Afcons Infrastructure Limited vs. Konkan Railway Corporation Limited (Bombay High Court); Arbitration Petition No. 10 OF 2019; Date: 02.06.2020
FACTS
On 21.05.2005, the Respondent floated a tender notice for construction of B.G. Single Line Tunnels on the Katra-Laole, section of Udhampur- Shrinagar- Baramulla Rail Link Project. Soon after, on 12.12.2005, a Contract bearing No. KR/PD/J&K/CONT/TUNNEL/T-38/47/2/2005 was executed between the Respondent and the Petitioner, whose bid was accepted.
The stipulated clause in the contract between the Petitioner and Respondent regarding arbitration are as under:
“Clause 46.0: The contractor shall sign the arbitration agreement along with the contract. The standing Arbitral Tribunal clauses shall in force from the date of signature of the Arbitration Agreement. The details pertaining to Arbitral Tribunal is included in the relevant annexure.”
Annexure P: Arbitral Tribunal reads as under:
“1.0 :- The Arbitration Tribunal (hereinafter referred to as the “TRIBUNAL”) shall be established on the date of signing of supplementary agreement.
1.1 :- The Arbitral Tribunal shall consist of a panel of three Gazetted Railway. Officers not below JA Grade, as the Arbitrators. For this purpose, the Corporation will send a panel of more than 3 names of Gazetted Railway Officers of one or more departments of the Railway, to the Contractor who will be asked to suggest to Managing Director KRCL, up to 2 names out of panel for appointment as Contractor’s nominee. The Managing Director/ KRCL shall appoint at least one out of them as the Contractor’s nominee and will, also simultaneously appoint the balance number of the Arbitrators either from the panel or from outside the panel, duly indicating the presiding Arbitrator from amongst the 3 Arbitrators so appointed. While nominating the Arbitrators, it will be necessary to ensure that one out of them is from the accounts department.
1.2 :- If the Contractor failed to select the members from the approved panel within 14 days of the date of signing of supplementary agreement, then upon the request of either or both parties, the Managing Director /KRCL shall select such member within 14 days of such request.
1.3 :- While nominating the panel of three arbitrators, it should be ensure that one member should be invariably from the Finance Department.
2.0 :- Reference to Arbitration:
2.1 :- Under clause 43 of the Standard General Conditions of Contract or Northern Railway, the Contractor has to prepare and furnish to the Engineer-in-charge and to Chief Engineer of Project, once in a month an account giving full and detailed particulars of all the claims for any additional expenses, to which the Contractors may consider himself entitled to an all extra and additional works ordered by the Engineer which he has executed during the preceding month. While submitting the said Monthly claim, if any dispute has arisen as regards execution of the works under the contract, the Contractor shall give full particulars of such disputes in the said submission.
2.2 :- The Contractor will submit a copy of the monthly claim to be furnished by the Contractor under Clause 43 of General Condition of Contract of Northern Railway, to Chief Engineer, along with particulars of any other disputes which may have arisen between the parties in respect of the execution of the Contract to the Arbitral Tribunal on a quarterly basis.
2.3 :- The parties while referring their claims to the TRIBUNAL shall submit all the relevant document in support of their claims and reasons for raising the dispute to the TRIBUNAL.
2.4 :- If the claims made by the Contractor in the said submission to Chief Engineer, is refuted or the payment is not made within one month from the date of the submission of the said monthly claim, a dispute would be deemed to have arisen between the parties. The Contractor, when the dispute arises or is deemed to have arisen, will communicate to the Arbitral Tribunal on a quarterly basis of the said refusal/ non -payment. The said communication will be the reference of the disputes to the arbitral tribunal appointed under the present agreement.”
The Petitioner notified the Respondent about the completion of the tunnel works as well as the expiration of the defect liability period through Letters dated 13.07.2016 and 17.08.2016. It also submitted full accounts of all claims to the Respondent vide a Letter dated 21.11.2016 and subsequently, Running Account Bills Nos. 112A, 112B and 112C accompanied by the Covering Letter dated 27.06.2017 were sent to the Respondent.
The Respondent disputed these claims vide its Letter dated 12.12.2017. On 04.01.2018, the Petitioner addressed a Letter to the Chief Engineer in accordance with the stipulation in the contract between itself and the Respondent. The Chief Engineer was called upon to give a final decision on the submitted claims within a period of 120 days from the date of receipt, failing which, the Petitioner would proceed with an appropriate dispute redressal. The Chief Engineer did not give his decision within the period and the Petitioner invoked arbitration vide its letter dated 02.07.2018.
In its Letter dated 02.07.2018, the Petitioner pointed out that the procedure laid down in the arbitration agreement for constitutional of Arbitral Tribunal was in contravention of Section 12 (5) read with the Fifth and Seventh Schedule of the Arbitration and Conciliation Act, 1996 (“the Act”) as amended by the Arbitration and Conciliation Amendment Act, 2015 (“the Amendment Act, 2015”). In lieu of the same, the Petitioner further stated the procedure prescribed under Section 11 (3) of the Act would govern the constitution of the Arbitral Tribunal and nominated an arbitrator, calling upon the Respondent to do the same within a period of 30 days.
In its Reply dated 11.07.2018 to the above mentioned Letter, the Respondent informed that the case regarding appointment of an arbitrator for the subject contract is subjudice before the Hon’ble High Court of Jammu and Kashmir.
The Petitioner issued a communication dated 03.08.2018 that the reference in its 02.07.2018 letter is a fresh distinct reference to arbitration, unrelated to the earlier reference dated 27.06.2012 and only the latter is pending before the Hon’ble High Court of Jammu and Kashmir.
The Respondent rejected the nominee arbitrator appointed by the Petitioner vide Letter dated 29.08.2018 and asserted that the Arbitral Tribunal was formed as per the contract between them and the same was under challenge at the instance of the Petitioner in the Hon’ble High Court of Jammu and Kashmir (Petition No. 28 of 2012 under Section 11(3), (4) and (6) of Jammu and Kashmir Arbitration Conciliation Act, 1997). The Respondent pointed out that the Petitioner had also filed an application under Section 9 of the Act in the Court of Principal District Judge, Ramban (No. 25-22/11/2012).
Therefore, the Petitioner approached the Bombay High Court for exercise of the jurisdiction under Section 11(6) of the Act as the Respondent has refused to nominate its arbitrator.
