1. This is an application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short "the Act") for appointment of an arbitrator to resolve the dispute between the parties to the petition.
2. The undisputed facts are that the petitioner's tender was accepted for castle Rock-Kulem Gauge Conversion from meter gauge to broad gauge-Earth work excavation/cutting construction of RCC retaining wall to facilitate extension of loops to full capacity at Dudhsagar Station Yard and Hubli Section of South Central Railway, The acceptance letter dated 27-3-1997 itself shows that until formal agreement is executed the acceptance letter itself constitute a binding contract between the petitioner and Railways. The due date of completion of the agreement is 19-3-1997 and the agreement was entered into on 27-3-1997. The initial value of the contract work was Rs.40,37,450. According to the petitioner, due to changes and modification the value of the contract was put to one crore rupees approximately. While so the respondents by letter dated 8-2-1999 asked the petitioner to stop the work. By another letter dated 26-2-1999 the respondent directed the petitioner to seek extension of time for completion of the contract. In view of the same the petitioner made a claim finally on 10-5-1999 which is filed at Page No.1 of the material papers to the application. In which he demanded to accept the claim and settle the matter and if for any reason the claims are disputed, consider the representation and to refer all the disputed claims for arbitration. As the respondents failed to refer the claims by appointing an arbitrator as per agreed terms of contract contained in clause 64 of the General Conditions of contract and as the same was not complied with the present application is filed for appointment of an arbitrator by this Court.
3. In response to the notice the Railway authorities filed counter admitting the agreement entered into by the railways on 27-3-1997. It is also contended in the counter that the contractor has been paid to the tune of Rs.47,88,220.17 as per the work done which is more than the contract value of Rs.40,77,450/- and there is no dispute whatsoever about the work carried out by the contractor. There is also no dispute whatsoever with regard to the claim as per the amended General Conditions of the contract. Clause 64(3)(a) of the General Conditions of Terms of contract indicates that where the claim is upto Rs.3,00.000/- the Arbitralor(s)/Umpire so appointed, as the case may be. Shall give the award on all matters referred to arbitration indicating therein break up of the sums awarded separately on each individual item of dispute and in case where the claim is more than Rs.3 lakh the Arbitrator(s)/ Umpire so appointed as the case may be shall give intelligible award (the reasoning leading to the award should be stated) with the sums awarded separately on each individual item of dispute referred in arbitration. Clause 64(b) provides for appointing two arbitrators as required in clause (a) above. The Railways contended that no officers other than the Railway employees designated by the General Manager to be appointed by the arbitrator. Therefore they prayed that at best this Court can direct the General Manager for appointing arbitrator as per the terms and conditions of the contract and not otherwise. Clause 64 of the General Conditions of the Contract reads thus:
64(1)(i) In the event of any dispute or difference between the parties here to 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 decision within a reasonable time, then and in any such case, save the excepted matters referred to in clause 63 of these conditions, the contractor after 90 days but within 180 days of his presenting his final claim on disputed matter, shall demand in writing that the dispute or difference be referred to arbitration.
"Clause 64(3)(a)(iii). It is a term of this contract that no person other than a Gazetted Railway Officer appointed by the General Manager as aforesaid should Act as an arbitrator/Umpire and if for any reason that is not possible, the matter is not to be referred to arbitration at all.
4. The learned Counsel for the petitioner contended that when the petitioner demanded for arbitration along with the claims on 10-5-1999 the authorities failed to appoint an arbitrator as per the demand. Hence, he invoked the jurisdiction of this Court. The Counsel contended that when the authorities are forfeited their right to appoint an arbitrator this Court can appoint an arbitrator. In support of his contention he relied upon judgments of this Court reported in D.G. Engineeing Industries private Limited, Secunderabad v. Government of India, 1997 (5) ALD 765 and M/s. Marshall Corporation Limited v. Union of India, .
5. On the other hand the learned Counsel for the respondents contended that in view of the amendment ro Section 64 of the General Conditions of Contract indicates that no person other than the Gazetted Officer appointed by the General Manager of the Railways as aforesaid should act as an arbitrator/umpire, and if for any reason that is not possible there is no agreement for arbitration. In support of his contention he relied upon a decision of this Court in APSRTC v. Reddy and Company, .
6. Admittedly in the present case the petitioner submitted his final claim only on 10-5-1999 in which he requested to accept the claims. If for any reason claims are disputed consider his representation as a demand for appointment of an arbitrator. He filed the present application on 1-7-1999. Section 11(2) of the Act provides that subject to subsection (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. In the instant case the parties have agreed to for a certain procedure for appointment of an arbitrator. Subsection (6) to Section 11 of the Act would apply only when the parties fail to act as required under that procedure. In terms of clause 64, the contractor after 90 days but within 180 days of his presenting his final claim on disputed matter shall demand in writing that the dispute or difference be referred to arbitration. That means if any final claim is made by the petitioner and the petitioner agreed that the Railways can decide the said dispute within 90 days. Only after expiry of 90 days but within 180 days the contractor can demand in writing if there is any dispute and the Railways fail to decide the same within 90 days, he is entitled to demand for arbitration.
7. From the facts narrated above it is clear that the question of appointing an arbitrator or demand by the claim can came only if the Railways fail to decide the dispute on his final claim i.e., after expiry of 90 days but not earlier to that. The judgments cited by the learned Counsel for the petitioner are not applicable to the facts in the present case. This Court has not considered the scope of Section 11(2) of the Act in the above cases. This Court in D. Raja Reddy v. Director General, National Institute of Agricultural Extension Management, Hyderabad, , also taken a similar view
while considering Section 11 of the Act and the arbitration clause and held in Para 10 of the judgment as follows:
"Section 11(2) of the Act provides that subject to sub-section (6) the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. In the instant case the parties have agreed to for a certain procedure for appointment of an arbitrator. Sub-section (6) to Section 11 would operate only if a party fails to act as required under that procedure. The instant case is not the one in which the management has failed to act according to the procedure. Immediately by rejecting the appeal field by the applicant contractor, by finding that there is dispute, it has proposed a panel of three names for appointment of one of them as the sole arbitrator in terms of the clause 52.3 of the agreement and it was only for the applicant to choose any one of them as the sole arbitrator which the applicant has not chosen to do so. From this it follows that the applicant wants to give a go-by to the procedure prescribed by the arbitration clause agreed to by the parties under clause 52.3. Since the parties are free to agree upon a procedure for the appointment of an arbitrator or arbitrators and after such agreement the applicant is bound by such agreement entered into. Hence the applicant has to follow such procedure and it was bound to accept one of the arbitrators from out of the panel suggested by the Manage in terms of clause 52.3. Therefore the applicant by refusing to follow the procedure by itself cannot approach this Court under Section 11 of the Act. The intendment of Section 11 is that if the other side is not ready to follow the procedure the applicant may seek the High Court for the direction to the other side either to follow the procedure or to request the High Court to appoint one arbitrator in terms of the scheme. In other words it does not lie in the mouth of any person to say "I do not want to follow the procedure prescribed under the arbitration clause and appoint one arbitrator for me. The arbitration application is rejected as 'without merit."
8. The Kerala High Court in Nirman Sindia v. M/s. Indal Electrnmells Limited, Coimbatore, , in Para 12 of its judgment held as follows:
"Therefore in view of the fact that the applicant has filed this arbitration request to appoint an arbitrator in accordance with the abitration clause provided in Ex.P4 agreement without resorting to or complying with or exhausting the prerequisites for the enforcement of the arbitration clause provided in the agreement, the same is not maintainable as pre-mature. Therefore this arbitration request is dismissed. However this order will not preclude the applicant from enforcing the arbitration clause in the agreement after due compliance of the pre-requisites for enforcing the arbitration clause provided in the agreement".
9. Their Lordships of the Supreme Court considered the demand for arbitration by virtue of arbitration clause as per the agreement between the parties in M.L. Shah Engineer and Contractor v. State of Madhya Pradesh, and as follows:
"A closure scrutiny of clause 3.3.29 clearly suggests that the parties intended to enter into an arbitration agreement for deciding all the questions and disputes arising between them through arbitration and thereby excluding the jurisdiction of ordinary civil Courts. Such reference to arbitration is required to be preceded by a decision of the Superintending Engineer and a challenge to such decision within 28 days by the party feeling aggrieved therewith."
10. In view of the above facts I am of the view that the petitioner in fact after making the claim, which is admittedly made by him on 10-5-1999 has to wait for 90 days and if the Railways fails to take a decision on the claim so made, then he can demand in writing that the dispute or differences be referred to the arbitrators as per clause 64(1)(i). As seen from the facts he submitted final claim only on 10-5-1999 and incidentally he made a demand to refer the same to the arbitrator which is not the procedure expected to be followed in view of clause 64 of the General Conditions of the contract. Only if the Railways failed to decide the dispute within a reasonable time after 90 days, but within 180 days of his presenting final claim on disputed matter the petitioner will get a right for demand of the arbitration, but not otherwise. In the present case, the petitioner before the expiry of 90 days has invoked the jurisdiction of this Court by filing application successfully prevented or frustrated the Railways from taking decision prescribed in the agreement to proceed with the enforcement of arbitration clause without resorting to or complying with the preceding steps in the agreement.
11. In view of the same the application field by the petitioner on 1-7-1999 is premature and the petitioner is not entitled to invoke the jurisdiction of this Court for appointment of an arbitrator. In view of the view I have taken that the application is premature, it is unnecessary to go into the contentions raised by the learned Counsel for the respondents about appointment of an arbitrator by the General Manager and no other person can be appointed and if it is not possible there is no agreement for the arbitration.
12. In the result, the application fails and it is accordingly dismissed. No costs.