Satish Chandra, J.:— Sri K.P Srivastava, learned counsel for the applicant submits that the applicant is a contractor. He supplied the goods to the Railway i.e opposite parties. He further submits that as per the General Conditions of Contract, 1999 pertaining to the Regulation for Tender and Contract, there is a provision in Clause 4(1) for demand of arbitration. The demand of arbitration was made by him. In pursuance to that, the names of the arbitrator were supplied by the opposite parties after thirty days. He also submits that the general conditions of contract is a “standard form of contract” where the applicant was not having any choice. The conditions are unreasonable. So, he made a request that sole arbitrator may kindly be appointed by this Hon'ble Court under Section 11(6) of the Arbitration and Conciliation Act, 1996.
On the other hand, Sri Manik Sinha, learned counsel for the opposite parties submits that the petitioner has demanded the names for arbitration and, as such, four names were supplied to him. The limitation is within 120 to 180 days and within this period, the names of the arbitrators, who are the departmental officers were supplied to the applicant but he prefers not to choose any arbitrator and approach this Hon'ble Court. He also submits that Hon'ble Supreme Court in the case of Datar Switchgears Limited v. Tata Finance Limited; (2000) 8 SCC 151, observed that when parties have entered into a contract and settled on a procedure, due importance has to be given to such procedure. Even though rigor of the doctrine of “freedom of contract” has been whittled down by various labour and social welfare legislation, still the court has to respect the terms of the contract entered into by parties and endeavor to give importance and effect to it. When the party has not disputed the arbitration clause, normally, he is bound by it and obliged to comply with the procedure laid down under the said clause.
He also submits that the applicant is bound by the contract and has no choice except the arbitrators supplied by the department-railway.
After hearing learned counsels for the parties, it appears that the agreement of General Conditions of Contract pertaining to the Regulation for Tenders and Contract (Work Hand Book Part 1 & 2) May, 1999 is a standard form of contract, which is applicable to every contract. The applicant has no choice except to accept it, may it be reasonable or unreasonable.
Further, it may be mentioned that in Datar Switchgears Limited case (supra), the Hon'ble Supreme Court has observed that when the party has not disputed the arbitration clause, normally he is bound by it but in the instant case, the applicant has a dispute and demanded arbitration. So, the ratio laid down by the Hon'ble Apex Court is not applicable in the instant case.
In the instant case, the applicant has asked for an arbitration as there was a dispute. The opposite parties - railways has supplied four names who are the officers of the railway but the same are not acceptable to the applicant.
Learned counsel for the applicant categorically submitted that the standard form of contract, which is general in nature and applicable to every contract of the railway, has unreasonable condition to impose the officers of the railway as an arbitrator.
Needless to mention that a term is unreasonable, if it would defeat the very purpose of the contract or if it is repugnant to public policy. Pointing this out in the Suisse Atlantique case, Lord WILBERFORCE said:
“one may safely say that the parties cannot, in a contract, have contemplated that a clause shall have so wide an ambit as in effect to deprive one party's stipulations of all contractual force: to do so would be reduce the contract to a mere declaration of intent.”
In the above circumstances, it may be mentioned that developments emphasise that to make a contract may no longer be a purely private act. It may be controlled or even dictated by legislative or economic pressure, and it may involve the courts in feats of construction akin to or borrowed from the technique of statutory interpretation. Yet, it is possible to exaggerate the effect. In daily life individually negotiated contracts exist and even bound. Moreover, as has already been said, the current law of contract is essentially the creation of the current century lawyers, and it is this law which their successors have to apply even in a new and uncongenial environment. The tools of the trade remain the same if they are put to uses that their inventors neither envisaged nor desired.
In the case of Lilly White v. Mannu Swami; AIR 1966 Mad 13, it was observed that an unreasonable term of the contract is not sustainable in the public interest. Unreasonable terms of the Standard Form of Contract is not justifiable and cannot be enforced. Lord DENNING LJ remarked:
“there is the vigilance of the common law which, while allowing freedom of contract watches to see that it is not abused.
In the present case, applicant has no faith/trust in the officers of the railways who were intended to be appointed as arbitrator. Justice need not only be done but appears that it has been done. To maintain the principle of impartiality, I am of the view that unreasonable term of the Standard Form of Contract is not binding on the applicant. Therefore, applicant is entitled to have an impartial and competent arbitrator to solve the dispute in hand.
Hence, in the interest of justice and to maintain the impartiality, I hereby exercise the power under Section 11(6) of the Arbitration and Conciliation Act, 1996 and with the consent of parties, I hereby appoint Hon'ble Mr. Justice O.N Khandelwal (Retd.), Judge of Allahabad High Court as sole Arbitrator in this Case.
It is expected that the Arbitrator will dispose of the case preferably within a period of six months and will charge a fee of Rs. 25,000/- (Twenty Fife thousand) per sitting subject to maximum total fee of Rs. 2.0 lacs (Rupees two Lacs) (inclusive all i.e secretarial assistance etc.), which will be equally borne by both the parties. The place of sitting will be at Lucknow.
The Registry of this Court is directed to obtain a consent from Hon'ble Mr. Justice O.N Khandelwal (Retd.) within a period of two weeks and inform the parties accordingly. The contact numbers of Hon'ble Mr. Justice O.N Khandelwal (Retd.) are 9935557745 and (0522) 2307145 while the residential address is 1/17, Vishwas Khand, Gomti Nagar, Lucknow.
The arbitration applications are disposed of.