SP SINGLA CONSTRUCTIONS PVT. LTD. versus STATE OF HIMACHAL PRADESH AND ANOTHER on 4 December 2018

[2018] 14 S.C.R. 1005

SP SINGLA CONSTRUCTIONS PVT. LTD.

v.

STATE OF HIMACHAL PRADESH AND ANOTHER

(Civil Appeal Nos.11824-25 of 2018)

DECEMBER 04, 2018

[R. BANUMATHI AND INDIRA BANERJEE, JJ.]

Arbitration and Conciliation Act, 1996:

ss. 11(6), 21 and 25 (a) – Appointment of arbitrator – Contractbetween appellant-contractor and respondent-State – Disputebetween the parties – Contractor requested appointment ofarbitrator – State appointed “Superintendent Engineer, ArbitrationCircle” as the arbitrator in terms of arbitration clause (clause 65of General Conditions of Contract) – Contractor did not participatein arbitration proceedings – The proceedings terminated u/s. 25(a)– Contractor being aggrieved by appointment of the arbitrator, filedpetition u/s. 11(6) before High Court seeking appointment ofindependent arbitrator – High Court dismissed the petition holdingthat grievance against appointment of arbitrator in terms ofagreement, can be by way of petition u/s. 13 and while challengingthe award u/s. 34 and s. 11(6) was not invokable – On appeal,held: The appointment of the arbitrator was as per the arbitrationclause of the contract – Arbitration clauses in government contractsproviding that an employee of the Department will be the solearbitrator are neither void nor unenforceable – Appointment of theSuperintendent Engineer in the present case was not in deviationof the arbitration clause of the contract – Any challenge toappointment of arbitrator ought to have been raised before thearbitrator himself in the first instance – Bar u/s. 12(5) of theAmendment Act of 2015, to appointment of arbitrator by post, wouldnot be applicable to the present case because the Amendment Actitself would not be applicable to the case as the arbitrationproceedings commenced much prior to coming into force ofAmendment Act – When the parties have specifically agreed forappointment of sole arbitrator, it was not proper for the contractorto approach High Court for seeking appointment of independentarbitrator – However, the termination of arbitration proceedings

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Awas not correct as no warning was given by the arbitrator to thecontractor before terminating the proceedings – State directed toappoint an arbitrator in terms of arbitration clause – Appellantdirected to file his claim before the arbitrator – Arbitration andConciliation (Amendment) Act, 2015 – ss.12(5) and 26.

BDisposing the appeals, the Court

HELD : 1. A perusal of clause (65) makes it apparentlyclear that it was permissible to appoint a person by designationand this will be evident from clause (65), in particular the sentence“the arbitrator to whom the matter is originally referred beingCtransferred or vacating his office or being unable to act for anyreason the Chief Engineer is to appoint another person….”. Ifappointments were only to be made by name and not bydesignation there could be no question of further appointmenton the Arbitrator vacating his office. It is only when an Arbitratoris appointed by designation that the question of a vacancy uponDthe incumbent vacating office could arise thereby enabling theChief Engineer to appoint another person to act as arbitrator.The Superintendent Engineer, Arbitration Circle appointed asthe Arbitrator is from the very arbitration circle, HPPWD andsuch appointment is only as per clause (65) of the contract andEthere is no merit in the objection raised by the appellant.[Para 10][1013-G-H; 1014-A-C]

2. It is not correct to say that the appointed arbitrator is anemployee in service of the HPPWD which the provision of Section12(5) of the 1996 Act (as amended w.e.f. 23.10.2015) bars at theFthreshold itself. Arbitration clauses in government contractsproviding that an employee of the department will be the solearbitrator are neither void nor unenforceable. The fact that anamed arbitrator is an employee of one of the parties is not ipsofacto a ground to raise a presumption of bias or lack ofindependence on his part. The arbitration agreements inGgovernment contracts providing that an employee of thedepartment or a higher official unconnected with the work or thecontract will be the arbitrator are neither void nor unenforceable.[Para 11][1014-C-F]

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Indian Oil Corporation Limited and others v. RajaTransport Private Limited (2009) 8 SCC 520 : [2009]13 SCR 510 ; Ace Pipeline Contracts (P) Ltd. v. BharatPetroleum Corporation Limited (2007) 5 SCC 304 :[2007] 4 SCR 777 ; Union of India and another v.M.P. Gupta (2004) 10 SCC 504 – relied on.

3. In government contracts before appointing arbitrators,the appointing authority should be more vigilant and moreresponsible in choosing arbitrators who are in a position to conductarbitral proceedings in an efficient manner without comprisingwith the other duties. In the present case, the SuperintendentEngineer, Arbitration Circle, HPPWD was appointed as the soleArbitrator who, by virtue of his designation, regularly does thearbitration, devoting time to the arbitration proceedings and suchappointment of Superintendent Engineer cannot be said to be adeviation from clause (65) of the agreement. [Para 12][1014-F-G; 1015-D-G]

Union of India v. Uttar Pradesh State BridgeCorporation Limited (2015) 2 SCC 52 – relied on.

4. Any challenge regarding the appointment of an arbitratoras per the terms of the agreement between the parties must beviewed in the context of the agreement between the parties. Theparties have mutually agreed that there will be sole Arbitrationby the person appointed by the Engineer-in-Chief and that theappellant shall have no objection to any such appointment thatthe Arbitrator so appointed is a Government Servant. If theappellant has any grievance that the appointment of the arbitratoris by ‘post’ and not by ‘person’, the appellant ought to have raisedthe challenge before the arbitrator in the first instance. In thepetition filed before the High Court under Section 11(6) of theArbitration and Conciliation Act, 1996, the appellant has onlyprayed for quashing the appointment of the SuperintendentEngineer, Arbitration Circle, HPPWD, as the sole arbitrator asunconstitutional and sought for appointment of an independentand impartial sole arbitrator to adjudicate the dispute betweenthe parties. It is fairly well settled that any challenge to thearbitrator appointed ought to have been raised before thearbitrator himself in the first instance. [Para 13][1015-F-H;1016-A-B]

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A5. As per Section 26 of the Amendment Act, the provisionsof the Amended Act, 2015 shall not apply to the arbitralproceedings commenced in accordance with the provisions ofSection 21 of the Principal Act before the commencement of theAmendment Act unless the parties otherwise agree. In the factsand circumstances of the present case, the proviso in clause (65)Bof the general conditions of the contract cannot be taken to bethe agreement between the parties so as to apply the provisionsof the amended Act. In the present case, arbitration proceedingscommenced way back in 2013, much prior to coming into force ofthe amended Act and therefore, provisions of the amended ActCcannot be invoked. [Para 15][1017-A-D]

Board of Control for Cricket in India v. Kochi CricketPrivate Limited and others (2018) 6 SCC 287: [2018]2 SCR 829 – relied on.

Ratna Infrastructure Projects Pvt. Ltd. v. Meja UrjaDNigam Private Limited (2017) SCC Online Del 7808 –referred to.

6. In the present case, the Arbitrator has been appointedas per clause (65) of the agreement and as per the provisions oflaw. Once, the appointment of an arbitrator is made at the instanceEof the government, the arbitration agreement could not have beeninvoked for the second time. [Para 19][1019-C-D]

Antrix Corporation Limited v. Devas Multimedia PrivateLimited (2014) 11 SCC 560 : [2013] 6 SCR 453 – relied on.F

7. Section 25 of the Arbitration Act, 1996 deals with thesituation where the parties commit default without showingsufficient cause and consequent termination of the proceedings.Section 25 provides three situations where on account of thedefault of a party, the arbitral tribunal shall terminate theGproceedings. Section 25(a) provides that the Arbitral Tribunalshall terminate the proceedings where the claimants failed tocommunicate his claim in accordance with sub-section (1) ofSection 23 of the Act. In the present case, the appellant hasfailed to file his statement of claim; and only sent thecommunication to the arbitrator seeking adjournment on theH

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ground that the appellant has approached the High Court by filingpetition under Section 11(6) of the Act. When the parties havespecifically agreed for appointment of sole Arbitrator of the personappointed by the Engineer-in-Chief/Chief Engineer, HPPWD, theappellant was not right in approaching the High Court seekingappointment of an independent Arbitrator. [Para 21][1020-A-F]

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8. Inspite of extension of time, since the appellant-contractor had not filed statement of claim, the arbitratorterminated the proceedings under Section 25(a) of the 1996 Act.The appellant had been writing letters to the arbitrator beforethe hearing seeking adjournment. However, on the fourthoccasion, proceedings were simply terminated since no hearingswere held on earlier occasions, he expected that his request mightbe accepted. The arbitrator could have issued a notice warningthe appellant that no adjournment would be granted under anycircumstances. Since, no such warning was given, it would beappropriate to set aside the order of termination. In the interestof justice, an opportunity is to be afforded to the appellant to gobefore the departmental arbitrator (as agreed by the parties inclause (65) of the general conditions of contract. [Para 22][1020-F-H; 1021-A-B]

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Case Law Reference

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CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 11824-11825 of 2018.

From the Judgment and Order dated 10.03.2014 of the High Courtof Himachal Pradesh at Shimla in Arbitration Case No. 4049 of 2013and order dated 01.09.2014 in Review Petition No. RPST/20087/2014.

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AManinder Singh, Sr. Adv., Anirudh Wadhwa, Atul Shankar Vinod,Prabhas Bajaj, Ms. Kanika Saran, Bhargav T., M. P. Vinod, Advs. forthe Appellant.

Abhinav Mukerji, Mrs. Bihu Sharma, Ms. Purnima Krishna, Ms.Pratishtha Vij, Advs. for the Respondents.BThe Judgment of the Court was delivered by

R. BANUMATHI, J.

1. Leave granted.

2. These appeals arise out of the judgments dated 10.03.2014 inCArbitration Case No.4049 of 2013 and dated 01.09.2014 in ReviewPetition No. RPST/20087/2014 passed by the High Court of HimachalPradesh in and by which the High Court dismissed the Arbitration Petitionand Review Petition filed by the appellant declining to appoint arbitratorholding that as per the terms of the agreement, arbitrator had alreadyDbeen appointed.3. Brief facts which led to the filing of these appeals are asfollows:-

The appellant was awarded construction work contract on19.12.2006 relating to balance work of 214.00 mtrs. span C/C bearingsEon abutment bridge over river Beas at Harsipattan on Mandi RewalsarChandesh-Rakhota Maserah Sarkaghat Tihra Sandhole AlampurJawalamukhi road for a sum of Rs.14,29,81,500/-. An agreement wasalso entered into between the parties and clause (65) of the GeneralConditions of Contract contains arbitration clause. The period allowedfor completion of work was on or before 04.01.2009. However, extensionFwas granted to the appellant up to 30.06.2010. The work was completedby the appellant on 04.06.2011 and payment for the execution of workwas made. The appellant raised a dispute and requested for theappointment of arbitrator vide its letter dated 18.10.2013. Pursuant tothe request of the appellant, the Chief Engineer, HPPWD appointed theG“Superintendent Engineer, Arbitration Circle, HPPWD, Solan” as thearbitrator on 30.10.2013 and the said appointment had been made interms of clause (65) of the agreement. The arbitrator entered uponreference on 11.11.2013. The appellant after requesting for theappointment of arbitrator either remained absent from the proceedingsor sought adjournments stating that he intends to challenge theH

appointment of arbitrator before the Chief Justice as per the provisionsof Arbitration and Conciliation Act, 1996. Even after hearing, no statementof claim was filed by the appellant. On 06.08.2014, arbitration proceedingswere terminated under Section 25(a) of the Arbitration and ConciliationAct, 1996.

4. Being aggrieved by the appointment of “SuperintendentEngineer, Arbitration Circle, Solan, HPPWD” as the arbitrator, theappellant filed petition before the High Court under Section 11(6) of the1996 Act praying for appointment of independent arbitrator. The HighCourt placed reliance upon the judgment of this Court in AntrixCorporation Limited v. Devas Multimedia Private Limited(2014) 11 SCC 560 wherein it was held that in case, if any party isdissatisfied or aggrieved by the appointment of arbitrator in terms of theagreement by other party/parties, his remedy would be by way of petitionunder Section 13 of the 1996 Act, and, thereafter while challenging theaward under Section 34 of the 1996 Act. The High Court held that theappointment of “Superintendent Engineer” as arbitrator being in termsof clause (65) of the agreement, Section 11(6) of the Act cannot beinvoked. The appointment of arbitrator could not be challenged by wayof an application under Section 11(6) of the 1996 Act. Being aggrievedby the dismissal of the arbitration petition, the appellant is before us.

5. On behalf of the appellant, learned senior counsel Mr. ManinderSingh submitted that the appointment by office after coming into operationof the 1996 Act, was no more permissible and any appointment couldonly be made in terms of Section 11 of 1996 Act. It was further submittedthat since the arbitrator appointed by office had entered upon thereference, the appellant was compelled to file Arbitration Petition No.4049of 2013 and the High Court erroneously rejected the prayer made onbehalf of the appellant for appointment of an independent arbitrator byname. The learned senior counsel further submitted that the arbitratorappointed by office, is an employee in service of the HPPWD which theprovision of Section 12(5) bars at the threshold. Learned senior counselplaced reliance upon Ratna Infrastructure Projects Pvt. Ltd. v. MejaUrja Nigam Private Limited (2017) SCC Online Del 7808.

6. Refuting the above contention, on behalf of the respondent-State, learned counsel submitted that the appointment of SuperintendentEngineer, Arbitration Circle is as per clause (65) of the agreement andas per the provisions of law. In response to the contention that Section A

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A12(5) of the Amendment Act, 2015 bars appointment of arbitrator bypost, the learned counsel for the State placed reliance upon Board ofControl for Cricket in India v. Kochi Cricket Private Limited andothers (2018) 6 SCC 287 and submitted that the provisions of theAmendment Act, 2015 shall apply in relation to arbitral proceedingscommenced on or after the date of commencement of the AmendmentBAct, 2015 and shall not apply to the arbitral proceedings commencedprior to the Amendment Act, 2015 unless the parties otherwise agree.The learned counsel submitted that the provision contained in clause(65) of the general conditions of the Contract would not amount toagreement of the parties so as to imply application of the provisions ofCthe Amendment Act, 2015.

7. We have carefully considered the contentions of the partiesand perused the impugned judgment and materials on record. The pointfalling for consideration in this appeal is that in the light of the agreementbetween the parties in clause (65) of the general conditions of contractDwhether the appellant/contractor can challenge the appointment of theSuperintendent Engineer, Arbitration Circle as Arbitrator to resolve thedispute between the parties.

8. By the order of HPPWD dated 30.10.2013, the SuperintendentEngineer, Arbitration Circle, HPPWD, Solan was appointed as the soleEArbitrator to decide and make its award regarding claim/dispute givenby the appellant/contractor. The main thrust of challenge for appointmentof sole arbitrator was on the ground that the arbitrator had not beenappointed by name but, had been appointed by designation. It wassubmitted that appointment of arbitrator by office is not permissible andappointment ought to have been made by name and the same is evidentFfrom bare perusal of clause (65) of the contract. It was submitted thatas per Section 11(1) of the 1996 Act “a person of any nationality maybe an arbitrator, unless otherwise agreed by the parties…….”. Itwas submitted that the Arbitrator appointed by the office is not anappointment in terms of clause (65) of the contract and this aspect hasGnot been properly considered by the High Court.

9. For proper appreciation of the contentions, we may usuallyrefer to Clause (65) of the general conditions of contract which reads asunder:-

“Clause 65 of the General Conditions of Contract-…..Exceptwhere otherwise provided in the contract all questions and disputesrelating to the meaning of the specifications, designs drawingsand instructions therein before mentioned and as to the quality ofworkmanship of materials used on the work or as to any otherquestion, claim, right matter or thing whatsoever in any way arisingout of or relating to the contractor designs drawings, specificationand estimates, instructions orders or these conditions otherwiseconcerning the works of the execution or failure to execute thesame whether arising during the progress of the work or after thecompletion or abandonment thereof shall be referred to the solearbitration of the person appointed by the Engineer-in-Chief/ChiefEngineer, Himachal Pradesh Public Works Department. It will beno objection to any such appointment that the arbitrator soappointed is a Government servant that he had to deal with thematters to which the contract relates, and that in the course of hisduties as Government servant he had expressed views on all orany of the matters in dispute or different. The arbitrator to whomthe matter is originally referred being transferred or vacating hisoffice or being unable to act for any reason that (sic) the ChiefEngineer, HPPWD at the time of such transfer vacation of officeor inability to act shall appoint another person to act as arbitratorin accordance with the terms of the contract. Such person shallbe entitled to proceed with the reference from the stage at whichit was left by his predecessor, it is also a terms of this contractthat no person other than a person appointed by the Chief Engineer,HPPWD, should act as arbitrator and if for any reason that is notpossible the matter is not be claim in dispute is Rs.50,000/- (RupeesFifty Thousand) and above, the arbitrator shall give reasons forthe award.

Subject as aforesaid the provision of the Arbitration Act, 1940 orany statutory modification or re-enactment thereof and the rulesmade thereunder and for the time being shall apply to the arbitrationproceeding under this clause.” [Underlining added]

10. A perusal of clause (65) makes it apparently clear that it waspermissible to appoint a person by designation and this will be evidentfrom clause (65), in particular the sentence “the arbitrator to whomthe matter is originally referred being transferred or vacating his ABC

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Aoffice or being unable to act for any reason the Chief Engineer isto appoint another person….”. If appointments were only to be madeby name and not by designation there could be no question of furtherappointment on the Arbitrator vacating his office. It is only when anArbitrator is appointed by designation that the question of a vacancyupon the incumbent vacating office could arise thereby enabling the ChiefBEngineer to appoint another person to act as arbitrator. TheSuperintendent Engineer, Arbitration Circle appointed as the Arbitratoris from the very arbitration circle, HPPWD and such appointment isonly as per clause (65) of the contract and we find no merit in the objectionraised by the appellant.C

11. Likewise, there is no merit in the contention of the appellant-contractor that the appointed arbitrator is an employee in service of theHPPWD which the provision of Section 12(5) of the 1996 Act (asamended w.e.f. 23.10.2015) bars at the threshold itself. In a catena ofjudgments, the Supreme Court held that arbitration clauses in governmentDcontracts providing that an employee of the department will be the solearbitrator are neither void nor unenforceable. [Indian Oil CorporationLimited and others v. Raja Transport Private Limited (2009) 8 SCC520, Ace Pipeline Contracts (P) Ltd. v. Bharat Petroleum CorporationLimited (2007) 5 SCC 304, Union of India and another v. M.P. Gupta(2004) 10 SCC 504] The fact that a named arbitrator is an employee ofEone of the parties is not ipso facto a ground to raise a presumption ofbias or lack of independence on his part. The arbitration agreements ingovernment contracts providing that an employee of the department ora higher official unconnected with the work or the contract will be thearbitrator are neither void nor unenforceable.F

12. Observing that, in government contracts before appointingarbitrators, the appointing authority should be more vigilant and moreresponsible in choosing arbitrators who are in a position to conduct arbitralproceedings in an efficient manner without comprising with the otherduties, in Union of India v. Uttar Pradesh State Bridge CorporationGLimited (2015) 2 SCC 52, it was held as under:- “17. In the case of contracts between government corporations/State-owned companies with private parties/contractors, the termsof the agreement are usually drawn by the government companyor public sector undertakings. Government contracts have broadlytwo kinds of arbitration clauses, first where a named officer is to H

act as sole arbitrator; and second, where a senior officer like aManaging Director, nominates a designated officer to act as thesole arbitrator. No doubt, such clauses which give the Governmenta dominant position to constitute the Arbitral Tribunal are held tobe valid. At the same time, it also casts an onerous and responsibleduty upon the persona designata to appoint such persons/officersas the arbitrators who are not only able to function independentlyand impartially, but are in a position to devote adequate time inconducting the arbitration.If the Government has nominated thoseofficers as arbitrators who are not able to devote time to thearbitration proceedings or become incapable of acting as arbitratorsbecause of frequent transfers, etc., then the principle of “defaultprocedure” at least in the cases where Government has assumedthe role of appointment of arbitrators to itself, has to be applied inthe case of substitute arbitrators as well and the Court will step into appoint the arbitrator by keeping aside the procedure which isagreed to between the parties. However, it will depend upon thefacts of a particular case as to whether such a course of actionshould be taken or not. What we emphasise is that Court is notpowerless in this regard.”

As pointed out earlier, in the case at hand, the SuperintendentEngineer, Arbitration Circle, HPPWD was appointed as the soleArbitrator who, by virtue of his designation, regularly does the arbitrationdevoting time to the arbitration proceedings and such appointment ofSuperintendent Engineer cannot be said to be a deviation from clause(65) of the agreement.

13. Any challenge regarding the appointment of an arbitrator asper the terms of the agreement between the parties must be viewed inthe context of the agreement between the parties. As pointed out earlier,the parties have mutually agreed that there will be sole Arbitration bythe person appointed by the Engineer-in-Chief and that the appellantshall have no objection to any such appointment that the Arbitrator soappointed is a Government Servant. If the appellant has any grievancethat the appointment of the arbitrator is by ‘post’ and not by ‘person’,the appellant ought to have raised the challenge before the arbitrator inthe first instance. Be it noted, in the petition filed before the High Courtunder Section 11(6) of the Arbitration and Conciliation Act, 1996 on28.12.2013, the appellant has only prayed for quashing the appointment AB

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Aof the Superintendent Engineer, Arbitration Circle, HPPWD, Solan asthe sole arbitrator as unconstitutional and sought for appointment of anindependent and impartial sole arbitrator to adjudicate the dispute betweenthe parties. It is fairly well settled that any challenge to the arbitratorappointed ought to have been raised before the arbitrator himself in thefirst instance.B

14. Drawing our attention to the wordings in Clause (65) “thatthe agreement is subject to any statutory modification or re-enactment thereof and the rules made thereunder and for the timebeing shall apply to the arbitration proceeding under this clause”the learned senior counsel contended that these words would certainlyCattract Section 12(5) of the Act as amended with effect from 23.10.2015.In this regard, the learned senior counsel placed reliance upon DelhiHigh Court judgment in Ratna Infrastructure Projects Pvt. Ltd. v.Meja Urja Nigam Private Limited (2017) SCC Online Del 7808wherein interpreting the similar words in a contract, Delhi High CourtDheld that those words satisfy the requirement of Section 26 (amendedAct of 2015) of there being an agreement between the parties that theAct as amended with effect from 23.10.2015 will apply and held asunder:- “22. ……. The words “any statutory modification or re-enactmentEthereof and the rules made thereunder and for the time being inforce shall apply to the arbitration…” satisfies the requirement ofSection 26 of there being an agreement between the parties thatthe Act as amended with effect from 23[rd] October 2015 will apply.The Court is not prepared to draw the fine distinction between‘agree’ and ‘agreed’. Once the amendment to the clause clearlyFstated that all statutory modidications and re-enactments wouldapply, then there is no need for further agreement in that respectafter 23[rd] October, 2015. The plea of the Respondent in this regardis rejected.

23. The net result is that Section 12(5) as amended with effectGfrom 23[rd] October 2015 would apply. Section 12(5) clearly prohibitsthe employee of one of the parties from being an Arbitrator. Thiswould straightway disqualify Mr. Kher who happens to be aserving GM of the Respondent. Therefore it is to no avail that theRespondent has by its letter dated 21[st] August 2016 appointedHMr. Kher as an Arbitrator to adjudicate the Arbitration Case Nos.1 of 2013 and 1 of 2014. His mandate stands terminated.”

15. Considering the facts and circumstances of the present case,we are not inclined to go into the merits of this contention of the appellantnor examine the correctness or otherwise of the above view taken bythe Delhi High Court in Ratna Infrastructure Projects case; suffice itto note that as per Section 26 of the Arbitration and Conciliation(Amendment) Act, 2015 the provisions of the Amended Act, 2015 shallnot apply to the arbitral proceedings commenced in accordance with theprovisions of Section 21 of the Principal Act before the commencementof the Amendment Act unless the parties otherwise agree. In the factsand circumstances of the present case, the proviso in clause (65) of thegeneral conditions of the contract cannot be taken to be the agreementbetween the parties so as to apply the provisions of the amended Act.As per Section 26 of the Act, the provisions of the Amendment Act,2015 shall apply in relation to arbitral proceedings commenced on orafter the date of commencement of the Amendment Act, 2015 (w.e.f.23.10.2015). In the present case, arbitration proceedings commencedway back in 2013, much prior to coming into force of the amended Actand therefore, provisions of the Amended Act cannot be invoked.

16. In Board of Control for Cricket in India v. Kochi CricketPrivate Limited and others, (2018) 6 SCC 287, this Court has held thatthe provisions of Amendment Act, 2015 (with effect from 23.10.2015)cannot have retrospective operation in the arbitral proceedings alreadycommenced unless the parties otherwise agree and held as under:- “37. What will be noticed, so far as the first part is concerned,which states—

“26. Act not to apply to pending arbitral proceedings.—Nothing contained in this Act shall apply to the arbitralproceedings commenced, in accordance with the provisions ofSection 21 of the principal Act, before the commencement ofthis Act unless the parties otherwise agree.…”

is that: (1) “the arbitral proceedings” and their commencement ismentioned in the context of Section 21 of the principal Act; (2)the expression used is “to” and not “in relation to”; and (3) partiesmay otherwise agree. So far as the second part of Section 26 isconcerned, namely, the part which reads, “… but this Act shallapply in relation to arbitral proceedings commenced on or afterthe date of commencement of this Act” makes it clear that the A

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Aexpression “in relation to” is used; and the expression “the” arbitralproceedings and “in accordance with the provisions of Section 21of the principal Act” is conspicuous by its absence.”

17. Immediately after the appointment of the SuperintendentEngineer, Arbitration Circle as the sole Arbitrator (30.10.2013), theBappellant preferred Arbitration Petition No.4049/2013 (28.12.2013) beforethe High Court under Section 11(6), 14 and 15 of the Arbitration andConciliation Act, 1996 for appointment of an independent sole Arbitrator.

18. The High Court placed reliance upon the judgment in AntrixCorporation Limited v. Devas Multimedia Private Limited (2014) 11CSCC 560 and held that when the Superintendent Engineer, ArbitrationCircle was appointed as the Arbitrator in terms of the agreement (orarbitration clause), the provisions of sub-section (6) of Section 11 cannotbe invoked again. The High Court further observed that in case, theother party is dissatisfied or aggrieved by the appointment of an arbitratorin terms of the agreement, his remedy would be by way of petition underDSection 13 and thereafter while challenging the award under Section 34of the 1996 Act.

19. The High Court in the impugned judgment placed relianceupon the judgment in Antrix Corporation Limited v. Devas MultimediaPrivate Limited (2014) 11 SCC 560 wherein the Supreme Court heldEas under:- “31. The matter is not as complex as it seems and in our view,once the arbitration agreement had been invoked by Devas and anominee arbitrator had also been appointed by it, the arbitrationagreement could not have been invoked for a second time by theFpetitioner, which was fully aware of the appointment made by therespondent. It would lead to an anomalous state of affairs if theappointment of an arbitrator once made, could be questioned in asubsequent proceeding initiated by the other party also for theappointment of an arbitrator. In our view, while the petitioner wasGcertainly entitled to challenge the appointment of the arbitrator atthe instance of Devas, it could not do so by way of an independentproceeding under Section 11(6) of the 1996 Act. While power hasbeen vested in the Chief Justice to appoint an arbitrator underSection 11(6) of the 1996 Act, such appointment can be questionedunder Section 13 thereof. In a proceeding under Section 11 of the H

1996 Act, the Chief Justice cannot replace one arbitrator alreadyappointed in exercise of the arbitration agreement.”

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33. Sub-section (6) of Section 11 of the 1996 Act, quitecategorically provides that where the parties fail to act in terms ofa procedure agreed upon by them, the provisions of sub-section(6) may be invoked by any of the parties. Where in terms of theagreement, the arbitration clause has already been invoked byone of the parties thereto under the ICC Rules, the provisions ofsub-section (6) cannot be invoked again, and, in case the otherparty is dissatisfied or aggrieved by the appointment of an arbitratorin terms of the agreement, his/its remedy would be by way of apetition under Section 13, and, thereafter, under Section 34 of the1996 Act.”

In the present case, the Arbitrator has been appointed as per clause(65) of the agreement and as per the provisions of law. Once, theappointment of an arbitrator is made at the instance of the government,the arbitration agreement could not have been invoked for the secondtime.

20. As pointed out earlier the Arbitrator has already entered uponreference on 11.11.2013. The Arbitrator had first hearing on 07.12.2013;on which date appellant-contractor was absent. For the next date ofhearing on 13.03.2014 the Arbitrator has recorded the finding that theappellant-claimant-contractor was absent without any intimation to theTribunal. In this regard, Mr. Maninder Singh, the learned Senior Councilfor the appellant has drawn our attention to the letter dated 12.03.2014sent by the appellant requesting for adjournment. Similarly, in the nextdate of hearings before the arbitrator namely, 03.04.2014, 25.04.2014and 06.08.2014 the appellant-contractor did not appear; but only sentthe letters requesting for adjournment. On 03.04.2014, the matter wasadjourned to 25.04.2014 directing that both parties to come prepared forthe next date of hearing on 25.04.2014. Similar was the order passed on25.04.2014 that both parties have to come prepared for the next date ofhearing on 06.08.2014. Since the appellant-claimant did not appear beforethe Arbitrator, the Arbitrator terminated the proceedings on 06.08.2014under Section 25(a) of the 1996 Act.

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A21. Section 25 of the Arbitration Act, 1996 deals with the situationwhere the parties commit default without showing sufficient cause andconsequent termination of the proceedings. Section 25 provides threesituations where on account of the default of a party, the arbitral tribunalshall terminate the proceedings which are as under:-

(i) Under Section 25(a) where the claimant fails tocommunicate his statement of claim in accordance with subsection (1) of Section 23; B

(ii) Under Section 25(b) continue the proceedings on the failureof the respondent to communicate his claim of defence inCaccordance with sub-section (1) of Section 23;

(iii) Under Section 25(c) continue the proceedings, and makethe arbitral award on the evidence before it, in the event ofa party failing to appear at an oral hearing or producedocumentary evidence.

DSection 25(a) provides that the Arbitral Tribunal shall terminatethe proceedings where the claimants failed to communicate his claim inaccordance with sub-section (1) of Section 23 of the Act. In the presentcase, the appellant has failed to file his statement of claim; and only sentthe communication to the arbitrator seeking adjournment on the groundEthat the appellant has approached the High Court by filing petition underSection 11(6) of the Act. When the parties have specifically agreed forappointment of sole Arbitrator of the person appointed by the Engineer-in-Chief/Chief Engineer, HPPWD, the appellant was not right inapproaching the High Court seeking appointment of an independentArbitrator.F

22. Inspite of extension of time, since the appellant-contractorhad not filed statement of claim, the arbitrator terminated the proceedingsunder Section 25(a) of the 1996 Act by proceedings dated 06.08.2014.The appellant-contractor did not file his statement of claim before thearbitrator since the appellant had approached the High Court by filingGpetition under Section 11(6) of the 1996 Act, probably under the advicethat the appellant can get an independent arbitrator appointed. Theappellant had been writing letters to the arbitrator before the hearingseeking adjournment. However, on the fourth occasion, proceedings weresimply terminated since no hearings were held on earlier occasions, heexpected that his request might be accepted. The arbitrator could haveH

Issues

issued a notice warning the appellant that no adjournment would begranted under any circumstances. Since, no such warning was given,we deem it appropriate to set aside the order of termination. Appellanthad made a claim on account of delay as indicated in his letter dated18.10.2013 under various heads. In the interest of justice, in ourconsidered view, an opportunity is to be afforded to the appellant to gobefore the departmental arbitrator (as agreed by the parties in clause(65) of the general conditions of contract) and the proceedings of thearbitrator dated 06.08.2014 terminating the proceedings is to be set aside.We are conscious that after the Amendment Act, 2015, there cannot bea departmental arbitrator. As discussed earlier, in this case, the agreementbetween the parties is dated 19.12.2006 and the relationship betweenthe parties are governed by the general conditions of the contract dated19.12.2006, the provisions of the Amendment Act, 2015 cannot be invoked.

23. In the result, the appeals are disposed of with the followingdirections:-

(i) the proceedings of the arbitrator dated 06.08.2014 terminatingthe arbitral proceedings is set aside. In terms of clause (65) of thegeneral conditions of contract, the Chief Engineer, HimachalPradesh Public Works Department is directed to appoint anarbitrator in terms of clause (65) of the agreement.

(ii) the appellant shall file his claim before the arbitrator sonominated and the arbitrator shall afford sufficient opportunitiesto both the parties and proceed with the matter in accordancewith law.

We make it clear that we have not expressed any opinion on themerits of the claim of the appellant.

Kalpana K. Tripathy

Appeals disposed of.

A

B

C

D

E

F

G

H