Calcutta High Court
Maa Durga Electric Centre vs Union Of India And Anr on 4 August, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OC 15
ORDER SHEET
AP-COM/549/2025
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
MAA DURGA ELECTRIC CENTRE
VS
UNION OF INDIA AND ANR
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 4th August, 2025.
Appearance:
Mr. Amritam Mondal, Adv.
Mr. Arindam Samanta, Adv.
. . .for the petitioner.
Mr. Shiv Chandra Prasad, Adv.
Mr. Srikumar Chakraborty, Adv.
. ..for the respondent.
The Court:
1. This is an application for appointment of an Arbitrator as per Clause 25 of
General Conditions of Contract, 2020 of the Central Public Works Department
(CPWD) (since modified).
2. The respondent no.2 issued a e-notice inviting tender for certain works, the
value of which was Rs.29,94,310/-. The petitioner submitted its bid and a letter
of award was issued by the respondents. An agreement bearing no.
03/EE(E)/Kol-II/2023-24, was entered into between the parties and the date for
completion of the work was April 15, 2024. As per the letter of award and the
agreement, the conditions of the GCC were made applicable.
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3. Disputes arose between the parties with regard to non-payment of part of
the 1st R/A Bill and the 2nd R/A Bill. The petitioner contends that the
respondents had issued a completion certificate on May 10, 2024, but did not
release the payment as also the performance guarantee.
4. Letters were written by the petitioner to the respondent no.2 as also to the
respondent no.1, on various occasions. The letters went unheeded. Accordingly,
on August 26, 2024, another letter was written to the respondent no.2 with a
copy to the respondent no.1, inter alia, stating that, in the event the respondents
did not perform their contractual obligations, the petitioner would refer the
dispute to arbitration in terms of Clause 25 of the GCC, 2020. Again, on October
3, 2024, the respondent no.2 was called upon to release the performance
guarantee, the final bill and all legitimate dues.
5. By the letter dated November 26, 2024, the Chief Engineer,(Kolkata)
Central Public Works Department was requested to appoint an Arbitrator as per
the contractual terms. As the respondents did not take any steps, the
application had been filed for appointment of an Arbitrator.
6. Ms. Banerjee, learned advocate for the respondent submits that the
payments had been made as per the work done. The claims were not admitted.
An application in proper form, seeking release of the performance guarantee, had
not been submitted by the petitioner. The Correction Slip No.7 which was the
modification of Clause 25 had not been properly followed. As per Clause 25.1 of
the said Corrections Slip No.7, the petitioner ought to have applied for
conciliation.
7. Mr. Mandal rebuts the submissions of Ms. Banerjee and states that the
issues raised must be decided by the learned Arbitrator. He further submits that
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the provision for conciliation is no-longer relevant in view of the fact that several
letters had been written to the respondents requesting for payment, release of
personal guarantee and compliance of the other obligations under the said
agreement.
8. Considered the submissions of the respective parties. Although, the
Correction Slip No.7 does away with the provision for constitution of a DRC, the
petitioner applied before the appropriate authority for constitution of a DRC. The
petitioner also approached the authority several times, requesting payment of
the money and release of the personal guarantee. Had the respondents been
serious about holding a conciliatory process, the request made by the petitioner
would have been responded to. Instead, there was total silence. The petitioner's
letters record the grievances and the nature of the dispute, in great detail.
9. Secondly, Clause 25.1 of Correction Slip No.7 provides that if the
contractor considers any work demanded of him to be outside the requirements
of the contract or disputes any drawing, record or decision given in writing by the
Engineer-in-Charge, or if the Engineer-in-Charge considers any act or decision of
the contractor on any matter in connection with or arising out of the contract or
carrying out of the work to be unacceptable and disputable, such party may
promptly refer such disputes and the amount claimed for each dispute, to the
Conciliator (Special Director General or the Additional director General concerned
with the work, as applicable). Such conciliation shall be applied in a particular
prescribed format which is Appendix XVII mentioned in Schedule F.
10. In my prima facie view, here, the conciliation clause is not applicable. If the
contractor considers a work demanded of him to be outside the requirement of
the contract or disputes the drawings or decision given in writing by the
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Engineer-in-Charge, the matter may be referred to conciliation. Alternatively, the
Engineer-in-Charge can also apply for conciliation, if he considers any act or
decision of the contractor on any matter in connection with the contract, to be
unacceptable and disputable. This is the limited scope of the conciliation
process. However, the question of the jurisdiction of the learned Arbitrator
includes arbitrability. The dispute can be decided by the learned Arbitrator.
11. Moreover, the letter dated November 26, 2024 clearly indicates that the
petitioner had asked the respondents to act on the basis of Clause 25 of the
General Conditions. It was the obligation of the respondent to act in terms of the
modified provision, that is, the Correction Slip No.7, which they chose not to do
so.
12. Under such circumstances, this Court is constrained to hold that the
reference of the dispute to further conciliation will be empty formality, especially
by taking into consideration the scope of conciliation under Clause 25(1).
13. Reference is made to the decision of Visa International Limited vs.
Continental Resources (USA) Limited reported in (2009) 2 SCC 55 and
Demerara Distilleries Private Limited and Anr. vs. Demerara Distillers
Limited reported in (2015) 13 SCC 610.
14. In the decision of Visa International (supra) the Hon'ble Apex Court held
as follows:-
"38. It was contended that the pre-condition for amicable settlement of
the dispute between the parties has not been exhausted and therefore
the application seeking appointment of arbitrator is premature. From the
correspondence exchanged between the parties at pp. 54-77 of the paper
book, it is clear that there was no scope for amicable settlement, for both
the parties have taken rigid stand making allegations against each other.
In this regard a reference may be made to the letter dated 15-9-2006
from the respondent herein in which it is inter alia stated "... since
February 2005 after the execution of the agreements, various
5
meetings/discussions have taken place between both the parties for
furtherance of the objective and purpose with which the agreement and
the MoU were signed between the parties. Several correspondences have
been made by CRL to VISA to help and support its endeavour for
achieving the goal for which the abovementioned agreements were
executed". In the same letter it is alleged that in spite of repeated
requests the petitioner has not provided any funding schedules for their
portion of equity along with supporting documents to help in convincing
OMC of financial capabilities of the parties and ultimately to obtain
financial closure of the project. The exchange of letters between the
parties undoubtedly discloses that attempts were made for an amicable
settlement but without any result leaving no option but to invoke the
arbitration clause."
15. In the decision of Demerara Distilleries Private Limited and Another v.
Demerar Distillers Limited reported in (2015)13 SCC 610, the Hon'ble Apex
Court held as follows:-
"5. Of the various contentions advanced by the respondent Company to
resist the prayer for appointment of an arbitrator under Section 11(6) of
the Act, the objections with regard the application being premature; the
disputes not being arbitrable, and the proceedings pending before the
Company Law Board, would not merit any serious consideration. The
elaborate correspondence by and between the parties, as brought on
record of the present proceeding, would indicate that any attempt, at
this stage, to resolve the disputes by mutual discussions and mediation
would be an empty formality. The proceedings before the Company Law
Board at the instance of the present respondent and the prayer of the
petitioners therein for reference to arbitration cannot logically and
reasonably be construed to be a bar to the entertainment of the present
application. Admittedly, a dispute has occurred with regard to the
commitments of the respondent Company as regards equity
participation and dissemination of technology as visualised under the
Agreement. It would, therefore, be difficult to hold that the same would
not be arbitrable, if otherwise, the arbitration clause can be legitimately
invoked. Therefore, it is the objection of the respondent Company that
the present petition is not maintainable at the instance of the
petitioners which alone would require an in-depth consideration."
16. Clause 25.2 provides that if the conciliation fails the party aggrieved can
ask the Chief Engineer to appoint an Arbitrator. The clause provides that the
Chief-Engineer or the Superintendent Engineer will appoint the Arbitrator. The
provision is quoted below:-
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"25.2 Arbitration: If the aforesaid conciliation proceedings fail or the
Conciliator fails to give proposal for settlement within the aforesaid
period, either party may promptly give notice in the proforma prescribed
in Appendix XVIII, under intimation to the other party, to the Chief
Engineer or the Superintending Engineer concerned with the work (as
applicable), hereinafter referred to as the Arbitrator Appointing
Authority as indicated in Schedule F. for appointment of Arbitrator.
However, a party may seek appointment of Arbitrator without taking
recourse to the process of conciliation mentioned in sub-clause 25.1
above.
In the event of either party giving a notice to the Arbitrator Appointing
Authority for appointment of Arbitrator, the said Authority shall appoint
Arbitrator as per the procedure given below and refer such disputes to
arbitration.
(a) Number of Arbitrators: If the contract amount is lass than Rs.100
crore, the disputes may be referred for adjudication by a sole Arbitrator.
If the contract amount is Rs. 100 crore or more, the disputes may be
referred to an Arbitral Tribunal of three Arbitrators.
(b) Qualification of Arbitrators: It is a term of this contract that each
member of the Arbitral Tribunal shall be Graduate Engineer with
experience in execution of public works engineering contracts, and he
should have worked earlier at a level not lower than the Chief Engineer
(equivalent to level of Joint Secretary to the Government of India).
The aforesaid educational qualification and work experience shall be
mandatory for appointment as Arbitrator.
The age of Arbitrator at the time of appointment shall not exceed 70
years. An Arbitrator may be appointed notwithstanding the total
number of active arbitration cases with him.
(c) Parties to select Arbitrator: Based on the criteria specified above, a
list of empanellea Arbitrators has been prepared in CPWD, and the
parties shall have option to select an Arbitrator from the list sent to
them.
25.3 Appointment of Sole Arbitrator: The parties may opt for
appointment of the Arbitrator of the Ministry of Housing and Urban
Affairs. In such cases, the party seeking arbitration has to submit án
express agreement in writing as per Appendix XIX towards waiver of
Section 12(5) of the Arbitration and Conciliation Act, 1996 along with
the notice for appointment of Arbitrator in the proforma prescribed in
Appendix XVIII. under intimation to the other party. The Arbitrator
Appointing Authority shall, within 30 days of receipt of the said notice,
appoint Arbitrator of the Ministry of Housing and Urban Affairs as
Arbitrator in the matter, provided the other party also submits waiver of
Section 12(5), ibid in Appendix XIX within 7 days of the receipt of the
said notice.
Where any one of the parties does not opt for the Arbitrator of the
Ministry of Housing and Urban Affairs, or does not submit the waiver
agreement, the Arbitrator Appointing Authority shall propose five
Arbitrators from the list of CPWD Empaneled Arbitrators 10 the party
seeking arbitration under intimation to the other party within 15 days of
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receiving the notice. The party seeking arbitration shall give his choice
for one of them within 15 days of receiving the list, and the Arbitrator
Appointing Authority shall appoint the chosen personas the Sole
Arbitrator within 15 days of the receipt of choice.
It is a term of this arbitration agreement that if the parties fail to select,
within the period prescribed above, an Arbitrator of their choice from
the list of CPWD Empaneled Arbitrators forwarded to them, the
Arbitrator Appointing Authority shall himself select and appoint
Arbitrator from the said list."
17. However, such provision of unilateral appointment is no-longer applicable,
in view of the decision of the Hon'ble Apex Court in the matter of Perkins
Eastman Architects DPC and Another vs. HSCC (India) Ltd. reported in 2019
SCC OnLine SC 1517, and Central Organisation for Railway Electrification
vs. ECI SPIC SMO MCML (JV) A joint Venture Company reported in 2024 SCC
OnLine SC 3219. The person who cannot act as an arbitrator, also cannot
appoint an arbitration. A person to be chosen from the curated panel of the
CPWD will also be contrary to Section 12(5) of the said Act.
18. The Hon'ble Apex Court in Central Organization for Railway
Electrification (supra), held thus:-
"73. The 2015 amendment has introduced concrete standards of
impartiality and independence of arbitrators. One of the facets of
impartiality is procedural impartiality. Procedural impartiality implies
that the rules constitutive of the decision-making process must favour
neither party to the dispute or favour or inhibit both parties
equally.137 Further, a procedurally impartial adjudication entails
equal participation of parties in all aspects of adjudication for the
process to approach legitimacy.138 Participation in the adjudicatory
process is meaningless for a party against whom the arbitrator is
already prejudiced.139 Equal participation of parties in the process of
appointment of arbitrators ensures that both sides have an equal say
in the establishment of a genuinely independent and impartial arbitral
process.
74. Under Sections 12(1) and 12(5), the Arbitration Act recognises
certain mandatory standards of independent and impartial tribunals.
The parties have to challenge the independence or impartiality of the
arbitrator or arbitrators in terms of Section 12(3) before the same
arbitral tribunal under Section 13.140 If the tribunal rejects the
8
challenge, it has to continue with the arbitral proceedings and make
an award. Such an award can always be challenged under Section 34.
However, considerable time and expenses are incurred by the parties
by the time the award is set aside by the courts. Equal participation of
parties at the stage of the appointment of arbitrators can thus obviate
later challenges to arbitrators.
75. Independence and impartiality of arbitral proceedings and equality
of parties are concomitant principles. The independence and
impartiality of arbitral proceedings can be effectively enforced only if
the parties can participate equally at all stages of an arbitral process.
Therefore, the principle of equal treatment of parties applies at all
stages of arbitral proceedings, including the stage of the appointment
of arbitrators.
***
124. The doctrine of bias as evolved in English and Indian law
emphasizes independence and impartiality in the process of
adjudication to inspire the confidence of the public in the adjudicatory
processes. Although Section 12 deals with the quality of independence
and impartiality inherent in the arbitrators, the provision’s emphasis
is to ensure an independent and impartial arbitral process.”
In Perkins Eastman (supra), the Hon’ble Apex Court held thus :-
…”20. We thus have two categories of cases. The first, similar to the
one dealt with in TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd.,
(2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] where the Managing
Director himself is named as an arbitrator 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
empowered or authorised to appoint any other person of his choice or
discretion as an arbitrator. 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 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 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 Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8
SCC 377 : (2017) 4 SCC (Civ) 72] , 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 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.
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21. But, in our view that has to be the logical deduction from TRF
Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 : (2017)
4 SCC (Civ) 72] Para 50 of the decision shows that this Court was
concerned with the issue, “whether the Managing Director, after
becoming ineligible by operation of law, is he still eligible to nominate
an arbitrator” The ineligibility referred to therein, was as a result of
operation of law, in that a person having an interest in the dispute or
in the outcome or decision thereof, must not only be ineligible to act
as an arbitrator but must also not be eligible to appoint anyone else as
an arbitrator and that such person cannot and should not have any
role in charting out any course to the dispute resolution by having the
power to appoint an arbitrator. The next sentences in the paragraph,
further show that 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.But, in a case
where only one party has a right to appoint a sole arbitrator, its choice
will always have an element of exclusivity in determining or charting
the course for dispute resolution. Naturally, the person who has an
interest in the outcome or decision of the dispute must not have the
power to appoint a sole arbitrator. That has to be taken as the essence
of the amendments brought in by the Arbitration and Conciliation
(Amendment) Act, 2015 (3 of 2016) and recognised by the decision of
this Court in TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8
SCC 377 : (2017) 4 SCC (Civ) 72]
…
24. In Voestalpine [VoestalpineSchienen GmbH v. DMRC, (2017) 4
SCC 665 : (2017) 2 SCC (Civ) 607] , this Court dealt with
independence and impartiality of the arbitrator as under : (SCC pp.
687-88 & 690-91, paras 20 to 22 & 30)
“20. Independence and impartiality of the arbitrator are the hallmarks
of any arbitration proceedings. Rule against bias is one of the
fundamental principles of natural justice which applied to all judicial
and quasi-judicial proceedings. It is for this reason that
notwithstanding the fact that relationship between the parties to the
arbitration and the arbitrators themselves are contractual in nature
and the source of an arbitrator’s appointment is deduced from the
agreement entered into between the parties, notwithstanding the same
non-independence and non-impartiality of such arbitrator (though
contractually agreed upon) would render him ineligible to conduct the
arbitration. The genesis behind this rational is that even when an
arbitrator is appointed in terms of contract and by the parties to the
contract, he is independent of the parties. Functions and duties
require him to rise above the partisan interest of the parties and not to
act in, or so as to further, the particular interest of either parties. After
all, the arbitrator has adjudicatory role to perform and, therefore, he
must be independent of parties as well as impartial. The United
Kingdom Supreme Court has beautifully highlighted this aspect
10
in Hashwani v. Jivraj [Hashwani v. Jivraj, (2011) 1 WLR 1872 : 2011
UKSC 40] in the following words : (WLR p. 1889, para 45)
’45. … the dominant purpose of appointing an arbitrator or arbitrators
is the impartial resolution of the dispute between the parties in
accordance with the terms of the agreement and, although the
contract between the parties and the arbitrators would be a contract
for the provision of personal services, they were not personal services
under the direction of the parties.’
21. Similarly, Cour de Cassation, France, in a judgment delivered in
1972 in Consorts Ury [Fouchard, Gaillard, Goldman on International
Commercial Arbitration, 562 [Emmanuel Gaillard & John Savage
(Eds.) 1999] {quoting Cour de cassation [Cass.] [Supreme Court for
judicial matters] Consorts Ury v. S.A. des Galeries Lafayette, Cass.2e
civ., 13-4-1972, JCP, Pt. II, No. 17189 (1972) (France)}.] , underlined
that:
‘an independent mind is indispensable in the exercise of judicial
power, whatever the source of that power may be, and it is one of the
essential qualities of an arbitrator’.
22. Independence and impartiality are two different concepts. An
arbitrator may be independent and yet, lack impartiality, or vice versa.
Impartiality, as is well accepted, is a more subjective concept as
compared to independence. Independence, which is more an objective
concept, may, thus, be more straightforwardly ascertained by the
parties at the outset of the arbitration proceedings in light of the
circumstances disclosed by the arbitrator, while partiality will more
likely surface during the arbitration proceedings.
***
30. Time has come to send positive signals to the international
business community, in order to create healthy arbitration
environment and conducive arbitration culture in this country.
Further, as highlighted by the Law Commission also in its report, duty
becomes more onerous in government contracts, where one of the
parties to the dispute is the Government or public sector undertaking
itself and the authority to appoint the arbitrator rests with it. In the
instant case also, though choice is given by DMRC to the opposite
party but it is limited to choose an arbitrator from the panel prepared
by DMRC. It, therefore, becomes imperative to have a much
broadbased panel, so that there is no misapprehension that principle
of impartiality and independence would be discarded at any stage of
the proceedings, specially at the stage of constitution of the Arbitral
Tribunal. We, therefore, direct that DMRC shall prepare a broadbased
panel on the aforesaid lines, within a period of two months from
today…”
19. The claim of the petitioner is less than Rs. 100 Crores and as such the
dispute is to be adjudicated by a sole Arbitrator.
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20. Upon a discussion of the above mentioned clauses, this Court is satisfied
that the dispute should be referred to arbitration, leaving all points raised by Ms.
Banerjee open for adjudication before the learned Arbitrator, which includes the
jurisdiction of the learned Arbitrator, arbitrability of the dispute, admissibility of
the claim etc.
21. Under such circumstances, the Court appoints Mr. Anindya Basu, learned
Advocate, Bar Library Club, as the Arbitrator, to arbitrate upon the dispute
between the parties. This appointment is subject to compliance of Section 12 of
the Arbitration and Conciliation Act, 1996.
22. The learned Arbitrator shall fix his own remuneration as per the Schedule
of the Arbitration and Conciliation Act.
23. All points including the point of limitation are left open to be decided by the
learned Arbitrator.
24. AP-COM 549 of 2025 is, accordingly, disposed of.
(SHAMPA SARKAR, J.)
SP/