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2003 DIGILAW 156 (KAR)

KARNATAKA POWER CORPORATION LIMITED, BANGALORE v. G. J. FERNANDEZ

2003-02-17

N.K.JAIN, V.G.SABHAHIT

body2003
N. K. JAIN, C. J. ( 1 ) THIS appeal is filed against the order of the learned Single Judge dated 28-10-2002 passed in W. P. No. 16188 of 2002, whereby the learned single Judge set aside the order in CMP No. 91 of 1999 and permitted the respondents to urge the contention that Clause 29 (c) and (e) are not arbitral clauses, before the Arbitrator. ( 2 ) THE 1st appellant is a Government of Karnataka undertaking engaged in the business of generating power and for the purpose of generating power the 1st appellant has constructed huge hydroelectric projects as well as thermal power stations. For the civil and structural work relating to the Units 5 and 6 of the said thermal plant the 1st appellant invited tenders during February 1996 and in response to the same the respondent submitted its offer and the same was accepted. The parties entered into an agreement dated 25-10-1996. ( 3 ) AFTER the respondent herein started performing its part of the contract, certain disputes arose regarding certain terms of the contract. The respondent placing reliance on Clause 29 (c) and (e) of the contract, vide letter dated 26-5-1999 made a request to the 1st appellant to refer the dispute to arbitration. The said request was rejected by the 1st appellant vide its letter dated 2-6-1999 stating that there was no arbitration clause in the agreement. ( 4 ) THE respondent then made an application under Section 11 of the arbitration and Conciliation Act, 1996 (for short, 'the Act'), for appointing an Arbitrator in CMP No. 91 of 1999. The designated Judge vide his order dated 21-1-2000 held that Clause 29 (c) and (e) of the contract were not arbitration clauses and dismissed CMP No. 91 of 1999. The respondent then filed O. S. A. No. 5 of 2000 before the Division Bench of this court. The designated Judge vide his order dated 21-1-2000 held that Clause 29 (c) and (e) of the contract were not arbitration clauses and dismissed CMP No. 91 of 1999. The respondent then filed O. S. A. No. 5 of 2000 before the Division Bench of this court. Later on in view of the decisions of the Supreme Court in Konkan railway Corporation Limited and Others v M/s. Mehul Construction company and in M/s. Konkan Railway Corporation Limited and Another v M/s. Rani Construction Private Limited, holding that no appeal could be filed against the decision of the designated Judge, and the only means to challenge the order of the designated Judge was to file a separate writ petition, the respondent withdrew OSA No. 5 of 2000 and filed Writ Petition No. 16188 of 2000 before this Court. The learned single Judge after hearing both sides set aside the order passed by the designated Judge and permitted to urge the contention that Clause 29 (c) and (e) are not arbitral clauses, before the Arbitrator. He remitted the matter to the designated Judge to appoint an Arbitrator as per the provisions of the Act. Feeling aggrieved by the said order, the appellants have preferred this appeal. ( 5 ) THE learned Counsel for the appellant submitted that this Court in malleshappa S. Mahur v The Executive Engineer, Irrigation Department and Another, held that Clause 66 of the agreement would make it clear that it is not an arbitration clause but is a mere provision for settlement of disputes containing the procedure before filing a suit in Civil Court. It was further held that Clause 66 only intends to prevent litigation' by requiring a decision by a named authority before the matter was taken to Court and was not intended to finally settle the disputes and it was not an arbitration agreement. In that case, the action of the learned single Judge refusing to appoint an Arbitrator invoking Section 11 (6) of the Act was upheld. ( 6 ) THE learned Counsel for the appellant submits that the learned single Judge has erred in relying on the decision of this Court in Prab- hakara Reddy's case, wherein this Court appointed an Arbitrator for adjudication of the dispute and referred the matter with a direction to raise all objections before the Arbitrator. ( 6 ) THE learned Counsel for the appellant submits that the learned single Judge has erred in relying on the decision of this Court in Prab- hakara Reddy's case, wherein this Court appointed an Arbitrator for adjudication of the dispute and referred the matter with a direction to raise all objections before the Arbitrator. Learned Counsel submits that prabhakara Reddy's case, supra, is not helpful and applicable to the facts of this case, as in that case the parties agreed and on consent order the matter was referred to an Arbitrator with direction. He further submits that the Arbitral Tribunal has the power to rule on its own as well as on the objection of with respect to the existence or validity of the arbitration agreement, as per Section 16 of the Act and the learned single Judge has erred in not appreciating the decision in Konkan Railway corporation Limited's case, supra, wherein Section 11 (6) of the Act has been discussed and so also the nature of the order - administrative or judicial, and therefore, the order of the learned Single Judge is liable to be set aside. He also relied on the decision in Wellington Associates limited v Kirit Mehta. ( 7 ) ON the other hand, the learned Counsel for the respondent submits that the learned Single Judge has rightly relied on the decision, and that if there are two views and the matter needs consideration of a larger Bench and no interference is required in this appeal. ( 8 ) AS agreed we have heard the learned Counsels for the parties, at the admission stage itself, perused the material on record and the case- laws cited. ( 9 ) THE law is well-settled that the Chief Justice or his delegate can appoint an Arbitrator under Section 11 as per agreement between the parties and while appointing an Arbitrator what is to be seen is that the Arbitrator is competent and impartial person who will decide the dispute between the parties. It is also settled that the parties can raise all objections and points arising from the arbitration clause of the agreement before the Arbitrator himself, as this Court cannot go into the merits and dispute pertaining to the objection, but if there is no arbitration clause in the agreement, power under Section 11 (6) of the Act cannot be exercised. It is also settled that the parties can raise all objections and points arising from the arbitration clause of the agreement before the Arbitrator himself, as this Court cannot go into the merits and dispute pertaining to the objection, but if there is no arbitration clause in the agreement, power under Section 11 (6) of the Act cannot be exercised. ( 10 ) THE main argument is that whether the learned Single Judge has rightly relied on Prabhakara Reddy's case, supra, in the facts of the given case? ( 11 ) IN Prabhakara Reddy's case, supra, the concerned Advocate did not dispute the legal position in Konkan Railway's case, supra, though there was no arbitration clause, but as agreed by the parties this Court appointed an Arbitrator and referred the matter for adjudication of the issue to the Arbitrator with a liberty to raise all objections before him. ( 12 ) WHEREAS in Malleshappa S. Mahur's case, supra, considering mysore Construction Company v Karnataka Power Corporation Limited and Others and considering Clause 66, which was replaced by Clause 29 of the conditions of contract forming part of supplementary agreement, it was found that it was a mere provision for settlement of disputes containing a procedure before filing a suit before Civil Court and it merely provided that if the contractor was not satisfied with the decision of the Engineer the contractor should approach the Civil Court for relief. So this Court has interpreted that Clause 66 was not an arbitration agreement. ( 13 ) IT is also seen that Clause 29 (c) and (e) is in pari materia to clause 66 having no arbitration clause and once the Court has come to the conclusion that there is no arbitration clause, the question of invoking section 11 (6) of the Act does not arise. No doubt, if there are two views, it will be appropriate to refer the matter to a larger Bench but as discussed in the facts of the given case, it cannot be said that there are two views, as argued. As stated, law is well-settled. However, each case depends on the facts and circumstances of its own. In Prabhakara reddy's case, supra, the parties agreed to the settled proposition of law and agreed to refer the matter to the Arbitrator and were prepared to take all objections before the Arbitrator himself. As stated, law is well-settled. However, each case depends on the facts and circumstances of its own. In Prabhakara reddy's case, supra, the parties agreed to the settled proposition of law and agreed to refer the matter to the Arbitrator and were prepared to take all objections before the Arbitrator himself. Under the circumstances, the learned Counsel cannot take advantage of the facts of that case with the argument advanced, which is not applicable and the learned Single Judge has erred in relying on the fact situation of Prabhakara reddy's case, supra, appointing an Arbitrator and referring the matter to the Arbitrator. Learned Single Judge also erred in holding that the decision in Prabhakara Reddy's case, supra, is not a decision on concession. As already stated, once this Court found that there was no arbitration clause in an identical matter, and in the absence of any clause, Section 11 (6) of the Act is not attracted. Unless the parties agree to the arbitration, the question of jurisdiction of the Arbitrator cannot be referred to the Arbitrator himself. ( 14 ) A perusal of Clause 29 (c) and (e) reveals that if a dispute or difference decided by Chief Engineer is not acceptable, then the contractor can approach the Court of law after notice to the Chief Engineer within a stipulated time of 90 days and if the Chief Engineer fails to decide the same within 90 days of the notice, the contractor can approach the Civil Court. So a bare reading of the said clause in the agreement reveals that a procedure has to be followed before approaching the competent Civil Court to resolve the dispute or difference, if any. We find no reason to differ from the facts and legal proposition in malleshappa S. Mahur's case, supra. In view of this, the order of the learned Single Judge setting aside the order of the learned designated judge and remitting the matter to appoint an Arbitrator as per the provisions of the Arbitration Act, and also permitting the respondents to urge the contention that Clause 29 (c) and (e) are not arbitral clauses before the Arbitrator, is liable to be set aside and accordingly it is set aside. In view of what we have discussed above writ appeal is allowed. In view of what we have discussed above writ appeal is allowed. However, dismissal of the application under Section 11 (6) of the Act will not preclude the parties to agitate their grievance in a competent Civil court in accordance with law. --- *** --- .