NON­REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.  4829 OF 2022
M/s Continental India Private Limited       …Appellant(s)
Versus
General Manager Northern Railway    …Respondent(s)
J U D G M E N T
M.R. SHAH, J.
1. Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment  and order  dated 15.09.2021 passed  by  the  High
Court of Judicature at Allahabad in Arbitration Application
No.   15   of   2021,   by   which,   while   allowing   the   application
under Section 11(6) of the Arbitration and Conciliation Act,
1996   (hereinafter   referred   to   as   the   “Act”)   filed   by   the
appellant   herein   –   original   applicant,   the   High   Court   has
directed   respondent   herein   to   send   a   fresh   panel   of   four
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retired   officers   in   terms   of   clause   64(3)(b)   of   the   General
Conditions   of   Contract   (hereinafter   referred   to   as   the
“GCC”)   and   thereafter,   the   appellant   herein   –   original
applicant   shall   select   two   from   the   four   suggested   names
and thereafter  the  respondent  shall constitute  the Arbitral
Tribunal in terms of clause 64(3)(b) of the GCC, the original
applicant has preferred the present appeal. 
2. That   the   appellant   and   respondent   herein   entered   into   a
contract/agreement  which  contains the arbitration  clause.
As   per   clause   32   of   the   agreement,   in   the   event   of   any
question,   dispute   or   difference   arising   under   or   in
connection   with   agreement,   the   same   shall   be   referred   to
the   sole   arbitration   of   a   person   appointed   to   be   the
arbitrator,   by   the   General   Manager   of   the   Railway.   A
request/prayer was made by the appellant herein – original
applicant to appoint an arbitrator  in terms of clause 32 of
the   agreement.   However,   the   General   Manager/Railway
failed to appoint an arbitrator as provided under clause 32
of the agreement. Therefore, the appellant herein – original
applicant filed the application before the High Court under
Section   11(6)   of   the   Act   and   requested   to   appoint   a   sole
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arbitrator.   Though,   the   High   Court   has   observed   that   the
respondent   has   failed   to   appoint   an   arbitrator   despite
raising   the   demand   of   appointing   an   arbitrator,   the
application   was   hence   liable   to   succeed.   However,
thereafter   instead   of   appointing   the   sole   arbitrator   in
exercise of powers under Section 11(6) of the Act, the High
Court   has   directed   to   appoint   an   arbitrator   in   terms   of
clause   64(3)(b)   of   the   GCC.   Feeling   aggrieved   and
dissatisfied with the impugned judgment and order passed
by the High Court in not appointing the sole arbitrator and
instead   directing   the   parties   to   appoint   the   arbitrator   as
per   the   GCC,   the   original   applicant   before   the   High   Court
has preferred the present appeal.       
3. Shri Ramesh Singh, learned Senior Advocate appearing on
behalf   of   the   appellant   herein   has   vehemently   submitted
that   the   High   Court   has   committed   a   serious   error   in   not
appointing   the   sole   arbitrator   in   exercise   of   powers   vested
under Section 11(6) of the Act.
3.1 It   is   submitted   that   the   parties   to   the   agreement   are
governed   by   the   arbitration   agreement/clause   in   terms   of
the clause 32 of the agreement. It is submitted that despite
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invocation   of   the   arbitration   clause   in   terms   of   the
agreement the respondent failed to appoint an arbitrator. It
is contended that therefore the respondent forfeited its right
to appoint an arbitrator under the agreement and therefore,
the  High  Court was required to  appoint a sole arbitrator  in
exercise   of   powers   under   Section   11(6)   of   the   Act.   Reliance
is   placed   on   the   decision   of   this   Court   in   the   case   of   Deep
Trading Company vs. Indian Oil Corporation and Others;
(2013) 4 SCC 35 .
3.2 It   is   further   submitted   by   Shri   Ramesh   Singh,   learned
Senior   Advocate   appearing   on   behalf   of   the   appellant   –
original applicant that the High Court has seriously erred in
directing   the   parties   to   appoint   the   arbitrator   in   terms   of
clause 64(3)(b) of the GCC. 
3.3 It   is   contended   that   in   the   present   case   the   General
Conditions   of   Contract   is   not   applicable   at   all   on   the
grounds inter­alia that (i) neither the GCC  has been signed
by   the   parties   nor   the   governing   agreement   makes   any
reference   to   the   GCC;   (ii)   the   parties   to   the   original
agreement are neither signatory to the GCC nor the GCC is
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made   part   of   the   original   agreement   entered   into   between
the   parties;   (iii)   even   as   per   the   communication   dated
16.07.2020,   the   GCC,   July   2020   shall   be   applicable   to
works contracts on Indian Railways with prospective effect.
It   is   submitted   that   therefore   the   High   Court   has   seriously
erred   in   directing   to   constitute   an   Arbitral   Tribunal   as   per
clause 64(3)(b) of the GCC. 
4. Shri K.M. Nataraj, learned ASG appearing on behalf of the
respondent   is   not   in   a   position   to   dispute   that   after   the
invocation   of   the   arbitration   clause,   the   General
Manager/Railway   failed   to   appoint   the   sole   arbitrator   in
terms   of   the   agreement.   He   is   also   not   in   a   position   to
satisfy   the   Court   as   to   how   the   General   Conditions   of
Contract shall be applicable with respect to the agreement
between   the   parties   which   has   been   entered   into   much
prior to the GCC coming into force i.e., July, 2020 and that
neither   is   there   any   reference   to   the   GCC     in   the   original
agreement   nor   the   GCC   has   been   signed   by   the   parties.
Therefore, he is unable to support the impugned judgment
and order passed by the High Court directing to constitute
an Arbitral Tribunal as per clause 64(3)(b) of the GCC. 
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5. We have heard the learned counsel appearing on behalf of
the respective parties at length. 
6. It is not in dispute that the parties to the agreement agreed
to   resolve   the   dispute   as   per   clause   32   of   the   original
agreement which reads as under: ­ 
“32. Arbitration. 
(a)  In   the   event   of   any   question,   dispute   or
difference   arising   under   or   in   connection   with   this
Agreement (except as to matters the decision of which
is   specially   provided   for   by   this   Agreement)   the   same
shall   be   referred   to   the   sole   arbitration   of   a   person
appointed to be the arbitrator, by the General Manager
or   the  Railway.   It   will be  no  objection   if  the  arbitrator
is   a   Government   servant,   that   he   had   to   deal   with
matters  to  which  the  Agreement  relates   or   that   in  the
course   of   his   duties   as   a   Government   servant   he   has
expressed views on all or any of the matters in dispute
or difference. The Award of the arbitrator shall be final
and binding on the parties to this Agreement. 
Provided always that the decision of the General
Manager   of   the   Railway   as   to   the   disputes   which   fell
within   the   “excepted   matters”   referred   to   above   shall
be   final   and   binding   on   the   parties   hereto   and   such
decision of the General Manager shall not be called in
question   before   the   arbitrator   by   either   of   the   parties
hereto. 
(b) In the event of the arbitrator dying, neglecting or
refusing to act, or resigning or being  unable to act for
any reason, or his award being set aside by the Court
for   any   reason   it   shall   be   lawful   for   the   authority
appointing the arbitrator to appoint another arbitrator
in   place   of   the   outgoing   arbitrator   in   the   manner
aforesaid. 
(c) It   is   further   a   term   of   this   Agreement   that   no
person   other   than   the   person   appointed   by   the
authority   as   aforesaid   should   act   as   arbitrator   and
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that if for any reason that is not possible, the matter is
not be referred to arbitration at all. 
………”      
The appellant and the respondent being signatories to
the   agreement   are   bound   by   the   aforesaid   arbitration
clause/arbitration   agreement.   As   the   dispute   arose
between   the   parties,   the   appellant   invoked   the   arbitration
clause in terms of the agreement. However, the respondent
– General Manager/Railway failed to appoint the arbitrator
in   terms   of   clause   32,   reproduced   hereinabove.   That
thereafter, the appellant herein approached the High Court
for appointment of the sole arbitrator in exercise of powers
under Section 11(6) of the Act. Once the dispute has arisen
between   the   parties   and   despite   invocation   of   the
arbitration   clause   in   terms   of   the   agreement   no   arbitrator
is appointed, it can be said that the authority has forfeited
its right to appoint the arbitrator in terms of the arbitration
agreement   and   thereafter   the   arbitrator   has   to   be
appointed under Section 11(6) of the Act. 
6.1 At this stage, the decision of this court in the case of   Deep
Trading   Company   (supra)   is   required   to   be   referred   to.   In
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the   said   decision   it   is   observed   and   held   that   once   an
arbitrator   is   not   appointed   as   per   the   agreed   procedure
within   stipulated   time,   right   of   the   party   concerned   to
appoint an arbitrator is forfeited and therefore, Chief Justice
ought to have appointed an arbitrator under Section 11(6) of
the   Act.   In   the   said   decision   the   Corporation   therein
appointed the arbitrator as per the agreed procedure during
pendency of the proceedings under Section 11(6) of the Act
and   to   that   it   is   observed   and   held   that   appointment   of
arbitrator   by   the   Corporation   during   pendency   of   the
proceedings   under   Section   11(6)   of   the   Act   was   of   no
consequence,   as   failing   to   appoint   an   arbitrator   within   the
prescribed time, the Corporation had lost its right to appoint
an arbitrator.
6.2 In the present case also, the respondent failed to appoint an
arbitrator   as   per   the   agreed   procedure   and   in   terms   of   the
agreement.   Therefore,   the   respondent   forfeited   its   right   to
appoint   an   arbitrator   in   terms   of   the   agreement   and
therefore the appellant was justified in filing the application
before the High Court for appointment of a sole arbitrator in
exercise of powers under Section 11(6) of the Act. The Chief
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Justice   or   his   nominee   thus   was   required   to   appoint   the
arbitrator under Section 11(6) of the Act. 
7. By   the   impugned   judgment   and   order   and   while   allowing
the   application   under   Section   11(6)   of   the   Act   instead   of
appointing   the   arbitrator   in   exercise   of   powers   under
Section   11(6)   of   the   Act,   the   High   Court   has   directed   to
constitute an Arbitral Tribunal in terms of clause 64(3)(b) of
the   GCC.   It   is   not   in   dispute   that   neither   the   GCC   was
signed   by   the   parties   nor   the   GCC   was   made   part   of   the
agreement between the parties. There is no reference to the
GCC   in   the   main   agreement   entered   into   between   the
parties.   Even   as   per   communication   dated   16.07.2020,   the
GCC,   July   2020   shall   be   applicable   to   works   contract   of
Indian   Railways   with   prospective   effect.   Therefore,   the
parties   are   not   governed   by   the   GCC   at   all.   Therefore,   the
High   Court   has   committed   a   serious   error   in   directing   to
constitute an Arbitral Tribunal in terms of the provisions of
the GCC, which are not binding to the parties. 
8. In   view   of   the   above   and   for   the   reasons   stated   above   the
impugned judgment and order passed by the High Court to
the   extent   directing   to   constitute   an   Arbitral   Tribunal   in
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terms   of   clause   64(3)(b)   of   the   GCC   is   unsustainable   and
deserves   to   be   quashed   and   set   aside   and   is   accordingly
quashed   and   set   aside.   The   Chief   Justice   or   his   nominee
was   required   to   appoint   a   sole   arbitrator/arbitrator   in
exercise of powers under Section 11(6) of the Act. The High
Court has failed to appoint the sole arbitrator in exercise of
powers   under   Section   11(6)   of   the   Act.   Therefore,   as   such
the matter is required to be remanded to the High Court for
appointment   of   a   sole   arbitrator.   However,   instead   of
remanding   the   matter   to   the   High   Court   and   to   avoid   any
further   delay,   with   the   consent   of   the   learned   counsel
appearing   on   behalf   of   the   respective   parties,   we   appoint
Smt. Justice R. Banumathi, Former Judge of this Court, as
a   sole   arbitrator   to   adjudicate   and   resolve   the   dispute
between   the   parties.   The   present   appeal   is   accordingly
allowed. No costs.    
………………………………….J.
[M.R. SHAH]
NEW DELHI; ………………………………….J.
July 27, 2022 [B.V. NAGARATHNA]
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