Arbitral Tribunal Of Retired Railway Officers Invalid Without Express Waiver U/S 12(5) A&C Act: MP High Court

The Madhya Pradesh High Court bench of Justice Vivek Jain has terminated the mandate of an arbitral tribunal constituted by Railways holding that unilateral appointment of railway officers as arbitrators despite a clear refusal by the contractor to waive the appointment under section 12(5) of the Arbitration Act rendered the tribunal de jure ineligible. The petitioner, Continental Telepower Industries Limited, was awarded a contract by Indian Railways for supply of PVC insulated armoured underground signalling cables. The arbitration was invoked after disputes had arisen between the parties during execution. The Railways sought a waiver from the petitioner under section 12(5) of the Arbitration Act to the appointment of railway officers as arbitrators. The petitioner expressly refused to grant such waiver. Despite this refusal, the Railways sent four names of ex-officers of the railways to the petitioner who was called upon to select two names. Subsequently, a three member arbitral tribunal consisting entirely of retired Railways officers was constituted which was objected to by the petitioner. Notwithstanding the objections raised by the petitioner, the tribunal entered upon reference and proceeded with arbitration. Subsequently, the petitioner had approached the High Court under section 14 seeking termination of the tribunal's mandate. The Union of India opposing the plea of the petitioner submitted that since the arbitral tribunal had been constituted before the Supreme Court judgment in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) (CORE), its ratio would not be applicable to the facts of the present case as the court had given its ruling in CORE a prospective effect. Rejecting the contention, the court noted that the petitioner had expressly refused to grant waiver under section 12(5) and objected to the constitution of the arbitral tribunal immediately after its formation without participating in the proceedings for a substantial length of time. Further rejecting the plea that the judgment in CORE had prospective application, the court held that the Railways could not rely on CORE judgment to justify unilateral appointments of arbitrators in a case where a waiver was expressly refused. “This Court would not be impressed by the argument about only prospective applicability of judgment in the case of CORE (Supra), because in the present case not only the petitioner had refused to waive off applicability of Section 12(5) as far back as on 20.09.2023 but had also written a letter to the Railways dated 2-07-2024 that he does not agree to the Tribunal which has been appointed by the Railways and that a proper Arbitral Tribunal be appointed in the matter.”, the court observed. Relying on the Delhi High Court's judgment in Mahavir Prasad Gupta & Sons, the court observed that ineligibility under section 12(5) of the Arbitration Act goes to the root of the matter and can be raised at any stage. The Delhi High Court had ruled that “the objection as to appointment of arbitrator can be made at any point of time even at the stage of Section 34 or during enforcement proceedings under Section 36 of Act of 1996. It is further held that the waiver can only be done by express agreement in writing after arising of disputes between the parties.” In light of the above discussion, the court concluded that since the constitution of the arbitral tribunal by the Railways was unilateral and contrary to section 12(5), the arbitrators were de jure ineligible to continue the proceedings. Accordingly, the court terminated the tribunal's mandate under section 14 and proposed a substituted arbitrator to continue the proceedings. Case Title: Continental Telepower Industries Limited Versus Union Of India And Others Case Number: ARBITRATION CASE No. 91 of 2025 Order Date: 22/12/2025 Shri R.K. Verma - Senior Advocate along with Shri Bhuvnesh Sharma,- Advocate for the Petitioner. Shri Sunil Jain - Additional Solicitor General through Video Conferencing with Shri Satyendra Kumar Patel - Central Government Standing Counsel for the Respondent. Click Here To Read/Download Order

Arbitral Tribunal Of Retired Railway Officers Invalid Without Express Waiver U/S 12(5) A&C Act: MP High Court

Mohd Malik Chauhan

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