Appointment Of Serving Or Retired Officials Of Railways As Arbitrators Can’t Be Made In View Of Section 12(5) & 7th Schedule Of A&C Act: Gauhati HC

The Gauhati High Court held that the appointment of serving or retired officials of Railways as Arbitrators cannot be made in view of Section 12(5) and 7th Schedule of the Arbitration and Conciliation Act, 1996 (A&C Act).

The Court was dealing with an arbitration petition for the appointment of an Arbitrator under Section 11(6) of the A&C Act.

A Single Bench of Justice Michael Zothankhuma observed, “As the earliest judgment of the Supreme Court on this issue after the 2015 amendment is TRF Limited (supra), this Court holds that the making of the panel/appointment of the serving/retired officials of the Railways, as members of the Arbitral Tribunal, is hit by Section 12(5) and the 7th Schedule of the 1996 Act, as their neutrality are in question. When the General Manager, N.F. Railway himself cannot be made an Arbitrator in view of Section 12(5) and the 7th Schedule to the 1996 Act, the panel/appointment of serving/retired officials of the Railways as Arbitrators cannot be made by the said official.”

Advocate A. Biswas appeared for the petitioner while CGC B. Chakraborty appeared for the respondents.

Facts of the Case -

The petitioner, a partnership firm entered into a contract agreement with the respondents to build and operate a 25,000 MT Capacity godown with private Siding under the Private Entrepreneurship Godown Scheme of the FCI. Consequently, contract agreement was executed between the parties. Disputes having arisen between the parties, the petitioner filed the application for appointment of an Arbitrator, as Clause 34 of the contract agreement provided for resolution of disputes between the parties by way of arbitration by constituting an Arbitral Tribunal, made up of members to be appointed by the General Manager, Northeast Frontier Railway.

The petitioner’s counsel submitted that though Clause 34 of the agreement provides that the dispute between the parties is to be referred to a 3-member Arbitral Tribunal to be constituted by the General Manager, N.F. Railway, the Arbitrator would have to be appointed by the High Court and not by the General Manager, N.F. Railway. He submitted that this is because the said General Manager cannot be appointed as an Arbitrator as he has interest in the dispute and is not a neutral person. Therefore, the issue to be decided was with regard to whether the General Manager, N.F. Railway could appoint 3 officers (retired/serving), as members of the Arbitral Tribunal in terms of Clause 34 of the contract agreement.

The High Court in the above context of the case said, “In the present case, there was a request by the Railways made to the petitioner, vide letter dated 27.06.2023, to waive the applicability of Section 12(5) of the 1996 Act. The same was however refused by the petitioner vide letter dated 03.07.2023. The Managing Director, N.F. Railway has further made a panel of names for appointment as Arbitrators. The above being said, the request to refer the dispute to arbitration has been made subsequent to the 2015 amendment and as such, this Court is of the view that the earliest judgment of the Supreme Court for appointment of an Arbitrator in terms of Section 11 and the amended Section 12 of the 1996 Act would have to be applied in this case.”

The Court, by applying the judgment of the Supreme Court in the case of Union Territory of Ladakh & Ors v. Jammu and Kashmir National Conference & Anr. [2023 Legal Eagle (SC) 891], noted that it is bound to follow the earlier judgment of the Supreme Court with regard to whether the Managing Director of N.F. Railway could have constituted the members of the Arbitral Tribunal in terms of Clause 34 of the contract agreement or in terms of Section 12(5) and the 7th Schedule of the 1996 Act.

“In view of the reasons stated above, the making of the panel/appointment of the members of the Arbitral Tribunal by the respondents is set aside. Consequently, in terms of Section 11(6) of the 1996 Act, this Court appoints Sri Mrinmoy Kumar Bhattacharjee, retired District & Sessions Judge as Arbitrator, who will decide the disputes that has arisen between the parties. The parties shall appear before the said Arbitrator within a period of 3(three) weeks from today. The issue as to whether the Arbitrator is handicapped by the provisions of Section 12(5) and the 7th Schedule of the 1996 Act is left at the hands of the parties, which doubt, if any, should be cleared at the earliest instance, in terms of Section 12 of the 1996 Act”, it directed.

Accordingly, the High Court disposed of the arbitration petition.

Cause Title- M/s Barpeta Agro Infra v. The Union of India & Ors.

Appearance:

Petitioner: Advocates A. Biswas and A. Banerjee.

Respondents: CGC B. Chakraborty and DY.S.G.I.

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