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IN THE HIGH COURT OF JUDICATURE AT MADRAS
R. SURESH KUMAR, J.
RPN Engineers Chennai Private Limited Rep. by its Managing Director, Chennai - Appellant
Versus
The Union of India Rep. by the General Manager, Southern Railway, Park Town, Chennai & Others - Respondent
Original Petition No. 766 of 2018
Decided on : 19-03-2019
Arbitration Agreement - Delay in Arbitration Proceedings - Arbitration and Conciliation Act, 1996, Section 15(2)
Fact of the Case:
The petitioner, a Private Limited Company, entered into an agreement with the first respondent Department for a construction project. The petitioner faced delays and hindrances in completing the work, leading to the termination of the contract by the respondent Department. The petitioner requested the appointment of an Arbitrator to adjudicate the dispute, but the Arbitral Tribunal, consisting of respondents 3 to 5, failed to make progress in the arbitration proceedings. The petitioner approached the court seeking to terminate the mandate of the Tribunal and appoint an independent Arbitrator.
Finding of the Court:
The Court found that there was considerable delay in the arbitration proceedings, with inexplicable gaps of months and even more than a year between sittings. The Court also noted that there had been direct communication between the Tribunal and the respondent Department without informing the petitioner, indicating a lack of neutrality. The Court terminated the mandate of the Arbitral Tribunal and directed the first respondent to reconstitute a fresh Arbitral Tribunal in accordance with the agreement between the parties.
Issues: Delay in arbitration proceedings, lack of neutrality in communication between the Tribunal and the respondent Department
Ratio Decidendi: The Court terminated the mandate of the Arbitral Tribunal due to considerable delay and lack of neutrality, and directed the reconstitution of a fresh Arbitral Tribunal in accordance with the agreement between the parties.
Final Decision: The Court terminated the mandate of the Arbitral Tribunal and directed the first respondent to reconstitute a fresh Arbitral Tribunal in accordance with the agreement between the parties.
1. This Original Petition has been filed seeking to terminate the mandate of the present Tribunal (comprising of the 3rd, 4th and 5th Respondents) and appoint an independent Arbitrator to arbitrate all the disputes and claims arising out of the Agreement No. MTP / Civil / 476 /13(CN), dated 20.02.2013.
2. The short facts of the case are as follows :
(i) The petitioner is a Private Limited Company having registered office at Chennai. The first respondent Department had invited tenders to do the work called "Royapuram-BG AC Satellite Loco shed to accommodate 50 to 100 Locos-proposed extension of medium and light lifting bay, Track work, GLR 1,00,000 litres capacity, Overhead Tank 50,000 litres capacity, road work, compound wall and other miscellaneous works.
(ii) The petitioner became the successful bidder, therefore a letter of acceptance was given by the first respondent Department on 03.10.2012. Pursuant to which, an agreement has been reached and it has been executed between the petitioner and the first respondent Department, dated 20.02.2013, which is herein after called as "Arbitration Agreement".
(iii) According to the contract, the time limit fixed for completion of the work was from 03.10.2012 to 02.10.2013, i.e., one year period. The value of the contract is for Rs.9,16,46,536/-.
(iv) In response to the contract awarded to the petitioner, it had started working with the said work and according to the petitioner, even though best efforts had been taken to complete the work in time, the progress of the work was frustrated due to various factors that can only be attributed to the respondent and not to the petitioner.
(v) According to the petitioner, out of the total contract value of Rs.9.16 crores, it was able to complete the work valued at Rs.4.59 crores due to various hindrances and defaults allegedly on the part of the respondent. The contract was extended only for just two months up to 02.12.2013 and thereafter the respondent Department terminated the contract on 04.12.2013.
(vi) In view of the termination of the contract, the petitioner vide his request, dated 29.10.2014, requested the first respondent to appoint an Arbitrator to adjudicate the dispute arising out of the said contract. Pursuant to the said request, the first respondent vide proceedings, dated 02.07.2015, appointed an Arbitral Tribunal consisting of Respondents 3 to 5, where the respondent 3 is the Presiding Arbitrator and Respondents 4 and 5 are the other Arbitrators. Thereafter on 17.07.2015, the terms of reference has been issued by the first respondent, which, according to the petitioner, is a truncated terms of reference.
(vii) The reason for such claim on the side of the petitioner that it is a truncated reference is that, a number of legitimate claims on the side of the petitioner had been left out in the said reference. It is to be noted that, by communication, dated 17.07.2015, while issuing the terms of reference, the first respondent had also requested the Arbitrators to expeditiously adjudicate the dispute and to pass an award within six months from 17.07.2015.
(viii) Since the terms of reference given by the first respondent does not contain all the claims of the petitioner, the petitioner on 30.11.2015 requested the first respondent to amend the terms of reference. Pursuant to which, the first respondent on 06.01.2016 issued the amended terms of reference to the Arbitrators and requested the Arbitrators to expedite the adjudication and to pass Award.
(ix) The Arbitral Tribunal had its preliminary sitting on 13.10.2015 and on 25.01.2016, the Tribunal directed both parties to file their respective pleadings with supporting documents. Thereafter, according to the petitioner, the Tribunal had second, third and fourth sitting on 24.02.2016, 19.04.2016 and 20.06.2016. Thereafter since no progress on the expected line had been made to complete the adjudication by the Tribunal, the petitioner seems to have sent repeated communications and lette
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