Page No.# 1/26

GAHC010073462023

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THE GAUHATI HIGH COURT

(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

Case No. : WP(C)/1908/2023

ECI- SANJOSE (JV)

A JOINT VENTURE BETWEEN ECI ENGINEERING AND CONSTRUCTION

COMPANY LIMITED, HAVING ITS REGISTERED OFFICE AT PLOT NO. A12

AND A13, PANCHAVATI TOWNSHIP, MANIKONDA, RAJENDRA NAGAR

MANDAL, DIST-RANGA REDDY, HYDERABAD-500089, TELANGANA AND

M/S CONSTRUCTOR A SANJOSE, S.A. HAVING ITS REGISTERED OFFICE AT

ROSALIA DE CASTRO, 44, PONTEVEDRA, SPAIN AND ITS INDIAN OFFICE

AT UNIT 602, GLOBAL FOYER BUILDING, GOLF COURSE ROAD, SECTOR-

43, GURGAON-122002, HARYANA AND HAVING ITS PRINCIPAL PLACE OF

BUSINESS AT 11TH FLOOR, HIRANANDANI, KNOWLEDGE PARK,

TECHNOLOGY STREET, POWAI, MUMBAI-76 AND IS REPRESENTED

THROUGH ITS AUTHORISED REPRESENTATIVE MR. P.M.V. RAGHUNADH

BABU, S/O P. KOTESWARA RAO, R/O FLAT NO. 111, JALVAYUVIHAR,

OPPOSITE JNTU KUKTPALLY, HYDERABAD, 500072, TELENGANA

VERSUS

THE UNION OF INDIA AND 5 ORS

REPRESENTED BY THE SECRETARY TO THE GOVT. OF INDIA, MINISTRY

OF RAILWAYS, NEW DELHI-110001

2:NORTHEAST FRONTIER RAILWAY

REPRESENTED BY ITS GENERAL MANAGER

NF RAILWAY H.Q.

MALIGAON

GUWAHATI-781011

3:GENERAL MANAGER (CONSTRUCTION)

NORTHEAST FRONTIER RAILWAY

NF RAILWAY HQ

MALIGAON

GUWAHATI-781011 Page No.# 1/26

GAHC010073462023

undefined

THE GAUHATI HIGH COURT

(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

Case No. : WP(C)/1908/2023

ECI- SANJOSE (JV)

A JOINT VENTURE BETWEEN ECI ENGINEERING AND CONSTRUCTION

COMPANY LIMITED, HAVING ITS REGISTERED OFFICE AT PLOT NO. A12

AND A13, PANCHAVATI TOWNSHIP, MANIKONDA, RAJENDRA NAGAR

MANDAL, DIST-RANGA REDDY, HYDERABAD-500089, TELANGANA AND

M/S CONSTRUCTOR A SANJOSE, S.A. HAVING ITS REGISTERED OFFICE AT

ROSALIA DE CASTRO, 44, PONTEVEDRA, SPAIN AND ITS INDIAN OFFICE

AT UNIT 602, GLOBAL FOYER BUILDING, GOLF COURSE ROAD, SECTOR-

43, GURGAON-122002, HARYANA AND HAVING ITS PRINCIPAL PLACE OF

BUSINESS AT 11TH FLOOR, HIRANANDANI, KNOWLEDGE PARK,

TECHNOLOGY STREET, POWAI, MUMBAI-76 AND IS REPRESENTED

THROUGH ITS AUTHORISED REPRESENTATIVE MR. P.M.V. RAGHUNADH

BABU, S/O P. KOTESWARA RAO, R/O FLAT NO. 111, JALVAYUVIHAR,

OPPOSITE JNTU KUKTPALLY, HYDERABAD, 500072, TELENGANA

VERSUS

THE UNION OF INDIA AND 5 ORS

REPRESENTED BY THE SECRETARY TO THE GOVT. OF INDIA, MINISTRY

OF RAILWAYS, NEW DELHI-110001

2:NORTHEAST FRONTIER RAILWAY

REPRESENTED BY ITS GENERAL MANAGER

NF RAILWAY H.Q.

MALIGAON

GUWAHATI-781011

3:GENERAL MANAGER (CONSTRUCTION)

NORTHEAST FRONTIER RAILWAY

NF RAILWAY HQ

MALIGAON

GUWAHATI-781011

Page No.# 2/26

4:PRESIDING ARBITRATOR SHRI A.K. MITTAL

EX. ME

RAILWAY BOARD AND FLAT C-2/10 (3102)

VANSHREE PLOT 1 AND 2 SECTOR 58A PALM BEACH ROAD

NEAR SEAWOODS ESTATE

NERUL

NAVI MUMBAI-400706

MAHARASHTRA

5:CO-ARBITRATOR SHRI AKHIL AGARWAL

EX-DG/S AND T/RAILWAY BOARD

K-122

GULSHAN VIVANTE

SECTOR-137

NOIDA-201304

U.P

6:CO-ARBITRATOR SHRI HARSH KUMAR

EX-FA AND CAO/NORTHERN RAILWAY

HOUSE NO. G-1001

NBCC HEIGHTS

SECTOR-89

PATAUDI ROAD

GURUGRAM-122505

HARYAN

Advocate for the Petitioners : Mr. G. N. Sahewalla, Sr. Advocate

:Mr. D. Senapati, Advocate

Advocate for the Respondents : Mr. B. Chakraborty, CGC

Date of Hearing : 22.08.2024

Date of Judgment : 22.08.2024

BEFORE

HONOURABLE MR. JUSTICE DEVASHIS BARUAH

JUDGMENT AND ORDER (ORAL)

Heard Mr. G. N. Sahewalla, the learned senior counsel assisted

by Mr. D. Senapati, the learned counsel appearing on behalf of the

petitioner. Mr. B. Chakraborty, the learned CGC appears behalf on

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behalf of the respondents.

2. The question which arises in the instant proceedings is as to whether

this Court should exercise the writ jurisdiction under Article 226 of the

Constitution in respect to a challenge to the Constitution of the Arbitral

Tribunal vide the communication dated 19.07.2022. Additionally, this Court

is called upon to decide the legality of the order dated 06.01.2023 by the

Arbitral Tribunal whereby the application filed by the petitioner to keep the

Arbitration proceedings in abeyance was rejected. For deciding the said

questions, this Court in brief, would like to take note of the facts involved

which led to the filing of the instant writ petition.

3. The Respondent No.2 herein through the Respondent No.3 had

invited a Notice Inviting Tender for “Construction of Single Line BG Tunnel

No.25 (App. Total Length 867 RM) in between Noney to Tupul in

connection with construction of New Railway Line Project Jiribam-Tupul

(Imphal) of NF Railway (Construction)”. The Petitioner herein was found to

be eligible and was awarded the work by issuance of a Letter of Intent

dated 13.10.2009. The Petitioner, thereupon, as per the contract terms,

furnished the requisite performance guarantee in the form of an

irrevocable bank guarantee. Pursuant thereto, the contract agreement

with the Petitioner was entered into on 26.02.2010.

4. While carrying out the said work, in respect to Tunnel No.25, it was

alleged that the respondent Railway Authorities informed the petitioner

that there was misalignment of both the ends of the said tunnel. The

Petitioner claimed that the misalignment was rectified and resultantly the

length of the Tunnel No.25 was changed from 867 meters to 1382 meters.

The extra cost which was on account of the increase in the length of the

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Tunnel No.25 was paid to the petitioner by the Railway Authorities in the

year 2016. Subsequently, on 26.02.2021, a letter was written to the

petitioner wherein the petitioner was directed to deposit the amount of

Rs.6,06,86,646.25p with the Railway Authorities else it was mentioned

that the Railway Authorities shall deduct the said amount from the already

pending bills. This communication dated 26.02.2021 was put to challenge

by the petitioner in WP(C) No.2438/2021.

5. The said writ petition was taken up on 05.04.2021. The Standing

Counsel of the Railways apprised this Court in the said proceedings that in

terms with Clause 64 of the General Conditions of the Contract, there is an

Arbitration Clause subject to the demand made by the party concerned. It

was also submitted that as the matter would involve adjudication of

disputed question of facts, the forum of arbitration as available under the

General Conditions of the Contract would be a more effective and

efficacious remedy. It was also submitted that for invoking Clause 64 of

the General Conditions of the Contract, the person aggrieved has to make

a request.

The learned counsel appearing on behalf of the writ petitioner in the

said proceedings during the course of the hearing readily agreed to the

said suggestion and submitted that the petitioner was ready to demand

for arbitration as per the mandate of Section 64(1) of the General

Conditions of the Contract. In addition to that, it was submitted by the

learned counsel for the writ petitioner that till the issues raised in the writ

petition were decided by the Arbitral Forum, no coercive measures should

be taken by the respondent Railways on the basis of the letter dated

26.02.2021.

Page No.# 5/26

The learned counsel for the Railway Authorities, though objected to

interim protection, but this Court disposed of the writ petition at the

motion stage itself by an order dated 05.04.2021 thereby directing the

respondent Railways not to initiate any coercive measures on the basis of

the letter dated 26.02.2021 against the writ petitioner subject to the

demand made by the writ petitioner for arbitration within a period of 30

days from the date of the said order. It was also clarified by this Court that

the interim order shall remain in force till the dispute is decided by the

Arbitral Tribunal or completion of the period of 30 days, whichever was

earlier and thereafter the same shall cease to operate.

6. The records herein transpire that in pursuance to the said order

dated 05.04.2021 passed in WP(C) No.2438/2021, the writ petitioner

submitted a demand for arbitration vide a communication dated

29.04.2021. In the said letter, a request was made by the writ petitioner

that the General Manager (Construction), N.F. Railway, Maligaon should

appoint an Arbitrator for the NF Railways who does not fall under any of

the categories specified in the Schedule VII of the Arbitration and

Conciliation (Amendment) Act, 2015. It was also mentioned that upon

receipt of the communication from the General Manager (Construction),

the petitioner shall appoint their nominee Arbitrator and both the

Arbitrators so appointed shall then appoint a third and Presiding Arbitrator

for constituting the Arbitral Tribunal.

7. Pursuant to the said communication dated 29.04.2021, the General

Manager (Construction) issued a letter dated 18.05.2022 to the Petitioner

whereby the General Manager (Construction) nominated four names of

retired Railway Officers for constitution of the Arbitral Tribunal. It is very

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pertinent to take note of the names of the persons who have been

nominated taking into account the dispute involved. The nominated

Arbitrators who were

(i) Shri A.K. Mittal, Ex. M.E., Railway Board who retired on 31.08.2017;

(ii) Shri Radhe Shyam, Ex G.M./South Eastern Railway who retired on

31.10.2015;

(iii) Shri Akhil Agarwal, Ex DG/S&T/Railway Board who retired dated

30.06.2018 and

(iv) Shri Harsh Kumar, Ex FA&CAO/1/Northern Railway who retired on

02.01.2014.

The petitioner was asked to nominate at least two names out of the

list so provided of Retired Railway Officers for appointment of the

Arbitrator as nominees from the petitioner side so that further necessary

action may be taken in the matter.

8. The petitioner did not challenge or object to the communication

dated 18.05.2022. On the other hand, on 15.06.2022, sent a

communication to the General Manager (Construction), thereby selecting

two names, namely, Shri A.K. Mittal, Ex. M.E., Railway Board and Shri

Akhil Agarwal, Ex DG/S&T/Railway Board and requested that an early

action in the constitution of the Arbitral Tribunal may be taken and the

petitioner be notified about the various details of all the members of the

Arbitral Tribunal.

9. Pursuant to the said communication dated 15.06.2022, the General

Manager (Construction) constituted the Arbitral Tribunal with two

Arbitrators who were nominated by the petitioner, i.e. Shri A.K. Mittal and

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Shri Akhil Agarwal and in addition to that Shri Harsh Kumar as the

nominees of the Railways. This aspect was informed to the petitioner vide

a communication dated 19.07.2022.

10. The petitioner did not challenge the communication dated

19.07.2022 in any manner whatsoever then. On the other hand on

12.09.2022, the petitioner submitted its Statement of Claim. The

Statement of Claim is not a part of the records of the instant proceedings.

Under such circumstances, this Court while hearing the instant writ

petition on 20.08.2024 directed the petitioner to produce the said

Statement of Claim. Accordingly, the same has been produced today

which is kept on record and marked with the letter “X”.

11. A perusal of the said Statement of Claim do not in any manner,

show that the petitioner had challenged the constitution of the Arbitral

Tribunal. On the other hand, a perusal of Paragraph No.13 and its sub-

paragraphs of the Statement of Claim would show that the petitioner

without any demur had submitted to the jurisdiction of the Arbitral

Tribunal. Paragraph Nos.13 (1) to 13 (6) of the Statement of Claim being

relevant is reproduced herein under:-

13. EVENTS LEADING TO CONSTITUTION OF ARBITRAL TRIBUNAL:

13.1 In compliance of the directions of the Hon’ble Court, the Claimant

invoked Arbitration clause of the contract agreement and made demand for

Arbitration vide letter dated 29.04.2021 (RD-20) addressed to the Respondent,

i.e., The General Manager (Construction), N.F. Railway, Malegaon, Guwahati,

Assam. In the Appendix-I enclosed to the said letter, the Claimant notified the

disputes between the Parties to be referred to the Arbitral Tribunal for

adjudication as under:

Page No.# 8/26

Dispute No.Particulars of DisputeAmount in Dispute

1 Why the N.F. Railway

although being aware of the

misalignment in Nov 2015

itself, did not investigate the

reasons for misalignment?

2 Why the N.F. Railway

although being aware of the

misalignment in Nov 2015

itself, still continued to make

payment for the misalignment

portion to M/s ECI-SANJOSE

(JV)?

3 Whether recovery of

Rs.6,06,86,646.25 proposed

by N.F. Railway against M/s

ECI-SANJOSE (JV) vide letter

dated 26.02.2021 issued by

the Dy.CE/CON/3/NFR/Imphal

which was paid earlier in

2015-16 is valid under the

law ?

Rs.6,06,86,646.25

4 Const of Arbitration As per actuals

13.2 In reply to the Claimant’s letter demanding Arbitration vide letter dated

29.04.2021, the Respondent notified a panel of 4 names vide letter dated

18.05.2022 (CD-21), and asked the Claimant to select 2 names from the panel

for appointment as the Claimant’s nominee Arbitrator.

13.3 Accordingly, the claimant selected 2 names from the panel sent by the

Respondent and conveyed the same to the Respondent vide letter dated

15.06.2022 (CD-22).

13.4 The Respondent constituted the Arbitral Tribunal comprising of Shri Aditya

Kumar Mittal, Ex ME/RB as Presiding Arbitrator, Shri Akhil Agarwal, Ex

DG/S&T/RB and Shri Harsh Kumar Ex FA&CAO/I/NR as Co Arbitrators by issuing

a notification dated 19.07.2022 (RD-23).

13.5. The Hon’ble Arbitral Tribunal has entered in to reference on 23.07.2022 as

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conveyed to the Claimant and the Respondent vide Notification No.1 dated

23.07.2022 (RD-24).

13.6 During the 1

st

Virtual Arbitration Proceedings dated 18.08.2022, the

Hon’ble Arbitral Tribunal directed the Claimant to submit Statement of Claims

and supporting documents by 15.09.2022 (RD-25).

12. Subsequent to the Statement of Claim being submitted by the

petitioner, the Railways submitted their Statement of Defence. Pursuant

thereto on 31.12.2022, the petitioner submitted an application for keeping

the arbitration proceedings in abeyance in view of the fact that the

judgment of the Supreme Court rendered in the case of Central

Organization for Railway Electricity Certification vs. ECI-SPIC-SMO-MCML

(JV), reported in (2020) 14 SCC 712 had been referred to a Large Bench by

the Supreme Court in the case of Union of India vs. Tantia Construction

Pvt. Limited vide an order dated 11.01.2021. It is under such

circumstances, the petitioner sought by the said application that the

arbitration proceedings be kept in abeyance till such an issue of

appointment of the Arbitrator by the General Manager, Railways is finally

settled by the larger Bench of the Supreme Court. The said application

dated 31.12.2022 was rejected vide the impugned order dated 06.01.2023

and the petitioner herein was directed to file rejoinder on 18.01.2023. It is

under such circumstances, the petitioner approached this Court by filing

the writ petition challenging the constitution of the Arbitral Tribunal vide

the letter dated 19.07.2022 as well as the order dated 06.01.2023 passed

by the Arbitral Tribunal. In addition to that, the petitioner has also sought

for appropriate directions upon the respondents to keep the Arbitral

Proceedings in abeyance till the determination of the question by the

Supreme Court.

Page No.# 10/26

13. Today, during the course of the hearing, the learned senior counsel

for the petitioner submitted that on 15.01.2023, the rejoinder was filed by

the petitioner in continuation to the direction so passed in the order dated

06.01.2023 by the Arbitral Tribunal wherein for the first time, the

constitution of the Arbitral Tribunal was questioned.

14. The instant writ petition was filed before this Court on 30.03.2023.

This Court vide an order dated 03.04.2023 posted the matter on

20.04.2023 for consideration of the interim prayer. Vide an order dated

26.06.2023 passed by this Court, the arbitration proceedings was kept in

abeyance.

15. An application was filed for vacating of the said interim order dated

26.06.2023 which was registered and numbered as I.A.(C) No.478/2024.

This Court further takes note of that an affidavit-in-opposition had also

been filed by the respondent Railways wherein the stand taken is that the

petitioner having already surrendered to the jurisdiction of the Arbitral

Tribunal, now cannot make a somersault and take a different stand. An

affidavit-in-reply has also been filed by the petitioner reiterating the stand

of the petitioner in the writ petition.

16. In the backdrop of the above facts, it is relevant to take note of that

when the writ petition was taken up for hearing on 19.08.2024, this Court

raised the issue as regards the maintainability of the instant writ petition,

and as such, gave an opportunity to both the parties to address this Court

on the same. The matter was heard on 20.08.2024 when submissions

were made even on merits as regards the legality of the order dated

06.01.2023 as well as that the petitioner did not submit to the jurisdiction

of the Arbitral Tribunal. It is under such circumstances this Court as

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stated above directed the Statement of Claim so filed by the petitioner

before the Arbitral Tribunal be brought on record as the same would aid in

deciding as to whether the petitioner herein had submitted to the

jurisdiction of the Arbitral Tribunal.

SUBMISSION OF THE PETITIONER

17. Mr. G. N. Sahewalla, the learned senior counsel for the petitioner

submitted that when the request was made vide the communication dated

29.04.2021 pursuant to the order passed by this Court on 05.02.2021 in

WP(C) No.2438/2021, it was clearly mentioned that the respondents

should nominate their own Arbitrator and the petitioner thereupon shall

nominate its own Arbitrator and both the Arbitrators thereupon shall

appoint the third Arbitrator. It is submitted that though the petitioner

agreed to the nomination and thereby nominated two Arbitrators amongst

the panel so provided, but the appointment of the Presiding Arbitrator

could not have been made by the General Manager (Construction) as it

would be in violation to the provisions of Section 12 (5) of the Arbitration

and Conciliation Act, 1996 (for short, ‘the Act of 1996’). He submitted that

as per the judgment of the Supreme Court in the case of TRF Limited vs.

Enegro Engineering Projects Limited, reported in (2017) 8 SCC 337 as well

as in the judgment in the case of Perkins Eastman Architects, DPC &

Another vs. HSCC (India) Limited, reported in (2020) 20 SCC 760, the

Supreme Court observed that a person who cannot be appointed as an

Arbitrator cannot also appoint an Arbitrator. He further submitted that

though in the case of Central Organization for Railway Electricity

Certification (supra), the Supreme Court while interpreting Clause 64 (3)

of the General Conditions of the Contract opined that it cannot be said

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that the General Manager had become ineligible to nominate the Arbitrator

and held that the judgment in the case of TRF Limited (supra) was not

applicable, but the said view in the decision rendered in Central

Organization for Railway Electricity Certification (supra) doubted by the

Supreme Court in the cases of Tantia Construction Pvt. Limited (supra) as

would be seen from the order dated 11.01.2021 as well as order dated

16.08.2022 in JSW Still Limited vs. South Western Railway & Another and

as such the matter is presently pending before a Constitution Bench of the

Supreme Court. He therefore submitted that the Arbitral Tribunal ought to

have stayed the arbitration proceedings pending the decision by the

Constitution Bench on the said issue. He further referred to the order of

the Constitution Bench of the Supreme Court in the case of Central

Organization for Railway Electricity Certification vs. ECI-SPIC-SMO-MCML

(JV), reported in 2023 SCC OnLine SC 55, {hereafter for short referred to as

the ‘CORE (2)’}. The learned senior counsel for the petitioner further

referred to the judgment of the Coordinate Bench in the case of Barpeta

Agro Infra vs. Union of India (Arbitration Petition No.21/2023) wherein the

Coordinate Bench did not agree that the General Manager, N.F. railway

could appoint an Arbitrator in view of Section 12 (5) and VII

th

Schedule to

the Act of 1996, and accordingly, appointed an Arbitrator to decide the

dispute. The learned senior counsel for the petitioner therefore summed

up that the arbitral proceedings so pending be kept in abeyance till the

decision is rendered by the Constitution Bench in the case of the CORE (2)

(Supra).

SUBMISSION OF THE RESPONDENTS

18. Per contra, Mr. B. Chakraborty, the learned counsel appearing on

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behalf of the Railway Authorities submitted that the petitioner herein

knowing very well the scope and ambit of Clause 64 of the General

Conditions of the Contract had submitted before this Court in the earlier

round of litigation that it would submit itself to the jurisdiction of the

Arbitral Tribunal, and accordingly, made the request vide the

communication dated 29.04.2021. He submitted that though in the

communication dated 29.04.2021, the petitioner mentioned as to how the

Arbitrators were to be appointed including the Presiding Arbitrator, but

when the nomination of four Arbitrators were made by the General

Manager (Construction), the petitioner not only submitted two names of

their choice to be the Arbitrators, but subsequently, in terms with the

appointment of the Arbitrators vide the communication dated 19.07.2022,

had submitted the Statement of Claim that too without raising any

objection to the Constitution of the Arbitral Tribunal. He submitted that the

Supreme Court recently in the case of Union Territory of Ladakh and

Others vs. Jammu and Kashmir National Conference and Another, reported

in 2023 SCC OnLine SC 1140 categorically observed at paragraph No.35

that it was not open unless specifically directed by the Supreme Court to

await an outcome of a reference or a review petition and it is also not

open to the High Court to refuse to follow a judgment by stating that it

has been doubted by the later Coordinate Bench. He therefore submitted

that in the order by which reference was made to the Constitution Bench

of the Supreme Court in the case of Core (2) (supra), there is no bar to

the arbitral proceedings being continued, the Arbitral Tribunal was justified

in passing the order dated 06.01.2023, more so, in view of the mandate of

Section 29A of the Act of 1996. The learned counsel for the respondents

Page No.# 14/26

further submitted that in the case of Bhaven Construction vs. Executive

Engineer, Sardar Sarobar Narmada Nigam Limited, reported in (2022) 1

SCC 75, the Supreme Court observed that the exercise of the powers

under Article 226/227 of the Constitution ought not to be made in respect

to an arbitral proceedings, unless in very exceptional circumstances. He

therefore submitted that the instant writ petition, therefore, is nothing but

a proceedings initiated with an oblique purpose to delay the arbitration

proceedings and consequently the interim order so passed by this Court in

its order dated 05.04.2021 in WP(C) No.2438/2021 can be continued.

POINTS FOR DETERMINSATION

19. From the materials on record and the submissions so made, the

following points for determination arise for consideration:

(A) Whether this Court should entertain the challenge to the

Constitution of the Arbitral Tribunal vide the communication dated

19.07.2022?

(B) Whether the Arbitral Tribunal was justified in passing the order

dated 06.01.2023?

ANALYSIS AND DETERMINATION

Let this Court first deal with the point for determination No.(A).

20. The facts narrated above would show that the petitioner in the

earlier round of litigation, i.e. in WP(C) No.2438/2021 had agreed to

submit to arbitration in terms with Clause 64 of the General Conditions of

the Contract and on the basis thereof, this Court directed the respondent

authorities not to take any coercive measures on the basis of the letter

dated 26.02.2021 against the petitioner subject to the petitioner

Page No.# 15/26

demanding for arbitration within the period of 30 days. The petitioner

thereupon submitted before the General Manager (Construction) vide the

communication dated the 29.04.2021 for appointment of Arbitrators in

terms with Clause 64 of the General Conditions of the Contract. In doing

so, the petitioner has categorically stated that the General Manager

(Construction) should nominate the Arbitrator for the Railways.

Thereupon, upon intimation, the petitioner would appoint its Arbitrator

and the Arbitrators jointly shall appoint the Presiding Arbitrator. Be that as

it may, four names were forwarded by the General Manager (Construction)

vide the communication dated 18.05.2022 to the petitioner for nomination

of at least two names for appointment of Arbitrator as nominee from the

petitioner’s side so that further necessary action may be taken. At this

stage, it is pertinent to observe that from details mentioned in the

communication dated 18.05.2022, it shows that the persons named

therein were erstwhile officials who retired from the services of the

Railways and the last one to retire was one Shri Akhil Agarwal dated

30.06.2018. The petitioner replied vide a communication dated

15.06.2022 thereby selecting two out of the four names and requested

the General Manager (Construction) to constitute the Arbitral Tribunal by

notifying their names, addresses, contact numbers and email IDs to the

petitioner.

21. At this stage, this Court finds it relevant to take note of Section 4 of

the Act of 1996. The said Section being relevant is reproduced herein

below:-

“4. Waiver of right to object.—A party who knows that—

(a) any provision of this Part from which the parties may derogate, or

Page No.# 16/26

(b) any requirement under the arbitration agreement, has not been complied

with and yet proceeds with the arbitration without stating his objection to such

non-compliance without undue delay or, if a time limit is provided for stating

that objection, within that period of time, shall be deemed to have waived his

right to so object.”

A perusal of the above provision could show that a party who knows

that any provision in Part I of the Act of 1996 from which a party may

derogate or any requirement under the arbitration agreement has not

been complied with but yet proceeds with the Arbitration without stating

his objections without undue delay or within the time limit provided, it

shall be deemed that the party had waived the right to object.

22. The petitioner herein did not object to the constitution of the

Arbitral Tribunal vide the communication dated 19.07.2022 except in the

instant proceedings for the first time. The petitioner readily without any

objection submitted to the jurisdiction of the Arbitral Tribunal by

submitting the Statement of Claim. The relevant paragraphs of the

Statement of Claim have been quoted herein above which would clearly

show that the petitioner did not object to the constitution of the Arbitral

Tribunal.

23. The respondents thereupon submitted the Statement of Defence.

On 31.12.2022, the petitioner submitted an application for keeping the

arbitration proceedings in abeyance till the Constitution Bench, of the

Supreme Court decides in the case of CORE (2) (supra). A perusal of the

said application which has been enclosed as Annexure-13 to the instant

writ petition do not show that there is a challenge to the constitution of

the Arbitral Tribunal. Rather, it is a simple application for keeping the

Page No.# 17/26

arbitral proceedings in abeyance. This application was rejected vide the

order dated is 06.01.2023 which has been impugned in the instant

proceedings. As stated above, it is only in the instant proceedings that the

petitioner had challenged the constitution of the Arbitral Tribunal for the

first time.

24. Now question falls which for consideration is how to challenge the

constitution of the Arbitral Tribunal. The Act of 1996 stipulates the manner

by which the appointment or constitution of an Arbitral Tribunal can be

challenged. Section 13 of the Act of 1996 stipulates the procedure of

challenge. Section 13 of the Act of 1996 is quoted herein below:-

“13. Challenge procedure.—(1) Subject to sub-section (4), the parties are

free to agree on a procedure for challenging an arbitrator.

(2) Failing any agreement referred to in sub-section (1), a party who intends to

challenge an arbitrator shall, within fifteen days after becoming aware of the

constitution of the arbitral tribunal or after becoming aware of any

circumstances referred to in sub-section(3) of section 12, send a written

statement of the reasons for the challenge to the arbitral tribunal.

(3) Unless the arbitrator challenged under sub-section (2) withdraws from his

office or the other party agrees to the challenge, the arbitral tribunal shall

decide on the challenge.

(4) If a challenge under any procedure agreed upon by the parties or under the

procedure under subsection (2) is not successful, the arbitral tribunal shall

continue the arbitral proceedings and make an arbitral award.

(5) Where an arbitral award is made under sub-section (4), the party

challenging the arbitrator may make an application for setting aside such an

arbitral award in accordance with section 34.

(6) Where an arbitral award is set aside on an application made under sub-

Page No.# 18/26

section (5), the Court may decide as to whether the arbitrator who is

challenged is entitled to any fees.”

A perusal of Section 13 (2) of the Act of 1996 shows that the time

limit for challenging the Arbitrator is within 15 days after becoming aware

of the constitution of the Arbitral Tribunal or after becoming aware of any

circumstance referred to in Sub-section (3) of Section 12 of the Act of

1996. How such challenge is to be made is also stipulated in Section 13

(2) of the Act of 1996. A conjoint reading of Sub-sections (3), (4) & (5) of

Section 13 of the Act of 1996 would show that if the challenge made

under Sub-section (2) of Section 13 of the Act of 1996 fails, the Arbitration

proceedings shall continue and only by way of Section 34 of the Act of

1996, it can be challenged.

25. This Court further finds it relevant to take note of Section 14 of the

Act of 1996 which stipulates when the mandate of an Arbitrator shall

terminate. Either the Arbitrator may withdraw or the parties terminate the

mandate mutually. In addition to that, the mandate may terminate if the

Arbitrator become dejure or defecto unable to perform his functions or for

other reasons fails to act without undue delay. In terms with Section 15

(2) of the Act of 1996, a substituted Arbitrator can be appointed. But for

doing so, a party has to apply to the Court in terms with Section 14 (2) of

the Act of 1996, i.e. the Court within the meaning of Section (e) of the Act

1996 {See para 17 of Bharat Broadband Network Ltd. vs. United Telecom

Ltd., reported in (2019) 5 SCC 755}. The reference to Section 14 and 15 of

the Act of 1996 is being made herein taking into account the eventuality if

the Constitution Bench holds overrules the decision rendered in Central

Organization for Railway Electricity Certificate (supra) and does not apply

Page No.# 19/26

the judgment rendered by the Constitution Bench of the Supreme Court

prospectively.

26. Now coming back to the facts involved, it would be seen that the

petitioner did not exercised its rights under Section 12 or 14 of the Act of

1996. In fact, prior to the challenge to the constitution of the Arbitral

Tribunal, by way of the present proceedings, there is no challenge to the

constitution of the Arbitral Tribunal. Therefore, in the said backdrop, the

question arises as to whether this Court under Article 226 of the

Constitution should entertain the challenge in the instant proceedings to

the constitution of the Arbitral Tribunal. The judgment of the Supreme

Court in Nivedita Sharma vs. COAL, reported in (2011) 14 SCC 337, at

paragraph No.11 states about when a writ petition should be entertained

when statutory remedies are available. Paragraph No.11 of the said

judgment is quoted herein below:-

“11. We have considered the respective arguments/submissions. There cannot

be any dispute that the power of the High Courts to issue directions, orders or

writs including writs in the nature of habeas corpus, certiorari, mandamus, quo

warranto and prohibition under Article 226 of the Constitution is a basic feature

of the Constitution and cannot be curtailed by parliamentary legislation—L.

Chandra Kumar v. Union of India. However, it is one thing to say that in exercise

of the power vested in it under Article 226 of the Constitution, the High Court

can entertain a writ petition against any order passed by or action taken by the

State and/or its agency/instrumentality or any public authority or order passed

by a quasi-judicial body/authority, and it is an altogether different thing to say

that each and every petition filed under Article 226 of the Constitution must be

entertained by the High Court as a matter of course ignoring the fact that the

aggrieved person has an effective alternative remedy. Rather, it is settled law

that when a statutory forum is created by law for redressal of grievances, a writ

Page No.# 20/26

petition should not be entertained ignoring the statutory dispensation.”

(emphasis applied upon the underlined portion)

27. In Deep Industries Ltd. vs. ONGCL & Another, reported in (2020) 15

SCC 706, the Supreme Court explained the inter play of Section 5 of the

Act of 1996 with Article 227 of the Constitution. Paragraph Nos.16 & 17 of

the said judgment is reproduced herein below:-

“16. Most significant of all is the non obstante clause contained in

Section 5 which states that notwithstanding anything contained in any other

law, in matters that arise under Part I of the Arbitration Act, no judicial

authority shall intervene except where so provided in this Part. Section 37

grants a constricted right of first appeal against certain judgments and

orders and no others. Further, the statutory mandate also provides for one

bite at the cherry, and interdicts a second appeal being filed [see Section

37(2) of the Act].

17. This being the case, there is no doubt whatsoever that if petitions were

to be filed under Articles 226/227 of the Constitution against orders passed

in appeals under Section 37, the entire arbitral process would be derailed

and would not come to fruition for many years. At the same time, we cannot

forget that Article 227 is a constitutional provision which remains untouched

by the non obstante clause of Section 5 of the Act. In these circumstances,

what is important to note is that though petitions can be filed under Article

227 against judgments allowing or dismissing first appeals under Section 37

of the Act, yet the High Court would be extremely circumspect in interfering

with the same, taking into account the statutory policy as adumbrated by us

hereinabove so that interference is restricted to orders that are passed

which are patently lacking in inherent jurisdiction.”

28. In Bhaven Construction (supra), the Supreme Court was specifically

dealing with the question of entertaining writ petition under Article

Page No.# 21/26

226/227 of the Constitution vis-à-vis an order rejecting an application

challenging the appointment of Sole Arbitrator under Section 16 (2) of the

Act of 1996. Paragraph Nos.11, 12, 13, 20, 22, 23, & 27 being relevant are

quoted herein below:-

“11. Having heard both the parties and perusing the material available

on record, the question which needs to be answered is whether the arbitral

process could be interfered under Articles 226/227 of the Constitution, and

under what circumstance?

12. We need to note that the Arbitration Act is a code in itself. This phrase is

not merely perfunctory, but has definite legal consequences. One such

consequence is spelled out under Section 5 of the Arbitration Act, which

reads as under

“5. Extent of judicial intervention.—Notwithstanding anything

contained in any other law for the time being in force, in matters

governed by this Part, no judicial authority shall intervene except where

so provided in this Part.”

(emphasis supplied)

The non obstante clause is provided to uphold the intention of the legislature as

provided in the Preamble to adopt UNCITRAL Model Law and Rules, to reduce

excessive judicial interference which is not contemplated under the Arbitration

Act.

13. The Arbitration Act itself gives various procedures and forums to challenge

the appointment of an arbitrator. The framework clearly portrays an intention to

address most of the issues within the ambit of the Act itself, without there being

scope for any extra statutory mechanism to provide just and fair solutions.

20. In the instant case, Respondent 1 has not been able to show exceptional

circumstance or “bad faith” on the part of the appellant, to invoke the remedy

under Article 227 of the Constitution. No doubt the ambit of Article 227 is broad

and pervasive, however, the High Court should not have used its inherent power

Page No.# 22/26

to interject the arbitral process at this stage. It is brought to our notice that

subsequent to the impugned order of the sole arbitrator, a final award was

rendered by him on merits, which is challenged by Respondent 1 in a separate

Section 34 application, which is pending.

22. The High Court did not appreciate the limitations under Articles 226 and

227 of the Constitution and reasoned that the appellant had undertaken to

appoint an arbitrator unilaterally, thereby rendering Respondent 1 remediless.

However, a plain reading of the arbitration agreement points to the fact that the

appellant herein had actually acted in accordance with the procedure laid down

without any mala fides.

23. Respondent 1 did not take legal recourse against the appointment of the

sole arbitrator, and rather submitted themselves before the tribunal to

adjudicate on the jurisdiction issue as well as on the merits. In this situation,

Respondent 1 has to endure the natural consequences of submitting themselves

to the jurisdiction of the sole arbitrator, which can be challenged, through an

application under Section 34. It may be noted that in the present case, the

award has already been passed during the pendency of this appeal, and

Respondent 1 has already preferred a challenge under Section 34 to the same.

Respondent 1 has not been able to show any exceptional circumstance, which

mandates the exercise of jurisdiction under Articles 226 and 227 of the

Constitution.

27. In view of the above reasoning, we are of the considered opinion that the

High Court erred in utilising its discretionary power available under Articles 226

and 227 of the Constitution herein. Thus, the appeal is allowed and the

impugned order4 of the High Court is set aside. There shall be no order as to

costs. Before we part, we make it clear that Respondent 1 herein is at liberty to

raise any legally permissible objections regarding the jurisdictional question in

the pending Section 34 proceedings.”

(Emphasis applied to the underlined portion)

Page No.# 23/26

29. The above settled law, if applied to the present case, it would be

seen that the petitioner herein has never challenged the jurisdiction of the

Arbitral Tribunal as per the statutory mandate. There is no exceptional

circumstances made out which would inspire this Court to exercise its

jurisdiction under Article 226/227 of the Constitution. Even otherwise also,

the filing of the Statement of Claim and participating in the Arbitration

proceedings without any objection, clearly shows that the petitioner

submitted to the jurisdiction of the Arbitral Tribunal. How much Section 4

of the Act of 1996 would debar the petitioner to challenge the constitution

of Arbitral Tribunal even in a proceedings under Section 34 of the Act of

1996 is left open to be decided in a proceedings, if so initiated under

Section 34 of the Act of 1996.

30. The learned senior counsel for the petitioner has referred to the

judgment of the Coordinate Bench in the case of Barpeta Agro Infra

(supra). However, the said judgment would not be applicable to the

present proceedings taking into account that the said judgment was

rendered in a proceedings under Section 11 of the Act of 1996 for

appointment of an Arbitrator whereas in the instant proceedings, the

petitioner has already submitted to the jurisdiction of the Arbitral Tribunal

by submitting the Statement of Claim. Furthermore, this proceedings is

under Article 226/227 of the Constitution.

31. Therefore, the challenge to the communication dated 19.07.2022 of

the constitution of the Arbitral Tribunal is rejected on the ground of that

the exercise of jurisdiction under Article 226/227 of the Constitution is not

called. However, the petitioner should be at liberty to challenge at the

stage of Section 34 of the Act of 1996, if so advised.

Page No.# 24/26

32. Let this Court now take up the next point for determination No.(B)

as to whether the Arbitral Tribunal was justified in rejecting the application

dated 30.12.2022 which resulted in the passing of the impugned order

dated 06.01.2023. For that purpose, this Court finds it relevant to take

note of the judgment of the Supreme Court in the case of Union Territory

of Ladakh and Others (supra) wherein the Supreme Court at paragraph

No.35, dealt with the issue in the context of various High Courts not

deciding cases on the ground that the leading judgment of the Supreme

Court in the subject matter was either referred to a Larger Bench or a

review petition relating thereto was pending. The Supreme Court observed

that the High Courts should proceed to decide matters on the basis of the

law as it stands. It was further observed that it is not open unless

specifically directed by the Supreme Court to await an outcome of a

reference or a review petition as the case may be. Paragraph No.35 of the

said judgment is reproduced herein below:-

“35. We are seeing before us judgments and orders by High Courts not deciding

cases on the ground that the leading judgment of this Court on this subject is

either referred to a larger Bench or a review petition relating thereto is pending.

We have also come across examples of High Courts refusing deference to

judgments of this Court on the score that a later Coordinate Bench has doubted

its correctness. In this regard, we lay down the position in law. We make it

absolutely clear that the High Courts will proceed to decide matters on the basis

of the law as it stands. It is not open, unless specifically directed by this Court,

to await an outcome of a reference or a review petition, as the case may be. It

is also not open to a High Court to refuse to follow a judgment by stating that it

has been doubted by a later Coordinate Bench. In any case, when faced with

conflicting judgments by Benches of equal strength of this Court, it is the earlier

one which is to be followed by the High Courts, as held by a 5-Judge Bench in

Page No.# 25/26

National Insurance Company Limited v. Pranay Sethi, (2017) 16 SCC 6805. The

High Courts, of course, will do so with careful regard to the facts and

circumstances of the case before it.”

33. In the background of the above, if this Court duly takes note of the

submission of the learned senior counsel appearing on behalf of the

petitioner, it would be seen that the petitioner has sought that the

arbitration proceedings should be kept in abeyance in view of the fact that

two subsequent Three Judges Bench of the Supreme Court have doubted

the decision in the case of Central Organization for Railway Electricity

Certification (supra). It is relevant to take note of that the perusal of the

judgment in the case of Central Organization for Railway Electricity

Certification (supra), the Three Judges Bench of the Supreme Court

categorically observed that the decision in the case of TRF Limited (supra)

is not applicable as regards the interpretation to be made in respect to

Clause 64 (3) of the General Conditions of the Contract. This judgment

may have been doubted and referred to a Constitution Bench, but not

overruled. It is also apposite to take note of that in the case of TRF

Limited (supra), Clause 64 (3) of the General Conditions of the Contract

was not an issue, rather what was in issue was Clause 33 of the General

Conditions of the Purchase Order and this aspect has been clearly

distinguished by the Supreme Court in the case of Central Organization for

Railway Electricity Certification (supra). Therefore, taking into account the

judgment in the case of Union Territory of Ladakh and Others (supra), this

Court finds no ground to interfere with the order dated 06.01.2023 passed

by the Arbitral Tribunal. This Court also takes note of the statutory

mandate contained in Section 29A of the Act of 1996 as well as the

Order downloaded on 24-12-2024 05:28:04 PMPage No.# 26/26

principles of unbreakability which is ingrained in an Arbitral proceedings

and is therefore of the opinion that the order dated 06.01.2023 is in

accordance with law.

CONCLUSION

34. (i) The challenge to the communication dated 19.07.2022 is rejected

on the ground that the said issue is not being entertained in the present

proceedings for the reasons above mentioned. The petitioner would be at

liberty to challenge the constitution of the Arbitral Tribunal at the stage of

Section 34 of the Act of 1996. It would however be open to the petitioner

to take recourse to Section 14 of the Act of 1996 in terms with the

judgment of the Supreme Court in United Telecom Ltd. (supra), if the

Constitution Bench overrules the judgment in Central Organization for

Railway Certification (supra).

(ii) The order of the Arbitral Tribunal dated 06.01.2023 is in accordance

with law and calls for no interference.

(iii) The Arbitral Tribunal shall proceed with the Arbitration proceedings.

The interim order stands vacated.

(iv) The period during which the Arbitral proceedings were stayed by this

Court shall be excluded from the operation of Section 29A of the Act of

1996.

(v) The writ petition accordingly stands disposed off. Pending

applications stands closed in view of the instant judgment.

JUDGE

Comparing Assistant