2019 (11) TMI 663 - SC - Indian Laws

Appointment of an independent arbitrator for adjudication of disputes between the parties instead of directing appointment of arbitrator as per Clause 64 of General Conditions of Contract (GCC) which stipulates that Railways Officers should be appointed as Arbitrator - HELD THAT - Admittedly the request for referring the dispute was made much prior to the Amendment Act 2015 which came into force w.e.f. 23.10.2015. Since the request for appointment of arbitrator was made much prior to the Amendment Act 2015 (w.e.f. 23.10.2015) the provision of the Amended Act 2015 shall not apply to the arbitral proceedings in terms of Section 21 of the Act unless the parties otherwise agree. As rightly pointed out by the learned counsel for the appellant the request by the respondent(s)- contractors is to be examined in accordance with the Principal Act 1996 without taking resort to the Amendment Act 2015. Applicability of the provisions of the Principal Unamended Act 1996 - Clause 64 of the General Conditions of Contract (GCC) - HELD THAT - Under Clause 64(1) of GCC if there is any dispute or differences between the parties or the respective rights and liabilities of the parties on any matter in question or any other ancillary dispute arising from the terms of the contract or if the railway administration fails to make a decision within the time stipulated thereon then in any such case but except in any of the excepted matters the General Manager may nominate the officer by designation as referred to under Clause 64(3)(a)(i) and a(ii) respectively with further procedure being prescribed for the sole arbitrator or the Arbitral Tribunal to adjudicate the dispute/differences arising under the terms of the contract between the parties. In Union of India and another v. M.P. Gupta 2004 (2) TMI 725 - SUPREME COURT Union of India v. Singh Builders Syndicate 2009 (2) TMI 794 - SUPREME COURT and in a catena of judgments the court held that whenever the agreement specifically provides for appointment of named arbitrators the appointment of arbitrator should be in terms of the contract. The court however observed in para (6) that in the case of public institutions which are slow in responding to the request made by the contractor for appointment of an arbitrator the power of the High Court to appoint an arbitrator under Section 11 is not taken away - The failure of the authorities in appointing an arbitrator and when the contractor approached the court for appointment of an arbitrator under Section 11 of the Act it will then be in the discretion of the Chief Justice/designated Judge to appoint a railway officer as per the contract or a High Court Judge. When the agreement specifically provides for appointment of named arbitrators the appointment should be in terms of the agreement. The High Court was not right in appointing an independent arbitrator ignoring Clause 64 of the General Conditions of Contract. We are not inclined to go into the merits of the contention of the parties. It is for the arbitrator to consider the claim of the respondent(s) and the stand of the appellant-railways. This contention raised by the parties are left open to be raised before the arbitrator. Appeal allowed.

Summary

Issues Involved:
1. Appointment of an independent arbitrator versus appointment as per Clause 64 of the General Conditions of Contract (GCC).
2. Applicability of the Arbitration and Conciliation Act, 1996 versus the Amendment Act, 2015.
3. Validity of "No Claim" certificates and supplementary agreements under alleged duress or undue influence.

Issue-wise Detailed Analysis:

1. Appointment of an Independent Arbitrator versus Appointment as per Clause 64 of the General Conditions of Contract (GCC):
The core issue in both appeals was whether the High Court was correct in appointing independent arbitrators instead of directing the appointment of arbitrators as per Clause 64 of the GCC, which stipulates that Railways' Officers should be appointed as arbitrators. The High Court had appointed independent arbitrators, reasoning that the Railways forfeited its right to appoint an arbitrator by failing to do so in a timely manner. However, the Supreme Court held that when an agreement specifically provides for the appointment of named arbitrators, the appointment should be in terms of the contract. The Court cited precedents like Union of India v. M.P. Gupta and Union of India v. Parmar Construction Company, emphasizing that the High Court was not justified in appointing independent arbitrators without following the procedure prescribed under Clause 64 of the contract.

2. Applicability of the Arbitration and Conciliation Act, 1996 versus the Amendment Act, 2015:
The Supreme Court clarified that since the requests for arbitration were made before the Amendment Act, 2015 came into force on 23.10.2015, the provisions of the Principal Act, 1996 would apply. The Court referred to Union of India v. Parmar Construction Company, which stated that the Amendment Act, 2015 would not apply to arbitral proceedings commenced in accordance with Section 21 of the Principal Act, 1996 before the Amendment Act came into force, unless the parties agreed otherwise. Thus, the Court ruled that the requests by the respondents should be examined under the Principal Act, 1996.

3. Validity of "No Claim" Certificates and Supplementary Agreements under Alleged Duress or Undue Influence:
The respondents claimed that the "No Claim" certificates and supplementary agreements were signed under compulsion and undue influence by the railway authorities. The Supreme Court did not delve into the merits of these allegations, stating that it was for the arbitrator to consider the claims and the stand of the appellant-railways. The Court left this contention open to be raised before the arbitrator, thereby not precluding the respondents from arguing that the "No Claim" certificates were issued under duress.

Conclusion:
The Supreme Court set aside the High Court's judgments appointing independent arbitrators and directed the appellant to appoint arbitrators as per Clause 64(3) of the GCC within one month. The respondents were instructed to file their statement of claims within six weeks of the arbitrator's appointment, and the appellant was to file its reply within four weeks thereafter. The arbitrator was directed to proceed expeditiously and decide the claims within four months, ensuring both parties were afforded sufficient opportunity to be heard.