UNION OF INDIA & ORS.versusU.P. STATE BRIDGE CORP. LTD.

                        [2014] 13 S.C.R. 1180


A                     UNION OF INDIA & ORS. ·
                                   v.
                  U.P. STATE BRIDGE CORP. LTD.
                   (Civil Appeal No. 8860 of2014)
B
                       SEPTEMBER 16, 2014
            [J. CHELAMESWAR AND A. K. SIKRI, JJ.]
          Arbitration and Conciliation Act, 1996 - ss. 11, 14 and
    15- General Conditions of Contract, 2001- Clause 64(1 )(ii)
C   - Contracts between Government Corporation-VOi with
    private parties-respondent- In terms of the arbitration clause
    dispute between the parties referred to arbitral tribunal
    constituted in terms of the agreement - Failure of arbitral
    tribunal to complete arbitral proceedings for four years -
D   Request case by respondent - High Court constituted the
    substitute arbitral tribunal, with the appointment of sole
    arbitrator - On appeal, held: General rule is that an
    f!Jppointment of a substitute arbitrator should be done in
    accordance with the provisions of the original agreement -
E   When the Government assumes the role of appointment of
    arbitrators to itself and the Government nominated arbitrators
    are incapable of acting as arbitrators, then the principle of
    'default procedure' would be applied in the case of substitute
    arbitrators and the Court will step in to appoint the arbitrator
F   by keeping aside the procedure agreed between the parties
    - Courts are not powerless to remedy such situations by
    springing into action and exercising their powers as
    contained ins. 11 to constitute an Arbitra/ Tribunal, so that
    interest of the other side is equally protected.
G         Dismissing the appeal, the Court
         HELD: 1.1 The first principle of the Arbitration and
  Conciliation Act, 1996 is "fair, speedy and inexpensive
  trial by an Arbitr.al Tribunal". The second principle is the
H party autonomy in the choice of procedure. This means
                               1180
   UNION OF INDIA v. U.P. STATE BRIDGE CORP. LTD.              1181


 that if a particular procedure is prescribed in the A
 Arbitration Agreement which the parties have agreed to,
  that has to be generally resorted to. It is because of this
  reason, as a normal practice, the Court would insist the
  parties to adhere to the procedure to which they have
  agreed upon. This would apply even while making the B
  appointment of substitute arbitrator and the general rule
. is that such an appointment ·of a substitute arbitrator
  should also be done in accordance with the provisions
  of the original agreement applicable to the appointment
  of the arbitrator at the initial stage. However, this principle c
  of party autonomy in the choice of procedure has been
  deviated from in those cases where one of the parties
  have committed default by not acting in accordance.with
  the procedure prescribed. [Para 1.8][1196-F-H;
  1197-A-D]                                                       D
     1.2 In the case of contracts between Government
Corporations/State owned companies with private
parties/ contractors, the terms of the agreement are
usually drawn by the Government company or public
sector undertakings. Government contracts have                   E
broadly two kinds of arbitration clauses, first where a
named officer is to act as sole arbitrator; and second,
where a senior officer like a managing director,
nominates a designated officer to act as the sole
arbitrator. No doubt, such clauses which give the                F
Government a dominant position to constitute the Arbitral
Tribunal are held to be valid. At the same time, it also
casts an onerous and responsible duty upon the
persona designata to appoint such persons/officers as
the arbitrators who are not only able to function                G
independently and impartially, but are in a position to
                                      '-
devote adequate time in conducting the arbitration. If the
Government has nominated those officers as arbitrators
who are not able to devote time to the arbitration
proceedings or become incapable of acting as                     H
1182        SUPREME COURT REPORTS               [2014] 13 S.C.R.

 A arbitrators because of frequent transfers 'etc., then the
   principle of 'default procedure' at least in the cases where
   Government has assumed the role of appointment of
   arbitrators to itself, has to be applied in the case of
   substitute arbitrators as well and the Court will step in
 B to appoint the arbitrator by keeping aside the procedure
   which is agreed to between the parties. However, it would
   depend upon the facts of a particular case as to whether
   such a course of action should be taken or not. It is
   emphasized that .court is not powerless in this regard.
 C [Para 19][1197-F-H; 1198-A-D]
             1.3 Leaving the respondent at the mercy of the
       appellant thereby giving the power to the appellant to
       constitute another Arbitral Tribunal would amount to
       adding insult to the serious injury already suffered by
 D     the respondent because of non conclusion of the arbitral
       proceedings even when the dispute were raised in the
       year 2007. In case, the cherished and benevolent purpose
       and objective of speedy resolution of the disputes by
       arbitral proceedings is to be accomplished, it becomes
 E     the bounden duty of the persona designata to appoint
       such arbitrator(s) who have sufficient time at their
       disposal to attend to this task assigned to them and to
       conclude the arbitral proceedings in a speedily manner.
       It is a common sight that the officers who are awfully
 F     busy in their other routine functions, because of their
       status and position, are made arbitrators. For them,
       discharge of their other duties assumes more
       importance (and naturally so) and their role as the
       arbitrators takes a back seat. This kind of behaviour
 G     s·howing casual approach in arbitration cases is
       anathema to the very genesis of arbitration. Therefore,
       where the Government assumes the authority and power
       to itself, in one sided arbitration clause, to appoint the
       arbitrators in the case of disputes, it should be more
 H
   UNION OF INDIA v. U.P. STATE BRIDGE CORP. LTD.               -1183


vigilant and more responsible in choosing the arbitrators A
who are in a position to conduct the arbitral proceedings
in an efficient manner, without compromising with their
other duties. Time has come when the appointing
authorities have to take call on such aspects failing
which (as in the instant case), Courts are not powerless B
to remedy such situations by springing into action and
exercising their powers as contained in Section 11 of
the Act to constitute an Arbitral Tribunal, so that interest
of the other side is equally protected. [Para 22]
[1200-C-H; 1201-A-B]                                         C
     North Eastern Railway v. Tripple Engineering
     Works 2014 (9) SCC 288; Yashwith Constructions
     (P) Ltd. v. Simplex Concrete Piles India Ltd. and
     another 2006 (3) Suppl. SCR 96 : (2006) 6 SCC
     204 - referred to.                                          D
     Department of Economics Policy and
     Development of the City of Moscow v. Bankers
     .Trust Co. (2004) EWCA Civ 314- referred to.
     Commercial Arbitration by Mustil/ and Boyd,                 E
     2001; Law and Practice of Arbitration and
     Conciliation by O.P. Malhotra - referred to.
                CASE LAW REFERENCE
2014 (9 ) sec 288,          referred to.         Para 10,        F
                                                 15, 18, 22.
(2004) EWCA Civ 314         referred to.         Para 16.
2006 (3) Suppl. SCR 96 referred to.              Para 18.
    CIVILAPPELLATE JURISDICTION: Civil Appeal No(s).             G
8860of2014.
     Fr9m the Judgment and Order dated 03-08-2011 of the
High Court of Judicature at Patna in Request Case No. 3/2011.
                                                                 H
1184        SUPREME COURT REPORTS                 [2014] 13 S.C.R.


 A          Tushar Mehta, ASG, Madhurima Mridul, Ms. Honey
       Kumari, S.N. Terdal, B. Krishna Prasad, Advs. for the
       Appellants.
            Vivek Singh, Lakshmi Raman Singh, Advs. for the
       Respondent.
 B          The Judgment of the Court was delivered by
            A. K. SIKRI, J.
            1. Leave granted.
            2. Counsel for the parties have been heard in detail in
 c 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
 D 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
 E GCC'), contained an arbitration clause that is provided for
  . deciding the dispute between the parties through arbitration
    by an arbitral tribunal to be constituted iri terms of the said
    agreement.
            3. Disputes arose between the parties with respect to
 F the said contract and on the request of the respondent an
    atbitral 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
 G 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
 H
   UNION OF INDIA v. U.P. STATE BRIDGE CORP. LTD.                 1185
                    [A. K. SIKRI, J.]

this case was taken up by the High Court on 09.03.2011, by A
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
theArbitral Tribunal to complete the arbitral proceeding within
a period of three months with direction to hold regular sittings B
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 C
 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 D
the case by 25.06.2011. However, even within the said allotted
time, the proceedings were not broughtto an end and, therefore,
the respondent filed Request Case No.3/2011 dated
29.06.2011.
                                                                   E
       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      F
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 G
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 H
1186       SUPREME COURT REPORTS                   [2014] 13 S.C.R.


 A after giving specific directions to conclude the matter within
   three months and lorig 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
 B 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
 C 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
 D 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 tht3 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.
 E 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 forthe respondent, on the other hand,
F 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
G appoint a retired Chief Justice as the arbitrator. He ref~_ffed
  to the specific findings of the High Court in the impugned
  judgment in this behalf, interalia, observing as under:
          "10. The entire facts and circumstances mentioned
          abpve depict that the delay caused in the arbitral
H         proceedings was intentional. The members of the arbitral
UNION OF INDIA v. U.P. STATE BRIDGE CORP. LTD.                      1187
                 [A. K. SIKRI, J.]

  tribunal continued their dilatory tactics in deciding the         A
  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          B
  and continued their dilatory attitude although the petitioner
   had produced the said order of this Court before the
   arbitral tril;>_t,rnal 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             c
   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            D
   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               E
   Request Case No.10 of 2010.
  11. All these facts also disclose a very sorry state of
  affairs that the members of the arbitral tribunal are inept
  & ineffectual by any standard, completely negligent
  towards their duties and having no sanctity for any law or F
  for the orders of the High Court, which are binging upon
  them. All the training courses etc. imparted to them have
  clearly proved to be wastage of public exchequer, which
  comes from the hard earned money of the people. The
  Railways must take note of these observations and the G
  order of this Court and act accordingly.
  12. So far this case is concerned, it had already been
  mentioned in order dated 09.03.2011 passed by this
  Court in Request Case No.10 of 2010 that if the
                                                                     H
1188       SUPREME COURT REPORTS                    [2014] 13 S.C.R.


 A        arbitration was not completed within three months from
          the date of receipUproduction of a copy of the said order
          before the arbitral tribunal, the petitioner would be at
          liberty to approach this Court and if the facts claimed by
          the petitioner were found to be true, this Court would be
 B        constrained to pass appropriate orders in accordance
          with the Act. In the said circumstances and in view of
          the claim of the petitioner having been found to be proved
          regarding the attitude of the tribunal, this request case is
          allowed and the arbitral tribunal appointed by respondent-
 C        authorities is hereby set aside and a sole Arbitrator is
          appointed to decide the arbitral proceedings
          expeditiously without giving any undue adjournment to
          any of the parties."
         10. He further submitted that in the case of North
 D Eastern Railway v. Tripple Engineering Works, decided
   on 13.08.2014 in Civil Appeal No.6275 of 2014 (arising out of
   S.L.P. (C) No.20427 of 2013), in almost identical
   circumstances, this Court had approved the similar directions
   of the Patna High Court.
 E
         11. It is not in dispute that as per Clause 64 of the GCC,
   three arbitrators are to be appointed, in the manner prescribed
   therein in case of dispute between the parties. The relevant
   portion of Clause 64 with which we are concerned with the
 F present conditions is extracted below:
          "64. (1) (i) Demand for Arbitration - In the event of any
          dispute or difference between the parties as to the
          construction or operation of this contract, or the respective
          rights and liabilities of the parties on any matter in
 G        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 to make a decision within 120 days, then and in any
          such case, but except in any of the expected matters
 H        referred to in clause 63 of these conditions, the contractor,
UNION OF INDIA v. U.P. STATE BRIDGE CORP. LTD.               1189
                [A. K. SIKRI, J.]

 after 120 days but within 180 days of his presenting his A
 final claim on disputed matters, shall demand in writing
 the dispute or difference be referred to arbitration.
                 xx            xx             xx
 64. (3) (a) (I) In cases where the total value of all claims B
 in question added together does not exceed 10,00,000/
 -(Rupees ten lakhs only), theArbitral Tribunal consist of
 a sole arbitrator who shall be either the General Manager
 of a gazette officer of Railway not below the grade of JA
 grade nominated by the General Manager in that behalf. c
 The sole arbitrator shall be appointed within 60 days from
 the day when a written and valid demand for arbitration
 is received by Railway.
 64. (3) (a) (ii) In cases not covered by clause 64 (3)
 (a) (I), the Arbitral Tribunal shall consist of a panel     D
 of three Gazetted Railway Officers not below JA
 grade, as the arbitrators. For this purpose, the Railway
 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      E
 to General Manager upto 2 names out of the panel for
 appointment as contractor's nominee. 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 either from the   F
 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 of them is from the Accounts
 department. An officer of Section Grade of the Account      G
 department shall be considered of equal status to the
 officers in SA grade of other departments of the Railways
 for the purpose of appointment of arbitrators.

                                                             H
1190      SUPREME COURT REPORTS                    [2014] 13 S.C.R.


 A        64. (3) (a) (iii) If one or more of the arbitrators
          appointed as above refuses to act as arbitrator,
          withdraws from his office as arbitrator, or vacates
          his/their office/ offices or is/ are unable or unwilling
          to perform his functions as arbitrator for any reason
 B        whatsoever or dies or in the opinion of the General
          Manager fails to act without undue delay, the General
          Manager shall appoint new arbitrator/arbitrators to
          act in his/their place in the same manner in which
          the earlier arbitrator/arbitrators had been appointed.
 c        Such re-constituted Tribunal may, at its discretion,
          proceed with the reference from the stage at which it was
          left by the previous arbitrator(s)."
         12.At this stage, we may take note of the scheme of the
   Act as well, by noticing those provisions which would be
 D attracted to deal with such a situation. Relevant provisions
   are extracted below for ready reference:
          "14. Failure or impossibility to act. - (1) The mandate
          of an arbitrator shall terminate if-
 E        (a) he becomes de jure or de facto unable to perform
          his functions or for other reasons fails to act without undue
          delay; and
          (b) he withdraws from his office or the parties agree to
          the termination of his mandate.
 F
          (2) If a controversy remains concerning any of the
          grounds referred to in clause (a) of sub-section (1 ), a
          party may, unless otherwise agreed by the parties, apply
          to the Court to decide on the termination of the mandate.
 G        (3) If, under this section or sub-section (3) of section 13,
          an arbitrator withdraws from his office or a party agrees
          to the termination of the mandate of an arbitrator, it shall
          not imply acceptance of the validity of any ground referred
          to in this section or sub-section (3) of section 12.
 H
UNION OF INDIA v. U.P. STATE BRIDGE CORP. LTD.                   1191
                 [A. K. SIKRI, J.]

 15. Termination of mandate and substitution of A
 ;:irbitrator. - ( 1) In addition to the circumstances referred
 to in section 13 or section 14, the mandate of an arbitrator
 shall terminate -
 (a) where he withdrawsfrom office for any reason; or
                                                                 8
 (b) by or pursuant to agreement of the parties.
 (2) Where the mandate of an arbitrator terminates, a
 substitute arbitrator shall be appointed according to the
 rules that were applicable to the appointment of the
 arbitrator being replaced.                                      c
 (3) Unless otherwise agreed by the parties, where an
 arbitrator is replaced under sub-section (2), any hearings
 previously held may be repeated at the discretion of the
 arbitral tribunal.
                                                                 D
 (4) Unless otherwise agreed by the parties, an order or
 ruling of the arbitral tribunal made prior to the replacement
 of an arbitrator under this section shall not be invalid
 solely because there has been a change in the
 composition of the arbitral tribunal.                           E
 32. Termination of proceedings. - (1) The arbitral
 proceedings shall be terminated by the final arbitral award
 or by an order of the arbitral tribunal Linder sub-section
 (2).
 (2) The arbitral tribunal shall issue an order for the          F
 termination of the arbitral proceedings where -
 (a) the claimant withdraws his claim, unless the
 respondent objects to the order and the arbitral tribunal
 recognises a legitimate interest on his part in obtaining G
 a final settlement of the dispute,
 (b) the parties agree on the termination of the
 proceedings, or
 (c) the arbitral tribunal finds that the continuation of the    H
1192       SUPREME COURT REPORTS                  [2014] 13 S'.C.R.


 A        proceedings has for any other reason become
          unnecessary or impossible.
          (3) Subject to section 33 and sub-section (4) of section
          34, the mandate of the arbitral tribunal shall terminate
          with the termination of the arbitral proceedings."
 B
          13.As is clear from the reading of Section 14, when there
   is a failure on the part of the Arbitral Tribunal to act and it is
   unable to perform its function either de jure or de facto, it is
   open to a party to the arbitration proceedings to approach the
 c Court to decide on the termination of the mandate. Section
   15 provides some more contingencies when mandate of an
   arbitrator can get terminated. In the present case, the High
   Court has come to a categorical finding that theArbitral Tribunal
   failed to perform its function, and rightly so. It is a clear case
 0 of inability on the part of the members of the Tribunal to proceed
   in the matter as the matter lingered on for almost four years,
   without any rhyme or justifiable reasons. The members did not
   mend their ways even when another life was given by granting
   three months to them. Virtually a pre-emptory order was passed
 E by the High Court, buttheArbitralTribunal remained unaffected
   and took the directions of the High Court in a cavalier manner.
   Therefore, the order of the High Court terminating the mandate
   of the arbitral tribunal is flawless. This aspect of the impugned
   order is not even questioned by the appellant at the time of
 F hearing of the present appeal.
          14. However, the contention of the appellant is that even
   if it was so, as per the provisions of Section 15 of the Act,
   substitute arbitrators should have been appointed "according
   to the rules that were applicable to the appointment of the
 G arbitrator being replaced". On this basis, it was the submission
   of Mr. Mehta, learned ASG, that High Court should have
   resorted to provision contained in Clause 64 of the GCC.
        · 15. No doubt, ordinarily that would be the position. The
   moot question, however, is as to whether such a course of
 H action has to be necessarily adopted by the High Court in all
   UNION OF INDIA v. U.P. STATE BRIDGE CORP. LTD.                   1193
                    [A. K. SIKRI, J.]

cases, while dealing with an application under Section 11 of A
the Act or there is a room for play in the joints and the High
Court is not divested of exercising discretion under some
circumstances? If yes, what are those circumstances? It is
this very aspect which was specifically dealt with by this Court
in Tripple Engineering Works (supra). Taking note of various B
judgments, the Court pointed out that the notion that the High
Court was bound to appoint the arbitrator as per the contract
between the parties has seen a significant erosion in recent
past. In para 5 of the said decision, those judgments where
departure of the aforesaid "classical notion" has been made         c
are taken note of. It would, therefore, be useful to reproduce
the said para along with paras 6 & 7 herein below:
     "5. The "classical notion" that the High Court while
     exercising its power Under Section 11 of the Arbitration
     and Conciliation Act, 1996 (hereinafter for short 'the Act')   D
     must appoint the arbitrator as per the contract between
     the parties saw a significant erosion in Ace Pipeline
     Contracts (P) Ltd. v. Bharat Petroleum Corporation
   . Ltd., (2007) 5 SCC 304 wherein this Court had taken
     the view that though the contract between the parties must     E
     be adhered to, deviations therefrom in exceptional
     circumstances would be permissible. Amore significant
     development had come in a decision that followed soon
     thereafter in Union of India v. Bharat Battery
     Manufaduring Co. (P) Ltd., (2007) 7 SCC 684 wherein            F
     following a three Judges Bench decision in Punj Lloyd
     Ltd. v. Petronet MHB Ltd., (2006) 2 SCC 638 it was
     held that once an aggrieved party files an application
     Under Section 11 (6) of the Act to the High Court, the
     opposite party would lose its right of appointment of the      G
     arbitrator(s) as per the terms of the contract. The
     implication that the Court would be free to deviate from
     the terms of the contract is obvious. The apparent
     dichotomy in Ace Pipeline (supra) and Bharat Battery
     Manufacturing. Company (P) Ltd. (supra) was                    H
1194   SUPREME COURT REPORTS                   [2014] 13 S.C.R.


 A     reconciled by a three Judges Bench of this Court in
       Northern Railway Administration, Ministry of
       Railway, New De/hiv. Patel Engineering Co. Limited,
       (2008) 10 SCC 240 where the jurisdiction of the High
       Court Under Section 11 (6) of the Act was sought to be
 B     emphasized by taking into account the expression "to
       take the necessary measure" appearing in Sub-section
       (6) of Section 11 and by further laying down that the said
       expression has to be read along with the requirement of
       Sub-section (8) of Section 11 of the Act. The position
 c     was further clarified in Indian Oil Corporation Limited
       & Ors. v. Raja Transport Private Limited, (2009) 8
       SCC 520. Paragraph 48 of the report wherein the scope
       of Section 11 of the Act was summarized may be quoted
       by reproducing Sub-paragraphs (vi) and (vii) herein
 D     below:
          "(vi) The Chief Justice or his designate while
          exercising power under Sub-section (6) of Section 11
          st1all endeavour to give effect to the appointment
          procedure prescribed in the arbitration clause.
 E
          (vii) If circumstances exist, giving rise to justifiable
          doubts as to the independence and impartiality of the
          person nominated, or if other circumstances warrant
          appointment of an independent arbitrator by ignoring
          the procedure prescribed, the Chief Justice or his
 F
          designate may, for reasons to be recorded, ignore the
          designated arbitrator and appoint someone else."
       6. The above discussion will not be complete without
       reference to the view of this Court expressed in Union
 G     of India v. Singh Builders Syndicate, (2009) 4 SCC
       523 wherein the appointment of a retired Judge contrary
       to the agreement requiring appointment of specified
       officers was held to be valid on the ground that the
       arbitration proceedings h_ad not concluded for over a
 H     decade making a mockery of the process. In fact, in
    UNION OF INDIA V. U.P. ST" BRIDGE CORP. LTD.                 1195
                    [A. K. SIKRI, J.]

      paragraph 25 of the report in Singh Builders Syndicate A
      (supra) this Court had suggested that the government,
      statutory authorities and government companies should
      consider phasing out arbitration cl?uses providing for
      appointment of serving officers and encourage
      professionalism in arbitration.                        B
      7. A pronouncement of late in Deep Trading Co. v.
      Indian Oil Corportation and Ors., (2013) 4 SCC 35
      followed the legal position laid down in Punj Lloyd Ltd.
      (supra) which in turn had followed a two Judges Bench
      decision in Datar Switchgears Ltd. v. Tata Finance C
      Ltd., (2000) 8 SCC 151. The theory of forfeiture of the
      rights of a party under the agreement to appoint its
      arbitrator once the proceedings under Section 11 (6) of
      the Act had commenced came to be even more formally
      embedded in Deep Trading Company(supra) subject, D
      of course, to the provisions of Section 11 (8), which
      provision in any event, had been held in Northern
      Railway Administration (supra) not to be mandatory,
      but only embodying a requirement of keeping the same
      in view at the time of exercise of jurisdiction under E
      Section 11 (6) of the Act."
      16. Speedy conclusion of arbitration proceedings hardly
  needs to be emphasised. It would be of some interest to note
  that in England also, Modern Arbitration Law on the lines of F
  UNCITRAL Model Law, came to be enacted in the same year
  as Indian Law which is known as EnglishArbitrationAct, 1996
  and it became effective from 31st January, 1997. It is treated
· as the most extensive statutory reform of English arbitration
"law. Commenting upon the structure of this Act, Mustill and
  Boyd in their"CommercialArbitration, 2001 companion volume G
  to the second edition, have commented that this Act founded
  on four pillars. These pillars are described as:
      (a) The First Pillar: Three General Principles.
                                                                  H
1196        SUPREMECOUR~EPORTS                     [2014] 13 S.C.R.


 A         (b) The Second Pillar: The General Duty of the Tribunal.
           (c) The Third Pillar: The General Duty of the Parties.
           (d) The Fourth Pillar: Mandatory and Semi Mandatory
           Provisions.
 B        In so far as first pillar is concerned, it contains V.ree
   general principles on which the entire edifice of the said Act is
   structured. These principles are mentioned by an English Court
   in its judgment in the case of Department of Economics
   Policy and Development of the City of Moscowv. Bankers
 C Trust Co., (2004) EWCA Civ 314. In that case, Mance, L.J.
   succinctly summed up the objective of this Act in the following
   words: 'Parliament has set out, in the Arbitration Act, 1996, to
   encourage and facilitate a reformed and more independent,
   as well as private and confidential, system of consensual
 D dispute resolution, with only limited possibilities of court
   involvement where necessary in the interests of the public and
   of basic fairness'. Section 1 of the Act sets forth the three
   main principles of arbitration law viz.- (I) speedy, inexpensive
   and fair trial by an impartial tribunal; (ii) party autonomy; and
 E (iii) minimum court intervention. This provision has to be
   applied purposively. In case of doubt as to the meaning of any
   provision of this Act, regard should be had to these principles.
          17. In the book "O.P. Malhotra on the Law and Practice
   of Arbitration and Conciliation" (Third Edition revised by Ms.
 F lndu Malhotra), it is rightly observed that Indian Arbitration Act
   is also based on the aforesaid four foundational pillars.
        18. First and paramount principle of the first pillar is "fair,
   speedy' and inexpensive trial by an Arbitrai Tribunal".
 G Unnecessary delay or expense would frustrate the very purpose
   of arbitration. Interestingly, second principle which is
   recognised in the Act is the party autonomy in the choice of
   procedure. This means that if a particular procedure is
   prescribed in the Arbitration Agreement which the parties have
 H agreed to, that has to be generally resorted to. It is because
    UNION OF INDIA v. U.P. STATE BRIDGE CORP. LTD.                   1197
                    [A. K. SIKRI, J.]

  of this reason, as a normal practice, the Court will insist the    A
. partiE?..~,.to adhere to the procedure to which they have agreed
  upon. This would apply even while making the appointment of
  substitute arbitrator and the general rule is that such an
  appointment of a substitute arbitrator should also be done in
  accordance with the provisions of the original agreement           B
  applicable to the appointment of the arbitrator at the initial
  stage. (see Yashwith. Constructions (P) Ltd. v. Simplex
  Concrete Piles India Ltd. and another, (2006) 6 SCC 204.
  However, this principle of party autonomy in the choice of
  procedure has been deviated from in those cases where one          C.
  of the parties have committed default by not acting in
  accordance with the procedure prescribed. Many such
  instances where this course of action is taken and the Court
  appoint the arbitrator when the persona designata has failed
  to act, are taken note of in para 5 of Tripple Engineering         D
  Works (supra). We are conscious of the fact that these were
  the cases where appointment of the independent arbitrator
  made by the Court in exercise of powers under Section 11 of
  account of 'default procedure'. We are, in the present case,
  concerned with the constitution of substituteArbitral Tribunal      E
  where earlierArbitral Tribunal has failed to perform. However,
  the above principle of default procedure is extended by this
  Court in such cases as well as is clear from the judgment in
  Singh Builders Syndicate (supra).
      19. In the case of contracts between Government F
Corporations I State owned companies with private parties/
contractors, the terms of the agreement are usually drawn by
the Government company or public sector undertakings.
Government contracts have broadly two kinds of arbitration
clauses, first where a named officer is to act as sole arbitrator; G        ·
and second, where a senior officer like a managing director,
nominates a designated officer to act as the sole arbitrator.
No doubt, such clauses which give the Government a dominant
position to constitute the Arbitral Tribunal are held to be valid.
At the same time, it also casts an onerous and responsible H
1198        SUPREME COURT REPORTS                   [2014] 13 S.C.R.


 A duty upon the persona designata to appoint such persons/
   officers as the arbitrators who are not only able to function
   independently and impartially, but are in a position to devote
   adequate time in conducting the arbitration. If the Government
   has nominated those officers as arbitrators who are not able
 B to devote time to the arbitration proceedings or become
   incapable of acting as arbitrators because of frequent transfers
   etc., then the principle of 'default procedure' at least in the
   cases where Government has assumed the role of appointment
   of arbitrators to itself, has to be applied in the case of substitute
 c arbitrators as well and the Courtwill step in to appoint the
   arbitrator by keeping aside the procedure which is agreed to
   between the parties. However, it will depend upon the facts of
   a particular case as to whether such·a course of action should
   be taken or not. What we emphasise is that Court is not
 D powerless in this regard.
         20. In Singh Builders Syndicate (supra) where
   pendency of arbitration proceedings for over a decade was
   found by this Court to be a mockery of a process. This anguish
   is expressed by the Court in the said judgment in the following
 E manner:
           "15. The object of the alternative dispute resolution
           process of arbitration is to have expeditious and effective
           disposal of the disputes through a private forum of the
           parties' choice. lftheArbitral Tribunal consists of serving
 F
           officers of one of the parties to the dispute, as members
           in terms of the arbitration agreement, and such tribunal
           is made non-functional on account of the action or
           inaction or delay of such party, either by frequent transfers
           of such members of the Arbitral Tribunal or by failing to
 G
           talffi steps expedititiously to replace the arbitrators in
           terms of the arbitration agreement, the Chief Justice or
           his designate, required to exercise power under Section
           11 of the Act, can step in and pass appropriate orders.
 H
  UNION OF INDIA v. U.P. STATE BRIDGE CORP. LTD.                 1199
                  [A. K. SIKRI, J.]

     16. We fail to understand why the General Manager of A
     the Railways repeatedly furnished panels containing
     names.of officers who were due for transfer in the near
     future. We are conscious of the fact that a serving officer
     is transferred on account of exigencies of service and
     transfer policy of the employer and that merely because B
     an employee is appointed as arbitrator, his transfer
     cannot be avoided or postponed. But an effort should
     be made to ensure that officers who are likely to remain.
     in a particular place are alone appointed as arbitrators
     and that theArbitral Tribunal consisting of serving officers, c
     decides the matter expeditiously.
     17. Constituting Arbitral Tribunals with serving officers
     from different far-away places should be avoided. There
     can be no hard-and-fast rule, but there should be a
     conscious effort to ensure that the Arbitral Tribunal is D
     COl'lstituted promptly and arbitration does not drag on for
     years and decades.
     18. As noticed above, the matter has now been pending
     for nearly ten years from the date when the demand for       E
     arbitration was first made with virtually no progress.
     Having regard to the passage of time, if the Arbitral
     Tribunal has to be reconstituted in terms of Clause 64,
     there may be a need to change even the other two
     members of the Tribunal.
                                                                  F
     19. The delays and frequent changes in the Arbitral
     Tribunal make a mockery of the process of arbitration.
     Having regard to this factual background, we are of the
     view that the appointment of a retired Judge of the Delhi
     High Court as sole arbitrator does not call for interference G
     in exercise of jurisdiction under Article 136 of the
     Constitution of India."
     21. The appointment of arbitrator by the Court, of its own
choice, departing from the arbitration clause, is therefore not
unknown and has become an acceptable proposition of law H
1200        SUPREME COURT REPORTS                    [2014] 13 S.C.R.


 A which can be termed as a legal principle which has come to
   be established by a series of judgments of this Court. Reasons
   for debating such a course of action are not far to seek and
   already taken note of above.
              22. In the present case, we find the fact situation almost
 B same as in Tripp/e Engineering Works (supra) and Singh
      Builders Syndicate (supra). If the contention of the appellant
      is allowed, it would amount to giving premium to the appellant
      for the fault of the Arbitral Tribunal's members who were
      appointed by none else but by appellant itself. As pointed
 C above, the appellant has not questioned the order of the High
      Court in so far as it has terminated the mandate of the earlier
      Arbitral Tribunal because of their inability to perform the task
      assigned to them. In such a situation, leaving the respondent
      at the mercy of the appellant thereby giving the power to the
 D · appellant to constitute another Arbitral Tribunal would amount
      to adding insult to the serious injury already suffered by the
      respondent because of non conclusion of the arbitral
      proceedings even when the dispute were raised in the year
      2007. In case, the cherished and benevolent purpose and
 E objective of speedy resolution of the disputes by arbitral
      proceedings is to be accomplished, it becomes the bounden
      duty of the persona designata to appoint such arbitrator( s) who
      have sufficient time at their disposal to attend to this task
      assigned to them and to conclude the arbitral proceedings in
 F a speedily manner. It is a common sightthat the officers who
      are awfully busy in their other routine functions, because of
      their status and position, are made arbitrators. For them,
      discharge of their other duties assumes more importance (and
   . naturally so) and their role as the arbitrators takes a back seat.
 G ., This kind'of behaviour showing casual approach in arbitration
      cases is anathema to the very genesis of arbitration; Therefore,
      where the Government assumes th~ authority and power to
      itself, in one sided arbitration clause, to appoint the arbitrators
      in the case of disputes, it should be more vigilant and more
 H responsible in choosing the arbitrators who are in a position
   UNION OF INDIA v. U.P. STATE BRIDGE CORP. LTD.                   1201
                   [A. K. SIKRI, J.]

to conduct the arbitral proceedings in an efficient manner, A
without compromising with their other duties. Time has come
when the appointing authorities have to take call on such
aspects failing which (as in the instant case), Courts are not
powerless to remedy such situations by springing into action
and exercising their powers as contained in Section 11 of the B
Act to constitute an Arbitral Tribunal, so that interest of the other
side is equally protected.
      23. In view of the aforesaid, we do not find any merit in
the present appeal which is dismissed with costs.
                                                                    c

Nidhi Jain                                      Appeal dismissed.