UNION OF INDIA Vs PREMCO - DKSPL (JV) .
Bench: SHIVA KIRTI SINGH,R. BANUMATHI
Case number: C.A. No.-006179-006179 / 2016
Diary number: 28103 / 2014
Advocates: SHREEKANT N. TERDAL Vs
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.6179 OF 2016 (Arising out of SLP (C) No. 28851 of 2014)
Union of India & Anr. …..Appellants
Versus
Premco-DKSPL (JV) & Ors. .....Respondents
J U D G M E N T
SHIVA KIRTI SINGH, J.
1. The appellants have assailed the legality and correctness of
final order dated 25.02.2014 passed in Arbitration Petition No.14 of
2013 by an Hon’ble Judge of Gauhati High Court designated by the
Chief Justice of that Court to decide respondents’ applications
under Section 11 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as ‘the Act’). By the impugned order the
designated Judge allowed the application under Section 11 of the
Act and appointed a former Judge of that Court as the Arbitrator
after holding that the appellants had forfeited their right to appoint
railway officers as arbitrators in terms of clause 64(3)(a)(ii) of the
agreement.
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2. According to Ms. Kiran Suri, learned senior counsel for the
appellants the impugned order suffers from apparent error of fact
on account of misreading or non-reading of the relevant clause of
the Agreement, i.e., clause 64(3)(a)(ii) which requires the
contractor/respondent to make a written demand for arbitration
and permits 60 days’ time to the Railways from the date of receipt
of the demand, to send a panel of more than three names of eligible
gazetted railway officers so that the contractor may suggest to
General Manager at least two names out of that panel for
appointment of the contractor’s nominee. Such suggestion from
the contractor should come within 30 days from the dispatch of the
request by Railways. According to learned senior counsel, the
relevant clause though indicated in paragraph 4 of the impugned
order has been misread leading to an erroneous inference in the
following words :
“…. This Clause permits the respondents to nominate a railway officer, provided of course, the nomination is made within 30 days of receipt of the demand letter from the petitioner. But since there was no reaction from the railways side within the permissible 30 days and since in the meantime the contractor has approached the High Court under Section 11(6) of the Arbitration Act, having regard to the decision in Datar Switchgears Ltd. (supra) it is apparent that the respondents have forfeited their right to appoint a railway officer as the arbitrator.”
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3. It has been further contended on behalf of the appellants that
the law laid down in the case of Datar Switchgears Ltd. v. Tata
Finance Ltd. & Anr.1 has not been correctly appreciated by the
learned Judge because in that case failure to meet the demand to
appoint an arbitrator was apparent on account of expiry of the
notice period of 30 days indicated in the demand. Even then the
Court held that since the application was under Section 11(6)(a) of
the Act and since that Section does not prescribe any time limit
rather gives an unfettered discretion to appoint an arbitrator
without any time limit, such power will stand forfeited only after
the party making the demand has moved the Court under Section
11 and not on mere expiry of the notice period of 30 days. It is
appellants’ stand that in view of stipulations in the relevant clause
providing for arbitration, the respondent-contractor admittedly sent
a notice demanding arbitration on 12.06.2013 which was served on
the appellants on 14.06.2013 and hence it had to wait for 60 days
for receipt of a panel of more than three names. Thereafter the
contractor had to suggest two names for appointment of his
nominee arbitrator within 30 days. The cause of action for sending
a notice of 30 days or any reasonable period, in view of clear terms
in the Arbitration Agreement which has not been repudiated, can 1 (2000) 8 SCC 151
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arise only after 60 days. Hence according to learned senior counsel
for the appellants, the learned Judge erred in holding that the
appellants had forfeited their right to appoint arbitrators. Instead,
the finding should have been that the application under Section
11(6) of the Act was premature.
4. On behalf of appellants reliance has been placed upon
judgment of this Court by a three Judges Bench in the case of
Northern Railway Administration, Ministry of Railway v. Patel
Engineering Company Limited2 in support of the proposition that
in the appointment of arbitrator by court under Section 11(6), the
Chief Justice or the designated person shall have “due regard to the
two conditions in Section 11(8)(a) and (b) relating to qualifications
required for the arbitrator by the agreement of the parties; and
other considerations relevant to secure the appointment of an
independent and impartial arbitrator”. Hence, in any event
appointment of a non-technical person, a former judge as arbitrator
was unwarranted.
5. On behalf of respondent contractor the relevant facts have not
been disputed and hence on facts it is beyond any doubt that the
learned Judge has misread or omitted to read the relevant clause of
the agreement which allows 60 days’ time to the Railways to 2 (2008) 10 SCC 240
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respond to the demand of the contractor by sending a panel
containing more than three names out of which the contractor has
to suggest at least two names to the Railways which has to appoint
one out of them as the contractor’s nominee. The relevant dates
are also not in dispute. Since the notice for appointment of
arbitrators dated 12.06.2013 was served on the railways on
14.06.2013, the contractor had to respect the terms of the
agreement which was unrepudiated and to wait for a period of at
least 60 days before Section 11 application could have been filed.
Instead of waiting for 60 days the contractor/respondent preferred
such application prematurely on 23.07.2013. The Railways sent a
panel of 4 names to the respondent on 30.07.2013, well within 60
days limit.
6. In the aforesaid facts and circumstances it did not lie in the
mouth of the respondent contractor that the appellants had
committed a default and had forfeited their right to appoint
arbitrators as per terms of the agreement. The learned Judge failed
to read the relevant clause of the agreement properly and therefore
wrongly placed reliance upon judgment in the case of Datar
Switchgears (supra). In that case this Court had extracted the
relevant terms of agreement in paragraph 9 which showed that
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there was no stipulation of any time limit like that of 60 days in the
present case. The terms of the Agreement bind the parties unless
they have chosen to repudiate the same. Relevant terms, if
provided, will be material for deciding when the right of a party to
appoint the arbitrator will suffer forfeiture and when the other
party would be entitled to give notice and on failure, move
application under Section 11(6) of the Act. Such terms deserve
respect of the parties and attention of the Court.
7. In view of aforesaid discussions we find no option but to set
aside the impugned order under appeal. We order accordingly. In
case the respondent contractor is still desirous of pursuing its
claim through arbitration in terms of the agreement, it is given the
option to serve a fresh notice for arbitration within a month and on
receipt of the same the appellants/railways shall be at liberty to
send a panel of requisite number of names to the respondents
within 60 days of receipt of the notice so that Arbitral Tribunal is
constituted in terms of the Agreement. It goes without saying that
if the Railways default in sending the panel within the stipulated
time, the contractor will be at liberty to pursue its further remedies
as per provisions of the Act and law. The appeal is allowed in
aforesaid terms but without any order as to costs.
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………………………………..…….J. [SHIVA KIRTI SINGH]
………………………………….…..J. [R. BANUMATHI]
New Delhi. July 25, 2016.
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