Back
2008 Supreme(Cal) 855
ASHIM KUMAR BANERJEE AND TAPAS KUMAR GIRI, JJ.
Niraj Kumar Bohra
Versus
Union of India.
G.A. Nos. 2542 and 2617 of 2008 and A.P.O. Nos. 281 of 2007, 200 of 2004
Decided on : 22 - 8 - 2008.
Jayanta Kumar Mitra, Sr. Adv. Moloy Kumar Ghosh, Ambar Majumdar; Basudeb Mukherjee, for Appellant; P.K. Dutta, Sr. Adv. N.R. Mukherjee, for Respondent.
Appointment of an Arbitrator who is not qualified in terms of the arbitration agreement is invalid.
Headnote:
ARBITRATION - APPOINTMENT OF ARBITRATOR - QUALIFICATION - RAILWAY GAZETTED OFFICER - NON-COMPLIANCE - VALIDITY OF AWARD - Section 63.3(a)(iii) of the General Conditions of Contract and Specification Standards, 1999 stipulated that arbitration would be conducted only by a railway gazetted officer. The Hon'ble Chief Justice appointed a retired Judge as the Sole Arbitrator, who was not a railway gazetted officer. The Supreme Court held that the appointment of an Arbitrator who is not qualified in terms of the arbitration agreement would be a situation compelling the parties to resolve their disputes through arbitration although not agreed upon by them.
Fact of the Case:
The appellant entered into an agreement with the respondent railways for performing a job as mentioned in the work order. The agreement provided that the General Conditions of Contract and Specification Standards 1999 would apply, which contained an arbitration clause. The appellant asked the Railway Authorities to refer the disputes to arbitration, but the Railways did not act upon such request. The appellant approached the Hon'ble Chief Justice under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (the "said Act of 1996") to appoint an Arbitrator. The Hon'ble Chief Justice nominated a retired Judge of this Court as Sole Arbitrator. The Arbitrator entered upon reference. The Railways filed a counter statement wherein they took the plea that his appointment was not in terms of the contract. The Arbitrator rejected the plea and published an award in favor of the appellant. The Railways filed an application for setting aside of the award before the learned single Judge, who allowed the application and set aside the award on the ground that the appointment of the Arbitrator was erroneous.
Finding of the Court:
The Court held that the appointment of the Arbitrator in the instant case was dehors the agreement entered into by and between the parties and such appointment was invalid in the eye of law. As a consequence, the award was bad and was rightly set aside by the learned single Judge.
Issues: Whether the appointment of an Arbitrator who is not qualified in terms of the arbitration agreement is valid.
Ratio Decidendi: The Court relied on the Supreme Court decisions in Union of India v. Sohanlal Puglia (AIR 2004 SC 1034), A. Md. Yunus, (AIR 2004 SCW 4953) (supra) and M. P. Gupta (2005 AIR SCW 3389) (supra) to hold that the parties agreed to have arbitration only through railway gazetted officers and in case it was not possible they would not go for arbitration. The Hon'ble Chief Justice could not have appointed an Arbitrator who was not a railway gazetted officer.
Final Decision: The Court dismissed the application for review.
ASHIM KUMAR BANERJEE, J. :-
Being satisfied with the grounds mentioned in the application delay is condoned.
2. The review applicant entered into an agreement with the respondent railways for performing the job as mentioned in the work order. Such agreement provided that the General Conditions of Contract and Specification Standards 1999 would apply. The General Conditions contained an arbitration clause. Clause 63.3(a)(iii) stipulated as follows :-
"63.3(a)(iii). It is a terms of this contract that no person other than a gazetted railway officer should act an Arbitrator/Umpire and if for any reason, that is not possible, the matter is not to be referred to the arbitration at all."
3. As per the arbitration clause since the work value was more than rupees three lacs two Arbitrators were to be appointed, one to be nominated by the Contractor and other to be nominated by the Railways and the third Arbitrator being an umpire would be appointed by the two Arbitrators. It was also provided that all the three Arbitrators must be Railway Gazetted Officers. In terms of Clause 3(b) the Railway was to send a panel to the Contractor containing more than three names and the Contractor was entitled to suggest a panel of three persons out of the said list. The General Manager would then appoint one Arbitrator out of the said panel as Contractor's nominee and then appoint a second Arbitrator of equal status as Railway's nominee either from the said panel or from outside the said panel. In the instant case the appellant/contractor asked the Railway Authorities to refer the disputes to arbitration. Despite repeated reminders Railway did not act upon such request. The review applicant approached the Hon'ble Chief Justice under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "said Act of 1996") to appoint an Arbitrator. The Hon'ble Chief Justice nominated a retired Judge of this Court as Sole Arbitrator. The Arbitrator entered upon reference. The Railways filed counter statement wherein they took the plea that his appointment was not in terms of the contract. It was the case of the applicant that the Railways did not press such plea till 44th sitting and allowed the Arbitrator to go into the dispute. At the 44th sitting Railways insisted that such plea must be decided by the Arbitrator under Section 16 of the said Act of 1996. The Arbitrator at the 48th meeting decided such preliminary issue and rejected the same. Ultimately the Arbitrator published an award in favour of the appellant. The Railways filed an application for setting aside of the award before the learned single Judge on the grounds mentioned in the said application. The learned single Judge by judgment and order dated May 17, 2007 allowed the said application and set aside the award principally on the ground that in view of the non-obstante clause being clause 63.3(a)(iii) appointment of the Arbitrator was erroneous and the award on the said ground was liable to be set aside. His Lordship relied on the three Apex Court decisions which are as follows :-
(i) 2000, Volume-II, Arbitration Law Reporter, Page 2 (SC) : (2000 AIR SCW 4953) (A. Mohammad Yunus (Dead) by L.Rs. v. Food Corporation of India.
(ii) 2003, Volume-III, Arbitration Law Reporter, Page 557 (SC) : (AIR 2004 SC 1034) (Union of India v. Sohan Lal Puglia).
(iii) 2004, Volume-X, Supreme Court Cases, Page 504 : (2005 AIR SCW 3389) (Union of India v. M. P. Gupta).
4. His Lordship also rejected the plea of waiver taken by the applicant under Section 4 of the said Act of 1996 by holding that once the Arbitrator had accepted the said objection and dealt with the same on merit Section 4 would have no application.
5. Being aggrieved and dissatisfied with the judgment and order of the learned single Judge the applicant preferred the instant appeal. This Court initially directed Paper Book to be filed. Despite such direction being given the appellant did not file any Paper Book. The appe
