Judgment

R. V. RAVEENDRAN, J.

The appellant challenges the order of the Delhi High Court dated 27.03.2006 appointing a retired judge of the High Court as sole arbitrator to decide the disputes arising in respect of a construction contract between the Northern Railway (appellant) and the respondent.

The appellant contends the appointment of arbitrators should be only in accordance with Clause 64 of the General Terms and Conditions of Contract which requires two serving Gazetted Railway Officers of equal status being appointed as arbitrators, one by the contractor from a panel made available by the General Manager of Northern Railway and the other by the Northern Railway, and the two arbitrators so appointed, in turn appointing an umpire.

It is true that the arbitral tribunal should be constituted in the manner laid down in the arbitration agreement. Provisions for arbitration in contracts entered by governments, statutory authorities and government companies, invariably require that the arbitrators should be their own serving officers. Such a provision has to be given effect, subject to requirements of independence and impartiality. But there can be exceptions and this case which has a chequered history, falls under such exceptions.

Let us refer to the facts briefly :

The respondent made a request for arbitration in the year 1999. As the appellant failed to take necessary steps as mandated by Clause 64, the respondent filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 ('the Act' for short) in AA No. 202/2000. In pursuance of the directions issued on 11.11.2002 by the designate of the Chief Justice of the Delhi High Court, an arbitral tribunal was constituted in terms of Clause 64, consisting of Shri A. K. Mishra (Chief Engineer/TPS) nominated by the contractor, Shri S. P. Virdi (Dy. F.A. & CEO) nominated by the appellant, and Shri H. K. Jaggi (Chief Bridge Engineer) as the umpire. But even before the proceedings could commence before the arbitral tribunal, Shri A. K. Mishra, one of the arbitrators, was transferred and consequently he tendered his resignation in May 2004. As the appellant failed to provide a fresh panel to enable the respondent to make a fresh nomination, the respondent again approached the High Court by filing AA No. 240/2004. A fresh panel was made available thereafter from which the respondent nominated Shri Ashok Gupta as its arbitrator. Hardly after one sitting of the arbitral tribunal, Shri Ashok Gupta was also transferred and he tendered his resignation on 21.07.2005. As appellant again failed to take steps for filling the vacancy, the respondent approached the court again by filing IA No. 6511/2005 in AA No. 240/2004. In pursuance of an order dated 24.08.2005 passed by the High Court, again a panel was made available and the respondent made its choice on 09.09.2005. As no steps were taken in pursuance of it by the appellant, the respondent sent a reminder on 14.10.2005. There was no response. In this background, the respondent again approached the High Court on 10.11.2005 in Arb. Petn. No. 256/2005 for appointment of an independent sole arbitrator. During the pendency of the said petition, the General Manager of Northern Railway appointed Sri Ved Pal as the contractor's nominee arbitrator on 22.11.2005.

The High Court was of the view that no useful purpose will be served by again reconstituting a three member arbitral tribunal in accordance with Clause 64. The High Court found that the matter has been pending from 1999 when the respondent first made the request for reference to arbitration and that the cumbersome process of constituting an arbitral tribunal in terms of the arbitration agreement and the delays on the part of Railway in complying with the provisions of the arbitration agreement, led to the arbitration becoming virtually a non-starter. Therefore, the High Court allowed the petition on 27.03.2006 and appointed Justice Jaspal Singh, a retired judge of the Delh