Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8860 OF 2014
(arising out of Special Leave Petition (Civil) No. 20183 of 2012)
UNION OF INDIA & ORS. .....APPELLANT(S)
VERSUS
U.P. STATE BRIDGE CORP. LTD. .....RESPONDENT(S)
J U D G M E N T
A.K. SIKRI, J.
Leave granted.
2) Counsel for the parties have been heard in detail in this appeal. In order
to determine the controversy that is raised in this appeal, which is filed
by the Union of India, challenging the decision dated 03.08.2011 of the
High Court, minimal facts which require a mention, are the following:
Signature Not Verified
The appellant had entered into an agreement with the
Digitally signed by
Deepak Mansukhani
Date: 2014.09.16
17:29:39 IST
Reason:
respondent vide which contract for construction of guide bunds,
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foundation and substructure of Rail Bridge across river Gangaes near
Digha Ghat, Patna and the said agreement contained various terms and
conditions. Clause 64 (1) (ii) of the General Condition of the Contract
2001 (for short 'the GCC'), contained an arbitration clause that is
provided for deciding the dispute between the parties through arbitration
by an arbitral tribunal to be constituted in terms of the said agreement.
3) Disputes arose between the parties with respect to the said contract and
on the request of the respondent an arbitral tribunal of the persons was
constituted in the year 2007, in which all the members were Railway
authorities. It is a matter of regret that inspite of expiry of four years, the
said tribunal did not complete the arbitral proceeding and the matter
kept hanging due to transfers/ retirement/ adjournments etc.
4) The respondent felt exasperated due to the prolongation of the matter
before the arbitral tribunal and chose to file Request Case No.10/2010.
Even at the time of filing of that case, there was a vacancy in the Arbitral
Tribunal. When this case was taken up by the High Court on
09.03.2011, by that time, the appellant had filled up the said vacancy.
Taking note thereof, the said petition was disposed of by the High Court
vide order dated 09.03.2011 giving the last chance to the Arbitral
Tribunal to complete the arbitral proceeding within a period of three
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months with direction to hold regular sittings at Patna from the date of
receipt/production of a copy of the said order. It was also stated in the
order dated 09.03.2011 that if arbitration proceedings are not completed
within the period fixed by the Court, the respondent would be at liberty
to approach the Court again and the Court would be constrained to pass
appropriate order in accordance with the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as 'the Act').
5) The Arbitral Tribunal was made aware of the said order as the copy
thereof was produced before it on 25.03.2011. This means that it was
supposed to complete the case by 25.06.2011. However, even within
the said allotted time, the proceedings were not brought to an end and,
therefore, the respondent filed Request Case No.3/2011 dated
29.06.2011.
6) The appellant contested the aforesaid petition of the respondent on
various grounds and also gave its own reasons because of which the
Arbitral Tribunal would not complete the proceedings. It was also
pointed out that though the Arbitral Tribunal was ready to hear the case
of the parties and decide it finally on 22.07.2011, the respondent had
informed the Tribunal of the filing of the said petition which led to the
adjournment of the matter by the Tribunal.
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7) The High Court took note of the various dates of hearings that are fixed
by the Tribunal between 25.03.2011 and 25.06.2011 and came to the
conclusion that delay caused in the arbitral proceedings was intentional.
So much so, the members of the Arbitral Tribunal were continuing their
dilatory tactics in deciding the matter before it since 2007 and four years
had passed in the process. Tribunal had faltered even after giving
specific directions to conclude the matter within three months and long
adjournments were granted thereby violating the specific directions of
the High Court. Terming this attitude of the members of the Tribunal as
negligent on their part towards their duties with no sanctity for any law
or for the orders of the High Court, the High Court allowed the petition of
the respondent herein and set aside the mandate of the Tribunal with
the appointment of sole arbitrator by the Court itself.
8) In the instant appeal, challenge is made to the aforesaid judgment of
the High Court with the plea that it was not open to the High Court to
appoint the sole arbitrator as it was not empowered to constitute Arbitral
Tribunal of its own and, that too, contrary to the arbitration clause. Mr.
Tushar Mehta, learned ASG appearing for the appellant has made a
vehement submission, in this behalf, that no such power is vested in the
High Court under the Act. His submission was that as per the scheme
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of the Act even if the mandate of the Arbitral Tribunal was to be
terminated, fresh Tribunal could be constituted only in accordance with
the arbitration agreement. It was thus argued that the High Court could
have, at the most, directed the appellant to constitute another Arbitral
Tribunal in accordance with Clause 64 of the GCC.
9) Learned counsel for the respondent, on the other hand, made an
effervasive attempt to justify the decision of the High Court with
emphatic plea that when the very purpose of arbitration is frustrated by
the members of the Tribunal who, were dragging the proceedings, the
Court was not powerless to travel beyond the framework of Clause 64 of
the GCC and appoint a retired Chief Justice as the arbitrator. He
referred to the specific findings of the High Court in the impugned
judgment in this behalf, inter alia, observing as under:
“10. The entire facts and circumstances mentioned above
depict that the delay caused in the arbitral proceedings
was intentional. The members of the arbitral tribunal
continued their dilatory tactics in deciding the arbitral
proceedings since 2007 and when after about four years
specific directions were given by this Court vide order
dated 09.03.2011 passed in Request Case No.10 of 2011
the said authorities did not flinch for a moment in
disobeying the specific direction of this Court and
continued their dilatory attitude although the petitioner had
produced the said order of this Court before the arbitral
tribunal on 25.03.2011 and filed his pleadings and reply
by 21.04.2011. Thereafter, long adjournments were
granted in the arbitral proceeding violating the specific
directions of this Court for holding regular sittings at Patna
and even after the long date fixed by the arbitral tribunal,
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sometimes respondent-authorities took long adjournments
to file their counter reply and most of the times one or the
other member of the arbitral tribunal were not available
and they saw to it that the time of three months granted
by this Court vide order dated 09.03.2011 is expired. This
attitude of the arbitral tribunal clearly amounts to
disobedience of the specific directions of this Court vide
order dated 09.03.2011 passed in Request Case No.10 of
2010.
11. All these facts also disclose a very sorry state of
affairs that the members of the arbitral tribunal are inept &
ineffectual by any standard, completely negligent towards
their duties and having no sanctity for any law or for the
orders of the High Court, which are binging upon them.
All the training courses etc. imparted to them have clearly
proved to be wastage of public exchequer, which comes
from the hard earned money of the people. The Railways
must take note of these observations and the order of this
Court and act accordingly.
12. So far this case is concerned, it had already been
mentioned in order dated 09.03.2011 passed by this Court
in Request Case No.10 of 2010 that if the arbitration was
not completed within three months from the date of
receipt/production of a copy of the said order before the
arbitral tribunal, the petitioner would be at liberty to
approach this Court and if the facts claimed by the
petitioner were found to be true, this Court would be
constrained to pass appropriate orders in accordance with
the Act. In the said circumstances and in view of the
claim of the petitioner having been found to be proved
regarding the attitude of the tribunal, this request case is
allowed and the arbitral tribunal appointed by
respondent-authorities is hereby set aside and a sole
Arbitrator is appointed to decide the arbitral proceedings
expeditiously without giving any undue adjournment to
any of the parties.”
10) He further submitted that in the case of North Eastern Railway v.
Tripple Engineering Works , decided on 13.08.2014 in Civil Appeal
No.6275 of 2014 (arising out of S.L.P. (C) No.20427 of 2013), in almost
identical circumstances, this Court had approved the similar directions
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of the Patna High Court.
11) It is not in dispute that as per Clause 64 of the GCC, three arbitrators
are to be appointed, in the manner prescribed therein in case of dispute
between the parties. The relevant portion of Clause 64 with which we
are concerned with the present conditions is extracted below:
“ 64. (1) (i) Demand for Arbitration - In the event of any
dispute or difference between the parties as to the
construction or operation of this contract, or the respective
rights and liabilities of the parties on any matter in
question, dispute or difference on any account or as to the
withholding by the Railway of any certificate to which the
contractor may claim to be entitled to, or if the Railway
fails to make a decision within 120 days, then and in any
such case, but except in any of the expected matters
referred to in clause 63 of these conditions, the contractor,
after 120 days but within 180 days of his presenting his
final claim on disputed matters, shall demand in writing
the dispute or difference be referred to arbitration.
xx xx xx
64. (3) (a) (I) In cases where the total value of all claims
in question added together does not exceed 10,00,000/-
(Rupees ten lakhs only), the Arbitral Tribunal consist of a
sole arbitrator who shall be either the General Manager of
a gazette officer of Railway not below the grade of JA
grade nominated by the General Manager in that behalf.
The sole arbitrator shall be appointed within 60 days from
the day when a written and valid demand for arbitration is
received by Railway.
64. (3) (a) (ii) In cases not covered by clause 64 (3) (a)
(I), the Arbitral Tribunal shall consist of a panel of
three Gazetted Railway Officers not below JA grade,
as the arbitrators. For this purpose, the Railway will
send a panel of more than 3 names of Gazetted Railway
Officers of one or more departments of the Railway to the
contractor who will be asked to suggest to General
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Manager upto 2 names out of the panel for appointment
as contractor's nominee. The General Manager shall
appoint at least one out of them as the contractor's
nominee and will, also simultaneously appoint the balance
number of arbitrators either from the panel or from outside
the panel, duly indicating the presiding arbitrator from
amongst the 3 arbitrators so appointed. While nominating
the arbitrators it will be necessary to ensure that one of
them is from the Accounts department. An officer of
Section Grade of the Account department shall be
considered of equal status to the officers in SA grade of
other departments of the Railways for the purpose of
appointment of arbitrators.
64. (3) (a) (iii) If one or more of the arbitrators
appointed as above refuses to act as arbitrator,
withdraws from his office as arbitrator, or vacates
his/their office/ offices or is/ are unable or unwilling to
perform his functions as arbitrator for any reason
whatsoever or dies or in the opinion of the General
Manager fails to act without undue delay, the General
Manager shall appoint new arbitrator/arbitrators to act
in his/their place in the same manner in which the
earlier arbitrator/arbitrators had been appointed.
Such re-constituted Tribunal may, at its discretion,
proceed with the reference from the stage at which it was
left by the previous arbitrator(s).”
12) At this stage, we may take note of the scheme of the Act as well, by
noticing those provisions which would be attracted to deal with such a
situation. Relevant provisions are extracted below for ready reference:
“ 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.
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(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 sub-section (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 sub-section (3) of section 12.
15. Termination of mandate and substitution of
arbitrator. - (1) In addition to the circumstances referred
to in section 13 or section 14, the mandate of an arbitrator
shall terminate -
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a
substitute arbitrator shall be appointed according to the
rules that were applicable to the appointment of the
arbitrator being replaced.
(3) Unless otherwise agreed by the parties, where an
arbitrator is replaced under sub-section (2), any hearings
previously held may be repeated at the discretion of the
arbitral tribunal.
(4) Unless otherwise agreed by the parties, an order or
ruling of the arbitral tribunal made prior to the replacement
of an arbitrator under this section shall not be invalid
solely because there has been a change in the
composition of the arbitral tribunal.
32. Termination of proceedings. - (1) The arbitral
proceedings shall be terminated by the final arbitral award
or by an order of the arbitral tribunal under sub-section
(2).
(2) The arbitral tribunal shall issue an order for the
termination of the arbitral proceedings where -
(a) the claimant withdraws his claim, unless the
respondent objects to the order and the arbitral tribunal
recognises a legitimate interest on his part in obtaining a
final settlement of the dispute,
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(b) the parties agree on the termination of the
proceedings, or
(c) the arbitral tribunal finds that the continuation of the
proceedings has for any other reason become
unnecessary or impossible.
(3) Subject to section 33 and sub-section (4) of section
34, the mandate of the arbitral tribunal shall terminate with
the termination of the arbitral proceedings.”
13) As is clear from the reading of Section 14, when there is a failure on the
part of the Arbitral Tribunal to act and it is unable to perform its function
either de jure or de facto , it is open to a party to the arbitration
proceedings to approach the Court to decide on the termination of the
mandate. Section 15 provides some more contingencies when
mandate of an arbitrator can get terminated. In the present case, the
High Court has come to a categorical finding that the Arbitral Tribunal
failed to perform its function, and rightly so. It is a clear case of inability
on the part of the members of the Tribunal to proceed in the matter as
the matter lingered on for almost four years, without any rhyme or
justifiable reasons. The members did not mend their ways even when
another life was given by granting three months to them. Virtually a
pre-emptory order was passed by the High Court, but the Arbitral
Tribunal remained unaffected and took the directions of the High Court
in a cavalier manner. Therefore, the order of the High Court terminating
the mandate of the arbitral tribunal is flawless. This aspect of the
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impugned order is not even questioned by the appellant at the time of
hearing of the present appeal.
14) However, the contention of the appellant is that even if it was so, as per
the provisions of Section 15 of the Act, substitute arbitrators should
have been appointed “according to the rules that were applicable to the
appointment of the arbitrator being replaced”. On this basis, it was the
submission of Mr. Mehta, learned ASG, that High Court should have
resorted to provision contained in Clause 64 of the GCC.
15) No doubt, ordinarily that would be the position. The moot question,
however, is as to whether such a course of action has to be necessarily
adopted by the High Court in all cases, while dealing with an application
under Section 11 of the Act or there is a room for play in the joints and
the High Court is not divested of exercising discretion under some
circumstances? If yes, what are those circumstances? It is this very
aspect which was specifically dealt with by this Court in Tripple
Engineering Works (supra). Taking note of various judgments, the
Court pointed out that the notion that the High Court was bound to
appoint the arbitrator as per the contract between the parties has seen a
significant erosion in recent past. In para 5 of the said decision, those
judgments where departure of the aforesaid “classical notion” has been
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made are taken note of. It would, therefore, be useful to reproduce the
said para along with paras 6 & 7 herein below:
“5. The “classical notion” that the High Court while
exercising its power Under Section 11 of the Arbitration
and Conciliation Act, 1996 (hereinafter for short 'the Act')
must appoint the arbitrator as per the contract between
the parties saw a significant erosion in Ace Pipeline
Contracts (P) Ltd. v. Bharat Petroleum Corporation
Ltd. , (2007) 5 SCC 304 wherein this Court had taken the
view that though the contract between the parties must be
adhered to, deviations therefrom in exceptional
circumstances would be permissible. A more significant
development had come in a decision that followed soon
thereafter in Union of India v. Bharat Battery
Manufacturing Co. (P) Ltd. , (2007) 7 SCC 684 wherein
following a three Judges Bench decision in Punj Lloyd
Ltd. v. Petronet MHB Ltd. , (2006) 2 SCC 638 it was held
that once an aggrieved party files an application Under
Section 11 (6) of the Act to the High Court, the opposite
party would lose its right of appointment of the
arbitrator(s) as per the terms of the contract. The
implication that the Court would be free to deviate from
the terms of the contract is obvious. The apparent
dichotomy in Ace Pipeline (supra) and Bharat Battery
Manufacturing Company (P) Ltd. (supra) was
reconciled by a three Judges Bench of this Court in
Northern Railway Administration, Ministry of Railway,
New Delhi v. Patel Engineering Co. Limited , (2008) 10
SCC 240 where the jurisdiction of the High Court Under
Section 11 (6) of the Act was sought to be emphasized by
taking into account the expression “to take the necessary
measure” appearing in Sub-section (6) of Section 11 and
by further laying down that the said expression has to be
read along with the requirement of Sub-section (8) of
Section 11 of the Act. The position was further clarified in
Indian Oil Corporation Limited & Ors. v. Raja
Transport Private Limited , (2009) 8 SCC 520.
Paragraph 48 of the report wherein the scope of Section
11 of the Act was summarized may be quoted by
reproducing Sub-paragraphs (vi) and (vii) herein below:
“(vi) The Chief Justice or his designate while
exercising power under Sub-section (6) of Section
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11 shall endeavour to give effect to the appointment
procedure prescribed in the arbitration clause.
(vii) If circumstances exist, giving rise to justifiable
doubts as to the independence and impartiality of
the person nominated, or if other circumstances
warrant appointment of an independent arbitrator by
ignoring the procedure prescribed, the Chief Justice
or his designate may, for reasons to be recorded,
ignore the designated arbitrator and appoint
someone else.”
6. The above discussion will not be complete without
reference to the view of this Court expressed in Union of
India v. Singh Builders Syndicate , (2009) 4 SCC 523
wherein the appointment of a retired Judge contrary to the
agreement requiring appointment of specified officers was
held to be valid on the ground that the arbitration
proceedings had not concluded for over a decade making
a mockery of the process. In fact, in paragraph 25 of the
report in Singh Builders Syndicate (supra) this Court
had suggested that the government, statutory authorities
and government companies should consider phasing out
arbitration clauses providing for appointment of serving
officers and encourage professionalism in arbitration.
7. A pronouncement of late in Deep Trading Co. v.
Indian Oil Corportation and Ors., (2013) 4 SCC 35
followed the legal position laid down in Punj Lloyd Ltd.
(supra) which in turn had followed a two Judges Bench
decision in Datar Switchgears Ltd. v. Tata Finance Ltd.,
(2000) 8 SCC 151. The theory of forfeiture of the rights of
a party under the agreement to appoint its arbitrator once
the proceedings under Section 11(6) of the Act had
commenced came to be even more formally embedded in
Deep Trading Company (supra) subject, of course, to
the provisions of Section 11(8), which provision in any
event, had been held in Northern Railway
Administration (supra) not to be mandatory, but only
embodying a requirement of keeping the same in view at
the time of exercise of jurisdiction under Section 11(6) of
the Act.”
16) Speedy conclusion of arbitration proceedings hardly needs to be
emphasised. It would be of some interest to note that in England also,
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Modern Arbitration Law on the lines of UNCITRAL Model Law, came to
be enacted in the same year as Indian Law which is known as English
st
Arbitration Act, 1996 and it became effective from 31 January, 1997. It
is treated as the most extensive statutory reform of English arbitration
law. Commenting upon the structure of this Act, Mustill and Boyd in
their “Commercial Arbitration, 2001 companion volume to the second
edition, have commented that this Act founded on four pillars. These
pillars are described as:
(a) The First Pillar: Three General Principles.
(b) The Second Pillar: The General Duty of the Tribunal.
(c) The Third Pillar: The General Duty of the Parties.
(d) The Fourth Pillar: Mandatory and Semi Mandatory
Provisions.
In so far as first pillar is concerned, it contains three general principles
on which the entire edifice of the said Act is structured. These principles
are mentioned by an English Court in its judgment in the case of
Department of Economics Policy and Development of the City of
Moscow v. Bankers Trust Co. , (2004) EWCA Civ 314. In that case,
Mance, L.J. succinctly summed up the objective of this Act in the
following words: 'Parliament has set out, in the Arbitration Act, 1996, to
encourage and facilitate a reformed and more independent, as well as
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private and confidential, system of consensual dispute resolution, with
only limited possibilities of court involvement where necessary in the
interests of the public and of basic fairness'. Section 1 of the Act sets
forth the three main principles of arbitration law viz. - (I) speedy,
inexpensive and fair trial by an impartial tribunal; (ii) party autonomy;
and (iii) minimum court intervention. This provision has to be applied
purposively. In case of doubt as to the meaning of any provision of this
Act, regard should be had to these principles.
17) In the book “O.P. Malhotra on the Law and Practice of Arbitration and
Conciliation” (Third Edition revised by Ms. Indu Malhotra), it is rightly
observed that Indian Arbitration Act is also based on the aforesaid four
foundational pillars.
18) First and paramount principle of the first pillar is “fair, speedy and
inexpensive trial by an Arbitral Tribunal”. Unnecessary delay or
expense would frustrate the very purpose of arbitration. Interestingly,
second principle which is recognised in the Act is the party autonomy in
the choice of procedure. This means that if a particular procedure is
prescribed in the Arbitration Agreement which the parties have agreed
to, that has to be generally resorted to. It is because of this reason, as
a normal practice, the Court will insist the parties to adhere to the
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procedure to which they have agreed upon. This would apply even
while making the appointment of substitute arbitrator and the general
rule is that such an appointment of a substitute arbitrator should also be
done in accordance with the provisions of the original agreement
applicable to the appointment of the arbitrator at the initial stage. (see
Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India
Ltd. and another , (2006) 6 SCC 204. However, this principle of party
autonomy in the choice of procedure has been deviated from in those
cases where one of the parties have committed default by not acting in
accordance with the procedure prescribed. Many such instances where
this course of action is taken and the Court appoint the arbitrator when
the persona designata has failed to act, are taken note of in para 5 of
Tripple Engineering Works (supra). We are conscious of the fact that
these were the cases where appointment of the independent arbitrator
made by the Court in exercise of powers under Section 11 of account of
'default procedure'. We are, in the present case, concerned with the
constitution of substitute Arbitral Tribunal where earlier Arbitral Tribunal
has failed to perform. However, the above principle of default procedure
is extended by this Court in such cases as well as is clear from the
judgment in Singh Builders Syndicate (supra).
19) In the case of contracts between Government Corporations / State
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owned companies with private parties/ contractors, the terms of the
agreement are usually drawn by the Government company or public
sector undertakings. Government contracts have broadly two kinds of
arbitration clauses, first where a named officer is to act as sole
arbitrator; and second, where a senior officer like a managing director,
nominates a designated officer to act as the sole arbitrator. No doubt,
such clauses which give the Government a dominant position to
constitute the Arbitral Tribunal are held to be valid. At the same time, it
also casts an onerous and responsible duty upon the persona designata
to appoint such persons/officers as the arbitrators who are not only able
to function independently and impartially, but are in a position to devote
adequate time in conducting the arbitration. If the Government has
nominated those officers as arbitrators who are not able to devote time
to the arbitration proceedings or become incapable of acting as
arbitrators because of frequent transfers etc., then the principle of
'default procedure' at least in the cases where Government has
assumed the role of appointment of arbitrators to itself, has to be
applied in the case of substitute arbitrators as well and the Court will
step in to appoint the arbitrator by keeping aside the procedure which is
agreed to between the parties. However, it will depend upon the facts of
a particular case as to whether such a course of action should be taken
or not. What we emphasise is that Court is not powerless in this regard.
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20) In Singh Builders Syndicate (supra) where pendency of arbitration
proceedings for over a decade was found by this Court to be a mockery
of a process. This anguish is expressed by the Court in the said
judgment in the following manner:
“15. The object of the alternative dispute resolution
process of arbitration is to have expeditious and effective
disposal of the disputes through a private forum of the
parties' choice. If the Arbitral Tribunal consists of serving
officers of one of the parties to the dispute, as members in
terms of the arbitration agreement, and such tribunal is
made non-functional on account of the action or inaction
or delay of such party, either by frequent transfers of such
members of the Arbitral Tribunal or by failing to take steps
expedititiously to replace the arbitrators in terms of the
arbitration agreement, the Chief Justice or his designate,
required to exercise power under Section 11 of the Act,
can step in and pass appropriate orders.
16. We fail to understand why the General Manager of
the Railways repeatedly furnished panels containing
names of officers who were due for transfer in the near
future. We are conscious of the fact that a serving officer
is transferred on account of exigencies of service and
transfer policy of the employer and that merely because
an employee is appointed as arbitrator, his transfer cannot
be avoided or postponed. But an effort should be made
to ensure that officers who are likely to remain in a
particular place are alone appointed as arbitrators and
that the Arbitral Tribunal consisting of serving officers,
decides the matter expeditiously.
17. Constituting Arbitral Tribunals with serving officers
from different far-away places should be avoided. There
can be no hard-and-fast rule, but there should be a
conscious effort to ensure that the Arbitral Tribunal is
constituted promptly and arbitration does not drag on for
years and decades.
18. As noticed above, the matter has now been pending
for nearly ten years from the date when the demand for
arbitration was first made with virtually no progress.
18
Having regard to the passage of time, if the Arbitral
Tribunal has to be reconstituted in terms of Clause 64,
there may be a need to change even the other two
members of the Tribunal.
19. The delays and frequent changes in the Arbitral
Tribunal make a mockery of the process of arbitration.
Having regard to this factual background, we are of the
view that the appointment of a retired Judge of the Delhi
High Court as sole arbitrator does not call for interference
in exercise of jurisdiction under Article 136 of the
Constitution of India.”
21) The appointment of arbitrator by the Court, of its own choice, departing
from the arbitration clause, is therefore not unknown and has become
an acceptable proposition of law which can be termed as a legal
principle which has come to be established by a series of judgments of
this Court. Reasons for debating such a course of action are not far to
seek and already taken note of above.
22) In the present case, we find the fact situation almost same as in Tripple
Engineering Works (supra) and Singh Builders Syndicate (supra). If
the contention of the appellant is allowed, it would amount to giving
premium to the appellant for the fault of the Arbitral Tribunal's members
who were appointed by none else but by appellant itself. As pointed
above, the appellant has not questioned the order of the High Court in
so far as it has terminated the mandate of the earlier Arbitral Tribunal
because of their inability to perform the task assigned to them. In such
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a situation, leaving the respondent at the mercy of the appellant thereby
giving the power to the appellant to constitute another Arbitral Tribunal
would amount to adding insult to the serious injury already suffered by
the respondent because of non conclusion of the arbitral proceedings
even when the dispute were raised in the year 2007. In case, the
cherished and benevolent purpose and objective of speedy resolution of
the disputes by arbitral proceedings is to be accomplished, it becomes
the bounden duty of the persona designata to appoint such arbitrator(s)
who have sufficient time at their disposal to attend to this task assigned
to them and to conclude the arbitral proceedings in a speedily manner.
It is a common sight that the officers who are awfully busy in their other
routine functions, because of their status and position, are made
arbitrators. For them, discharge of their other duties assumes more
importance (and naturally so) and their role as the arbitrators takes a
back seat. This kind of behaviour showing casual approach in
arbitration cases is anathema to the very genesis of arbitration.
Therefore, where the Government assumes the authority and power to
itself, in one sided arbitration clause, to appoint the arbitrators in the
case of disputes, it should be more vigilant and more responsible in
choosing the arbitrators who are in a position to conduct the arbitral
proceedings in an efficient manner, without compromising with their
other duties. Time has come when the appointing authorities have to
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take call on such aspects failing which (as in the instant case), Courts
are not powerless to remedy such situations by springing into action and
exercising their powers as contained in Section 11 of the Act to
constitute an Arbitral Tribunal, so that interest of the other side is equally
protected.
23) In view of the aforesaid, we do not find any merit in the present appeal
which is dismissed with costs.
.............................................J.
(J. Chelameswar)
.............................................J.
(A.K. SIKRI)
New Delhi
September 16, 2014
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ITEM NO.1A COURT NO.9 SECTION XVI
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No. 8860 of 2014
(Arising out of Petition(s) for Special Leave to Appeal (C)
No(s). 20183/2012)
UNION OF INDIA & ORS. Appellant(s)
VERSUS
U.P.STATE BRIDGE CORP. LTD. Respondent(s)
Date : 16/09/2014 This appeal was called on for pronouncement
of judgment today.
For Petitioner(s)
Mr. B. Krishna Prasad,Adv.
For Respondent(s)
Mr. Lakshmi Raman Singh,Adv.
Hon'ble Mr. Justice A.K. Sikri pronounced the
judgment of the Bench comprising of Hon'ble Mr. Justice J.
Chelameswar and His Lordship.
Leave granted.
The appeal is dismissed with costs in terms of
the signed reportable judgment.
(DEEPAK MANSUKHANI) (INDU BALA KAPUR)
COURT MASTER COURT MASTER
(Signed reportable judgment is placed on the file)
22