1. This order shall also govern the disposal of this batch of petitions filed under Article 226 of the Constitution of India given the similarity of the issue involved. For the sake of convenience, the facts as narrated in Writ Petition No. 12141/2019 are being taken into consideration.
2. The sole question that arises for the consideration of this court is that whether a writ petition is maintainable to challenge the appointment of an arbitrator by the petitioner who is not a party to the arbitration agreement.
3. The Writ Petition has been filed against order dated 22.05.2018 (Annexure P/3) passed by the Chief Engineer (CZ), Central Public Works Department, Nirman Sadan, Bhopal MP (respondent No.3) whereby to adjudicate a dispute between respondents No.3 and 4 (on one side) and respondent No.5 (on the other), respondent No.6 has been appointed as an Arbitrator.4. Petitioner's contention is that the appointment of respondent No.6, as an Arbitrator, to adjudicate the dispute between respondents No.3 & 4 and respondent No.5 is contrary to Section 12 of Arbitration and Conciliation Act, 1996 (herein after referred to as "AC Act of 1996) read with Vth and VIIth Schedule.
5. In brief, the facts of the case are that the petitioner - Pandit Dwarka Prasad Mishra, Indian Institute of Information Technology, Design and Manufacturing (in short, IIITDM) is an autonomous Technical Institute of National importance fully funded by Ministry of Human Resources Development (MHRD). According to the petitioner, it had assigned construction activities of its campus to respondents No.1 to 4, who are the Authorities of CPWD; and has also deposited more than 200 crores with respondents No.1 to 4 during different financial years for construction of the projects. According to the petitioner, the work has still not been completed even after lapse of seven years; and on a complaint made by the petitioner, the matter has also been referred by the respondent No.1 to the Central Vigilance Commissioner (CVC) and the entire work initiated by respondents No.3 to 5 is to be evaluated by CVC.
6. It is further the case of the petitioner that for construction of the aforesaid work, a Memorandum of Understanding (Moll) between petitioner and respondent No.3 has also executed on 20th November, 2009 (Annexure P/1) enumerating various conditions for construction of projects needed by the petitioner for running the Institution effectively. Pursuant to the aforesaid Moll, respondent No.3 also issued a Notice Inviting Tender (NIT) for construction of projects; and respondent No.5 was selected as the Contractor.
7. Admittedly a dispute has arisen between respondent No.5 and respondent No.3, pursuant to which, Shri Basab Majumdar, a Retired Director General, CPWD, New Delhi (Respondent No.6) has been appointed as an Arbitrator by the respondent No.3 to adjudicate the dispute between the parties.
8. It is also an admitted fact that the contract executed between respondents No.3 & 4 with respondent No.5 is governed by General Conditions of Contract of CPWD (Annexure P/2) in which Clause 25 provides for settlement of dispute through Arbitrator.
9. Grievance of the petitioner is that appointment of respondent No.6, as an Arbitrator, to adjudicate the dispute between the parties is in contravention of Section 12 of the AC Act of 1996 read with Schedule Vth and VIIth appended therewith, as respondent No.6 is a Retired Director General of CPWD and falls within the mischief of the said Section and cannot be appointed as an Arbitrator.
10. In support of his contention, Shri Ajay Pal Singh, counsel for the petitioner has also relied upon the decision rendered by Supreme Court in the case of (1) TRF Limited v. Energo Engineering Projects Limited reported as (2017) 8 SCC 377 (Para 15), (2) recent judgment of the Supreme Court in the case of M/s. Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Limited. Civil Appeal No.2701/2020 dated 21st August, 2020 (Paras 16 and 18), (3) in the case of M/s. Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Limited reported as (2017) 4 SCC 665 (Paras 24 and 27) and (4) in case of Central Organization for Railway Electrification v. JECI-SPIC-SMO-MCML (JV) a Joint Venture Company. Civil Appeal Nos.9486-9487 of 2019 arising out of SLP (C) Nos.24173-74 of 2019 (Para 9).
11. A reply has also been filed by the respondents No.1 to 4 traversing the averments made in the writ petition and also specifically referring to conditions of Moll entered into between the petitioner and respondent No.3.
12. Shri Jitendra Kumar Jain, learned Assistant Solicitor General appearing for the respondents No.1 to 4, while objecting to the averments of the petition, has submitted that no case for interference is made out, as the petitioner itself failed to deposit the amount, as desired in the Moll within time and even otherwise as per the conditions set out in the MOU, the petitioner has already agreed that the Arbitration shall be contested by the respondent no.1 only and the decision of which would also be binding on the petitioner. It is submitted that the respondent was given forty (40) works by the petitioner (IIITDM), as per memo Annexure R/2, total amounting to Rs.361.00 crores, whereas only a sum of Rs.205.00 crores has been deposited by them; and that too, in a piecemeal manner from time to time. It is further submitted that before the appointment of Arbitrator, certain letters were also issued to the petitioner requesting that if IIITDM is having any Panel of Arbitrators, who are qualified to adjudicate arbitration disputes of such contractual matters, the same may be sent to the Office of Respondent No.3, so that authority competent to appoint Arbitrator can select from that Panel also, however, as there was no response, respondent No.3 was bound to appoint an Arbitrator, as per Clause 25 of General Conditions of Contract for Central PWD Works. It is further submitted that even otherwise, appointment of Shri Basab Majumdar (respondent No.6 herein) is in accordance with Section 12 of AC Act of 1996, as he is a retired person from the services of CPWD in the year 2006, whereas, as per Vth Schedule of AC Act of 1996, as amended in 2015, there is a limitation of three years. It is further submitted that Shri Basab Majumdar is having an experience of thirty-six years and is eligible to adjudicate the dispute between the parties. Thus, it is submitted that the petition being devoid of merits is liable to be dismissed.
13. No rejoinder to this reply has been filed by the petitioner.
14. A reply to petition has also been filed by respondent No.5, who is represented by Shri Brian D'Silva, learned Senior Counsel assisted by Shri Ishan Soni, advocate. A preliminary objection was raised that the petition itself is liable to be dismissed on the sole ground that the petitioner is not a party to the agreement which has been entered into between the respondents No.3 and 4 on one side and respondent No.5 on the other. It is further submitted that in the said agreement there was no third party and respondent No.3 was obliged to appoint an Arbitrator in consonance with Clause 25 (ii) of General Conditions of Contract of CPWD; and it was only for the respondent No.5 to object to the appointment of the Arbitrator, if the same was contrary to Section 12 of the AC Act of 1996.
15. While supporting the appointment of the Arbitrator, Shri Brian D'Silva, learned Senior Counsel has submitted that Arbitrator can be appointed under the provisions of AC Act of 1996 at the instance of the parties to the agreement with respect to a dispute between them; since the petitioner was not a party to the agreement, hence, IIITDM cannot challenge the appointment of Arbitrator; and as such, the petitioner has no locus standi to call in question the arbitration, or the appointment of the Arbitrator.
16. In support of his contention, Shri Brian D'Silva has also relied upon the decision rendered by Supreme Court in the case of (1) Indowind Energy Ltd v. Wescare India Ltd & Another reported as (2010) 5 SCC 306 (paras 16 and 17), (2) Deutsche Postbank Home Finance Ltd v. Taduri Sridhar and another reported as (2011) 11 SCC 375 (Para 19) and (3) (2011) 11 SCC 320.
17. In rebuttal, the petitioner has also filed a rejoinder to the return filed by respondent No.5. However, only the submissions made in the petition have been reiterated. Counsel for the petitioner Shri Ajay Pal Singh has heavily relied upon the appointment of CVC to investigate into the matter.
18. I have heard the learned counsel for the parties and perused the record.
19. From perusal of the record, this Court finds that Moll / agreement between the petitioner and respondents No.1 to 4 has been executed, which was accepted by the then Director of IITDM, Jabalpur vide letter dated 20th November, 2009 (Annexure R/1); relevant portions of terms and conditions of Moll are reproduced, as under: -
"1. Full estimated cost of the work as worked out by the CPWD including departmental charges will have to be deposited by the client department before the work is taken up for execution. No interest will be paid by CPWD to the client department for such deposits.
4. Any dispute arising out of the operation of the contract(s) for the subject work will be subject to arbitration as provided for in the contract agreement. CPWD will defend the arbitration proceedings as best as it can and get the arbitrator's award examined by the appropriate authority. The decision of the competent authority in CPWD to accept the award or to challenge the same in a Court of Law will be binding on the client department.
5. Funds for making payment of all amounts which may be decreed by a Court of Law, Tribunal or by award of an arbitrator in relation to the deposit work will be made available by the client department promptly irrespective of it not being a party before the Court, Tribunal or Arbitrator. Such payments will be in addition to the payments made to the contractors for execution of work."
20. Admittedly, the petitioner has provided forty works to CPWD for construction under the said Moll. A perusal of the aforesaid conditions of MoU clearly demonstrates that the petitioner has agreed that dispute between the respondent - CPWD and its Director will be defended in arbitration by CPWD only and it shall also get Arbitrator's award examined by Appropriate Authority; and the decision of the Competent Authority will be binding on the client's department i.e. the petitioner. Clause 5 of the aforesaid terms and conditions of the MoU also provides that the funds for making payment of all amounts, which may be decreed by a Court of Law, Tribunal or by award of an Arbitrator has to be made available by the client department i.e. the petitioner promptly irrespective of it not being a party before the Court, Tribunal or Arbitrator; and such payments will be in addition to the payments made to the contractors for execution of work.
21. In the considered opinion of this Court, after having entered into an agreement with open eyes on such terms and conditions with respondents No.1 to 4, the petitioner cannot claim that the Arbitrator appointed by respondents No.1 to 4 is contrary to Section 12 of the AC Act of 1996, especially when the petitioner IIITDM, Jabalpur is not a party to the agreement executed between respondents No.1 to 4 on one part and respondent No.5 on the other.
22. So far as the challenge to the appointment of an arbitrator by a party is concerned, the same is specifically provided under s.12 of the AC Act of 1996. The same reads as under:-
"Section 12. Grounds for challenge.
(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality.
(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if
(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or
(b) he does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made." (emphasis supplied)
23. Section 2(h) of the said Act which refers to Definitions, reads as under-
2(h) "party" means a party to an arbitration agreement. (emphasis supplied)
24. A conjoint reading of the aforesaid provisions of the AC Act of 1996 clearly reveals that only a party to the arbitration agreement can challenge the appointment of an arbitrator and none else. In this regard a reference may be had to the decision rendered by the Supreme Court in the case of Deutsche Postbank Home Finance Ltd v. Taduri Sridhar and another (supra). Relevant para 19 of the aforesaid decision is reproduced, as under: -
"19. The arbitration agreement relied upon by the first respondent to seek appointment of arbitrator, is clause (7) of the construction agreement dated 21.2.2008. The appellant was not a party to the said construction agreement dated21.2.2008 containing the arbitration agreement. It is no doubt true that the loan agreement dated 21.12.2006 between the first respondent as borrower, and the appellant as the creditor, also contains an arbitration clause (vide Article 11) providing for resolution of disputes in regard to the said loan agreement by arbitration. But the developer was not a party to the loan agreement. There is no arbitration agreement between the developer and the appellant. The disputes between the first respondent and the developer cannot be arbitrated under Article 11 of the Loan Agreement. The first respondent invoked the arbitration agreement contained in clause 7 of the construction agreement (between first respondent and developer) and not the arbitration agreement contained in clause 11 of the loan agreement (between appellant and first respondent). The existence of an arbitration agreement in a contract between appellant and first respondent, will not enable the first respondent to implead the appellant as a party to an arbitration in regard to his disputes with the developer." (emphasis supplied)
25. Reference may also be made to the decision rendered by the Supreme Court in the case of Indowind Energy Ltd v. Wescare India Ltd & Another (supra). Relevant paras 16 and 17 of the aforesaid decision read as under: -
"16. The learned counsel for Wescare referred to various clauses in the agreement dated 24-2-2006 to contend that it should be deemed to be an agreement executed/signed by Indowind. Firstly, it was submitted that the agreement was entered into by Subuthi as the promoter of Indowind and also described Indowind as its nominee and the agreement was signed on behalf of Subuthi by a person who was also a Director of Indowind. It is submitted that the agreement also specifically stated that Subuthi was desirous of purchasing certain assets of Wescare for its nominee Indowind, and in fact, Indowind purchased the said assets of Wescare. This according to the learned counsel for Wescare, led to an irresistible conclusion that Indowind was acting in terms of the agreement dated 24-2-2006 and therefore, it would be bound by the arbitration clause therein.
17. It is not in dispute that Subuthi and Indowind are two independent companies incorporated under the Companies Act, 1956. Each company is a separate and distinct legal entity and the mere fact that the two Companies have common shareholders or common Board of Directors, will not make the two Companies a single entity. Nor will the existence of common shareholders or Directors lead to an inference that one company will be bound by the acts of the other. If the Director who signed on behalf of Subuthi was also a Director of Indowind and if the intention of the parties was that Indowind should be bound by the agreement. nothing prevented Wescare insisting that Indowind should be made a party to the agreement and requesting the Director who signed for Subuthi also to sign on behalf of Indowind." (emphasis supplied)
26. This Court is also conscious of the fact that the peculiar situation has arisen in the present case where on one side the petitioner has agreed to such a terms and conditions of Moll, that it would rely upon the discretion of respondents No.1 to 4 in any case where a dispute arises between respondents No.1 to 4 on one hand and the respondent no.5 on the other hand, however, the petitioner is now questioning of intention of respondents No.1 to 4; and the legality and propriety of their action in appointing the Arbitrator but the question is whether writ is the remedy available to petitioner. In the rejoinder, the petitioner, without placing any order on record, has also stated that it had approached the Arbitrator, but the Arbitrator has declined to
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accept his request to intervene in the matter on the ground that IIITDM is not a party to the arbitration agreement. Whether the aforesaid order has been challenged by the petitioner is also not disclosed by the petitioner. 27. In the considered opinion of this Court, it is true that the petitioner happens to be the employer of respondents No.1 to 4 as it has also entered into a Moll with respondents No.1 to 4 for execution of its work (s), the aforesaid Moll can be said to be based on the mutual respect and agreement, as both (petitioner and respondents No.1 to 4) are government agencies handling and utilizing public funds. In such a situation, subsequently, if the petitioner has objected to the legality and the propriety of the actions of respondents No.1 to 4 and is feeling cheated or betrayed, in that case, it cannot be said that the petitioner is remedy less, as it has the remedy of taking recourse of both civil as well as criminal proceedings against the respondents and appointment of Chief Vigilance Commission appears to be one such step. 28. So far as the decisions relied upon by shri Ajay Pal Singh are concerned, none of the decisions postulates that a writ petition is maintainable to question the appointment of an arbitrator by a third party who is not a party to the arbitration agreement between two other parties. The aforesaid decisions refers to the circumstances under which appointment of an arbitrator can be challenged by the other party to the arbitration agreement. 29. Under these facts and circumstances of the case, the petition itself is not maintainable and otherwise also where various disputed question of facts and law are involved, this Court is of the firm view that extraordinary original jurisdiction of the High Court under Article 226 of Constitution of India cannot be invoked. 30. Resultantly, the present petition being devoid of merits is hereby dismissed.