inkinccorporation@gmail.com Calcutta High Court
Rajesh Singh vs West Bengal Live Stock Development … on 29 April, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD -21
ORDER SHEET
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
AP-COM/328/2025
RAJESH SINGH
VS
WEST BENGAL LIVE STOCK DEVELOPMENT CORPORATION
LIMITED
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 29thApril, 2025.
Appearance:
Ms. Sweta Gandhi, Adv.
Mr. Sounak Bhattacharya, Adv.
.... for the petitioner
Mr. Sanjay Mukherjee, Adv.
Mr. Balarko Sen, Adv.
Mr. Suvradal Choudhury, Adv.
Ms. Anjali Das, Adv.
Ms. Rupsa Ganguly, Adv.
...for the respondent
The Court:1.This is an application for appointment of a learned
arbitrator, in terms of clause 2 of the Agreement of Contract dated April 4,
2022. Clause 4 of the said Agreement mentions that all disputes shall be
subject to the jurisdiction of the Calcutta High Court.
2. The petitioner was awarded the work of setting up of a Commercial
Layer Farm for 2.4 lakhs birds. The work order was issued upon acceptance of
a lumpsum price quoted by the petitioner to the tune of Rs. 32,83,00,000/-.
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According to the petitioner, the work was near completion, but the respondent
raised objection with regard to the delay in completion. The respondent
debarred the petitioner from continuing with the work any further, and
engaged a third party to complete the work. Aggrieved, the petitioner moved an
application under Section 9 of the said act for a order of injunction restraining
the respondent from encashing the bank guarantee, thereby treating the said
debarment as a termination. The petitioner was favoured with an order of
injunction. The petitioner has thereafter invoked arbitration, by a letter dated
February 28, 2025, to which the respondent replied on April 10, 2025.
3. Mr. Sanjoy Mukherjee, learned advocate for the respondent
submits that clause 54 of the notice inviting tender dated December 21, 2021,
did away with the provision for arbitration. The clause is quoted below:-
"54. There shall no provision of Arbitration. Hence clause 25 of the West
Bengal Form No. 2911(ii) shall not be allowed vide memo no. 558/SPW dated
13.12.2011 of P.W.D. Establishment Branch."
4. It is urged that the matter should not be referred to arbitration.
5. This Court finds that pursuant to the notice inviting tender, the
petitioner's bid was accepted. He was the successful bidder. The petitioner was
awarded the work and an agreement was entered into on April 4, 2022. The
agreement provided that in case of a dispute with regard to the rights and
liabilities of the parties arising from the contract, the aggrieved party may refer
3
the matter to the sole arbitrator as may be appointed by the Government of
West Bengal, ARD Department.
6. Under such circumstances, this Court finds that the agreement
provided an option to a party aggrieved by the terms and conditions of the
agreement or in case of any dispute and difference arising out of the said
agreement, to refer the dispute to arbitration. The term 'may' is neither
definitive nor binding. Admittedly, there is no binding arbitration clause in the
agreement. However Section 7 of the Act defines an arbitration agreement in
the following manner :
"7. Arbitration agreement.--(1) In this Part, "arbitration agreement"
means an agreement by the parties to submit to arbitration all or
certain disputes which have arisen or which may arise between
them in respect of a defined legal relationship, whether contractual
or not.
(2) An arbitration agreement may be in the form of an arbitration
clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in-- (a) a
document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of
telecommunication 1 [including communication through electronic
means] which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the
existence of the agreement is alleged by one party and not denied
by the other.
(5) The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the
contract is in writing and the reference is such as to make that
arbitration clause part of the contract."
Clause 7(2) provides that an arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a separate agreement. Clause
4
7(4) provides that the arbitration agreement would be treated to be in writing if
it is contained in (a) a document signed by the parties (b) an exchange of
letters, telex, telegrams or other means of telecommunication (c) an exchange
of statements of claim and defence in which the existence of arbitration clause
alleged by one party is not denied.
7. Under clause 2 of the subject agreement, the petitioner has a right to
request for arbitration or to refer the dispute for arbitration. This clause in the
context will prevail over the NIT. The petitioner exercised such choice and
issued a notice invoking arbitration and named an arbitrator. In response,the
respondent's advocate by letter dated April 10, 2025 denied the claims and the
allegation leveled against the respondent. According to the respondent, the
arbitration clause must precede an attempt at mutual resolution of the dispute
and on failure of such attempt, the matter should be referred to the sole
arbitrator to be appointed by the Government of West Bengal, ARD
Department. A detailed response to the notice invoking arbitration was issued.
The thrust of the objections of the respondent was on non-admissibility of the
claim, baseless allegations made by the petitioner and the petitioner misleading
the learned Commercial Court at Rajarhat, in order to obtain an order of
injunction etc. The respondent refused to refer the dispute to the arbitration of
the named arbitrator in the letter issued by the petitioner, but proposed the
5
name of a learned senior advocate of the Bar Library Club, High Court,
Calcutta. Paragraph 25 of the letter is relevant which is observed as follows :
"25. Since the NIT and Contract provides that to resolve the disputes
between the parties, the aggrieved party may refer the matter to the sole
arbitrator as may be appointed by the Government of West Bengal, ARD
Department on reference from either party for arbitration and the decision
of the arbitrator shall be final and binding on both the parties, our Client
proposes the name of Mr. Suman Dutt, Senior Advocate, Bar Library Club,
Calcutta High Court, as the Sole Arbitrator to adjudicate the dispute
between the parties and we expect that you will convey the acceptance
your name which is proposed in terms of the extant arbitration clause
(considering that you are no longer interested in settlement of dispute
through mutual discussion) within 15 days from the date of receipt of this
communication failing which our clients will refer the matter to the
proposed Arbitrator for adjudication of the disputes."
Thus, the option under clause 2 of the agreement was exercised by the
petitioner, seeking reference of dispute to arbitration and two named
arbitrators were nominated in the notice. The respondent alternatively recorded
that as the NIT and the contract provided that a dispute between the parties
may be referred to a sole arbitrator to be appointed by the Government of West
Bengal whose decision shall be final and binding, the dispute should be
referred to the arbitrator suggested by the respondent. The contention of Mr.
Mukherjee that it was the prerogative of the Government/respondent to
appoint an arbitrator is not accepted by the Court. The petitioner has rightly
approached this Court in view of the provisions of Section 12(5) read with
schedule 5 and 7 which prohibits unilateral appointment of an arbitrator by
interested parties. Reference is made to the decisions Perkins Eastman
Architects DPC and Another vs. HSCC (India) Ltd. reported in 2019 SCC
6
OnLine SC 1517, and Central Organisation for Railway Electrification vs.
ECI SPIC SMO MCML (JV) A joint Venture Company reported in 2024 SCC
OnLine SC 3219.
8. The Hon'ble Apex Court in Central Organization for Railway
Electrification (supra), held thus:-
"73. The 2015 amendment has introduced concrete standards of
impartiality and independence of arbitrators. One of the facets of
impartiality is procedural impartiality. Procedural impartiality
implies that the rules constitutive of the decision-making process
must favour neither party to the dispute or favour or inhibit both
parties equally. 137 Further, a procedurally impartial adjudication
entails equal participation of parties in all aspects of adjudication
for the process to approach legitimacy. 138 Participation in the
adjudicatory process is meaningless for a party against whom the
arbitrator is already prejudiced. 139 Equal participation of parties in
the process of appointment of arbitrators ensures that both sides
have an equal say in the establishment of a genuinely independent
and impartial arbitral process.
74. Under Sections 12(1) and 12(5), the Arbitration Act recognises
certain mandatory standards of independent and impartial
tribunals. The parties have to challenge the independence or
impartiality of the arbitrator or arbitrators in terms of Section 12(3)
before the same arbitral tribunal under Section 13.140 If the
tribunal rejects the challenge, it has to continue with the arbitral
proceedings and make an award. Such an award can always be
challenged under Section 34. However, considerable time and
7
expenses are incurred by the parties by the time the award is set
aside by the courts. Equal participation of parties at the stage of the
appointment of arbitrators can thus obviate later challenges to
arbitrators.
75. Independence and impartiality of arbitral proceedings and
equality of parties are concomitant principles. The independence
and impartiality of arbitral proceedings can be effectively enforced
only if the parties can participate equally at all stages of an arbitral
process. Therefore, the principle of equal treatment of parties
applies at all stages of arbitral proceedings, including the stage of
the appointment of arbitrators.
***
124. The doctrine of bias as evolved in English and Indian law
emphasizes independence and impartiality in the process of
adjudication to inspire the confidence of the public in the
adjudicatory processes. Although Section 12 deals with the quality
of independence and impartiality inherent in the arbitrators, the
provision’s emphasis is to ensure an independent and impartial
arbitral process.”
In Perkins Eastman (supra), the Hon’ble Apex Court held thus
:-
…”20. We thus have two categories of cases. The first, similar to the
one dealt with in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd.,
(2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] where the Managing
Director himself is named as an arbitrator with an additional power
to appoint any other person as an arbitrator. In the second category,
the Managing Director is not to act as an arbitrator himself but is
empowered or authorised to appoint any other person of his choice
or discretion as an arbitrator. If, in the first category of cases, the
8Managing Director was found incompetent, it was because of the
interest that he would be said to be having in the outcome or result
of the dispute. The element of invalidity would thus be directly
relatable to and arise from the interest that he would be having in
such outcome or decision. If that be the test, similar invalidity would
always arise and spring even in the second category of cases. If the
interest that he has in the outcome of the dispute, is taken to be the
basis for the possibility of bias, it will always be present irrespective
of whether the matter stands under the first or second category of
cases. We are conscious that if such deduction is drawn from the
decision of this Court in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects
Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] , all cases having
clauses similar to that with which we are presently concerned, a
party to the agreement would be disentitled to make any
appointment of an arbitrator on its own and it would always be
available to argue that a party or an official or an authority having
interest in the dispute would be disentitled to make appointment of
an arbitrator.
21. But, in our view that has to be the logical deduction from TRF
Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 :
(2017) 4 SCC (Civ) 72] Para 50 of the decision shows that this Court
was concerned with the issue, “whether the Managing Director, after
becoming ineligible by operation of law, is he still eligible to
nominate an arbitrator” The ineligibility referred to therein, was as a
result of operation of law, in that a person having an interest in the
dispute or in the outcome or decision thereof, must not only be
ineligible to act as an arbitrator but must also not be eligible to
appoint anyone else as an arbitrator and that such person cannot
and should not have any role in charting out any course to the
dispute resolution by having the power to appoint an arbitrator. The
next sentences in the paragraph, further show that cases where
both the parties could nominate respective arbitrators of their choice
were found to be completely a different situation. The reason is clear
that whatever advantage a party may derive by nominating an
arbitrator of its choice would get counter-balanced by equal power
with the other party.But, in a case where only one party has a right
to appoint a sole arbitrator, its choice will always have an element of
exclusivity in determining or charting the course for dispute
resolution. Naturally, the person who has an interest in the outcome
or decision of the dispute must not have the power to appoint a sole
arbitrator. That has to be taken as the essence of the amendments
brought in by the Arbitration and Conciliation (Amendment) Act,
92015 (3 of 2016) and recognised by the decision of this Court in TRF
Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 :
(2017) 4 SCC (Civ) 72]
…
24. In Voestalpine [VoestalpineSchienen GmbH v. DMRC, (2017) 4
SCC 665 : (2017) 2 SCC (Civ) 607] , this Court dealt with
independence and impartiality of the arbitrator as under : (SCC pp.
687-88 & 690-91, paras 20 to 22 & 30)
“20. Independence and impartiality of the arbitrator are the
hallmarks of any arbitration proceedings. Rule against bias is one of
the fundamental principles of natural justice which applied to all
judicial and quasi-judicial proceedings. It is for this reason that
notwithstanding the fact that relationship between the parties to the
arbitration and the arbitrators themselves are contractual in nature
and the source of an arbitrator’s appointment is deduced from the
agreement entered into between the parties, notwithstanding the
same non-independence and non-impartiality of such arbitrator
(though contractually agreed upon) would render him ineligible to
conduct the arbitration. The genesis behind this rational is that
even when an arbitrator is appointed in terms of contract and by the
parties to the contract, he is independent of the parties. Functions
and duties require him to rise above the partisan interest of the
parties and not to act in, or so as to further, the particular interest
of either parties. After all, the arbitrator has adjudicatory role to
perform and, therefore, he must be independent of parties as well as
impartial. The United Kingdom Supreme Court has beautifully
highlighted this aspect in Hashwani v. Jivraj [Hashwani v. Jivraj,
(2011) 1 WLR 1872 : 2011 UKSC 40] in the following words : (WLR
p. 1889, para 45)
’45. … the dominant purpose of appointing an arbitrator or
arbitrators is the impartial resolution of the dispute between the
parties in accordance with the terms of the agreement and, although
the contract between the parties and the arbitrators would be a
contract for the provision of personal services, they were not
personal services under the direction of the parties.’
21. Similarly, Cour de Cassation, France, in a judgment delivered in
1972 in Consorts Ury [Fouchard, Gaillard, Goldman on
International Commercial Arbitration, 562 [Emmanuel Gaillard &
John Savage (Eds.) 1999] {quoting Cour de cassation [Cass.]
[Supreme Court for judicial matters] Consorts Ury v. S.A. des
10
Galeries Lafayette, Cass.2e civ., 13-4-1972, JCP, Pt. II, No. 17189
(1972) (France)}.] , underlined that:
‘an independent mind is indispensable in the exercise of judicial
power, whatever the source of that power may be, and it is one of
the essential qualities of an arbitrator’.
22. Independence and impartiality are two different concepts. An
arbitrator may be independent and yet, lack impartiality, or vice
versa. Impartiality, as is well accepted, is a more subjective concept
as compared to independence. Independence, which is more an
objective concept, may, thus, be more straightforwardly ascertained
by the parties at the outset of the arbitration proceedings in light of
the circumstances disclosed by the arbitrator, while partiality will
more likely surface during the arbitration proceedings.
***
30. Time has come to send positive signals to the international
business community, in order to create healthy arbitration
environment and conducive arbitration culture in this country.
Further, as highlighted by the Law Commission also in its report,
duty becomes more onerous in government contracts, where one of
the parties to the dispute is the Government or public sector
undertaking itself and the authority to appoint the arbitrator rests
with it. In the instant case also, though choice is given by DMRC to
the opposite party but it is limited to choose an arbitrator from the
panel prepared by DMRC. It, therefore, becomes imperative to have
a much broadbased panel, so that there is no misapprehension that
principle of impartiality and independence would be discarded at
any stage of the proceedings, specially at the stage of constitution of
the Arbitral Tribunal. We, therefore, direct that DMRC shall prepare
a broadbased panel on the aforesaid lines, within a period of two
months from today…”
9. Under such circumstances, this Court is persuaded to hold that such
communication of the respondent is covered by the definition of an arbitration
clause in terms of clause 7(4)(b) of the said Act. The petitioner exercised the
option of reference to arbitration. The respondent was agreeable to refer the
dispute, but to an arbitrator of their choice. In the letter, the respondent
11
accepts the arbitration clause. Further deliberation on this, is a question with
regard to arbitrability or jurisdiction of the learned arbitrator, which the
respondent is entitled to raise before the learned arbitrator. Objections with
regard to the admissibility of the claims or otherwise, are also to be decided by
the learned Arbitrator. The prayer for appointment of a learned arbitrator is
allowed.
10. Justice Pradipta Ray (Retired), former Judge of this Court
(Mobile No.9830986136), is appointed as the sole arbitrator, to arbitrate upon
the dispute between the parties.
11. The learned Arbitrator shall comply with the provisions of Section 12
of the Arbitration and Conciliation Act, 1996. The learned Arbitrator shall be at
liberty to fix her remuneration as per the Schedule of Arbitration and
Conciliation Act, 1996.
(SHAMPA SARKAR, J.)
TR/