GCC Clause For Appointment OF Three Gazetted Railway Officers Panel For Arbitration Violates Section 12(5) A&C: Calcutta High Court

Brief Facts:

The matter revolved around a Memorandum of Understanding (MoU) executed on 4th August 2018, followed by a Letter of Acceptance issued by the Respondent, Metro Railway, on 7th December 2018. Pursuant to this agreement, the Petitioner was entrusted with the execution of civil engineering works spanning from Noapara to the RCC ramp of the Airport Circular Railway track. The terms of the agreement were governed by the General Conditions of Contract. The Petitioner contended that the termination of the agreement by the Respondent was unlawful, asserting that it occurred within the extension period granted by the Respondent. Seeking redress, the Petitioner approached the Rajarhat Commercial Court for interim protection, successfully securing a restraint preventing the respondent from encashing provided bank guarantees. The Petitioner then initiated arbitration proceedings, invoking Clause 64 of the GCC via a notice, with the Respondent to the notice. The Petitioner approached the Calcutta High Court for appointment of the arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).

However, the resolution of the dispute encountered a preliminary objection raised by the Respondent. It is argued that the Petitioner was bound by Clause 64(3)(a)(ii) of the GCC, which pertained to the appointment of an arbitrator for cases exceeding Rs. 25 lakhs. This clause envisioned a panel of three gazetted railway officers, not below a specified rank. The Respondent insisted that compliance with Clause 64(3)(a)(ii), including an agreement to the specified panel, was mandatory for the Petitioner.

Observations by the High Court:

The High Court noted that the Clause 64(3)(a)(ii) of the GCC mandated an agreement to arbitration under three gazetted railway officers, subject to a specified rank. The High Court noted that Section 12(5) of the Arbitration Act, in conjunction with the Fifth and Seventh Schedules, guards against the appointment of arbitrators with potential conflicts of interest. It highlighted Entry-1 of the Seventh Schedule, which specifically bars arbitrators with relationships or conflicts with the parties, counsel, or if the arbitrator has a business relationship with a party.

Considering the unilaterality of Clause 64(3)(a)(ii) of the GCC and the Petitioner stance against waiving Section 12(5) of the 1996 Act, the High Court rejected the arguments raised by the Respondents. Consequently, the Petition was allowed and disposed of by appointing Mr. Rabindranath Samanta and Mr. Siddhartha Roy Chowdhury, former Judges of the High Court, as two arbitrators, with Mr. Bikash Ranjan Bhattacharya, senior counsel, designated as the presiding arbitrator.

Case Title: RKD Niraj JV vs The Union Of India.

Case Number: AP-COM/54/2024.

Advocate for the Petitioner: Mr. Pratip Mukherjee, Adv. Mr. Ritoban Sarkar, Adv. Mr. Surojit Basu, Adv. Mr. Raju Mondal, Adv.

Advocate for the Respondent: Mr. Rudraman Bhattacharya, Adv. Mr. Sailendra Kumar Tiwari, Adv.

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