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JSW STEEL LIMITED v. SOUTH WESTERN RAILWAY
Factual and Procedural Background
JSW Steel Limited filed a Special Leave Petition challenging the order dated 23-12-2021 of the High Court of Karnataka, Circuit Bench at Dharwad, in CMP No. 100015/2021. The dispute concerns the validity of an arbitrator appointed by South Western Railway. Relying on the decision in Central Organisation for Railway Electrification v. ECL-SPIC-SMO-MCML (JV), the High Court upheld the appointment.
After the respondent-nominated arbitrator entered reference, arbitral proceedings were conducted and an award was passed on 30-03-2022. The record shows that JSW Steel did not participate in the arbitral proceedings, and no witness stepped into the box for the respondents. The Supreme Court, seized of the SLP, heard counsel on 16-08-2022.
Legal Issues Presented
- Whether the appointment of the arbitrator by South Western Railway complies with the principles laid down in TRF Limited v. Energo Engineering Projects Limited (2017) 8 SCC 377 and Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2020) 20 SCC 760.
- Whether the correctness of the three-judge decision in Central Organisation for Railway Electrification v. ECL-SPIC-SMO-MCML (JV) (2020) 14 SCC 712—on which the High Court relied—needs reconsideration by a larger Bench.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| TRF Limited v. Energo Engineering Projects Limited, (2017) 8 SCC 377 | Invalidity of an arbitrator nominated by an interested party/conflict of interest. | Cited as the benchmark for assessing the legality of the present arbitrator’s appointment. |
| Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760 | Reaffirmed and extended the TRF principle to situations where a party has a unilateral choice in appointing the arbitrator. | Invoked to question whether the respondent’s unilateral nomination is sustainable. |
| Central Organisation for Railway Electrification v. ECL-SPIC-SMO-MCML (JV), (2020) 14 SCC 712 | Distinguished TRF and Perkins; upheld certain appointments under railway contracts involving panel arbitrators. | Formed the basis of the High Court’s decision and the challenged appointment. |
| Union of India v. Tantia Constructions Limited, SLP (Civil) No. 12670/2020, order dated 11-01-2021 | Three-judge Bench order expressing prima facie disagreement with Central Organisation for Railway Electrification. | Relied on to show that the correctness of the Central Organisation ruling is already in doubt, warranting reference to a larger Bench. |
Court's Reasoning and Analysis
1. The Court identified the “basic issue” as the conformity of the arbitrator’s appointment with the standards set in TRF and Perkins.
2. It noted that the High Court had validated the appointment solely on the strength of Central Organisation for Railway Electrification, a three-judge decision that distinguished TRF and Perkins.
3. The Bench recorded that another coordinate Bench in Union of India v. Tantia Constructions Limited had, prima facie, disagreed with the reasoning in Central Organisation for Railway Electrification and had requested constitution of a larger Bench.
4. In the present matter, although an award has been rendered, both parties’ participation in the arbitral proceedings was either absent (petitioner) or minimal (respondent), raising additional concerns about fairness; however, the Court expressly refrained from examining the award’s merits.
5. Given the conflicting judicial views and recurring nature of the issue, the Court concluded that authoritative resolution by a larger Bench is necessary.
Holding and Implications
Order: The matter is referred to the Hon’ble Chief Justice of India for constitution of a larger Bench. The effect and operation of the arbitral award dated 30-03-2022 are stayed pending such consideration.
Implications: The stay preserves the status quo between the parties and prevents enforcement of the award. More broadly, the referral signals that the Supreme Court may soon settle the divergent interpretations on unilateral appointment of arbitrators under government contracts, potentially impacting numerous pending and future arbitrations.
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ITEM NO.26 COURT NO.2 SECTION IV-A
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition for Special Leave to Appeal (C) No.9462/2022 (Arising out of impugned final judgment and order dated 23-12-2021 in CMP No.100015/2021 passed by the High Court Of Karnataka Circuit Bench At Dharwad)
JSW STEEL LIMITED Petitioner(s)
VERSUS
SOUTH WESTERN RAILWAY & ANR. Respondent(s) (FOR ADMISSION and I.R.; IA No.75755/2022 - FOR EXEMPTION FROM
FILING C/C OF THE IMPUGNED JUDGMENT; and, IA No.75756/2022 - FOR PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES) Date : 16-08-2022 This petition was called on for hearing today.
CORAM :
HON'BLE MR. JUSTICE UDAY UMESH LALIT HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE SUDHANSHU DHULIA For Petitioner(s) Mr. K.V. Viswanathan, Sr. Adv. Ms. Anushka Sharda, Adv.
Mr. Rohit Ghosh, Adv.
Mr. Madhav Khosla, Adv.
M/s. Khaitan & Co., AOR
For Respondent(s) Mr. K.M. Nataraj, ASG Mr. Shailesh Madiyal, Adv.
Mr. Kanu Agrawal, Adv.
Mr. Amit Sharma, Adv.
Mr. Amrish Kumar, AOR
UPON hearing the counsel the Court made the following
O R D E R
1. The basic issue involved in the instant matter is whether the appointment of the Arbitrator was in conformity with the law laid down by this Court in Trf Limited v. Energo Engineering Projects Limited ., (2017) 8 SCC 377; and, Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760.
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2. The High Court has gone by the decision rendered by a Bench of three-Judges of this Court in Central Organisation For Railway Electrification v. ECL-SPIC-SMO-MCML (JV), A Joint Venture Company, (2020) 14 SCC 712, which decision had distinguished the applicability of TRF Ltd. (supra) and Perkins Eastman Architects DPC (supra) to the fact situation involved therein.
3. It has been brought to our notice that subsequently, a Bench of three-Judges of this Court in Union Of India Petitioner(S) v. Tantia Constructions Limited (S)., [SLP (Civil) No.12670 of 2020], vide its order dated 11.01.2021, prima facie expressed its disagreement with the view taken in Central Organisation For Railway Electrification (supra) and requested the Hon'ble the Chief Justice of India to constitute a larger Bench to look into the correctness of the decision in Central Organisation For Railway Electrification (supra).
4. In the present case, after the appointment of the Arbitrator nominated by the respondent herein, the proceedings took place before the Arbitrator and award was passed on 30.03.2022.
5. The copy of the Award shows that there was no participation on part of the present petitioner. Further, none had stepped into the box on behalf of the respondents in support of its case.
6. We need not, at this stage, go into the correctness of such Award, as those questions are not presently arising for our consideration. It is however, quite clear that the correctness of the decision in Central Organisation For Railway Electrification (supra), based on which the appointment of the Arbitrator was made
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and the matter had proceeded before the Arbitrator, was doubted by a subsequent Bench of three Judges.
7. In the circumstances, we direct that the papers of the present matter be placed before the Hon'ble the Chief Justice of India for constituting a larger Bench.
8. Since the issue has been re-occurring, we may observe that it would be in the fitness of things that the question is resolved at an early date.
9. Pending such consideration, the effect and operation of the Award dated 30.03.2022 shall remain stayed.
(MUKESH NASA) (VIRENDER SINGH)
AR-cum-PS BRANCH OFFICER
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