Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2021 Supreme(Raj) 145

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR
DINESH MEHTA, J.
Samaritan Consultancy And Tech. Services - Petitioner
Versus
Union Of India, Through The Secretary To The Govt. Of India Ministry Of Railways, Rail Bhawan New Delhi – Respondents
S.B. Arbitration Application No. 15/2018
Decided on : 06-09-2021

Advocates:
Advocate Appeared:
For the Petitioner: Mr. Hardik Gautam
For the Respondent: Mr. Deepak Vyas

Point of Law: Scope of judicial review by court while deciding an application under Sections 8 or 11 of Arbitration Act, post amendments by Act 3 of 2016 (with retrospective effect from 23-10-2015) and even post amendments vide Act 33 of 2019 (with effect from 9-8-2019), is no longer applicable - General rule and principle, in view of legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and principle of severability and competence-competence, is that Arbitral Tribunal is preferred first authority to determine and decide all questions of nonarbitrability - Court has been conferred power of “second look” on aspects of non-arbitrability post award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of Arbitration Act.

Headnote:
Arbitration & Conciliation Act, 1996 - Section 8, 11, 11(4), 11(5), 11(6), 11(6A), 34(2)(a) (i), (ii) or (iv), 34(2)(b) (i) - Arbitration and Conciliation Amendment Act, 2019 - Section 1, 3(v), 4, 11 and 15 - Indian Railway Arbitration Rules - Settlement of Disputes - Principle of severability - Whether word “existence” would include weeding out arbitration clauses in agreements which indicate that subject-matter is incapable of arbitration - Whether other party committed breach cannot be decided by party alleging breach - Whether he committed breach or other party committed breach - Whether during progress of work or after its completion or after determination of contract are required to be intimated by Contractor to General Manager, who within 120 days of receipt of representation is supposed to notify all matters, subject of course to exception that has been carved out in clause 63 to effect that matters in which action/decision has been made in clauses 8, 18, 22(5), 39, 43(2), 45(a), 55, 55- A(5), 57, 57A, 61(1), 61(2) and 62(1) to (xiii)(B) of Standard General Conditions of Contract would be deemed as ‘excepted matters’ and decisions of Railway authorities thereon will be final and binding - Whether a dispute is arbitrable or not is required to be decided by arbitrator
Findings of the court: Sub-section (6A) reproduced hereinabove unequivocally suggests that High Court while considering an application under section 11 of Act of 1996 is required to confine itself to examination of existence of an arbitration agreement - A contract cannot provide that one party will be arbiter to decide he committed breach or other party committed breach - In event of any dispute or difference between parties hereto as to construction or operation of this contract, or respective rights and liabilities of parties on any matter in question, dispute or difference on any account or as to withholding by Railway of any certificate to which contractor may claim to be entitled to, or if Railway fails to make a decision within 120 days, then and in any such case, but except in any of “excepted matters” referred to in Clause 63 of these Conditions, contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters shall demand in writing that dispute or difference be referred to arbitration -
Result: Application rejected.

JUDGMENT :

1. The instant application under section 11 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as “the Act of 1996”) has been filed by the applicant inter-alia praying that an Arbitrator be appointed in terms of Standard General Conditions of Contract for resolution of the dispute between the applicant and the respondent – Railway.

2. Shorn of unnecessary details, the facts are that the applicant submitted his tender/offer dated 27.04.2016 with respect to NIT No.3 of 15-16 for the work of “Design, Supply, Installation, Testing & Commissioning of (VVVF type) Dyna drive for load sharing test of AC Coach and testing of 25 kW Alternator in New AC POH shop at Railway Carriage workshop Jodhpur.”

3. An agreement dated 29.07.2016 was executed between the applicant and the Union of India through respondent No.2 – General Manager, North Western Railway, Jaipur. The contract aforesaid was governed by Indian Railways Standard General Conditions of Contract issued in July, 2014.

4. Finding that the applicant’s progress in the work was not up to the mark, the respondent No.3 issued various letters/notices to the applicant to accelerate the work. Regardless of those letters/notices, when satisfactory progress did not take place, the respondent No.3 issued notice dated 31.01.2018 requiring the applicant – Contractor to show the progress in work and cautioned that on failure the contract in question would be rescinded and the work would be carried out at applicant’s risk. It was also notified that applicant’s security deposit would be forfeited and performance guarantee be encashed.

5. The respondents rescinded the contract in question vide order dated 12.02.2018, citing applicant’s failure to show requisite progress.

6. On determination of the contract, the applicant through his counsel served a notice dated 20.04.2018 inter alia stating that the applicant has completed his substantial work due to which 70% of the contract amount had been disbursed and further that the termination of the contract was one sided. While referring to the General Conditions of the Contract and section 11 of the Arbitration Act, 1996, a request was made to appoint an Arbitrator.

7. The applicant’s such notice was responded to by the respondent No.3 vide letter dated 28.05.2018. In the letter aforesaid, the respondent Railways highlighted the defects and deficiencies in the work performed by the applicant. It was further indicated that the request for arbitration is to be decided by the Zonal Headquarters with the suggestion to the applicant to contact North Western Railways Headquarters.

8. Instant application under section 11 of the Act of 1996 has been preferred stating that the applicant is not agreeable to the appointment of the Arbitrator as per the Standard General Conditions of the Contract and thus, a prayer has been made to appoint an independent Arbitrator.

9. A reply to the application had been filed on 27.02.2019 stating that the applicant has failed to follow the prescribed procedure for appointment of Arbitrator. Thereafter, an additional reply came to be filed by the Railways on 02.09.2019 highlighting that the dispute sought to be adjudicated by the applicant by way of arbitration is not arbitrable. It has been contended by the respondents that the contract in question has been determined in terms of clause 62 of the Standard General Conditions of the Contract, which contingency has been specifically kept out of the purview of the arbitration as per clause 63 of the General Conditions of the Contract.

10. Mr. Gautam, learned counsel for the applicant submitted that as a consequence of pre-mature termination of the contract, the applicant has been put to grave financial loss, which needs to be adjudicated by dispute resolution mechanism as stipulated in clause 64 of the Standard General Conditions of the Contract. While pointing out that clause 64.(1) incorporates an arbitration clause, he implored that an independent arbitrator be

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2021 Supreme(Raj) 145

Cases Referred (8)