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CASE NO.: Appeal (civil)  6593-6594 of 2005

PETITIONER: Union of India  & Anr.

RESPONDENT: M/s. V.S.Engineering (P) Ltd.

DATE OF JUDGMENT: 16/11/2006

BENCH: A.K.MATHUR & LOKESHWAR SINGH  PANTA

JUDGMENT: J U D G M E N T

A.K.MATHUR,J

               These appeals are directed against the judgment  and order passed by the High Court of Andhra Pradesh. By the  impugned order dated 27.4.2001 a batch of writ petitions were  disposed of including the one before us whereby the High  Court appointed arbitrator under Section 11 of the Arbitration  and Conciliation Act, 1996 (hereinafter to be referred to as ’the   Act’).  In the present appeals, we are concerned with Writ  Petition No.2465 of 2001 [ Union of India  & Anr. v.  M/s.V.S.Engineering (P) Ltd & Anr.]. So far as order dated  27.4.2001 passed by the Division Bench of the High Court is  concerned, all the issues raised in that order has already been  decided by this Court in the case of SBP & Co. v. Patel  Engineering Ltd. & Anr. [ (2005) 8 SCC 618] by a seven Judge  Bench of this Court. Therefore, no purpose will be served by  examining the validity of the order of the Division Bench of the  High Court challenged in this present appeal as all issues are  covered in the decision of SBP & Co. (supra), therefore this  appeal is accordingly disposed of in the light of the aforesaid  decision.         Brief  facts giving rise to  another appeal  are that M/s.  V.S. Engineering Private Limited, Hyderabad was awarded the  work of supply and stacking of 50mm machine crushed stone  ballast at Nallapadu Depot and loading the same into  B.T.Wagons by Mechanical/ Manual means for a quantity of 1.8  lakh cum at the value of Rs.5,02,20,000/-. The agreement  No.GM/W/SC/93/2 providing payment of mobilization advance  and machinery and plant advance was executed by  the  contractor on 19.4.1993.  The completion period was 39  months as per the acceptance letter dated 27.1.1993. As per  the agreement the work was to be commenced from 26.4.1993  and completed by 26.4.1996 supplying the ballast at the rate  of 60,000 cum per annum. As the contractor could not  commence the work as per the tender conditions  and supplied  only 88214 cum up to November, 1997 penalty for an amount  of Rs.1,01 crore was recovered from the running bills of the  contractor.  The appellant did not agree to the request of the  contractor for waiver of penalty and rescheduling of supply.   Therefore, a dispute arose between the parties  and the  contractor sought appointment of an arbitrator under clause  64 of the General Conditions of contract.  In pursuance of the  contractor’s demand the Arbitral Tribunal was appointed to  adjudicate the contractor’s claim.  The Arbitral Tribunal  initiated  the proceedings  and the contractor submitted his

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claim statement  before the Arbitral Tribunal.  Subsequently,  the contractor  filed an arbitration application  No.60 of 1998  dated 16.10.1998 before the High Court of Andhra Pradesh at  Hyderabad under section 11 of the Act, seeking appointment  of an Arbitrator to resolve the dispute emanating from the  agreement dated 19.4.1993.  The appellant- Union of India  contested the arbitration application filed by the respondent by  filing a counter and denying the allegations. It was pointed out  that it was wrong to say that the payment was not done for the  work done. It was alleged that the payment was made as per  the terms of the contract and there was no delay on the part of  the Railway. It was also contended that the request  for  referring the dispute for arbitration has to be done in  accordance with Clauses 63 & 64 of the General Clauses of  Contract. As per Clause 63, on receipt of the application the  Railway had to notify the decisions on all matters  including  the matters which came up under  the caption excepted  matters.  The respondent subsequently made a request for  referring the matter to Arbitral Tribunal,  The General Manager  of the Railways  as per Clause 64 of the General Conditions of  Contract accepted the request of the respondent for referring  the dispute to the Arbitral Tribunal and accordingly, a letter  was sent on 5.5.1998  furnishing four names  of Railways  Officers out of which the respondent had to nominate up to  two names which was the requirement in accordance with  clause 64 (3) (a) (ii) of the General Conditions of Contract. The  respondent chose  one name i.e. Shri R.N. Raghavan out of the  four names given to him and the dispute was referred to the  Arbitral Tribunal on 20.8.1998. Thereafter some other Railway  Official was appointed. Some claims were not referred to the  Arbitral Tribunal.  Meanwhile, the contactor filed petition in the  High Court. The High Court on 28.11.2000 appointed  Mr.Justice Y.V.Narayana as Arbitrator to resolve the disputes  and referred all 14 claims and also fixed the fee at Rs.2 lac .  Aggrieved by the order dated 28.11.2000 passed in  Civil  Miscellaneous Petition No.60 of 1998,  the appellant filed a  writ petition before the High Court challenging the order of the  learned Single Judge appointing the Arbitrator before the  Division Bench.   The Division Bench  clubbed together large  number of matter including various issues pertaining to  Arbitration Act, 1996 & decided by its order dated 27.4.2001.   This order was also challenged  by Union of India by filing the  present appeal. The Division Bench of the High Court by this  order  disposed of  Union of India’s appeal pertaining to this  subject matter and  directed that  in view of the peculiar facts  of this case  that since  General Manager of the Railway has  already constituted an Arbitral Tribunal, the appellant should  approach the learned Single Judge for modification/ recalling  the aforesaid order dated 28.11.2000.  Pursuant to that the  appellant approached the learned Single Judge praying for  modification of the order. Learned Single Judge dismissed the  aforesaid application by order dated 21.2.2002.  While  dismissing the application, learned Single Judge observed as  follows :

               " As this court is of the opinion that the  Arbitral tribunal constituted by the General  Manager is impliedly set aside and the matters  referred are  already withdrawn by referring the  same to the sole Arbitrator appointed by this  Court, the question of functioning of the  Arbitral Tribunal constituted by the General  Manager, Railways, does not arise."

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Hence, aggrieved against this order the present Special Leave  Petition was filed and  leave was granted.  Hence both  the  present appeals have come up before us for final disposal.

       Learned Additional Solicitor General appearing for the  appellant- Union of India has pointed out that as per Clauses  63 & 64 of the General Conditions   of  Contract,  this  Court in  no uncertain terms has held that  the Arbitral Tribunal has to  be constituted  as per the General Conditions of Contract,   the  High Court should not interfere under Section 11 of the Act  and the High Court should  accept the  Arbitral Tribunal  appointed by the General Manager, Railway.  In this  connection,  learned ASG invited our attention to a decision of  this Court directly bearing on the subject in Union of India &  Anr. v. M.P.Gupta  [ (2004) 10 SCC 504] wherein a similar  question with regard to appointment of Arbitral Tribunal  for  the Railways with reference to Clause 64 of the General  Conditions of Contract came up before this Court and this  Court held that where two gazetted railway officers are  appointed as the Arbitral Tribunal, the High Court should not  appoint a retired Judge of the High Court as a sole Arbitrator  and the appointment of sole arbitrator was set aside.  The  conditions of Clauses 63 & 64  of the General Conditions of  Contract are almost analogous to the one we have in our hand.   In that case also relying on Clause 64 of the contract a three  Judge Bench presided over by the Chief Justice of India   observed as follows :         "  In view of the express provision contained  therein that two gazetted railway officers shall  be appointed as arbitrators, Justice P.K.Bahri  could not be appointed by the High Court as the  sole arbitrator. On this short ground alone, the  judgment and order under challenge  to the  extent  it appoints Justice P.K.Bahri as sole  arbitrator is set aside. Within 30 days from  today, the appellants herein shall appoint two  gazetted railway officers as arbitrators. The two  newly appointed arbitrators shall enter into  reference within a period of another one month  and thereafter the arbitrators shall make their  award within a period of three months."                  Earlier also in the case of Datar Switchgears Ltd. v. Tata  Finance Ltd & Anr.  [ (2002) 8 SCC 151] their Lordships have   observed that  the arbitrator should be appointed within thirty  days on demand being made by the other party and the  appointment could still be made but before the other party  moves the Court under Section 11 of the Act. It was observed  that once  the other party moves  the court the right to make  the appointment ceases to exist. In the present case  as it  appears that the General Manager, Railway has already  appointed  the arbitrator but despite this, learned Single Judge  has overruled the objection of the Union of India & appointed  learned Judge of the High Court as arbitrator.         As against this learned counsel appearing for the  respondent has invited our attention to a decision of this Court  in  SBP & Co. v. Patel Engineering Ltd. & Anr. [ (2005) 8 SCC  618] in a Bench of seven Judges by majority has overruled  the  earlier decision given in  Konkar Railway Corporation Ltd. &  Anr. v. Rani Construction Pvt. Ltd. [ (2002) 2 SCC 388]. So far  as the case of SBP & Co. (supra)  is concerned it cannot come  to the rescue of the respondent. Learned counsel for the  respondent invited our attention to paragraph 47 that this  judgment will have prospective following. But  it did not lay  down that when as per agreement arbitrator is appointed then

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Court should or should not interfere in the matter, whereas  this issue is covered by earlier judgment by this Court  in the  case of Union of India v. M.P.Gupta (supra) by a three Judge  bench which is binding on us.   Therefore, the decision in SBP  & Co. (supra) cannot be of any help to the respondent.  It has  also been pointed out that the arbitration proceedings are  almost complete.  But this Court has stayed the  pronouncement of the award.  In the present case, in view of  the decision in M.P. Gupta (supra)  a three Judge Bench has  clearly stated that whenever the agreement specifically  provided for appointment of two gazetted railway officers of  equal status as arbitrators by the General Manager, Railway,  then in that case the Court should give this latitude to the  General Manager to make appointment.                  However, before parting with this case we may also  observe that Railways and Public institutions are very slow in  reacting to the request made by a contractor for appointment  of the arbitrator. Therefore, in case appointment is not made  in time on the request made by the contracting party. then in  that case the power of the High Court to appoint arbitrator  under Section 11 of the Act will not be denuded.    We cannot  allow administrative authorities to sleep over the matter and  leave the citizens without any remedy. Authorities shall be  vigilant and their failure shall certainly give rise to cause to the   affected party. In case, the General Manager, Railway does not  appoint the arbitral tribunal after expiry of the notice of 30  days or before the party approaches the High Court, in that   case, the High Court will be fully justified in appointing  arbitrator under section 11 of the Act. It is the discretion of the  High Court that they can appoint any railway officer or they can  appoint any High Court Judge  according to the given situation.                  As a result of our above discussion, we allow these  appeals, set aside the orders of the High  Court. We direct the  General Manager, Railway to appoint arbitral tribunal within a  period of 30 days from the date of receipt of a certified copy of  this order. The arbitral tribunal so appointed shall enter into  the matter and dispose of the  arbitration proceedings as  expeditiously as possible. Consequently, the appointment of  Justice Y.V.Narayana as arbitrator  is set aside. There would be  no order as to costs.