IMPORTANT NOTES TAKEN BY V.K.GUPTA, DY.CE/WORKS
N.RLY, DURING CONTRACT & ARBITRATION COURSE NO.653
FROM 16-01-06 TO 27-01-06 AT IRICEN/PUNE.
Acts/Important letters are:-
Indian Contract Act 1872.
Arbitration and Conciliation Act,1996 (Important points & GIST at Annex-I)
Engineering Code Chapter 12.
Engineering Standing Order No.10 (1998).
Railway Board‟s letter No.94/CE-I/CT/4 dated 22-10-01 & 17-10-02.
Important points of Sh. B S Sudhir Chandra Committee
HQ to inform Railway Board if amount of arbitration award is more than
Rs.50,000/-. (Rly BD no. F(X)IV/86/PW/6 dt. 5/5/87).
First letter of contractor to GM shall be treated as application for redressal
of claims within 120 days (Para 63 of GCC Railway Board revision dated
09-10-03). If no decision is taken by the GM or contractor is not satisfied
with the GMs decision, then after 120 days but before expiry of 180 days
contractor shall ask for arbitration otherwise no arbitration.
Arbitrator is bound by the agreement signed by claimant and respondent
as both of them have signed it.
Supplementary Agreement:- Supplementary Agreement should be added
in all the contracts of Open Line also as is already being done in
Construction contracts. If at the time of final bill contractor refuses to sign
supplementary agreement the department should ask the contractor for
claims if any and should be ready for arbitration. (ANNEXURE- X).
Important clauses of new Act are 7, 16, 11, 31, 34, and 64(5). Clause 7, 16,
34 are contradictory regarding jurisdiction of Arbitration Tribunal.
In case of orders by the court to appoint arbitrator, send all the claims to
Arbitrator and clearly mention that “This is an excepted matter and is not in
the purview of arbitrator vide GCC Clause No. ___.” against the excepted
Since the contractor has signed the contract agreement wherein it was
mentioned that the contractor and the department are bound to follow GCC
hence courts are also bound to follow GCC of Railways.
As per Contract Act 1940 the arbitration has to be completed within 120
days but in the New Act there is no such limit. But it must be completed in
On termination of work GCC 61 (1) says approved materials and works
shall be payable. Also see 62 (2). Railway shall admit claims for
expenditures done in expectations of completing works.
Arbitration claims of contractor can be accepted only upto 20% of contract
value. For this see clause 63 & 64 of GCC.
The Arbitrator must mention in the award regarding the period of payment
of award and interest thereon otherwise contractor will get 18% after 60
days as per Clause 31-7b of GCC.
Whenever a letter is written by Sole/Presiding/Co-Arbitrator the copy of the
same must be sent to the other arbitrators, claimant, respondent and the
arbitrator appointing office.
Arbitrator to submit all the papers to HQ along with the award.
Umpire takes a final decision in case the two Co-Arbitrators do not agree in
old cases but in new act majority of arbitrators will decide award, may be
even two Co-Arbitrators against the Presiding Arbitrator.
In cases prior to 1996 where arbitrator appointed before 1996, award has to
be approved by the Court as per Arbitration Act 1940, then only it will
become a decree.
In new act, award after expiry of 90 days automatically becomes decree if
not challenged in court Cl-34 of GCC.
For terminating contract after expiry of DOC only one proforma of Railway
Board’s letter No.99/CE-I/CT/28(PT) dated 17-05-04 is enough.
For place of Arbitration GCC Clause 64 (i).
Clause 14 & 15 for cases prior to 1997
Arbitrator can be challenged if he does not possess the agreed qualification
Clause 12 of Arbitration Act. In prior to 1996 cases, Arbitrator has to be a
Railway Gazetted Officer.
If L1 withdraws then re-tender, CVC No.98/ORD/1 dated 24-08-01.
If a part of an award is to be challenged in a court, the agreed amount should be
deposited with the court to avoid interest on that part.
If Central PSU is within 10% of L1 the work goes to PSU. Instructions to be
FDRs etc. to be verified by Accounts Department and not by the Executive
Department (as told by ED/Vig. during the lecture to course 653 at IRICEN).
Outside Arbitrator if appointed may be asked to accept the fee structure of retired
Railway Officers. Must attend each meeting fixed by the arbitrator especially the
meeting when fee is to be decided by the arbitrator. Fee must be reasonable as
mentioned in Clause 38, 39 of GCC.
Presiding Arbitrator participates in the proceedings whereas Empire does not
participates in proceedings and only gives the decision in case of any difference
between the two Co-Arbitrators.
1. U.O.I. V/s Sarvesh Chopra case: - Regarding Excepted Matters. Not to
be referred, even High Court cannot ask for referring excepted
matters to arbitrators. (ANNEXURE- IV).
2. Union of India V/s M.P.Gupta: - Regarding appointment of Arbitrator
under old Act. Only Gazetted Officers to be appointed. No Judge
etc. (ANNEXURE- V).
3. Union of India V/s Major ................................ (Guwahati High Court) –
Interest on Earnest Money, payments etc. (ANNEXURE- VI).
4. New India Civil Erection (P) Ltd. V/s ONGC – Arbitrator can not award
any amount ruled out by terms of agreement. (ANNEXURE- VII).
5. Sarvesh Kapoor V/s U.O.I. – Supplementary agreement signed.
Arbitration clause seizes. (ANNEXURE- VIII).
6. Judgment of seven Supreme Court Judges – Only High Court can
appoint Outside Arbitrator & no interference of High Court in
Arbitration Tribunal working. (ANNEXURE- III).
7. No Claim & Supplementary Agreement signed.
CPDE/SE Rly. letter No.E-R/ARB/Judgements/S.E.Rd/2004 dated
Bench of HC Calcutta Ambica Court V/s UOI two cases AP No.193 of
2001 & AC No. 9 of 1998. Cl. 43(2) of GCC regarding Supplementary
agreement & 16(2) of GCC regarding interest. (ANNEXURE-XI & XIII)
Letter must go to contractor informing that proceedings have started for
appointment of arbitrator.
Whatever you say verbally to Arbitrator/Court during arbitration
proceedings submit everything in writing along with the documents to the
Arbitrator/or court immediately after the proceedings or as early as
In the initial stage of defence first statement is “Most Important” & carries
Legal misconduct is consequent of mistake whereas personal misconduct means
Regarding facilities for inspection, facilities to be given by the contractor see
Clause 62 of GCC.
Tenders cannot be delayed for indefinite period for verification of FDRs/
In case arbitrator has awarded a small amount as Excepted Matter, Railway
should not go to court to avoid delays and bigger amounts by the other
(Vinay Kumar Gupta)
ARBITRATION ACT (IMP. POINTS)
Arbitration Fee: Rs.300/- per day, Rs.150/- per half day subject to a maximum
of Rs.10,000/- per case. Half day means two hours or less. Railway Board‟s
letter No.E(G)2004/H01-2 dated 24-02-04. Only one steno Rs.500/- per case.
Sole Arbitrator for amount less than Rs.5 lakhs for old G.C.C. (1989 and 1973),
less than Rs.10 lakhs for new G.C.C. (May‟ 1999). GCC 64 (3) (a) (i).
Presiding Arbitrator (Empire) for old G.C.C. nominated by Co-Arbitrators for
new G.C.C. by GM. Contractor to nominate one name in old G.C.C. and two in
No direction for Fees of retired Arbitrators.
Arbitrator appointment within 120 days of receipt of application of contractor.
Arbitration Award within 120 days of nomination.
Payment within 90 days or as directed by Arbitrator.
In old cases rate of interest was generally 18% but now it is 9% to 12% in
Open Line and Construction are different organizations. Arbitrator should be
from Organization different from the one to which dispute pertains – HQ letter
No.362E/0/2/Eiv dated 27-11-1967.
Procedure for demand of Arb. by contractor GCC 64 (1) (i).
Excepted Matters: Clause 8, 18, 22(5), 39, 43(2), 45/A, 55, 55(A), 57, 57/A,
61(2), 61(1), 61(3).
8 – Tools/Plants to be issued by Rly.
Awareness of site conditions, materialtiate equipment. – 19(1)
18 – Illegal gratification.
No interest – 16(3).
22(5) – Specs & Drgs.
39 – Rates for extra items.
43(2) – No Claim Certificate.
45(a) – Measurements if not objected within 7 days.
55 – Wages Act employment.
55A – Contract Labour Act.
57 – Workmen Compensation Act.
57A – Mines Act.
61(1) – Determine Contract by Railway.
61(2) - Determine Contract by Railway.
62(1) - Determination of contract due to contractor fault and Prolongation of
THE ARBITRATION AND CONCILIATION ACT, 1996 (IMP. CLAUSES)
The law on arbitration was substantially contained in three enactments, viz. the
Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the
Foreign Awards (Recognition and Enforcement) Act, 1961.
Act 26 of 1996: The Arbitration and Conciliation Bill having been passed by both
the Houses of Parliament received the assent of the President on 16 th August,
1996. It came on the Statute Book as THE ARBITRATION AND CONCILIATION
ACT, 1996 (26 OF 1996).
1. Short title, extent and commencement.
PART – I
3. Receipt of written communications:-
(a) any written communication is deemed to have been received if it is
delivered to the addressee personally or at his place of business, habitual
residence or mailing address, and
(b) if none of the places referred to in clause (a) can be found after
making a reasonable inquiry, a written communication is deemed to have
been received if it is sent to the addressee‟s last known place of business.
4. Waiver of right to object.
5. Extent of judicial intervention.
6. Administrative assistance.
7. Arbitration agreement.
8. Power to refer parties to arbitrator where there is an arbitration agreement.
If issue is pending before the judicial authority, an arbitration may be
commenced or continued and an arbitral award made.
9. Interim measures, etc. by Court.
COMPOSITION OF ARBITRAL TRIBUNAL
10. Number of arbitrators:-
The parties are free to determine the number of arbitrators, provided that
such number shall not be an even number.
11. Appointment of arbitrators:-
Failing any agreement referred to in sub-section (2), in an arbitration with
three arbitrators, each party shall appoint one arbitrator, and the two
appointed arbitrators shall appoint the third arbitrator who shall act as the
If the appointment procedure in sub-section (3) applies and –
(a) A party fails to appoint an arbitrator within thirty days from the
receipt of a request to do so from the other party; or
(b) The two appointed arbitrators fail to agree on the third arbitrator
within thirty days from the date of their appointment,
the appointment shall be made, upon request of a party, by the
Chief Justice or any person or institution designated by him.
The Chief Justice or the person or institution designated by him, in
appointing an arbitrator, shall have due regard to –
(a) Any qualifications required of the arbitrator by the agreement of the
(b) Other considerations as are likely to secure the appointment of an
independent and impartial arbitrator.
12. Grounds for challenge:-
When a person is approached in connection with his possible appointment
as an arbitrator, he shall disclose in writing any circumstances likely to
give rise to justifiable doubts as to his independence or impartiality.
An arbitrator may be challenged only if –
(a) Circumstances exist that give rise to justifiable doubts as to his
independence or impartiality, or
(b) He does not possess the qualifications agreed to by the
13. Challenge procedure.
14. Failure or impossibility to act:- The mandate of an arbitrator shall
terminate if –
(a) He becomes de jure or de facto unable to perform his functions or
for other reasons fails to act without undue delay; and
(b) He withdraws from his office or the parties agree to the termination
of his mandate.
15. Termination of mandate and substitution of arbitrator:-
Where he withdraws from office for any reason; or
JURISDICTION OF ARBITRAL TRIBUNAL
16. Competence of arbitral tribunal to rule on its jurisdiction.
17. Interim measures ordered by arbitral tribunal.
CONDUCT OF ARBITRAL PROCEEDINGS
18. Equal treatment of parties.
19. Determination of rules of procedure.
20. Place of arbitration:-
Failing any agreement referred to in sub-section (1), the place of
arbitration shall be determined by the arbitral tribunal having regard to the
circumstances of the case, including the convenience of the parties.
The arbitral tribunal may, unless otherwise agreed by the parties, meet at
any place it considers appropriate for consultation among its members.
21. Commencement of arbitral proceedings:-
Shall commence on the date on which a request for that dispute to be
referred to arbitration is received by the respondent.
22. Language:- The arbitral tribunal shall determine.
23. Statement of claim and defence.
Unless otherwise agreed by the parties, either party may amend or
supplement his claim or defence during the course of the arbitral
24. Hearings and written proceedings:
Arbitral tribunal shall decide whether to hold oral hearings for the
presentation of evidence or for oral argument, or whether the proceedings
shall be conducted on the basis of documents and other materials.
The parties shall be given sufficient advance notice.
25. Default of a party:-
(a) If the claimant fails to communicate his statement of claim in
accordance with sub-section (1) of Section 23, the arbitral tribunal
shall terminate the proceedings;
(b) The respondent fails to communicate his statement of defence in
the arbitral tribunal shall continue the proceedings without treating
that failure in itself as an admission of the allegations by the
(c) A party fails to appear at an oral hearing or to produce
documentary evidence, the arbitral tribunal may continue the
proceedings and make the arbitral award on the evidence before it.
26. Expert appointment by arbitral tribunal:-
The arbitral tribunal may appoint one or more experts.
The experts shall, on the request of a party, make available to that party
for examination all documents, goods or other property in the possession
of the expert with which he was provided in order to prepare his report.
27. Court assistance in taking evidence.
MAKING OF ARBITRAL AWARD AND TERMINATION OF PROCEEDINGS
28. Rules applicable to substance of dispute.
29. Decision making by panel of arbitrators:-
Any decision of the arbitral tribunal shall be made by a majority of all its
It is not compatible with an arbitration agreement for an arbitral tribunal to
encourage settlement of the dispute and, with the agreement of the
parties, the arbitral tribunal may use mediation, conciliation or other
procedures at any time during the arbitral proceedings to encourage
If, during arbitral proceedings, the parties settle the dispute, the arbitral
tribunal shall terminate the proceedings and, if requested by the parties
and not objected to by the arbitral tribunal, record the settlement in the
form of an arbitral award on agreed terms.
And shall state that it is an arbitral award & shall have the same status.
31. Form and contents of arbitral award:
An arbitral award shall be made in writing and shall be signed by the
members of the arbitral tribunal.
In arbitral proceedings with more than one arbitrator, the signatures of the
majority of all the members of the arbitral tribunal shall be sufficient.
The arbitral award shall state its date and the place of arbitration.
After the arbitral award is made, a signed copy shall be delivered to each
The arbitral tribunal may include in the sum for which the award is made
interest, at such rate as it deems reasonable, on the whole or any part of
the money, for the whole or any part of the period.
Unless otherwise agreed by the parties – the costs of an arbitration
shall be fixed by the arbitral tribunal.
Explanation:- For the purpose of clause (a), “costs” means reasonable
costs relating to.
32. Termination of proceedings:- The arbitral proceedings shall be
terminated by the final arbitral award.
(a) The claimant withdraws his claim, unless the respondent objects.
(b) The parties agree on the termination of the proceedings,
(c) The arbitral tribunal finds that the continuation of the proceedings
has for any other reason become unnecessary or impossible.
33. Correction and interpretation of award; additional award:
(1) Within thirty days from the receipt of the arbitral award.
(a) A party, with notice to the other party, may request the arbitral
tribunal to correct any computation errors, any clerical or
(b) Request the arbitral tribunal to give an interpretation of a specific
(4) Request within thirty days from the....... , the arbitral tribunal to
make an additional arbitral award as to claims presented in the
arbitral proceedings but omitted from the arbitral award.
(5) If the arbitral tribunal considers the request made under sub-section
.....additional arbitral award within sixty days.
RECOURSE AGAINST ARBITRAL AWARD
34. Application for setting aside arbitral award.
(2) An arbitral award may be set aside by the Court only if –
FINALITY AND ENFORCEMENT OF ARBITRAL AWARDS
35. Finality of arbitral awards.
36. Enforcement: Where the time for making an application to set aside the
arbitral award under section 34 has expired.
37. Appealable orders (1) To the Court authorized by law.
(1) The arbitral tribunal may fix the amount of the deposit ... , as an
advance for the costs referred to in....
(2) The deposit referred to in sub-section (1) shall be payable in equal
shares by the parties.
Provided that where one party fails to pay his share.
Further that where the other party also does not pay the aforesaid share in
respect of the claim or the counter-claim, the arbitral tribunal may suspend
or terminate the arbitral proceedings.
39. Lien on arbitral award and deposits as to costs:
(2) If in any case an arbitral tribunal refuses to deliver its award except
on payment on the costs demanded by it, the Court may, on an application
in this behalf, order that the arbitral tribunal shall deliver the arbitral award
to the applicant on payment into Court by the applicant of the costs
demanded, and shall, after such inquiry, if any, as it thinks fit, further order
that out of the money so paid into Court there shall be paid to the arbitral
tribunal by way of costs such sum as the Court may consider reasonable
and that the balance of the money, if any, shall be refunded to the
40. Arbitration agreement not to be discharged by death of party thereto.
41. Provisions in case of insolvency.
(2) An arbitration shall be deemed to have commenced on the date
referred in section 21.
ENFORCEMENT OF CERTAIN FOREIGN AWARDS
NEW YORK CONVENTION AWARDS (Clause 44 to 52)
GENEVA CONVENTION AWARDS (Clause 53 to 60)
64. Appointment of conciliators.
(1) (a) In conciliation proceedings with one conciliator, the parties may
agree on the name of a sole conciliator;
(b) In conciliation proceedings with two conciliators, each party may
appoint one conciliator;
(2) Parties may enlist the assistance of a suitable institution or person
in connection with the appointment of conciliators.
(a) A party may request such an institution or person to recommend
the names of suitable individuals to act as conciliator;
67. Role of conciliator.
(1) The conciliator shall assist the parties in an independent and
impartial manner in their attempt to reach an amicable settlement of
68. Administrative assistance. In order to facilitate the conduct of the
conciliation by a suitable institution or person.
69. Communication between conciliator and parties:
(1) The conciliator may invite the parties to meet him or may
communicate with them orally or in writing. He may meet or communicate
with the parties together or with each of them separately.
70. Disclosure of information: When the conciliator receives factual
information concerning the dispute from a party, he shall disclose the
substance of that information to the other party.
Provided that when a party gives any information to the conciliator subject
to a specific condition that it be kept confidential, the conciliator shall not
72. Suggestions by parties for settlement of dispute: Each party may.
73. Settlement agreement:
(1) When it appears to the conciliator that there exist elements of a
settlement which may be acceptable to the parties, he shall formulate the
terms of a possible settlement and submit them to the parties for their
76. Termination of conciliation proceedings:
(a) By the signing of the settlement agreement by the parties.
(b) By a written declaration of the conciliator, after consultation with the
parties, to the effect that further efforts at conciliation are no longer
(c) By a written declaration of the parties addressed to the conciliator.
(d) By a written declaration of a party to the other party and the
77. Resort to arbitral or judicial proceedings: The parties shall not initiate,
during the conciliation proceedings, any arbitral or judicial proceedings.
78. Costs: (1) Upon termination of the conciliation proceedings, the conciliator
shall fix the costs of the conciliation. “Costs” means reasonable costs.
THE APPOINTMENT OF ARBITRATORS BY THE
CHIEF JUSTICE OF INDIA SCHEME, 1996.
1. Short title: This Scheme may be called the Appointment of Arbitrators by
the Chief Justice of India Scheme, 1996.
2. Submission of request: The request to the Chief Justice under sub-
section (4) or sub-section (5) or sub-section (6) of section 11 shall be
made in writing and shall be accompanied by....
3. Authority to deal with the request: Chief Justice may either deal with
the matter entrusted to him or designate any other person or institution.
6. Rejection of request: The Chief Justice or the person or the institution
designation by him may reject it.
B.S.Sudhir Chandra Committee Recommendations (IMP. FEATURES)
220.127.116.11. Eligibility criteria for open tenders.
18.104.22.168. Documents to be submitted with tender.
22.214.171.124 Limited Tenders from approved list of tenderers only.
126.96.36.199 Publishing of Limited Tenders.
- Limit of calling Limited Tenders raised from Rs.40 lacs to Rs.1
Dy.CE(C)/Sr.DEN = Upto Rs.10 lacs.
SAG/DRM = > Rs.10 lacs upto Rs.25 lacs.
PHOD = > Rs.25 lacs upto Rs.50 lacs.
CAO/C, GM = > Rs.50 lacs upto Rs.1 Crore.
- Contractors registered in a slab can be allowed in same slab only
not even for lower.
188.8.131.52 Approved list of contractors: Upper limit for approved contractors
is Rs.1 crore.
Class „D‟ Upto Rs.10 lacs.
Class „C‟ > Rs.10 lacs upto Rs.25 lacs.
Class „B‟ > Rs.25 lacs upto Rs.50 lacs.
Class „A‟ > Rs.50 lacs upto Rs.1 crore.
List valid for three years. Reviewed every year for deletion /
addition of names. (deletion yearly on 1 st July, addition 1st July & 1st
- List separate for Open Line & Construction Organization for each
- „B‟, „C‟ & „D‟ in Division & „A‟ in HQ in Const. „B‟,‟C‟,‟D‟ generally
Dy.CE/C wise & „A‟ by CAO(C) / GM.
Class Selection Committee Accepting Authority
„A‟ One each SAG of Exec. Branch PHOD of Exec.
„B‟, „C‟ One each JAG of Exec. Branch DRM/SAG
„D‟ One each Sr. Scale of Exec. Dy.CE/C, Sr.DEN/C
Branch & Finance.
- In Construction Orgn. generally no contract below Rs.10 lacs.
Registration Fee: „D‟ – Rs.5000/-, „C‟ – Rs.7500/-, „B‟ – Rs.10,000/-, „A‟ –
Rs.15000/- for each category in each slab for 3 years or part thereof.
Standing Earnest Money only for approved contractors -
„D‟ – Rs.15,000/-, „C‟ – Rs.35000/-, „B‟ – Rs.75,000/-, „A‟ – Rs.1,50000/-.
- Standing Earnest Money (SEM) separate for Construction & Open
- Valid for all Branches i.e. Engineering, Electrical, Mechanical ......
- Valid in same Organization.
Special Limited Tenders:
- For works of specialized nature (PHOD), urgent nature (GM),
Consultancy work (GM).
- 6 tenders but never less than 4.
Dispensing calling of Tenders (i.e. calling of quotations):-
(Para 1211(E) ).
184.108.40.206. Should be avoided & exercised sparingly. With finance concurrence
Rank of Officer Per case Annual
Sr.Scale Rs.50,000/- Rs.2,00,000/- With own
Charge) approval of the
JAG/SG Rs.1,00,000/- Rs.5,00,000/- officers
SAG Rs.2,00,000/- Rs.10,00,000/- (Register to be
220.127.116.11. Two Packet System of Tendering:-
May be adopted in specifically identified situations & qualifying
criteria concurred by FA&CAO & CAO/C & approved by GM/CAO.
- L-1 is lowest, valid, eligible, and technically acceptable.
- Negotiation with L-1 only (or with PSU not more by 10% higher than
- Board‟s letters No.61/W-II/CT/24 dated 31-10-65, No.73/W-II/CT/15
dated 15-3-74 & No.84/W-I/CT/28(P) dated 9-7-85.
Variation in contract qualities:
- Upto +25% a regulatory mechanism as part of the contract itself.
- Next 15% (i.e. upto +40%) reduction in rate by 2% beyond (+)25%
& 4% for next 10% (i.e. beyond +40% upto +50% reduction of 4%).
- Beyond +50% of contract value not allowed (Railway Board
- From beyond +25% quantities monitored carefully at least at JAG
No.Dy.CE/Works/Misc./2006. Dated: 20-02-06.
Sr. Divisional Engineer (C),
DLI, FZR, LKO, MB & UMB.
Sub: Important Notes taken during Contract & Arbitration Course
No.653 from 16-01-06 to 27-01-06 at IRICEN/Pune.
The important notes taken by undersigned during Contract & Arbitration
Course No.653 from 16-01-06 to 27-01-06 at IRICEN/Pune are enclosed
herewith for information and suggestions please.
Secy./Pr.CE for kind information of Pr.CE please.
CTE, CBE, CE/P&D, CE/TSP, CE/G, CE/MRTS, CE/TMC - for kind information.
Dy.CE/TP, Dy.CE/TS-I, Dy.CE/TS-II, Dy.CE/TO, Dy.CE/TM, Dy.CE/Br.HQ,
Dy.CE/Br.D, Dy.CE/P&D and Dy.CE/Land.