K. Narayana Raju, Contractor Vs. Union of India (Uoi) Rep. by Its General Manager, South Central Railway and ors. - Court Judgment

Excerpt:
- cantonments act[c.a. no. 41/2006]. section 346 & cantonment fund (servants rules, 1937, rules 13, 14 & 15: [h.l. gokhale, ag. cj, p.v. hardas, naresh h. patil, r.m. borde & r.m. savant, jj] jurisdiction of school tribunal constituted under maharashtra employees of private schools (conditions of service) regulations act, (3 of 1978) held, school run by the cantonment board is a primary school and it is not a school recognised by any such board comparable to the divisional board or the state board. the school tribunal constituted under section 8 of the maharashtra act cannot entertain appeals filed under section 9 by the employees working in schools which are established and administered by the cantonment board. teacher employed in the school run by cantonment board being covered under.....ordert. ch. surya rao, j.1. applicant seeks appointment of an independent arbitrator under section 11, sub-sections (5) and (6) of the arbitration and conciliation act, 1996.2. pursuant to the tender notice, dated 19-7-1999, issued by the respondent for construction of pile foundations, r.c.c. columns and superstructure between chirala and stuartpuram railway station, vijayawada, gudur section, the petitioner submitted his negotiated offer on 11-1-2000 and respondents accepted the same on 19-1-2000. as per the terms of the agreement, the work should be completed within 12 months from the date of acceptance letter i.e., on or before 18-1-2001. initially value of the work was rs. 1,54,62,330/- the parties entered into an agreement bearing n0.2/cao/c/sc/2000 on 7-2-2000. the petitioner.....

Judgment:
ORDER

T. Ch. Surya Rao, J.

1. Applicant seeks appointment of an independent arbitrator under Section 11, Sub-sections (5) and (6) of the Arbitration and Conciliation Act, 1996.

2. Pursuant to the tender notice, dated 19-7-1999, issued by the respondent for construction of pile foundations, R.C.C. columns and superstructure between Chirala and Stuartpuram railway station, Vijayawada, Gudur section, the petitioner submitted his negotiated offer on 11-1-2000 and respondents accepted the same on 19-1-2000. As per the terms of the agreement, the work should be completed within 12 months from the date of acceptance letter i.e., on or before 18-1-2001. Initially value of the work was Rs. 1,54,62,330/- The parties entered into an agreement bearing N0.2/CAO/C/SC/2000 on 7-2-2000. The petitioner deposited an amount of Rs. 53,358/-towards EMD out of three crores to be deposited and requested the respondents to recover the balance amounts from his running bills and accordingly they recovered an amount of Rs. 2,46,642/-. The quantities mentioned in the tender schedule are only approximate and they are liable to be varied up to 25% beyond the agreement at the time of actual execution of the work. Due to improper planning of the respondents, they could not hand over the site and could not obtain permission from the R & B Department of Government of A.P., on account of which the work could not be progressed as planned. Contrary to the terms of the agreement, the respondents directed the petitioner to test drive the pile foundations and further directed to stop the work until a decision was taken. While the work was in progress, the site engineer asked the petitioner to stop the work until further instructions. On account of the stoppage of the work, the petitioner incurred an amount of Rs. 50,000/- per day for the establishment besides that he had to incur idling charges, therefore, the petitioner requested the respondents to extend the currency of contract upto 31-3-2002 on the condition that the respondents shall hand over the site after duly obtaining permission from R&B; Department and arrange payment as demanded in his letter dated 23-10-2001. The respondents extended currency of the agreement up to 31 -3-2002, but no subsidiary agreement was entered into. Therefore, the agreement came to an end with the efflux of time on 30-6-2001. The applicant, therefore, raised certain disputes on 5-12-2001 and made claims on 5-4-2002. Eventually he requested the respondents to refer the matter to arbitration. The respondents issued a seven days notice on 6-2-2002 followed by forty eight hours notice on 18-2-2002 and thereafter terminated the contract. The competent authority in response to the request of the petitioner dated 5-4-2002 sent a panel of arbitrators on 26-11-2002 to enable the petitioner to choose his nominee. As one of the officers in the panel was not available in India, the petitioner requested third respondent to furnish him a fresh panel of arbitrators on 23-12-2002. When the respondent furnished the fresh panel, the petitioner conveyed his nominee and accordingly the competent authority constituted arbitral tribunal on 24-4-2003.

3. The tribunal asked the parties to file the respective claim statements along with necessary documents by 13-10-2003. The petitioner thus submitted his claim statements and the respondents too. The petitioner thereafter filed his rejoinder on 11-12-2003. However, as the tribunal did not proceed with the settlement, despite the request of the petitioner to proceed with the matter on 29-6-2004, the petitioner once again requested the tribunal to proceed with the matter on 11-8-2004. When the petitioner made discrete enquiries for the delay he came to know that one of the arbitrators was not interested to proceed with the matter, since huge amounts were due to him. Since the tribunal constituted was not proceeding with the adjudicating process, the petitioner requested the first respondent to reconstitute the tribunal with a fresh panel of arbitrators, in terms of Clause 64 (iii) C. However, the respondents failed to constitute a new tribunal. Hence, the petition.

4. The case of the respondents 1 to 3 is that the petitioner could not complete the work within the stipulated time and requested for extension of time. At his request time was extended after 30-6-2001 without penalty. Even then, the petitioner could not complete the work. A slow progress notice was issued to the petitioner on 20-12-2001. Again he requested for extension of time and the same was extended up to 31 -3-2002 without penalty for the second time. However, he could not complete the work even in the second extended period and failed to sign the Sub-agreement for second extension of time. He was issued seven days notice and eventually the contract was terminated by means of letter dated 3-6-2002. At the request of the petitioner the General Manager constituted arbitral tribunal. The tribunal entered into the reference on 2-9-2003 and started functioning by asking the parties to submit their claim statements and counter to the claim statements. The tribunal thereafter issued notice dated 24-9-2004 to the petitioner and the respondent fixing the first hearing on 8-10-2004 and also directed the parties to deposit a sum of Rs. 3,500/- each. Since the tribunal started functioning even before the filing of the present application, it is not maintainable. The tribunal issued another notice dated 24-9-2004 to the petitioner and the respondents fixing date of hearing on 8-10-2004 extending the time to deposit the amount of Rs. 3,500/-. Though the respondents attended the meeting, the petitioner failed to appear. One more notice was issued by the Presiding Arbitrator on 8-10-2004 to the parties fixing the date of hearing on 9-11-2004. However, there was no response from the petitioner. Another notice was also issued on 11-10-2004 fixing the date of hearing on 9-11-2004. It appears, the petitioner had not appeared before the tribunal intentionally with a view to get an outsider's appointment as an arbitrator.

5. The arbitrators-respondents in counter mentioned inter alia that the tribunal has entered reference on 2-9-2003 and started functioning and that the party submitted his claim statements and the petitioner even submitted his rejoinder on 11-12-2003. The tribunal had taken all steps for conducting the proceedings and issued notices to the parties, but the petitioner failed to appear before the tribunal and failed to deposit the requisite fees. For the default on the part of the petitioner the proceedings could not be held.

6. From the above pleadings it is obvious that there has been a dispute in between the parties inter se which is got to be resolved. Admittedly, Clauses 63 and 64 of the General Conditions of the Contract govern the parties. As per the said Clauses, the dispute shall be resolved by means of arbitration. The Clauses, inter alia, envisage the procedure for appointment of arbitrators and dissolution of the dispute. When the petitioner invoked the said Clauses, the competent authority did constitute a tribunal consisting of three arbitrators, out of which one was the nominee of the petitioner himself. While it was the case of the petitioner that the tribunal did not proceed with the process of adjudication and there had been delay, the petitioner requested the competent authority to constitute a fresh tribunal, the respondents failed to do so; it was the case of the respondents that on account of the default on the part of the petitioner himself the tribunal could not proceed with the hearing. It is the case of the respondents-arbitrators too that a default was on the part of the petitioner and it was intentional.

7. Be that as it may, it is now the contention of the learned Counsel appearing for the respondents that the present application is not maintainable inasmuch as the petitioner cannot seek the appointment of an arbitrator without seeking the cancellation of the arbitral tribunal constituted for the purpose of dissolution of the dispute. That appears to be the core contention on the side of the respondents. It is apt, therefore, at this stage to look at the provision germane in the context for consideration, for brevity and better understanding of the matter. Section 11, Sub-section (6) reads as under:

(6) Where, under an appointment procedure agreed upon by the parties.-

(a) a party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

Section 14, which is also apt, reads as under: '14. Failure or impossibility to act:

(1) The mandate of an arbitrator shall terminate if,-

(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and

(b) he withdraws from his office or the parties agree to the termination of his mandate.

(2) If a controversy remains concerning any of the grounds referred to in Clause (a) of Sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.

(3) If, under this section or subsection (3) of Section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or subsection (3) of Section 12.

8. Section 14, clearly envisages the termination of arbitration when the arbitrators are unable to perform their functions or the arbitrators withdraw from their office or when the parties agree to terminate the mandate as arbitrators. Now under Sub-section (6) of Section 11, an arbitrator can be appointed where as per the agreed procedure the party fails to act in appointment of an arbitrator or where the parties or appointed arbitrators failed to reach an agreement contemplated under the procedure or where the arbitrators failed to perform any function entrusted to. them under that procedure. Having regard to Sub-section (6) of Clause (c) of Section 11 and Section 14 of the Act, it is the contention of the learned Counsel for the respondents that unless the tribunal constituted earlier is terminated, the petitioner cannot seek appointment of a new arbitrator. To buttress the said contention the learned Counsel seeks to place reliance upon the judgment of the Delhi High Court in Haryana Telecom Ltd. v. Union of lndia 2003(1) RAJ 63 (Del.). That was a case where the respondents appointed one K.L. Jain G.M. (Development) as arbitrator initially. Since the said K.L. Jain expressed his unwillingness to act as an arbitrator, one, Ram Kumar G.M. (A&P;) was appointed under a latter dated 26-11-2000. The arbitrator asked the petitioner to file claims and pursuant thereto the petitioner submitted claims on 27-10-2000. On the premise that the arbitrator did not hold even a single hearing after the filing of claims the petitioner by his letter dated 14-2-2001 requested the arbitrator to proceed in the matter. However, the arbitrator was not interested to continue. So, by the letter dated 23-3-2001 the petitioner requested the Director General, Department of Telecom to appoint another person in the place of Ram Kumar. Since his request was not acceded to, the petitioner filed an application before the Chief Justice of the Delhi High Court. The respondent's case was that one R.K. Chary was appointed on 4-10-2001 in the place of Ram Kumar, the application became infractuous. Under such circumstances, it was held that the provisions of Sections 11, 5 and 6 would not attract as admittedly Ram Kumar was in a position as arbitrator by the date of the notice dated 23-3-2001 whereunder the petitioner demanded for the appointment of a fresh arbitration. It was also further observed by the Court that even when Ram Kumar or R.K. Chary who has been appointed in the place of Ram Kumar failed to act without undue delay the remedy open to the petitioner was to file petition under Section 14(1)(a) of the Act for his removal.

9. Let us at this stage consider the relevant provisions of the Act under which when the appointment of an arbitrator can be assailed and when an arbitrator appointed will seized (sic. cease) to be an arbitrator and when the appointment can be terminated. Under Section 12 of the Act a person who is appointed as an arbitrator under which when a person is approached in connection with his possible appointment as an arbitrator he shall disclose in writing any circumstances which may give rise reasonable doubt about his independence or impartiality. Not only that he shall from time to time during the course of the proceedings disclose to the parties in writing about his independence or impartiality. The appointment of an arbitrator may be challenged only when there are reasonable grounds to doubt his independence or impartiality and when he does not possess the qualifications agreed to by the parties. A party may also challenge arbitrator appointed by him for the reasons, which he becomes aware after the appointment has been made. The parties might agree on a procedure for challenging an arbitrator as per Section 13. In the event of no such agreement, the party, who intends to challenge an arbitrator, shall send a written statement of the reasons for the challenge to the arbitral tribunal. On such challenge, if the arbitrator failed to withdraw, the tribunal shall decide on the challenge. If the challenge for any reason is unsuccessful, the tribunal shall continue the proceedings; when the tribunal passes an award the party may again challenge the award by seeking to set aside the same in accordance with the provisions contained in Section 34. Under Section 14, the mandate of an arbitrator shall be terminated if the arbitrator becomes de jure or de facto unable to perform his functions or he fails to act without undue delay or if he withdraws from his office or the parties agree to the termination of his mandate. In the event of any controversy on any of the grounds mentioned above, the party may apply to the Court to decide on the termination of the mandate. As per Section 15, in addition to the circumstances, the mandate of the arbitrator shall terminate where the arbitrator withdraws from his office for any reason or pursuant to the agreement of the parties. When the mandate of an arbitrator is terminated, a substitute arbitrator shall be appointed as per the agreement. Thus, Sections 12 - 15 deal with either withdrawal of the arbitrator by himself or on account of the challenge made by either of the parties or by means of an agreement reached by the parties or when the arbitrator becomes de jure or de facto unable to perform his functions or when he fails to act without undue delay. In the event of any controversy remaining concerning the grounds mentioned in Clause (a) Sub-section (1) of Section 14 viz., the arbitrator becoming de jure or de facto unable to perform his functions or if he fails to act without undue delay, the party may apply to the Court to decide on the termination of the mandate. Sub-section (2) of Section 14 thus seems to be germane in the context. Having regard to the respective stands taken by the petitioner and the respondents it appears there is a controversy as regards the ground that the arbitrator failed to act without undue delay, which entails the termination of the mandate, the party has to invariably approach the Court to decide on the termination of the mandate. Without such termination of the mandate of an arbitrator the petitioner cannot seek the appointment of an arbitrator, inasmuch as the arbitral tribunal continues for all practical purposes. The Court which is competent to act in the event of filing of an application by either of the parties under Sub-section (2) of Section 14 is the Court which is defined under Clause (e) of Sub-section (1) of Section 2 of the Act and also the High Court in exercise of its ordinary original civil jurisdiction. Therefore, the District Court as well as the High Court have concurrent jurisdiction to act under subsection (2) of Section 14. It is open to the parties to seek the termination of the mandate of an arbitrator and simultaneously to appoint a substitute arbitrator. Here in the instant case there has been no prayer for the termination of the mandate of the arbitrator, therefore the petitioner cannot automatically seek the appointment of his substitute arbitrator. It is not a case where the petitioner can fall back on Sub-section (6) of Section 11 of the Act. None of the Clauses (a), (b) and (c) enjoined under Sub-section (6) of Section 11 is attracted in this case so as to enable the petitioner to approach the Chief Justice. Therefore, the request of the petitioner for appointment of an arbitrator without seeking the termination of the mandate as arbitrator, for the reasons hereinabove discussed, cannot be conceded.

10. For the above reasons, the application must fail and is dismissed.