Arbitration Act Envisages Complete Consensus On All Points, Consensual Dispute Resolution Forms Its 'Leitmotif': Calcutta High Court

The Calcutta High Court has recently allowed a plea for the appointment of a sole arbitrator by M/s Mehrotra Buildcon Pvt Ltd, to adjudicate over its dispute with the South Eastern Railway (SER).

In allowing the petitioner's application under Section 11 of the Arbitration & Conciliation Act, 1996 ("Act"), by calling out the restrictive clause in the General Conditions of Contract ("GCC") which made the petitioner choose an arbitrator from a list given by the respondent, a single bench of Justice Moushumi Bhattacharya held:

Petitioner was to choose 2 names from the 4 names given by the respondent. The clause does not provide for any elbow-room for the petitioner to make a free choice. The names are simply handed on a platter, the petitioner is to choose 2 and the final choice rests on the GM of the respondent; that too as the petitioner's nominee arbitrator. Nothing can be more one-sided than this. The absence of consent and choice is writ large in clause 64(3)(b)(ii) of the GCC. 

Brief Facts

It was submitted that the respondent SER, had engaged the petitioner for the construction of a foot overbridge in Odisha, and subsequently, the emergence of disputes pertaining to the price variation clause led to the petitioner sending notice to the respondent for conciliation of disputes pre-arbitration. 

It was argued that the petitioner attempted other avenues to resolve the dispute, but was constrained to invoke the arbitration clause by notice dated 4.7.2023.

It was submitted that pursuant to clause 64(3)(b)(ii) of the GCC, the respondent sent a list of four arbitrators, for the petitioner to choose from. 

The petitioner disputed whether they would be bound by the aforesaid clause of the agreement due to its unilateral nature. 

Clause 64(3)(b)(ii) provides for cases exceeding Rs. 50 lakhs in value (as the present case) and the arbitral tribunal to consist of a panel of 3 retired Railway Officers not below the rank of senior administrative grade officers. The clause further provides that the Railway will the send a panel of at least 4 names of retired Railway Officers to the contractor (petitioner in the present case) within 60 days from the day of a valid demand for arbitration being received by the General Manager of the respondent.

Petitioner relied on several apex court decisions to substantiate that the impugned clause could not be enforced due to it furthering unilateral appointment of arbitrators. 

Court's Findings

In perusing the case laws relied on by the parties, the Court looked at the impugned clause and noted that the petitioner had made its stand abundantly clear in letters addressed to the respondent that they were not agreeable to the arbitration mechanism provided under clause 64(3)(b)(ii) of the GCC wherein the petitioner would have to nominate 2 from the 4 names sent by the respondent and the respondent would have the final say in appointing one of the 2 names chosen, as the petitioner's nominee in the arbitration.

Court noted that the petitioner had also referred to the decision of the Supreme Court on unilateral appointments and that its letters expressed clearly that it disagreed with the arbitration mechanism in the impugned clause due to which it could not be dragged into the stranglehold of the same. 

The Arbitration Act envisages complete consensus on all points. It does not envisage a situation where one of the parties, who has made it clear in no uncertain terms to disagree with the mode of appointment, being bodily-bundled, kicking and screaming, to arbitration in utter disregard to the lack of consent, it held. 

It concluded that the unilaterality of the clause supported the Court's view and that the Supreme Court had in similar cases, held that the panel must be made more broadbased to cut back any apprehension of partiality or lack of independence of the arbitrators.

Accordingly, the application was allowed and the Court appointed (Retd) Justice Ranjit Kr Bag as the sole arbitrator. 

 Citation: 2023 LiveLaw (Cal) 351

Case: M/s. Mehrotra Buildcon Pvt. Ltd. v South Eastern Railway

Case No: AP 736 of 2023

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