Court quashes Arbitral Tribunal constitution, upholds Engineer's decisions subject to arbitration.

The court ruled in favor of the petitioner, quashing the constitution of the Arbitral Tribunal with respondents No. 3 and 4. It found the parallel arbitral proceedings to be without jurisdiction and unsustainable. The Engineer's decisions were deemed final but subject to arbitration, allowing the respondent to contest them before the Arbitral Tribunal. The court emphasized the need for all issues to be decided in a single proceeding to avoid conflicting decisions. The Tribunal retained jurisdiction despite timeliness objections, with parties instructed to cover their own costs.

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Issues Involved:
1. Constitution of the Arbitral Tribunal.
2. Finality and binding nature of the Engineer's decisions.
3. Jurisdiction and legality of parallel arbitral proceedings.
4. Timeliness and validity of objections to the Engineer's decisions.

Issue-wise Analysis:

1. Constitution of the Arbitral Tribunal:
The petitioner challenged the constitution of an Arbitral Tribunal at the instance of respondent No. 1, which included respondents No. 3 and 4, under Clause 67 of the agreement. The petitioner argued that no parallel or concurrent reference could be made to another Tribunal when disputes regarding the same subject matter were already pending before an earlier constituted Arbitral Tribunal. The court found that the earlier Tribunal was duly constituted at the petitioner's instance and was already adjudicating the disputes. Therefore, the constitution of another Tribunal for the same disputes was deemed "wholly without jurisdiction" and not sustainable.

2. Finality and Binding Nature of the Engineer's Decisions:
The petitioner contended that the Engineer's decisions on certain claims had become final and binding as respondent No. 1 did not challenge these decisions within the stipulated period. The court acknowledged that the Engineer's decisions are final subject to arbitration under Sub-clause 67.3 of the agreement. However, the respondent retained the right to contest the Engineer's decisions before the Arbitral Tribunal, which would adjudicate the disputes on their merits.

3. Jurisdiction and Legality of Parallel Arbitral Proceedings:
The court addressed whether respondent No. 1 could constitute another Arbitral Tribunal for disputes already pending before an existing Tribunal. The court concluded that the constitution of a second Tribunal for the same disputes was "clearly without jurisdiction" and not permissible under the agreement or any legal provisions. All issues between the parties should be decided in a single proceeding to avoid contradictory decisions and wastage of resources.

4. Timeliness and Validity of Objections to the Engineer's Decisions:
Respondent No. 1 argued that the time limit for challenging the Engineer's decisions should be ignored under Section 28 of the Contract Act and sought an extension under Section 43 of the Arbitration and Conciliation Act. The court noted that the respondent had the right to seek an extension of time, which was pending before the District Judge. However, the court emphasized that the failure to lodge a protest within the prescribed time did not strip the Arbitral Tribunal of its jurisdiction to adjudicate the disputes. The Tribunal must evaluate the legality and validity of the claims on their merits.

Conclusion:
The court allowed the writ petition, quashing the constitution of the Arbitral Tribunal consisting of respondents No. 3 and 4. It held that the continuation of proceedings before this Tribunal was "wholly illegal, unwarranted," and not sustainable in law. The parties were ordered to bear their own costs.

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