Calcutta High Court
Variety Industrial Works Private … vs The Eastern Railway on 2 April, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISION
Present:
Hon'ble Justice Shampa Sarkar
AP-COM/1042/2024
VARIETY INDUSTRIAL WORKS PRIVATE LIMITED
VS
THE EASTERN RAILWAY
For the petitioner : Mr. Sarosij Dasgupta,
Mr. Biswaroop Mukherjee,
Mr. Avijit Dey,
For the respondent : Mr. Siddhartha Lahiri,
Mrs. Sarda Sha
Hearing concluded on:- 13.01.2025
Judgment on:- 02.04.2025
Shampa Sarkar, J.:-
1. This is an application under Section 14, read with Section 11 of the
Arbitration and Conciliation Act, 1996 (herein after referred to as the said Act).
2. The petitioner is a small scale industrial unit engaged in the business of
manufacturing and supply of Grooved Rubber Sole Plates (for short 'GRSP') and
other allied items to the Indian Railways, Eastern Railways, South Western
Railways, etc.
2
3. Pursuant to a tender which was floated by the respondent (Eastern
Railways), the petitioner was offered the work of supply of GRSP. A formal
purchase order was issued on December 11, 2006. Due to various differences
and disputes between the parties, the petitioner filed an application under
Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to
as the said Act), being Misc. Case No.117 of 2010, before the learned City Civil
Court at Calcutta. By an order dated February 4, 2020, the said Court
restrained the respondents from giving effect or further effect to two letters
dated December 24, 2009 and December 31, 2009, or from making any risk
purchase at the risk and cost of the petitioner. The respondent was also
restrained from levying any general damage on the petitioner or from
withholding payment.
4. By order dated August 2, 2012, while disposing of the application under
Section 9, the learned City Civil Court directed the parties to proceed towards
arbitration and restrained the respondents from making any risk purchase at
the cost of the petitioner, till disposal of the arbitral proceeding.
5. According to the petitioner, the parties were governed by the Indian
Railways Standard Conditions of Contract (IRSCC). Clause 2900 thereof,
contained an arbitration clause.
6. On October 4, 2012, the first arbitrator, one Dinesh Kumar (Dy. FA &
CAO/WST), was appointed by the respondent. On January 21, 2015, the
second arbitrator Mr. S.K. Karmakar (Dy. CEE/Con HQ), was appointed on
3
transfer of the first arbitrator. The petitioner filed a statement of claim before
the second arbitrator and also gave its consent for the proceedings to continue
under the provisions of the Arbitration and Conciliation (Amendment) Act,
2015. The petitioner agreed not to raise any objection with regard to the
applicability of Section 12(5) of the said Act as the arbitrator was an employee
of the Easter Railways. Thereafter, on September 7, 2020, one Shri Achinta Roy
Chowdhury was appointed as the third learned arbitrator, in place of Mr. S.K.
Karmakar.
7. The petitioner filed this application for termination of the mandate of
Shri Achinta Roy Chowdhury, Dy. CME/Workshop/HQ Eastern Railway,
Kolkata. The petitioner prayed for appointment of a substitute arbitrator The
petitioner's contentions were as follows:-
(a) The petitioner had not waived the applicability of the legal bar under
Section 12(5) of the said Act, with regard to the appointment of Shri
Achinta Roy Chowdhury. No such agreement had been entered into by
and between the parties.
(b) The appointment of Shri Achinta Roy Chowdhury was contrary to a
decision of the Hon'ble Apex Court in TRF Ltd. v. Energo Engineering
Project Ltd. decided in Civil Appeal No.5306 of 2017, as the
appointment was not permissible under the provisions of the 5th and 7th
Schedule of the said Act.
4
(c) Shri Achinta Roy Chowdhury was de jure incapable of acting as an
arbitrator, being an employee of Eastern Railways, and the petitioner had
already informed such fact to the learned Arbitrator.
(d) The learned Arbitrator refused to acknowledge the objection regarding
invalidity of his appointment.
(e) The learned Arbitrator failed to make the disclosure in terms of Section
12 of the said Act.
(f) The arbitrator addressed a letter to the petitioner on August 23, 2023,
requesting the petitioner to confirm and consent to the arbitration
proceeding.
(g) There were justifiable grounds for apprehension of lack of independence
and impartiality.
(h) Unilateral appointment of arbitrator, by the Railways, was contrary to
law. Without an agreement between the parties to waive the applicability
of Section 12(5) of the said Act, the arbitrator could not proceed with the
matter.
(i) The arbitrator, in spite of knowing that the application for termination of
mandate was pending before the High Court, had rejected the objection
raised by the petitioner with regard to his inability to act as an arbitrator.
The arbitrator rejected the application on the advice and written
comments of the senior law officer of the respondent.
5
(j) The Hon'ble Apex Court had held that consent to waive the applicability
of Section 12(5) of the said Act should be obtained in writing, each time
an arbitrator was appointed, even if the appointment was in the same
arbitral proceeding.
8. Mr. Lahiri, learned Advocate for the respondent submitted that the
petitioner filed an application under Section 16 of the said Act, challenging the
jurisdiction of the learned Arbitrator. The said application was rejected. The
grounds taken were lack of independence and impartiality of the learned
Arbitrator. When the learned Arbitrator had passed an order rejecting the
application under Section 16, the said order could only be challenged under
Section 34 of the said Act, after termination of the arbitral proceeding. The
present application was not maintainable.
9. The petitioner had signed a waiver clause as per the proviso to Section
12(5), which implied that the petitioner would have no objection to the
respondent appointing their own official as an arbitrator. Similar agreements in
each and every round of appointment of an arbitrator, were not contemplated
under the law.
10. Considered the submissions of the learned Advocates for the respective
parties.
11. The prayers in the application are quoted below:-
"(a) The mandate of the learned arbitrator being Shri Achinta Roy
Chowdhury be terminated;
(b) A neutral and impartial individual be appointed to discharge the
functions and duties as the learned arbitrator in the place and stead of
6
Shri Achinta Roy Chowdhury, to entertain, try and determine the
disputes and differences amongst the parties to the arbitration
agreement;
(c) The papers and documents pertaining to the subject arbitration be
transferred from the office of the learned incumbent arbitrator to the
office of the learned arbitrator to be appointed while disposing of the
instant application;
(d) Stay of all proceedings pertaining to the Arbitration Case in
connection with Agreement No. 02/06/6005/1/25/991 dated 11th
December, 2006 presently before the learned incumbent arbitrator Shri
Achinta Roy Chowdhury, pending hearing of the instant application;
(e) Ad interim orders in terms of prayers above;
(f) Such further and/or other orders."
12. The petitioner may have an arguable case with regard to the inability of
the learned Arbitrator to continue with the proceeding on the ground that he
was de jure unable to perform under the provisions of Section 12(5) read with
the 5th and the 7th Schedule of the Act. Similar objections which were raised by
an application under Section 16 of the said Act, was rejected by the learned
Arbitrator. The petitioner had asked the Arbitrator to recuse from the
proceeding.
13. However, the petitioner had filed an application under Section 9 of the
said Act, before the City Civil Court. The petitioner had sought for interim
protections. The petitioner had treated the said court as the principal civil
court having jurisdiction to entertain the prayers for interim reliefs.
14. The said Act defines Court as below:-
"2 (1)(e) "Court" means-- (i) in the case of an arbitration other than
international commercial arbitration, the principal Civil Court of original
jurisdiction in a district, and includes the High Court in exercise of its
ordinary original civil jurisdiction, having jurisdiction to decide the
questions forming the subject-matter of the arbitration if the same had
7
been the subject-matter of a suit, but does not include any Civil Court of
a grade inferior to such principal Civil Court, or any Court of Small
Causes;
(ii) in the case of international commercial arbitration, the High Court in
exercise of its ordinary original civil jurisdiction, having jurisdiction to
decide the questions forming the subject-matter of the arbitration if the
same had been the subject-matter of a suit, and in other cases, a High
Court having jurisdiction to hear appeals from decrees of courts
subordinate to that High Court.
15. Termination of mandate of the learned Arbitrator is provided under
Section 14 of the said Act, which is quoted below:-
"14. Failure or impossibility to act.--
(1) The mandate of an arbitrator shall terminate and he shall be
substituted by another arbitrator, if--
(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.
(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.
(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."
16. In my opinion, reference to 'Court' under Section 14 is the principal civil
court of ordinary jurisdiction, which the petitioner chose to be the City Civil
Court at Calcutta. By virtue of the applicability of Section 42, which is quoted
below, all applications under Part-I must be filed in the same court, that is, the
City Civil Court at Calcutta, in this case. This is also an application under Part-
I of the said Act. Section 42 is quoted below:-
8
"42. Jurisdiction.--Notwithstanding anything contained elsewhere in
this Part or in any other law for the time being in force, where with
respect to an arbitration agreement any application under this Part has
been made in a Court, that Court alone shall have jurisdiction over the
arbitral proceedings and all subsequent applications arising out of that
agreement and the arbitral proceedings shall be made in that Court and
in no other Court."
17. In the matter of State of West Bengal and Others vs Associated
Contractors, reported in (2015) 1 SCC 32, a three Judges Bench of the
Hon'ble Apex Court answered a reference made by the Division Bench of this
Court with regard to interplay of Section 2(1)(e) and 42 of the said Act. The
Hon'ble Apex Court held as follows:-
"9. As the matter has been referred to us for an authoritative
pronouncement on Section 2(1)(e) and Section 42 it will be important to set
out Section 2(1)(e) and Section 42 of the Arbitration Act, 1996 which read as
follows:
"2. (1)(e) 'Court' means the Principal Civil Court of Original Jurisdiction
in a district, and includes the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction to decide the questions
forming the subject-matter of the arbitration if the same had been the
subject-matter of a suit, but does not include any civil court of a grade
inferior to such Principal Civil Court, or any Court of Small Causes;
***
42. Jurisdiction.–Notwithstanding anything contained elsewhere in
this Part or in any other law for the time being in force, where with
respect to an arbitration agreement any application under this Part has
been made in a court, that court alone shall have jurisdiction over the
arbitral proceedings and all subsequent applications arising out of that
agreement and the arbitral proceedings shall be made in that court and
in no other court.”
xxxx
25. Our conclusions therefore on Section 2(1)(e) and Section 42 of the
Arbitration Act, 1996 are as follows:
(a) Section 2(1)(e) contains an exhaustive definition marking out only the
Principal Civil Court of Original Jurisdiction in a district or a High Court
9having original civil jurisdiction in the State, and no other court as
“court” for the purpose of Part I of the Arbitration Act, 1996.
(b) The expression “with respect to an arbitration agreement” makes it
clear that Section 42 will apply to all applications made whether before
or during arbitral proceedings or after an award is pronounced under
Part I of the 1996 Act.
(c) However, Section 42 only applies to applications made under Part I if
they are made to a court as defined. Since applications made under
Section 8 are made to judicial authorities and since applications under
Section 11 are made to the Chief Justice or his designate, the judicial
authority and the Chief Justice or his designate not being court as
defined, such applications would be outside Section 42.
(d) Section 9 applications being applications made to a court and Section
34 applications to set aside arbitral awards are applications which are
within Section 42.
(e) In no circumstances can the Supreme Court be “court” for the
purposes of Section 2(1)(e), and whether the Supreme Court does or does
not retain seisin after appointing an arbitrator, applications will follow
the first application made before either a High Court having original
jurisdiction in the State or a Principal Civil Court having original
jurisdiction in the district, as the case may be.
(f) Section 42 will apply to applications made after the arbitral
proceedings have come to an end provided they are made under Part I.
(g) If a first application is made to a court which is neither a Principal
Court of Original Jurisdiction in a district or a High Court exercising
original jurisdiction in a State, such application not being to a court as
defined would be outside Section 42. Also, an application made to a
court without subject-matter jurisdiction would be outside Section 42.
The reference is answered accordingly.”
18. The Hon’ble Apex Court held that even an application for termination of
mandate must be filed before the principal civil court. In Swadesh Kumar
Agarwal vs Dinesh Kumar Agarwal reported in (2022) 10 SCC 235, the
appeals before the Apex Court, arose out of an order dated September 7, 2017
and order dated November 17, 2017 passed by the High Court of Madhya
Pradesh by which the High Court in exercise of powers under Section 11(6) of
the Arbitration and Conciliation Act, 1996 had terminated the mandate of the
10
sole arbitrator appointed by the parties and substituted the sole arbitrator by
appointing a fresh arbitrator on the ground that the mandate of the sole
arbitrator stood terminated in view of Section 14(1)(a) of the 1996 Act. The
termination was on the basis that there was undue and unreasonable delay in
proceeding with the arbitration proceeding by the erstwhile arbitrator.
19. The question which before the Apex Court, is quoted below:-
“14.Now the next question which is posed for consideration of this Court
is, whether, in exercise of powers under sub-section (6) of Section 11 of
the 1996 Act, the High Court can terminate the mandate of the sole
arbitrator and appoint a substitute the arbitrator in view of Section
14(1)(a) of the 1996 Act on the ground that he has failed to act without
undue delay and in such a situation aggrieved party has to approach the
“court” to terminate his mandate.”
20. While answering the said question, the Hon’ble Apex Court considered
the provisions of Section 11, 12, 13, 14, 15, 25, 30 and 32 of the said Act. The
Hon’ble Apex Court held as follows:-
18. Sections 14 and 15 provide for termination of the mandate of the
arbitrator. Section 14 of the 1996 Act provides that the mandate of the
arbitrator shall terminate and he shall be substituted by another
arbitrator in case of any eventuality mentioned in Section 14(1)(a). As per
sub-section (2) of Section 14, if a controversy remains concerning any of
the grounds referred to in clause (a) of sub-section (1), a party may,
apply to the “court” to decide on the termination of the mandate.
19. The expression “court” is defined under Section 2(1)(e) of the 1996
Act, which reads as under:
“2. (1)(e) “Court” means–
(i) in the case of an arbitration other than international commercial
arbitration, the Principal Civil Court of Original Jurisdiction in a
district, and includes the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction to decide the
questions forming the subject-matter of the arbitration if the same
had been the subject-matter of a suit, but does not include any
11civil court of a grade inferior to such Principal Civil Court, or any
Court of Small Causes;
(ii) in the case of international commercial arbitration, the High
Court in exercise of its ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the subject-matter of
the arbitration if the same had been the subject-matter of a suit,
and in other cases, a High Court having jurisdiction to hear
appeals from decrees of courts subordinate to that High Court;”
20. Section 15 provides other grounds for termination of the mandate of
the arbitrator. It provides that in addition to the circumstances referred
to in Section 13 or Section 14, the mandate of an arbitrator shall
terminate (a) where he withdraws from office for any reason; or (b) by or
pursuant to an agreement of the parties. Where the mandate of an
arbitrator is terminated on the aforesaid grounds mentioned in Sections
15(1)(a) and (b) in such a situation a substitute arbitrator shall have to
be appointed and that too, according to the rules that were applicable to
the appointment of the arbitrator being replaced.
21. Therefore, on a conjoint reading of Sections 13, 14 and 15 of the Act,
if the challenge to the arbitrator is made on any of the grounds
mentioned in Section 12 of the Act, the party aggrieved has to submit an
appropriate application before the Arbitral Tribunal itself. However, in
case of any of the eventualities mentioned in Section 14(1)(a) of the 1996
Act and the mandate of the arbitrator is sought to be terminated on the
ground that the sole arbitrator has become de jure and/or de facto
unable to perform his functions or for other reasons fails to act without
undue delay, the aggrieved party has to approach the “court” concerned
as defined under Section 2(1)(e) of the 1996 Act. The court concerned has
to adjudicate on whether, in fact, the sole arbitrator/arbitrators
has/have become de jure and de facto unable to perform his/their
functions or for other reasons he fails to act without undue delay. The
reason why such a dispute is to be raised before the court is that
eventualities mentioned in Section 14(1)(a) can be said to be a
disqualification of the sole arbitrator and therefore, such a
dispute/controversy will have to be adjudicated before the court
concerned as provided under Section 14(2) of the 1996 Act.
22. So far as the termination of the mandate of the arbitrator and/or
termination of the proceedings mentioned in other provisions like in
Section 15(1)(a) where he withdraws from office for any reason; or (b) by
or pursuant to an agreement of the parties, the dispute need not be
raised before the court concerned. For example, where the sole arbitrator
himself withdraws from office for any reason or when both the parties
agree to terminate the mandate of the arbitrator and for substitution of
the arbitrator, thereafter, there is no further controversy as either the
sole arbitrator himself has withdrawn from office and/or the parties
12
themselves have agreed to terminate the mandate of the arbitrator and to
substitute the arbitrator. Thus, there is no question of raising such a
dispute before the court. Therefore, the legislation has deliberately
provided that the dispute with respect to the termination of the mandate
of the arbitrator under Section 14(1)(a) alone will have to be raised before
the “court”. Hence, whenever there is a dispute and/or controversy that
the mandate of the arbitrator is to be terminated on the grounds
mentioned in Section 14(1)(a), such a controversy/dispute has to be
raised before the “court” concerned only and after the decision by the
“court” concerned as defined under Section 2(1)(e) of the 1996 Act and
ultimately it is held that the mandate of the arbitrator is terminated,
thereafter, the arbitrator is to be substituted accordingly, that too,
according to the rules that were applicable to the initial appointment of
the arbitrator. Therefore, normally and generally, the same procedure is
required to be followed which was followed at the time of appointment of
the sole arbitrator whose mandate is terminated and/or who is replaced.
***
***
32.5. In a case where there is a dispute/controversy on the mandate of
the arbitrator being terminated on the ground mentioned in Section
14(1)(a), such a dispute has to be raised before the “court”, defined under
Section 2(1)(e) of the 1996 Act and such a dispute cannot be decided on
an application filed under Section 11(6) of the 1996 Act.
21. The facts of the case in Gammon Engineers and Contractors Pvt. Ltd.
vs State of West Bengal reported in 2023 SCC Online Cal 2326, are similar
to those herein. Paragraphs 14 and 15 of the said judgment are quoted below
for convenience:-
“14. The respondent has raised the issue of maintainability and
challenged the jurisdiction of this court to entertain the instant
application under Section 14, 15 read with Section 11 of the Act.
Therefore, before alluding to other aspects of the dispute, it is imperative
that I first decide upon the maintainability of the application.
15. Owing to a prior Section 9 application being filed before the learned
District Judge at Jalpaiguri, the respondent contends that the instant
application must be made before the same ‘court’, as per the mandate of
Section 42 of the Act. The said Section is reproduced hereinbelow:–
13
’42. Jurisdiction – Notwithstanding anything contained elsewhere in this
Part or in any other law for the time being in force, where with respect to
an arbitration agreement any application under this Part has been made in
a Court, that Court alone shall have jurisdiction over the arbitral
proceedings and all subsequent applications arising out of that agreement
and the arbitral proceedings shall be made in that Court and in no other
Court’.”
22. The learned court went on to hold as follows:-
18. In Swadesh Kumar Agarwal v. Dinesh Kumar Agarwal, (2022)
10 SCC 235, the Supreme Court delineated the law with respect to the
court to which an application for termination of an arbitrator’s mandate
would lie. The appropriate portions are extracted below: —
’21. Therefore, on a conjoint reading of Sections 13, 14 and 15 of the
Act, if the challenge to the arbitrator is made on any of the grounds
mentioned in Section 12 of the Act, the party aggrieved has to submit
an appropriate application before the Arbitral Tribunal itself. However,
in case of any of the eventualities mentioned in Section 14(1)(a) of the
1996 Act and the mandate of the arbitrator is sought to be terminated
on the ground that the sole arbitrator has become de jure and/or de
facto unable to perform his functions or for other reasons fails to act
without undue delay, the aggrieved party has to approach the “court”
concerned as defined under Section 2(1)(e) of the 1996 Act. The court
concerned has to adjudicate on whether, in fact, the sole
arbitrator/arbitrators has/have become de jure and de facto unable to
perform his/their functions or for other reasons he fails to act without
undue delay. The reason why such a dispute is to be raised before the
court is that eventualities mentioned in Section 14(1)(a) can be said to
be a disqualification of the sole arbitrator and therefore, such a
dispute/controversy will have to be adjudicated before the court
concerned as provided under Section 14(2) of the 1996 Act.
***
32.3. In a case where there is a written agreement and/or contract
containing the arbitration agreement and the appointment or
procedure is agreed upon by the parties, an application under Section
11(6) of the Act shall be maintainable and the High Court or its
nominee can appoint an arbitrator or arbitrators in case any of the
eventualities occurring under Sections 11(6)(a) to (c) of the Act.
32.4. Once the dispute is referred to arbitration and the sole arbitrator
is appointed by the parties by mutual consent and the
arbitrator/arbitrators is/are so appointed, the arbitration agreement
cannot be invoked for the second time.
32.5. In a case where there is a dispute/controversy on the mandate
of the arbitrator being terminated on the ground mentioned in Section
14
14(1)(a), such a dispute has to be raised before the “court”, defined
under Section 2(1)(e) of the 1996 Act and such a dispute cannot be
decided on an application filed under Section 11 (6) of the 1996 Act.’
19. Therefore, it is palpably clear that the ‘court’ to be approached
under Section 14(1)(a) for termination of an arbitrator’s mandate, for
de jure or de facto reasons, is the ‘court’ under Section 2(1)(e).
Correspondingly, the bar of Section 42 is applicable in the instant
case.
Additionally, termination cannot be made in an application filed under
Section 11(6) of the Act, contrary to what was contended by the
petitioner during oral pleadings.”
23. Under such circumstances and in view of the above discussions, the
application for termination of mandate ought to have been filed before the
principal civil court having jurisdiction, i.e., the City Civil Court at Calcutta.
This application is not maintainable before this Court, seeking termination.
Appointment of a substitute arbitrator can be made only upon termination of
mandate.
24. AP-COM 1042 of 2024 is disposed of.
25. The order will not preclude the petitioner from proceeding as per law.
26. There shall be no order as to costs.
(Shampa Sarkar, J.)
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