Coastal Engineering, Konthuruthy v. Southern Railway and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** ## **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** **TUESDAY, THE 15TH DAY OF NOVEMBER 2016/24TH KARTHIKA, 1938** ## **AR.No. 21 of 2012 ()** **---------------------** **APPLICANT:** - **-------------------** **M/S.COASTAL ENGINEERING, KONTHURUTHY, KOCHI-682 013, REPRESENTED BY ITS MANAGING PARTNER, K.J.JOHN, AGED 48 YEARS, S/O. K.J. JOSEPH, KOITHARA HOUSE, KONTHURUTHY, KOCHI-682 013.** **BY ADVS.SRI.K.S.BABU,** **SMT.N.SUDHA, SRI.K.S.GOPI, SRI.ANTONY MATHEW, SRI.GEEN T.MATHEW, SRI.BABU SHANKAR.** **OPPOSITE PARTIES:** - **-----------------------------** **1. SOUTHERN RAILWAY, HEAD QUARTERS OFFICE, PARK TOWN, CHENNAI-600 003, REPRESENTED BY THE GENERAL MANAGER, SOUTHERN RAILWAY, HEAD QUARTERS OFFICE, PARK TOWN, CHENNAI-600 003.** **2. THE CHIEF ADMINISTRATIVE OFFICER, CONSTRUCTION, SOUTHERN RAILWAY, EGMORE, CHENNAI-600 008.** **3. THE CHIEF ENGINEER (NORTH), CONSTRUCTION, SOUTHERN RAILWAY, EGMORE, CHENNAI-600 008.** **4. THE DEPUTY CHIEF ENGINEER, CONSTRUCTION, SOUTHERN RAILWAY, KANNUR.** **5. UNION OF INDIA, REPRESENTED BY THE GENERAL MANAGER, SOUTHERN RAILWAY, HEADQUARTERS OFFICE, PARK TOWN, CHENNAI-600 003.** **R1 BY ADV. SRI.C.S.DIAS, SC.** - **THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 15-11-2016, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **rs.** **AR.No. 21 of 2012** ## **APPENDIX** ## **PETITIONER'S ANNEXURES:-** **ANNEXURE A1: THE TRUE PHOTOSTAT COPY OF THE LETTER NO.W.496/CN/TVC/03 (OT) DATED 08.11.2003 ISSUED BY THE CHIEF ENGINEER, CONSTRUCTION, SOUTHER RAILWAY, THIRUVANANTHAPURAM TO THE APPLICANT.** - **ANNEXURE A2: THE TRUE PHOTOSTAT COPY OF THE LETTER OF ACCEPTANCE DATED 01.12.2003 ISSUED BY THE CHIEF ENGINEER, CONSTRUCTION, SOUTHERN RAILWAY, THIRUVANANTHAPURAM TO THE APPLICANT.** ## **ANNEXURE A1 & A2 IN I.A. NO.10/2016** - **ANNEXURE A1 COPY OF THE ORDER IN AR. NO.21/2012 OF THE HONOURABLE HIGH COURT DATED 16/07/2012.** - **ANNEXURE A2 COPY OF THE LETTER DATED 25/01/2016 ISSUED BY SHRI M.ELAVARASAN, ONE OF THE JOINT ARBITRATORS, NOW WORKING AS CHIEF SIGNAL & TELECOM ENGINEER, NEW GM'S OFFICE, GADAG ROAD, HUBLI-580 020.** - **ANNEXURE A3: THE TRUE PHOTOSTAT COPY OF THE LETTER DATED 11.02.2004 ISSUED BY THE EXECUTIVE ENGINEER (CONSTRUCTION), SOUTHERN RAILWAY, TRIVANDRUM FOR CHIEF ENGINEER, (CONSTRUCTION), SOUTHERN RAILWAY, TRIVANDRUM TO THE APPLICANT.** - **ANNEXURE A4: THE TRUE PHOTOSTAT COPY OF THE LETTER DATED 16.03.2004 ISSUED BY THE APPLICANT TO THE CHIEF ENGINEER (CONSTRUCTION), SOUTHERN RAILWAY, EGMORE, CHENNAI-8** - **ANNEXURE A5: THE TRUE PHOTOSTAT COPY OF THE FORM NO.B 029743 ISSUED BY THE CHIEF MANAGER, STATE BANK OF INDIA, SSI BRANCH, ERNAKULAM TO THE CHIEF ENGINEER(N), CONSTRUCTION, SOUTHERN RAILWAY, CHENNAI 600008** - **ANNEXURE A6: ATTESTED PHOTOSTAT COPY OF AGREEMENT NO.177/CN/04 DATED 06.05.2004 EXECUTED BETWEEN RAILWAY ADMINISTRATION AND THE APPLICANT.** - **ANNEXURE A7: THE TRUE PHOTOSTAT COPY OF THE LETTER DATED 28.03.2005 ISSUED BY THE APPLICANT TO THE CHIEF ENGINEER (N), CONSTRUCTION, SOUTHERN RAILWAY, EGMORE, CHENNAI THROUGH THE DEPUTY CHIEF ENGINEER/CN/CAN.** - **ANNEXURE A8: THE TRUE PHOTOSTAT COPY OF THE RECEIPT OF ACKNOWLEDGEMENT OF ANNEXURE-A7 BY THE CHIEF ENGINEER, CONSTRUCTION, SOUTHERN RAILWAY, CHENNAI.** **.....2/-** **AR.No. 21 of 2012** ## **ANNEXURE A9:** - **THE TRUE PHOTOSTAT COPY OF THE LETTER NO. W.148/CN/CAN/CE/312 DATED 11.06.2005 ISSUED BY THE 4TH OPPOSITE PARTY.** - **ANNEXURE A10: THE TRUE PHOTOSTAT COPY OF THE NOTICE OF CLAIMS DATED 09.09.2005 SUBMITTED BY THE APPLICANT TO THE OPPOSITE PARTIES 1 TO 4.** - **ANNEXURE A11: THE TRUE PHOTOSTAT COPY OF THE LETTER DATED 02.04.2012 SENT BY THE APPLICANT.** - **ANNEXURE A11(a): POSTAL RECEIPT DATED 02.04.2012 OF LETTER SENT TO 1ST OPPOSITE PARTY.** - **ANNEXURE A11(b): POSTAL RECEIPT DATED 02.04.2012 OF LETTER SENT DEPUTY GENERAL MANAGER(GENERAL).** - **ANNEXURE A11(c): POSTAL RECEIPT DATED 02.04.2012 OF LETTER SENT TO THE THEN PRESIDING ARBITRATOR NOW HOLDING THE CHARGE OF FINANCIAL COMMISSIONER (RAILWAYS), RAILWAY BOARD, NEW DELHI.** - **ANNEXURE A12: TRUE PHOTOSTAT COPY OF THE LETTER DATED 18.04.2012 ISSUED BY THE 1ST OPPOSITE PARTY TO THE 2ND OPPOSITE PARTY.** - **ANNEXURE A13: TRUE COPY OF PAGE NOS. 1 AND 27 TO 29 OF THE GENERAL CONDITIONS OF CONTRACT WHICH CONTAIN THE RELEVANT CLAUSES FOR THE DETERMINATION OF THE DISPUTE INVOLVED IN THE ABOVE CASE.** ## **RESPONDENT'S ANNEXURES:-** - **ANNEXURE R4(1) COPY OF THE LETTER DATED 10/03/2016 ISSUED BY THE 1ST RESPONDENT TO THE MEMBER ARBITRATOR.** **ANNEXURE B1 COPY OF THE ORDER ISSUED BY THE DEPUTY GENERAL MANAGER, SOUTHERN RAILWAY, CHENNAI.** **//TRUE COPY//** **P.S. TO JUDGE** ## **rs.** ## **ANTONY DOMINIC, J** ........................................ Arbitration Request. 21/2012 .............................................. Dated this the 16[th ] day of July, 2012 ## **ORDER** Heard the learned counsel for the applicant and the learned Standing Counsel appearing for the respondent. 2. Applicant was a contractor of the Railways. AnnexureA6 is the agreement between the parties. General Conditions of the Contract provides for settlement of disputes between the parties by way of arbitration. Insofar as it is relevant for this case, clause 64(3) (a)(ii) and 64(3)(a)(iii) are extracted below for reference. ## 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 the General Manager upto 2 names out of the panel for appointment as the 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 'residing arbitrator' from amongst **A.R.21/12** 2 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 Selection Grade of the Accounts 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).” 3. Applicant had certain disputes with the Railways and they sought appointment of an Arbitrator. Accordingly, in 2006, an Arbitration Tribunal consisting of three Officers of the Railways was appointed by the first respondent. It is on record that the applicant filed their claim statement on 1.12.2006 and on completion of the pleadings, preliminary hearing was held on 12.10.2007. 4. However, subsequently in 2010, the Presiding **A.R.21/12** 3 Arbitrator got appointed as the Financial Commissioner of Railway Board and therefore, she was unable to perform her functions as the Presiding Arbitrator. 5. Despite this stalemate, fresh appointment was not made. Finally the applicant gave Annexure-A11 notice dated 2.4.2012 seeking the appointment of a Presiding Arbitrator. Annexure-A12 reply given by the respondents on 18.4.2012 shows the receipt of Annexure-A11. However appointment was not done and that made the applicant to file this request under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an independent Arbitrator as the Presiding Arbitrator, and this Application was presented on 13.6.2012. 6. Notice was given to the learned Standing Counsel appearing for the Railways and he has filed statement dated 2.7.2012. In this statement, it is disclosed that the first respondent, by his order dated 13.6.2012 appointed Smt. Usha Venugopal as the Presiding Arbitrator and that the other two arbitrators who are already appointed have been **A.R.21/12** 4 ordered to continue in the Arbitration Tribunal. According to him, therefore, nothing further survives in this Application. 7. However, learned counsel for the Applicant contended that Annexure-A11 notice of demand, having been given on 2.4.2012 and was admittedly received by the respondents, which is evident from Annexure A12, appointment ought to have been made within 30 days thereafter and that, on account of the failure of the first respondent in doing so, the first respondent has forfeited their right under Anneuxre-A6, the agreement between the parties and the General Conditions of Contract referred to above. It is on this basis, he seeks appointment of an independent Arbitrator to preside over the Arbitration Tribunal. Counsel also relied on the judgments of the Apex Court in **Datar Switchgears Ltd. v. Tata Finance Ltd. And Another (2000 (8) SCC 151),** and **Punj Lloyd Ltd. v. Petronet MHB Ltd. (2006 (2) SCC 638)** and of this Court in **The Divisional Railway Manager (Works), Southern Railway, Palakkad v. West Coast Agencies And Others (2005 (2) KLT, 734)** . **A.R.21/12** 5 8. However this argument of the learned counsel for the applicant was sought to be resisted by the learned counsel for the respondents by contending that the judgments relied on dealt with the cases of appointment of Arbitrators and not appointment consequent on the arbitrator withdrawing from arbitration. 9. Having considered the rival submissions, I do not see any substance in the contentions raised by the respondents. The provisions of the General Conditions of Contract extracted above, show that if one or more of the arbitrators of the Tribunal are unable to perform their functions as Arbitrator, the General Manger shall appoint a new Arbitrator/Arbitrators, in the same manner in which the earlier Arbitrator/Arbitrators had been appointed. Therefore, when an Arbitrator is to be substituted, the Contract contemplates the applicability of the provisions which are relevant for the appointment of arbitrator itself. The aforesaid judgments relied on by the learned counsel for the Applicant show that when a notice of demand is given for appointment of Arbitrator and if the opposite party fails to **A.R.21/12** 6 make appointment within 30 days, lapse of 30 days by itself does not result in a situation where he forfeits the right to make appointment and, that right will continue to be available till an application under Section 11(6) of the Act is made to the Court. 10. In this case, admittedly the applicant approached this Court by presenting this Petition on 13.6.2012 and the document produced along with the statement shows that the first respondent made the appointment on 13.6.2012 only and the communication in this behalf was received by the applicant on 20.6.2012. In such a case, it cannot be contended by the respondents that the appointment was made before the date of presentation of the petition. If that be so, having failed to make the appointment within the time as contemplated in the Act and in the judgments referred to above, the first respondent has forfeited its right to make appointment leading to a situation of failure of the agreed procedure of Arbitration and entitling this Court to invoke the powers under Section 11(6) of the Act and appoint an independent Arbitrator. 7 ## **A.R.21/12** The applicant has submitted a panel of three persons to be appointed as the Arbitrator. Accordingly, this Court appoint Justice Sri.T.V.Ramakrishnan, Former Judge, High Court of Kerala as the Presiding Arbitrator, who shall conduct the arbitration along with the arbitrators who are already appointed by the 1[st] respondent. The Presiding Arbitrator in consultation with the other members of the Tribunal shall complete the arbitration proceedings and conclude the same as expeditiously as possible fixing their terms as well. ## **Sd/- ANTONY DOMINIC, JUDGE** mrcs /true copy/ PA To Judge