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M/s. K.P.R. Constructions Rep. by its Power Agent B. Chandra Sekhar Reddy v/s The Union of India Rep by the General Manager Southern Railway, Chennai & Others

    Arb. O.P.(Com.Div.) No. 137 of 2022

    Decided On, 04 April 2022

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE M. SUNDAR

    For the Petitioner: S. Amalaraj Penikilapatti, Advocate. For the Respondents: P.T. Ramkumar, standing counsel for Southern Railways.



Judgment Text

1. This order will dispose of the captioned 'Arbitration Original Petition' [hereinafter 'Arb OP' for the sake of convenience and clarity].

2. Mr.Amalaraj S.Penikilapatti, learned counsel on record for sole petitioner and Mr.P.T.Ramkumar, learned standing counsel for Southern Railways on behalf of three respondents are before this Court.

3. This order has to be read in conjunction with and in continuation of earlier proceedings made in the previous listing on 24.03.2022 which reads as follows:

'Captioned 'Arbitration Original Petition' [hereinafter 'Arb OP' for the sake of convenience and clarity] has been presented in this Court on 04.03.2022 under Section 11(6) of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)' [hereinafter 'A and C Act' for the sake of convenience and clarity] with a prayer for appointment of a sole arbitrator.

2. Mr.Amalaraj S.Penikilapatti, learned counsel for sole petitioner who is before this Court submits that the captioned Arb OP is predicated on clause 64 of 'General Conditions of Contract' ['GCC'] which forms part of a 'contract dated 09.01.2012' [hereinafter 'primary contract' for the sake of convenience and clarity] between the petitioner (contractor) and respondents (Southern Railways collectively).

3. Aforementioned clause 64 of GCC as placed before this Court in the case file reads as follows:

4. Learned counsel for contractor submits that primary contract is inter alia for construction of roads under bridge between Melalathur and Valathoor stations by using Box Pushing Technique.

5. Learned counsel submits that arbitrable disputes erupted qua primary contract owing to alleged non-payment by Southern Railways in spite of work under primary contract being completed.

6. It is also submitted that a trigger notice qua aforementioned arbitration clause (which serves as arbitration agreement between the parties being arbitration agreement within the meaning of Section 2(1)(b) read with Section 7 of A and C Act) dated 13.12.2021 has been issued but there has been no response or reply from Southern Railways though the trigger notice has been duly served on Southern Railways on 17.12.2022. This has necessitated the presentation of captioned Arb OP in this Court is learned counsel's say.

7. Prima facie case for issue of notice made out.

8. Mr.P.T.Ramkumar, learned standing counsel for Southern Railways who is present in Court accepts notice on behalf of all the three respondents.

9. Learned counsel for contractor/petitioner to serve one set of papers on learned standing counsel for Southern Railways.

10. Registry to show the name of learned standing counsel for Southern Railways in the next listing.

11. List one week hence. List in the Admission Board i.e., MOTION LIST. List on 31.03.2022.'

4. Aforementioned proceedings shall be read as an integral part and parcel of this order. The short forms, abbreviations and short references used in the aforementioned proceedings shall continue to be used in the instant order also.

5. To be noted, thereafter there was one more listing of captioned Arb OP on 31.03.2022 and the proceedings made on that listing reads as follows:

'Read this in conjunction with and in continuation of earlier proceedings made in the previous listing on 24.03.2022.

2. Mr.Amalaraj S.Penikilapatti, learned counsel for sole petitioner is before this Court and learned counsel is ready.

3. Mr.P.T.Ramkumar, learned standing counsel for Southern Railways on behalf of all the three respondents requests for a short accommodation to get written instructions and revert to this Court. Request acceded to.

4. List in the Admission Board i.e., MOTION LIST on Monday. List on 04.04.2022.'

6. Be that as it may, adverting to the aforementioned earlier proceedings dated 24.03.2022, learned counsel on both sides submit that the facts have been correctly captured. Furthermore, learned counsel on both sides submit that in a similar case, this Court appointed an independent sole Arbitrator in and by order dated 17.02.2022 made in Arb OP.No.205 of 2021 inter alia by following Datar Switchgears Ltd., Vs. Tata Finance Ltd., and another reported in (2000) 8 SCC 151, Punj Lloyd Ltd., Vs. Petronet MHB Ltd., reported in (2006) 2 SCC 638 and Union of India Vs. Bharat Battery Manufacturing Co (P) Ltd., reported in (2007) 7 SCC 684 case laws which are authorities for the principle that respondents Southern Railways is deemed to have waived its right when the panel of arbitrators is not sent (within the agreed time line) in response to a contractor's request for arbitration.

7. This Court is also informed that the aforementioned order dated 17.02.2022 made in Arb OP.No.205 of 2021 has not been assailed in Hon'ble Supreme Court. Aforementioned order dated 17.02.2022 made in Arb OP.No.205 of 2021 reads as follows:

'Captioned 'Arbitration Original Petition' [hereinafter 'Arb OP' for the sake of brevity] has been presented in this Court on 07.10.2021 under Section 11(6) of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)' [hereinafter 'A and C Act' for the sake of convenience and clarity] with a prayer for appointment of an Arbitrator.

2. Aforementioned prayer is predicated on an arbitration clause in an 'agreement dated 26.08.2016 bearing reference 09/Dy.CE/N/I/MDU/AIC/2016 between the petitioner and respondents' [hereinafter 'said contract' for the sake of convenience and clarity].

3. In the said contract, petitioner is the contractor and the respondents shall be collectively referred to as Southern Railway.

4. In the captioned matter, Ms.K.Aparna Devi, counsel on record for petitioner and Mr.P.T.Ramkumar, learned standing counsel for Southern Railway on behalf of both the respondents (Southern Railway) are before this Court.

5. There is no disputation or disagreement about the existence of the arbitration clause. To put it differently, there is no disputation or disagreement about the existence of an arbitration agreement between the contractor and Southern Railway i.e., an arbitration agreement within the meaning of 2(1)(b) read with Section 7 of A and C Act, which is in the form of a clause in said contract.

6. Short facts are, the contractor triggered the arbitration agreement by a notice dated 04.03.2021 which was received by Southern Railway on 09.03.2021. Under clause 64.(3) (a)(ii) of 'General Conditions of Contract' (hereinafter 'GCC' for the sake of convenience and clarity) which admittedly forms part of the said contract, Southern Railway should have sent a panel of three names of Gazetted Railway officers to the contractor within 60 days from the date of receipt of this trigger notice. In this case, as the trigger notice was received by Southern Railway on 09.03.2021, 60 days elapsed on 09.05.2021. Admittedly, Southern Railway did not send a panel of names in accordance with Clause 64.(3) (a)(ii) of GCC. Learned counsel for Southern Railway submits that respondents i.e., Southern Railway could not send the panel owing to pandemic and lock down and it is not deliberate. It may not be necessary to dilate much on the reasons as Southern Railway deemed to have waived its rights in the light of Datar Switchgears Ltd., Vs. Tata Finance Ltd., and another reported in (2000) 8 SCC 151, Punj Lloyd Ltd., Vs. Petronet MHB Ltd., reported in (2006) 2 SCC 638 and Union of India Vs. Bharat Battery Manufacturing Co (P) Ltd., reported in (2007) 7 SCC 684. Relevant paragraphs in these three case laws are as follows: 'Para 19 in Datar Switchgears case:

19. So far as cases falling under Section 11(6) are concerned — such as the one before us — no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11(4) and Section 11(5) of the Act. In our view, therefore, so far as Section 11(6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an arbitrator under Section 11(6) is forfeited. Para 5 in Punj Lloyd case:

5. Having heard the learned counsel for the parties, we are satisfied that the appeal deserves to be allowed. The learned counsel for the appellant has placed reliance on the law laid down by this Court in the case of Datar Switchgears Ltd. v. Tata Finance Ltd. [(2000) 8 SCC 151] (SCC p. 158, para 19) wherein this Court has held as under:

“[S]o far as Section 11(6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases.'

Para 12 in Bharat Battery case:

12. A three-Judge Bench of this Court in Punj Lloyd Ltd. v. Petronet MHB Ltd. [(2006) 2 SCC 638] considered the applicability of Section 11(6) petition and considered the facts which are similar to the facts of the present case and held that once notice period of 30 days had lapsed, and the party had moved the Chief Justice under Section 11(6), the other party having right to appoint arbitrator under arbitral agreement loses the right to do so. While taking this view, the Court had referred to the judgment rendered in Datar Switchgears Ltd. v. Tata Finance Ltd. [(2000) 8 SCC 151] wherein at SCC p. 158, para 19, this Court held as under:

“19. So far as cases falling under Section 11(6) are concerned— such as the one before us—no time-limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11(4) and Section 11(5) of the Act. In our view, therefore, so far as Section 11(6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an arbitrator under Section 11(6) is forfeited.”

(emphasis in original)

As already noticed, the respondent filed Section 11(6) petition on 30-3-2006 seeking appointment of an arbitrator. The appellant, thereafter, said to have appointed one Dr. Gita Rawat on 15-5- 2006 as a sole arbitrator, purportedly in terms of Clause 24 of the agreement. Once a party files an application under Section 11(6) of the Act, the other party extinguishes its right to appoint an arbitrator in terms of the clause of the agreement thereafter. The right to appoint arbitrator under the clause of agreement ceases after Section 11(6) petition has been filed by the other party before the Court seeking appointment of an arbitrator.'

7. This takes this Court to the scope of a legal drill under Section 11 of A and C Act. The scope of a legal drill under Section 11 of A and C Act is within the legal landscape or legal perimeter ingrained in sub-section (6A) of Section 11 of A and C Act. This has ben highlighted by the Hon'ble Supreme Court in what has now come to stay as in Mayavati principle in litigation parlance, ratio of Hon'ble Supreme Court laid down in Mayavati Trading Pvt. Ltd., Vs. Pradyuat Deb Burman reported in (2019) 8 SCC 714)] is contained in paragraph 10, which reads as follows:

'10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgments, as Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment in Duro Felguera SA.'

(underlining made by this Court to supply emphasis and highlight)

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/>8. In the light of the narrative thus far, this Court proceeds to appoint Mr.M.Sricharan Rangarajan, Advocate at New No.20A, Luz Avenue, 5th Street, Mylapore, Chennai-600 004 (Telephone No.2498 7863) as Sole Arbitrator to enter upon reference, adjudicate the arbitral disputes between the parties and make an award. Sole Arbitrator now appointed shall conduct arbitration in Madras High Court Arbitration Centre under the aegis of this Court [MHAC] in accordance with Madras High Court Arbitration Proceedings Rules, 2017 and Hon'ble Arbitrator's fee shall be as per Madras High Court Arbitration Centre (MHCAC) (Administrative Cost and Arbitrator's Fees), Rules 2017. 9. Captioned OP is disposed of in the aforesaid manner.' 8. Owing to/in the light of the narrative thus far, Hon'ble Mr.Justice T.Ravindran (Retd.,), residing at New No.27, Old No.12, 3rd Avenue, Indira Nagar, Adyar, Chennai - 600 020 [Mob: 9941350926, 9444399700], a former Judge of this Court is appointed as sole Arbitrator. Hon'ble sole Arbitrator is requested to enter upon reference, adjudicate arbitrable disputes between the parties and make an award. Hon'ble sole Arbitrator now appointed shall conduct arbitration in accordance with 'Madras High Court Arbitration Proceedings Rules, 2017' and Hon'ble Arbitrator's fee shall be as per 'Madras High Court Arbitration Centre (MHCAC) (Administrative Cost and Arbitrator's Fees), Rules 2017'. M.SUNDAR. J., mk 9. Captioned Arb OP is disposed of in the aforesaid manner. There shall be no order as to costs.
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