G H CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATIONversusM/S ECI-SPIC-SMO-MCML (JV)JOINT VENTURE COMPANY

1234                      [2019]
               SUPREME COURT     16 S.C.R. 1234
                              REPORTS                    [2019] 16 S.C.R.


 A                    CENTRAL ORGANISATION FOR
                       RAILWAY ELECTRIFICATION
                                       v.
                       M/S ECI-SPIC-SMO-MCML (JV)
                       A JOINT VENTURE COMPANY
 B
                      (Civil Appeal Nos. 9486-9487 of 2019)
                             DECEMBER 17, 2019
                  [R. BANUMATHI, A. S. BOPANNA AND
                         HRISHIKESH ROY, JJ.]
 C
             Arbitration and Conciliation Act, 1996:
             s.11(6) – Application under – Seeking appointment of sole
       arbitrator – High Court appointed a sole Arbitrator – Appeal to
       Supreme Court – Held: High Court was not justified in appointing
       an independent sole arbitrator ignoring Clauses 64(3)(a)(ii) and
 D
       64(3)(b) of General Conditions of Contract whereby it was
       specifically provided that Arbitral Tribunal would consist of three
       arbitrators from out of the panel of serving or retired Railway
       Officers – The appointment of the Arbitrators should have been
       in terms of the agreement between the parties.
 E           Allowing the appeals, the Court
             HELD: 1.1 Clause 64 of the General Conditions of
       Contract (GCC) deals with the procedure for resolution of the
       disputes and provides for “Demand for arbitration” and
       appointment of the arbitrators. After coming into force of
 F     Arbitration and Conciliation (Amendment) Act, 2015, the
       Government of India, Ministry of Railways made a modification
       to Clause 64 of the General Conditions of Contract and the
       Railway Board issued a notification dated 16.11.2016 in this
       regard. The modified Clause 64(3)(a)(i) (where applicability of
 G     Section 12(5) of the Arbitration and Conciliation Act, 1996 has
       been waived off inter alia provided that in case where the total
       value of all claims in question added together does not exceed
       rupees one crore, the arbitral tribunal shall consist of a sole
       arbitrator who shall be a Gazetted Officer of Railways not below
       JA Grade nominated by the General Manager. In terms of Clause
 H
                                      1234
  CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                        1235
             ECI-SPIC-SMO-MCML (JV)

64(3)(a)(i), the sole arbitrator shall be appointed within sixty days   A
from the day when a written and valid demand for arbitration is
received by the General Manager. In the present case, since
the value of the work contract is worth more than Rs.165 crores,
Clause 64(3)(a)(i) is not applicable. Clause 64(3)(a)(ii) of GCC
deals with cases not covered by Clause 64(3)(a)(i) where
                                                                        B
applicability of Section 12(5) of the Act has been waived off.
[Paras 15-17] [1245-A-G-H; 1246-A-B]
      1.2 Clause 64(3)(b) of GCC deals with appointment of
arbitrator where applicability of Section 12(5) of the Act has not
been waived off. The modified Clause 64(3)(b) inter alia provided
that the arbitral tribunal shall consist of a panel of three retired    C
railway officers not below the rank of SAO officer as arbitrator.
For this purpose, the Railway will send a panel of at least four
names of retired railway officer(s) empanelled. The contractor
will be asked to suggest to the General Manager at least two
names out of the panel for appointment as the contractor’s              D
nominee and the General Manager shall appoint at least one out
of them as the contractor’s nominee. The General Manager will
also simultaneously appoint the balance number of arbitrators
from the panel or from outside the panel. [Para 18] [1246-F-H]
       1.3 After coming into force of the Arbitration and               E
Conciliation (Amendment) Act, 2015, when Clause 64 of the
General Conditions of Contract was modified inter alia providing
for constitution of Arbitral Tribunal consisting of three arbitrators
either serving or retired railway officers, the High Court is not
justified in appointing an independent sole arbitrator without
resorting to the procedure for appointment of the arbitrator as         F
prescribed under Clause 64(3)(b) of the General Conditions of
Contract. [Para 19] [1247-E-F]
      1.4 Even in the application filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996, the respondent prayed
for appointment of a sole arbitrator in terms of Clause 1.2.54(b)(i)    G
of the Tender Agreement/Clause 64 of the General Conditions
of Contract for adjudicating the disputes which have arisen
between the parties. The respondent itself sought for
appointment of arbitrator in terms of Clause 64 of the General
Conditions of Contract. As the value of the work contract was           H
1236           SUPREME COURT REPORTS                     [2019] 16 S.C.R.


 A     worth more than Rs.165 crores, the dispute can be resolved only
       by a panel of three arbitrators in terms of Clause 64(3)(b) of the
       General Conditions of Contract. The respondent was not right
       in seeking for appointment of a sole arbitrator in terms of Clause
       1.2.54(b)(i) of the Tender Agreement/Clause 64 of the General
       Conditions of Contract. [Para 20] [1247-G-H; 1248-A]
 B
             Union of India v. Parmar Construction Company
             (2019) SCC Online SC 442 ; Union of India v.
             Pradeep Vinod Construction Company (2019) SCC
             Online SC 1467 ; Government of Haryana PWD
             Haryana (B and R) Branch v. G.F. Toll Road Private
 C
             Limited and Others (2019) 3 SCC 505 : [2019] 1 SCR
             270 – relied on.
             Voestalpine Schienen Gmbh v. Delhi Metro Rail
             Corporation Limited (2017) 4 SCC 665 ; Bharat
             Broadband Network Limited v. United Telecoms Limited
 D
             (2019) 5 SCC 755 – referred to.
             2. The appellant has forwarded a list of four retired railway
       officers on its panel thereby giving a wide choice to the
       respondent to suggest any two names to be nominated as
       arbitrators out of which, one will be nominated as the arbitrator
 E
       representing the respondent-Contractor. The very reason for
       empanelling the retired railway officers is to ensure that the
       technical aspects of the dispute are suitably resolved by utilising
       their expertise when they act as arbitrators. Merely because the
       panel of the arbitrators are the retired employees who have
 F     worked in the Railways, it does not make them ineligible to act
       as the arbitrators. [Para 27] [1251-A-B]
             Voestalpine Schienen Gmbh v. Delhi Metro Rail
             Corporation Limited (2017) 4 SCC 665; Bharat
             Broadband Network Limited v. United Telecoms Limited
 G           (2019) 5 SCC 755 – relied on.
             3. By the letter dated 26.09.2018, the respondent
       conveyed their disagreement in waiving the applicability of
       Section 12(5) of the Amendment Act, 2015. By the letter dated
       25.10.2018, in terms of Clause 64(3)(b) of GCC (where
 H     applicability of Section 12(5) has not been waived off) the
  CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                      1237
             ECI-SPIC-SMO-MCML (JV)

appellant has nominated a panel of four retired railway officers      A
to act as arbitrators and requested the respondent to select any
two from the list and communicate to the appellant within thirty
days from the date of the letter for formation of Arbitration
Tribunal. The respondent has neither sent its reply nor selected
two names from the list and replied to the appellant. Without
                                                                      B
responding to the appellant, the respondent has filed petition
under Section 11(6) of the Arbitration and Conciliation Act before
the High Court on 17.12.2018. When the respondent has not
sent any reply to the communication dated 25.10.2018, the
respondent is not justified in contending that the appointment
of Arbitral Tribunal has not been made before filing of the           C
application under Section 11 of the Act and that the right of the
appellant to constitute Arbitral Tribunal is extinguished on filing
of the application under Section 11(6) of the Act. [Para 30] [1253-
B-E]
      Punj Lloyd Ltd. v. Petronet MHB Ltd. (2006) 2 SCC               D
      638 ; Union of India v. Bharat Battery Manufacturing
      Co. (P) Ltd. (2007) 7 SCC 684 : [2007] 8 SCR 993 –
      referred to.
       4. In the present matter, after the respondent had sent the
letter dated 27.07.2018 calling upon the appellant to constitute      E
Arbitral Tribunal, the appellant sent the communication dated
24.09.2018 nominating the panel of serving officers of Junior
Administrative Grade to act as arbitrators and asked the
respondent to select any two from the list and communicate to
the office of the General Manager. By the letter dated
26.09.2018, the respondent conveyed their disagreement in             F
waiving the applicability of Section 12(5) of the Amendment Act,
2015. In response to the respondent’s letter dated 26.09.2018,
the appellant has sent a panel of four retired Railway Officers
to act as arbitrators giving the details of those retired officers
and requesting the respondent to select any two from the list         G
and communicate to the office of the General Manager. Since
the respondent has been given the power to select two names
from out of the four names of the panel, the power of the
appellant nominating its arbitrator gets counter-balanced by the
power of choice given to the respondent. Thus, the power of the
General Manager to nominate the arbitrator is counter-balanced        H
1238            SUPREME COURT REPORTS                     [2019] 16 S.C.R.


 A     by the power of the respondent to select any of the two
       nominees from out of the four names suggested from the panel
       of the retired officers. In view of the modified Clauses 64(3)(a)(ii)
       and 64(3) (b) of GCC, it cannot therefore be said that the General
       Manager has become ineligible to act as the arbitrator. [Para 37]
       [1257-C-F]
 B
             TRF Limited v. Energo Engineering Projects Limited
             (2017) 8 SCC 377 : [2017] 7 SCR 409 – held
             inapplicable.
             TRF Limited, in Perkins Eastman Architects DPC and
 C           another v. HSCC (India) Limited (2019) SCC Online
             SC 1517 – referred to.
             5. There is an express provision in the modified clauses
       of General Conditions of Contract, as per Clauses 64(3)(a)(ii)
       and 64(3)(b), the Arbitral Tribunal shall consist of a panel of three
       Gazetted Railway Officers [Clause 64(3)(a)(ii)] and three retired
 D     Railway Officers retired not below the rank of Senior
       Administrative Grade Officers [Clause 64(3)(b)]. When the
       agreement specifically provides for appointment of Arbitral
       Tribunal consisting of three arbitrators from out of the panel
       serving or retired Railway Officers, the appointment of the
 E     arbitrators should be in terms of the agreement as agreed by
       the parties. That being the conditions in the agreement between
       the parties and the General Conditions of the Contract, the High
       Court was not justified in appointing an independent sole
       arbitrator ignoring Clauses 64(3)(a)(ii) and 64(3)(b) of the
       General Conditions of Contract. [Para 38] [1257-G-H; 1258-A-
 F     B]
             Union of India and Another v. M.P. Gupta (2004) 10
             SCC 504 ; Union of India and Another v. V.S.
             Engineering (P) Ltd. (2006) 13 SCC 240 : [2006] 9
             Suppl. SCR 125 – relied on.
 G                            Case Law Reference
       (2017) 4 SCC 665                  referred to          Para 12
       (2019) 5 SCC 755                  referred to          Para 13
       (2004) 10 SCC 504                 relied on            Para 21
 H     [2006] 9 Suppl. SCR 125           relied on            Para 21
  CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                             1239
             ECI-SPIC-SMO-MCML (JV)

(2017) 4 SCC 665                     relied on             Para 25           A
[2019] 1 SCR 270                     relied on             Para 26
(2006) 2 SCC 638                     referred to           Para 28
[2007] 8 SCR 993                     referred to           Para 29
[2017] 7 SCR 409                     held inapplicable     Para 31           B
      CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 9486-
9487 of 2019.
       From the Judgment and Order dated 03.01.2019 & 29.03.2019
of the High Court of Court of Judicature at Allahabad in Arbitration
                                                                             C
Application No. 151 of 2018
      A.N.S. Nadkarni, ASG, Ms. Rashmi Malhotra, Jitin Singhal,
S.S. Rebello, Ms. Priyanka Dass, Ms. Arzu Paul, Neeleshwar Pavani,
Ms. Shivikka Agarwal, Ms. Riya Soni, Sumit Upadhyay, Raj Bahadur
Yadav, Advs. for the Appellant.
                                                                             D
      Sridhar Potaraju, Ms. Shweta Parihar, Ms. G. Usha Sri, Vishnu
Thulasi Menon, Advs. for the Respondent.
      The Judgment of the Court was delivered by
      R. BANUMATHI, J.
                                                                             E
      1. Leave granted.
       2. These appeals have been preferred against the impugned
orders dated 03.01.2019 and 29.03.2019 passed by the High Court of
Judicature at Allahabad in Arbitration Application No.151 of 2018 in
and by which the High Court rejected the contention of the appellant         F
that the arbitrator is to be appointed as per General Conditions 64
(3)(a)(ii) and 64 (3)(b) of the Contract and appointed Shri Justice Rajesh
Dayal Khare as the sole arbitrator for resolving the dispute between
the parties.
       3. The appellant awarded work contract of Rs.165,67,98,570/-
                                                                             G
to the respondent-Company by an agreement dated 20.09.2010 which
contains the arbitration clause. Subsequently, after coming into force
of Arbitration and Conciliation (Amendment) Act, 2015 (w.e.f.
23.10.2015), the Government of India, Ministry of Railways made a
modification to Clause 64 of the General Conditions of Contract and
issued a notification dated 16.11.2016 for implementation of modification.   H
1240             SUPREME COURT REPORTS                          [2019] 16 S.C.R.


 A     The modified Clause 64(3)(a)(ii) (where applicability of Section 12(5)
       has been waived off) inter alia provided that in cases where the total
       value of all claims exceeds Rs. 1 crore, the Arbitral Tribunal shall consist
       of a panel of three gazetted Railway Officers not below JA (Junior
       Administrative) Grade or two Railway Gazetted Officers not below JA
       Grade and a retired Railway Officer, retired not below the rank of Senior
 B
       Administrative (SA) Grade officer as arbitrators. The procedure for
       constitution of the Arbitral Tribunal is provided thereon. Clause 64(3)(b)
       deals with the appointment of arbitrator where applicability of Section
       12(5) of the Arbitration and Conciliation Act has not been waived off.
       Clause 64(3)(b) stipulates that the Arbitral Tribunal shall consist of a
 C     panel of three retired railway officers not below the rank of Senior
       Administrative Officer as the arbitrators as per the procedure indicated
       thereon.
              4. Since the respondent did not complete the work under the
       contract within the prescribed period, on 18.10.2017, the appellant issued
 D     “Seven days” notice under Clause 62 of the General Conditions of
       Contract to the respondent. Thereafter on 27.10.2017, the appellant
       issued a “48 hours’ notice” to the respondent calling upon the respondent
       to make good the progress of work, failing which the contract will stand
       terminated. Since the respondent did not make adequate progress in
 E     the work, on 01.11.2017, the contract was terminated as per Clause
       62 of the General Conditions of the Contract. The respondent was
       also informed that their security deposit has been forfeited and the
       performance guarantee submitted by it shall also be encashed.
              5. The respondent filed a Petition No.760 of 2017 before the High
 F     Court challenging the termination of the contract which came to be
       dismissed by the High Court vide order dated 28.11.2017 and the High
       Court directed the respondent to avail the alternative remedy by invoking
       arbitration clause. The respondent vide its letter dated 27.07.2018
       requested the appellant for appointment of an Arbitral Tribunal for
       resolving the disputes between the parties and settle the claims value
 G     of Rs.73.35 crores. In reply dated 24.09.2018, the appellant sent a list
       of four serving Railway Electrification Officers of JA Grade to act as
       arbitrators. The respondent was asked to select any two and
       communicate to the appellant for formation of the arbitration tribunal
       panel. Vide letter dated 25.10.2018, the respondent was sent a list of
 H     another panel comprising four retired Railway officers. In terms of
  CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                               1241
     ECI-SPIC-SMO-MCML (JV) [R. BANUMATHI, J.]

Clause 63(3)(b) of Railway’s General Conditions of Contract, the               A
respondent was asked to select any two from this list and communicate
them to the appellant within thirty days for constitution of the arbitration
tribunal.
       6. The respondent did not send a reply to the above letters of
the appellant; but filed Arbitration Petition No. 151 of 2018 before High      B
Court under Section 11(6) of the Arbitration and Conciliation Act seeking
appointment of a sole arbitrator for resolution of differences. In its
petition, the respondent suggested the name of one Shri Ashwani Kumar
Kapoor, retired member Electrical from Railway Board to be appointed
as an arbitrator in the matter. According to the respondent, there exists
a valid and binding arbitration clause between the parties being clause        C
1.2.54 of Part I of Chapter 2 and also 64 of the General Conditions of
Contract; but since no neutral arbitrator is contemplated to be appointed
in the General Conditions of Contract, the respondent has no other
recourse except by filing the petition under Section 11(6) of the
Arbitration and Conciliation Act, 1996.                                        D
        7. The High Court vide the impugned order dated 03.01.2019
rejected the argument of the appellant that the arbitrator ought to be
appointed only from the panel of arbitrators in terms of General
Conditions of Contract. The High Court observed that the powers of
the Court to appoint arbitrator are independent of the contract between        E
the parties and no fetters could be attached to the powers of the court.
With those findings, the High Court appointed Shri Rajesh Dayal Khare,
a retired judge of the Allahabad High Court as the sole arbitrator subject
to his consent, under Section 11(8) of the Arbitration and Conciliation
Act. Subsequently, vide order dated 29.03.2019, the High Court noted
the consent of the arbitrator appointed by the court and directed the          F
Arbitrator to proceed with the arbitration proceedings. Being aggrieved,
the appellant has preferred these appeals.
      8. Mr. A.N.S. Nadkarni, learned Additional Solicitor General
(ASG) appearing for the appellant submitted that in terms of Clause
64(3)(a)(ii) of the General Conditions of Contract (where applicability        G
of Section12(5) of the Amended Act has been waived off), the Arbitral
Tribunal shall consist of a panel of three Gazetted Railway Officers
not below Junior Administrative Grade or two Railway Gazetted
Officers not below Junior Administrative Grade and a retired Railway
Officer retired not below the rank of Senior Administrative Grade              H
1242            SUPREME COURT REPORTS                         [2019] 16 S.C.R.


 A     Officer as the arbitrators. It was submitted that as per Clause 64(3)(b)
       of the General Conditions of Contract (where applicability of Section
       12(5) of the Act has not been waived off), the Arbitral Tribunal shall
       consist of a panel of three retired Railway Officers retired not below
       the rank of Senior Administrative Grade Officers as the arbitrators after
       compliance of the procedure stipulated in Clause 64(3)(b). It was
 B
       contended that when the agreement and the General Conditions of
       Contract provided for appointment of Arbitral Tribunal consisting of three
       arbitrators from the Panel, the High Court erred in appointing the sole
       arbitrator outside the panel of the arbitrators. The learned ASG further
       submitted that the appointment of an independent arbitrator is in
 C     contravention of Clauses 64(3)(a)(i), 64(3)(a)(ii) and 64(3)(b) of the
       General Conditions of Contract and the impugned judgment appointing
       a former Judge of the High Court of Allahabad is not sustainable. In
       support of the contention, the learned ASG inter alia placed reliance
       upon Union of India v. Parmar Construction Company (2019) SCC
       Online SC 442 and Union of India v. Pradeep Vinod Construction
 D
       Company (2019) SCC Online SC 1467 and other judgments.
              9. Refuting the above contention, Mr. Sridhar Potaraju, learned
       counsel appearing for the respondent submitted that the Arbitration and
       Conciliation Act, 1996 was amended with effect from 23.10.2015 and
       in the present case, the demand for arbitration for resolution of disputes
 E     was made by the respondent on 27.07.2018 and hence, the provisions
       of the amended Act applies to the present case. It was submitted that
       by virtue of the provisions of Section 12(5) read with Schedule VII to
       the Arbitration and Conciliation Act, 1996, the panel of arbitrators
       proposed by the appellant vide letter dated 24.09.2018 were statutorily
       made ineligible to be appointed as arbitrators since they were either
 F
       serving or retired employees of the appellant. It was contended that
       as per the provisions of the Amendment Act, 2015, all employees present
       or past are statutorily made ineligibile for appointment as arbitrators.
       The learned counsel further submitted that when the General Manager
       himself being ineligible to be appointed as an arbitrator under Section
 G     12(5) read with Schedule VII of the Act, the General Manager cannot
       nominate any of the persons to be arbitrator. The learned counsel for
       the respondent inter alia placed reliance upon Voestalpine Schienen
       Gmbh v. Delhi Metro Rail Corporation Limited (2017) 4 SCC 665,
       TRF Limited v. Energo Engineering Projects Limited (2017) 8 SCC
       377 and number of other judgments which would be referred to at the
 H     appropriate place.
  CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                            1243
     ECI-SPIC-SMO-MCML (JV) [R. BANUMATHI, J.]

      10. We have carefully considered the submissions and perused          A
the impugned judgment and materials on record. The point falling for
consideration is whether the High Court was right in appointing an
independent arbitrator in contravention of the Clauses 64(3)(a)(ii) and
64(3)(b) of the General Conditions of Contract.
      Appointment of an independent arbitrator without                      B
      reference to the Clauses of General Conditions of
      Contract (GCC) – Whether correct?
       11. Learned counsel for the respondent submitted that being
serving employees of the appellant, the panel of arbitrators proposed
by the appellant vide letter dated 24.09.2018 were not eligible to be       C
appointed as arbitrators in view of provisions of Section 12(5) read with
Schedule VII of the Arbitration and Conciliation Act. Learned counsel
further submitted that the panel of arbitrators proposed by the appellant
vide letter dated 25.10.2018 comprising of retired employees of the
appellant were also not eligible to be appointed as arbitrators under
Section 12(5) read with Schedule VII of the Act as the employees of         D
the appellant are expressly made ineligible.
      12. In support of the above contention, learned counsel for the
respondent has placed reliance upon Voestalpine Schienen Gmbh v.
Delhi Metro Rail Corporation Limited (2017) 4 SCC 665 wherein,
the Supreme Court held as under:-                                           E

      “24. …….The amended provision puts an embargo on a person
      to act as an arbitrator, who is the employee of the party to the
      dispute. It also deprives a person to act as an arbitrator if he
      had been the consultant or the advisor or had any past or present
      business relationship with DMRC…….”.                                  F
      13. On behalf of the respondent, reliance was also placed upon
Bharat Broadband Network Limited v. United Telecoms Limited
(2019) 5 SCC 755 wherein, the Supreme Court held as under:-
      “15. Section 12(5), on the other hand, is a new provision which
                                                                            G
      relates to the de jure inability of an arbitrator to act as such.
      Under this provision, any prior agreement to the contrary is wiped
      out by the non obstante clause in Section 12(5) the moment any
      person whose relationship with the parties or the counsel or the
      subject-matter of the dispute falls under the Seventh Schedule.
      The sub-section then declares that such person shall be               H
1244             SUPREME COURT REPORTS                         [2019] 16 S.C.R.


 A           “ineligible” to be appointed as arbitrator. The only way in which
             this ineligibility can be removed is by the proviso, which again is
             a special provision which states that parties may, subsequent to
             disputes having arisen between them, waive the applicability of
             Section 12(5) by an express agreement in writing. What is clear,
             therefore, is that where, under any agreement between the
 B
             parties, a person falls within any of the categories set out in the
             Seventh Schedule, he is, as a matter of law, ineligible to be
             appointed as an arbitrator. The only way in which this ineligibility
             can be removed, again, in law, is that parties may after disputes
             have arisen between them, waive the applicability of this sub-
 C           section by an “express agreement in writing”. Obviously, the
             “express agreement in writing” has reference to a person who
             is interdicted by the Seventh Schedule, but who is stated by
             parties (after the disputes have arisen between them) to be a
             person in whom they have faith notwithstanding the fact that such
             person is interdicted by the Seventh Schedule.”
 D
              14. Per contra, on behalf of the appellant, Mr. A.N.S. Nadkarni,
       learned ASG has submitted that the appointment of arbitrator is
       governed as per Clauses 64(3)(a)(i) and 64(3)(a)(ii) of the General
       Conditions of Contract (GCC) where applicability of Section 12(5) of
 E     the Arbitration and Conciliation Act has been waived off and the Arbitral
       Tribunal shall consist of a panel of three serving Railway Officers or
       two serving officers and one retired officer. Learned ASG submitted
       that Clause 64(3)(b) of GCC deals with appointment of arbitrator where
       applicability of Section 12(5) of the Act has not been waived off. It
       was further submitted that Clause 64(3)(b) of GCC stipulates that the
 F
       Arbitral Tribunal shall consist of a panel of three retired railway officers
       not below the rank of Senior Administrative Officer and the Arbitral
       Tribunal to be constituted as per the procedure indicated thereon.
       Placing reliance upon Union of India v. Parmar Construction
       Company (2019) SCC Online SC 442 and Union of India v.
 G     Pradeep Vinod Construction Company (2019) SCC Online SC
       1467, learned ASG has submitted that when the agreement specifically
       provides for appointment of panel of arbitrators, the appointment should
       be in terms of the agreement and the appointment of independent sole
       arbitrator is in contravention of the General Conditions of Contract which
 H     govern the parties for appointment of arbitrators.
  CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                             1245
     ECI-SPIC-SMO-MCML (JV) [R. BANUMATHI, J.]

      15. Clause 64 of the General Conditions of Contract deals with         A
the procedure for resolution of the disputes and provides for “Demand
for arbitration” and appointment of the arbitrators. Clause 64 of the
General Conditions of Contract (GCC) reads as under:-
      “64. (1): Demand for Arbitration:
                                                                             B
      64. (1) (i) In the event of any dispute or difference between
      the parties hereto as to the construction or operation of this
      contract, or the respective rights and liabilities of the parties on
      any matter in question, dispute or difference on any account or
      as to the withholding by the Railway of any certificate to which
      the contractor may claim to be entitled to, or if the Railway fails    C
      to make a decision within 120 days, then and in any such case,
      but except in any of the “excepted matters” referred to in Clause
      63 of these Conditions, the contractor, after 120 days but within
      180 days of his presenting his final claim on disputed matters shall
      demand in writing that the dispute or difference be referred to
                                                                             D
      arbitration.
      64. (1) (ii) (a) The demand for arbitration shall specify the
      matters which are in question, or subject of the dispute or
      difference as also the amount of claim item-wise. Only such
      dispute or difference, in respect of which the demand has been
                                                                             E
      made, together with counter claims or set off, given by the
      Railway, shall be referred to arbitration and other matters shall
      not be included in the reference.
      64. (1) (ii) (b) The parties may waive of the applicability of sub-
      section 12(5) of Arbitration and Conciliation (Amendment) Act,         F
      2015. If they agree or such waiver in writing after having arisen
      between them in the formation under Annexure XII of these
      conditions.”
      16. After coming into force of Arbitration and Conciliation
(Amendment) Act, 2015, the Government of India, Ministry of Railways         G
made a modification to Clause 64 of the General Conditions of Contract
and the Railway Board issued a notification dated 16.11.2016 in this
regard. The modified Clause 64(3)(a)(i) (where applicability of Section
12(5) of the Act has been waived off) inter alia provided that in case
where the total value of all claims in question added together does not
exceed rupees one crore, the arbitral tribunal shall consist of a sole       H
1246            SUPREME COURT REPORTS                         [2019] 16 S.C.R.


 A     arbitrator who shall be a Gazetted Officer of Railways not below JA
       Grade nominated by the General Manager. In terms of Clause
       64(3)(a)(i), the sole arbitrator shall be appointed within sixty days from
       the day when a written and valid demand for arbitration is received by
       the General Manager. In the present case, since the value of the work
       contract is worth more than Rs.165 crores, Clause 64(3)(a)(i) is not
 B
       applicable.
             17. Clause 64(3)(a)(ii) of GCC deals with cases not covered by
       Clause 64(3)(a)(i) where applicability of Section 12(5) of the Act has
       been waived off. Clause 64(3)(a)(ii) of General Conditions of Contract
       reads as under:-
 C
             “64. (3) Appointment of Arbitrator:
             ………..
             64. (3) (a) (ii) In case not covered by the Clause 64(3)(a)(i),
             the Arbitral Tribunal shall consist of a Panel of three Gazette
 D
             Railway Officers not below JA Grade or two Railway Gazette
             Officers not below JA Grade and a retired Railway Officer,
             retired not below the rank of SAG officer, as the arbitrators. For
             this purpose, the railway will send a panel of at least four (4)
             names of Gazette Railway Officers of one or more departments
 E           of the Railway which may also include the name(s) of retired
             Railway Officer(s) empanelled to work as railway Arbitrator to
             the contractor within 60 days from the day when a written and
             valid demand for arbitration is received by the GM………”.
              18. Clause 64(3)(b) of GCC deals with appointment of arbitrator
 F     where applicability of Section 12(5) of the Act has not been waived
       off. The modified Clause 64(3)(b) inter alia provided that the arbitral
       tribunal shall consist of a panel of three retired railway officers not
       below the rank of SAO officer as arbitrator. For this purpose, the
       Railway will send a panel of at least four names of retired railway
       officer(s) empanelled. The contractor will be asked to suggest to the
 G     General Manager at least two names out of the panel for appointment
       as the contractor’s nominee and the General Manager shall appoint at
       least one out of them as the contractor’s nominee. The General
       Manager will also simultaneously appoint the balance number of
       arbitrators from the panel or from outside the panel. The modified
 H     Clause 64(3)(b) of the General Conditions of Contract reads as under:-
  CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                              1247
     ECI-SPIC-SMO-MCML (JV) [R. BANUMATHI, J.]

      “64. (3)(b) Appointment of Arbitrator where applicability               A
      of Section 12(5) of A&C Act has not been waived off.
      The Arbitrator Tribunal shall consist of a Panel of three retired
      Railway Officer retired not below the rank of SAO officer, as
      the arbitrator. For this purpose, the Railway will send a panel of
      at least four names of retired Railway Officer(s) empanelled to         B
      work as Railway. Arbitrator indicating their retirement date to
      the contractor within 60 days from the day when a written and
      valid demand for arbitrators is received by the GM.
      Contractor will be asked to suggest to General Manager at least
      two names out of the panel for appointment as contractor’s              C
      nominee within 30 days from the date of dispatch of the request
      by Railway. The General Manager shall appoint at least one out
      of them as the contractor’s nominee and will, also simultaneously
      appoint the balance number of arbitrators other from the panel
      or from outside the panel, duly indicating the ‘presiding arbitrator’
      from amongst the three arbitrators so appointed CM shall                D
      complete tis exercise of appointing the Arbitral Tribunal within
      30 days from the receipt of the names of contract’s nominees.
      While nominating the arbitrators, it will be necessary to ensure
      that one of them has served in the Accounts Department.”
      19. After coming into force of the Arbitration and Conciliation         E
(Amendment) Act, 2015, when Clause 64 of the General Conditions of
Contract has been modified inter alia providing for constitution of
Arbitral Tribunal consisting of three arbitrators either serving or retired
railway officers, the High Court is not justified in appointing an
independent sole arbitrator without resorting to the procedure for            F
appointment of the arbitrator as prescribed under Clause 64(3)(b) of
the General Conditions of Contract.
      20. It is pertinent to note that even in the application filed under
Section 11(6) of the Arbitration and Conciliation Act, 1996, the
respondent prayed for appointment of a sole arbitrator in terms of Clause     G
1.2.54(b)(i) of the Tender Agreement/Clause 64 of the General
Conditions of Contract for adjudicating the disputes which have arisen
between the parties. In the petition filed under Section 11(6) of the Act,
the respondent prayed for appointment of one Shri Ashwani Kumar
Kapoor to act as the arbitrator. Thus, the respondent itself sought for
appointment of arbitrator in terms of Clause 64 of the General                H
1248            SUPREME COURT REPORTS                         [2019] 16 S.C.R.


 A     Conditions of Contract. The appointment of Shri Ashwani Kumar
       Kapoor as arbitrator, of course, was not agreeable to the appellant, since
       it was found that said Shri Ashwani Kumar Kapoor was not in the panel
       of arbitrators and therefore, could not be considered for appointment
       as arbitrator. As the value of the work contract was worth more than
       Rs.165 crores, the dispute can be resolved only by a panel of three
 B
       arbitrators in terms of Clause 64(3)(b) of the General Conditions of
       Contract. The respondent was not right in seeking for appointment of
       a sole arbitrator in terms of Clause 1.2.54(b)(i) of the Tender
       Agreement/Clause 64 of the General Conditions of Contract.
              21. Considering the various matters of railway contracts and
 C
       interference with the appointment of independent arbitrators, after
       referring to Union of India and Another v. M.P. Gupta (2004) 10
       SCC 504 and Union of India and Another v. V.S. Engineering (P)
       Ltd. (2006) 13 SCC 240 and other judgments, in Union of India v.
       Parmar Construction Company (2019) SCC Online SC 442, the
 D     Supreme Court set aside the appointment of an independent arbitrator
       and directed the General Manager of Railways to appoint arbitrator in
       terms of Clause 64(3) of the agreement. In Para (44) of Parmar
       Construction Company, the Supreme Court held as under:-
             “44. To conclude, in our considered view, the High Court was
 E           not justified in appointing an independent arbitrator without
             resorting to the procedure for appointment of an arbitrator which
             has been prescribed under clause 64(3) of the contract under
             the inbuilt mechanism as agreed by the parties.”
               22. Applying ratio of the Parmar Construction Company, in
 F     Pradeep Vinod Construction Company (2019) SCC Online SC
       1467, the Supreme Court held that the appointment of arbitrator should
       be in terms of the agreement and the High Court was not right in
       appointing an independent arbitrator ignoring Clause 64 of the General
       Conditions of Contract. As held in Parmar Construction Company
 G     and Pradeep Vinod Construction Company, the High Court was not
       justified in appointing an independent arbitrator without resorting to the
       procedure for appointment of the arbitrators which has been prescribed
       under the General Conditions of Contract.
             RE: Contention:- Retired Railway Officers are not eligible
 H           to be appointed as arbitrators under Section 12(5) read
  CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                             1249
     ECI-SPIC-SMO-MCML (JV) [R. BANUMATHI, J.]

      with Schedule VII of the Act and were statutorily made                 A
      ineligible to be appointed as an arbitrator.
       23. Vide letter dated 27.07.2018, the respondent made a request
for appointment of arbitrator/constitution of Arbitral Tribunal. In
response to the same, the appellant sent a letter dated 24.09.2018
nominating the names of four serving railway officers and the respondent     B
was asked to select any two names from the list of the four railway
officers and communicate to the appellant. It is seen from the record
that the respondent vide their letter dated 26.09.2018 expressed their
disagreement in waiving off the applicability of Section 12(5) of the
Amendment Act, 2015. Referring to its own earlier letter dated
24.09.2018 and letter of the respondent dated 26.09.2018, the appellant      C
had sent a communication dated 25.10.2018 nominating the panel of
four retired railway officers to act as arbitrators and requesting the
respondent to select any two names from the list in terms of Clause
64(3)(b) of GCC and communicate to the appellant within thirty days
from the date of the letter for formation of Arbitration Tribunal.           D
According to the appellant, the respondent failed to select any of the
nominee from the panel within the stipulated time of thirty days. The
respondent neither responded to the appellant’s letter dated 25.10.2018
not suggested the names of two arbitrators from the panel sent by the
appellant. Instead the respondent approached the High Court under
Section 11(6) of the Act for appointment of an independent sole arbitrator   E
by filing a petition on 17.12.2018.
       24. The contention of the learned counsel for the respondent is
that the panel of arbitrators proposed by the appellant vide letter dated
25.10.2018 comprising of retired employees of the appellant are not
eligible to be appointed as arbitrators under Section 12(5) read with        F
Schedule VII of the Act. Further contention of the learned counsel for
the respondent is that the panel of arbitrators drawn by the appellant
consist of those persons who were railway employees or Ex-railway
employees and therefore, they are statutorily made ineligible to be
appointed as arbitrators.                                                    G
       25. Contending that the appointment of retired employees as
arbitrators cannot be assailed merely because an arbitrator is a retired
employee of one of the parties, learned ASG has placed reliance upon
Voestalpine Schienen Gmbh v. Delhi Metro Rail Corporation
Limited (2017) 4 SCC 665. After referring to various judgments and           H
1250            SUPREME COURT REPORTS                         [2019] 16 S.C.R.


 A     also the scope of amended provision of Section 12 of the Amendment
       Act, 2015 and the entries in the Seventh Schedule , the Supreme Court
       observed that merely because the panel of arbitrators drawn by the
       respondent-Delhi Metro Rail Corporation are the Government
       employees or Ex-Government employees, that by itself may not make
       such persons ineligible to act as arbitrators of the respondent-DMRC.
 B
       It was observed that the persons who have worked in the Railways
       under the Central Government or the Central Public Works Department
       or Public Sector Undertakings cannot be treated as employee or
       consultant or advisor of the respondent-DMRC. In para (26) of
       Voestalpine Schienen Gmbh, the Supreme Court held as under:-
 C           “26. It cannot be said that simply because the person is a retired
             officer who retired from the government or other statutory
             corporation or public sector undertaking and had no connection
             with DMRC (the party in dispute), he would be treated as
             ineligible to act as an arbitrator. Had this been the intention of
 D           the legislature, the Seventh Schedule would have covered such
             persons as well. Bias or even real likelihood of bias cannot be
             attributed to such highly qualified and experienced persons, simply
             on the ground that they served the Central Government or PSUs,
             even when they had no connection with DMRC. The very reason
             for empanelling these persons is to ensure that technical aspects
 E           of the dispute are suitably resolved by utilising their expertise
             when they act as arbitrators. It may also be mentioned herein
             that the Law Commission had proposed the incorporation of the
             Schedule which was drawn from the red and orange list of IBA
             guidelines on conflict of interest in international arbitration with
 F           the observation that the same would be treated as the guide “to
             determine whether circumstances exist which give rise to such
             justifiable doubts”. Such persons do not get covered by red or
             orange list of IBA guidelines either.” [Underlining added]
             26. The same view was reiterated in Government of Haryana
 G     PWD Haryana (B and R) Branch v. G.F. Toll Road Private Limited
       and Others (2019) 3 SCC 505 wherein, the Supreme Court held that
       the appointment of a retired employee of a party to the agreement
       cannot be assailed on the ground that he is a retired/former employee
       of one of the parties to the agreement. Absolutely, there is no bar under
       Section 12(5) of the Arbitration and Conciliation (Amendment) Act, 2015
 H     for appointment of a retired employee to act as an arbitrator.
  CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                             1251
     ECI-SPIC-SMO-MCML (JV) [R. BANUMATHI, J.]

        27. By the letter dated 25.10.2018, the appellant has forwarded      A
a list of four retired railway officers on its panel thereby giving a wide
choice to the respondent to suggest any two names to be nominated
as arbitrators out of which, one will be nominated as the arbitrator
representing the respondent-Contractor. As held in Voestalpine
Schienen Gmbh (2017) 4 SCC 665, the very reason for empanelling
                                                                             B
the retired railway officers is to ensure that the technical aspects of
the dispute are suitably resolved by utilising their expertise when they
act as arbitrators. Merely because the panel of the arbitrators are the
retired employees who have worked in the Railways, it does not make
them ineligible to act as the arbitrators.
      RE: Contention:- Failure to act in terms of the Contract               C
      in not responding within thirty days from the date of the
      request.
       28. Learned counsel for the respondent has submitted that vide
letter dated 27.07.2018, the respondent requested for referring the
dispute to arbitration but, no steps were taken by the appellant within      D
thirty days from the date of request dated 27.07.2018. It was submitted
that on 17.12.2018, respondent filed application under Section 11(6) of
the Act before the High Court for appointment of a sole arbitrator, by
which time, no steps were taken by the appellant under the Contract,
except sending two lists of persons by letters dated 24.09.2018 and          E
25.10.2018 who were de jure ineligible to be appointed as the
arbitrators. In this regard, reliance was placed upon Punj Lloyd Ltd.
v. Petronet MHB Ltd. (2006) 2 SCC 638. Considering the applicability
of Section 11(6) of the Act, in Punj Lloyd Ltd., the Supreme Court
held as under:-
                                                                             F
      “5. Having heard the learned counsel for the parties, we are
      satisfied that the appeal deserves to be allowed. The learned
      counsel for the appellant has placed reliance on the law laid down
      by this Court in the case of Datar Switchgears Ltd. v. Tata
      Finance Ltd. (2000) 8 SCC 151, wherein this Court has held as
      under:                                                                 G
      “[S]o far as Section 11(6) is concerned, if one party demands
      the opposite party to appoint an arbitrator and the opposite party
      does not make an appointment within 30 days of the demand,
      the right to appointment does not get automatically forfeited after
      expiry of 30 days. If the opposite party makes an appointment          H
1252            SUPREME COURT REPORTS                          [2019] 16 S.C.R.


 A           even after 30 days of the demand, but before the first party
             has moved the court under Section 11, that would be sufficient.
             In other words, in cases arising under Section 11(6), if the opposite
             party has not made an appointment within 30 days of demand,
             the right to make appointment is not forfeited but continues, but
             an appointment has to be made before the former files application
 B
             under Section 11 seeking appointment of an arbitrator. Only then
             the right of the opposite party ceases.”
              As held in Punj Lloyd Ltd., if the opposite party has not made
       any application for appointment of the arbitrator within thirty days of
       demand, the right to make appointment is not forfeited but continues;
 C     but the appointment has to be made before the former files application
       under Section 11 of the Act seeking appointment of an arbitrator. Only
       then the right of the opposite party ceases.
             29. In Union of India v. Bharat Battery Manufacturing Co.
             (P) Ltd. (2007) 7 SCC 684, on 30.03.2006, the respondent
 D           thereon filed petition under Section 11(6) seeking appointment of
             an arbitrator. Union of India-the appellant thereon appointed Dr.
             Gita Rawat on 15.05.2006 as a sole arbitrator in terms of Clause
             24 of the agreement. In such facts and circumstances of the case,
             considering the decision in Punj Lloyd Ltd., the Supreme Court
 E           held that “once a party files an application under Section
             11(6) of the Act, the other party extinguishes its right to
             appoint an arbitrator in terms of the clause of the agreement
             thereafter. The right to appoint arbitrator under the clause
             of agreement ceases after Section 11(6) petition has been
             filed by the other party before the Court seeking appointment
 F           of an arbitrator…..”.
              30. As discussed earlier, as per the modified Clause 64(3)(b) of
       GCC, when a written and valid demand for arbitration is received by
       the General Manager, the Railway will send a panel of at least four
       names of retired railway officers empanelled to work as arbitrators.
 G     The contractor will be asked to suggest to the General Manager at least
       two names out of the panel for appointment as contractor’s nominee
       within thirty days from the date of dispatch of the request by the
       Railway. Vide letter dated 27.07.2018, the respondent has sought for
       appointment of an arbitrator for resolving the disputes. The appellant
 H     by its letter dated 24.09.2018 (which is well within the period of sixty
  CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                              1253
     ECI-SPIC-SMO-MCML (JV) [R. BANUMATHI, J.]

days) in terms of Clause 64(3)(a)(ii) (where applicability of Section 12(5)   A
of the Act has been waived off) sent a panel of four serving railway
officers of JA Grade to act as arbitrators and requested the respondent
to select any two from the list and communicate to the office at the
earliest for formation of Arbitration Tribunal. By the letter dated
26.09.2018, the respondent conveyed their disagreement in waiving the
                                                                              B
applicability of Section 12(5) of the Amendment Act, 2015. By the letter
dated 25.10.2018, in terms of Clause 64(3)(b) of GCC (where
applicability of Section 12(5) has not been waived off) the appellant
has nominated a panel of four retired railway officers to act as
arbitrators and requested the respondent to select any two from the
list and communicate to the appellant within thirty days from the date        C
of the letter for formation of Arbitration Tribunal. The respondent has
neither sent its reply nor selected two names from the list and replied
to the appellant. Without responding to the appellant, the respondent
has filed petition under Section 11(6) of the Arbitration and Conciliation
Act before the High Court on 17.12.2018. When the respondent has
                                                                              D
not sent any reply to the communication dated 25.10.2018, the
respondent is not justified in contending that the appointment of Arbitral
Tribunal has not been made before filing of the application under Section
11 of the Act and that the right of the appellant to constitute Arbitral
Tribunal is extinguished on filing of the application under Section 11(6)
of the Act.                                                                   E
      RE: Contention:- General Manager himself becoming
      ineligible by operation of law to be appointed as arbitrator,
      is not eligible to nominate the arbitrator.
       31. Stand of the learned counsel for the respondent is that by
virtue of Section 12(5) read with Schedule VII of the Act, General            F
Manager himself is made ineligible to be appointed as an arbitrator and
hence, he cannot nominate any other person to be an arbitrator. The
essence of the submission is “that which cannot be done directly, may
not be done indirectly”. In support of his contention, the learned counsel
for the respondent placed reliance upon TRF Limited v. Energo                 G
Engineering Projects Limited (2017) 8 SCC 377 wherein the
Supreme Court held as under:-
      “54. In such a context, the fulcrum of the controversy would
      be, can an ineligible arbitrator, like the Managing Director,
      nominate an arbitrator, who may be otherwise eligible and a             H
1254            SUPREME COURT REPORTS                         [2019] 16 S.C.R.


 A           respectable person. As stated earlier, we are neither concerned
             with the objectivity nor the individual respectability. We are only
             concerned with the authority or the power of the Managing
             Director. By our analysis, we are obligated to arrive at the
             conclusion that once the arbitrator has become ineligible by
             operation of law, he cannot nominate another as an arbitrator.
 B
             The arbitrator becomes ineligible as per prescription contained
             in Section 12(5) of the Act. It is inconceivable in law that person
             who is statutorily ineligible can nominate a person. Needless to
             say, once the infrastructure collapses, the superstructure is bound
             to collapse. One cannot have a building without the plinth. Or to
 C           put it differently, once the identity of the Managing Director as
             the sole arbitrator is lost, the power to nominate someone else
             as an arbitrator is obliterated. Therefore, the view expressed by
             the High Court is not sustainable and we say so.”
              32. In TRF Limited, though the court observed that once the
 D     arbitrator has become ineligible by operation of law, he cannot nominate
       another as an arbitrator, in para (50), the Court has discussed about
       another situation where both the parties could nominate respective
       arbitrators of their choice and that it would get counter-balanced by
       equal power with the other party. In para (50) of TRF Limited, the
       Supreme court held as under:-
 E
             “50. …..We are singularly concerned with the issue, whether the
             Managing Director, after becoming ineligible by operation of law,
             is he still eligible to nominate an arbitrator. At the cost of
             repetition, we may state that when there are two parties, one
             may nominate an arbitrator and the other may appoint another.
 F           That is altogether a different situation. If there is a clause
             requiring the parties to nominate their respective arbitrator, their
             authority to nominate cannot be questioned. What really in that
             circumstance can be called in question is the procedural
             compliance and the eligibility of their arbitrator depending upon
 G           the norms provided under the Act and the Schedules appended
             thereto….” [Underlining added]
             33. Considering the decision in TRF Limited, in Perkins Eastman
       Architects DPC and another v. HSCC (India) Limited (2019) SCC
       Online SC 1517, the Supreme Court observed that there are two
 H     categories of cases. The first, similar to the one dealt with in TRF
   CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                                 1255
      ECI-SPIC-SMO-MCML (JV) [R. BANUMATHI, J.]

Limited where the Managing Director himself is named as an arbitrator             A
with an additional power to appoint any other person as an arbitrator.
In the second category, the Managing Director is not to act as an
arbitrator himself; but is authorized to appoint any other person of his
choice or discretion as an arbitrator. Observing that if in the first category,
the Managing Director was found incompetent similar invalidity will
                                                                                  B
always arise even in the second category of cases, in para (20) in
Perkins Eastman, the Supreme Court held as under:-
       “20. ….If, in the first category of cases, the Managing Director
       was found incompetent, it was because of the interest that he
       would be said to be having in the outcome or result of the dispute.
       The element of invalidity would thus be directly relatable to and          C
       arise from the interest that he would be having in such outcome
       or decision. If that be the test, similar invalidity would always
       arise and spring even in the second category of cases. If the
       interest that he has in the outcome of the dispute, is taken to be
       the basis for the possibility of bias, it will always be present           D
       irrespective of whether the matter stands under the first or
       second category of cases. We are conscious that if such
       deduction is drawn from the decision of this Court in TRF Limited,
       all cases having clauses similar to that with which we are
       presently concerned, a party to the agreement would be
       disentitled to make any appointment of an Arbitrator on its own            E
       and it would always be available to argue that a party or an
       official or an authority having interest in the dispute would be
       disentitled to make appointment of an Arbitrator.”
       34. After referring to para (50) of the decision in TRF Limited,
in Perkins Eastman, the Supreme Court referred to a different situation           F
where both parties have the advantage of nominating an arbitrator of
their choice and observed that the advantage of one party in appointing
an arbitrator would get counter-balanced by equal power with the other
party. In para (21), it was held as under:-
       “21. ….The next sentences in the paragraph, further show that              G
       cases where both the parties could nominate respective arbitrators
       of their choice were found to be completely a different situation.
       The reason is clear that whatever advantage a party may derive
       by nominating an arbitrator of its choice would get counter
       balanced by equal power with the other party…..”                           H
1256            SUPREME COURT REPORTS                       [2019] 16 S.C.R.


 A            35. As discussed earlier, after Arbitration and Conciliation
       (Amendment) Act, 2015, the Railway Board vide notification dated
       16.11.2016 has amended and notified Clause 64 of the General
       Conditions of Contract. As per Clause 64(3)(a)(ii) [where applicability
       of Section 12(5) of the Act has been waived off], in a case not covered
       by Clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of
 B
       three Gazetted Railway Officers not below the rank of Junior
       Administrative Grade or two Railway Gazetted Officers not below the
       rank of Junior Administrative Grade and a retired Railway Officer
       retired not below the rank of Senior Administrative Grade Officer, as
       the arbitrators. For this purpose, the General Manager, Railway will
 C     send a panel of at least four names of Gazetted Railway Officers of
       one or more departments of the Railway within sixty days from the
       date when a written and valid demand for arbitration is received by
       the General Manager. The contractor will be asked to suggest to
       General Manager at least two names out of the panel for appointment
       as contractor’s nominees within thirty days from the date of dispatch
 D
       of the request from the Railway. The General Manager shall appoint
       at least one out of them as the contractor’s nominee and will also
       simultaneously appoint balance number of arbitrators from the panel
       or from outside the panel duly indicating the “Presiding Officer” from
       amongst the three arbitrators so appointed. The General Manager shall
 E     complete the exercise of appointing the Arbitral Tribunal within thirty
       days from the date of the receipt of the names of contractor’s nominees.
              36. Clause 64(3)(b) of GCC deals with appointment of arbitrator
       where applicability of Section 12(5) of the Act has not been waived
       off. In terms of Clause 64(3)(b) of GCC, the Arbitral Tribunal shall
 F     consist of a panel of three retired Railway Officers retired not below
       the rank of Senior Administrative Grade Officers as the arbitrators. For
       this purpose, the Railway will send a panel of at least four names of
       retired Railway Officers empanelled to work as arbitrators indicating
       their retirement date to the contractor within sixty days from the date
       when a written and valid demand for arbitration is received by the
 G     General Manager. The contractor will be asked to suggest the General
       Manger at least two names out of the panel for appointment of
       contractor’s nominees within thirty days from the date of dispatch of
       the request of the Railway. The General Manager shall appoint at least
       one out of them as the contractor’s nominee and will simultaneously
 H     appoint the remaining arbitrators from the panel or from outside the
  CENTRAL ORG FOR RAILWAY ELECTRIFICATION v. M/S                               1257
     ECI-SPIC-SMO-MCML (JV) [R. BANUMATHI, J.]

panel, duly indicating the “Presiding Officer” from amongst the three          A
arbitrators. The exercise of appointing Arbitral Tribunal shall be
completed within thirty days from the receipt of names of contractor’s
nominees. Thus, the right of the General Manager in formation of
Arbitral Tribunal is counter-balanced by respondent’s power to choose
any two from out of the four names and the General Manager shall
                                                                               B
appoint at least one out of them as the contractor’s nominee.
        37. In the present matter, after the respondent had sent the letter
dated 27.07.2018 calling upon the appellant to constitute Arbitral Tribunal,
the appellant sent the communication dated 24.09.2018 nominating the
panel of serving officers of Junior Administrative Grade to act as
arbitrators and asked the respondent to select any two from the list           C
and communicate to the office of the General Manager. By the letter
dated 26.09.2018, the respondent conveyed their disagreement in
waiving the applicability of Section 12(5) of the Amendment Act, 2015.
In response to the respondent’s letter dated 26.09.2018, the appellant
has sent a panel of four retired Railway Officers to act as arbitrators        D
giving the details of those retired officers and requesting the respondent
to select any two from the list and communicate to the office of the
General Manager. Since the respondent has been given the power to
select two names from out of the four names of the panel, the power
of the appellant nominating its arbitrator gets counter-balanced by the
power of choice given to the respondent. Thus, the power of the General        E
Manager to nominate the arbitrator is counter-balanced by the power
of the respondent to select any of the two nominees from out of the
four names suggested from the panel of the retired officers. In view
of the modified Clauses 64(3)(a)(ii) and 64(3)(b) of GCC, it cannot
therefore be said that the General Manager has become ineligible to
                                                                               F
act as the arbitrator. We do not find any merit in the contrary contention
of the respondent. The decision in TRF Limited is not applicable to the
present case.
      38. There is an express provision in the modified clauses of
General Conditions of Contract, as per Clauses 64(3)(a)(ii) and 64(3)(b),
                                                                               G
the Arbitral Tribunal shall consist of a panel of three Gazetted Railway
Officers [Clause 64(3)(a)(ii)] and three retired Railway Officers retired
not below the rank of Senior Administrative Grade Officers [Clause
64(3)(b)]. When the agreement specifically provides for appointment
of Arbitral Tribunal consisting of three arbitrators from out of the panel
serving or retired Railway Officers, the appointment of the arbitrators        H
1258             SUPREME COURT REPORTS                       [2019] 16 S.C.R.


 A     should be in terms of the agreement as agreed by the parties. That
       being the conditions in the agreement between the parties and the
       General Conditions of the Contract, the High Court was not justified in
       appointing an independent sole arbitrator ignoring Clauses 64(3)(a)(ii)
       and 64(3)(b) of the General Conditions of Contract and the impugned
       orders cannot be sustained.
 B
              39. In the result, the impugned orders dated 03.01.2019 and
       29.03.2019 passed by the High Court of Judicature at Allahabad in
       Arbitration Application No.151 of 2018 are set aside and these appeals
       are allowed. The appellant is directed to send a fresh panel of four
       retired officers in terms of Clause 64(3)(b) of the General Conditions
 C     of Contract within a period of thirty days from today under intimation
       to the respondent-contractor. The respondent-contractor shall select
       two from the four suggested names and communicate to the appellant
       within thirty days from the date of receipt of the names of the nominees.
       Upon receipt of the communication from the respondent, the appellant
 D     shall constitute the Arbitral Tribunal in terms of Clause 64(3)(b) of the
       General Conditions of Contract within thirty days from the date of the
       receipt of the communication from the respondent. Parties to bear their
       respective costs.


 E     Kalpana K. Tripathy                                        Appeals allowed.




 F




 G




 H