UNION OF INDIA & ORS. versus U.P. STATE BRIDGE CORP. LTD.

Citation: [2014] 13 S.C.R. 1180 · Decided: 16-09-2014 · Supreme Court of India · Bench: JASTI CHELAMESWAR · Disposal: Dismissed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
[2014] 13 S.C.R. 1180 
UNION OF INDIA & ORS. · 
v. 
U.P. STATE BRIDGE CORP. LTD. 
(Civil Appeal No. 8860 of2014) 
SEPTEMBER 16, 2014 
[J. CHELAMESWAR AND A. K. SIKRI, JJ.] 
Arbitration and Conciliation Act, 1996 - ss. 11, 14 and 
15- General Conditions of Contract, 2001- Clause 64(1 )(ii) 
C - Contracts between Government Corporation-VOi with 
private parties-respondent- In terms of the arbitration clause 
dispute between the parties referred to arbitral tribunal 
constituted in terms of the agreement - Failure of arbitral 
tribunal to complete arbitral proceedings for four years -
D Request case by respondent - High Court constituted the 
substitute arbitral tribunal, with the appointment of sole 
arbitrator - On appeal, held: General rule is that an 
f!Jppointment of a substitute arbitrator should be done in 
accordance with the provisions of the original agreement -
E When the Government assumes the role of appointment of 
arbitrators to itself and the Government nominated arbitrators 
are incapable of acting as arbitrators, then the principle of 
'default procedure' would be applied in the case of substitute 
arbitrators and the Court will step in to appoint the arbitrator 
F by keeping aside the procedure agreed between the parties 
- Courts are not powerless to remedy such situations by 
springing into action and exercising their powers as 
contained ins. 11 to constitute an Arbitra/ Tribunal, so that 
interest of the other side is equally protected. 
G 
Dismissing the appeal, the Court 
HELD: 1.1 The first principle of the Arbitration and 
Conciliation Act, 1996 is "fair, speedy and inexpensive 
trial by an Arbitr.al Tribunal". The second principle is the 
H party autonomy in the choice of procedure. This means 
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UNION OF INDIA v. U.P. STATE BRIDGE CORP. LTD. 
1181 
that if a particular procedure is prescribed in the A 
Arbitration Agreement which the parties have agreed to, 
that has to be generally resorted to. It is because of this 
reason, as a normal practice, the Court would insist the 
parties to adhere to the procedure to which they have 
agreed upon. This would apply even while making the B 
appointment of substitute arbitrator and the general rule 
. is that such an appointment ·of a substitute arbitrator 
should also be done in accordance with the provisions 
of the original agreement applicable to the appointment 
of the arbitrator at the initial stage. However, this principle c 
of party autonomy in the choice of procedure has been 
deviated from in those cases where one of the parties 
have committed default by not acting in accordance.with 
the procedure prescribed. [Para 1.8][1196-F-H; 
1197-A-D] 
D 
1.2 In the case of contracts between Government 
Corporations/State owned companies with private 
parties/ contractors, the terms of the agreement are 
usually drawn by the Government company or public 
sector undertakings. Government contracts have E 
broadly two kinds of arbitration clauses, first where a 
named officer is to act as sole arbitrator; and second, 
where a senior officer like a managing director, 
nominates a designated officer to act as the sole 
arbitrator. No doubt, such clauses which give the F 
Government a dominant position to constitute the Arbitral 
Tribunal are held to be valid. At the same time, it also 
casts an onerous and responsible duty upon the 
persona designata to appoint such persons/officers as 
the arbitrators who are not only able to function G 
independently and impartially, but are in a position to 
'-
devote adequate time in conducting the arbitration. If the 
Government has nominated those officers as arbitrators 
who are not able to devote time to the arbitration 
proceedings or become incapable of acting as H 
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SUPREME COURT REPORTS 
[2014] 13 S.C.R. 
A arbitrators because of frequent transfers 'etc., then the 
principle of 'default procedure' at least in the cases where 
Government has assumed the role of appointment of 
arbitrators to itself, has to be applied in the case of 
substitute arbitrators as well and the Court will step in 
B to appoint the arbitrator by keeping aside the procedure 
which is agreed to between the parties. However, it would 
depend upon the facts of a particular case as to whether 
such a course of action should be taken or not. It is 
emphasized that .court is not powerless in this regard. 
C [Para 19][1197-F-H; 1198-A-D] 
1.3 Leaving the respondent at the mercy of the 
appellant thereby giving the power to the

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