Axis Communications vs Union Of India And Others

Dhiraj Singh Thakur, CJ

P C :

Bids are invited from eligible bidders by virtue of R.F.P, dated 18.12.2021, for conduct of City Parade at Visakhapatnam by the authorities of Indian Navy. The R.F.P. was issued on a two-bid basis.

The petitioner claims that it participated in the bidding process and was declared as successful. The services were rendered by the petitioner for which it is stated that an appreciation letter was also issued by respondent No.2. Following the successful completion of the event, the applicant raised invoices amounting to Rs.2,65,31,352/-, towards provision of additional items and services rendered at Visakhapatnam.

Despite repeated requests, the payment having been not made, the petitioner claims that it was asked to attend the bilateral discussions before going for arbitration through email received on 30.07.2022. The bilateral meeting, according to the petitioner, resulted in assurances to the petitioner that the amount due would be released after the verification report was received from the officers concerned.

It is stated that despite assurances and repeated communications, the requisite payment was not made which forced the petitioner to invoke the arbitration clause, vide communication, dated 29.03.2025. It is not denied that according to the R.F.P, the disputes and differences were required to be settled by sole arbitrator appointed by the Commanding Officer, INS Kalinga, at Visakhapatnam.

In the counter-affidavit filed by the respondents, while the existence of the arbitration clause and the notice invoking arbitration is not denied, yet what is stated is that the additional payment of Rs.2,65,31,352/- on account of alleged additional work/services claimed was beyond the terms and conditions of the R.F.P and the Work Order, and therefore was not payable. It is also stated that there was no approval ever granted for additional payment during the event and therefore, the payment is not payable.

Although the arbitration clause envisages reference of the disputes to an Arbitrator to be appointed by the Commanding Officer, INS Kalinga, the said clause goes contrary to the express ratio of the judgment rendered in the case of Perkins Eastman Architects DPC vs. HSCC (India) Limited (2020) 20 SCC 760 wherein the Apex Court in para No.20 held as under:

“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] 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 Managing 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. , 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.”

The ratio of the aforementioned judgment rendered in Perkins Eastman Architects DPC was subsequently reaffirmed by a Constitution Bench judgment of the Apex Court in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) A Joint Venture Co. 2024 SCC OnLine SC 3219 wherein it is held:

“129. Equal treatment of parties at the stage of appointment of an arbitrator ensures impartiality during the arbitral proceedings. A clause that allows one party to unilaterally appoint a sole arbitrator is exclusive and hinders equal participation of the other party in the appointment process of arbitrators. Further, arbitration is a quasi-judicial and adjudicative process where both parties ought to be treated equally and given an equal opportunity to persuade the decision-maker of the merits of the case. An arbitral process where one party or its proxy has the power to unilaterally decide who will adjudicate on a dispute is fundamentally contrary to the adjudicatory function of arbitral tribunals.

…

c. A clause that allows one party to unilaterally appoint a sole arbitrator gives rise to justifiable doubts as to the independence and impartiality of the arbitrator. Further, such a unilateral clause is exclusive and hinders equal participation of the other party in the appointment process of arbitrators;

d. In the appointment of a three-member panel, mandating the other party to select its arbitrator from a curated panel of potential arbitrators is against the principle of equal treatment of parties. In this situation, there is no effective counterbalance because parties do not participate equally in the process of appointing arbitrators.”

Disputes having arisen between the parties, the same have to be referred for adjudication through the mechanism of arbitration.

Be that as it may, the present application is allowed. Justice D. V. S. S. Somayajulu, former Judge of the High Court of Andhra Pradesh, is appointed as an Arbitrator, who shall enter upon the reference and render the Award within the statutory period. The parties shall be free to file detailed claims and counter-claims, before the learned Arbitrator. The learned Arbitrator shall also be entitled to claim the fee in consultation with the parties.

Pending miscellaneous applications, if any, shall stand closed. No costs.

A copy of this order be communicated to the learned Arbitrator on the address mentioned herein below:

Justice D. V. S. S. Somayajulu,

41, (2nd Floor) Uday Park,

August Kranti Marg, New Delhi – 110049,

Ph#9849128028