T) (COMM.) 7/2025 and on 19.05.2018 in O.M.P. (T) (COMM.) 6/2025.
5. Thereafter, the petitioner made representation to the respondent in terms of Clause No. 64 of the GCC which is the applicable provision for the dispute resolution. Relevant portion of the said Clause is extracted below:-
to havecommenced from the day, a written and valid demand for arbitration isreceived by the Railway. (b) The claimant shall submit his claim stating the factssupporting the claims along with all the relevant documents and therelief or remedy sought against each claim within a period of 30 daysfrom 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 geographicallimits 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) - …………. 64 (1) (iv) - If the contractor(s) does/do not prefer his/their specific andfinal claims in writing, within a period of 90 days of receiving theintimation from the Railways that the final bill is ready for payment,he/they will be deemed to have waived his/their claim(s) and theRailway shall be discharged and released of all liabilities under thecontract in respect of these claims. 64 (2) - Obligation During Pendency of Arbitration - Work under the contract shall, unless otherwise directed by the Engineer, continue during the arbitration proceedings, and no payment due or payable bythe Railway shall be withheld on account of such proceedings, provided, however, it shall be open for Arbitral Tribunal to considerand 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 questionadded together does not exceed Rs.10,00,000/- (Rupees ten lakhs only),the Arbitral tribunal shall consist of a sole arbitrator who shall be a gazetted officer of Railway not below JA grade, nominated by theGeneral Manager. The sole arbitrator shall be appointed within 60days from the day when a written and valid demand for arbitration isreceived 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 Gazatted 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. Officer 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 the names 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 aboverefuses to act as arbitrator, withdraws from his office as arbitrator, orvacates his/their office/offices or is/are unable or unwilling toperform his functions as arbitrator for any reason whatsoever or diesor in the opinion of the General Manager fails to act without unduedelay, the General Manager shall appoint new arbitrator/arbitratorsto act in his/their place in the same manner in which the earlier arbitrator/arbitrators had been appointed. Such re-constitutedTribunal may, at its discretion, proceed with the reference from thestage at which it was left by the previous arbitrator (s).” (Emphasis added)
6. Pursuant to the aforesaid representation, the respondent appointed three serving railway employees as Arbitrators to adjudicate the disputes between the parties.
7. The petitioner appeared before the Arbitral Tribunal constituted by the respondent on 7 hearings and thereafter, filed the present petition.
8. Before going into the submissions, it is apposite to extract the relevant paragraphs of the orders passed by the Arbitral Tribunal. “Order dated 19.10.2024 i.e. 7th Hearing “2.0 During hearing it was brought to the notice of Arbitral Tribunal that though Claimant and Respondent have separately submitted waiver of applicability of section 12(5) of Arbitration & Conciliation Act, an express agreement in writing between Claimant & Respondent is yet to be entered into.
3.0 Arbitral Tribunal brought to the attention of Claimant and Respondent that certain documents filed by them are not legible and also directed claimant and respondent to re-look such documents filed by them and submit clear and legible copies on next hearing.
4.0 After hearing both the parties, Arbitral Tribunal has directed that following documents are to be submitted by 14.11.2024. 4.[1] Agreement for waiver of applicability of Section 12(5) of Arbitration & Conciliation Agreement, duly signed jointly by authorized representatives on behalf of Claimant and Respondent.” Order dated 02.12.2024 i.e. 9th Hearing
2.0 Vide Para 2.0 of Order Sheet of 7th hearing dated 19.10.2024, it was recorded that, “During hearing it was brought to the notice of Arbitral Tribunal that though Claimant and Respondent have separately submitted waiver of applicability of section 12(5) of Arbitration & Conciliation Act an express agreement in writingbetween Claimant & Respondent is yet to be entered into”. Vide Para 4.[1] of OrderSheet of 7th hearing dated 19.10.2024, ArbitralTribunal has directed that, Agreement for waiver of application of section 12 (5) of Arbitration & Conciliation Act, duly signed by authorized representative of Claimant and Respondent to be submitted by 14.11.2024.
3.0 During 8th hearing dated 22.11.2024, compliances of 7th hearing were pending. Claimant and Respondent were again directed to ensure compliances as discussed and agreed during 7th hearing dated 19.10.2024 & next (9th ) hearing was fixed on 02.12.2024.
4.0 During 02.12.2024, agreement duly signed by Respondent for waiver of application of section 12(5) of Arbitration & Conciliation Act was brought by Respondent representative Shri Rakesh Kumar, AXEN/C/LKO. However, this was not signed by Claimant & during hearing dated 02.12.2024, Claimant Advocatehas verbally informed that a petition under Section 14 of Arbitration & ConciliationAct seeking constitution of new Arbitral Tribunal has been filed by them before Hon‟ble High Court of Delhi, adjudication of same is awaited from Hon‟ble High Court of Delhi and final order as and when received will be duly intimated to the Ld. Arbitral Tribunal. E-mail confirmation from Claimant on the issue is placed as Annexure-A/1-2.”
9. It is the sole contention of Mr. Pathak, learned counsel for the petitioner that the Arbitral Tribunal has been appointed unilaterally by the respondent which is against the settled principles of law and hence, the mandate of the Arbitral Tribunal be terminated and new Arbitral Tribunal be constituted. Reliance is placed on judgments of this Court passed in Arb. P. No. 703 of 2023, Arb. P. 1715 of 2024 and connected matters.
10. Per Contra, Mr. Mishra, learned counsel for the respondent states that the petitioner has already waived the applicability of section 12(5) of 1996 Act on 23.02.2024. In this regard, he relied upon the letter of the petitioner which reads as under:- “23.02.2024 To Dy. Chief Engineer/Construction/G-1 Office of the Chief Administrative Officer/Construction Northern Railway, Head Quarter Kashmiri Gate, Delhi - 110006 Kind Att. Mr. Puneet Kumar Srivastava, CE/Con/G-1 Subject: …… Reference: 1.LOA No.-74-W/1/1/WA/Misc./LKO dated 25.05.2016.
2. Agreement No. 47-A/CS/Dy. C.P./C-III/LKO dated 17.06.2016.
3. Your office letter NO. 74-W/3/2/Misc./WA/LKO/T-44/Omni/Arb dated 20.02.2024. Dear Sir, We received your above (Ref-3) letter, vide which we have been intimidated to submit copy of Annexure-XV for switching over our Arbitration Case according to the provision of Arbitration and Conciliation Act
2015. We are enclosing the same and request you to kindly proceed at your earliest. Yours Sincerely For M.V. Omni Projects (India) Limited Authorized Signatory Enclosure- Annexure XV ANNEXURE- XV Agreement towards Waiver under Section 12(5) and Section 31-A(5) of Arbitration and Conciliation(Amendment) Act We M/s M.V. Omni Projects ( India) Limited with reference to agreement no. 47-Acs/Dy. CE/C/III/LKO dated 17.06.2016 dated 17.06.2016 raised disputes as to the construction and operation of this Contract, or the respective rights and liabilities, withholding of certificate and demand arbitration in respect of following claims: List of claims:
┌─────────────────────────────────────────────────────────────────────────────────────────────────────┐ │ Sl. Claims Amount in Rs/. │ │ No. │ │ Page 9 of 27 │ │ Digitally Signed │ │ By:MAYANK │ ├─────────────────────────────────────────────────────────────────────────────────────────────────────┤ │ 1 Claim-A On account of outstanding amount Rs. 40,37,847.45/- │ │ (Last RA & Final │ │ Bill) │ └─────────────────────────────────────────────────────────────────────────────────────────────────────┘
18.3. Though Section 12(5) specifically mentions that the arbitrator should disclose his relationship with the parties, however, proviso to Section 12(5) mentions about waiver in writing. In the present proceedings, the claimant by express agreement in writing had waived the applicability of sub-section (5) of Section 12. Therefore, according to me, the claimant at the stage of Section 34 is bared from taking up a ground under Section 12(5) for challenging the award. ………………..
20. Subsequently, when the arbitration proceedings commenced, the claimant had an option to file an application before the Arbitral Tribunal under Section 16 read with Section 13(2) of the Arbitration Act. However, the claimant has not taken up any such steps as contemplated under Section 16 of the said Act. Section 16 of the Arbitration Act, envisages the jurisdiction of the Arbitral Tribunal wherein if a party has to take an objection about the jurisdiction of the Arbitral Tribunal, the same can be made before the Arbitral Tribunal, and the Arbitral Tribunal can decide the same. If the said application is allowed, the Arbitral Tribunal proceedings come to an end. However, if such an application is not allowed, the same can be taken as a ground along with the other grounds while challenging to the arbitral award, if it is against the said party. In the present proceeding, no such steps were taken up by the claimant, as contemplated under Section 13(2).
20.1. The Supreme Court in HRD Corpn. v. GAIL (India) Ltd.[7] has held that if the arbitrator fails to file disclosure in terms of Section 12(1) read with Fifth Schedule of the Arbitration and Conciliation Act, 1996, the remedy of the party in that event would be to apply under Section 14(2) of the Arbitration and Conciliation Act, 1996 to the court to decide about the termination of the mandate of the Arbitral Tribunal on that ground.
20.2. Under Section 16, the Arbitral Tribunal is empowered to rule on its own jurisdiction including ruling on any objection with respect to the existence or validity of arbitration agreement. Such plea shall be raised not later than the submission of the statement of defence. If such plea is rejected by the Arbitral Tribunal, it has to proceed with the arbitral proceedings and declare an award. If plea of jurisdiction is accepted by the Arbitral Tribunal, the respondent may file an appeal under Section 37. If plea of jurisdiction is not accepted, the respondent may challenge such ruling along with award under Section 34.
21. For the first time in the present proceedings which is filed under Section 34, the claimants have raised an issue about sub-section (5) of Section 12. According to me, as discussed in earlier paragraphs, the claimants at least had three occasions before challenging the award under Section 34, to raise the issue of arbitrator not been qualified/eligible to conduct the proceedings. The petitioner claimant chose not to take any such steps. Again, I would like to mention here that the claimants themselves had invoked arbitration clause, knowing fully well that as per Clause 64(3)(a)(i) the sole arbitrator would be a railway employee. Only after the award is passed, in the present proceedings such an issue has been raised by the claimant. According to me, the same is a complete afterthought, hence is rejected.”
26. The Bombay High Court, in similar arbitration clause, upheld the waiver given by the claimant therein. The said judgment is distinguishable as the petitioner therein challenge the jurisdiction of the Arbitrator at section 34 stage and did not file any application under section 11 seeking appointment of Arbitrator, section 14 seeking termination of the mandate of the Arbitrator or section 16 before the Arbitrator stating that the Arbitrator was ineligible. Hence, the High Court therein dismissed the petition. The same is not in the present case. Soon after the Arbitral Tribunal was constituted, the petitioner has filed the present petition seeking termination of mandate of the Arbitral Tribunal. Additionally, the AT also has asked the petitioner to submit waiver in writing in the 7th and 9th hearing dated 19.10.2024 and 02.12.2024 respectively which the petitioner has refused to give.
27. A Co-ordinate bench in M/s M.V. Omni Projects (India) Ltd. v. Union of India, through Dy. Chief Engineer/Const.II/Northern Railway, 2024:DHC:7874, in a similar arbitration clause, appointed the Sole Arbitrator and observed that the appointment procedure is invalid, any proceedings before the same are non-est. Also in Arb. P. 1715/2024 and connected matters, in a similar arbitration clause, this Court appointed Sole Arbitrator.
28. For the reasons noted above, the petition is allowed and the letter dated 23.02.2024 is no waiver in the eyes of law. Consequently, the Arbitral Tribunal appointed by the respondent is set aside.
29. Learned counsels for the petitioner and respondent are granted one week to agree to a name of a Sole Arbitrator or nominate their respective Arbitrators. In case, the parties are unable to nominate their arbitrator or agree to a Sole Arbitrator, this Court will be constrained to appoint the Sole Arbitrator/ Arbitral Tribunal.
30. List for further hearing on 22.05.2025.
JASMEET SINGH, J