APHCO10278272021 EREriT IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI FRIDAY,THE TWENTY SEVENTH DAY OF JUNE TWO THOUSAND AND TWENTY FIVE PRESENT HON'BLE SRI JUSTICE DHIRAJ SINGH THAKUR, CHIEF JUSTICE ARBITRAT[Q_N APPLl.CATION`NQ: 25 OF `2O21 Between: RashtrI'ya lSPat Nigam Limited, Visakhapatnam Steel plant, Represented by 'lts P. Chakrapani, Deputy General Manager (Operation), Traffic, Visakhapatnam Steel plant, M/s.Rashtriya lspat Nigam Ltd, Visakhapatnam, Ukkunagaram, Visakhapatnam-530 OO1. ...Applicant AND 1. Union of India, Ministry of Railways, Rep. by its Secretary, Rail Bhavan, Raisini Road, New Delhi -110001. 2. East Coast Railways, Re`p. by its Chief Commercial Manager,Rail Sadan, Chandrasekharpur, Bhubaneswar, Orissa -751017. 3. General ManagerArbitration, East Coast Railways, Rail Sadan Chandrasekharpur, Bhubaneswar, Orissa -751017. 4. Shri B K Joshi, Retd. COM/SEC Railway, GA -130 (2nd floors), NiladrI' Vihar, Bhubaneswar, Orjssa -750121 ...Respondents Arbitration Application under Section ll (5) & (6) of Arbitraion and Conciliation Act,1996 praying that the High Court may be pleased to pass an Order a) Declaring the proceedings no. ECoR/GA/Abr/PCCM/RINl_/810/ 9189 dated 15-04-2021, marked as Annexure-A12 of the Respondent No.3 and the consequential proceeding no. i..,I.;. `_ `*`'=+.`` * JRT?,:I-II <|.I *..*. ;;`-?`gr |+ |r+ I,?I._ `.\| I~ | I,'=. .|~ r_ trq_ ( t'`~.t> ECOR/GA/ARB/ECCM/RINL/810/9236 dated 15.06.2021, marked as Annexure-A16 of Respondent no.3 in appointI-ng Respondent no.4 as Sole Arbitrator as bad, illegal, arbitrary, contrary to provisions contained under schedule v I/w section 12(1)(a) and Schedule VII I/w s'ectI'On .12(5) of.the Arbitration and Conciliation Act,1996 and also contrary to law laid down by the Apex Court and Set AsI|de the Same. b) By further declaring that the 4th Respondent's appointment as Sole Arbitrator and all consequential Arbitration proceedI-ngS intiated by him are also null ahd void. c) And further be pleased to Appoint an Independent Arbitrator of panel of Arbl'trators in terms of section ll (6) of the Arbitration and ConciliatI'On Act,1996-as amended, R/w. Rules and Scheme under the ArbI'tratiOn and Conciliation Act, 1996. lANO: 1 OF2021 PetI'tiOn under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the HI'gh Court may be pleased to suspend the operation of proceedings no. ECoR/GA/Abr/PCCM /RINL/810/9189 dated 15-04-2021 of the Respondent No.3 and the COnSequential proceeding no.ECOR/GAJARB/ECCM/RINL/810/9236 dated 15.06.2021 of Respondent No.3, in appointing Respondent nol4 as Sole Arbitrator, by further restraining the Respondent no.4 from proceeding with the arbitration proceedings in terms of hI'S Proceedings in Arbitration/BKJ, dt.18.06.2021 pending disposal of the main Arbitration Application. IANO: 2OF2021 -;i;- Petit'IOn under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to extend the Interim Orders dt.17-09-2021 whl-ch was in force till 23- 10-2021 until further orders, pending disposal of the Arb. AppI. 25 of 2021 and Pass. lANO: 1 OF2022 Between : Rashtriya lspat Nigam Limited, Visakhapatnam Steel Plant, Represented by its p. chakrapani, Deputy General Manager (Operation), Traffic, visakhapatnam steel plant, M/s.Rashtriya lspat Nigam Ltd, visakhapatnam, ukkunagaram, visakhapatnam-530 001. .HApplicant/Respondents AND 1, Union of lnclia, Ministry of Railways, Rep. by its Secretary, Rail Bhavan, Raisini Road, New Delhi -110001. 2. East Coast Railways, Rep. by its Chief Commercial Manager,Rail sadan, chandrasekharpur, Bhubaneswar, Orissa -751017. 3. General ManagerArbitration, East Coast Railways, Rail Sedan chandrasekharpur, Bhubaneswar, Orissa -751017. 4. Shri B K Joshi, Retd. COM/SEC Railway, GA -130 (2nd floors), Niladri Vihar, Bhubaneswar, Orissa -750121 H.Applicant/Respondents petition under section 151 CPC praying that in the Circumstances stated 'ln the affidavit filed in support of the Petition, the High Court may be pleased to direct vacation of the Interim stay order dated 17.09.2021 passed by this HQn'ble Court and declare the appointment Of Sole arbitrator by the respondent as valid and the Hon'ble court may be pleased to dimSiSS the above application and grant any other relief as deemed fit for just and Proper end of Justice. counsel for the Applicant : Sri W.B Srinivas, Senior Counsel appearing for Sri V Subrahmanyam counsel for the Respondents : Sri Jupudi Yagnadutt (Central Government Coun'se]) The Court made the following: APHCO10278272021 IN THE HIGH COURT OF ANDHRA PRADESH Bench Sr.No:-1 AT AMARAVATI [3441 I ARBITRATION APPLICATION NO: 25 of 2021 Rashtriya lspat Nigam Limited Vs. Union Of lrldia and Others Advocate for Applicant: Advocate(s) for Respondent(s): ********** ...Applicant ...Respondent(s) Mr. WI B. Srinivas, Senior Counsel, appearing for Mr. V. Subrahmanyam Mr. Jupudi V K Yagnadutt (Central ~ Government Counsel) CORAM :THE CHIEF JUSTICE DHIRAJ SINGH THAKUR DATE : ¥>.06,2025 PC: The present application has been filed under section ll of the Arbitration and ConciliatI-On Act, 1996, for appol'ntment of an Arbitrator to adjudicate upon the disputes arising out of and in connection with the agreement, dated 25.09.2017, as amended by supplementary agreement, dated 27-08.2019. 2. The fact that there was such an agreement and that the agreement did contain an arbitration clause is not denied. The arbitration clause as contaI'ned in the agreement reads as under: 2 HCJ Arb_Ap p I_2 5_2021 "SectI'On 13.5 Arbitration: In the event of any question, dispute Qr difference arising Out Of Or under this Contract in connection therewith (except as to matters, the decision to which iS specifically provided under this Contract) the same shall be resolved by amicable settlement failing which 'the' matter will be referred to the Sole Arbitrator appointed by the Competent Authority i.e. General Manager of concerned Zonal Railways. The arbitration shall be conducted in accordance with the provisions of Arbitration and Conciliation Act, 1996 as amended in 2015 and the Rules made thereunder. The decision of the Arbitrator shall be final and binding upon the parties." 3. [t is stated that disputes having arisen between the parties, the respondent - East Coast Railways invoked the arbitration clause w'cte communication, dated 15.04.2021, by forwarding a panel of officers out of which the applicant was required to nominate at least two names, out of which one would be chosen-to be appointed as a sole arbitrator. 4. This communication was thereafter responded to by virtue of letter, dated 03.05.2021, wherein the applicant stated that the course adopted by the East Coast Railways in forwarding a panel Qf Officers for nomination Was contrary tO the Provisions Of the Arbitration and Conciliation Act, more particularly, Schedule V and Vll as also in gross contradiction to the ratio of the judgment rendered by the Apex Court in Perkins Eastman Architects DPC vs| HSCC (India) Limited1. 1 (2020) 20 SCC 760 3 HCJ Arb_Appl_25_2021 ln the aforementioned context, the applicant communicated to the respondent that an independent arbI'tratOr, Who iS not connected in any manner wl'th both the parties,I is to be appointed. 5. The stand of the applicant is that despite the communication supra, the respondent proceeded to appoI'nt Mr. B. K. Joshi, retired Ral'Iway officer, as a sole arbitrator, who entered upon the reference. By virtue of an interim order passed in the present application on 17.09.2021, the arbitrator was restrained from passing an award. The aforementioned order was extended from time to time and is sti[[ in force. Since there is no dispute regarding. the existence of arbitration clause as also existence of the dispute between the t`wo parties, the only question that required to be considered as to whether the appointment of the sole arbitrator by the respondent - East Coast Railways is legally sustainable or not and if not, whether the present application ought to be allowed. 6. Having heard learned counsel for the parties, we have no hesitation in holding that the appointment of a sole arbitrator by the respondent, who is one of the parties to the arbitration agreement, goes contrary to the express ratio of the judgment rendered in the case of Perkins Eastman Architects DPC (supra) wherein the Apex Court in para No.20 held as under: l'20. We thus have two categories of cases. The first, similar to the one dealt wl-th in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377] where the Managing Director himself is named as an 4 HCJ Arb_Ap p I_2 5_2021 arbitrator with an additi6nal power to appoint any other Person aS an arbitrator. ln the second category, the Managing Director iS not tQ act aS an arbitrator h'lmself but is empowered or authorised to appoint any other person of his choice or discretion as an arbitrator. lf, in the first category of cases, the Managing Director was found incompetent, it Was because Of the interest that he ivould 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. lf that be the test, siniilar invalidity would always arise and spring even in the second category of cases. lf 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. , all cases having clauses similar to that with which we are presently concerned, a party to the agreement would be disen{itled 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 WOu'd be disentit'ed to make appointment of an arbitrator." 7. The ratio of the aforementioned judgment rendered in Perkins Eastman Architects DPC was subsequently reaffirmed by a Constitution Bench judgment Qf the Apex Court in. Central Organisation foray Railway EIectrification v. Eel SPIC SMO MCML (JV) A Joint Venture Co.2 wherein it is held: tl129. Equal treatment of parties at the Stage Of appointment Of an arbitrator ensures impartiality during the arbitral proceedings. A clause that allows one party to unilaterally appoint a sole arbitrator iS exclusive and hinders equal participation of the other party in the appointment process of arbitrators. Further, arbitration is a quaSiiudiCial and adjudicative process where both parties ought to be treated equally and g'lven an equal opportunity to persuade the decision-maker of the merits of the case. An arbitral process where one Party Or its Proxy has the power to unilaterally decide who will adjudicate on a dispute is fundamentally contrary to the adjudicatory function of arbitral tribunals. 169. c. A clause that allows one party tO unilaterally appoint a SOle arbitrator gives rise to justifiable doubts as to the independence and '2 2024 SCC Online SC 3219 5 HCJ Arb_Ap p I_2 5_2021 impartiality of the arbitratc;r. Further, such a unilateral clause is exclusive and hinders equal participation of the other party in the appointment Process Of arbitrators; d. In the appointment of a three-member panel, mandating the other party to select its arbitrator from a curated panel of potential arbitrators is against the principle of equal treatment of parties. In this situation, there is no effective counterb-alance because parties do not participate equally in the process of appointing arbitrators." 8. The connected issue that arises for consideratI-On iS Whether the appointment already made by the respondent needs to be challenged in appropriate Proceedings especially under Section 13 of the Arbitration and Conciliation Act or whether this court has power to entertain the present application under Section ll of the Act. Even this issue is no longer res ,|nfegra. The Supreme Court in Bharat Broadband Network LTD v. UnI-ted Telecoms Ltd3, in para No.17, held as under: "17. The scheme of Sections 12, 13, and 14, therefore, is that where an arbitrator makes a disclosure in writing which is likely to give justifiable doubts as to his independence or impartiality, the appointment of such arbitrator may be challenged under Sections 12(1) to 12(4) read with SectI'On 13. However, where such person becomes tlineligible'' to be appointed as an arbI'tra{Or, there iS nO question Of Challenge to such arbl'trator, before such arbitrator. ln such a case, i.e., a case which falls under Section 12(5), Sectl'on 14(1)(a) of the Act gets attracted inasmuch as the arbitrator becomes, as a matter of law (i.e., c/e /lure), unable to Perform his functions under Section 12(5), being inelI'gible tO be appointed as an arbitrator. .." 3 .(2019) 5 SCC 755 6 HCJ Arb_Appl_25_2021 Be that as it may, this Court holds that the appointment of Mr. B. K. Joshi as the sole arbitrator by the respondent is r,or, esf in the eyes of law. 9. ln view of the above, the present application is allowed. Justice Naresh Harishchandra Patil, former Chief Justice of the Bombay High Court, is appointed as an Arbitrator, who shall enter upon the reference and render the Award within the statutory period. The parties shall be free to file detailed claims and counter-claims, before the learned Arbitrator. The learned Arbitrator shall also be entitled to claim the fee in consultation with the parties. Pending miscellaneous applications, if any, shall stand closed. No costs. A copy of this order be communicated to the learned Arbitrator on the address mentioned herein below: Just-Ice Naresh Harishchandra Patil, Rajgir chambers, 2nd Floor, Office No.19, Opp. Old Customs House, Fort, Mumbai -400001, Mobile: 9422210444 //TRUE COPY// sd/-s.v.S.R.MURTHY JOINT REGISTRAR pr Sk=_ SECTION OFFICER To, 1. Sri Justice Naresh Harishchandra Pati', former Chief Justice of Bombay High Court, a/a Rajgir chambers, 2nd Floor, Office No.19, Opp. Old customs House, Fort, Mumbai-400001, Mobile: 9422210444(along with a copy of Arbitration Application Affidavit and all material papers filed along with Arbitration Application) (BY SPEED POST) 2. The Registrar(Judicial), High Court of Andhra Pradesh at Amaravathi 3. Union of India, Ministry of Railways, Rep. by its Secretary, Rail Bhavan, Raisini Road, New Delhi -110001. 4. East Coast Railways, Rep. by its Chief Commercial Manager Rail sadan chandrasekharpur, Bhubaneswar, Orissa -751017. 5. General Manager Arbitration, East Coast Rai~lways, Rail Sadan Chandrasekharpur', Bhubaneswar, Orissa -751017. 6. Shri B K Joshi, Retd. COM/SEC Railway, GA -130 (2nd floors), Niladri Vihar, Bhubaneswar, Orissa -750121 7. One CC to Sri. V Subrahmanyam Advocate [OPUC] 8. One CC to Sri. Jupudi V K Y;gnadutt(Central Government Counsel) Advocate [OPUC] 9. The Section Officer, O.S Section, High Court ofAndhra Pradesh at Amaravathi 10. Two CD Copies Stu Vna /( + __ - i `Ji` HIGH COURT DATED:27/06/2025 ORDER ARBAPPL No. 25/2021 ALLOWING THE ARBITRATION APPLICATION