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Nccl-Premco(Jv) v. Rail Vikas Nigam Limited .

Delhi High Court

Oct 11, 2018

Judgment

CaseIQ

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Factual and Procedural Background

The petitioner, NCCL-PREMCO(JV), was awarded a contract by the respondent, Rail Vikas Nigam Limited (RVNL), for construction works related to doubling with railway electrification on the Vijayawada division of South Central Railway. The contract included an arbitration clause (clause 20.3) specifying the procedure for appointment of arbitrators in case of disputes. After disputes arose, the petitioner invoked the arbitration agreement. The respondent forwarded a panel of three names for the petitioner to choose its nominee arbitrator. The petitioner requested a broader panel in line with Supreme Court and Delhi High Court precedents, which the respondent refused. Consequently, the petitioner nominated a former High Court Judge as its arbitrator and filed the present petition seeking appointment of the respondent's nominee arbitrator and a presiding arbitrator, as the respondent had failed to appoint its nominee arbitrator as per the arbitration agreement.

Legal Issues Presented

Whether the respondent complied with its obligation under the arbitration agreement and Section 12 of the Arbitration and Conciliation Act, 1996, by forwarding only a limited panel of arbitrators for the petitioner’s selection.
Whether the court should appoint the nominee arbitrator on behalf of the respondent due to the respondent’s failure to discharge its obligations under the arbitration agreement.

Arguments of the Parties

Petitioner’s Arguments

The respondent failed to provide a broad-based panel of arbitrators as mandated by the Supreme Court judgment in Voestalpine Schienen GMBH vs. Delhi Metro Rail Corporation Ltd and this Court’s judgment in Larsen & Toubro Ltd. vs. Rail Vikas Nigam Ltd.
By forwarding only a limited number of arbitrators, the respondent violated the arbitration agreement and forfeited its right to appoint a nominee arbitrator.

Respondent’s Arguments

The respondent acted strictly in accordance with the arbitration agreement by forwarding a panel of three names for the petitioner to choose from.
The petitioner should have chosen its nominee arbitrator from the panel provided.
After filing the petition, the respondent offered the entire panel of arbitrators to the petitioner.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Voestalpine Schienen GMBH vs. Delhi Metro Rail Corporation Ltd (2017) 4 SCC 665	Requirement of providing a broad-based panel of arbitrators including persons of diverse professional backgrounds to ensure impartiality and independence in arbitration appointments.	The court held that the respondent’s limited panel did not conform to this precedent, as it lacked diversity and was predominantly former railway and PSU employees, thereby violating the arbitration agreement and Section 12 of the Act.
Larsen & Toubro Ltd. vs. Rail Vikas Nigam Ltd, 2018 SCC OnLine Del 9176	Interpretation of arbitration agreement obligations and application of Supreme Court precedent on appointment of arbitrators and the consequences of failure to provide an adequate panel.	The court reaffirmed that forwarding a limited panel amounts to failure to discharge obligations under the arbitration agreement and Section 12 of the Act, justifying court appointment of the arbitrator.

Court's Reasoning and Analysis

The Court analyzed the arbitration agreement's clause 20.3 and the procedure for appointment of arbitrators, particularly the obligation of the respondent to provide a panel of names for the petitioner’s selection. The Court relied on the Supreme Court’s decision in Voestalpine Schienen and its own prior ruling in Larsen & Toubro Ltd. to establish that merely forwarding a limited panel is insufficient and constitutes a failure to fulfill contractual and statutory obligations.

The Court found that the respondent’s panel lacked the required diversity, excluding professionals such as judges, lawyers, and chartered accountants, which is inconsistent with the principles of impartiality and independence emphasized in the cited precedents. Despite the respondent’s subsequent offer of a broader panel, the Court noted this was after the petition was filed and did not cure the initial failure.

Consequently, the Court concluded that the respondent had breached the arbitration agreement and Section 12 of the Arbitration and Conciliation Act, 1996, thereby justifying judicial intervention to appoint the nominee arbitrator on behalf of the respondent.

Holding and Implications

The petition is disposed of with the appointment of the nominee arbitrator for the respondent confirmed.

The Court appointed Mr. B.K. Makhija, Former Director-Projects, RITES, as the nominee arbitrator for the respondent. It directed the two arbitrators to make disclosures under Section 12 of the Act and to appoint a presiding arbitrator expeditiously, preferably within four weeks from the order.

The decision enforces strict compliance with arbitration agreement provisions and relevant statutory requirements, emphasizing the necessity of a broad and diverse panel of arbitrators. However, the judgment does not establish a new precedent beyond applying existing Supreme Court and Delhi High Court rulings to the facts of the case.

Show all summary ...

$-44 * IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision: 11.10.2018

+ ARB.P. 627/2018 NCCL-PREMCO(JV) ..... Petitioner Through: Dr.Amit George, Mr.Rishabh Dheer, Mr.Swaroop George, Ms.Rajshree Ajay, Advs.

versus

RAIL VIKAS NIGAM LIMITED ..... Respondent Through: Mr.Anil Seth, Adv.

CORAM:

HON'BLE MR. JUSTICE NAVIN CHAWLA

NAVIN CHAWLA, J. (Oral)

1. This petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') has been filed by the petitioner seeking appointment of a nominee Arbitrator on behalf of the respondent and the Presiding Arbitrator for constituting the Arbitral Tribunal to adjudicate the disputes that have arisen between the parties in relation to the work of Construction of Roadbed, Major and Minor Bridges, Track Linking (Excluding supply of Rail and PSC sleepers), General Electrical, Traction and Signal & Telecommunication works (Outdoor) in connection with Doubling with Railway Electrification of Gudivada - Bhimavaram Town stations (Excluding Moturu &

Bhimavaram Town yards) on Vijayawada division of South Central Railway awarded to the petitioner by the respondent vide Letter of Acceptance dated 13.03.2013 and the subsequent Agreement dated 22.05.2013.

2. The said Agreement contains an Arbitration Agreement between the parties in form of clause 20.3 of the General Conditions of Contract, the relevant portion of which is reproduced hereinbelow:

"20.3 Arbitration Any dispute in respect of which amicable settlement has not been reached arising between the Employer and the Domestic or Foreign Contractor related to any matter arising out of or connected with this contract, the disputes shall be settled in accordance with the Indian Arbitration & Conciliation Act,. 1996 and any statutory modification or re-enactment thereof.

Further, it is agreed between the parties as under:

20.3.1 Number of Arbitrators: The arbitral tribunal shall consist of:

(i) Sole Arbitrator in cases where the total value of all claims in question added together does not exceed Rs.50 Lakhs

(ii) 3 (Three) arbitrators in all other cases.

20.3.2 Procedure for Appointment of Arbitrators: The arbitrators shall be appointed as per following procedure:

(i) In case of Sole Arbitrator: MD/RVNL shall appoint any working officer of RVNL not below the rank of AGM.

(ii) In case of 3 Arbitrators

(a) Employer will forward a panel of 3 names

to the contractor and contractor will give his consent for any one name out of the panel to be appointed as one of the Arbitrators.

(b) Employer will decide the second Arbitrator out of the remaining two names in the panel as mentioned in para (a) above.

(c) The third Arbitrator shall be chosen by the two Arbitrators so appointed by the parties and shall act as Presiding Arbitrator. In case of failure of the two Arbitrators appointed by the parties to reach upon consensus within a period of 30 days from the appointment of the Arbitrators subsequently appointed, then, upon the request of either or both parties, the presiding Arbitrator shall be appointed by the Managing Director, Rail Vikas Nigam Limited, New Delhi.

20.3.3 Qualification and Experience of Arbitrators: The arbitrators to be appointed shall have minimum qualification and experience as under:

In case of Sole Arbitrator:

Arbitrator shall be a working officer of RVNL (not below the rank of AGM)

In case of 3 Arbitrators:

Arbitrators shall be retired officers (retired not below the rank of GM/Additional Member and above in Railways or Director/MD in a PSU, age not exceeding 70 years and in reasonably good mental and physical fitness) of Engineering Services of Indian Railway or Indian Railway Accounts Service having experience in Contract Management of construction contracts. No person other than the persons appointed as per above procedure and having above qualification and experience shall act as Arbitrator."

3. Disputes having arisen between the parties, the

petitioner invoked the dispute resolution procedure vide its letter dated 07.05.2018. The disputes having persisted, the petitioner invoked the Arbitration Agreement vide its letter dated 28.05.2018.

4. The respondent vide its letter dated 22.06.2018 forwarded a panel of three names for the petitioner to chose its nominee arbitrator from.

5. The petitioner, relying upon the Judgment of the Supreme Court in Voestalpine Schienen GMBH vs. Delhi Metro Rail Corporation Ltd. (2017) 4 SCC 665 and this Court in Larsen & Toubro Ltd. vs. Rail Vikas Nigam Ltd. 2018 SCC OnLine Del 9176, called upon the respondent to give the entire broad-based panel of Arbitrators for the petitioner to chose its nominee Arbitrator.

6. The respondent, however, vide its letter dated 31.07.2018 refused to accede to this request of the petitioner.

7. The petitioner, therefore, vide its letter dated 07.08.2018 proceeded to nominate a former Judge of High Court of Judicature at Hyderabad as its nominee Arbitrator and file the present petition seeking appointment of a nominee Arbitrator on behalf of the respondent and a Presiding Arbitrator as the respondent had failed to appoint its nominee Arbitrator.

8. Counsel for the petitioner relying upon the Judgments of the Supreme Court in Voestalpine Schienen(supra) as also of this Court in Larsen & Toubro Ltd. (supra), submits that as the respondent has failed to give the entire panel of Arbitrators

to the petitioner for making its choice of a nominee Arbitrator, the action of the respondent is clearly in violation of the direction given by the Supreme Court in Voestalpine Schienen(supra). This Court in Larsen & Toubro Ltd. (supra) has already considered this issue and held as under:-

"10. Following the reasoning given by this Court in Bernard Ingenieure ZT - GMBH (supra), in my opinion, in the present case also, as the respondent has forwarded only a list of five persons to the petitioner, from which it has called upon the petitioner to choose one Arbitrator as its nominee, the respondent has failed to discharge the obligations that have been cast upon it under the Arbitration Agreement read with Section 12 of the Amended Act and is therefore, deemed to have forfeited its right under the said Agreement."

9. Counsel for the respondent, however, on the other hand submits that the respondent has strictly acted in accordance with the Arbitration Agreement between the parties and cannot be faulted for the same. The petitioner should have chosen its nominee Arbitrator from the panel forwarded by the respondent to the petitioner. In any case, after filing of the petition along with its reply (which is not on record), the respondent has offered the entire panel of Arbitrators to the petitioner to chose its nominee Arbitrator.

10. I have considered the submissions made by the counsels for the parties. As noted above, this Court in Larsen &

Toubro Ltd. (supra) in similarly situated facts had held that mere forwarding of a list of five persons (in that case) would be a failure of the respondent to discharge its obligations that have been cast upon it under the Arbitration Agreement read with Section 12 of the Amended Act as also the Judgment of the Supreme Court in Voestalpine Schienen(supra).

11. As in spite of the judgment of the Supreme Court in

Voestalpine Schienen(supra) and of this Court in Larsen & Toubro Ltd. (supra), the respondent insisted on giving only a limited number of names from its panel of Arbitrators to the petitioner for choosing its nominee Arbitrator, the same clearly amounts to a failure on part of the respondent to act in accordance with the Arbitration Agreement read with Section 12 of the Amended Act.

12. Even the panel of Arbitrators that has been framed by the respondent and has been offered by it to the petitioner alongwith its reply to the present petition, in my opinion, does not conform to the Judgment of the Supreme Court in

Voestalpine Schienen(supra) inasmuch as it still does not include Engineers of prominence and high repute from private sector, persons with legal background like Judges and lawyers of repute or people having knowledge in accountancy, i.e. Chartered Accountant, etc. The panel is still predominantly of former employees with the Railways and Public Sector Companies connected thereto.

13. Be that as it may, as the respondent had failed to

discharge its obligations in terms of the Arbitration Agreement read with Section 12 of the Act, the appointment of the nominee Arbitrator of the petitioner is confirmed.

14. I appoint Mr.B.K.Makhija, Former Director-Projects, RITES as the nominee Arbitrator for the respondent.

15. The two Arbitrators shall give their disclosure under Section 12 of the Act before proceeding with the reference.

16. The two nominated Arbitrators shall also expeditiously appoint a Presiding Arbitrator, preferably within four weeks from the receipt of copy of this order.

17. The petition is disposed of with the above directions, with no order as to costs.

NAVIN CHAWLA, J

OCTOBER 11, 2018