Arbitrator Panel Restricting Nominee Selection To Railways' Officers and Suggested Names Is Not Valid: Delhi High Court

The Delhi High Court bench of Justice Prateek Jalan has held that panel comprising of serving or retired officers of Railways not only restricted the party's choice but also compelled it to choose its nominee from amongst four names suggested by the Railways. The bench noted that such a panel is not in consonance with the judgment of the Supreme Court in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV). Brief Facts: The matter pertained to disputes arising from a Contract Agreement which was for construction of a 2-lane overbridge and a road underbridge in place of certain level crossings at specified locations between Rathdhana and Narela Railway stations and between Gurugram and Basai Dhankot railway stations. The Contract was signed between Godara Construction Company (Petitioner) and Union of India. The Contract included a clause (Clause 64) that mandated arbitration for dispute resolution. This clause specified that disputes involving claims of less than one crore rupees will be decided by a sole arbitrator, while claims exceeding this amount will be resolved by a three-member tribunal. The clause further detailed the procedure for appointing a three-member tribunal, including the contractor's nominee. The tribunal should consist of three Gazetted Railway Officers not below Junior Administrative Grade, or two such officers along with a retired Railway Officer of Senior Administrative Grade. After disputes arose, the Petitioner invoked arbitration and requested Railways to pay the claimed amounts or proceed to arbitration. The Railways did not respond which prompted the Petitioner to approach the Court under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator. Observations by the High Court: The High Court, upon examining clause 64.3(a)(ii) of the arbitration agreement, held that it imposes unreasonable restrictions on the Petitioner's ability to choose its nominee. It noted that the clause not only confines the Petitioner's options to serving or retired officers of the Railways but also mandated that the Petitioner select its nominee from a list of four names proposed by the Railways. Further, the High Court noted that the Petitioner was required to suggest two out of these four names, and ultimately, the Railways would appoint the petitioner's nominee. The bench held that this method of selection does not align with the decision of the Supreme Court in Central Organisation for Railway Electrification. Therefore, the petition was disposed of by the High Court with a directive that each party nominates one member of their choice to the Arbitral Tribunal within two weeks. The two appointed members will then have the liberty to select the presiding arbitrator, which will complete the constitution of the Arbitral Tribunal. Case Title: GJ (JV) Comprising of M/S Godara Construction Company M/S Jandu Construction India Pvt. Ltd. Vs Union Of IndiaCitation: 2024 LiveLaw (Del) 778 Case Number: ARB.P. 862/2024 Advocate for the Petitioner: Mr. Vivekanand and Mr. Abhishek Sanwal, Advocates Advocate for the Respondent: Ms. Iram Majid, CGSC with Mr. Md. Suboor, Advocate. Date of Judgment: 09.07.2024 Click Here To Read/Download Order or Judgment

Arbitrator Panel Restricting Nominee Selection To Railways' Officers and Suggested Names Is Not Valid: Delhi High Court

Rajesh Kumar

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