1. This is an application under Sections 10 and 11 of the Arbitration and Conciliation Act, 1996 filed by the petitioners. According to the petitioners, they are approved contractors of the Eastern Railway for quite a long time and they have executed diverse works under numerous contracts with such Railway for a period of about 15 years between 1978 to 1993. Disputes arose in respect of 145 contracts, and all the said 145 contracts were covered by the same and identical Arbitration Clause namely, Clause 63 of General Conditions of Contract.

2. Under the sub-clause (3)(i) of the said General Clause 63, a sole arbitrator is to be appointed by the Railways, in cases, where the claim in question is below Rs. 5,00,000/- (Rupees Five Lakhs) and in cases, where the issues involved are not of a complicated nature.

3. Under sub-clause (3)(ii), two arbitrators are to be appointed in the manner laid in Clause 63(3)(b) for all claims of Rs. 5,00,000/- (Rupees Five Lakhs) and above, and for all claims irrespective of the amount of value of such claims, if the issues involved are of complicated nature. In the event of the two arbitrators being divided in their opinions, the matter under disputes will be referred to an Umpire to be appointed to the manner laid down in Clause 3(b) for his decision.

4. Since disputes arose in respect of all the 145 aforesaid contracts, the petitioner requested the General Manager, Eastern Railway, the respondent No. 2 herein, to appoint arbitrators in terms of the Arbitration Clause and to refer the disputes to the arbitrators for adjudication. When no response was received from the respondent No. 2 in the matter, the petitioners altogether filed 145 Special Suits under Section 20 of the Arbitration Act, 1940 praying for referring the disputes to arbitrators. The said 145 suits were filed during the period between 1991 to 1993. Out of the said 145 suits, 109 suits were filed in the Howrah District Court, 21 suits were filed in the Burdwan District Court, 4 suits were filed in the Bolpur Court, 10 suits were filed in the Suri District Court and 1 suit was filed in this Hon'ble Court. According to the petitioners, the value of the claim under each of the aforesaid dispute was more than Rs. 5,00,000/- including interest.

5. Thereafter on or about 20th August, 1993 the petitioners moved an application under Clause 13 of the Letters Patent read with Section 24 of the Code of Civil Procedure, as well as Section 8 of the Arbitration Act, 1940 in this Hon'ble Court before Hon'ble Justice S.K Hazari, whereupon. His Lordship granted an order of stay in all the above 144 suits pending in different District Courts and also gave direction for service of copies. Ultimately. His Lordship by an order dated February 23, 1994 directed to transfer all the said 144 Special Suits from the District Courts to this Hon'ble Court and appointed two former Judges of this Hon'ble Court as arbitrators — one for adjudicating the disputes in respect of 72 contracts and other for the rest of the contracts. Against the said order, the respondent No. 2 preferred an appeal before the Division Bench of this Hon'ble Court, and the Appeal Bench by its order dated 3rd October, 1994 allowed the appeal setting aside the order of the learned trial Judge. Against the said order of the Appeal Bench, the petitioners filed a Special Leave Petition in the Hon'ble Supreme Court, being Special Leave Petition (Civil) No. 15864 of 1994, which was disposed of by the Apex Court on August 21, 1995 by passing the following order:—

“Heard counsel for the parties. We are not inclined to interfere with the order passed by the Division Bench. Mr. Verma learned Senior Counsel appearing for the respondent-Railway states that arbitrators shall be appointed in respect of different agreements entered into between the petitioners and the respondent-Railway to adjudicate the dispute in question. He also stated that if within the jurisdiction of one particular Court there are more than one disputes, which have to be referred to for Arbitration then one arbitrator shall be appointed for all such disputes. The petitioner shall be at liberty to give suggestion on the above lines within two weeks. The respondent shall appoint arbitrators within 6 weeks from the date of suggestions which are furnished to them by the petitioner. The S.L.P is disposed of.”

6. The petitioners then, as per the above observations of the Supreme Court, suggested the names of 15 persons (3 each in respect of 5 groups of disputes pending in 5 different Courts) including the names of 5 retired Judges of this Hon'ble Court and 10 Railway Officers. The respondent No. 2, however, issued five letters on November 6, 1995 appointing 2 Arbitrators in respect of the disputes pending in each of the 4 District Courts and one sole arbitrator in respect of the dispute pending in this Hon'ble Court. One of the two arbitrators in each of the said 4 Courts was appointed from amongst the Railway Officers, whose names were suggested by the petitioners, as would appear from Annexure ‘E’ to the application.

7. As none of the arbitrators so appointed by the respondent No. 2, entered on the references and as the joint arbitrators appointed in respect of the disputes covered under the suits filed in the Howrah District Court resigned, the respondent No. 2 unilaterally purported to appoint 2 substitute arbitrators, selecting one out of the petitioner's letter dated August 30, 1995.

8. In the meantime, however, the petitioners on December 8, 1995 filed a contempt petition before the Apex Court of this country inter alia, on the ground that the respondents had violated the order passed by the Apex Court on 21st August, 1995 and committed breach of the undertaking given by the Senior Counsel appearing for the respondents before the Apex Court on that date, by not appointing 5 sole arbitrators for cases relating to disputes in respect of which suits were filed in 5 different Courts. The respondents did not file any counter to the said contempt petition. However, the respondent-Railway also filed on December 14, 1995 a separate application being I.A No. 2 of 1996 in the Supreme Court of India, seeking clarification of the aforesaid order dated 21st August, 1995 to the effect that appointment of joint arbitrators in respect of disputes covered by the suits filed in the 4 different District Courts by the respondent No. 2 was in consonance with the aforesaid order of the Supreme Court dated 21st August, 1995. The Supreme Court, however, by its order dated September 23, 1997 dismissed both the contempt petition filed by the petitioners and also the I.A filed by the respondent as would appear from Annexure ‘H’ to the application, with the following observations:

“We are satisfied that there is no case made for entertaining this contempt petition especially in the background of the effort made in this Court to sort out the controversy, the offer made on behalf of Railways to appoint two officers exclusively for this work and yet the reluctance of the applicants to accept anything which was offered to them. The contempt petition is, therefore, dismissed.

I.A 2 is also dismissed.”

9. The petitioners also have stated that because of the said order of the Supreme Court dated 23rd September, 1997 the Court's earlier order dated 21st August, 1995 still stands and as the respondents did not comply and/or did not act in terms of the Supreme Court's said order dated 21st August, 1995, the petitioners have filed the present application in this Hon'ble Court under Sections 10 and 11 of the Arbitration and Conciliation Act, 1996 for appointment of a sole arbitration in terms of Section 11(5)of the said Act in respect of each of the 5 Courts for adjudicating the claims and disputes as raised in the Special Suits pending in such Courts as stated above, particulars of which have been described in the Schedule being Annexure ‘B’ to the present application.

10. Mr. Mitra, learned Senior Counsel appearing on behalf of the petitioners, contends inter alia, that in view of the admitted fact, that no arbitrator allegedly appointed in the matters by the respondents as referred to above, indicated his willingness to act as such, there was no proper appointment of arbitrators for such matters, and since, no arbitral proceeding had commenced in the above matters while the Arbitration Act, 1940 was in force, the Arbitration and Conciliation Act, 1996 which came into force on 25th January, 1996 would apply to the facts of the present case, and in support of his said contention, refers to the judgment of the Supreme Court in the case of The Secretary to the Govt. of Orissa v. Sarbeswar Rout, AIR 1989 SC 2259. In the said case, it has been inter alia, held by the Supreme Court, that in arbitration proceeding, as soon as the arbitrator indicates his willingness to act as such, the proceeding must be held to have commenced, and that the arbitration proceeding is instituted when the claimant files his claims. According to Mr. Mitra, so far as the present case is concerned, no arbitrator appointed by the respondent No. 2 indicated his willingness to act as such, and the claimant/petitioners also had not filed their claims before any arbitrator and therefore, no arbitral proceeding can be said to have commenced under the old Act in any of the above 145 suits. Mr. Mitra also refers to the decision of the Andhra Pradesh High Court in the case of Y. Parthasarathy v. General Manager, Railway Electrification, Allahabad, 1997 (2) Arbi LR 247, wherein also, the Andhra Pradesh High Court had taken the same view as was taken by the Supreme Court of India in its above decision in AIR 1989 SC 2259. Mr. Mitra further submits that the above two decisions were referred to in an unreported decision of the Single Bench of this Hon'ble Court, dated 29th April, 1998 passed by Sujit Sinha, J. in A.P No. 164 of 1997 (Monoranjan Mondal v. Union of India).

11. According to Mr. Mitra therefore, since no arbitral proceeding had started under the Arbitration Act, 1940 in respect of the contracts forming the subject-matters of the above 145 suits, the provisions of the New Act of 1996 would apply squarely to the present case.

12. Lastly, Mr. Mitra also contends that whatever might have been agreed by the petitioners in their disputed 145 contracts as referred to above regarding arbitration, in view of the stand taken by the Senior Counsel to the Railways before the Supreme Court, as would appear from the order of the Hon'ble Supreme Court dated August 21, 1995 as referred to above, the Railway-respondents had waived all their rights in the matter of appointing arbitrators in the matters under the Clause 63 of the General Clause of Arbitration, more so, when the contempt application and the interlocutory application being I.A No. 2 of 1996 filed by the petitioners and the Railway authority respectively, were both dismissed by the Supreme Court by its order dated 23rd September, 1997 which means that its order dated 21st August, 1995 is still subsisting and as such, the Arbitration Act, 1940 would not apply under any circumstances to the matters pending in five different Courts as stated above.

13. The learned Counsel for the respondent, however, contends that the present application is not maintainable first, because the special suits as referred to above were filed by the petitioners under Section 20 of the Arbitration Act, 1940 and the same are still pending for final adjudication, and as such, this Hon'ble Court has no jurisdiction to entertain, try or pass any order relating to the said pending proceedings and secondly, as the above Special Suits were filed prior to 1993-1994 and the Appeal Bench of this Hon'ble Court passed its order on 3rd October, 1994 and the order of the Supreme Court was passed on 21st August, 1995, which all happened including the appointment of arbitrators subsequent thereto, when Old Act of 1940 was in force, and prior to coming into force of the New Act of 1996, which came into effect on or about 25th January, 1996 only, the 1996 Act would not apply to the said suits at all.

14. Learned Counsel for the Railway-respondent further contends inter alia, that as there has been no failure on the part of the Railway-respondent to appoint arbitrators in the matters as would appear from the facts of this present application, and also from the order of the Supreme Court dated 23rd September, 1997 as referred to above, and as the Railway-respondent had all along been ready and willing to appoint arbitrators, and it was the reluctance on the part of the petitioners to accept such appointment that had prevented the arbitrators from functioning, as was also indicated by the Supreme Court in its said order dated 23rd September, 1997 the petitioners cannot take recourse to the 1996 Act specially, Section 11 thereof, alleging that the parties did not agree to the procedure of appointing arbitrators. Failure of the respondent-Railways to act in the matter of appointing arbitrator, is a condition precedent for the applicability of the New Act of 1996 and since, the Railway authorities always were ready and willing to appoint arbitrators and in fact, had offered to appoint arbitrators and subsequently appointed arbitrators, the Railway-respondents cannot be held to be guilty of any inaction on their part in appointing arbitrators so that 1996 Act can be invoked.

15. Lastly, it has also been contended on behalf of the Railway-respondent that the petitioners were deliberately trying to avoid the process of appointment of the arbitrators with a view to frustrate the order of the Hon'bie Supreme Court of India.

16. Heard the learned Counsels for the parties and also considered the petition and the affidavit-in-opposition and the counter-affidavit filed by the respective parties and also perused the written arguments submitted by both the parties.

17. It is quite clear, that all the above 145 contracts were covered by the General Clause of Arbitration namely, Clause 63 of Annexure ‘A’ to the present application. Under Clause 63(3)(i) a Sole Arbitrator, who shall be the General Manager or a Gazetted Railway Officer nominated by him, is to be appointed in a case where the claim in question is below Rs. 5,00,000/-.

18. Clause (ii) says that for all claims of Rs. 5,00,000/- and above, 2 arbitrators who shall be Gazetted Railway Officers of equal status are to be appointed. Clause 63(3)(b) of the General Arbitration Clause says, that for the purpose of appointing 2 arbitrators as referred to in sub-clause (a)(ii), the Railway will send a panel of more than three names of Gazetted Railway Officers of one or more departments of the Railway to the Contractor, who will be asked to suggest to the General Manager one name out of the list, for appointment as the Contractor's nominee. The General Manager, while so appointing the Contractor's nominee, will also appoint a second arbitrator as the Railway's nominee, either from the panel or from outside the panel, ensuring that one of the two arbitrators so nominated, is invariably from the Accounts Department. Before entering upon the reference, the two arbitrators shall nominate an Umpire who shall be a Gazetted Railway Officer to whom the case will be referred in the event of any difference between the two arbitrators.

19. In the present case, against the order dated 3rd October, 1994 passed by the Division Bench in appeal preferred against the order of the learned single Judge dated February 23, 1994 as referred to above, the petitioners filed a Special Leave Petition in the Supreme Court of India being SLP (C) No. 15864 of 1995 and the same was admitted and disposed of on 21st August, 1995 by the Hon'ble Supreme Court holding inter alia, that Mr. Verma, learned Senior Counsel appearing for the respondent-Railway stated that arbitrators would be appointed in respect of different agreements entered into between the petitioners and the Railway-respondent to adjudicate the disputes in question. He also stated that if within the jurisdiction of one particular Court, there were more than one disputes which had to be referred to Arbitration, then one arbitrator should be appointed for all such disputes. The Apex Court also observed that the petitioners should be at liberty to give suggestion on the above line within 2 weeks and the respondent should appoint arbitrators within 8 weeks from the date of such suggestion as would be furnished to them by the petitioners. From Annexure ‘D’ to the application, being the petitioners' letters, addressed to the respondent-Railway dated 30th August, 1995 it appears, that in obedience to the said order of the Supreme Court dated 21st August, 1995 the petitioners duly suggested the names of 15 persons (3 each in respect of 5 groups of disputes pending in 5 different Courts), including the names of 5 retired Judges of this Hon'ble Court and 10 Railway Officials. By their letters dated November 6, 1995 and November 8, 1995 the respondent No. 2, however, appointed 2 arbitrators in respect of the disputes pending in each of the 4 District Courts and one sole arbitrator in respect of the disputes pending in this Hon'ble Court, in total violation of the Hon'ble Supreme Court's order dated 21st August, 1995, inasmuch as, it would appear from the said order that the Supreme Court had disposed of the petitioners' Special Leave Petition because of the submission made by the learned Senior Counsel of the respondent-Railway to the effect that if within the jurisdiction of one particular Court there were more than one disputes which had to be referred to for arbitration, then one arbitrator should be appointed for all such disputes. Therefore it would be quite clear from the stand taken by the Railway authority before the Supreme Court as stated above, suggesting the names by the petitioners by their letter dated 30th August, 1995 (Annexure ‘D’) in compliance of the Apex Court's said order, that both the parties had in fact waived the General Clause of Arbitration being Clause 63 as quoted above and had agreed into a new method in the process of appointing arbitrator.

(Emphasis added)

20. Secondly, it would also be quite clear, that none of the arbitrators so appointed by the respondent-Railways as per their above letters dated 6th November and 8th November, 1995 being Annexure ‘E’ (collective) to the petition, entered on the references. In fact, some of the said arbitrators had even resigned namely, the Joint Arbitrators appointed in respect of the disputes covered under the suits filed in Howrah Court after which, the respondent No. 2 unilaterally appointed 2 substitute arbitrators by its letter dated February 13, 1996 being Annexure ‘F’. Such unilateral act on the part of the Railway authorities purportedly under the said Clause 63, cannot be called as legal, in view of the special facts and circumstances of the present case.

21. The records of the case would further show that the petitioners filed a contempt application before the Supreme Court for alleged violation of its order dated 21st August, 1995 by the respondent-Railway in appointing 2 arbitrators for each of the 4 Courts except this Hon'ble Court, although it was the specific stand taken on behalf of the respondent-Railway before the Hon'ble Supreme Court that they would appoint one arbitrator for all the cases appearing in one Court in respect of the disputed special suits as would appear from the Hon'ble Supreme Court's said order itself. The respondent-Railway also filed an application for modification/clarification of the said order of the Hon'ble Supreme Court being I.A No. 2 of 1996 and the Supreme Court in its order dated 6th of December, 1996 observed inter alia, that a controversy had arisen as to whether the arbitration proceedings in question, should be governed by the provisions of the Arbitration Act, 1940 or by the provisions of the Arbitration and Conciliation Act, 1996 and as such let both the above applications be listed before an appropriate Bench in the 2nd week of January, 1997 for consideration of the question aforesaid. Thereafter on 22nd of July, 1997 the learned Counsel for the Union of India suggested that the Union of India was prepared to appoint 2 sets of arbitrators who would be assigned exclusively the work of arbitration alone, so that there were no other work to be performed during the period of arbitration to which, the petitioners wanted some time to consider. However, as the petitioners did not accept such proposal, both the application and the application for modification being I.A No. 2 of 1996 were dismissed by the Hon'ble Supreme Court by its order dated 23rd September, 1997 no doubt, observing inter alia, that they were satisfied that there was no case made for entertaining the contempt petition especially in the background of the effort made in that Court to sort out the controversy, the offer made on behalf of Railways to appoint two officers exclusively for this work and yet the reluctance of the applicants to accept anything which was offered to them. The Railway's application for modification was also dismissed by the said order.

22. Rejection of the said application for contempt, however, does not mean, according to me, that the Supreme Court's order dated 21st August, 1995 was also recalled or withdrawn. More so, when the application for modification was also dismissed, and since the said order of the Supreme Court dated 21st August, 1995 still remains valid, the parties to it must act as per the said order and if the parties cannot agree to act accordingly, then Section 11 of the Arbitration and Conciliation Act, 1996 can very well be taken recourse to.

23. Regarding the question as to whether the present case would be governed under the Arbitration Act, 1940 or under the Arbitration and Conciliation Act, 1996, the 1940 Act certainly would have been made applicable in the matters in controversy since suits were filed under that Act which are still pending, provided of course, any arbitration proceeding had commenced already. However, it is an undisputed fact, that no arbitrator, allegedly appointed in the matter, indicated his willingness to act as such, and no arbitrator, pursuant to the unilateral appointment made by the Railways as stated above, had asked the petitioners to file their claims, and it means, that in fact, no proper appointment of arbitrator was made in the matters, or in other words, no arbitral proceeding was commenced before the 1996 Act had come into force.

24. Section 85 of the Arbitration and Conciliation Act, 1996 repeals the Arbitration Act, 1940. Section 85(2) of the 1996 Act, however, is a saving clause so far as the provisions of the repealed 1940 Act are concerned, but that too, under certain conditions and/or circumstances only. The said Section 85 of the 1996 Act is reproduced below for our convenience.

“Section 85.

Repeal and Savings

(1) The Arbitration (Protocol and Convention) Act, 1937, the Arbitration Act, 1940 and the Foreign Awards (Recognition and Enforcement) Act, 1961 are hereby repealed.

(2) Notwithstanding such repeal,—

(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;

(b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act.”

25. Therefore, it is abundantly clear from the provisions of Section 85(2)(a) of the 1996 Act, that notwithstanding the repeal, the provisions of the 1940 Act shall apply in relation to arbitral proceedings which commenced before the 1996 Act came into force unless otherwise agreed by the parties.

26. It would, however, be quite clear from the facts and circumstances of the present case that no arbitral proceedings had ever started under the 1940 Act, since, no arbitrator appointed unilaterally by the Railway authorities without following the Supreme Court's order dated 21st August, 1995 ever acted as such, and even some of such arbitrators had resigned. An arbitration proceeding is stated to have commenced, when the arbitrator expresses his willingness to act as such, and the claimant lays its claims before the arbitrator, as has been clearly held by the Apex Court of the country in its decision in AIR 1989 SC 2259, cited on behalf of the petitioners and as referred to above. In this context, a latest judgment of the Andhra Pradesh High Court in the case of Marshall Corporation Ltd., Vishakhapatnam v. Union of India, represented by the Engineer-in-Chief, Army Head Quarter, New Delhi, 1998 (2) Arb LR 175, can also be referred to. It was also held in that case referring to the above Supreme Court decision and also the earlier judgment of the same High Court, reported in 1997 (2) Arb LR 347, as referred to above, that arbitral proceeding cannot be said to have commenced when the arbitrator fails to express his willingness to act as an arbitrator. The respondent-Railways have failed to refer to a single instance in the present case, when the arbitrators appointed by them or any of them had expressed any willingness to act as such. Therefore, according to me, the Arbitration and Conciliation Act, 1996 will apply so far as the present case is concerned.

27. Moreover, if the parties or any one of them fail or fails to act as per the appointment procedure agreed to by the parties, under the provisions of Section 11 of the 1996 Act, a party may request the Chief Justice or any person or institution designated by him, to take necessary measure as per the said Act.

28. In the present case, originally, the parties agreed to the procedure relating to appointment of arbitrators as laid down in Clause 63 of the General Clause of Arbitration being Annexure ‘A’ to the application. Subsequently, however, before the Hon'ble Supreme Court the respondent-Railway took a stand that when there were more than one Special Suit pending in a particular Court concerning Arbitration Clause, one sole arbitrator will be appointed in respect of all such suits in a particular Court and the petitioners were to suggest the names of such arbitrators within a specified time as indicated by the Hon'ble Supreme Court in its order dated 21st August, 1995 pursuant to which, the petitioners suggested the names by the letter dated 30th August, 1996 being Annexure ‘D’. The said facts would clearly show that the original agreement was given a go-by and a new procedure for appointment of arbitrator was agreed upon by the parties. However, it is not disputed that the Railway-respondent had failed to appoint arbitrators as per the stand taken by it before the Supreme Court, as it would appear from Supreme Court's above order dated 21st August, 1995. Therefore the petitioners under sub-section (5) of Section 11 of the 1996 Act can very well approach or may request the Chief Justice to take the necessary measure in the matter as per the provisions of Section 11(5) of the Arbitration and Conciliation Act, 1996. The petitioners also served 30 days' notice under Section 11(5) on the respondent No. 2 by the letter dated February 2, 1998 being Annexure ‘N’ to the application.

29. The application is thus allowed and the matter is referred to the Hon'ble Chief Justice for appointing 5 several sole arbitrators one for each of the five Courts viz., Howrah, Burdwan. Bolpur, Suri and this Hon'ble Court in accordance with the Apex Court's order dated August 21, 1995 and in terms of Section 11(5) of the Arbitration and Conciliation Act, 1996.

Application allowed.