# M/s Vidyawati Constructions Company v. Union of India

- **Citation:** (2021) 1 ILRA 226
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2020-11-17
- **Bench:** Rohit Ranjan Agarwal
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-vidyawati-constructions-company-v-union-of-india-45988
- **Pages:** 25

## Headnote

Law
-
Arbitration
and
Conciliation Act (26 of 1996)- Section
11 - Appointment of arbitrators -
Derogation - no derogation in the
appointment of arbitrator can be
made where the clause specifically
provides for certain persons to be
appointed as arbitrator - In the
instant case clause 64(3)(b) of the
agreement
provided
for
the
composition of the Arbitral Tribunal of
two arbitrators, who are gazetted
railway officer, who were to appoint
an Umpire - as agreement itself
provided for arbitrators, then no
question arises to derogate from the
said arbitration clause and appoint a
retired Judge (Para 76, 88)

B.
Civil
Law
-
Arbitration
and
Conciliation
Act
(26
of
1996)-
Sections 11, 34(2)(a)(v) & 37 -
Arbitral award - Setting aside of on
the ground composition of the arbitral
tribunal was not in accordance with
the agreement of the parties

Appellant awarded contract for construction
of building complex - As respondents did
not make full payment hence appellant
invoked arbitration clause - Application filed
for appointment of arbitrator under Section
11 (4) - Court on 26.08.1998 appointed
two arbitrator in terms of Clause 64 of the
GCC - Arbitral Tribunal entered into
reference - Appellant filed modification
Application
filed
with
a
prayer
for
appointing another person as presiding
arbitrator - on 26.09.2003, the then Chief
Justice, treated the modification application
as application u/s 11 & appointed retired
Chief Justice as the sole arbitrator without
taking note of earlier Arbitral Tribunal -
respondents filed objections u/s 16 raising
preliminary
objection
regarding
composition & constitution of the Arbitral
Tribunal - Held - constituting fresh Arbitral
Tribunal without replacing the earlier
Tribunal or terminating its mandate, was
against
the
agreement
entered
into
between the parties - there was no dispute
1 All. M/s Vidyawati Constructions Company Vs. Union of India
227
between the parties to the very constitution
of the Arbitral Tribunal in the year 1998 -
only a presiding arbitrator could have been
substituted or after termination of the
earlier
Arbitral
Tribunal,
could
have
constituted a new Arbitral Tribunal (Para
53, 54, 89)

Dismissed. (E-4)

List of Cases cited :-

## Text

_Characters 0–39,927 of 84,174. This is a partial read: ask again with offset=39927 for what follows._

226 INDIAN LAW REPORTS ALLAHABAD SERIES
1/5
Deduction
for
personal expenses
- Rs. 20,160.00
Rs. 80,640.00
Multiplier
 x 17
Rs.13,70,880.00
Medical Bills
+1,12,176.00
Conventional Head as
per Pranay Sethi
 + 70,000.00
Rs.15,53,056.00

17. The awarded compensation is
accordingly reduced from Rs. 20,13,376/-
to Rs. 15,53,056/- as calculatee above,
however, the aforesaid amount shall carry
interest as dirtected by the learned
Tribunal.

18. The appeal, accordingly, stands
partly allowed.
----------
(2021)01ILR A226
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 17.11.2020

BEFORE

THE HON'BLE ROHIT RANJAN AGARWAL, J.

FAFO No.- 3316 of 2013

M/s Vidyawati Constructions Company
 ...Appellant
Versus
Union of India ...Opposite Party

Counsel for the Appellant:
Sri Vinod Sinha, Sri Krishna Agrawal, Sri
Mahesh Sharma, Sri Manish Goyal

Counsel for the Respondent:
Sri Anil Kumar, Sri Tarun Varma

A.
Civil
Law
-
Arbitration
and
Conciliation Act (26 of 1996)- Section
11 - Appointment of arbitrators -
Derogation - no derogation in the
appointment of arbitrator can be
made where the clause specifically
provides for certain persons to be
appointed as arbitrator - In the
instant case clause 64(3)(b) of the
agreement
provided
for
the
composition of the Arbitral Tribunal of
two arbitrators, who are gazetted
railway officer, who were to appoint
an Umpire - as agreement itself
provided for arbitrators, then no
question arises to derogate from the
said arbitration clause and appoint a
retired Judge (Para 76, 88)

B.
Civil
Law
-
Arbitration
and
Conciliation
Act
(26
of
1996)-
Sections 11, 34(2)(a)(v) & 37 -
Arbitral award - Setting aside of on
the ground composition of the arbitral
tribunal was not in accordance with
the agreement of the parties

Appellant awarded contract for construction
of building complex - As respondents did
not make full payment hence appellant
invoked arbitration clause - Application filed
for appointment of arbitrator under Section
11 (4) - Court on 26.08.1998 appointed
two arbitrator in terms of Clause 64 of the
GCC - Arbitral Tribunal entered into
reference - Appellant filed modification
Application
filed
with
a
prayer
for
appointing another person as presiding
arbitrator - on 26.09.2003, the then Chief
Justice, treated the modification application
as application u/s 11 & appointed retired
Chief Justice as the sole arbitrator without
taking note of earlier Arbitral Tribunal -
respondents filed objections u/s 16 raising
preliminary
objection
regarding
composition & constitution of the Arbitral
Tribunal - Held - constituting fresh Arbitral
Tribunal without replacing the earlier
Tribunal or terminating its mandate, was
against
the
agreement
entered
into
between the parties - there was no dispute
1 All. M/s Vidyawati Constructions Company Vs. Union of India
227
between the parties to the very constitution
of the Arbitral Tribunal in the year 1998 -
only a presiding arbitrator could have been
substituted or after termination of the
earlier
Arbitral
Tribunal,
could
have
constituted a new Arbitral Tribunal (Para
53, 54, 89)

Dismissed. (E-4)

List of Cases cited :-

1. Narayan Prasad Lohia Vs Nikunj Kumar
Lohia & ors. AIR 2002 SC 1139

2. B.S.N.L. Ltd. Vs Motorola India (P. Ltd.)
2008 (12) SCALE 720

3. St. of Orissa & ors . Vs Gokulananda
Jena, (2003) 6 SCC 465

4. S.B.P. and Co. Vs M/s. Patel Engineering
Ltd. & anr. AIR 2006 SC 450

5. Northern Eastern Railway & ors. Vs
Tripple Engineering Works 2014 (3) Arb. LR
327 (SC)

6. Dakshin Shelters P. Ltd. Vs Geeta S.
Jauhari (2012) 5 SCC 152

7. U.O.I. Vs BESCO Ltd. AIR 2017 SC 1628

8. Bharat Wire Ropes Ltd. Vs U.O.I. & ors.
(2012) 5 ADJ 644

9. Abdul Gaffar Vs Sri Jaichandlal Ashok
Kumar & Co. Pvt. Ltd. & anr. JT (2000) 8
SC 152

10. Citibank N.A. Vs TLC Marketing & anr
.(2008) 1 SCC 481

11. Konkan Railway Corporation Ltd. & anr.
Vs Rani Construction Pvt. Ltd (2002) 2 SCC
388
12. B.S. Bajwa Vs St. of Pun. (1998) 2 SCC
523

13. M.M.T.C. Ltd. Vs Sterlite Industries
(India) Ltd. AIR 1997 SC 605

14. SVG Molasses Co. B.V. Vs Mysore
Mercantile Co. Ltd. & ors. 2007 (9) SCALE
89

15. I.O.C. Ltd. Vs Raja Transport (P) Ltd.,
MANU/SC/1502/2009

16. Antrix Corporation Ltd. Vs Devas
Multimedia P. Ltd. (2014) 11 SCC 560

17. Rail India Technical & Economic
Services Ltd. Vs Vidyawati Construction
Ltd., Writ Petition No. 16445 of 2001, Dt.
24.05.2001

18. NHAI Vs Bumihiway DDB Ltd. (JV) &
ors., (2006) 10 SCC 763

19. Lion Engineering Consultants Vs St. of
H.P. & ors. (2018) 16 SCC 758

20. Aargee Engineers &Co. & anr. Vs Era
Infra Engineering Ltd. & ors.,(2017) 4 ADJ
513

21 Basai Steels Pvt. Ltd. Vs Gobins India
Engineering Pvt. Ltd. & anr., 2018 (5) Arb.
LR 480(Karn.) (DB)

(Delivered by Hon'ble Rohit Ranjan Agrawal, J.)

1. This appeal under Section 37 of the
Arbitration and Conciliation Act, 1996 (for
short "Act 1996") has been filed assailing
the judgment and order dated 09.09.2013
passed
by
District
Judge,
Allahabad
allowing objection under Section 34 of the
Act, 1996 in Arbitration Case No. 25 of
2008, Union of India vs. M/s. Vidyawati
Construction Company, against award
228 INDIAN LAW REPORTS ALLAHABAD SERIES
dated 21.02.2008 made by the sole
arbitrator.

2. Facts in nutshell, are that appellant
was awarded a contract for construction of
multistorey RCC frame building complex (
Ground + 3 stories) for office of General
Manager,
Railway
Electrification,
Allahabad (now Prayagraj) for total cost of
Rs.87,76,517/-, and a letter of acceptance
of contract was issued on 13.03.1989. Due
to administrative reasons, awarded work
was reduced from G+3 to G+2 and original
cost
was
revised
and
reduced
to
Rs.66,32,912/- and the work was to be
completed within 18 months (i.e. by
18.09.1990). However, actual work was
completed on 31.05.1993, and final amount
paid to the appellant was Rs.68.77 lacs.

3. Appellant submitted his final bill
for Rs.4,26,54,807/- on 15.04.1994. As
respondents did not make full payment
hence on 18.05.1996, appellant invoking
the arbitration clause sent a registered letter
requesting that panel of arbitrators under
Clause 64(3)(b) of General Condition of
Contract be forwarded to them for selection
of an arbitrator. The respondents authorities
on 27.06.1996, 07.10.1996 and 17.01.1997,
through the said letters required details of
the claim made by appellant.

4. Sometimes in January, 1997,
appellant filed Civil Misc (Arbitration)
Application
No.
35
of
1997
for
appointment of arbitrator under Section 11
(4) of the Act of 1996. This application was
contested by the Railway authorities and a
counter affidavit was filed, wherein it was
stated in para 6 that a panel of arbitrator
was appointed by the General Manager.
After hearing the parties, this Court on
26.08.1998 appointed one Smt. Tanuja
Pandey, as railway nominee and Sri O.P.
Narang as the appellant's nominee, as
arbitrators. The order further required that
as per Clause 64 (3)(b), before entering into
the reference two arbitrators were required
to nominate an Umpire who shall be the
Gazetted Officer and to whom the case may
be referred in the event of any difference
between the two arbitrators. It was on
05.10.1998 that both the arbitrators jointly
agreed and appointed one Sri P.K. Sharma,
Chief Engineer N.F. Railway, as Umpire.
But a Civil Misc. (Arbitration) Application
No. 47 of 1998 was filed by the appellant
for complying the earlier order dated
26.08.1998 for appointment of an Umpire
by the two arbitrators so appointed. In the
counter affidavit filed by Railways, it was
stated that both the arbitrators have jointly
agreed for name of Sri P.K. Sharma. This
Court on 01.11.1999 disposed of the
application approving the name of P.K.
Sharma as the Umpire.

5. The Arbitral Tribunal entered into
reference and statement of claim was filed
by
appellant
on
06.01.1999,
while
statement
of
defence
was
filed
by
respondents Railway on 06.04.1999.

6. The appellant in the year 2000 filed
a
Civil
Misc.
Review/
Correction
Application No. 101974 of 2000 in
Arbitration Application no. 47 of 1998 with
a prayer that the Umpire appointed by the
Court may be treated as the presiding
arbitrator of the Arbitral Tribunal in view
of Act, 1996. This Court on 15.03.2002
allowed the application filed by appellant
and held that the Umpire shall be treated as
the presiding arbitrator of the Tribunal. It
appears that on 24.04.2002, the presiding
arbitrator,
P.K.
Sharma
showed
his
unwillingness to act as a presiding
arbitrator, thus, two arbitrators so appointed
by
this
Court
through
letter
dated
1 All. M/s Vidyawati Constructions Company Vs. Union of India
229
02.05.2000 informed the Registrar of this
Court about refusal/ resignation of Sri P.K.
Sharma and requested for nominating
presiding arbitrator so that the proceedings
can be resumed.

7.

Meanwhile
on
10.09.2002,
appellant filed a Civil Misc. Modification
Application No. 8 of 2002, with a prayer
for modifying the earlier order of this Court
dated 15.03.2002 for appointing another
person as presiding arbitrator (not being a
person belonging to Railway Department).
This modification application was filed in
the
earlier
Civil
Misc.
(Arbitration)
Application No. 35 of 1997. But on
26.09.2003, the matter was placed before
the then Chief Justice, who treated the
modification application as application
under Section 11 of the Act and appointed
Mr. Justice H.N. Seth, a retired Chief
Justice of this Court as the sole arbitrator,
while the proceedings were pending before
the earlier Arbitral Tribunal appointed by
this Court on 26.08.1998.

8. The first arbitration meeting was
held on 05.12.2003 before the sole
arbitrator
appointed
on
26.09.2003,
wherein the counsel for both the parties
agreed that under order of Chief Justice
constituting the Tribunal, appointment of
two earlier arbitrators stands superseded
and further agreed that respective statement
of claim and defence already filed by the
parties before previous arbitrators should
form basis of adjudication in the present
proceedings. Claimant was granted time
until 02nd January, 2004 to file statement
of claim, while respondents were granted
time till 15th January, 2004 for filing
statement of defence.

9. Both the parties filed their copies of
statement of claim, defence and rejoinder,
which were filed by them before previous
arbitrators in the second meeting held
before the sole arbitrator on 14.02.2004.
Parties were given time to check and verify
whether each of them has filed correct
copies of documents and nothing has been
omitted therefrom. It was made open to the
parties to file additional documents for
supporting their respective cases after
serving the copies thereof on the other side,
fixing 12.03.2004, as the next date.

10. In the third meeting held on
12.03.2004,
claimant-appellant
filed
application of date praying that respondents
be directed to supply copy of certain
documents. On the said date, respondents
agreed that they will furnish copies of bill,
as far as Measurement Book (M.B's.) were
concerned, it was stated that they are
Railways internal records and there was no
provision for giving copies thereof. After
hearing the parties, the sole arbitrator
directed the respondent-Railway to supply
photo copy of M.Bs. It was further
observed that parties had filed their
respective statement of claim, defence and
reply. As claimants had filed number of
annexures as the record show, it had
become necessary for the respondents to
modify their statement of defence in the
light of those annexures and were granted a
month's time for this purpose.

11. On the next date i.e. 24.04.2004,
respondents filed objections under Section
16 of the Act raising dispute to the effect
that Tribunal has no jurisdiction to decide
the claim. The arbitrator on 20.10.2004
rejected
the
preliminary
objection
regarding composition and constitution of
the Tribunal on the ground of delay in
raising the objections. The arbitrator,
thereafter, proceeded and gave award on
21.02.2008. This award was put to
230 INDIAN LAW REPORTS ALLAHABAD SERIES
challenge through objections under Section
34 of the Act of 1996 before the District
Judge, Allahabad, which was numbered as
Arbitration Case No. 25 of 2008. The court
below on 09.09.2013 set aside the award
dated 21.02.2008 passed by Mr. Justice
H.N. Seth, a former Chief Justice of this
Court considering the objections filed by
respondent- Railway under Section 34 of
the Act.

12. Heard Sri Manish Goyal, learned
Senior Counsel assisted by Sri Krishna
Agrawal, learned counsel for the appellant
and Sri Tarun Varma, along with Sri Anil
Kumar,
learned
counsel
for
the
respondents.

13. It is contended on behalf of
appellant that the sole basis of order
impugned is the ground under Section
34(2)(a)(v) of the Act, 1996 inasmuch as
the District Judge recorded a conclusion to
the effect that
appointment of sole
arbitrator by the Chief Justice was against
the terms and conditions of the agreement
entered into between the parties.

14. Sri Manish Goyal, learned Senior
Counsel submitted that challenge under
Section 35(2)(a)(v) was not available to the
respondents as ground of challenge does
not fulfill the ingredients of Section
34(2)(a)(v),
and
the
District
Judge
completely overlooked the qualifying part
of the said section and has not noticed the
fact that parties derogated and such
derogation was permissible under the law.
He further submitted that agreement
between the parties cannot be the sole
criteria and appointment of sole arbitrator
cannot be said to dehors the agreement of
parties. Section 10 of the Act specifically
prohibits appointment of even number of
arbitrators, while agreement of the parties
specifically provided for appointment of
even number of arbitrators and it was only
in case when the even number of arbitrators
were divided in their opinion that the
matter could have travelled to Umpire. This
was squarely in violation of Section 10(1)
of the Act, and under such circumstances,
provisions of Section 10(2) of the Act will
apply. This aspect was not dealt by the
court below and, therefore, the application
could not have been allowed merely on the
ground
of
applying
under
Section
34(2)(a)(v) of the Act which was to be read
along with other provisions of the Act that
includes Section 4, Section 10 and Section
16 of the Act.

15. According to him, a fundamental
error was committed by the court below in
setting
aside
the
award
on
the
misconceived
ground
of
Section
34(2)(a)(v) and the application could not
have been entertained.

16. Reliance has been placed upon
decision in case of Narayan Prasad Lohia
vs Nikunj Kumar Lohia & Ors, AIR 2002
SC 1139 (Para 16 and 19), and B.S.N.L.
Ltd. vs. Motorola India (P. Ltd.), 2008
(12) SCALE 720 (Para 18).

17. Secondly, it was submitted that
challenge to jurisdiction of appointment of
sole arbitrator stood waived by conduct of
respondents and hence by virtue of Section
4 of the Act, respondents were not
competent to challenge the jurisdiction of
arbitrator. It was submitted that order of
appointing the sole arbitrator was made on
26.09.2003
and
against
the
said
appointment, neither any appeal was filed
nor any objection was raised while the sole
arbitrator was being appointed by the then
Chief Justice. As it is evident from
proceedings before the sole arbitrator on
1 All. M/s Vidyawati Constructions Company Vs. Union of India
231
05.12.2003, 14.02.2004 and 12.03.2004
that the parties and their advocates have
acquiesced to the jurisdiction of sole
arbitrator and also acquiesced to the
previous appointment of two arbitrators
being superseded. The objection for the
first time came up after order were passed
on 12.03.2004, directing respondents to
provide photo copies of M.Bs. relating to
reinforcement of steel to the claimant
which was an uncomfortable order for
respondents that an objection was raised on
24.04.2004 relating to jurisdiction of the
Tribunal.

18. This according to him, was an
abuse of process on the part of respondents
who is a State and is bound to act fairly. All
these aspects have been dealt in extenso by
sole arbitrator but no reason has been given
by the court below (District Judge) for
upsetting the finding so recorded. It was
also submitted that statement of defence
was already on record and the parties in
their first meeting had accepted that the
statement of claim and defence filed before
the previous arbitrator should form basis of
adjudication before the sole arbitrator and
the arbitrator had granted time till 15th
January, 2004 for submitting statement of
defence.

19. As the second meeting was held
on 14.02.2004, parties had filed statement
of claim, defence and rejoinder, as such any
objections in regard to challenge to
jurisdiction in view of provisions contained
in Section 16(2) of the Act could have been
raised
till
that
point
of
time
but
respondents-Railways filed objection on
24.04.2004 after the filing of statement of
defence which was rightly repelled by the
arbitrator on 20.10.2004. Thus, by legal
fiction, waiver will come into play as
contemplated by Section 4 of the Act and
challenge
to
jurisdiction
of
Arbitral
Tribunal stood waived by conduct of
respondents. Reliance on this point of
waiver has been made in case of Narayan
Prasad Lohia (supra), Motorola India (P.
Ltd.) (supra) and State of Orissa and
others vs. Gokulananda Jena, (2003) 6
SCC 465 (Paras 5, 6 and 7).

20. The third point canvassed by
learned Senior Counsel was that the sole
arbitrator rightly recorded finding while
rejecting the objection of the respondents
as to jurisdiction of Arbitral Tribunal, while
the District Judge solely relying upon the
decision of the Apex Court in the case of
S.B.P. and Co. vs. M/s. Patel Engineering
Ltd. and another, AIR 2006 SC 450, held
that appointment of sole arbitrator could
not have been challenged and the said
judgment was prospective while the sole
arbitrator was appointed in the year 2003
and only objections under Section 16(2)
could have been made before the Arbitral
Tribunal.

21. According to him, neither the
points raised nor statutory provisions
have been dealt by the court below and
without
appreciating
the
statutory
scheme of Part-I of the Act, learned
District Judge had proceeded to hold
the appointment of sole arbitrator
against the terms and conditions of the
agreement. It was further contended
that the court below misconstrued the
provision and did not notice the fact
that where technical qualifications are
not mentioned in the arbitration clause,
then the parties can derogate and under
such circumstances, this Court rightly
appointed a retired Judge as a sole
arbitrator and the court below had not
touched upon the impact of Section 10
or Section 4 of the Act.
232 INDIAN LAW REPORTS ALLAHABAD SERIES

22. Reliance has been placed upon
decision in the case of Northern Eastern
Railway
and
others
vs.
Tripple
Engineering Works, 2014 (3) Arb. LR 327
(SC), Dakshin Shelters P. Ltd. vs. Geeta S.
Jauhari, (2012) 5 SCC 152, Union of
India vs. BESCO Ltd., AIR 2017 SC 1628
and Bharat Wire Ropes Ltd. vs. Union of
India and others, (2012) 5 ADJ 644.

23. The next point canvassed by Sri
Goyal was that the appointment of sole
arbitrator and award pronounced by him
have subserved the purpose of parties and
this Court had rightly appointed a retired
Judge
as
sole
arbitrator
instead
of
appointing presiding arbitrator, as the very
purpose of Act of 1996 is to provide speedy
remedy instead of formal process of
litigation. It is designed to provide
alternative dispute resolution and in order
to achieve objective that different facets are
to be weighed that, inter alia, include low
cost, early disposal and convenience of
parties, and these three facets are not
exhaustive but illustrative.

24. According to him, what is to be
made is that prejudice may not be caused to
any of the parties and in the present case no
single ground was taken in application
under Section 34 by respondents that they
suffered any prejudice in the decision
making process of the sole arbitrator. The
outcome may be their prejudice but that is
how the law takes its own course. Further,
there is no statement to the effect that
arbitrator was biased or the decision
making process stood invalidated by the
conduct of arbitrator, thus, under such
circumstances, proceedings before sole
arbitrator
subserved
the
purpose
of
arbitration and did not cause prejudice to
either of the parties. Reliance on this issue
has been placed upon decision in case of
Abdul Gaffar vs. Sri Jaichandlal Ashok
Kumar and Co. Pvt. Ltd. and another, JT
(2000) 8 SC 152 and Citibank N.A. vs.
TLC Marketing and another, (2008) 1
SCC 481.

25. Sri Goyal then invited the
attention of the Court to Section 23 of the
Act which is statement of claim and
defence. Sub-section (1) of Section 23
provides that within the period of time
agreed upon between the parties or
determined by Arbitral Tribunal, the
claimants shall state the fact supporting his
claim, the points at issue and relief or
remedy sought, and the respondents shall
state his defence in respect of these
particulars,
unless
the
parties
have
otherwise agreed as to the required
elements of those statements.

26. According to him, sole arbitrator
on 05.12.2003 had granted time uptil 15th
January, 2004 for filing statement of
defence which was filed in the second
meeting
held
on
14.02.2004
by
respondents-Railways. Now, according to
Section 16(2), plea regarding that Arbitral
Tribuanl does not have jurisdiction shall be
raised not later than the submissions of
statement of defence, thus, Section 16(2)
has to be read along with Section 23(1) of
the Act, and in the present case objections
challenging the very Arbitral Tribunal were
raised by respondents on 24.04.2004 i.e in
the fourth meeting, thus, the said objections
were rightly rejected by the sole arbitrator.

27. While Section 25 provides for
default of a party and Sub-section (b) of
Section 25 is in regard to the respondent
failing to file his statement of defence in
accordance with Sub-section (1) of Section
23, in that case the Arbitral Tribunal shall
continue the proceedings without treating
1 All. M/s Vidyawati Constructions Company Vs. Union of India
233
that failure in itself has an admission of the
allegation by the claimant. Thus as the
statement of defence, according to Sri
Goyal was filed on 14.02.2004 and
objections to the constitution of the Arbitral
Tribunal was not filed as per provisions of
Section 16(2), there is a default committed
by the respondents which cannot be cured
and Section 25(b) provides for the default
in case of non filing of statement of
defence by respondent, the same shall be
treated as a default by respondents in not
filing the objections as mandated in Section
16(2), at the time of filing of written
statement.

28. Replying to the above arguments,
Sri
Tarun
Varma,
learned
counsel
appearing for respondents submitted that as
per
Clause
64(3)(a)(ii)
of
General
Condition of Contract two arbitrators, who
shall be the Gazetted Railway Officer of
equal status, were to be appointed in
manner laid down in Clause 64(3)(b), one
from the Department side and other from
the side of contractor, and the two
arbitrators so nominated shall nominate an
Umpire who shall also be Gazetted
Railway Officer.

29. According to him, this Court on the
Application No. 35 of 1997, on 26.08.1998
had appointed Smt. Tanuja Pandey from the
side of respondents and Sri O.P. Narang,
from the side of contractor-appellant, as
arbitrator and by the same order, they were
required to nominate an Umpire as provided
in Clause 64(3)(b). As one P.K. Sharma was
jointly agreed as an Umpire, this Court on
01.11.1999, accepted his nomination. It was
on the correction application filed by
appellant in the year 2000 that Sri P.K.
Sharma was treated as presiding arbitrator of
the Tribunal instead of an Umpire vide order
dated 15.03.2002.

30. As Arbitral Tribunal had already
entered
into
reference
on
06.01.1999,
presiding arbitrator showed his unwillingness
to act, which was intimated to the Registrar
of this Court on 02.05.2002. Simultaneously,
a modification application was also moved by
the appellant for appointment of presiding
arbitrator which was dealt by the Chief
Justice as an application under Section 11 and
a new Arbitral Tribunal de novo was
constituted,
without
superseding
or
terminating the mandate of the earlier
Tribunal.

31. Sri Varma submitted that the Tribunal
which was constituted by this Court on
26.08.1998 was still in existence as the
proceedings before the same were not
terminated, neither the order appointing sole
arbitrator took note of the fact that earlier
Arbitral Tribunal was in existence and order
passed on 26.09.2003 superseded the earlier
Arbitral Tribunal. It is also contended that
neither there was any prayer in the modification
application for terminating the Arbitral Tribunal
nor for appointment of sole arbitrator and
prayer was made only for appointment of
presiding arbitrator not being an officer of
Railway. As the earlier appointments of two
arbitrators were in terms of Clause 64 of the
GCC, fresh appointment made was against the
agreement/ contract entered into between the
parties.

32. Sri Varma submitted that appointment
of the sole arbitrator made on 26.09.2003 could
not be challenged in view of the law prevalent
at that time as in case of Konkan Railway
Corporation Ltd. and another vs. Rani
Construction Pvt. Ltd., (2002) 2 SCC 388, it
was held by Apex Court that such an order was
an administrative order.

33. He further submitted that on the
first date before the sole arbitrator, consent
234 INDIAN LAW REPORTS ALLAHABAD SERIES
given by counsel as regards constitution of
Tribunal of sole arbitrator is not binding on
the Railways as held in the case of B.S.
Bajwa vs. State of Punjab, (1998) 2 SCC
523. As on that date appellants were
directed to file claim by 2nd January, 2004
and respondents' statement of defence by
15th January, 2004. On 14.02.2004, which
was the second date fixed before the sole
arbitrator, the parties had filed their copies
of statement of claim, defence and
rejoinder which were filed by them before
previous arbitrators and nothing new was
filed and the sole arbitrator had granted
time for verifying the documents filed by
each of the parties and had also granted
time to file additional documents for
supporting their respective cases.

34. It was in the third meeting held on
12.03.2004 that claimant/ appellant had
filed application requiring the respondents
to file certain documents, wherein the sole
arbitrator had directed the respondents to
supply photo copies of M.B's. relating to
reinforcement of steel to the claimant. The
sole arbitrator had recorded in the said
proceedings that claimant had filed number
of annexures and thus respondents were
granted liberty to modify their statement of
defence in light of those annexures. On the
next date fixed i.e. fourth meeting which
was held on 24.04.2004, respondents had
filed their objections under Section 16(2)
and thus, there was no delay as the sole
arbitrator had already granted time to
modify their statement of defence, meaning
thereby that statement of defence till that
date was not complete.

35. He, next submitted that plea of
waiver raised by appellant as mandated in
Section 4 of the Act of 1996 cannot be
attracted in the present case, as after the
Arbitral Tribunal was constituted on
26.08.1998 by this Court in terms of
agreement, there was no need to file
objection as to jurisdiction. However,
subsequently
the
Chief
Justice
on
26.09.2003 had appointed a retired Chief
Justice of this Court as sole arbitrator
against the agreement without terminating
the mandate of the earlier Arbitral Tribunal,
hence the Railways filed objection as to
jurisdiction/ composition of Tribunal under
Section 16 before the Arbitral Tribunal of
sole arbitrator.

36. According to him, reliance placed
on decision of B.S.N.L vs. Motorola India
Pvt. Ltd. (supra) does not come to the
rescue of appellant. He further submitted
that proceedings before Arbitral Tribunal of
Sri H.N. Seth was going on and no hearing
had taken place, except exchange of
pleadings and permitting respondents to
rectify/ modify their defence statements,
thus,
no
hearing
commenced
till
24.04.2004 nor defence statement filed by
respondents had attained finality.

37. As far as Section 10 of the Act is
concerned, he submitted that as agreement
Clause 64 of General Condition of Contract
provides for two arbitrators, who are to be
nominated by both the parties (i.e Railway
and Contractor) and the two appointed
arbitrators were to nominate an Umpire,
which was followed, while application
under Section 11 of the appellant was
decided on 26.08.1998. Reliance has been
placed upon decision of the Apex Court in
case of M.M.T.C. Limited vs. Sterlite
Industries (India) Ltd., AIR 1997 SC 605.

38. The third point canvassed by Sri
Varma is that while appointing Arbitral
Tribunal under Section 11, the Court
cannot alter the terms of contract and
cannot direct for appointing a sole
1 All. M/s Vidyawati Constructions Company Vs. Union of India
235
arbitrator in place of three arbitrators as
provided in the agreement, as it would
amount to altering the terms of agreement
entered into between the parties.

39. Reliance has been placed upon
decision of Apex Court in case of SVG
Molasses Co. B.V. vs. Mysore Mercantile
Co. Ltd. and others, 2007 (9) SCALE 89
(Paras 12 and 15), Indian Oil Corporation
Ltd.
vs.
Raja
Transport
(P)
Ltd.,
MANU/SC/1502/2009
and
Antrix
Corporation Ltd. vs. Devas Multimedia P.
Ltd., (2014) 11 SCC 560.

40. Referring to Sections 12 and 13 of
the Act, respondents counsel submitted that
it is no doubt true that arbitrators may be
challenged on the ground of justifiable
doubts, independence, impartiality and not
possessing qualification. While Section 13
provides a party who intends to challenge
arbitrator on the grounds mentioned in
Section 12 within 15 days after becoming
aware.

41. He contended that RespondentRailways never challenged the arbitrator on
the
ground
of
justifiable
doubts,
independence,
impartiality
and
qualification and their case was not covered
under Sections 12 and 13 of the Act, which
is also reflected from the order of sole
arbitrator dated 20.10.2004 rejecting their
objection. The case of respondents is solely
against the composition of the Arbitral
Tribunal and objection was filed under
Section 16(2) of the Act.

42. According to him, the law
prevailing at the time when order under
Section 11 was passed that it was an
administrative order in terms of the law laid
down by the Apex Court in case of Konkan
Railway Corporation Ltd. (supra) and no
appeal would lie against such order and the
decision of S.B.P. and Co. (supra) came
subsequently thus, was not applicable at
that time and the Apex Court in the case of
Gokulananda Jena (supra) had already
held that all the grounds of attack can very
well be raised before the arbitrator as
alternative remedy is available under the
Act itself.

43. Reliance has also been been
placed on a decision of Division Bench of
this Court in case of Rail India Technical
and Economic Services Ltd. vs. Vidyawati
Construction Ltd., Writ Petition No. 16445
of 2001, decided on 24.05.2001, wherein it
was held that writ petition was not
maintainable as any objection to be raised
against the order of Chief Justice has to be
raised under Section 16 of the Act.

44. It was then contended that Section
15 of the Act of 1996 provides that where a
mandate of an arbitrator terminates, a
substitute arbitrator shall be appointed. In
the present case, as the presiding arbitrator
P.K. Sharma resigned/ withdrawn, a
substitute arbitrator could have been
appointed as per Section 15(2) of the Act
which was not done. Reliance has been
placed upon a decision in case of National
Highways
Authority
of
India
vs.
Bumihiway DDB Ltd. (JV) and others.,
(2006) 10 SCC 763.

45. The next point raised by learned
counsel was that provisions of Section 34
of the Act clearly provides the grounds for
setting aside Arbitral Award, wherein
Section 34(2)(a)(v) itself provides that
award may be set aside when the
composition of Arbitral Tribunal is not in
accordance with agreement. As a retired
Chief Justice was appointed as the sole
arbitrator
against
the
terms
of
the
236 INDIAN LAW REPORTS ALLAHABAD SERIES
agreement, so this case squarely fell within
the ambit of Section 34(2)(a)(v). As in the
application
filed
under
Section
34,
answering respondents had requested that
point raised as regards to the composition
of Arbitral Tribunal be decided first as a
preliminary
issue,
against
which
the
appellant had filed objections and the court
below after hearing the parties decided the
objection on 09.09.2013. Reliance has been
placed on decision of Apex Court in case of
Lion Engineering Consultants vs. State of
H.P. and others, 2018 (16) SCC 758.

46. I have heard learned counsel for
the parties and perused the material on
record.

47. Before proceeding to decide the
issue in hand, a glance of the General
Condition of Contract (GCC) is necessary,
which is extracted hereasunder:

"64. (1) Demand of arbitration. -
In the event of any dispute or difference
between the parties here to 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 a
reasonable time 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 90 days of his
presenting his final claim on disputed
matters, may demand in writing that the
dispute or difference be referred to
arbitration. Such demand for arbitration
shall specify the matters which are in
question dispute or difference and only
such dispute or difference of which the
demand has been made and no other shall
be referred to arbitration.

(2) Obligation during pendency
of arbitration.- Work under the contract
shall, unless otherwise directed by the
Engineer, continue during the arbitration
proceedings and no payment due to
payable by the Railway shall be withheld
on an account of such proceedings
provided however shall be open for
arbitrator or arbitrators to consider and
decide whether or not such work should
continue during arbitration proceedings.

(3) (a) Arbitration- Matter in
question dispute or difference to be
arbitrated upon shall be referred for
decision to:-

(I) A sole arbitrator who shall be
General Manager or a nominated by him in
that behalf in cases where the claim in
question is below Rs. 300000/- and in cases
where the issues involved not of a
complicated nature. The General Manager,
shall be the Sole Judge to decide whether
or
not
the
issues
involved
are
of
complicated nature.

(ii) Two Arbitrators, who shall be
Gazetted Railway Officers equal status to
be appointed in the manger laid down in
claim 64(3)(b) for all claims of Rs.
300000/- and above and for all claim
irrespective of the amount of value of such
claims if the issue involved are of a
complicated nature. The General Manager,
shall be the sole Judge to decide whether
the issues are of a complicated nature or
not. In the event, of the two Arbitrators
being divided in their opinion the matter
under dispute will be referred to an Umpire
to be appoint in the manner laid down in
sub clause 3(b) for his decision.

3. (b) For the purpose of
appointing two arbitrators as referred to in
sub clause (a) (ii) above the Railway will
send a panel of more then three names of
1 All. M/s Vidyawati Constructions Company Vs. Union of India
237
Gazetted Railway Officers of one or more
depart of the Railway of the Contractor,
who will be asked to suggested to the
General Manager one name out of the list
for
appointment
as
the
contractor/
nominee. The General Manager, while so
appointing the Contractor/ nominee will
also appoint a second arbitrator as the
Railway nominee either from the panel or
from outside the panel, ensuring that one of
the two arbitrators so nominated is
invariably from the accounts Department
before entering upon the reference the two
Arbitrator shall nominate an Umpire who
shall be a Gazetted Railway Officer whom
the case will be referred to in the event of
any difference between the two arbitrators.
Officers of the Junior Administrative grade
of the Accounts Department of the Railway
shall be considered as of equal status to the
officers in the intermediate administrative
grade of other department of the Railway
for
the
purpose
of
appointment
as
arbitrators.

3. (c) If the sole arbitrator
appointed under sub clause (a)(i) or one or
both the arbitrators appointed under sub
clause (b) above resigns his appointment/
resign their appointments or vacated his
office/ vacate their offices or is/ are unable
or unwilling to act for any reason
whatsoever or dies/ die. The General
Manager may appoint a new arbitrators to
act in his/their place in accordance with
the provisions of sub clause (a)(i) of sub
clause (b) above as the case may be. Such
arbitrator/ arbitrators, as the case may be
shall be entitled to proceed with the
reference from the stage at which it was left
by the previous arbitrator/ arbitrators.

3.
(d)
The
Arbitrator
or
Arbitrators or the Umpire shall have power
to call for such evidence by way of affidavit
or
otherwise
as
the
Arbitrator
or
Arbitrators or Umpire shall think proper,
and it shall be the duty of the parties here
to do or cause to be done all such things as
may be necessary to enable the Arbitrator
or Arbitrators or Umpire to make the
award without any delay.

3. (e) It will be no objection that
the
person
appointed
as
Arbitrator,
Arbitrators,
Umpire
are
Government
servants and that in the course of their
duties
as
Govt.
servants
they
have
expressed view on all or any of the matter
in dispute.

3. (f) Subject as aforesaid,
Arbitrator Act 1940 and the Rules there
under and any statutory modification
thereof shall apply to the Arbitration
proceedings under this clause."

48. From the perusal of Clause
64(3)(a)(ii),
two
arbitrators
who
are
Gazetted Railway Officers of equal status
are to be appointed for claims of Rs. 3 lacs
and above, and in case of difference of
opinion, the matter is to be referred to
Umpire in a manner laid down in sub
clause 3(b). As it is not in dispute that it
was on the application of the appellant filed
before this Court for appointment of
arbitrator in terms of the agreement under
Clause 64(3)(b) of General Condition of
Contract, that this Court on 26.08.1998
after hearing both the parties appointed
Smt. Tanuja Pandey, arbitrator from the
side of respondent-railway and Sri O.P.
Narang as arbitrator from the side of
appellant. The Court made clear that as per
Clause 64(3)(b), before entering into
arbitration, arbitrators were required to
nominate an Umpire.

49. As record reveals that though both
the arbitrators had agreed on the name of
one P.K. Sharma as an Umpire, but the
same was not conveyed to the appellant, as
such another arbitration application no. 47
238 INDIAN LAW REPORTS ALLAHABAD SERIES
of 1998 was preferred for the appointment
of Umpire. It was through counter affidavit
that Railways brought on record name of
Sri P.K.