ARBITRATION

ARBITRATION
In the interest of the railway administration, in case of any dispute or difference between the contractor and the railway administration over a contract is protected under clause 64 of standard general conditions of contract, for works contract and clause 2900 of IRS conditions of contract in case of supply. In case of any question or dispute arising under any conditions of contract, the same shall be referred to the sole arbitrator or joint arbitrators. The arbitrator shall be a railway gazttted officer appointed by the GM in case of contract entered into by zonal railways. In case of contracts entered in to by railway board by also GM/AGM the arbitrator shall be a JA grade officer or above. The arbitrator should be one who had not an opportunity to deal with the matter under dispute or who is course in his duties should not have expressed his views on any matter under dispute. The award of the arbitrator is final and binding on both the parties.

No arbitration demand from the contractor shall be entertained if the contractor has received the final settlement of all claims and given a no claims certificate. Railway board should be informed in case the payment of award exceeds by more than Rs 50000/- against the amount considered by the railway administration before the arbitration. The arbitration should begin only after a demand from the contractor. Excepted matters shall not be referred to arbitration. Excepted matters means, the items in the contract which will bind the contractor as per the conditions of the contact and the decisions of the engineer of the railways is final. For example, classification of soil.

A single arbitrator is appointed in the case the claim is less than Rs 5 lakhs and where the issue involved is not complicated in nature. Two arbitrators of equal status one invariably from accounts department if the claim is more than Rs 5 lakhs or complicated in nature are appointed. Where the claim is up to Rs 3 lakhs item wise award should be given. If above Rs 3 lakhs, a case a reasoned / intelligible award is given.

Appointment of arbitrators: Where two arbitrators are to be appointed, a panel of more than three officers is sent to the contractor who will select and suggest one of them as his nominee. GM shall nominate another. The arbitrators can nominate another gazetted officer as umpire and GM appoints him. In case the arbitrator dies ore resigns or unwilling, GM will nominate another arbitrator. The arbitration is covered under Arbitration Act 1940.
ADVANTAGE OF ARBITRATION:
1. Quick settlement, 2. Early finality, 3. Simple procedures, 4. Inexpensive proceedings, 5. Non involvement of lawyers, 6. Privacy maintained and 7. Awards are binding.
1. Quick settlement: As time given to the arbitrator / umpire is limited to 4/2 months respectively to settle the dispute. Therefore arbitration can not be dragged.
2. early finality: The arbitrator’s award can be set aside only on very limited grounds whereas in courts, the lawyers see to it and the case is taken to higher courts for several years causing financial and mental agony to both the parties of dispute.
3. Simple procedures: Arbitration is quasi judicial. Legal formalities are not followed. Lawyers need not be engaged. Any one can present the case and argue unlike the court where the presentation is filtered by the integrity, intelligence, industry and understanding of the lawyer.
4. Inexpensive proceedings: No court fee is to be paid. Only the expenses of the meeting or hearing are to be paid. Small honorarium is paid to the arbitrator.
5. Non involvement of lawyers: Arbitrator with technical knowledge and experience can decide the case. Hence the services of lawyers are not required.
6. Privacy maintained: Since the proceedings are held in camera, privacy is maintained.
7. Awards are binding: Very little scope exists for setting aside the award and going for appeal against the award.
Ingredients of arbitration: Arbitration is said to be a domestic tribunal. There must be an agreement between the parties in writing. There should be provision for arbitration in the agreement.

Nature of dispute referred to arbitration:
1. claim for extra item of work, quantum , rate of payment etc
2. claims for variations in scheduled quantities
3. delay in completion of work
4. compensation for prolonged duration
5. delay in settlement of bills
6. delay in giving decisions on matters referred
7. dispute against non – scheduled items
8. dispute on termination of contract at contractor’s risk and cost
9. questioning the decision of railway clauses on excepted matters
10. regarding measurement, specification and drawing, defective workmanship
11. dispute on hire charges of plant and machinery
12. Lacunae in contract conditions.

Procedure for conducting arbitration: The arbitrator may conduct the proceeding in any manner he deems fit but within the principles of natural justice. The arbitrator is not bound by any rule of procedure which the court shall follow. The arbitrator need not record statements and file documents etc. it is not obligatory on his part to take notes of his proceeding. If he keeps such notes he cannot be compelled to produce them in court. In arriving the decision by relying upon facts and conditions on which court of law does not interfere, but the arbitrator shall hear both the parties to submit their claim. Once the claim and the counter claims are received a date is fixed for the hearing, the arbitrator reads out the terms of reference and then the proceeding are started. Being the appellant, the contractor is given the first chance and then the railways. Both are given the full opportunity back and forth to present their respective points. Exhibits presented by both the parties are scrutinized and evidence adduced. The site is visited by the arbitrator / s if called upon by any party. The date of next hearing is also included in the minutes and handed over to both the parties. At the end of the haring a certificate is obtained from both the parties to be the effect that an adequate opportunity was given to both of them. Arbitrator than finalize the award.

The arbitrator advises the parties that 1. The award is ready 2. The amount of fees to be paid and 3. The amount to be paid as stamp duty. After the fees are paid, award is written and signed on the stamp paper. With the signing of the award which is known as publication of the award, the arbitrator becomes “ functus officio” . He then informs both the parties and the award is filed in a court. Filing of the award in compulsory if the reference for arbitration is directed by a court under section 20(4) of Arbitration Act 1940. The party calling for it will move to the court for issue of decree. Based on the decree the award is affected.

Honorarium: The quantum of honorarium paid to the arbitrator is as follows:
In some railways the honorarium is paid by the railways and in other railways the amount is paid / shared by both the railways and the contractor. All communications addressed by the arbitrator should be endorsed to both the parties. No deliberations should be done in the absence of any one of the aggrieved party.

Time limit: Where nothing is stipulated in the terms of reference the time limit is 4 month for the arbitrator and 2 months for the umpire. The time span can be enlarged only with the mutual consent of both the parties or by the court. If the arbitrator / umpire enlarge the time frame suo moto such action will be null and void. If the award is not given within the time limit, the arbitrator will become “functous officio”.

Provisions in the Act:
1. the arbitrator should be appointed by a third party or by a court
2. grounds for setting aside the award
a. where there is an apparent error
b. the arbitrator misconducted himself
c. the award has been made superceding the directions of a court
d. Award has been improperly procured in other words, “invalid”. The term “invalid” means where ambiguous and uncertain award which cannot be implemented. The award which does not decides all disputers, award otherwise than the authority conferred. The subject matter of the award is incapable of being referred, award passed on erroneous legal perspectives. All the above items narrated above come under the term “invalid”
e. no second appeal shall lie except to appeal to supreme court

Reasons for the increase in arbitration cases:
1. initial mistake and incorrect preparation of tender documents
2. improper maintenance of records for issue of materials
3. failure in giving appropriate notices for the delays on the part of the contractor
4. Delay in taking decisions relating to rates, new items, variation in quantity and modification in work.
5. improper assessment of contractor’s credentials
6. incorrect or ambiguous terms in the conditions
7. recording of measurements in the absence of the contractor
8. difference in opinion in the interpretation of scheduled items classification of soil etc
9. delay in supplying of materials leading the materials to the site, poor quality, incorrect assessment in quantity and accounts of scrap etc
10. delay in acquiring land
11. Granting of extension without valid reasons and without the consent of the party and not quoting the clause under which the extension is rendered.

Improvements: the above mentioned short comings are to be avoided

Pre Arbitration Committee: With a view to settle that claims of the contractors arising out of disputes and to reduce the number of arbitrations, new procedure was introduced in I R in the middle of the year 1991. A joint procedure was issued by FA & CAO and CE during June 1991. a divisional level and HQ level committee is nominated to deal with the disputes prior to the arbitration and termed as Pre Arbitration Committee. In divisional level, the members of the committee should be a J A Grade officer and accounts officer either in J A grade or in Sr Scale. In the case of HQ level JA grade officers from executive and accounts dept.

Matters referred to Pre Arbitration Committee:
v It is proposed to terminate a contract which has sufficiently advanced or the contract is running into trouble before taking decision to terminate a contract and to avoid the arbitration and solved problems, the matter will be referred to pre arbitration committee.
v For any claim while the work is in progress or work completed awaiting payment, the pre arbitration can enquire
v Even before the contractor seeks for any arbitration, the matter can be referred to the arbitration.
Nominations of the members of the committee at HQ level by PHOD for the contracts entered into by them or lower authorities by AGM/GM in other cases. All divisional leve the nominations are made by DRM. Recommendations of Pre Arbitration Committee should be put up to DDRM in the divisional level and PHOD or AGM/GM in case of HQ level..
Conduct of the Meeting:
Discussion held with the contractor or his representative and shall record the discussion signed by the members and contractor. The contractor shall be made known that the discussion is without prejudice to the railways interest. If any understanding ire reached for a full claim or a partial claim a “claims certificate” should be obtained in writing from the contractor.
Committee shall record the specific reasons for the conclusions and put up to the accepting authority. In case of difference of opinion, it should be recorded separately and put up to the accepting authority whose decision is final. The recommendations should be routed through associate finance. The proceedings of the committee should be specific and in detail. No firm commitment should be given to the contractor. He should be made known that the recommendations of the committee are tentative subject to acceptance of the accepting authority. To this effect, a specific letter should be obtained from the contractor.