# M/s Three Star Engineering Works Pvt. Ltd v. Diesel Locomotives Works Varanasi & Anr

- **Citation:** (2020) 12 ILRA 516
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2020-12-07
- **Case number:** Arbitration and Conciliation Application No. 118 of 2020
- **Bench:** Pankaj Bhatia
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-three-star-engineering-works-pvt-ltd-v-diesel-locomotives-works-varanasi-anr-45628
- **Pages:** 7

## Headnote

A. Civil Law -Arbitration and Conciliation
Act (26 of 1996) - Section 12(5) - proviso
- Waiver of ineligibility prescribed in
Section 12 (5) - In view of Section 12(5)
read with Seventh Schedule (i) a person
who is disqualified cannot be appointed as
an Arbitrator unless there is an agreement
in writing with regard to the specific
named Arbitrator; (ii) the said agreement
in writing should be subsequent to the
arising of the dispute in between the
parties; (iii) and such agreement in
writing should be in conformity with
Section 9 of the Contract Act - General
Conditions of Contract (in short 'GCC') -
Clause 64 - Held - Clause 64 of the GCC is
in not an express agreement in writing in
conformity with Section 9 of the Contract
Act and is also not subsequent to the
arising of dispute, as such, the procedure
prescribed therein would also having no
applicability (Para 15)

B. Civil Law -Arbitration and Conciliation Act
(26 of 1996)- Section 11 (4) - Appointment
of Neutral Arbitrator - If a party fails to
appoint an arbitrator within thirty days from
the receipt of a request to do so from the
other party the appointment shall be made,
upon request of a party, by Court - Held -
mandate of S. 11 (4) is extremely clear, time
for appointment of Arbitrator is only
restricted to 30 days (Para 15)

Agreement entered into between the parties -
certain amounts were not paid, as such, a
dispute arose between the parties - on
1.10.2020, applicant requested the Opposite
Parties to appoint arbitrator- as no Arbitrator
was appointed within a period of 30 days as
mandated under Section 11 (4) of the Act - then
the applicant approached High Court for
appointment of an Arbitrator - Opposite party
argued that on 3.12.2020, one retired employee
of the railways has been appointed as an
Arbitrator thus application liable to be rejected
- Held - Appointment of retired employee of the
railways is not valid appointment - As, no
Arbitrator was appointed in terms of the request
made on 1.10.2020 within a period of 30 days,
as mandated under Section 11 (4) of the Act,
applicant is right in approaching Court for
appointment of an Arbitrator U/ss 11 (4) & 11
(6) of the Act - Court appointed retired judge as
Arbitrartor.

Application allowed. (E-5)

Listed of Cases cited: -

## Text

516 INDIAN LAW REPORTS ALLAHABAD SERIES
warrant any interference of this Court as
the applicant had completely failed to
disclose that earlier arbitral proceedings in
regard to the dispute which was initiated in
the year 1996 had not come to an end,
neither any prayer has been made for
terminating the mandate of the Arbitrator
nor any prayer has been made for the
substitution of Arbitrator and simplicitor
the application under Section 11 has been
moved invoking the arbitration clause 46.

58. This Court does not find any need
to interfere, as this application is totally
misconceived and is hereby dismissed.
----------
(2020)12ILR A516
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 07.12.2020

BEFORE

THE HON'BLE PANKAJ BHATIA, J.

Arbitration and Conciliation Application No. 118
of 2020

M/s Three Star Engineering Works Pvt.
Ltd. ...Applicant
Versus
Diesel Locomotives Works Varanasi & Anr.
 ...Respondents

Counsel for the Applicant:
Sri Aditya Pandey, Sri Arvind Sikariya

Counsel for the Respondents:
Sri Rajnish Kumar Rai

A. Civil Law -Arbitration and Conciliation
Act (26 of 1996) - Section 12(5) - proviso
- Waiver of ineligibility prescribed in
Section 12 (5) - In view of Section 12(5)
read with Seventh Schedule (i) a person
who is disqualified cannot be appointed as
an Arbitrator unless there is an agreement
in writing with regard to the specific
named Arbitrator; (ii) the said agreement
in writing should be subsequent to the
arising of the dispute in between the
parties; (iii) and such agreement in
writing should be in conformity with
Section 9 of the Contract Act - General
Conditions of Contract (in short 'GCC') -
Clause 64 - Held - Clause 64 of the GCC is
in not an express agreement in writing in
conformity with Section 9 of the Contract
Act and is also not subsequent to the
arising of dispute, as such, the procedure
prescribed therein would also having no
applicability (Para 15)

B. Civil Law -Arbitration and Conciliation Act
(26 of 1996)- Section 11 (4) - Appointment
of Neutral Arbitrator - If a party fails to
appoint an arbitrator within thirty days from
the receipt of a request to do so from the
other party the appointment shall be made,
upon request of a party, by Court - Held -
mandate of S. 11 (4) is extremely clear, time
for appointment of Arbitrator is only
restricted to 30 days (Para 15)

Agreement entered into between the parties -
certain amounts were not paid, as such, a
dispute arose between the parties - on
1.10.2020, applicant requested the Opposite
Parties to appoint arbitrator- as no Arbitrator
was appointed within a period of 30 days as
mandated under Section 11 (4) of the Act - then
the applicant approached High Court for
appointment of an Arbitrator - Opposite party
argued that on 3.12.2020, one retired employee
of the railways has been appointed as an
Arbitrator thus application liable to be rejected
- Held - Appointment of retired employee of the
railways is not valid appointment - As, no
Arbitrator was appointed in terms of the request
made on 1.10.2020 within a period of 30 days,
as mandated under Section 11 (4) of the Act,
applicant is right in approaching Court for
appointment of an Arbitrator U/ss 11 (4) & 11
(6) of the Act - Court appointed retired judge as
Arbitrartor.

Application allowed. (E-5)

Listed of Cases cited: -

1.
 Central
Organisation
for
Railway
Electrification Vs M/s Eci-SPIC-SMO-MCML (JV),
12 All. M/s Three Star Engineering Works Pvt. Ltd. Vs. Diesel Locomotives Works Varanasi & Anr. 517
A Joint Venture Company dt 17.12.2019 Civil
Appeal Nos. 9486-9487 of 2017 (arising out of
the SLP (C) Nos. 24173-74 of 2019)

2. Bharat Broadband Network Limited Vs United
Telecoms Limited, (2019) 5 SCC755

(Delivered by Hon'ble Pankaj Bhatia, J.)

1. Instructions produced before this
Court today is taken on record.

2. Present application has been filed
seeking appointment of a neutral Arbitrator
in terms of the powers vested in this Court
by virtue of Section 11 (6) of the
Arbitration and Conciliation Act, 1996 (in
short 'the Act').

3. The averments, in brief, are that
Opposite Parties through tender invited bid
for maintenance contract of EOT Cranes,
DSA and EOT Track Measurement and
Repairing with Spares. In pursuance to the
said tender, the applicant also gave his bid
and was declared successful. Subsequently,
a Letter of Acceptance was issued by the
Opposite Parties and subsequent thereto, an
agreement was entered into between the
parties on 18.4.2015. A copy of the
agreement
is
filed
as
Annexure-3.
Arbitration clause is provided under
Condition No. 26 of the tender document,
which is as under;

"26.1 In the event of any
question, dispute or difference arising
under these conditions or any special
conditions of contract, or instructions to
tenderers or in connection with this
contract (except as to any matter the
decision of which is specifically provided
for by these conditions or instructions to
tenders or the special conditions) the same
shall be referred to the sole arbitration of a
Gazetted Railway Officer appointed to be
the Arbitrator however, will not be one of
those who had an opportunity to deal with
the matters to which the contract relates or
who in the course of his duties as a Railway
servant had expressed views on all or any
of the matters under dispute or difference.
The award of the arbitrator shall be final
and binding on the parties to this contract.

26.2 In the event of the arbitrator
dying neglecting or refusing to act, or
resigning or being unable to act for any
reason or his award being set aside by the
court for any reason, it shall be lawful for
the authority appointing the arbitrator to
appoint another arbitrator in place of the
out going arbitrator in the manner
aforesaid.

26.3 It is further a term of this
contract that no person other than the
persons appointed by the authority as
aforesaid should act as arbitrator and that
if for any reason that is not possible the
matter is not to be referred to arbitration at
all.

26.4 The arbitrator may from
time to time with the consent of all the
parties to the contract enlarge, the time for
making the award.

26.5 Upon every and any such
reference, the assessment of the cost
incidental to the reference and award
respectively shall be at the discretion of the
arbitrator.

26.6 Subject to as aforesaid, the
Arbitration Act 1940 and the rules there
under and any statutory modification
thereof, for the time being in force, shall be
deemed to apply to the arbitration
proceedings under this clause.

26.7 Work under the contract, if
reasonably possible if so decided by the
Engineer,
may
continue
during
the
arbitration proceedings and no payment
due to or payable by the Engineer shall be
with held on account of such proceedings.
518 INDIAN LAW REPORTS ALLAHABAD SERIES

26.8 The venue of arbitration
shall be the place from which the contract
is issued, or such other place as the
arbitrator at his discretion may determine.

26.9 In this clause the authority
to appoint the arbitrator includes, if there
be no such authority, the offer, for the time
being discharging the functions of that
authority, whether in addition to other,
functions or otherwise."

4. The contention is that after the
completion of the contract, certain amounts
were not being paid, as such, a dispute
arose between the parties and pursuant to
the arbitration clause, a request was made
on 31.8.2020 for payment of the due
amount along with the request that in case
the payment was not being made, the
matter
may
be
referred
before
the
Arbitrator in terms of the arbitration clause.

5. The applicant claims that once
again he was informed vide letter dated
23.9.2020 that no claims are pending and
all the claims have been forfeited by the
Opposite Parties. Certain other allegations
were also levelled against the applicant.

6. The applicant claims that once
again on 1.10.2020, the applicant requested
the Opposite Parties that as dispute has
arisen between the parties, the matter may
be referred to the arbitration as per the
arbitration clause in the agreement. It is
stated that as no Arbitrator was appointed
in terms of the request so made on
1.10.2020 within a period of 30 days as
mandated under Section 11 (4) of the Act
and thus, the applicant has approached this
Court for appointment of an Arbitrator.

7. Sri Rajnish Kumar Rai, Advocate
appearing on behalf of Opposite Parties, on
instructions, states that on 3.12.2020, one
Sri Harsh Kumar, a retired employee of the
railways
has
been
appointed
as
an
Arbitrator in terms of the request of the
applicant dated 1.10.2020 and thus, this
application is liable to be rejected. He
further argues that agreement in question
includes
the
General
Conditions
of
Contract (in short 'GCC') which provides
for a manner of appointment of arbitrator.

Clause 64 of the GCC is quoted as
under:

Clause
64.
(1):
Demand
for
Arbitration:

64. (1) (i) In the event of any dispute
or difference between the parties hereto as
to the construction or operation of this
contract, or the respective rights and
liabilities of the parties on any matter in
question, dispute or difference on any
account or as to the withholding by the
Railway of any certificate to which the
contractor may claim to be entitled to, or if
the Railway fails to make a decision within
120 days, then and in any such case, but
except in any of the "excepted matters"
referred to in Clause 63 of these
Conditions, the contractor, after 120 days
but within 180 days of his presenting his
final claim on disputed matters shall
demand in writing that the dispute or
difference be referred to arbitration.

64. (1) (ii) (a) The demand for
arbitration shall specify the matters which are in
question, or subject of the dispute or difference
as also the amount of claim item-wise. Only such
dispute or difference, in respect of which the
demand has been made, together with counter
claims or set off, given by the Railway, shall be
referred to arbitration and other matters shall
not be included in the reference.

64. (1) (ii) (b) The parties may
waive of the applicability of sub-section 12
12 All. M/s Three Star Engineering Works Pvt. Ltd. Vs. Diesel Locomotives Works Varanasi & Anr. 519
(5)
of
Arbitration
and
Conciliation
(Amendment) Act, 2015. If they agree or
such waiver in writing after having arisen
between them in the formation under
Annexure XII of these conditions."

"64.
(3)
Appointment
of
Arbitrator:
......................................................................
........

64. (3) (a) (ii) In case not covered
by the Clause 64(3)(a)(i), the Arbitral
Tribunal shall consist of a Panel of three
Gazette Railway Officers not below JA
Grade or two Railway Gazette Officers not
below JA Grade and a retired Railway
Officer, retired not below the rank of SAG
officer, as the arbitrators. For this purpose,
the railway will send a panel of at least
four (4) names of Gazette Railway Officers
of one or more departments of the Railway
which may also include the name(s) of
retired Railway Officer(s) empanelled to
work
as
railway
Arbitrator
to
the
contractor within 60 days from the day
when a written and valid demand for
arbitration is received by the GM.........".

8. On the strength of the said clause
as referred above, Sri Rajnish Kumar Rai
argues that in terms of the proviso to
Section 12(5) of the Act, once there is an
express waiver the bar contained under
Section 12(5) of the Act would not apply.
He further fortifies his submission to state
that retired employees would not fall within
the rigours of Section 12 (5) of the Act as
they are included in the panel of Arbitrators
and in terms of the GCC, there is an
express agreement with regard to the
appointment of the retired employees and
thus, the contention of counsel for the
applicant does not merit acceptance.

9. Sri Rajnish Kumar Rai submits that
the Diesel Locomotives Works (in short
DLW) is an organisation within the Indian
Railways and is governed by the Indian
Railways. He further submits that the
proposed
Arbitrators
are
the
retired
employees of railways and do not stand
disqualified by virtue of Clause 1 of the
Seventh Schedule read in consonance with
Sections 12 (1) and 12 (5) of the Act, to
which the counsel for the applicants
submits that the proposed Arbitrator would
clearly fall within scope of Clause 1 of the
Seventh Schedule as he is an retired
employee with the railways under which
the respondent organization functions.

10. He further placed reliance on the
judgment of the Supreme Court in Central
Organisation for Railway Electrification
Vs. M/s Eci-SPIC-SMO-MCML (JV), A
Joint Venture Company dated 17.12.2019
passed in Civil Appeal Nos. 9486-9487 of
2017 (arising out of the SLP (C) Nos.
24173-74 of 2019). Based upon the said
judgment, he argues that Supreme Court
had duly considered Clause 64 of the GCC
and argues that there is an express
agreement in terms of the proviso to
Section 12(5) of the Act and thus, the
contention of the counsel for the applicant
merits rejection on that count. He further
argues that in the said very judgment, the
question of non-appointment of Arbitrator
within 30 days was also considered and
repelled by the Supreme Court.

11. Refuting the submissions, the
counsel for the applicant specifically argues
that in the request dated 31.8.2020, a
specific denial was made with regard to the
right of appointment of an Arbitrator,
whose names finds mention in Schedule 7
of the Act and thus, he argues that there
was no waiver in terms of proviso to
Section 12 (5) of the Act. He further argues
that on a plain reading of Section 12(5) of
520 INDIAN LAW REPORTS ALLAHABAD SERIES
the Act read with the proviso makes it clear
that two conditions are required for waiver
of the bar under Section 12(5) of the Act
namely that there should be an express
agreement in writing specifically and the
said agreement in writing should be
subsequent to the dispute having arisen. In
the present case, he argues that even if for
the sake of arguments, it is presumed that
Clause 64 of the GCC would amount to
waiver in terms of the proviso to Section
12(5), the same falls short of the
requirement of the proviso as, admittedly,
the same has not been executed subsequent
to the dispute having arisen in between the
parties. He has strongly placed reliance on
the judgment of the Supreme Court in the
case of Bharat Broadband Network Limited
Vs. United Telecoms Limited, (2019) 5
Supreme Court Cases 755 wherein the
Supreme Court had considered the scheme
of Section 12(5) and the proviso to Section
12(5) and had specifically held as under:

"20. This then brings us to the
applicability of the proviso to Section (12)5
on the facts of this case. Unlike Section 4 of
the Act which deals with deemed waiver of
the right to object by conduct, the proviso
to Section (12)5 will only apply if
subsequent to disputes having arisen
between the parties, the parties waive the
applicability of sub-section (5) of Section
12 by an express agreement in writing. For
this reason, the argument based on the
analogy of Section 7 of the Act must also be
rejected. Section 7 deals with arbitration
agreements that must be in writing, and
then explains that such agreements may be
contained in documents which provide a
record of such agreements. On the other
hand, Section (12)5 refers to an "express
agreement in writing". The expression
"express agreement in writing" refers to an
agreement made in words as opposed to an
agreement which is to be inferred by
conduct. Here, Section 9 of the Indian
Contract Act, 1872 becomes important. It
states:

"9.
Promises,
express
and
implied.--In so far as a proposal or
acceptance of any promise is made in
words, the promise is said to be express. In
so far as such proposal or acceptance is
made otherwise than in words, the promise
is said to be implied."

It is thus necessary that there be
an "express" agreement in writing. This
agreement must be an agreement by which
both parties, with full knowledge of the fact
that Shri Khan is ineligible to be appointed
as an arbitrator, still go ahead and say that
they have full faith and confidence in him
to continue as such. The facts of the present
case disclose no such express agreement.
The appointment letter which is relied upon
by the High Court as indicating an express
agreement on the facts of the case is dated
17.01.2017. On this date, the Managing
Director of the appellant was certainly not
aware that Shri Khan could not be
appointed by him as Section 12 (5) read
with the Seventh Schedule only went to the
invalidity of the appointment of the
Managing
Director
himself
as
an
arbitrator. Shri Khan's invalid appointment
only became clear after the declaration of
the law by the Supreme Court in TRF Ltd.
(supra)
which,
as
we
have
seen
hereinabove, was only on 03.07.2017. After
this date, far from there being an express
agreement between the parties as to the
validity of Shri Khan's appointment, the
appellant
filed
an
application
on
07.10.2017 before the sole arbitrator,
bringing the arbitrator's attention to the
judgment in TRF Ltd. (supra) and asking
him to declare that he has become de jure
incapable of acting as an arbitrator.
Equally, the fact that a statement of claim
12 All. M/s Three Star Engineering Works Pvt. Ltd. Vs. Diesel Locomotives Works Varanasi & Anr. 521
may have been filed before the arbitrator,
would not mean that there is an express
agreement in words which would make it clear
that both parties wish Shri Khan to continue as
arbitrator despite being ineligible to act as
such. This being the case, the impugned
judgment is not correct when it applies Section
4, Section 7, Section 12(4), Section 13(2), and
Section 16 (2) of the Act to the facts of the
present case, and goes on to state that the
appellant cannot be allowed to raise the issue
of eligibility of an arbitrator, having itself
appointed the arbitrator. The judgment under
appeal is also incorrect in stating that there is
an express waiver in writing from the fact that
an appointment letter has been issued by the
appellant, and a statement of claim has been
filed by the respondent before the arbitrator.
The moment the appellant came to know that
Shri Khan's appointment itself would be invalid,
it filed an application before the sole arbitrator
for termination of his mandate."

12. After hearing the parties what is to
be considered by this Court is whether the
appointment of Arbitrator, as informed by
Sri Rajnish Kumar Rai on 3.12.2020 is a
valid appointment or not and whether the
Court can appoint an neutral arbitrator in
exercise of its powers under Section 11 (4)
and 11 (6) of Act.

13. A peculiar situation has arisen as
the counsel for the parties have relied upon
the Supreme Court judgment dealing with
the issue in the case of Bharat Broadband
Network Limited (Supra), wherein the
Supreme Court had clearly considered the
scheme of Section 12(5) read with Seventh
Schedule of the Act to hold

(i) that a person who is disqualified
cannot be appointed as an Arbitrator unless
there is an agreement in writing with regard
to the specific named Arbitrator;

(ii) the said agreement in writing
should be subsequent to the arising of the
dispute in between the parties;

(iii) and such agreement in writing
should be in conformity with Section 9 of
the Contract Act.

14. The said judgment although was
considered by the Supreme Court in the
judgment
in
the
case
of
Central
Organisation for Railway Electrification
(Supra), however, on a reading of the said
judgment, there appears to be no discussion
with regard to the agreement (in the present
placed Clause 64 (3)(b) of the GCC) being
subsequent to the arising of the dispute or
not.

15. In view of the fact that the
judgment
in
the
case
of
Central
Organisation for Railway Electrification
(Supra) does not consider the scope of the
proviso to Section 12 (5) as to whether the
GCC is subsequent to the arising of the
dispute or not, I am bound by the judgment
of the Supreme Court in the case of Bharat
Broadband Network Limited (Supra) which
specifically deals with the issue. The
Supreme Court in the case of Central
Organisation for Railway Electrification
(Supra) had dealt with the issue of expiry
of 30 days from the date the railway, on
appointment of Arbitrator, and has held that
in view of the manner of appointment
prescribed under Clause 64 of the GCC, the
period of 30 days would have no
applicability. I have already held that
following the judgment in the case of
Bharat
Broadband
Network
Limited
(Supra) that Clause 64 of the GCC is in not
an express agreement in writing in
conformity with Section 9 of the Contract
Act and is also not subsequent to the
arising of dispute, as such, the procedure
prescribed therein would also having no
522 INDIAN LAW REPORTS ALLAHABAD SERIES
applicability. The mandate of the Act as
contained under Section 11 (4) is extremely
clear as the time for appointment of
Arbitrator is only restricted to 30 days.
Admittedly, the arbitrator has not been
appointed within 30 days. Thus, I have no
hesitation to hold that the applicant is right
in approaching this Court for appointment
of an Arbitrator in exercise of the powers
under Section 11 (4) and 11 (6) of the Act.
Accordingly, I appoint Justice Shashi Kant
Gupta (R/o Judges Bungalow No. 25,
Drummond Road, Prayagraj/9 Elgin Road,
Civil
Lines,
Prayagraj
(Mobile
No.
9415216833) as an Arbitrator.

16. Office is directed to seek consent
of the learned Arbitrator by the next date in
terms of mandate of Section 11 (8) of the
Act.

17. List this case on 7.1.2021.
----------
(2020)12ILR A522
ORIGINALJURISDICTION
CIVILSIDE
DATED: ALLAHABAD 12.10.2020

BEFORE

THE HON'BLE VIVEK KUMAR BIRLA, J.

Matter Under Article 227 No.2471 of 2020

Smt. Leela Devi ...Petitioner
Versus
Ramchandra Prasad & Ors. ...Respondents

Counsel for the Petitioner:
Sri Abhishek Kumar.

Counsel for the Respondents:
Sri Ravindra Nath Chaubey, Sri Rajni Ojha.

A. Constitution of India, 1950-Article 227 & U.P.
Act No. 13 of 1972-Section 24-right of re-entry
u/s 24 of the Act is in regard to the "building"
only where the same is in existing form or reconstructed after demolition and there is no
power to direct the re-entry over the vacant
land of the demolished building or over which
the demolished building was once existing. it is
obvious that the power to put the tenant back
in possession of his tenanted accommodation
could be exercised only if the building had not
be
demolished
and
was
available
for
occupation in its original condition. it does not
authorize the prescribed authority or the
District Judge to direct the tenant shall occupy
the site of the building and put his own
structure temporary or otherwise. (Para 2 to 16)

The Petition is dismissed. (E-6)

List of Cases cited:-

1. Anand Kumar Vs Tulsi Ram, (2005) 2 JCLR
323 Alld, (2004) 2 ARC 832

2. Hameed Kunju Vs Nazim (2017) 8 SCC 611

(Delivered by Hon'ble Vivek Kumar Birla, J.)

1. Heard Sri Abhishek Kumar, learned
counsel for the petitioner-tenant and Ms.
Rajni
Ojha,
learned
counsel
for
the
respondents-landlord and perused the record.

2. Present petition has been filed
challenging the judgement and order dated
31.1.2020
passed
by
the
Additional
Sessions Judge, Ballia in Civil Misc. Case
No. 205 of 2017 under Section 24 of the
UP Act No. 13 of 1972 (Leela Devi vs.
Ramchandra Prasad and others).

3. The admitted facts, shorn of details,
are that in regard to the property in dispute a
release
application
was
filed
by
the
respondents-landlord under Section 21(1)(a)
of the UP Act 13 of 1972, which was
contested by the petitioner-tenant herein upto
the Hon'ble Apex Court without success and
thereafter, in execution proceedings the
possession of the property in question was
handed
over
to
the
landlord.