ARBITRATION IN RAILWAYS

Arbitration can be defined as an inbuilt mechanism in contracts whether with Government Departments,
Commercial, domestic or international whereby disputes arising out of contract between the parties can be
resolved without going through the process of judiciary. In India, Indian Arbitration and conciliation Act, 1996
came into force repealing the then Arbitration Act, 1929 which is considered to be more simple, straight and
easy in its understanding and implementation.
Indian Railways have a set of enabling provisions in contracts which are popularly known as Indian Railways
Standard and General Conditions of Contract which have been thoroughly revised and published in July, 2014.
This consists of 65 clauses and clauses 63 and 64 extensively deal with various rules and regulations relating to
seeking arbitration to publishing award and amends to the award.
The present write up covers following aspects:

• Reasons for disputes between parties to contract.

• Procedure to seek reference to appointment of Arbitration Tribunal.
• Time limit envisaged for seeking Arbitration of claims.
• Excepted Matters.
• Appointment of tribunal by the General Manager
• Proceedings of Arbitration.
• Publication of Arbitration Award.
• Amendments to Award
• Cost of Arbitration.
• Appeal against Award in appropriate court.
1. Reasons for disputes :- Disputes between the parties to a contract may arise during execution of contract on
account of several reasons. Important reasons are highlighted as under:
2. Site not handed over in time due to delayed land acquisition
3. Other obstructions like non-removal of power line crossings
• Non-availability of Permanent Way materials
1. Delays in obtaining clearances from Foest Department and other ministries.
2. Plans/drawings/designs are not provided
3. Inadequate or delay in issuing instructions.
• Frequent changes introduced during tenure of contract.
• Non-finalisation of variation statements and finalisation of rated for increased quantities and additional items.
1. Delays in taking measurements and arranging passing of bills.
2. Inadequate funds availability leading to delays in payments.
3. Not attending promptly the grievances of the contractor.
• Improper fixation of completion time leading to number of extensions to currency of contract.
2. Procedure to seek appointment of Arbitration Tribunal: Disputes may arise either during execution of
contract or after completion of work. The Contractor can seek reference to arbitration all disputes except
matters relating to Excepted matters referred to in clauses 8,18, 22(5),32,39,45,55,61, 61(2), 62 and claims
attracted by any special conditions of contract, which are specifically not arbitrable and stand excluded from
the purview of arbitration and the decision of the administration is final and binding. The final claims preferred
for Arbitration should be item wise, amount of claim to be indicated for each claim.
3. Time limit envisaged for seeking Arbitration : As per General Conditions of Contract, the contractor can
demand for appointment of Arbitral Tribunal by the General Manager after making his final claims to
administration and after completion of 120 days, if no satisfactory reply is received.
4. EXCEPTED MATTERS: The following issued envisaged in clauses of GCC elucidated hereinunder are
termed as excepted matters tand they are excluded from the purview of Arbitration and the decision of
administration in these matters is final and binding. Excepted matters are:
• Clause 8 of GCC: Assistance by the Railway for the Stores to be obtained by the Contractor.
• Clause No.18: Illegal Gratification.
• Clause No.22(5): Meaning and intent of specification and drawing.
• Clause No.39: Fixation of rates for additional items.
• Clause No.43(2): Monthly statement of claims.
• Clause No.45(a):
• Clause No.55: Provisions of Payment of Wages Act.
• Clause No.55(a)(5): Payment made to any worker working under Contractor on account of Provisions of
Contract Labour (Regulation and Abolition) Act, 1970 can be recovered by Railway Administration from
the Contractor.
• Clause No.57: Workmen Compensation Act.
• Clause No.57(a): Mines Act.
• Clause No.61(1): Right of Railways to determine the Contract.
• Clause No.61(2): Payment on determination of contract and
• Clause No.62(1) (Termination of contract) to (xiii)(b) of GCC or any clause in special conditions of
contract.
5. Appointment of tribunal by the General Manager: General Manager may appoint Arbitration Tribunal within 60
days of the receipt of written demand seeking Arbitration from the Contractor. The Tribunal may consist of sole
Arbitrator in case of claims valuing up to Rs.25 Lakhs (Rupees Twenty Five Lakhs) and 3 Arbitrators in case of
claims valuing above Rs.25 Lakhs. In case of Tribunal consisting 3 Arbitrators, the Contractor will be asked to
indicate 2 names from the panel as his nominee and balance will be nominated by the General Manager from
the panel of eligible Officers in Railways. As far as Finance Member is concerned, Officer in Selection Grade is
considered on par with SAG Officer in other Departments for the purpose of Arbitration Tribunal. It is also to
be kept in view that the Officers who have dealt the case in any manner in the past are not eligible to be
appointed as Arbitrator even though it does not affect the legal sanctity of Constitution of Arbitration Tribunal.
6. Proceedings of Arbitration: Arbitration proceedings are quasi-judicial in nature. They are based on
documents/records and daily record of proceedings is to be kept by the tribunal. Equal and adequate opportunity
is to be afforded to both parties to the dispute. Any communication from one party to the tribunal should be
endorsed to the other party to enable the other party to offer their views/ or objections. No new claim should be
allowed during arbitration proceedings but parties can supplement and modify their existing claims. Dates of
hearing can be decided with the consent of parties. Place and mode of hearings and language to be used to be
decided with the consent of the parties. Finally, AT should obtain from the parties a certificate to the effect that
they were given fair and adequate opportunity to represent their case in the proceedings of the arbitration
tribunal.
7. Publication of Award: After the final hearing is completed, the AT shall meet and finalise the award and publish
the same on stamp paper of requisite value applicable to the state or union territory. The Award should furnish
claim wise and item wise with the specific amount of award and also should give detailed reasons for their
award. This will help the parties to understand infer the same. The Award shall also state whether any interest is
payable, if so, from which date and at what rate. Normally, AT allows 60 days from the date of award for
implementation by the administration and thereafter interest rate is specified till the date of actual payment.
8. Amendments to Award : The party to the dispute may ask for amendment to award or supplementary award if
the tribunal by mistake omitted to publish award for certain claim or for corrections for clerical mistakes within
60 days from the date of receipt of award.
9. Cost of Arbitration: Normally the costs include fee payable to the members of the tribunal, Honorarium to the
steno/PA who assisted the tribunal in correspondence/typing the award. Further, clerical costs are also to be paid
to the presiding Arbitrator. In case of Retired Officers, Honorarium payable is Rs.75000/- per case. In case of
serving Railway Officers, Honorarium is decided by the tribunal based on number of sittings and at prescribed
rates. Normally, each arbitrator gets RS.10000/ per case. Both honorarium and cost of arbitration are shared
equally by both the parties.
10. Appeal against Award in Court: The Award published by the tribunal becomes rule of the court in 90 days from
the date award is published. Prior to new Arbitration Act, the award used to be filed in court in 90 days before
implementation. Now the award automatically becomes implementabkle if the administration or contractor does
not contest the award in 90 days. Hence the limit for contesting the award is 90 days. Parties to arbitration are at
liberty to contest the award in appropriate court. Such decision is taken in consultation with finance and law
branch and after obtaining approval of competent authority.