IMPORTANT POINTS
Appointment of arbitrator by High Court in contravention of terms of contract is not justified.
Merely because the arbitrators in panel are the retired employees who have worked in the Railways, it does not make them ineligible to act as the arbitrators in terms of section 12(5).
When power of General Manager to appoint arbitrator gets counter balanced by equal power to respondent to appoint arbitrator, the General Manager cannot be held incompetent to appoint arbitrators because he himself is ineligible to be appointed an arbitrator in terms of section 12(5).

JUDGMENT :

R. BANUMATHI, J.

Leave granted.

2. These appeals have been preferred against the impugned orders dated 03.01.2019 and 29.03.2019 passed by the High Court of Judicature at Allahabad in Arbitration Application No.151 of 2018 in and by which the High Court rejected the contention of the appellant that the arbitrator is to be appointed as per General Conditions 64 (3)(a)(ii) and 64 (3)(b) of the Contract and appointed Shri Justice Rajesh Dayal Khare as the sole arbitrator for resolving the dispute between the parties.

3. The appellant awarded work contract of Rs.165,67,98,570/-to the respondent-Company by an agreement dated 20.09.2010 which contains the arbitration clause. Subsequently, after coming into force of Arbitration and Conciliation (Amendment) Act, 2015 (w.e.f. 23.10.2015), the Government of India, Ministry of Railways made a modification to Clause 64 of the General Conditions of Contract and issued a notification dated 16.11.2016 for implementation of modification. The modified Clause 64(3)(a)(ii) (where applicability of Section 12(5) has been waived off) inter alia provided that in cases where the total value of all claims exceeds Rs. 1 crore, the Arbitral Tribunal shall consist of a panel of three gazetted Railway Officers not below JA (Junior Administrative) Grade or two Railway Gazetted Officers not below JA Grade and a retired Railway Officer, retired not below the rank of Senior Administrative (SA) Grade officer as arbitrators. The procedure for constitution of the Arbitral Tribunal is provided thereon. Clause 64(3)(b) deals with the appointment of arbitrator where applicability of Section 12(5) of the Arbitration and Conciliation Act has not been waived off. Clause 64(3)(b) stipulates that the Arbitral Tribunal shall consist of a panel of three retired railway officers not below the rank of Senior Administrative Officer as the arbitrators as per the procedure indicated thereon.

4. Since the respondent did not complete the work under the contract within the prescribed period, on 18.10.2017, the appellant issued “Seven days” notice under Clause 62 of the General Conditions of Contract to the respondent. Thereafter on 27.10.2017, the appellant issued a “48 hours’ notice” to the respondent calling upon the respondent to make good the progress of work, failing which the contract will stand terminated. Since the respondent did not make adequate progress in the work, on 01.11.2017, the contract was terminated as per Clause 62 of the General Conditions of the Contract. The respondent was also informed that their security deposit has been forfeited and the performance guarantee submitted by it shall also be encashed.

5. The respondent filed a Petition No.760 of 2017 before the High Court challenging the termination of the contract which came to be dismissed by the High Court vide order dated 28.11.2017 and the High Court directed the respondent to avail the alternative remedy by invoking arbitration clause. The respondent vide its letter dated 27.07.2018 requested the appellant for appointment of an Arbitral Tribunal for resolving the disputes between the parties and settle the claims value of Rs.73.35 crores. In reply dated 24.09.2018, the appellant sent a list of four serving Railway Electrification Officers of JA Grade to act as arbitrators. The respondent was asked to select any two and communicate to the appellant for formation of the arbitration tribunal panel. Vide letter dated 25.10.2018, the respondent was sent a list of another panel comprising four retired Railway officers. In terms of Clause 63(3)(b) of Railway’s General Conditions of Contract, the respondent was asked to select any two from this list and communicate them to the appellant within thirty days for constitution of the arbitration tribunal.

6. The respondent did not send a reply to the above letters of the appellant; but filed Arbitration Petition No. 151 of 2018 before High Court under Section 11(6) of the Arbitration and Conciliation Act seek