Mohammad Rafiq, J.:— This application has been filed by applicant M/s. Dwarka Traders Private Limited, under Sections 10 and 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of independent Arbitrator to resolve its dispute with non-applicants Union of India through General Manager, North Western Railway, NWR Head Quarter, Near Jawahar Circle, Jagatpura Road, Jaipur and their Divisional Railway Manager (NWR), DRM Office, North Western Railway, Ajmer.

2. Applicant is engaged in construction business. Applicant is also approved contractor and supplier of non-applicant Railways. Non-applicant no. 2 invited tenders for the year 2011-12 for work of RPZ Sub Division Zone No. 15 (2011-12) Marwar Junction (Excl) to Bari Sadri (Incl) to Mavli Jn (Incl) and PRS Nathdwara (Temple) PRS Rajsamand (incl) to Chittorgarh (Excl). This included all types of repair and maintenance work in staff quarters and service buildings with regard to civil and sanitary works. Applicant also submitted tender for aforesaid work. Estimated costs of said work was Rs. 33,19,011/- and period for completion of work was six months from 02.12.2011 to 30.06.2012 Offer of applicant being lowest, work was awarded to it vide Acceptance Letter No. WA-118/2/Zone/15 (2011-12) dated 02.12.2011 Applicant deposited FDR No. 228740 dated 14.01.2012 for Rs. 1,66,000/- drawn on Bank of Baroda, Hanumangarh, towards due performance of work. Amount of Rs. 66,600/- was also deposited towards earnest money. In the work order issued, non-applicants required applicant to commence the work from 07.02.2012 and complete the same by 03.05.2012

3. A contract agreement was executed by and between the railways administration and applicant with regard to aforesaid work. Clause 64 of the agreement pertains to arbitration, which provides that in the event of any dispute or difference between the parties, excluding “excepted matters”, (matters not arbitrable), referred to in Clause 63 of the General Conditions of Contract, the Contractor shall, after 120 days but within 180 days of presenting his final claim on disputed matters, demand in writing that the dispute or difference be referred to arbitration.

4. Mr. Devidutt Sharma, learned counsel for the applicant, argued that security deposit of Rs. 1,05,951/- has been illegally deducted from running bills payable to applicant. No further extension was given to applicant after expiry of period on 20.08.2012 Applicant suddenly received a letter dated 13.12.2012 sent by the Divisional Engineer (South) NWR Ajmer, informing that contract stands terminated with effect from extended date of completion of contract i.e 20.08.2012 New tenders for fresh zone work were invited and work was also awarded to other contractor. Letter dated 13.12.2012 was issued after expiry of date of completion of contract, only with a view to harassing applicant and causing enormous losses. Applicant thereafter received another letter dated 01.01.2013 informing that 10% penalty on the contract value of Rs. 33,19,011/- has been imposed on applicant and contract is closed, and that applicant's FDR for earnest money of Rs. 66,600/- and PG FDR of Rs. 1,66,000/- was also forfeited.

5. Mr. Devidutt Sharma, learned counsel, submitted that work assigned to applicant was a zone work, which is awarded annually and normally required at least one year time period for its completion, but in the present case, this time was reduced to only six months. There are serious disputes between the parties and therefore as per Clause 64 of the General Conditions of the Contract, applicant invoked arbitration clause and served notice dated 28.01.2013 through its counsel on non-applicants demanding arbitration in the matter. Non-applicants, however, vide letter dated 21.08.2013, turned down its request vide on the premise that this matter comes under the category of Clause 62(1)(viii) of General Conditions of Contract, which is deemed “excepted matter” and that as per Clause 63 of General Conditions of Contract, the “excepted matters” shall stand specifically excluded from the preview of arbitration clause. Learned counsel for applicant argued that this issue, having been decided by the Supreme Court in number of cases, is no longer res integra. It has been authoritatively held by the Supreme Court that reference to arbitration cannot be declined on the ground that the dispute falls in “excepted matters”. Reliance is placed on a judgment of the Supreme Court in Arasmeta Captive Power Company Private Limited v. Lafarge India Private Limited - (2013) 15 SCC 414, wherein, while dealing with application under Section 11(6), it was held that Chief Justice/designate would not be justified in deciding whether a claim falls under excepted matter or not under the arbitration agreement, and decision as to such issue ought to be left to arbitrator. Reliance for the same proposition of law is also placed on judgment of the Supreme Court in North Eastern Railway v. Tripple Engineering Works - 2014 (3) Arb.LR 327 (SC).

6. Learned counsel for applicant further argued that despite notice by applicant, non-applicants failed to appoint arbitrator as per agreed procedure contained in contract and, therefore, their right to appoint arbitrator is forfeited. It is not mandtory for the Chief Justice or his Designate to appoint named Arbitrator. Prayer is made for appointment of independent arbitrator in view of provisions contained in Sections 11, 12(5) and 14 of the Arbitration and Conciliation Act, 1996, (for short, ‘the Act of 1996’) and Fifth and Seventh Schedule appended to the Act of 1996. Plea of non-applicants that they have not appointed Arbitrator treating it as “excepted matter” and now if the court were to do so, it should appoint the arbitrator as per the prescription made in the agreement, is not sustainable. Question whether the dispute is “excepted matter” or not, was not required to be considered by the General Manager NWR. General Manager cannot take any decision about condition of contract. In this connection, reliance is placed on judgments in - Punj Lloyd Ltd. v. Petronet Mhb Ltd. - (2006) 2 SCC 638, Deep Trading Co. v. IOCL - (2013) 4 SCC 35 - Datar Switch Gears Ltd. v. TATA Finance Limited - (2000) 8 SCC 151, Suri Const Co. v. State of Rajasthan - 2006 (1) Arb.L.R 553 and Northern Railway Administration v. Patel Engineering - 2008 (3) Arb. L.R (SC).

7. Per contra, Mr. Shailesh Prakash Sharma, learned counsel for non-applicants, opposed application and submitted that Clauses 63 and 64 of the General Conditions of Contract contain procedure for settlement of disputes between the parties. Clause 63 provides that disputes and differences of any kind in connection with contract shall be referred by the contractor to the General Manager and the General Manager shall, within 120 days, after receipt of contractor's representation, make and notify decisions on all matters referred to by the contractor in writing provided that matters for which provision has been made in Clauses 8, 18, 22(5), 39, 43(2), 45(a), 55, 55-A(5), 57 and 57A, 61(1), 61(2) and 62(1) to (Xiii)(B) of Standard General Conditions of Contract or in any Clause of the Special Conditions of the Contract shall be deemed as “excepted matters”, which are not arbitrable, and decision of the Railway authority on such matters shall be final and binding on the contractor, provided further that ‘excepted matters’ shall stand specifically excluded from the purview of Arbitration Clause.

8. Learned counsel for non-applicants argued that in the matters pertaining to arbitration, there are three situations which may arise; first, where on notice given by the contractor, his demand for arbitration is decided in the terms that dispute being covered in “excepted matters” is not arbitrable; second, where notice has been given and decision of appointment of arbitrator is taken and the contractor does not select the arbitrator out of the names provided; and third, where notice has been given by the contractor and appointment of the arbitrator is not made. In first of these three situations where the General Manager of the respective zone of railways takes a decision not to refer the matter to the arbitrator because the dispute is covered by “excepted matters”, such a decision of General Manager is final and binding on the contractor.

9. Learned counsel submitted that the Supreme Court in General Manager, Northern Railway v. Sarvesh Chopra - (2002) 4 SCC 45, has held that if any claim comes within ‘excepted matter’, such claim cannot be referred to arbitrator and that binding judgment has not been noticed by the Supreme Court in subsequent judgments, especially in Arasmeta Captive Power Company, supra, and therefore the law enunciated therein should be declared per incurium.

10. Learned counsel for non-applicants further argued that the Arbitration and Conciliation (Amendment) Act, 2015 came into force with effect from 23.10.2015, and Section 26 of the Amending Act clearly provides that provisions contained therein would not apply to pending arbitral proceedings. Present matter, in view of Section 21 of the Act of 1996, would be deemed to be pending matter, arbitration proceedings having already commenced upon service of notice by the Contractor on 28.01.2013 prior to commencement of Amending Act, 2015. This matter would therefore be governed by provisions, which existed prior to enforcement of Amending Act, 2015 and therefore the provisions contained under Section 12(5) of the Act of 1996 would not apply. Notwithstanding anything contained in Section 12(5) of the Act of 1996, reference of dispute should be made to General Manager Railways for arbitration and that he shall not be disqualified by virtue of his official position to act as an Arbitrator or suggest the panel of arbitrators to the Contractor to chose one of them to act as arbitrator.

11. Inviting attention of the court towards Section 21 of the Act of 1996, learned counsel for applicant argued that where arbitration proceedings commenced by giving notice and a decision, final and binding, as per Clause-63 of the General Conditions of Contract, is taken by the General Manager, not to refer the dispute on the premise that it falls in the category of “excepted matters”, the appointment of Arbitrator, even if it were to be made now by this Court on the present application, would substitute the decision of the General Manager and therefore this court ought to refer this dispute for arbitration to the General Manager to proceed afresh as per Clause 64(3)(a)(i) and Clause 64(3)(a)(ii).

12. Learned counsel, in support of his arguments, has placed reliance on judgments of the Supreme Court in Shetty's Constructions Co. Pvt. Ltd. v. Konkan Railway Construction - (1998) 5 SCC 599 and National Aluminium Co. Ltd. v. Metalimpex Ltd.. - (2001) 6 SCC 372 and U.P State Sugar Corporation Ltd. v. Jain Construction Co. - (2004) 7 SCC 332.

13. I have given my anxious consideration to rival submissions, perused the material on record and also carefully studied the cited precedents.

14. Question whether non-applicants Railways would be justified in refusing to refer the dispute to Arbitrator on the premise that such dispute falls in the category of “excepted matter”, stands covered by law laid down by the Supreme Court in number of judgments referred to above, the latest one being in Arasmeta Captive Power Company, supra. The Supreme Court, while dealing with application under Section 11(6) of the Act of 1996, on survey of entire previous case law on the subject, has authoritatively held that the Chief Justice or his Designate would not be justified in deciding whether a claim falls under “excepted matter” or not, under arbitration agreement, and such decision ought to be left to arbitrator.

15. Contention of learned counsel for non-applicants that since decision of this court on present application would substitute the decision of the Railways, conveying refusal to refer the dispute to Arbitrator on the ground that the same falls in “excepted matters” by communication dated 21.08.2013, on which date the Amending Act, 2015 was not in force, therefore, the dispute should be referred to the General Manager of the non-applicants and not to any other Arbitrator, giving him opportunity to suggest the panel of officers to the applicant so that he could choose one amongst them as arbitrator, is noted to be rejected. Reference in this regard be pertinently made to the judgment of the Apex Court in North Eastern Railway v. Tripple Engineering Works, supra, in which their Lordships, while dealing with the same Arbitration Clause 64(3) of the General Conditions of Contract, had considered its various earlier decisions with regard to the powers of the Chief Justice/Designate under Section 11 of the said Act, and held as under:-

“6. The “classical notion” that the High Court while exercising its power Under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter for short ‘the Act’) must appoint the arbitrator as per the contract between the parties saw a significant erosion in Ace Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corporation Ltd. wherein this Court had taken the view that though the contract between the parties must be adhered to, deviations therefrom in exceptional circumstances would be permissible. A more significant development had come in a decision that followed soon thereafter in Union Of India v. Bharat Battery Manufacturing Co. (P) Ltd. wherein following a three-Judge Bench decision in Punj Lloyd Ltd. v. Petronet Mhb Ltd. it was held that once an aggrieved party files an application Under Section 11(6) of the Act to the High Court, the opposite party would lose its right of appointment of the arbitrator(s) as per the terms of the contract. The implication that the Court would be free to deviate from the terms of the contract is obvious.

7. The apparent dichotomy in ACE Pipeline and Bharat Battery Mfg. Co. (P) Ltd. was reconciled by a three-Judge Bench of this Court in Northern Railway Admn. v. Patel Engg. Co. Ltd. wherein the jurisdiction of the High Court Under Section 11(6) of the Act was sought to be emphasized by taking into account the expression “to take the necessary measure” appearing in sub-section (6) of Section 11 and by further laying down that the said expression has to be read alongwith the requirement of sub-section (8) of Section 11 of the Act. The position was further clarified in Indian Oil Corporation Limited v. Raja Transport Pvt. Ltd. Para 48 of the Report wherein the scope of Section 11 of the Act was summarised may be quoted by reproducing sub-paras (vi) and (vii) herein below.

“48. (vi) The Chief Justice or his designate while exercising power under sub-section (6) of Section 11 shall endeavour to give effect to the appointment procedure prescribed in the arbitration clause

(vii) If circumstances exist, giving rise to justifiable doubts as to the independence and impartiality of the person nominated, or if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, the Chief Justice or his designate may, for reasons to be recorded ignore the designated arbitrator and appoint someone else.”

8. The above discussion will not be complete without reference to the view of this Court expressed in Union Of India v. Singh Builders Syndicate wherein the appointment of a retired Judge contrary to the agreement requiring appointment of specified officers was held to be valid on the ground that the arbitration proceedings had not been concluded for over a decade, making a mockery of the process. In fact, in para 25 of the Report in Singh Builders Syndicate this Court had suggested that the Government, statutory authorities and government companies should consider phasing out arbitration clauses providing for appointment of serving officers and encourage professionalism in arbitration.

9. A pronouncement of late in Deep Trading Co. v. Indian Oil Corporation followed the legal position laid down in Punj Lloyd Ltd. which in turn had followed a two-Judge Bench decision in Datar Switchgears Ltd. v. Tata Finance Ltd. The theory of forfeiture of the rights of a party under the agreement to appoint its arbitrator once the proceedings under Section 11(6) of the Act had commenced came to be even more formally embedded in Deep Trading Co. subject, of course, to the provisions of Section 11(8), which provision in any event, had been held in Northern Railway Admn. not to be mandatory, but only embodying a requirement of keeping the same in view at the time of exercise of jurisdiction Under Section 11(6) of the Act.

10. In the present case Clauses 64(3)(a)(ii) and (iii) of the general conditions of contract do not prescribe any specific qualification of the arbitrators that are to be appointed under the agreement except that they should be Railway Officers. As already noticed, even if the arbitration agreement was to specifically provide for any particular qualification(s) of an arbitrator the same would not denude the power of the Court acting Under Section 11(6), in an appropriate case to depart therefrom…….”

16. The afore-noted decision has been followed by the Apex Court recently in Union of India v. U.P State Bridge Corporation Ltd, 2014 (10) Scale 561, upholding the appointment of Arbitrator made by the High Court on its own, departing from the prescription made in the arbitration clause. It was held in para 21 as under:-

“21. The appointment of arbitrator by the Court, of its own choice, departing from the arbitration clause, is therefore not unknown and has become an acceptable proposition of law which can be termed as a legal principle which has come to be established by a series of judgments of this Court. Reasons for debating such a course of action are not far to seek and already taken note of above.”

17. The Supreme Court in Datar Switch Gears Ltd. v. TATA Finance Limited, supra, held that in cases arising under Section 11 (6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. Their Lordships therein therefore disagreed with the observation in earlier judgments that if the appointment is not made within 30 days of demand, the right to appoint an arbitrator under Section 11(6), is forfeited. The said law was again reiterated by the Supreme Court in Punj Lloyd Ltd. v. Petronet Mhb Ltd. supra.

18. The High Court of Kerala in Coastal Engineering v. Southern Railway Headquarters Office - 2014 (3) KLJ 358, while dealing with Clause 64(1)(i) of the General Conditions of Contract, which is the same Clause, with which we are concerned here in the present case, held that the right of the party to move the arbitration request is protected and if the appointment of arbitrator is made by Railways after the party moves the court, the same cannot survive.

19. The Supreme Court in Northern Railway Administration v. Patel Engineering Company Limited, supra, observed that Section 11(6) of the Act of 1996 provides that the Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to; (a) any qualifications required of the arbitrator by the agreement of the parties; and (b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator. It was held that appointment of arbitrator or arbitrators named in the arbitration agreement is not a must, but while making appointment the twin requirements of sub-section (8) of Section 11 have to be kept in view, considered and taken into account. Mandate of law contained in sub-section (6) of Section 11 of the Act has to be followed in all such cases, which provides that, “a party may request the Chief Justice or any person or institution designated by him to take the necessary measures.” The expression “necessary” as a general rule can be broadly stated to be those things which are reasonably required to be done or legally ancillary to the accomplishment of the intended act. This expression has to be read with the requirement in Section 11(8) of the Act that the Chief Justice or the person or an institution designated by him in appointing an arbitrator shall have “due regard” to the two cumulative conditions contained in Sections 11(8)(a) and (b) relating to qualifications and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.

20. As held by the Supreme Court in Northern Railway Administration, Ministry of Railway, New Delhi (supra), the Court must first ensure that the remedies provided for are exhausted. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations. The expression “due regard” means that proper attention to several circumstances have been focused. The expression “necessary” as a general rule can be broadly stated to be those things which are reasonably required to be done or legally ancillary to the accomplishment of the intended act. Necessary measures are the steps which are reasonably required to be taken, one of which is to secure appointment of an independent and impartial arbitrator, which aspect has been emphasised even by the Parliament in the newly introduced the Arbitration and Conciliation (Amendment) Act, 2015, especially in Clauses 1 and 5 of the Fifth Schedule with reference to explanation to Section 12(1)(b) and Clauses 1 and 5 of Seventh Schedule with reference to Section 12(5) of the Act.

21. Various judgments, which have been relied on behalf of the Railways, dealt with the disputes, which arose during transition period of switch over from the old Act of 1940 to the Act of 1996 and held that the Act of 1940 would continue to apply to matters where the arbitral proceedings had commenced in the said Act by service of notice on the opposite party requiring appointment of arbitrator. None of the relied judgments can apply to present application because Section 12(5) of the Act of 1996, inserted by Amending Act, 2015, would have overriding effect.

22. Section 12(5) of the Act of 1996 provides that notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule, shall be ineligible to be appointed as an arbitrator. Seventh schedule referred to in Section 12(5) provides that if the arbitrator is an employee, consultant, advisor or has other past or present business relationship with a party, it would give rise to justifiable doubts as to his independence or impartiality. Clauses 5 of Seventh Schedule also provides for similar consequences, if any arbitrator happens to be manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties, if the affiliate is directly involved in the matters in dispute in the arbitration. Sub-section (5) of Section 12 of the Act of 1996 has thus been given overriding effect over any prior agreement to the contrary. Therefore, independence and impartiality of arbitrator as mandated by Amending Act of 2015 has now been made a paramount consideration for appointment of arbitrator. In the facts of the case therefore, the General Manager Railways can neither be appointed as an Arbitrator nor can he be called upon to nominate another officer of the Railways to act as the Arbitrator.

23. The non-applicants Railways cannot be allowed to substitute its earlier decision not to refer the dispute to the arbitrator on the premise that the same falls within the category of “excepted matters” now by another decision that fresh opportunity should be given to General Manager Railways to proceed to appoint arbitrator as per the prescription made in the agreement. This argument proceeds on the fallacious assumption that had non-applicants not decided to reject the request for reference of dispute to arbitrator on the premise of its being covered by the category of “excepted matters”, they would on the date of taking such decision have the opportunity to make the reference of the dispute through the General Manager Railways to one of their officers as per the agreement and that decision of this court now should relate back to the date of such refusal made by them. Once the non-applicants ceases to have right to make appointment of arbitrator, this court on its own would be fully justified in referring the dispute to an independent arbitrator.

24. In view of the position of law noted above, if the Railways refused to make appointment of or refer the dispute to, arbitrator within thirty days of the notice, may be on the premise that dispute falls in the category of “excepted matters”, it would lead to the same consequence that Railways has failed to make appointment of arbitrator within thirty days. Certainly, the right to make appointment of arbitrator survives with them till filing of the application by the applicant but they failed to do so even after application under Section 11 of the Act was filed by the applicant. Therefore, the right of non-applicants to appoint arbitrator ceased to exist and stood forfeited.

25. In the result, application is allowed. Hon'ble Mr. Justice M.A.A Khan, R/o A-19, Raghunath Puri, Kalwar Road, Jhotwara, Jaipur (mobile number - 9414318794 and land-line number 0141-2342022), is hereby appointed as an independent sole arbitrator to resolve the disputes between the parties. The cost of arbitration proceedings and the arbitration fees shall be as per Fourth Schedule inserted in the Act of 1996 vide Arbitration and Conciliation (Amendment) Act, 2015.

26. A copy of this order be sent to Hon'ble Mr. Justice M.A.A Khan, R/o A-19, Raghunath Puri, Kalwar Road, Jhotwara, Jaipur (mobile number - 9414318794 and land-line number 0141-2342022).