Civil Appeal No. 8860 of 2014 (Arising out of Special Leave Petition (Civil) No. 20183 of 2012). Case: Union of India (UOI) Vs U.P. State Bridge Corporation Ltd.. Supreme Court (India)

Case NumberCivil Appeal No. 8860 of 2014 (Arising out of Special Leave Petition (Civil) No. 20183 of 2012)
CounselFor Appellant: Tushar Mehta, ASG, Madhurima Mridul, Honey Kumari, S.N. Terdal and B. Krishna Prasad, Advs. and For Respondents: Vivek Singh and Lakshmi Raman Singh, Advs.
JudgesJasti Chelameswar and Arjan Kumar Sikri, JJ.
IssueArbitration and Conciliation Act, 1996 - Sections 1, 11, 11(6), 11(8), 12(3), 13, 13(3), 14, 14(2), 15, 33, 34(4); English Arbitration Act, 1996; Constitution of India - Article 136
Judgement DateSeptember 16, 2014
CourtSupreme Court (India)


Arjan Kumar Sikri, J.

1. Leave granted.

2. Counsel for the parties have been heard in detail in this appeal. In order to determine the controversy that is raised in this appeal, which is filed by the Union of India, challenging the decision dated 03.08.2011 of the High Court, minimal facts which require a mention, are the following:

The Appellant had entered into an agreement with the Respondent vide which contract for construction of guide bunds, foundation and substructure of Rail Bridge across river Gangaes near Digha Ghat, Patna and the said agreement contained various terms and conditions. Clause 64(1)(ii) of the General Condition of the Contract 2001 (for short 'the GCC'), contained an arbitration clause that is provided for deciding the dispute between the parties through arbitration by an arbitral tribunal to be constituted in terms of the said agreement.

3. Disputes arose between the parties with respect to the said contract and on the request of the Respondent an arbitral tribunal of the persons was constituted in the year 2007, in which all the members were Railway authorities. It is a matter of regret that inspite of expiry of four years, the said tribunal did not complete the arbitral proceeding and the matter kept hanging due to transfers/retirement/adjournments etc.

4. The Respondent felt exasperated due to the prolongation of the matter before the arbitral tribunal and chose to file Request Case No. 10/2010. Even at the time of filing of that case, there was a vacancy in the Arbitral Tribunal. When this case was taken up by the High Court on 09.03.2011, by that time, the Appellant had filled up the said vacancy. Taking note thereof, the said petition was disposed of by the High Court vide order dated 09.03.2011 giving the last chance to the Arbitral Tribunal to complete the arbitral proceeding within a period of three months with direction to hold regular sittings at Patna from the date of receipt/production of a copy of the said order. It was also stated in the order dated 09.03.2011 that if arbitration proceedings are not completed within the period fixed by the Court, the Respondent would be at liberty to approach the Court again and the Court would be constrained to pass appropriate order in accordance with the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act').

5. The Arbitral Tribunal was made aware of the said order as the copy thereof was produced before it on 25.03.2011. This means that it was supposed to complete the case by 25.06.2011. However, even within the said allotted time, the proceedings were not brought to an end and, therefore, the Respondent filed Request Case No. 3/2011 dated 29.06.2011.

6. The Appellant contested the aforesaid petition of the Respondent on various grounds and also gave its own reasons because of which the Arbitral Tribunal would not complete the proceedings. It was also pointed out that though the Arbitral Tribunal was ready to hear the case of the parties and decide it finally on 22.07.2011, the Respondent had informed the Tribunal of the filing of the said petition which led to the adjournment of the matter by the Tribunal.

7. The High Court took note of the various dates of hearings that are fixed by the Tribunal between 25.03.2011 and 25.06.2011 and came to the conclusion that delay caused in the arbitral proceedings was intentional. So much so, the members of the Arbitral Tribunal were continuing their dilatory tactics in deciding the matter before it since 2007 and four years had passed in the process. Tribunal had faltered even after giving specific directions to conclude the matter within three months and long adjournments were granted thereby violating the specific directions of the High Court. Terming this attitude of the members of the Tribunal as negligent on their part towards their duties with no sanctity for any law or for the orders of the High Court, the High Court allowed the petition of the Respondent herein and set aside the mandate of the Tribunal with the appointment of sole arbitrator by the Court itself.

8. In the instant appeal, challenge is made to the aforesaid judgment of the High Court with the plea that it was not open to the High Court to appoint the sole arbitrator as it was not empowered to constitute Arbitral Tribunal of its own and, that too, contrary to the arbitration clause. Mr. Tushar Mehta, learned ASG appearing for the Appellant has made a vehement submission, in this behalf, that no such power is vested in the High Court under the Act. His submission was that as per the scheme of the Act even if the mandate of the Arbitral Tribunal was to be terminated, fresh Tribunal could be constituted only in accordance with the arbitration agreement. It was thus argued that the High Court could have, at the most, directed the Appellant to constitute another Arbitral Tribunal in accordance with Clause 64 of the GCC.

9. Learned Counsel for the Respondent, on the other hand, made an effervasive attempt to justify the decision of the High Court with emphatic plea that when the very purpose of arbitration is frustrated by the members of the Tribunal who, were dragging the proceedings, the Court was not powerless to travel beyond the framework of Clause 64 of the GCC and appoint a retired Chief Justice as the arbitrator. He referred to the specific findings of the High Court in the impugned judgment in this behalf, inter alia, observing as under:

10. The entire facts and circumstances mentioned above depict that the delay caused in the arbitral proceedings was intentional. The members of the arbitral tribunal continued their dilatory tactics in deciding the arbitral proceedings since 2007 and when after about four years specific directions were given by this Court vide order dated 09.03.2011 passed in Request Case No. 10 of 2011 the said authorities did not flinch for a moment in disobeying the specific direction of this Court and continued their dilatory attitude although the Petitioner had produced the said order of this Court before the arbitral tribunal on 25.03.2011 and filed his pleadings and reply by 21.04.2011. Thereafter, long adjournments were granted in the arbitral proceeding violating the specific directions of this Court for holding regular sittings at Patna and even after the long date fixed by the arbitral tribunal, sometimes Respondent-authorities took long adjournments to file their counter reply and most of the times one or the other member of the arbitral tribunal were not available and they saw to it that the time of three months granted by this Court vide order dated 09.03.2011 is expired. This attitude of the arbitral tribunal clearly amounts to disobedience of the specific directions of this Court vide order dated 09.03.2011 passed in Request Case No. 10 of 2010.

11. All these facts also disclose a very sorry state of affairs...

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