The court upheld the validity of the waiver of objections regarding arbitrator eligibility and affirmed that it does not review arbitral awards on merits, focusing only on public policy and patent illegality grounds.

JUDGMENT :

Rajesh S. Patil, J

1. The present petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short ‘the Arbitration Act’), by the original claimant seeking to quash and set aside the arbitral award dated 4^th February 2022, passed by the sole arbitrator.

FACTS

2. On 5^th May 2016, a tender was published by the Divisional Railway Manager (Mechanical), Central Railway, Mumbai (for short ‘Railways’) towards the work of Pest and Rodent Control, in railway passenger coaches maintained at CSTM, WB, MZN, DRT and LDT, Coaching Depots and Rodent Control in Coaching Depots yard and premises. The petitioner participated in the tender process and on 7^th June 2016, was declared as the successful bidder. Accordingly, the contract work of the said tender was awarded to the petitioner, for an amount of Rs.1,96,32,255/-. The contract period was for three years i.e. from 30^th November 2016 to 29^th November 2019.

3. Meanwhile, Government issued Notification on 19^th January 2017, by which the rates of minimum wages payable to labourers were increased. Additionally, the railways issued a Joint Procedure Order (for short ‘JPO’) dated 20^th December 2017, wherein all the contractors were permitted to foreclose their contracts on the condition that the contractors would continue the ongoing work till the finalisation of a new contract, and the minimum wages would be paid to the labourer till the foreclosure of the contract and no dues financial or otherwise shall be staked by the contractor.

4. The petitioner vide their letter dated February 2018 and a further letter dated January 2019 communicated their intention to withdraw from the contracted work as per the terms of the JPO. The railways accordingly on 8^th January 2019 issued a new contract for the balance work and foreclosed the contract with the petitioner.

5. The petitioner claimed an additional manpower expense of Rs.20,91,522/- along with interest from the railways. As the said amount was disputed, the petitioner, on 7^th December 2020, issued a legal notice to the railways and invoked Arbitration Clause, thereby calling upon them to pay the differential wages of Rs.20,91,522/- along with interest.

6. Subsequently on 18^th December 2020 the petitioner signed and stamped the “Waiver off agreement”, under Section 12(5) of Arbitration Act. The Railways accordingly proceeded further and on 28^th April 2021 appointed Shri D. K. Tripathi, Deputy Mechanical Engineer (D), Central Railway, Mumbai, CSMT, to act as a ‘Sole Arbitrator”.

7. The petitioner/claimant, on 8^th June 2021, filed their Statement of Claim along with all the relevant annexures with the sole Arbitrator. The Railways being the respondents filed their reply to the statement of claim before the sole Arbitrator.

8. On 1^st October 2021, the Railways issued Work Completion Certificate, to the petitioner in respect of the contracted work, mentioning therein that the work completed on 10^th January 2019, amounting to Rs.1,29,74,966/-.

9. The proceedings before the Arbitral Tribunal, consisting of Sole Arbitrator went ahead and after hearing both the sides the Sole Arbitrator, on 4^th February 2022 passed an Award, thereby dismissing the claim of the petitioner.

10. Being dissatisfied with the dismissal of their claim by impugned Award dated 4^th February 2022 the petitioner/claimant have challenged the same by way of present Arbitration Petition, filed under Section 34 of the Arbitration Act.

SUBMISSIONS

11. Mr. Shekhar Jagtap appeared on behalf of the petitioner/claimant and made his submissions.

(i) He submitted that the sole Arbitrator was appointed by the Railways, therefore, under the provisions of Section 12 (5) read with Schedule VII of the Arbitration Act, the award passed by the Sole Arbitrator who was himself de jure ineligible to be an Arbitrator, hence, the Award is void ab initio.

(ii) The Waiver mentioned in the proviso of Section 12(5) of the Arbitration Act is required to be exercised in true letter and spirit