High Court of KeralaSingle Judge2022-08-08Disposal of AR 22/2021 with provisional appoint...

M/S Coastal Engineering, Konthuruthy, Kochi-682013 v. Union of India and Others

Case / Petition Number:AR NO. 22 OF 2021

Neutral Citation:/

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: Sathish Ninan
Judgment Date: 2022-08-08
Court Decision / Holding: Arbitration Request disposed; Retired Justice R. Bhaskaran is provisionally nominated as Sole Arbitrator. Copy of the order to be communicated to the Sole Arbitrator, who must file a disclosure under Section 11(8) r/w Section 12(1). Registry to place disclosure before Court for confirmation of appointment. Arbitrator’s fees to be paid as per IV Schedule; arbitration costs to be shared equally.
Final Disposition: Disposal of AR 22/2021 with provisional appointment of Sole Arbitrator; disclosure to be filed; fees as per IV Schedule; costs shared equally; modified GCC not applicable to pre-existing contract in absence of assent.

Parties to the Case

Appellants / Petitioners

M/S Coastal Engineering, Konthuruthy, Kochi-682 013

Respondents

The Union of India
The Chief Engineer (South), Construction, Southern Railway
The Deputy Chief Engineer, Construction, Southern Railway

Legal Representation & Advocates

Counsels for Petitioners

• K.L. Varghese (Sr.)
• Smt. Samantha Varghese
• Sri. Rahul Varghese
• Sri. Ranjith Varghese

Counsels for Respondents

• Sri. A. Dinesh Rao, SC, Railways
• Sri. S. Biju

Case Synopsis & Summary

This Arbitration Request arises from a contract for doubling the Kuruppanthara-Chingavanam railway track. Annexure-A1 (dated 30.01.2016) incorporates Annexure-A16 General Conditions of Contract (GCC). A dispute emerged regarding the appointment of an Arbitrator. Clause 64(3)(a)(i) of Annexure-A16 prescribes appointment of serving Railway officers as Arbitrators, but the applicant contends that Section 12(5) of the Arbitration and Conciliation Act prohibits appointing serving officers, mandating an impartial Arbitrator. The respondents rely on Annexure-R2(d), dated 11.11.2016, which purportedly modifies the GCC to allow retired Railway officers as Arbitrators. The work was awarded 11.05.2015 and Annexure-A1 contract executed 30.01.2016; Annexure-R2(d) came into effect later, and the contract in question did not reflect assent to the modification. The Court notes the technical nature of the dispute and, invoking Section 26 of the Arbitration Act, acknowledges the need for expert assistance in technical matters. Relying on Apex Court judgments in T.R.F. Limited v. Energo Engineering Projects Ltd, Bharat Broadband Network Ltd v. United Telecoms Ltd, Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd, and Ellora Paper Mills Ltd. v. State of Madhya Pradesh, the Court holds that Clause-64 cannot be the exclusive arbitrator-pool. The AR is disposed by nominating retired Justice R. Bhaskaran as Sole Arbitrator, with disclosure, fees, and cost directions.

Provisions of Law Cited

Arbitration and Conciliation Act, 1996Section 12(5) of the Arbitration and Conciliation Act, 1996Section 11(8) r/w Section 12(1) of the Arbitration and Conciliation Act, 1996Section 26 of the Arbitration and Conciliation Act, 1996IV Schedule to the Arbitration and Conciliation Act, 1996Clause 64(3)(a)(i) of Annexure-A16 General Conditions of ContractAnnexure-R2(d) modified General Conditions of Contract

Submissions & Arguments

Contentions of Appellants / Petitioners

The applicant argued that Section 12(5) of the Act bars serving officers of the department from acting as Arbitrators, requiring an impartial arbitrator. They contended that Annexure-R2(d) cannot retroactively apply to a pre-existing contract and that Annexure-A16's Clause 64 cannot be read to force the parties into appointing serving officers as Arbitrators.

Contentions of Respondents

The respondents contended that Annexure-R2(d) modifies the GCC to permit retired Railway officers as Arbitrators; since Annexure-R2(d) was issued, it should apply, and the contract should be read with the modified GCC. They also argued that technical expertise necessitates special expertise and Section 26 empowers Arbitrators to appoint experts.

Cited Precedents (4)

Case Name	Citation	Treatment	Explanation
TRF Limited v. Energo Engineering Projects Ltd.	(2017) 8 SCC 377	Positive	Cited to support that Section 12(5) disqualifies serving officers as arbitrators and that an impartial arbitrator should be appointed; utilized to reject exclusive reliance on Clause 64.
Bharat Broadband Network Limited v. United Telecoms Limited	(2019) 5 SCC 755	Positive	Cited for the principle that imparts impartial arbitration and the non- exclusivity of serving-officer appointments; supports appointment of an impartial arbitrator.
Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd.	(2020) 20 SCC 760	Positive	Cited to reinforce the precedence that the arbitration framework requires independence and that modifications cannot override statutory protections under Section 12(5).
Ellora Paper Mills Ltd. v. State of Madhya Pradesh	(2022) 3 SCC 1	Positive	Cited for reaffirming impartial arbitrator principles and that statutory safeguards apply to arbitration even in technical disputes.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE SATHISH NINAN** **MONDAY, THE 8[TH] DAY OF AUGUST 2022 / 17TH SRAVANA, 1944** ## **AR NO. 22 OF 2021** ## **APPLICANT:** M/S.COASTAL ENGINEERING, KONTHURUTHY, KOCHI-682 013, REPRESENTED BY ITS MANAGING PARTNER, K.J.JOHN. BY ADVS. K.L.VARGHESE (SR.) SMT.SANTHA VARGHESE SRI.RAHUL VARGHESE SRI.RANJITH VARGHESE ## **RESPONDENTS:** 1 THE UNION OF INDIA, REPRESENTED BY THE GENERAL MANAGER, HEADQUARTERS OFFICE SOUTHERN RAILWAY, CHENNAI-600 003. 2 THE CHIEF ENGINEER (SOUTH), CONSTRUCTION, SOUTHERN RAILWAY, KOCHI-682 016. 3 DEPUTY CHIEF ENGINEER, CONSTRUCTION, SOUTHERN RAILWAY, KOCHI-682 016. BY ADVS. SRI.A.DINESH RAO, SC, RAILWAYS SRI.S. BIJU THIS ARBITRATION REQUEST HAVING COME UP FOR ADMISSION ON 08.08.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **SATHISH NINAN, J.** **= = = = = = = = = = = = = = = = = = Arbitration Request No.22 of 2021 = = = = = = = = = = = = = = = = = = Dated this the 8[th] day of August, 2022** ## **O R D E R** The applicant was awarded the work of, doubling of Kuruppanthara-Chingavanam Railway track. Annexure-A1 is the contract dated 30.01.2016 entered into between the parties in the said regard. Annexure-A16 is the General Conditions of Contract. It is not in dispute that the general conditions formed part of the contract between the parties. There has arisen disputes between the parties. Clause 64(3)(a)(i) of the General Conditions of Contract provides for appointment of serving officers of the department as Arbitrators. In view of Section 12(5) of the Arbitration and Conciliation Act and the law laid down by the Apex Court in a series of judgments, the serving officers cannot be appointed as Arbitrators and an impartial Arbitrator is to be appointed, contends the applicant. Since the parties were not able to arrive at a consensus with regard to the appointment of an **AR No.22 of 2021** -: 2 :- Arbitrator, the applicant has approached this Court by way of this Arbitration Request. 2. The respondents have filed a counter affidavit. They essentially rely on Annexure-R2(d) modified General Conditions of Contract which stipulate for appointment of retired officers of the Railway as Arbitrators. It is contended that the appointment could be made only in terms thereof. 3. Heard Sri.K.L.Varghese, learned Senior Counsel appearing on behalf of the applicant and Sri.S.Biju, learned CGC, appearing on behalf of the respondents. 4. The existence of an Arbitration Clause in the agreement between the parties, providing for resolution of disputes by Arbitrator, is not in dispute. The only dispute is with regard to the naming/nomination of the Arbitrator. Clause 64 of Annexure-A16 General Conditions of Contract though provide for appointments of serving officers of the Railway to be Arbitrators, the same cannot be resorted to in the light of Section 12(5) of **AR No.22 of 2021** -: 3 :- the Arbitration and Conciliation Act and as laid down by the Apex Court in _**T.R.F. Limited v. ENERGO Engineering Projects Ltd. [(2017) 8 SCC 377], Bharat Broadband Network Limited v. United Telecoms Limited [(2019) 5 SCC 755]**_ , _**Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. [(2020) 20 SCC 760]**_ , _**Ellora Paper Mills Ltd. v. State of Madhya Pradesh [(2022) 3 SCC 1]**_ . In the light of the above, it could not be contended that only the officers named under Clause-64 of Annexure-A16 General Conditions of Contract could be appointed as Arbitrators, is unsustainable. 5. The learned counsel for the respondents would then contend that, the General Conditions of Contract has been modified as per Annexure-R2(d), and that in terms thereof, retired Railway Officers are to be appointed as Arbitrators. Noticeably, Annexure-R2(d) modified General Conditions of Contract is dated 11.11.2016 whereas the work in question was awarded on 11.05.2015. Annexure-A1 contract was executed on **AR No.22 of 2021** -: 4 :- 30.01.2016. The modified general conditions of contract was not in force at the time when Annexure-A1 contract was entered into. It came into effect much later. At the time of award of the contract and entering into Annexure-A1 contract, Annexure-A16 was the General Conditions of Contract in force and it formed part of Annexure-A1 contract. The respondents cannot unilaterally seek to impose the terms of the modified General Conditions of Contract into a pre-existing contract, unless assented to by the other party. There is no case for the respondents that the applicant had agreed to and accepted the modified General Conditions of Contract as part of the agreement between the parties. In the light thereof, it could only be held that the parties are bound by Annexure-A1 contract read with Annexure-A16 General Conditions of Contract, and that Annexure-R2(d) modified General Conditions of Contract does not apply. **AR No.22 of 2021** -: 5 :- 6. It is next contended by the learned Standing Counsel for the respondents that the issue involved requires technical expertise and hence it is only appropriate to nominate former officers of the Railway as Arbitrators. In this context Section 26 of the Arbitration and Conciliation Act is of relevance. The provision gives due authority to the Arbitrator to call for expert opinion. It shall always be open for the Arbitrator to appoint an expert for technical assistance and information. 7. Resultantly, the Arbitration Request is disposed of with the following directions:- (a) Retired Justice R. Bhaskaran, Sreekrishna Kripa, Kaloor, Kochi-682017, is nominated provisionally as the Sole Arbitrator to adjudicate upon the disputes between the parties. (b) A copy of this order shall be communicated to the learned Sole Arbitrator by the Advocate of the applicant within a period of one week from today. A copy **AR No.22 of 2021** -: 6 :- of the order shall also be forwarded to the learned Sole Arbitrator by the Registry. (c) The Arbitrator is requested to forward the statement of disclosure under Section 11(8) r/w Section 12(1) of the Arbitration and Conciliation Act, 1996. (d) The registry shall place the disclosure statement before this Court, for confirmation of the appointment of the Arbitrator. (e) The Arbitrator's fees shall be payable as per IV[th] Schedule to the Arbitration and Conciliation Act, 1996. - (f) The arbitration costs and fees shall be shared - equally. Sd/- **SATHISH NINAN JUDGE** kns/- //True Copy// P.S. to Judge **AR NO. 22 OF 2021** ## **APPENDIX** ## **PETITIONER'S ANNEXURES :-** |**ANNEXURE-A1**|**TRUE COPY OF THE FACING SHEET OF THE AGREEMENT**| |---|---| ||**EXECUTED BY THE APPLICANT AND THE RESPONDENTS.**| |**ANNEXURE-A2**|**TRUE COPY OF THE SCOPE OF THE SUBJECT WORK.**| |**ANNEXURE-A3**|**TRUE COPY OF THE INTERIM ORDER ORDERING STATUS QUO**| ||**IN WPC 3201/2019**| |**ANNEXURE-A4**|**TRUE COPY OF THE JUDGMENT DATED 07.02.2019 IN WPC**| ||**3201/2019.**| |**ANNEXURE-A5**|**TRUE COPY OF THE REPRESENTATION DATED 26.02.2019**| ||**SUBMITTED TTHROUGH COVER OF LETTER DATED 27.02.2019**| ||**TO THE 2ND RESPONDENT.**| |**ANNEXURE-A6**|**TRUE COPY OF THE LETTER DATED 06.08.2019 ISSUED BY**| ||**THE 2ND RESPONDENT TO THE 3RD RESPONDENT.**| |**ANNEXURE-A7**|**TRUE COPY OF THE LEGAL NOTICE DATED 12.08.2019**| ||**ISSUED BY THE APPLICANT'S LAWYERS TO THE 3RD**| ||**RESPONDENT.**| |**ANNEXURE-A8**|**TRUE COPY OF THE JUDGMENT OF THIS HON'BLE COURT**| ||**DATED 29.08.2019 IN WPC NO.22961/2019.**| |**ANNEXURE-A9**|**TRUE COPY OF THE LETTER DATED 23.09.2019 ISSUED BY**| ||**THE APPLICANT TO THE 2ND RESPONDENT.**| |**ANNEXURE-A10**|**TRUE COPY OF THE LETTER DATED 31.01.2020 ISSUED BY**| ||**THE APPLICANT TO THE 1ST RESPONDENT.**| |**ANNEXURE-A11**|**TRUE COPY OF THE LETTER DATED 22.02.2020 ISSUED BY**| ||**THE APPLICANT TO THE 1ST RESPONDENT.**| |**ANNEXURE-A12**|**TRUE COPY OF THE LETTER DATED 03.08.2020 ISSUED BY**| ||**THE APPLICANT TO THE 1ST RESPONDENT.**| |**ANNEXURE-A13**|**TRUE COPY OF THE LETTER DATED 13.08.2020 ISSUED BY**| ||**THE 1ST RESPONDENT TO THE APPLICANT.**| APPENDIX- **AR NO. 22 OF 2021** -2- **ANNEXURE-A14 TRUE COPY OF THE LETTER DATED 11.09.2020 ISSUED BY THE APPLICANT TO THE 1ST RESPONDENT ANNEXURE-A15 TRUE COPY OF THE LETTER DATED 30.10.2020 ISSUED BY THE 1ST RESPONDENT TO THE APPLICANT.** **ANNEXURE-A16 TRUE COPY OF THE ARBITRATION CLAUSE.** **ADDL. TRUE COPY OF THE DESIGN SUBMITTED BY THE APPLICANT ANNEXURE-A17 DT. 24.01.2019.** **ADDL. TRUE COPY OF THE NEW TENDER PROCEEDINGS WITH NEW ANNEXURE-A18 SPECIFICATIONS ISSUED BY THE SOUTHERN RAILWAY IN RELATION TO PETITIONER'S FORECLOSED WORK.** **ADDL. TRUE COPY OF THE LETTER DT. 10.02.2020 ISSUED BY TEH ANNEXURE-A19 2ND RESPONDENT TO THE APPLICANT.** ## **RESPONDENTS ANNEXURERS :-** **ANNEXURETRUE COPY OF THE REGULATIONS FOR TENDERERS AND R2(a) CONTRACTOR'S AND INSTRUCTION TO THE TENDERES. ANNEXURETRUE COPY OF THE ORDER DATED 20.03.2019 ISSUED BY R2(b) THE 1ST RESPONDENT TO THE APPLICANT. ANNEXUREA TRUE COPY OF THE LETTER DATED 13.08.2020. R2(c) ANNEXURETRUE COPY OF THE NOTIFICATION ISSUED BY THE MINISTRY R2(d) OF RAILWAY (RAILWAY BOARD) DATED 11.11.2016.** **-----**