Calcutta HC Stays Order For Formation Of “High-Level Enquiry Committee” To Probe Collusion Among Railway Officials In Obtaining Arbitral Award

The Calcutta High Court has partially stayed an order of a single-bench which directed the formation of a “multi-member high level enquiry committee” to look into and furnish a report on alleged collusion between railway officials in obtaining an arbitral award in favour of the South-Eastern Railways.

A division-bench of Justice IP Mukherji and Justice Biswaroop Chowdhury held that while points on maintainability of the appeal may remain open to be disputed, the operative portion of the single-judge’s order directing for an enquiry committee to furnish a report within three months, shall remain stayed. It held:

There is no doubt that a High Court enjoys unlimited power to do justice between the parties. This power includes in appropriate cases directing an enquiry or investigation into alleged fraudulent or wrongful acts by a specialised investigating agency. In a Section 36 application, unilaterally this kind of an order, without even a chance to the concerned persons to explain themselves, appears to be prima facie without jurisdiction.

The single-bench, in an application under Section 36 of the Arbitration & Conciliation Act, 1996, had also unconditionally stayed the aforesaid award on grounds of fraud and corruption which emanated out of the alleged collusion.

It shocks the conscience of this Court to observe that the Railways, [handling funds of the public exchequer] in defending a claim valued above Rs. 4000 crores, declined to present any witness and refrained from leading any evidence. This Court is at pains to re-emphasize that dishonesty is the cornerstone for fraud and that Railway’s [actions] do not fall short of actual and deliberate fraud and/or corruption which may have taken place in the present case, the single-bench had noted.

Appellants argued that in the impugned judgement “scurrilous remarks” had been made against the character, honesty and integrity of railway officials.

It was argued that the Court had no jurisdiction to make an enquiry into such areas while adjudicating over Section 36 application and that the order “expressing harsh views” was totally without jurisdiction and ought to be expunged from the record.

Counsel conceded that while the appeal against the order per se would lie before the Supreme Court, the appellants were presently aggrieved with the single-judges “highly prejudicial” observations on the character of railway officials.

Counsel for the respondents submitted that the single-judge had the power to express the aforesaid opinions and make such an enquiry and the present appeal was not maintainable.

In recording the submissions of the parties, the Court was of the prima facie opinion, that it must be ascertained whether the single-judge in dealing with a Section 36 application had the jurisdiction to make “this kind of order.”

While ascertaining that such a question could only be examined on hearing the appeal, the Court admitted the appeal, and accordingly stayed the single-judge’s direction for “constitution of a multi- member high-level enquiry committee to complete the enquiry and submit a report before it within three months.”

The Court further clarified that the Bench hearing the Section 34 application of the appellant for setting aside of the arbitral award, shall not be guided by any remarks made by the single-judge in the impugned judgement.

Case: Rashmi Metaliks Limited v Union of India & Anr.

Case No: APOT/308/2023 with AP/482/2021

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