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XEN/works/CN/MS (Retired)

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PostPosted: Thu May 19, 2011 4:57 pm Back to top

In Railways Arbitration cases are on the raise and the increase in the last few years is phenomenon. As per the general opinion the spurt in arbitration cases mainly due to non adhearance of , rules and regulations incorporated in the General conditions of contract and special conditions of contract, non - adhering to these rules due to ignorance or negligence lead to many arbitration cases.

1. Contracts as far as possible should be finalized only after the site, drawings required for executing the work etc., are in readiness. The delay in issue of drawings leads to delay in completion of work.

2. Queries if any received from the contractor with regard to execution of work or on any matter should be invariably replied in time.

3. On account payments should be released to the contractor as and when demanded by the contractor for the completed works.

4. Validity of bank guarantee submitted by the contracts towards security deposit/ performance guarantee has to be watched and if for any reason the validity of BG has not been extended before the stipulated period, a claim has to be lodged with the bankers within the date specified in the BG.

5. The site supervisors have to be properly educated about the importance of maintenance of various registers such as Daily progress register, materials receipt and issue register, hidden measurements register, site order book, machineries registers, cube test register, test results of various material used in the work like steel, cement, water, coarse aggregate etc. The registers should be jointly signed by the contractor/ his representative and the site supervisor and it can be countersigned by the officer concerned.

6. Contractor should not be allowed to execute any new item of work prior to finalization of rates for the same in accordance with clause 39 of General conditions of contract.

7. Hire charges for materials issued on hire basis has to be intimated to the contractor in advance and recovery should also be made in this regard in every on account bill.

8. Whenever extension of currency has been sanctioned, contractor’s acceptance for adopting same rates, terms and conditions of the existing contract should be invariably obtained and rider agreements for the extended period should also be executed immediately.

9. After the completion of work, final measurements have to be recorded as early as possible in the presence of the contractor. The contractor has to be advised about the probable date for recording of final measurements.

10. The attention of the contractor can also be invited to clause 45 of General conditions of contract. As per this clause measurements can be taken and recorded even in the absence of the contractor and the contractor within 7 days from the date of recording of such measurement can lodge his protest for any of the measurements so recorded in the Measurement book. Failure of the contractor to file the objection within the 7 days, the measurements whatsoever recorded in the MB is final and binding on the contractor.

11. After the finalization of contract and after the completion of maintenance of period, steps to be taken immediately to release the security deposit available with the Railways. Non- release of security deposit led to many arbitration cases in the past.

12. If a contract is terminated, the tender for carrying out the left over works should be finalized as early as possible within Six months from the date of termination and it should be ensured that the left over works are completed within the period stipulated. This will justify Railway’s action in terminating a contract.

13. All the records pertaining to a contract should be preserved properly, till such time all the disputes arising out of that contract is settled either mutually or through arbitration.

Only some of the important aspects in maintaining a contract efficiently have been highlighted and it is sincerely believed that the above mentioned are followed scrupulously there won’t be any arbitration cases in Railways and even if there is any arbitration case, Railway will be in a position to defend the case in more efficient way.

Views are solicited.
- S. RAVI XEN/works/CN/MS ... 19-05-11

Rtd. Dy Chief Engineer

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PostPosted: Tue May 31, 2011 9:18 am Back to top

The spurt in Arbitration cases is noted due to preoccupation of Divisional Engineers beyond their control.The contractors take advantage of situational modification in the scope of works.The site In charges find them self under pressure to carry out excess works due to extraneous reasons.In my opinion,Zonal tenders should be recast.SOP should also be reviewed to cover upto 25% excess quantity within the power of SDENs inchage of section.The site Incharge should immediately bring in notice to SDENs any irregularity in the execution.
- MOHAMMAD BAKHSH  Rtd. Dy Chief Engineer ... 31-05-11

XEN/works/CN/MS (Retired)

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PostPosted: Tue Aug 16, 2011 6:15 am Back to top

(Included in Short Term Course on Contract & Arbitration Management at HQ Office, CST, Mumbai from 12th-14th August, 2003)

1. Should ‘excepted matters’ be included in Terms of Reference for Arbitrtion?

Ans: The A&C Act 1996 does not say what should and what should not be included in the Terms of Reference. Clause 63 of the Railway GCC says that the decision of the Railway Administration on the Excepted Matters shall be final and binding on the contractor and that the E.M. shall stand specifically excluded from the purview of arbitration and not to be referred to Arbitration. Thus, obviously the E.M. cannot be referred to arbitration. But the trouble may arise when the contractor may challenge that the dispute itself is not covered by any of the clauses given in Clause 63 e.g. Excepted Matters and may thus allege the matter is not an E.M. Thus, the reference will be not adjudicate on merits of the claim but to decide whether the matter falls within the ambit of E.M. or not. Once the Arbitrator finds it is an E.M. he cannot at all go into the merits of claim, otherwise he will decide on merits. A clause in one contract provided some excluded matters relating to idling labour due to local disturbances. While agreeing that this becomes an E.M. the High Court held that the Arbitrator has powers to examine how the situation was created and who was responsible. If it finds that it was beyond the control of the petitioner then the court cannot give any further decision. (W.B. Infrastructure Dev. Corpn. V/s. Star Engg. AIR 1987 Cal 126)

2. What is the sanctity of the original claim of the Claimant. Normally the contractor shall submit his claim at the time of requesting for arbitration. Should be once again be asked to submit his claim to the Arbitrator?

Ans: Not necessarily. The original claim has full sanctity. Clause 64(1)(ii) of Railway’s GCC says “the matters on which the demand has been made shall be referred to Arbitration”. It is only S.23 of the Act that enables the party to give facts in support of his claim. Thus, what he is requested to give now is only the facts in proof of his claim and not the claim itself which is already known to the Respondent.

But a possible problem arises due to right of the parties to amend or supplement their claim as per S.23(3) of the Act Clause 64(1)(iii) of Railway’s GCC bards a ‘new claim’ but permits to amend or supplement the original claim. In cace of both words ‘supplement or amend’ being there, it is believed that even if he may not add a new claim initially while acting under S.23(1), he may do the same by amending or supplementing the claim during the Arbitration.

Regarding referring by the Railways, attention is also drawn to Clause 64(1)(i) of GCC which says ‘within 180 days of presenting his final claim or disputed matters,’ shall demand in writing that the difference or dispute be referred to arbitration. Thus, the Railway will be within its right to refer only such matters which he had asked for arbitration and on which the dispute continues.

It is suggested that the exact import of the words ‘amend or supplement’ may be clearly outlined and if necessary, they may be suitably amended.

3. What is the course of action if the claimant refuses to accept an arbitrator after his appointment?

Normally, he will have no course once the arbitrator has been appointed as per the Arbitration Agreement by the party competent to appoint him and the procedure as given in the agreement has been correctly followed. S.12(b) of the Act gives the grounds on which the appointment of an arbitrator may be challenged and S.13 gives the procedure for it. The grounds are- (i) independence and impartiality, (ii) he should passes the qualification, if any, given in the agreement. No other grounds to challenge the appointment of an arbitrator are permissible. At latter stages, the possible grounds can also be the arbitrator exceeding his jurisdiction or authority U/S 16 or becoming De-facto De-jure unable to perform his duties U/S 14.

The other way can be if both the parties may agree to the removal of an arbitrator, then he may be asked to withdraw himself from the proceedings.

4. What is the correct procedure for changing an Arbitrator?

Whereas the grounds for challenge have been given in the above question, the procedure for his change is as given in S13 of the Act which says:

An application shall be filed by the party seeking change of the arbitrator quoting the grounds therein, within a period of 15 days of (i) constitution of the tribunal, or (ii) after becoming aware of the circumstances relating to his disqualification or lack of impartiality/independence. At this the courses open to the Tribunal are (i) either the arbitrator withdrawn himself from the proceedings or else the Tribunal will decide on the challenge. (ii) if the tribunal rejects the challenge then the arbitration shall proceed and award shall be made, (iv) if the party still holds on to his challenge then now he may challenge before the court only U/S 34 of the Act.

However, the Act permits that if the parties like they may provide any other procedure to decide on the challenge. Normally parties are not known to provide any alternate procedure.

5. When does an Arbitral Tribunal come to existence when terms of reference are issued or when the arbitrators enter into the terms of reference?

The Act is silent on this aspect. S-21 only says when the arbitration starts,S-12 obligates a person that when he is approached to becomes an arbitrator, he must declare in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. Thus, the stage involved in creating an arbitral tribunal are (i) approach a person for his possible appointment as an Arbitrator, (ii) his declaration of his independence and impartiality, (iii) issue of the appointment letter by each party to his arbitrator, (iv) the two arbitrators to appoint a third person called Presiding Arbitrator. The Act does not talk of any reference to the arbitrators or any entering upon the reference by them. The next stage as per S-23(1) is for the claimant to submit his statement of claim.

Thus, the Arbitral Tribunal comes into existence with appointment of the Arbitrator in case of Sole Arbitrator and the appointment of the third arbitrator in case of multiple arbitrator.

6. What is the Jurisdiction of the Arbitrator?

Jurisdiction refers to the circumscription within the four walls of which an authority has to exercise his powers. It can either be laid down as per the territory or as per the financial limits or as per the subjects to be dealt with or all S-16 of the Act gives the remedy when the arbitrator may exceed his authority or jurisdiction. It is seen that certain agreement, relate the jurisdiction or arbitrator by the amount (as Railway GCC limits disputes upto 10 lakhs only for a Sole Arbitrator). So also some contracts do not have an omnibus arbitration clause and exclude certain items from the purview of arbitration, for example claims exceeding 20% of the contract value are not arbitrable in Western Railway or Excepted Matters are excluded in almost all the Govt. contracts from arbitration.

The jurisdiction or an arbitrator depends upon the wordings in clause, eg.the Railway GCC Clause 63 says ‘all differences or disputes of any kind whatsoever, arising out of an connected with the contract …. Shall be referred and keeps Excepted Matters only out of arbitral jurisdiction. So, (i) primarily the arbitrator derives his jurisdiction from the contract as he is the creation of the contract itself and (ii) secondarily he is bound by the exclusion clause also. It may however he noted that the clause ‘arising out of and connected with’ is a very wide clause and some times matters which ostensible have no nexus with the contract may fall for arbitrator agrees that they are ‘arising out of or are connected with the main contract’.

In case of the arbitrator goes beyond his jurisdiction then the parties are advised to take recourse to S-16.

7. What is the difference between a judge and an arbitrator? What is the difference between a judicial proceedings and an arbitral proceeding?

A judge is deciding authority
May be decided by Arbitrator only
Gets powers as per Law CPC and Evidence Act applicable
Proceedings not covered by CPC not applicable, only N.J. applies.
Proceedings have to be declared as juridical by law only than S-219, 228, 193 IPC will apply
No such need
No automatic application

The proceedings under A&C Act have trappings of the court but are not judicial proceedings for the above sections of the IPC as the Act does not treat them so are not judicial.

Judicial proceedings may even be administrative, Ministerial or executive or non-judicial. The crux lies in its decision which determines the right of parties and it affects them. The acts of special tribunals or arbitral tribunal are also judicial in that sense except for the sectiois of the IPC given above unless specifically to be so.

Appointed as per law.
Appointed as per arbitration agreement
Is a specially qualified person
May be even a layman
Enjoys legal rights & privileges of his status
Privileges either as per law or agreement
All decisions are appealable
Normally no appeal lies
Is given authority by law
Gets authority from Agreement
Is paid by Government
Paid by Parties
CPC, IEA are binding
Not binding. Follows N.J. only
Age limit applies
No age limit
Gives a Decree
Gives an Award

8. What records an arbitrator can admit? Is the claimant authorised to any Documents? Is Railway bound to give all the documents?

Ans: The arbitrator has to admit all the records given with the statements of Claim and Defence. Further, during the proceedings all the documents produced by one party and admitted by the other or proved by production of a witness, have to be admitted. Unadmitted records or those of which the authenticity has not been proved may not be admitted.

As regards party asking for the records, the 1949 Act had a provision of DISCOVERY AND PRODUCTION of records. Such provision is not in the present law. So the question in this respect is open. However, S-19 makes IPC and IEA not applicable to Arbitration but at the same time it gives powers to the Arbitrator to decide the procedure and has powers to decide admissibility, relevances, materiality and weight of the evidence. Thus, if he finds that a document is relevant, he can use the tool of discovery and production which tools is certainly a part of procedure which the Arbitrator has powers to decide. The persons holding the documents shall have to product the same, of course, subject to his right to claim a privilege. Further in Railway’s Clause 64(3)(a)(iv) mandated the parties to do or cause to be done all such things as may be necessary to enable the arbitral tribunal to make the award without any delay.

9. What are the powers of Arbitrator to get records he has asked?

As shown in the above question, the Act does not given any specific powers to the Arbitrator. But as he is entitled to decide the procedure, of course subject to any other agreement between the parties and also subject to the provisions of Part-I of the Act, so he has full powers to requisition the relevant records from the parties. But a mute question is what can he do if the party refuses to give the record. In out opinion the fallouts can possible be: (i) The arbitrator may recourse to S-27 i.e. approach the court for held in taking the evidence, or (ii) Draw an adverse inference against the party refusing to give the records or (iii) may treat the refusal of its orders as a contempt of the arbitrator u/s 27(5) and proceed accordingly.

In any case, in the Railways we have already drawn attention to Clause 64(3)(a)(iv) of GCC.

10. If the Ex-parte proceedings have been commenced without the railways’ defence statement, how to admit the same if the same it submitted later?

The stage when the defence statement has to be given is provided in S-23(1) of the Act that is the time which has been agreed upon between the parties, the claimant shall give his claim statement and within a given time thereafter the respondent will give his Defence statement and counterclaims, if any. Clause 64(1)(a) of GCC, the Claimant has to give his claim within 30 days of appointment of the Arbitral Tribunal and the Respondent (Railway) shall submit its defence statement within 60 days of receipt of the claim statement. Vide S-25(b) if the respondent fails to give his statement in time the Arbitrator may not wait for it and to ahead with the proceedings. Now if the Railway produces the defence at any later stage whereas ordinarily the Arbitrator could have admitted it but now in face of S-4 of the Act, the other party may object it as a Waiver. So if may be very difficult for the Arbitrator to admit a belated defence statement. So the possible advise that can be given is:- (i) Give the defence statement certainly within the time as specified; (ii) If not full, give at least a part statement and later supplement if u/s 23(3); (iii) At least submit an application before the tribunal requesting permission to submit defence statement later so that if may not be hit by the provisions of Waiver.

11. Should there be Oral hearings or the Arbitrator can decide a matter based on Documents only?

Ans: Primarily it is for the parties to lay down whether the arbitrator will hold oral hearings or not. In absence of such an agreement S-24 gives options as (i) to hold oral hearings (ii) Not to hold oral arguments, or (iii) to conduct proceedings on the basis of documents and other material. Thus the preference has been given to a decision of the parties, else the Arbitrator can decide as per documents also. Though no guidelines are given, yet there is enough case law suggesting that where the resolution of a dispute can be done only by perusal of documents. No hearings are necessary, however, whenever the arbitrator may choose to adopt this procedure, he must tell the parties in advance and still if any party wants an oral hearing to the done, the arbitrator shall allow it unless the agreement bars totally any oral hearing. S-24(i) (Proviso).

12. Can Arbitrator use his personal knowledge (technical or other) to ask questions?

We must distinguish between using the knowledge for asking the questions and using the knowledge for giving the award. So far as the former is concerned there can be no objection in asking the questions by the Arbitrator because both the parties have opportunity to raise there objections and supply their own evidence on it. We will however, advise that the arbitrator should ask his questions only after both sides have finished their examination and cross examination so that he may not give impression of siding with any party. Of course both parties can question the witness on the questions put by the arbitrator if new facts comd to knowledge through answers to the questions put by the Arbitrator.

Should Arbitrator use his personal knowledge or expertise in deciding the dispute? No. He can do so only if he has been appointed due to his such knowledge and expertise and specifically authorised to decide as per that knowledge. If he intends to use his personal knowledge he must notify in advance to both parties and opportunity to counter his facts within his knowledge (Russel on Arbitration PP.286-287)

13. Should all members be present during the hearings?

Ans: Yes. All members (Claimant & Defendant) muse be present throughout the hearing either by themselves or through their authorized representatives, except when it has been started as an Ex-parte hearing by the Arbitrators. So far as the members of the Arbitral Tribunal are concerned, they all must be present physically not only throughout the whole proceedings but also in the deliberation on merits of the case and deciding on the Award.

14. While writing an award, can a claim be refuted if not supported by the law of the land even the same was not argued?

Ans: To reply to this question, we have to understand the provisions of Sections 20 and 28 vide S-20 the parties are at liberty to decide the place where the arbitration shall be held and failing this the Arbitrator will decide the place of arbitration. S-28 says that when an arbitration is held in India, the dispute shall be decided as per the substantive law of India. S-28(3) provides that the arbitrator shall also take into consideration the trade usage and the terms of the contract. All this means that the Arbitration is bound to decide the matter as per (a) Law of land, (b) terms of the contract, and (c) trade usage as applicable to the transaction. Thus, where a claim is not as per law, the arbitrator has to reject it even if such a plea was not taken during the proceedings.

Here one thing more may be noted that the arbitrator as per 1996 Act cannot decide as per Equity unless he has been specifically authorized by the parties to go by Equity (S-26(2).

15. What is meaning of a ‘signed copy of Award’?

Ans: S-31(5) mandates that the arbitrator shall give a signed copy of award to each party. The word ‘Sign’ means, as per Webster, to write one’s name on, as in acknowledgement, authorship etc. Thus to sign means to write one’s name on any document. The word ‘Copy’ means a document prepared from the original which is an accurate and true copy of the original. It must be full reproduction of the original and that it should be accurate and true. The person signing it is deemed to authenticate the accuracy and authenticity of the copy.

Next a question may be raised about the stamping of an award. An award not written on a stamp paper of appropriate value is invalid. But the same is not true for copy of an award. So long as the original award has been written on proper Stamp paper the copies can be on other paper too but have to be signed in token of authentication that it is the true and accurate copy of the Award. (Hindustan Constn. V/s. UOI AIR 1967 SC 526).

16. What is the value of Stamp paper required for publishing an award?

Ans: Stamp duty value is governed by the Stamp Act of each State and it may differ from State to State. So before purchasing the Stamp paper, it must be ascertained from the courts about value required, i.e. in Gujarat it is Rs. 100/- but in some other States it is Rs. 50/- only.

17. How to enforce a Negative (i.e. in favour of Railway) Award?

Ans: S-35attaches a finality to the Arbitration Award. When the time for taking recourse to the court for setting aside the award is over S-36 bestows the status of the decree of the court to the said award. Thus, the requirement under the 1940 Act to file the award in the court and to get it converted into the decree of the court under section 17 is not required now. After the time limit as mentioned above expires, the Award automatically becomes a decree of the court. This means that it can be executed in the same manner as any other decree of the court under the CPC. Order XXI CPC deals with Execution of decrees and applies to all decrees including those by the tribunal or of the Arbitrator whether negative or positive. Unless the judgement debtor deposits the decretal amount in the court where an execution proceeding has been filed (OXXI r-1) if necessary the court can detain him in Civil prison or attach and sell his property (OXXI r-30).

We can advice the authorities that wherever they get such award:- (i) Hold back all payments to the contractor; (ii) Ascertain his properties as you have to help the court identify his assets if attachment has to be done; (iii) Wait for the period given for filing an application u/s 36 or if such application has been filed, wait for its rejection by court (iv) File an Execution case in the court.

18. Whether an oral arbitration agreement is valid if it is ratified by parties?

Ans: S-7 required an arbitration agreement to be in writing and signed by the parties. It must be so from the beginning and no later ratification can validate or otherwise ab-initio void agreement. Of course as per S-7 ‘in writing’ itself has been given various meanings e.g. (i) exchange of telex, telegrams etc. which keep record of the agreement; (ii) Exchange of statement of claim and defence whereby one party alleges existence of an agreement and the other does not deny it; (iii) a document signed by the parties. So ‘in writing’ itself has a wide connotation under 1996 Law, but it all must be before entering into actual arbitration and not at an later stage.

19. Are there any guidelines for the CAJ in selecting an arbitrator when approached by a party?

Ans: Yes. As per S-11(Cool of the Act the C.J. shall have ‘due regard to (i) independence and impartiality, (ii) Qualifications as prescribed in the Arbitration agreement. The words ‘due regard’ means that he has to make attempts to find out the person who fulfils these requirements before appointing him as an arbitrator. It is only when either the parties forego these requirements or such a person is not available despite reasonable attempt or for other justifying reasons that the C.J. may appoint any other person. If without trying as above the C.J. appoint a person as an arbitrator. The parties can raise no objection to it as his decision cannot be challenged in any court as it is final and binding as per S-11(7). Nevertheless if a party is aggrieved by it, the remedy lies in S-12 and 13 e.g. an application challenging the arbitrator may be made before the arbitral tribunal and in case its decision is also not acceptable, then the Award may be challenged u/s 34.

20. Can a party go to the Court ignoring the arbitration agreement? Any way out?

Arbitration being only an alternative and not substitute of the court of law and also being only a voluntary choice of the parties, any party may walk out of it at any time if the other does not object it. So despite there being an arbitration agreement if the party wants to go to the court, it can do so. But then such a liberty will render the arbitration law otiose. So if it so happens, it is for the other party to decide whether to now remain in the court or to request the court to refer the matter back to arbitration. In the latter case, the party must apply to the court enclosing a copy of the arbitration agreement in proof of the fact that there is an arbitration agreement, requesting the court to refer the matter to arbitration. But an important precaution is that such a request must be made before filing the statement of defence. Once the defence statement is filed without such request, if shall be presumed that the other party is also willing to follow the matter in the Court (S-Cool. In case of such a request the court is bound to refer the matter to arbitration.

21. Can a party file writ petition in an arbitration matter?

A writ is an extra ordinary jurisdiction of the Supreme Court and the High Courts. It is granted when no other alternate remedy is available. In case where the contract had been terminated in terms of the conditions of the contract having an arbitration clause the contractor went to the High Court for a writ. The court held that there being an arbitration agreement under the Arbitration Act which is a complete code in itself, the party cannot go to the High Court by passing his own agreement (Rukmani Bar V/s. Collector AIR 1981 S C 482).

22. Where the owner feels that there has been no loss to the Contractor so no arbitration can be given and refuses to refer the matter to arbitration, is he still bound to refer the claim?

It is common experience that when a claim is raised and the owner feels that it has already been paid for so no claim is there and so refuses to refer to it arbitration, or that he finds that in fact no loss has been caused to the contractor so no justification for arbitration. Answering in a case having similar situation, the court observed that once there is a dispute, it has to be decided by the arbitrator and the parties cannot impose their own decision on the other party irrespective whether it has caused any loss or not (N. Singh V/s. Vulcan Ins. AIR 1972 DLI 1820).

23. What is the procedure to conduct Arbitration?

Ans: Arbitration being a civil proceeding should normally be held as per the CPC but S-19(1) specifically excludes application of CPC to Arbitration. S-19(2) empowers the parties to decide the procedure to be followed. If they do not lay down any procedure then S-19(3) mandates the arbitrator to conduct proceedings in any manner he considers appropriate. CPC is not binding does not mean that the arbitrator cannot take guidance from the provisions in CPC. In fact in most of the cases the arbitrators do go to the spirit of CPC whenever in doubt. From the decided cases we find that:

(i) Rules of procedure as given in S-18 to 27 of S&C Act are binding;
(ii) (ii) The arbitrator may hold a preliminary hearing to ascertain matters as
(a) ascertain particulars of claim and counter claim, if any;
(b) Discovery of documents in possession of the parties,
(c) Inspection of property and or things,
(d) main points/issues to be decided,
(e) evidence to be adduced
(f) clarify salient stages of procedure,
(g) claims/counter claims if admitted,
(h) fixing time, date, venue etc. for hearing, (whether hearing to be done),
(i) whether reasons wanted in award,
(j) in case of tie between three arbitrators whether Presiding Arbitrator’s decision will prevail, etc. etc.

(iii) Though Evidence Act is not applicable yet, the Arbitrator must follow the principles of Evidence.
(iv) Any special procedure to be followed by the Arbitrator must be put to the parties.
(v) No communication with one party without informing other.
(vi) The Arbitrator derives his jurisdiction and authority from the Arbitration Agreement and the A&C Act, so study them thoroughly.
(vii) Frame issues if demanded or felt necessary.
(viii) Let the claimant open his case first including his defence to the counter claim, if any. Let him call his witnesses, examine, cross examine and re-examine them one by one.
(ix) Then the Respondent will open his case and call, examine, cross examine and re-examine his witness, if any.
(x) The claimant will present his oral/written arguments. The the respondent shall similarly submit his oral/written arguments. At the end the claimant gives his reply.
(xi) Not mandatory for the arbitrator to record everything verbatim. He may record salient points for his use.
(xii) If necessary, the arbitrator may have the site visits under adivse to both the parties and record visit notes.
(xiii) Advisable to record minutes of the proceedings indicating salient events during the hearings and give copy to the parties.
(xiv) Discourage adjournments unless absolutely necessary.
(xv) Arbitrator may call a witness not called by any party but with the consent of the parties.
(xvi) No Ex-parte hearing without giving notice of Ex-parte.
(xvii) Arbitrator cannot delegate his authority to any one.
(xviii) During hearings all the arbitrators must remain present.
(xix) Award must be by the majority of arbitrators.
(xx) If necessary the arbitral tribunal may administer oath.

24. How can the clerical/accidental error in an award be corrected?

Ans: S-33(1) permits a party, with notice to the other party to request the arbitral tribunal to correct any clerical/accidental/other errors in the award.S-33(3) gives powers to the Tribunal to correct such efforts suo motto also (and there is not notice to parties has been provided in such a case). The limitation for requesting the Tribunal for this is 30 days from receipt of Award copy. It is suggested that this power should be used by the parties with care and caution. In one case the award on issue No. 1 therein said that the ‘Award was not Unlawful’. Decision on issues Nos. 2,3 &4 were however in contradiction with this decision. So the arbitrator was requested to correct his decision on issue No. 2, 3 & 5. He, however removed the work ‘UN’ from ‘unlawful’ and thus corrected the award holding the contract as not lawful and thus upheld his decision on other issues. This was set aside by the court as the arbitrator was not asked to reconsider issue No.1 (Kerala V/s. Joseph Velangdan AIR’90 Ker.276). This was under 1940 Act. Under 1996 law since power for suThe stage when the defence statement has to be given is provided in S-23(1) of the Act that is the time which has been agreed upon between the parties, the claimant shall give his claim statement and within a given time thereafter the respondent will give his Defence statement and counterclaims, if any. Clause 64(1)(a) suo-motto correction have also been given to the arbitrator, he can himself pick up the award for correction. So the parties have to be all the more careful now during the period available to arbitrator for correction/alteration etc.

25. How to decide arbitrator’s fees? Can an outsider arbitrator demand fees higher than the rate permitted by the agreement?

Ans: This issue is becoming more serious now with more number of outsiders being appointed as arbitrators, specially in the govt. cases and they asking for a very high rate of fees. S-31(a) empowers the Arbitral Tribunal to fix the costs (which includes arbitrator’s fees also as per explanation to this clause). But this section is subject to agreement by the parties. This means that the arbitrator is bound by the rate of fees as fixed by the agreement. In Railway’s Clause 64(b) of GCC says, ‘Costs shall include the fees of arbitrator as per rates fixed by the Railway administration from time to time.’ So there is no scope for the arbitrator to dictate his terms on matter of costs in Railways. However, difficulty arises in cases of arbitrators appointed by the C.J. The law believes in the dictum that in absence of an agreement, the arbitrator can fix his own fees. So the arbitrator can be checked only by apprising him of the fees rates before he is appointed and obtained his agreement. As in most of such cases the railway will not know who was going to be appointed, perhaps one way out could be that whenever a notice for appointing an arbitrator by C.J. is received, the Railway should apprise him of their clause as also the current rate of fees as per the arbitration agreement and inform the proposed arbitrator about it. If he agrees, no problem. But if he does not agree, the railway may refuse to agree to his demand and may not deposit the fees asked by him. In that case, the risk is that either the other party will pay railways share of fee or else, the Arbitrator may refuse to arbitrate on the counter claims, if any, of the Railway. In case both the parties do not agree to pay, the arbitrator may terminate the arbitral proceedings. S-38(1) & (2). Another possibility is that the arbitrator may make award but hold a lien on it and not declare till his costs are not paid. In such case, again the interested party can go to the court, deposit the demanded amount. The court will decide the reasonable amount of costs and balance, if any, will be returned to the depositor (S-39). (Incidentally, the rates fixed by the Indian Council of Arbitration can be used as a guideline in suitable cases).

26. Is there any time fixed for giving an award? Can it be extended? If so, how?

Ans: Unlike the 1940 Act laying down a time limit of 4 months for giving an award and powers to the court to extend it, the 1996 law does not given any such time limit or any provision for extension. However, the spirit of the new law is a speedy disposal of the case so no delay can be brooked. The check against delays has been given in S-14(1)(a) which says that the mandate of arbitrator shall terminate if he fails to act ’without undue delay’. In case of he not agreeing about the delay, the matter can even be taken to the court also to decide whether the impugned delay was reasonable or undue. Thus, the arbitrator has always to proceed with due dispatch.

Sometimes, the person who appoints the arbitrator (i.e. General Manager) directs the arbitrator to give award within a fixed time. This may be alright if there is any such clause in the agreement because time for giving an award is a part of procedure which the parties can decide as per S-19(2). But in absence of a mutually agreed time limit, it can not be unilaterally imposed by one of the parties and the arbitrator may not feel bound by it. At best it may help the GM keep a watch over the progress of arbitration to ensure no undue delay. In case of undue delay, recourse to S-14 has to be taken. Since no time limit for giving an award has been given in the Act, the question of extension of the same does not arise.

27. Can contractor ask for arbitration after receiving payment for final Bill or after giving a ‘NO CLAIM’ Certificate?

Ans: It is common experience that many a times the contractors ask for arbitration on items for which they have already received the payment without protest as per the final Bill or even after giving a ‘No Claim’ Certificate to the owner. In a case where 4 bungalows were constructed and 4 final bills were prepared and the payment received by the contractor, still the contractor asked for arbitration. The High Court observed that normally no claim subsists after the final payment. But then whether it is a final and full payment or not is itself a dispute to be decided by the Arbitrator (Promod Constn. V/s. IOC AIR 1993 Bom.76). Similar were the views of S.C. in Jayesth Engg. Works V/s. New India Ins. Co. (2000) 10 SCC 178). While dealing with a question of ‘Final Claim’ the S.C. observed that a ‘final claim’ must be definite, certain and crystallized under diverse heads either flowing from the final bill or even earlier arising out of the acknowledgements when the final bill was not prepared. Thus, instead of reading down the final claim arising out of the matters in arbitration clause the mean only final claim as disputed matters as employed by the clause would cover final claims on disputed matters lodged during or after termination of contract or even after the Final Bill. (Setty’s Constrn. Co. V/s. XRC, AIR 2000 SC 122).

28. What are the powers of Arbitrator under 1996 Law?

Ans: (1) Competency to decide his jurisdiction and authority, (2) Order interim measures on subject matter of dispute, (3) Determine rules of procedure, (4) Decide venue, (5) Appoint Expert (6) Decide language, (7) Rules applicable to substance of dispute, (Cool Demand deposits, (9) Administer Oath, (10) Make interim award, (11) Correct errors etc.

29. Can you suggest a form for making an award?

The 1996 Act vide S-31 lays down some form and contents of an award which are (1) it will be in writing and signed by members, (2) will be by majority, (3) will give reasons, (4) will give date and place of making award, (5) a signed copy will be given to each party, (6) may be an interim award also, (7) will hear interest, and (Cool will lay down the costs, besides this no other guidelines are available. However, we may suggest the sequence in an award as (i) arbitration agreement, with dates and name of parties. (ii) Date & method of appointment of arbitrator, (iii) Procedure adopted, (iv) issues framed, (v) Arguments of the parties, (vi) first issue………….I prefer…………because……….
Second issue…………I prefer……………..because……………
(vii) I therefore decide and award (?) with/without interest @ …………..from
………………to …………….
(viii) I award interest @ ………../do not award any interest from the date of award to the date of payment or from ……………..months after the date of Award till the date of payment.

Date:……… Place:………. Signature of Arbitrator:
(1) ………………

30. Can a party go to consumer forum in face of an arbitration agreement?

Ans: S-5 of the Act bars jurisdiction of all judicial authorities in matters covered by the A&C Act 1996. In one case the matter where an arbitration clause was there still matter was entertained by the Consumer Forum. The High Court upheld it on the ground that the jurisdiction of CPA cannot be taken away on technical ground that the matter is referable to arbitration.

Housing & Dev. Pvt. Ltd. V/s. M H Kalaiselvi (Supp) Arb.LR 406 Mad)

With utmost respect it is submitted that this needs be tested before the Hon’ble Supreme Court.

31. What responds should arbitrator expect in the following?

(I) Compensation for delay in execution of work: Time allowed for performance record showing the reciprocal operations and compliance thereof by Claimant; showing time was of the Essence, Actual delay, Loss caused by delay, Procedures as given in the contract for extension etc. were correctly followed. In case of L.D., the L.D. clause, otherwise records to prove actual loss in terms of money; requirements of S-63 and 74 of IC Act; disposal of protests of the contractor having bearing on timely pref. Supply of materials, etc. Pert Chart/Bar Chart/Milestone stages etc. show stages when performance was due and when it was actually performed. Efforts made by the owner to avoid delays so far as it could be possible for him to do. Contributory negligence of third parties on which contractor had control.

(II) Loss due to irrecoverable advance for materials: Whose duty to supply materials, Terms for giving the advance; Purpose of advance; precautions at the time of giving advance; Records of bringing materials on site; records of use of materials; Rejection records within reasons; balance materials – their condition and quantity; measures taken to safeguard the material and their misuse.

(III) Material brought to site but not used: Was it required for the work; In whose custody? Were the excess materials, rejected materials notified to the contractor and handed over to him or disposed off as per contract conditions; Records of receipt and disposal; receipt and issue notes; Safe storage, Work orders for consumption of materials, Actual cost of material remaining unused.

(IV) Drawings and Designs: When was it required and when actually brought on site; In whose custody; Conditions of warehouse etc.; Nature of damage, Cause of damage; existent of damage; cost of repairs if repairable; contributory negligence.

(V) Idling of Machines: Whose machines, conditions for supply of Railway machines, skills to operate if available with contractor; time when operation was required; were facilities to operate available, Site electricity etc. available, whose responsibility to operate – whether joint; position of notices to operate etc. if required; Logs of use; steps taken to remove machines from site after use was over.
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