whether (1) the High Court was justified in invoking amended provision which has been introduced by Arbitration and Conciliation(Amendment Act), 2015 with effect from 23rd October, 2015(hereinafter being referred to as “Amendment Act, 2015”); (2) whether the arbitration agreement stands discharged on acceptance of the amount and signing no claim/discharge certificate and (3) whether it was permissible for the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996(prior to the Amendment Act, 2015) to appoint third party or an independent Arbitrator when the parties have mutually agreed for the procedure vis­à­vis the authority to appoint the designated arbitrator.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(s). 3303 OF 2019
(Arising out of SLP(C ) No(s). 6312 of 2018)
UNION OF INDIA ……Appellants(s)
VERSUS
PARMAR CONSTRUCTION COMPANY ……Respondent(s)
WITH
CIVIL APPEAL NO(s).3306 OF 2019
(Arising out of SLP(C ) No(s). 6034 of 2018)
CIVIL APPEAL NO(s). 3304 OF 2019
(Arising out of SLP(C ) No(s). 2166 of 2018)
CIVIL APPEAL NO(s). 3307 OF 2019
(Arising out of SLP(C ) No(s). 6316 of 2018)
CIVIL APPEAL NO(s). 3312 OF 2019
(Arising out of SLP(C ) No(s). 7720 of 2018)
CIVIL APPEAL NO(s). 3310 OF 2019
(Arising out of SLP(C ) No(s). 8019 of 2018)
CIVIL APPEAL NO(s). 3311 OF 2019
(Arising out of SLP(C ) No(s). 8021 of 2018)
1
CIVIL APPEAL NO(s). 3305 OF 2019
(Arising out of SLP(C ) No(s). 7937 of 2018)
CIVIL APPEAL NO(s). 3308 OF 2019
(Arising out of SLP(C ) No(s). 8597 of 2018)
CIVIL APPEAL NO(s). 3319 OF 2019
(Arising out of SLP(C ) No(s).8256 OF 2019)
(Arising out of Diary No.8885/2018)
CIVIL APPEAL NO(s). 3309 OF 2019
(Arising out of SLP(C ) No(s). 8596 of 2018)
CIVIL APPEAL NO(s). 3314 OF 2019
(Arising out of SLP(C ) No(s). 9514 of 2018)
CIVIL APPEAL NO(s). 3313 OF 2019
(Arising out of SLP(C ) No(s). 8598 of 2018)
CIVIL APPEAL NO(s). 3315 OF 2019
(Arising out of SLP(C ) No(s). 9559 of 2018)
CIVIL APPEAL NO(s). 3317 OF 2019
(Arising out of SLP(C ) No(s). 11417 of 2018)
CIVIL APPEAL NO(s). 3318 OF 2019
(Arising out of SLP(C ) No(s). 11862 of 2018)
CIVIL APPEAL NO(s). 3316 OF 2019
(Arising out of SLP(C ) No(s). 22263 of 2018)
J U D G M E N T
Rastogi, J.
Leave granted.
2

  1. The question that arises for consideration in the batch of
    appeals by special leave is as to whether (1) the High Court was
    justified in invoking amended provision which has been
    introduced by Arbitration and Conciliation(Amendment Act),
    2015 with effect from 23rd October, 2015(hereinafter being
    referred to as “Amendment Act, 2015”); (2) whether the
    arbitration agreement stands discharged on acceptance of the
    amount and signing no claim/discharge certificate and (3)
    whether it was permissible for the High Court under Section
    11(6) of the Arbitration and Conciliation Act, 1996(prior to the
    Amendment Act, 2015) to appoint third party or an independent
    Arbitrator when the parties have mutually agreed for the
    procedure vis­à­vis the authority to appoint the designated
    arbitrator. The High Court has passed separate orders in
    exercise of its powers under Section 11(6) of the Act, 1996 in
    appointing an independent arbitrator without adhering to the
    mutually agreed procedure under the agreement executed
    between the parties. Since the batch of appeals involve common
    questions of law and facts with the consent of parties, are
    disposed off by the present judgment.
    3
  2. The facts have been noticed from civil appeal arising out of
    SLP(Civil) no. 2166 of 2018.
  3. The work for construction of office accommodation for
    officer and rest house was allotted to the respondent contractor,
    at Dungarpur in the State of Rajasthan on 21st December, 2011.
    As alleged, the extension was granted by the appellants to
    complete the work by 31st March, 2013. The measurement was
    accepted by the respondent under protest and when appellants
    officials failed to clear 7th final bill until the respondent put a line
    over “under protest” and signed no claim certificate. The total
    value of the work executed was of Rs. 58.60 lakhs against which
    Rs. 55.54 lakhs was paid and escalation cost was not added with
    interest @ 18% over delay payment. Demand notice was sent to
    the appellants to appoint an arbitrator invoking Clause 64(3) of
    the GCC to resolve the disputes/differences on 23rd December,
  4. When the appellants failed to appoint the arbitrator in
    terms of Clause 64(3), application came to be filed under Section
    11(6) of the Act, 1996 before the Chief Justice/his Designate for
    appointment of an independent arbitrator who after hearing the
    parties under the impugned judgment allowed the application of
    4
    the respondent and appointed a retired judge of the High Court
    as an independent arbitrator to arbitrate the proceedings.
  5. In the instant batch of appeals, one fact is common that the
    orders were placed for various nature of construction works for
    its execution and the agreement executed between the parties
    includes a separate chapter for settlement of disputes leaving any
    dispute or difference between the parties to be resolved through
    the process of arbitration by appointing an arbitrator invoking
    clause 64(3) of the contract. As per terms of the agreement, date
    of completion of the project was delayed as alleged due to breach
    of obligations by the appellants and the scheduled date of
    completion had to be extended. Meanwhile, due to rise in the
    prices of raw material, the project was impossible to be completed
    by the respondent contractors and hence correspondence was
    made to either pay the escalated price or in the absence, the
    respondents would not be in a position to conclude the contract.
    It was alleged that the appellants accepted the terms and
    conditions for escalated prices and asked the respondents to
    complete the work and handover the project.
    5
  6. But when the respondents raised the final bills in the predetermined format (which also included the no dues certificate)
    on the newly agreed prices, dispute has arisen in context of
    payment of escalated prices or withholding of security deposits,
    taking note of the existence of arbitration clause in the agreement
    the respondents sent a notice to appoint an arbitrator as per
    clause 64(3) of GCC to resolve the dispute of payment of
    outstanding dues which was declined by the appellants by
    sending the reply that “No Due Certificate” was signed and that
    entails no dispute to be sent to arbitration. Since the appellants
    failed to appoint the arbitrator in accordance with the arbitration
    clause in the agreement, each of the respondent filed application
    under Section 11(6) of the Act before the High Court for
    appointment of an independent arbitrator and the primary
    objection of the appellants before the High Court was that on
    furnishing the no claim certificate by the contractor, no dispute
    subsists which is to be sent to the arbitrator and further the
    claims which has been submitted were beyond time as prescribed
    in the agreement and thus falls under the ‘excepted matter’ in the
    agreement.
    6
  7. After the matter being heard, the application for
    appointment of arbitrator under Section 11(6) of the Act, 1996
    came to be decided by the High Court of Rajasthan by separate
    order(s) keeping in view the independence and neutrality of
    arbitrator as envisaged under Section 12(5) of the Amendment
    Act, 2015. The High Court further observed that the amended
    provisions of Act, 2015 shall apply to the pending proceedings
    and mere furnishing of no claim certificate would not take away
    the right of the parties and it is open for adjudication before the
    arbitrator and appointed a retired Judge of the High Court as an
    independent sole arbitrator under the impugned judgment in
    exercise of power under Section 11(6) of the Act, 1996.
    Indisputedly, the request for the dispute to be referred to
    arbitration in the instant batch of appeals was received by the
    appellants much before the Amendment Act, 2015 came into
    force (i.e. 23rd October, 2015).
  8. Mr. K.M. Natarajan, learned Additional Solicitor General
    appearing for the appellants submits that Section 12 including
    sub­sections (1) and (5) as also Fifth and Seventh Schedule, has
    come into force by the Amendment Act, 2015 w.e.f. 23rd October,
    7
    2015 and indisputedly, in the instant batch of appeals, request to
    refer to the arbitration was received by the appellants much prior
    to the Amendment Act, 2015. In view of Section 21 read with
    Section 26 of the Amendment Act, 2015 where the request has
    been sent to refer the dispute to arbitration and received by the
    other side before the amendment Act, 2015 has come into force,
    the proceedings will commence in accordance with the preamended provisions of the Act, 1996 and in the given
    circumstances, apparent error has been committed by invoking
    Section 12(5) of the Amendment Act, 2015 for appointment of an
    independent arbitrator without resorting to the clause 64(3) of
    GCC as agreed by the parties and in support of submission,
    learned counsel has placed reliance on the decision of this Court
    in the case of M/s. Aravali Power Company Private Limited
    Vs. Era Infrastructure Engineering Limited 2017(15) SCC 32
    and S.P. Singla Constructions Pvt. Ltd. Vs. State of
    Himachal Pradesh and Others 2018(15) Scale 421.
  9. Learned counsel further submits that once the no claim
    certificate has been signed by each of the respondent and after
    8
    settlement of the final bills, no arbitral dispute subsists and the
    contract stands discharged and they cannot be permitted to urge
    that they gave the no claim certificate under any kind of financial
    duress/undue influence and even in support thereof, no prima
    facie evidence has been placed on record. In the given
    circumstances, the appointment of an independent arbitrator by
    the High Court under Section 11(6) of the Act, 1996 is not
    sustainable and in support of submission, learned counsel has
    placed reliance on the decisions of this Court in Union of India
    and Others Vs. Master Construction Company 2011(12) SCC
    349; New India Assurance Company Limited Vs. Genus
    Power Infrastructure Ltd. 2015(2) SCC 424; ONGC Mangalore
    Petrochemicals Limited Vs. ANS Constructions Limited and
    Anr. 2018(3) SCC 373.
  10. Learned counsel further submits that none of the
    respondents had made any allegation of bias to the arbitrator
    who was likely to be appointed by the railways in terms of the
    agreement. The said issue would have cropped up only when the
    appointment of arbitrator was made by the railways. It was
    9
    required in the first instance to make every possible attempt to
    respect the agreement agreed upon by the parties in appointing
    an arbitrator to settle the disputes/differences and only when
    there are allegations of bias or malafide, or the appointed
    arbitrator has miserably failed to discharge its obligation in
    submitting the award, the Court is required to examine those
    aspects and to record a finding as to whether there is any
    requirement in default to appoint an independent arbitrator
    invoking Section 11(6) of the Act, 1996 and in support of
    submission, learned counsel has placed reliance on the decision
    of this Court in Union of India & Another Vs. M.P. Gupta
    2004(10) SCC 504, Union of India & Another Vs. V.S.
    Engineering(P) Ltd. 2006(13) SCC 240, Northern Railway
    Administration, Ministry of Railway, New Delhi Vs. Patel
    Engineering Co. Limited 2008(10) SCC 240, Union of India Vs.
    Singh Builders Syndicate 2009(4) SCC 523.
  11. Learned counsel further submits that as indicated in clause
    64(7) of the GCC, all statutory modifications thereof will be
    binding to the arbitration proceedings and after promulgation of
    10
    the Arbitration and Conciliation (Amendment) Act, 2015, clause
    64(7) stood amended to fulfil the mandate of Amendment Act,
    2015 and it was clarified that all statutory modifications thereof
    shall apply to the appointment of arbitrator and arbitration
    proceedings and the respondents being signatory to the
    agreement have accepted the enforceability of aforesaid clause
    64(7) and, therefore, are bound by any modification made in GCC
    even subsequently and placed reliance on the judgment of this
    Court in S.P. Singla Constructions Pvt. Ltd’s case(supra).
  12. Per contra, Mr. Sameer Jain, learned counsel for the
    respondents submits that respondents are the registered
    contractors undertaking various nature of works contracts with
    the railway establishment and are not in a bargaining position
    and it is a ground reality that final bills are not being released
    without a no claim certificate being furnished in advance by
    them. In all the cases, unilateral deductions have been made
    from the final bills furnished by each of the respondent and they
    are very small and petty contractors and the payments are not
    released unless the no claim certificate is being furnished, it is
    nothing more than a financial duress and undue influence by the
    11
    authorities and is open for the arbitrator to adjudicate by
    examining the bills which was furnished for payment.
  13. Learned counsel further submits that the effect of no claim
    certificate has been examined by this Court in National
    Insurance Company Limited Vs. Boghara Polyfab Private
    Limited 2009(1) SCC 267 and there are series of decisions of this
    Court where no claim certificate in itself has never been
    considered to be the basis to non­suit the request made in
    appointing an arbitrator to independently examine the dispute
    arising under the terms of the agreement.
  14. Learned counsel further submits that once the appellants
    have failed to appoint an arbitrator under the terms of agreement
    before the application under Section 11(6) being filed before the
    Court, the authority forfeits its right of appointing an arbitrator
    and it is for the Chief Justice/his designate to appoint an
    independent arbitrator under Section 11(6) of the Act, 1996 as
    held by this Court in Datar Switchgears Ltd. Vs. Tata Finance
    Ltd. and Another 2000(8) SCC 151 followed in Punj Lloyd Ltd.
    12
    Vs. Petronet MHB Ltd. 2006(2) SCC 638 and later in Union of
    India Vs. Bharat Battery Manufacturing Co. (P) Ltd. 2007(7)
    SCC 684 that once the party fails to appoint an arbitrator until
    filing of an application under Section 11(6) of the Act, the
    opposite party would lose its right of appointment of arbitrator(s)
    as per the terms of the contract.
  15. Learned counsel further submits that while dealing with
    Section 11(6), the Chief Justice/his designate can even overlook
    the qualification of the arbitrator under the agreement but
    arbitration agreement in the instant case does not contain any
    specific qualification of the arbitrator under Clause 64(3) of the
    GCC and since the appellants failed to appoint an arbitrator until
    the application was filed, Section 11(6) empowers the Court to
    deviate from the agreed terms if required by appointing an
    independent arbitrator and by virtue of operation of Section 12(5)
    of the Amendment Act, 2015, the employee of the railway
    establishment became ineligible to be appointed as arbitrator. In
    the given circumstances, the authority is vested with the Chief
    Justice or his designate to appoint an independent arbitrator
    under Section 11(6) of the Act and the same has been held by
    13
    this Court in North Eastern Railway and Others Vs. Tripple
    Engineering Works 2014(9) SCC 288 and Union of India and
    Others Vs. Uttar Pradesh State Bridge Corporation Limited
    2015(2) SCC 52.
  16. Learned counsel further submits that the primary object by
    introducing the remedy to measure arbitration is to have a fair,
    speedy and inexpensive trial by the Arbitral Tribunal.
    Unnecessary delay or expense would frustrate the very purpose
    of arbitration and it holds out that arbitrator should always be
    impartial and neutrality of the arbitrator is of utmost importance
    and that has been noticed by the Parliament in amending Section
    12(5) of the Act, 1996 which came into force on 23rd October,
    2015 and when the matters have been taken up for hearing by
    the High Court after the amendment has come into force, the
    effect of the amended provisions would certainly be taken note of
    and in the given circumstances, if an independent arbitrator has
    been appointed which is indisputedly an impartial and neutral
    person fulfilling the mandate of the object of the proceedings of
    arbitration, the amended provision has been rightly invoked by
    14
    the High Court in the appointment of an independent arbitrator
    invoking Section 11(6) of the Act, 1996.
  17. We have heard learned counsel for the parties and with
    their assistance perused the material on record.
  18. The facts which manifest from the batch of appeals are that
    the respondents are the registered contractors with the railway
    establishment and undertaking work contracts (construction) of
    various kinds. They raised a demand for escalation cost and the
    interest accrued thereon because the date of the completion of
    the project was delayed as alleged due to breach of obligations by
    the appellants and the scheduled date of completion had to be
    extended. In the interregnum period, there was a rise in the
    prices of the raw material and the project became impossible to
    be completed by the respondent contractors. Hence, a request
    was made to the appellants to either pay the enhanced escalation
    price otherwise the respondent contractors would not be in a
    position to conclude the contract and on the acceptance for
    payment of the escalation costs, respondent contractor completed
    the work and delivered the project and raised final bills in the
    15
    prescribed pre­determined format (which also included no dues
    certificate). Since the dispute has arisen in the context of the
    payment of the escalated cost, as demanded by respondent
    contractors, and their being a clause of arbitration in the
    agreement, each of the respondent contractors sent a notice for
    arbitration invoking clause 64(3) of GCC, which in majority of the
    cases declined by the appellants stating that no dues certificate
    has been furnished and that entailed no subsisting dispute and
    that was the reason due to which each of the respondent
    contractor had approached the High Court by filing an
    application under Section 11(6) of the Act, 1996. It is also not in
    dispute that the request for referring the dispute to arbitration
    was received by the appellants much prior to the enforcement of
    the Amendment Act, 2015 which came into force, w.e.f. 23rd
    October, 2015.
  19. To proceed with the matter further, it will be apposite to
    take note of the relevant clauses of the agreement with which we
    are presently concerned: ­
    “CLAIMS 43.(1) Monthly Statement Of Claims : The
    Contractor shall prepare and furnish to the Engineer
    once in every month an account giving full and detailed
    16
    particulars of all claims for any additional expenses to
    which the Contractor may consider himself entitled to
    and of all extra or additional works ordered by the
    Engineer which he has executed during the preceding
    month and no claim for payment for and such work
    will be considered which has not been included in such
    particulars.
    43.(2) Signing Of “No Claim” Certificate : The
    Contractor shall not be entitled to make any claim
    whatsoever against the Railway under or by virtue of or
    arising out of this contract, nor shall the Railway
    entertain or consider any such claim, if made by the
    Contractor, after he shall have signed a “No Claim”
    Certificate in favour of the Railway in such form as
    shall be required by the Railway after the works are
    finally measured up. The Contactor shall be debarred
    from disputing the correctness of the items covered by
    “No Claim” Certificate or demanding a clearance to
    arbitration in respect thereof.
    64.(1) Demand for Arbitration:
    64.(1) (i) In the event of any dispute or difference
    between the parties hereto as to the construction or
    operation of this contract, or the respective rights and
    liabilities of the parties on any matter in 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
    “excepted matters” referred to in Clause 63 of these
    Conditions, the contractor, after 120 days but within
    180 days of his presenting his final claim on disputed
    matters shall demand in writing that the dispute or
    difference be referred to arbitration.
    64.(1) (ii) The demand for arbitration shall specify the
    matters which are in question, or subject of the
    dispute or difference as also the amount of claim itemwise. Only such dispute(s)or difference(s) in respect of
    which the demand has been made, together with
    counter claims or set off, given by the Railway, shall be
    referred to arbitration and other matters shall not be
    included in the reference.
    17
    64.(1) (iii) (a) The Arbitration proceedings shall be
    assumed to have commenced from the day, a written
    and valid demand for arbitration is received by the
    Railway. (b) The claimant shall submit his claim
    stating the facts supporting the claims alongwith all
    the relevant documents and the relief or remedy
    sought against each claim within a period of 30 days
    from the date of appointment of the Arbitral Tribunal.
    (c) The Railway shall submit its defence statement and
    counter claim(s), if any, within a period of 60 days of
    receipt of copy of claims from Tribunal thereafter,
    unless otherwise extension has been granted by
    Tribunal. (d) Place of Arbitration : The place of
    arbitration would be within the geographical limits of
    the Division of the Railway where the cause of action
    arose or the Headquarters of the concerned Railway or
    any other place with the written consent of both the
    parties.
    64.(1) (iv) No new claim shall be added during
    proceedings by either party. However, a party may
    amend or supplement the original claim or defence
    thereof during the course of arbitration proceedings
    subject to acceptance by Tribunal having due regard to
    the delay in making it.
    64.(1) (v) If the contractor(s) does/do not prefer
    his/their specific and final claims in writing, within a
    period of 90 days of receiving the intimation from the
    Railways that the final bill is ready for payment,
    he/they will be deemed to have waived his/their
    claim(s) and the Railway shall be discharged and
    released of all liabilities under the contract in respect
    of these claims.
    64.(2) Obligation During Pendency Of Arbitration :
    Work under the contract shall, unless otherwise
    directed by the Engineer, continue during the
    arbitration proceedings, and no payment due or
    payable by the Railway shall be withheld on account of
    such proceedings, provided, however, it shall be open
    for Arbitral Tribunal to consider and decide whether or
    not such work should continue during arbitration
    proceedings.
    64.(3) Appointment of Arbitrator :
    18
    64.(3) (a)(i) In cases where the total value of all claims
    in question added together does not exceed Rs.
    25,00,000 (Rupees twenty five lakh only), the Arbitral
    Tribunal shall consist of a Sole Arbitrator who shall be
    a Gazetted Officer of Railway not below JA Grade,
    nominated by the General Manager. The sole arbitrator
    shall be appointed within 60 days from the day when a
    written and valid demand for arbitration is received by
    GM. {Authority : Railway Board’s letter no. 2012/CEI/CT/ARB./24, Dated 22.10./05.11.2013}
    64.(3) (a)(ii) In cases not covered by the Clause 64(3)(a)
    (i), the Arbitral Tribunal shall consist of a Panel of
    three Gazetted Railway Officers not below JA Grade or
    2 Railway Gazetted Officers not below JA Grade and a
    retired Railway Officer, retired not below the rank of
    SAG Officer, 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 which may also include the name(s) of
    retired Railway Officer(s) empanelled to work as
    Railway Arbitrator to the contractor within 60 days
    from the day when a written and valid demand for
    arbitration is received by the GM. Contractor will be
    asked to suggest to General Manager at least 2 names
    out of the panel for appointment as contractor’s
    nominee within 30 days from the date of dispatch of
    the request by Railway. 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 panel or
    from outside the panel, duly indicating the ‘presiding
    arbitrator’ from amongst the 3 arbitrators so
    appointed. GM shall complete this exercise of
    appointing the Arbitral Tribunal within 30 days from
    the receipt of the names of contractor’s nominees.
    While nominating the arbitrators, it will be necessary
    to ensure that one of them is from the Accounts
    Department. An officer of Selection Grade of the
    Accounts Department shall be considered of equal
    status to the officers in SA grade of other departments
    of the Railway for the purpose of appointment of
    arbitrator.
    64.(7) Subject to the provisions of the aforesaid
    Arbitration and Conciliation Act, 1996 and the rules
    thereunder and any statutory modifications thereof
    19
    shall apply to the arbitration proceedings under this
    Clause.
  20. As per clause 43(2), the contractor signs a “No claim”
    certificate in favour of the railway in the prescribed format after
    the work is finally measured up and the contractor shall be
    debarred from disputing the correctness of the items covered
    under the “No Claim” certificate or demanding a clearance to
    arbitration in respect thereof. Each of the respondent has to
    attach no claim certificate with final bills in the prescribed format
    to be furnished in advance before the final bills are being
    examined and measured by the railway authorities. Although it
    has been seriously disputed by the appellants but that is the
    reason for which even after furnishing no claim certificate with
    the final bills being raised, it came to be questioned by the
    respondent(contractor) by filing an application to refer the matter
    to arbitration invoking clause 64(3) of the conditions of contract
    as agreed by the parties.
  21. Under clause 64(1), if there is any dispute or difference
    between the parties hitherto as to the construction or operation
    20
    of the contract, or the respective rights and liabilities of the
    parties on any matter in question or any other ancillary disputes
    arising from the terms of the contract or if the railway
    establishment fails to take a decision within the stipulated period
    and the dispute could not be amicably settled, such dispute or
    difference is to be referred to arbitration and who shall arbitrate
    such disputes/differences between the parties, the General
    Manager may nominate the officer by designation as referred to
    under clause 64(3)(a)(i) and a(ii) respectively with further
    procedure being prescribed for the sole arbitrator or the Arbitral
    Tribunal to adjudicate the disputes/differences arising under the
    terms of contract between the parties.
  22. It is also not disputed that when the request of the
    respondent contractors was rejected by the appellants on the
    premise of the no claim certificate being furnished, arbitral
    dispute does not survive which is to be sent to arbitration, each
    of the respondent contractor approached the High Court by filing
    an application under Section 11(6) of the Act for appointment of
    an arbitrator for settling their disputes/differences arising from
    the terms of contract as agreed between the parties.
    21
  23. It is to be noticed that the cost of escalation which was
    raised by each of the respondent contractor with final bills were
    appended with the no claim certificate in the prescribed predetermined format and each of the claim of the respondent
    contractor for making a reference to the Arbitrator for settling the
    disputes/differences arising from the terms of the contract, as
    agreed between the parties was turned down by the appellants
    because of furnishing no claim certificate.
  24. As on 1st January, 2016, the Amendment Act, 2015 was
    gazetted and according to Section 1(2) of the Amendment Act,
    2015, it deemed to have come into force on 23rd October 2015.
    Section 21 of the Act, 1996 clearly envisage that unless otherwise
    agreed by the parties, the arbitral proceedings in respect of a
    dispute shall commence from the date on which a request for
    that dispute to be referred to arbitration is received by the
    respondent and the plain reading of Section 26 of Amendment
    Act, 2015 is self­explicit, leaves no room for interpretation.
    Section 21 & 26 of the Act, 1996/Amendment Act, 2015 relevant
    for the purpose is extracted hereunder: ­
    22
    “21. Commencement of arbitral proceedings. —
    Unless otherwise agreed by the parties, the arbitral
    proceedings in respect of a particular dispute
    commence on the date on which a request for that
    dispute to be referred to arbitration is received by the
    respondent.
  25. Act not to apply to pending arbitral
    proceedings – Nothing contained in this Act shall
    apply to the arbitral proceedings commenced, in
    accordance with the provisions of Section 21 of the
    principal Act, before the commencement of this Act
    unless the parties otherwise agree but this Act shall
    apply in relation to arbitral proceedings commenced on
    or after the date of commencement of this Act.”
  26. The conjoint reading of Section 21 read with Section 26
    leaves no manner of doubt that the provisions of the Amendment
    Act, 2015 shall not apply to such of the arbitral proceedings
    which has commenced in terms of the provisions of Section 21 of
    the Principal Act unless the parties otherwise agree. The effect of
    Section 21 read with Section 26 of Amendment Act, 2015 has
    been examined by this Court in Aravali Power Company
    Private Limited Vs. Era Infra Engineering Limited (supra)
    and taking note of Section 26 of the Amendment Act, 2015 laid
    down the broad principles as under:­
    “22. The principles which emerge from the decisions
    referred to above are:
    22.1. In cases governed by 1996 Act as it stood before
    the Amendment Act came into force:
    23
    22.1.1. The fact that the named arbitrator is an
    employee of one of the parties is not ipso facto a
    ground to raise a presumption of bias or partiality or
    lack of independence on his part. There can however
    be a justifiable apprehension about the independence
    or impartiality of an employee arbitrator, if such
    person was the controlling or dealing authority in
    regard to the subject contract or if he is a direct
    subordinate to the officer whose decision is the
    subject­matter of the dispute.
    22.1.2. Unless the cause of action for invoking
    jurisdiction under Clauses (a), (b) or (c) of sub­section
    (6) of Section 11 of the 1996 Act arises, there is no
    question of the Chief Justice or his designate
    exercising power under sub­section (6) of Section 11.
    22.1.3. The Chief Justice or his designate while
    exercising power under sub­section (6) of Section 11
    shall endeavour to give effect to the appointment
    procedure prescribed in the arbitration clause.
    22.1.4. While exercising such power under sub­section
    (6) of Section 11, 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 designate may, for reasons to be
    recorded ignore the designated arbitrator and appoint
    someone else.
    22.2. In cases governed by 1996 Act after the
    Amendment Act has come into force: If the arbitration
    clause finds foul with the amended provisions, the
    appointment of the arbitrator even if apparently in
    conformity with the arbitration clause in the
    agreement, would be illegal and thus the court would
    be within its powers to appoint such arbitrator(s) as
    may be permissible.”
    which has been further considered in S.P. Singla Constructions
    Pvt. Ltd. case(supra).
    24
    “16. Considering the facts and circumstances of the
    present case, we are not inclined to go into the merits
    of this contention of the appellant nor examine the
    correctness or otherwise of the above view taken by the
    Delhi High Court in Ratna Infrastructure Projects case;
    suffice it to note that as per Section 26 of the
    Arbitration and Conciliation (Amendment) Act, 2015
    the provisions of the Amended Act, 2015 shall not
    apply to the arbitral proceedings commenced in
    accordance with the provisions of Section 21 of the
    Principal Act before the commencement of the
    Amendment Act unless the parties otherwise agree. In
    the facts and circumstances of the present case, the
    proviso in clause (65) of the general conditions of the
    contract cannot be taken to be the agreement between
    the parties so as to apply the provisions of the
    amended Act. As per Section 26 of the Act, the
    provisions of the Amendment Act, 2015 shall apply in
    relation to arbitral proceedings commenced on or after
    the date of commencement of the Amendment Act,
    2015(w.e.f. 23.10.2015). In the present case,
    arbitration proceedings commenced way back in 2013,
    much prior to coming into force of the amended Act
    and, therefore, provisions of the Amended Act cannot
    be invoked.”
  27. We are also of the view that the Amendment Act, 2015
    which came into force, i.e. on 23rd October, 2015, shall not apply
    to the arbitral proceedings which has commenced in accordance
    with the provisions of Section 21 of the Principal Act, 1996 before
    the coming into force of Amendment Act, 2015, unless the parties
    otherwise agree.
  28. In the instant case, the request was made and received by
    the appellants in the concerned appeal much before the
    25
    Amendment Act, 2015 came into force. Whether the application
    was pending for appointment of an arbitrator or in the case of
    rejection because of no claim as in the instant case for
    appointment of an arbitrator including change/substitution of
    arbitrator, would not be of any legal effect for invoking the
    provisions of Amendment Act, 2015, in terms of Section 21 of the
    principal Act, 1996. In our considered view, the
    applications/requests made by the respondent contractors
    deserves to be examined in accordance with the principal Act,
    1996 without taking resort to the Amendment Act, 2015 which
    came into force from 23rd October, 2015.
  29. The thrust of the learned counsel for the appellants that
    submission of a no claim certificate furnished by each of the
    respondent/contractor takes away the right for settlement of
    dispute/difference arising in terms of the agreement to be
    examined by the arbitrator invoking Clause 64(3) of the
    conditions of the contract. The controversy presented before us
    is that whether after furnishing of no claim certificate and the
    receipt of payment of final bills as submitted by the contractor,
    26
    still any arbitral dispute subsists between the parties or the
    contract stands discharged.
  30. Before we take note of the factual aspect of the present
    matters, it will be appropriate to carefully consider the plenitude
    of decisions of this Court referred to by learned counsel for the
    parties and to summarise (first category) Union of India Vs.
    Kishorilal Gupta & Bros. AIR 1959 SC 1362; P.K. Ramaiah &
    Co. Vs. Chairman and Managing Director, National Thermal
    Power Corpn. 1994 Supp(3) SCC 126; State of Maharashtra
    Vs. Nav Bharat Builders 1994 Supp(3) SCC 83; Nathani Steels
    Limited Vs. Associated Constructions 1995 Supp(3) SCC
    324……(second category) Damodar Valley Corporation Vs. KK
    Kar 1974(1) SCC 141; Bharat Heavy Electricals Limited
    Ranipur Vs. Amarnath Bhan Prakash 1982(1) SCC 625;
    Union of India and Anr. Vs. L.K. Ahuja and Co. 1988(3) SCC
    76; Jayesh Engineering Works Vs. New India Assurance Co.
    Ltd. 2000(10) SCC 178; Chairman and MD, NTPC Ltd. Vs.
    27
    Reshmi Constructions Builders & Contractors 2004(2) SCC
    663.
  31. The aforesaid cases fall under two categories, the one
    category where the Court after considering the facts found that
    there was full and final settlement resulting in accord and
    satisfaction and there was no substance in the allegations of
    coercion/undue influence. In the second category of cases, the
    Court found some substance in the contention of the claimants
    that “no­dues/no claims certificate or discharge vouchers” were
    insisted and taken (either on a printed format or otherwise) as a
    condition precedent for release of the admitted dues and
    consequently this Court held that the disputes are arbitrable. It
    took note of the principles earlier examined and summarised in
    National Insurance Company Limited Vs. Boghara Polyfab
    Private Limited case (supra) as under: ­
    “44. None of the three cases relied on by the appellant
    lay down a proposition that mere execution of a full
    and final settlement receipt or a discharge voucher is a
    bar to arbitration, even when the validity thereof is
    challenged by the claimant on the ground of fraud,
    coercion or undue influence. Nor do they lay down a
    proposition that even if the discharge of contract is not
    genuine or legal, the claims cannot be referred to
    arbitration. In all the three cases, the Court examined
    28
    the facts and satisfied itself that there was accord and
    satisfaction or complete discharge of the contract and
    that there was no evidence to support the allegation of
    coercion/undue influence.”
  32. Further, taking note of the jurisdiction of the Chief Justice/
    his Designate in the proceedings under Section 11(6) of Act 1996,
    this Court culled out the legal proposition in paragraph 51 as
    follows:­
    “51. The Chief Justice/his designate exercising
    jurisdiction under Section 11 of the Act will consider
    whether there was really accord and satisfaction or
    discharge of contract by performance. If the answer is
    in the affirmative, he will refuse to refer the dispute to
    arbitration. On the other hand, if the Chief Justice/his
    designate comes to the conclusion that the full and
    final settlement receipt or discharge voucher was the
    result of any fraud/coercion/undue influence, he will
    have to hold that there was no discharge of the
    contract and consequently, refer the dispute to
    arbitration. Alternatively, where the Chief Justice/his
    designate is satisfied prima facie that the discharge
    voucher was not issued voluntarily and the claimant
    was under some compulsion or coercion, and that the
    matter deserved detailed consideration, he may instead
    of deciding the issue himself, refer the matter to the
    Arbitral Tribunal with a specific direction that the said
    question should be decided in the first instance.”
  33. It further laid down the illustrations as to when claims are
    arbitrable and when they are not. This may be illustrative (not
    exhaustive) but beneficial for the authorities in taking a decision
    as to whether in a given situation where no claim/discharge
    voucher has been furnished what will be its legal effect and still
    29
    there is any arbitral dispute subsists to be examined by the
    arbitrator in the given facts and circumstances and held in para
    52 of National Insurance Company Limited Vs. Boghara
    Polyfab Private Limited(supra) as follows:­
    “52. Some illustrations (not exhaustive) as to when
    claims are arbitrable and when they are not, when
    discharge of contract by accord and satisfaction are
    disputed, to round up the discussion on this subject
    are:
    (i) A claim is referred to a conciliation or a pre­litigation
    Lok Adalat. The parties negotiate and arrive at a
    settlement. The terms of settlement are drawn up and
    signed by both the parties and attested by the
    conciliator or the members of the Lok Adalat. After
    settlement by way of accord and satisfaction, there can
    be no reference to arbitration.
    (ii) A claimant makes several claims. The admitted or
    undisputed claims are paid. Thereafter negotiations are
    held for settlement of the disputed claims resulting in
    an agreement in writing settling all the pending claims
    and disputes. On such settlement, the amount agreed
    is paid and the contractor also issues a discharge
    voucher/no­claim certificate/full and final receipt.
    After the contract is discharged by such accord and
    satisfaction, neither the contract nor any dispute
    survives for consideration. There cannot be any
    reference of any dispute to arbitration thereafter.
    (iii) A contractor executes the work and claims payment
    of say rupees ten lakhs as due in terms of the contract.
    The employer admits the claim only for rupees six
    lakhs and informs the contractor either in writing or
    orally that unless the contractor gives a discharge
    voucher in the prescribed format acknowledging
    receipt of rupees six lakhs in full and final satisfaction
    of the contract, payment of the admitted amount will
    not be released. The contractor who is hard­pressed for
    funds and keen to get the admitted amount released,
    30
    signs on the dotted line either in a printed form or
    otherwise, stating that the amount is received in full
    and final settlement. In such a case, the discharge is
    under economic duress on account of coercion
    employed by the employer. Obviously, the discharge
    voucher cannot be considered to be voluntary or as
    having resulted in discharge of the contract by accord
    and satisfaction. It will not be a bar to arbitration.
    (iv) An insured makes a claim for loss suffered. The
    claim is neither admitted nor rejected. But the insured
    is informed during discussions that unless the
    claimant gives a full and final voucher for a specified
    amount (far lesser than the amount claimed by the
    insured), the entire claim will be rejected. Being in
    financial difficulties, the claimant agrees to the
    demand and issues an undated discharge voucher in
    full and final settlement. Only a few days thereafter,
    the admitted amount mentioned in the voucher is paid.
    The accord and satisfaction in such a case is not
    voluntary but under duress, compulsion and coercion.
    The coercion is subtle, but very much real. The
    “accord” is not by free consent. The arbitration
    agreement can thus be invoked to refer the disputes to
    arbitration.
    (v) A claimant makes a claim for a huge sum, by way of
    damages. The respondent disputes the claim. The
    claimant who is keen to have a settlement and avoid
    litigation, voluntarily reduces the claim and requests
    for settlement. The respondent agrees and settles the
    claim and obtains a full and final discharge voucher.
    Here even if the claimant might have agreed for
    settlement due to financial compulsions and
    commercial pressure or economic duress, the decision
    was his free choice. There was no threat, coercion or
    compulsion by the respondent. Therefore, the accord
    and satisfaction is binding and valid and there cannot
    be any subsequent claim or reference to arbitration.”
  34. It is true that there cannot be a rule of absolute kind and
    each case has to be looked into on its own facts and
    circumstances. At the same time, we cannot be oblivious of the
    31
    ground realities that where a petty/small contractor has made
    investments from his available resources in executing the works
    contract and bills have been raised for the escalation cost
    incurred by him and the railway establishments/appellants
    without any justification reduces the claim unilaterally and take
    a defence of the no claim certificate being furnished which as
    alleged by the respondents to be furnished at the time of
    furnishing the final bills in the prescribed format.
  35. The nature of work under contract of the respondent
    contractors and the claim of the contractors which is the dispute
    in brief to be adjudicated by the arbitrator is submitted as
    follows:­
    S.N
    o
    SLP No Name of
    Contractor
    Nature of Work under
    Contract
    Claim of Contractor
  36. 6312/2018 Parmar
    Construction
    Company
    Construction,
    Strengthening and
    rebuilding of major
    bridges between
    Nadbhai-Idgah (Agra)
    Total Cost of Contract
    Rs 3,30,71,724/-
    Rs 1,07,98,765/-
    (Final Bill) + Interest
    and Arbitration Cost.
  37. 2166/2018 S.K.
    Construction
    Construction of Office
    Accomodation for
    officers and rest house
    at Dungarpur.
    Total Cost of Contract
    Rs 43,76,112/-.
    Rs 2.96 Lacs (Deficit
    amount) + Rs 2.65 Lacs
    (Escalation cost) + Rs 2.39
    Lacs (Commercial Interest @
    18% p.a.)
    32
    Total value of Work
    done was Rs 58.50
    Lacs.
    Rs 55.54 Lacs were
    paid.
    Total Rs 8 Lacs
  38. 7937/2018 Anil Trading
    Company
    Augmentation of the
    capacity of Diesel Shed,
    Bhagat-ki-kothi,
    Jodhpur.
    Contract Price Rs
    2,42,85,808.84/-
    Rs. 2,15,000/- (Non
    availability of Drawing) + Rs
    1,50,000/- (Non availability
    of clear site) + Rs 1,14,099
    (interest on delay of Final bill
    payment) + Rs 12,15,000/-
    (Bank Guarantee) + Rs
    12,14,290/- (Security Deposit
    with interest) + Rs 1,00,000/-
    (Arbitration Cost)
    Total Rs 30,08,389/-
  39. 6034/201
    8
    Rajendra
    Prasad Bansal
    Construction addition
    and alteration and
    raising of existing
    platform surfacing
    RRI Building, S&T
    Structures and
    dismantling of various
    structures at
    Bharatpur-Agra Fort
    Station Yard.
    Total Cost of Contract
    Rs 87,85,292/-
    3 Supplementary
    contracts of the value
    of rs 24,62,511.52/-,
    Rs 3.5 Lacs & Rs
    26,12,977,14/-
    Rs 1.5 Lacs (deducted along
    with interest of 18% p.a.) +
    Rs 7.9 Lacs (expenses
    incurred on office staff and
    labour office) + Rs 1.2Lacs
    (delayed release of security
    amount & Final bill) + Rs
    2Lacs (Loss of Profit)
    Total Rs 12,60,000/-
  40. 6316/201
    8
    Maya
    Construction
    Pvt Ltd
    Construction of
    Ratangarh Bye Pass.
    Total Cost of Contract
    Rs 8,29,25,822.68/-
    Rs 38,27,196/- (Final bill
    amount) + Rs 17,78,231/-
    (PVC Final bill amount) +
    Rs 50,63,738/- (Security
    deposit & EMD)
    Total Rs 1,06,69,165/-
  41. 8597/201
    8
    Bharat Spun
    Pipes &
    Construction
    Company
    Construction of Road
    Over Bridges across
    Railway track in
    Dausa Yard.
    Total Cost of Contract
    Rs 3,81,90,423.68/-
    Rs 1,88,709/- (charged
    under head Cess) + Rs
    8,36,386/- (Final PVC Bill)
    Total Rs 10,25,095/-
    33
  42. 8596/201
    8
    Harsha
    Constructions
    Construction of new
    Major Bridge no 178
    (on Banas River)
    Total Cost of Contract
    Rs 10,51,42,109/-
    Rs 1,30,960/- (Payment
    withheld for expansion
    joints) + Rs 1 Lacs (Refund
    of penalty from bill no
    XXV) + 36 Lacs (refund of
    cost of PSC box girder) + Rs
    3,19,573/- (Loss due to
    delay in making final
    payment) + Rs 76,15,206/-
    (Incresed cost of material)
    Total Rs 1,17,65,739/-
  43. 8019/2018 Bharat Spun
    Pipes &
    Construction
    Company
    Construction of road
    over bridges across
    railway track
    Total cost of
    Contract Rs
    6,31,07,472.50/-
    Rs 6,18,302/- (charged
    under head Cess) + Rs
    10,30,081/- (Final PVC Bill)
    Total Rs 16,48,383/-
  44. 8021/2018 SB-SHC-MCDPL
    (JV)
    Construction of Major
    Bridges including
    earth work.
    Total Cost of
    Contract Rs
    15,92,08,761.97/-
    Rs 27,93,752/- (amount
    deducted which was
    previously paid on account
    of overlapping under 10th
    running bill) + Rs 1,66,785/-
    (work done outside the
    scope of work order) +
    7,98,214/- (deduction of 1%
    Cess) + Rs 5,78,144/-
    (Interest on delayed
    payment) + Rs 28,085 (Cost
    of computer stolen) + Rs
    24,87,864/- (Cost of
    expansion joint) + Rs
    1,81,003/- (Price variation)
  • Rs 60,390/- (Welding and
    bolting)
    Total Rs 70,94,237/-
  1. 7720/2018 Bharat Spun
    Pipes &
    Construction
    Company
    Construction of road
    over bridges across
    railway track
    Total cost of
    Contract Rs
    2,98,59,531/-
    Rs 44,514/- (charged under
    head Cess) + Rs 7,80,547
    (Final PVC Bill)
    Total Rs 8,25,061/-
  2. 8598/2018 Rajendra
    Prasad Bansal
    Construction of misc.,
    AEN Office,
    Signalling structure,
    platform surfacing,
    Rs 8.8 Lacs (loss of Profit) +
    Rs 5 Lacs (loss due to bad
    debts) & some other grounds
    like price variation, non
    34
    temporary site offices,
    addition and alteration
    of existing structure,
    dismantling and
    rebuilding various
    structures between
    Idgah-Agra Fort
    Station Yard.
    Total Cost of Contract
    Rs 1,40,43,594/-
    payment of final bill and
    security deposit for 1.5 yrs
    & interest on amount of final
    bill
    Total Rs 13.8 Lacs/-

[exact amount not
ascertainable from
documents on record]

Diary No
8885/2018
Bharat Spun
Pipes &
Construction
Company
Construction of road
over bridges across
railway track
Total cost of
Contract Rs
5,47,26,451.47/-
Rs 4,78,780/- (charged
under head Cess) + Rs
23,07,563/- (Final PVC Bill)
along with price variation
and interest
Total Rs 27,86,343/- 9514/201
8
B.M.
Construction
Company
Construction of major
bridge between
Kanauta- Jaipur
stations.
Total Cost of
Contract Rs
8,46,08,660/-
Rs 7,21,733/- (for adding
10% more cement) + Rs
6,23,923/- + Rs 7,55,734/-
(Extra work) + Rs
11,07,561/ -(Price variation
of Steel purchased) + 4Lacs
(using pressure rings) +
4,53,304/- (Labour Cess
deducted), Rs 1.25Lacs
(deduction from bills) + Rs
3,47,880/- (interest on
delayed paymet) + Rs 1.28
Lacs (Deducted as penalty)

  • Rs 19,01,537 (on a/c of
    PVC) + Rs 60Lacs (20Lacs
    each for business losses,
    mental agonies and social
    humiliation) along with
    interest
    Total Rs 1,93,34,667/-
  1. 9559/201
    8
    Balaji Builders
    & Developers
    Construction of 72
    Units Type-II, 108
    Units Type-III, 36
    Units Type-IV in
    multi-storied tower
    and health units,
    shopping complex and
    Rs 1,32,71,424/- (Final PVC
    Bill) + Rs 50Lacs (Price
    variation of steel bars)
    Total Rs
    1,82,71,424/-
    35
    other ancillary works
    near Getore Jagatpur
    Railway Station.
    Total Cost of Contract
    Rs 28,28,20,028/-
  2. 22263/20
    18
    B.M.
    Construction
    Company
    Construction of major
    bridge between
    Jatwara- Kanauta
    stations.
    Total Cost of
    Contract Rs
    10,4484,441/-
    Rs 39,05,010/- (for vacant
    labour charges of 9 months)
  • Rs 19,46,970/- (delay in
    providing drawing) + Rs
    13,66,488/-(Price variation
    of Steel purchased) + Rs
    3,91,534.88/- (using
    pressure rings) + 1,32,655/-
    (Labour Cess deducted), Rs
    1,30,771/- (deduction from
    bills) + Rs 50,000/-
    (Deducted from 21 running
    bills) + Rs 11,91,127/-
    (interest on delayed
    payment) + Rs 56,40,327/-
    (Security Amount) + Rs
    1,38,000/- (deducted as
    penalty) + Rs 76,39,600/-
    (PVC Bill)+ Rs 60Lacs
    (20Lacs each for business
    losses, mental agonies and
    social humiliation) along
    with interest
    Total Rs 2,85,32,482/-
  1. 11417/20
    18
    Kewai
    Constructions
    Co (JV)
    Construction of Minor
    Bridge between Dausa
    – Lalsot
    Total Cost of Contract
    Rs 5,98,22,476/-
    Rs 16,74,748/- (security
    Deposit) + Rs 47,66,869/-
    (Payment of Bill) + Rs
    31,33,116/- (Cost of
    material left at site) + Rs
    10Lacs (PSC Slab
    Advances) + Rs 13.85 Lacs
    (Idle Labour Charge) + Rs
    50,000/- (Cost of
    Arbitration)
    Total Rs. 1,20,09,733/-
  2. 11862/20
    18
    Harinarayan
    Khandelwal
    Construction of
    Staircase for fire exit,
    drilling tube well,
    underground water
    tank, and other
    Rs 4,82,283.26/- (Final PVC
    Bill)
    36
    miscellaneous works
    Total Cost of Contract
    Rs 1,56,63,006.87/-
  3. The respondents are the contractors and attached with the
    railway establishment in the instant batch of appeals are
    claiming either refund of security deposits/bank guarantee,
    which has been forfeited or the escalation cost has been reduced
    from final invoices unilaterally without tendering any
    justification. It is manifest from the pleadings on record that the
    respondent contractors who entered into contract for
    construction works with the railway establishment cannot afford
    to take any displeasure from the employer, the amount under the
    bills for various reasons which may include discharge of his
    liability towards the bank, financial institutions and other
    persons, indeed the railway establishment has a upper hand. A
    rebutable presumption could be drawn that when a no claim has
    been furnished in the prescribed format at the time of final bills
    being raised with unilateral deductions made even that
    acceptable amount will not be released, unless no claim
    certificate is being attached to the final bills. On the stated facts,
    para 52(iii) referred to by this Court in National Insurance
    37
    Company Limited Vs. Boghara Polyfab Private Limited(supra)
    indeed covers the cases of the present contractors with whom no
    option has been left and being in financial duress to accept the
    amount tendered in reference to the final bills furnished and
    from the discharge voucher which has been taken to be a defence
    by the appellants prima facie cannot be said to be voluntary and
    has resulted in the discharge of the contract by accord and
    satisfaction as claimed by the appellants. In our considered view,
    the arbitral dispute subsists and the contract has not been
    discharged as being claimed by the appellants employer(s) and all
    the contentions in this regard are open to be examined in the
    arbitral proceedings.
  4. Learned counsel for the appellants has referred to the
    judgments in Union of India and Others Vs. Master
    Construction Company(supra); New India Assurance
    Company Limited Vs. Genus Power Infrastructure Limited
    (supra); ONGC Mangalore Petrochemicals Limited Vs. ANS
    Constructions Limited and Anr. (supra). In all the cases
    referred, this Court has taken note of the judgment in National
    38
    Insurance Company Limited Vs. Boghara Polyfab Private
    Limited (supra) on which a detailed discussion has been made
    and taking note of the pleadings of the case on hand, this Court
    arrived at a conclusion that prima facie there is an evidence on
    record to justify that no claim certificate or letter of subrogation
    was voluntary and free from coercion/undue influence and
    accordingly held that there is no live claim subsists, which is
    arbitrable after the discharge of the contract by accord and
    satisfaction.
  5. The further submission made by the appellants that the
    High Court has committed error in appointing an independent
    arbitrator without resorting to the arbitrator which has been
    assigned to arbitrate the dispute as referred to under clause 64(3)
    of the contract. To examine the issue any further, it may be
    relevant to take note of three clauses in sub­section 6 of Section
    11 of Act, 1996(pre­amended Act, 2015) which is as under:­
    “(6) Where, under an appointment procedure agreed
    upon by the parties,—
    (a) a party fails to act as required under that
    procedure; or
    39
    (b) the parties, or the two appointed arbitrators, fail to
    reach an agreement expected of them under that
    procedure; or
    (c) a person, including an institution, fails to perform
    any function entrusted to him or it under that
    procedure,
    a party may request the Chief Justice or any person or
    institution designated by him to take the necessary
    measure, unless the agreement on the appointment
    procedure provides other means for securing the
    appointment.
  6. Clause (c) of sub­section (6) of Section 11 relates to failure
    to perform any function entrusted to a person including an
    institution and also failure to act under the procedure agreed
    upon by the parties. In other words, clause(a) refers to the party
    failing to act as required under that procedure; clause(b) refers to
    the agreement where the parties fails to reach to an agreement
    expected of them under that procedure and clause (c ) relates to a
    person which may not be a party to the agreement but has given
    his consent to the agreement and what further transpires is that
    before any other alternative is resorted to, agreed procedure has
    to be given its precedence and the terms of the agreement has to
    be given its due effect as agreed by the parties to the extent
    possible. The corrective measures have to be taken first and the
    Court is the last resort. It is also to be noticed that by appointing
    40
    an arbitrator in terms of sub­section (8) of Section 11 of Act,
    1996, due regard has to be given to the qualification required for
    the arbitrator by the agreement of the parties and also the other
    considerations such as to secure an independent and impartial
    arbitrator. To fulfil the object with terms and conditions which
    are cumulative in nature, it is advisable for the Court to ensure
    that the remedy provided as agreed between the parties in terms
    of the contract is first exhausted.
  7. It has been considered by a three Judges’ Bench of this
    Court in Union of India & Another Vs. M.P. Gupta(supra).
    Taking note of clause 64 of the agreement for arbitration, the
    Court held that in view of express provision contained in terms of
    the agreement in appointment of two gazetted railway officers,
    the High Court was not justified in appointment of a retired
    Judge as the sole arbitrator. It held as under:­
    “3. The relevant part of clause 64 runs as under:
    “64. Demand for arbitration.—***
    (3)(a)(ii) Two arbitrators who shall be gazetted railway
    officers of equal status to be appointed in the manner
    laid in clause 64(3)(b) for all claims of Rs 5,00,000
    (Rupees five lakhs) and above, and for all claims
    irrespective of the amount or value of such claims if
    41
    the issues involved are of a complicated nature. The
    General Manager shall be the sole judge to decide
    whether the issues involved are of a complicated
    nature or not. In the event of the two arbitrators being
    undecided in their opinions, the matter under dispute
    will be referred to an umpire to be appointed in the
    manner laid down in sub­clause (3)(b) for his decision.
    (3)(a)(iii) It is a term of this contract that no person
    other than a gazetted railway officer should act as an
    arbitrator/umpire and if for any reason, that is not
    possible, the matter is not to be referred to arbitration
    at all.”
  8. In view of the express provision contained therein
    that two gazetted railway officers shall be appointed as
    arbitrators, Justice P.K. Bahri could not be appointed
    by the High Court as the sole arbitrator. On this short
    ground alone, the judgment and order under challenge
    to the extent it appoints Justice P.K. Bahri as sole
    arbitrator is set aside. Within 30 days from today, the
    appellants herein shall appoint two gazetted railway
    officers as arbitrators. The two newly appointed
    arbitrators shall enter into reference within a period of
    another one month and thereafter the arbitrators shall
    make their award within a period of three months.”
  9. It was further considered by this Court in Union of India
    and Another Vs. V.S. Engineering(P) Ltd. (supra) as under:­
    “3. The learned Additional Solicitor General appearing for the
    appellants Union of India has pointed out that as per clauses
    63 and 64 of the General Conditions of Contract, this Court in
    no uncertain terms has held that the Arbitral Tribunal has to
    be constituted as per the General Conditions of Contract, the
    High Court should not interfere under Section 11 of the Act
    and the High Court should accept the Arbitral Tribunal
    appointed by the General Manager, Railways. In this
    connection, the learned ASG invited our attention to a
    decision of this Court directly bearing on the subject in Union
    of India v. M.P. Gupta [(2004) 10 SCC 504] wherein a similar
    question with regard to appointment of the Arbitral Tribunal
    for the Railways with reference to clause 64 of the General
    Conditions of Contract came up before this Court and this
    42
    Court held that where two gazetted railway officers are
    appointed as the Arbitral Tribunal, the High Court should not
    appoint a retired Judge of the High Court as a sole arbitrator
    and the appointment of sole arbitrator was set aside. The
    conditions of clauses 63 and 64 of the General Conditions of
    Contract are almost analogous to the one we have in our
    hand. In that case also relying on clause 64 of the contract a
    three-Judge Bench presided over by the Chief Justice of
    India observed as follows: (SCC p. 505, para 4)
    “4. In view of the express provision
    contained therein that two gazetted railway
    officers shall be appointed as arbitrators,
    Justice P.K. Bahri could not be appointed by
    the High Court as the sole arbitrator. On this
    short ground alone, the judgment and order
    under challenge to the extent it appoints
    Justice P.K. Bahri as sole arbitrator is set
    aside. Within 30 days from today, the
    appellants herein shall appoint two gazetted
    railway officers as arbitrators. The two newly
    appointed arbitrators shall enter into
    reference within a period of another one
    month and thereafter the arbitrators shall
    make their award within a period of three
    months.”
    and further reiterated by this Court in Northern Railway
    Administration, Ministry of Railway, New Delhi Vs. Patel
    Engineering Company Limited(supra) as follows:­
    “5. It is pointed out that there are three clauses in
    sub­section (6) of Section 11. Clause (c) relates to
    failure to perform function entrusted to a person
    including an institution and also failure to act under
    the procedure agreed upon by the parties. In other
    words, clause (a) refers to parties to the agreement.
    Clause (c) relates to a person who may not be party to
    the agreement but has given consent to the agreement.
    It is also pointed out that there is a statutory mandate
    to take necessary measures, unless the agreement on
    the appointment procedure provided other means for
    securing the appointment. It is, therefore, submitted
    that before the alternative is resorted to, agreed
    procedure has to be exhausted. The agreement has to
    43
    be given effect and the contract has to be adhered to as
    closely as possible. Corrective measures have to be
    taken first and the Court is the last resort.
  10. It is also pointed out that while appointing an
    arbitrator in terms of sub­section (8) of Section 11, the
    Court has to give due regard to any qualification
    required for the arbitrator by the agreement of the
    parties and other considerations as are likely to secure
    the appointment of an independent and impartial
    arbitrator. It is pointed out that both these conditions
    are cumulative in nature. Therefore, the Court should
    not directly make an appointment. It has to ensure
    first that the provided remedy is exhausted and the
    Court may ask to do what has not been done.
  11. A bare reading of the scheme of Section 11 shows
    that the emphasis is on the terms of the agreement
    being adhered to and/or given effect as closely as
    possible. In other words, the Court may ask to do what
    has not been done. The Court must first ensure that
    the remedies provided for are exhausted. It is true as
    contended by Mr. Desai, that it is not mandatory for
    the Chief Justice or any person or institution
    designated by him to appoint the named arbitrator or
    arbitrators. But at the same time, due regard has to be
    given to the qualifications required by the agreement
    and other considerations.”
    and further, in Union of India Vs. Singh Builders
    Syndicate(supra) it was held as under:­
    “11. The question that arises for consideration in this
    appeal by special leave is whether the appointment of a
    retired Judge of the High Court as sole arbitrator
    should be set aside and an Arbitral Tribunal should
    again be constituted in the manner provided in terms
    of Clause 64.
  12. Dealing with a matter arising from the old Act (the
    Arbitration Act, 1940), this Court, in Union of
    India v. M.P. Gupta [(2004) 10 SCC 504] held that
    appointment of a retired Judge as sole arbitrator
    44
    contrary to Clause 64 (which requiring serving gazetted
    railway officers being appointed) was impermissible.
  13. The position after the new Act came into force, is
    different, as explained by this Court in Northern
    Railway Admn., Ministry of Railway v. Patel Engg. Co.
    Ltd.[(2008) 10 SCC 240]. This Court held that the
    appointment of arbitrator(s) named in the arbitration
    agreement is not mandatory or a must, but the
    emphasis should be on the terms of the arbitration
    agreement being adhered to and/or given effect, as
    closely as possible.
  14. It was further held in Northern Railway
    case [(2008) 10 SCC 240] that the Chief Justice or his
    designate should first ensure that the remedies
    provided under the arbitration agreement are
    exhausted, but at the same time also ensure that the
    twin requirements of sub­section (8) of Section 11 of
    the Act are kept in view. This would mean that
    invariably the court should first appoint the arbitrators
    in the manner provided for in the arbitration
    agreement. But where the independence and
    impartiality of the arbitrator(s) appointed/nominated
    in terms of the arbitration agreement is in doubt, or
    where the Arbitral Tribunal appointed in the manner
    provided in the arbitration agreement has not
    functioned and it becomes necessary to make fresh
    appointment, the Chief Justice or his designate is not
    powerless to make appropriate alternative
    arrangements to give effect to the provision for
    arbitration.”
  15. This Court has put emphasis to act on the agreed terms and
    to first resort to the procedure as prescribed and open for the
    parties to the agreement to settle differences/disputes arising
    under the terms of the contract through appointment of a
    designated arbitrator although the name in the arbitration
    agreement is not mandatory or must but emphasis should always
    45
    be on the terms of the arbitration agreement to be adhered to or
    given effect as closely as possible.
  16. The judgments in Datar Switchgears Ltd. case(supra);
    Punj Lloyd case(supra) and Union of India Vs. Bharat Battery
    Manufacturing Co. (P) Ltd. case(supra) on which reliance has
    been placed by the learned counsel for the
    respondents/contractors may not be of assistance for the reason
    that the question for consideration before this Court was that if
    one party demands the opposite party to appoint an arbitrator
    and the other party fails to appoint an arbitrator within 30 days
    what will be its legal consequence and it was held in the
    cases(supra) that if one party demands the opposite party to
    appoint an arbitrator and if the opposite party has failed to make
    an appointment within 30 days, the right to make appointment is
    not forfeited but continues, but an appointment has to be made
    before the former makes an application under Section 11 seeking
    appointment of an arbitrator. In the instant cases, the question
    for consideration is as to whether the Chief Justice or his
    Designate in exercise of power under Section 11(6) of the Act
    46
    should directly make an appointment of an independent
    arbitrator without, in the first instance, resorting to ensure that
    the remedies provided under the arbitration agreement are
    exhausted.
  17. In the present batch of appeals, independence and
    impartiality of the arbitrator has never been doubted but where
    the impartiality of the arbitrator in terms of the arbitration
    agreement is in doubt or where the Arbitral Tribunal appointed in
    terms of the arbitration agreement has not functioned, or has
    failed to conclude the proceedings or to pass an award without
    assigning any reason and it became necessary to make a fresh
    appointment, Chief Justice or his designate in the given
    circumstances after assigning cogent reasons in appropriate
    cases may resort to an alternative arrangement to give effect to
    the appointment of independent arbitrator under Section 11(6) of
    the Act. In North Eastern Railway and Others Vs. Tripple
    Engineering Works (supra), though the panel of arbitrators as
    per clause 64(3)(a)(ii) and (iii) of the general conditions of contract
    under GCC was appointed in the year 1996 but for two decades,
    the arbitrator failed to pass the award and no explanation came
    47
    forward. In the given situation, this Court observed that general
    conditions of the contract do not prescribe any specific
    qualification of the arbitrators to be appointed under the
    agreement except that they should be railway officers further
    held that even if the arbitration agreement was to specifically
    provide for any particular qualification(s) of an arbitrator the
    same would not denude the power of the Court acting under
    Section 11(6) to depart therefrom and accordingly, confirmed the
    appointment of an independent arbitrator appointed by the High
    Court in exercise of Section 11(6) of the Act, 1996. Almost the
    same situation was examined by this Court in Union of India
    and Others Vs. Uttar Pradesh State Bridge Corporation Ltd.
    (supra) and after placing reliance on North Eastern Railway
    and Others Vs. Tripple Engineering works(supra) held that
    since Arbitral Tribunal has failed to perform and to conclude the
    proceedings, appointed an independent arbitrator in exercise of
    power under Section 11(6) of the Act, 1996. In the given
    circumstances, it was the duty of the High Court to first resort to
    the mechanism in appointment of an arbitrator as per the terms
    of contract as agreed by the parties and the default procedure
    48
    was opened to be resorted to if the arbitrator appointed in terms
    of the agreement failed to discharge its obligations or to arbitrate
    the dispute which was not the case set up by either of the
    parties.
  18. To conclude, in our considered view, the High Court was not
    justified in appointing an independent arbitrator without
    resorting to the procedure for appointment of an arbitrator which
    has been prescribed under clause 64(3) of the contract under the
    inbuilt mechanism as agreed by the parties.
  19. Consequently, the orders passed by the High Court are
    quashed and set aside. The appellants are directed to appoint
    the arbitrator in terms of clause 64(3) of the agreement within a
    period of one month from today under intimation to each of the
    respondents/contractors and since sufficient time has been
    consumed, at the first stage itself, in the appointment of an
    arbitrator and majority of the respondents being the petty
    contractors, the statement of claim be furnished by each of the
    respondents within four weeks thereafter and the arbitrator may
    decide the claim after affording opportunity of hearing to the
    parties expeditiously without being influenced/inhibited by the
    observations made independently in accordance with law.
    49
  20. The batch of appeals are accordingly disposed of on the
    terms indicated. No costs.
  21. Pending application(s), if any, stand disposed of.
    …………………………J.
    (A.M. KHANWILKAR)
    …………………………J.
    (AJAY RASTOGI)
    NEW DELHI
    March 29, 2019
    50