Madras High Court Sets Aside Arbitral Award After Railways Unilaterally Appointed Tribunal

The Madras High Court has recently struck down an arbitral award in a dispute with the Integral Coach Factory after finding that the Railways unilaterally appointed the arbitral tribunal, even though the contractor had clearly objected to the process.

Justice N. Anand Venkatesh held that the arbitral award stood “vitiated due to lack of jurisdiction” since the tribunal had been unilaterally constituted.

The dispute goes back to a contract awarded in November 2017 by the Integral Coach Factory to RPN Engineers Chennai Private Limited for water supply and allied works.

The work was to be completed within nine months, but the timeline was extended repeatedly. The contractor claimed that it was asked to execute additional works that were not part of the original agreement, substantially increasing the project value. Later, alleging that outstanding dues were not paid and that a completion certificate was not issued, the contractor invoked arbitration in June 2021.

At the time of invoking arbitration, the contractor recorded its objections in writing, stating that it was not willing to waive the statutory protection against biased appointments.

It specifically said that railway officials and railway-controlled entities were ineligible to act as arbitrators. Despite this, the Railways went ahead and unilaterally constituted a three-member arbitral tribunal.

The tribunal delivered its award in February 2022, granting the contractor only a limited portion of its claims. The contractor then moved the High Court to challenge the award.

The Railways argued that since the contractor had taken part in the arbitral proceedings, it could not question the tribunal's authority after the award had been passed.

The court rejected this argument, pointing out that the record clearly showed the contractor had neither agreed to the tribunal's constitution nor waived its rights.

Finding that the award had been passed without jurisdiction, the court set it aside, while leaving it open to the parties to seek the appointment of a fresh arbitral tribunal in accordance with law.

For Petitioner: Advocate J. Srinivasa Mohan

For Respondents: Advocate K.S. Jeyaganesan