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2004 DIGILAW 426 (AP)

Sun Techno Constructions (P) Ltd. , Railway Contractors v. Union of India, rep. by its General Manager, South Central Railway, secunderabad

2004-04-02

DEVENDER GUPTA

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DEVENDER GUPTA, J. ( 1 ) THE question required to be considered by me is, whether the respondents-Railways have failed to act as required under the procedure agreed to by the parties for appointment of arbitrators so as to enable the petitioner to seek appointment ot a sole arbitrator by this Court. ( 2 ) ADMITTED facts are that an agreement dated 6-9-1999 was entered into between the parties under which the petitioner was awarded by the Chief Engineer (Construction-l), South Central Railway the work in question the total value of which was estimated at Rs. 4,72,55,037. 74. ( 3 ) ON 25th June, 2003 the petitioner submitted representation to the Railways making fifteen claims and simultaneously reserving its right to add/modify the claims, if necessary, at the time of signing of the final bill which was yet to be signed. On 9-9-2003, the Railways notified its decision on all the matters referred by the petitioner that the claims are not justified and are not acceptable. On 22-10-2003, the petitioner sent its communication in response to railways reply dated 9-9-2003 asserting that the claims were tenable and requested that in spite of the clarifications made by it in their letter, if the Railways still would be unable to settle the petitioner s claims the same be treated as disputed matters and be referred for arbitration in terms of Clause 64 of General Conditions of Contract (GCC ). ( 4 ) THE case of the Railways is that on 26-12-2003 the petitioner was informed through letter by the Chief Engineer, construction-l, South Central Railways stating that the claims made by it are not justified and not acceptable. However, the petitioner was informed that as demanded by it the case was being referred for arbitration. The petitioner without making reference to this letter of the respondents by petition dated 27-12-2003 filed in this Court on 29-12-2003 under Section 11 (6) of the arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act ) prayed for appointment of sole arbitrator in accordance with Section 11 of the Act alleging that despite the request made by the petitioner on 22-10-2003, Railways had failed to appoint arbitrators, therefore, sole arbitrator in terms of Section 11 of the Act was required to be appointed. ( 5 ) RESPONDENTS-RAILWAYS opposed the petition on the ground that in the representation dated 25-6-2003, the petitioner raised fifteen claims but reserved its right to add or modify its at the time of signing the final bill which was signed under protest only on 22-10-2003. As the petitioner had in representation dated 25-6-2003 represented that it was going to add or modify its claims at the time of signing the final bill, therefore, till the petitioners complying with the conditions of Clause no. 63 of General Conditions of Contract and submission of supporting vouchers and bills, it was not possible to verify the same. In any case, the Railways alleged that while final bill was under preparation, before expiry of 120 days therefrom the petitioner had submitted his representation on 22-10-2003, which was premature. Thus there was no justification in the petitioner approaching this court for appointment of an independent sole arbitrator without complying with clause 64 (1) (iv) of GCC. The Railways alleged that there was no failure on its part of the agreed procedure for appointment of an arbitrator, therefore, the application was not maintainable. It is alleged that the petitioner was duly informed that the respondents were seized of the matter for appointment of an arbitrator, irrespective of defect on the part of the petitioner and had also sent a panel of officers to the petitioner to nominate one of the Officers from the panel as arbitrator. Respondents, therefore, prayed that the parties may be left to appoint the arbitrators as per the procedure prescribed in the agreement. ( 6 ) THE petitioner in his rejoinder asserted that after the Railways rejected its claims by letter dated 9-9-2003, the petitioner made a request on 22-10-2003 for appointment of an arbitrator. The petitioner further alleged that the respondents with an ante letter dated 26-12-2003 intimated that the appointment of arbitral tribunal was under process, which panel of arbitrators sent to it on 4-2-2004 much later to the receipt of notice from this Court. Since the respondents had failed to make appointment of an arbitrator in response to the letter of the petitioner-dated 22-10-2003, it was permissible for this court to make appointment of an independent sole arbitrator. ( 7 ) LEARNED counsel for the petitioner placed reliance upon the following decisions:1. Madhava Hytech Engineers Pvt. Ltd. Secunderabad v. Union of india, South Central Railway, secunderabad and another. ( 7 ) LEARNED counsel for the petitioner placed reliance upon the following decisions:1. Madhava Hytech Engineers Pvt. Ltd. Secunderabad v. Union of india, South Central Railway, secunderabad and another. 2. Madhava Hytech Engineers Pvt. Ltd. Secunderabad v. Union of india, South Central Railway, secunderabad and another. 3. Union of India, South Central railway, Secunderabad and others v. B. Janardhan Reddy and another. 4. M/s. Konkan Railway Corporation ltd. and another v. M/s. Rani construction P. Ltd. ( 8 ) LEARNED counsel for the respondents placed reliance upon the following decisions:1. Union of India and another v. Sohanlal Puglia 2. Datar Switchgears Ltd. v. Tata finance Ltd. . 3. Union of India v. Vengamamba engineering Co. Juputi, Krishna district. 1. 2003 (3) ALT 16 . 4. AIR 2002 SC 778 . 2. 2003 (1) ALT 321 . 5. (2004) 1 SCC 768 . 3. 2003 (6) ALT 641. 6. (2000) 8 SCC 151 . 7. 2001 (4) ALT 45 = 2001 (3) ALD 776 (D. B. ). ( 9 ) I have gone through the record and also perused the decisions relied upon by the learned counsel for the parties. Since the decision under Section 11 (6) of the Act is only an administrative decision, I need not proceed to assign lengthy reasons in support of the order but would proceed to determine answer to the question (supra) in short. It is not in dispute that the petitioner approached the Court alleging that under the procedure agreed to by the parties, the respondents have failed to act as required under the procedure, therefore, prayed for appointment of sole arbitrator. ( 10 ) BEFORE I proceed further, it is necessary to quote the relevant clauses of general Conditions of Contract laying down the procedure viz. , Clauses 63, 64 (1) (i), 64 (3) (a) (i) and 64 (3) (a) (ii): 63. ( 10 ) BEFORE I proceed further, it is necessary to quote the relevant clauses of general Conditions of Contract laying down the procedure viz. , Clauses 63, 64 (1) (i), 64 (3) (a) (i) and 64 (3) (a) (ii): 63. Matters finally determined by the railway: All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the work or after its completion and whether before or after the determination of the contract shall be referred by the contractor to the Railway and the Railway shall within 120 days after receipt of contractor s representation make and notify decisions on all matters referred to by the contractor writing provided that matters for which provisions has been made in clauses 8 (a), 18, 22 (5), 39, 43 (2), 55k, 45 (A), 55-A (3), 57, 57-A, 61 (1), 61 (2) and 62 (1) (b) for general conditions of Contract or in any clause of the special conditions of the contract shall be deemed as excepted matters and decision of the railway authority, thereon shall be final and binding on the contractor provided further that expected matters shall stand specifically excluded from the purview of the Arbitration clause and not be referred to arbitration. 64 (1) (i) Demand for Arbitration: in the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities 01 the parties on any matter in question, dispute or difference on any account or as to the withholding by the railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in such cases, but except in any of the excepted matters referred to in clause 63 of these conditions, the contractor, after 20 days but within 180 days of his presenting his final claim on disputed matters, shall demand in writing that the dispute or difference be referred to arbitration. 64 (3) (a) (i): In cases where the total value of all claims in question added together does not exceed Rupees 10,00,000/- (Rupees Ten Lakhs only), the Arbitral Tribunal consist of a sole arbitrator who shall be either the general manager or Gazetted Officer of Railways not below the grade of JA grade nominated by the General manager in that behalf. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by Railway. 64 (3) (a) (ii): In cases not covered by clause 64 (3) (a) (i), the Arbitral Tribunal shall consist of a panel of three gazetted Railway Officers not below ja grade, as the Arbitrators. For this purpose, the Railway will send a panel of more than three names of Gazetted railway Officers of one more departments of the Railway to the contractor who will be asked to suggest to General manager up to two names out of the panel for appointment as Contractor s nominee. The General manager shall appoint at least one out of them as the contractor s nominee and will also simulataneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the "presiding arbitrator" from amongst the three arbitrators so appointed. While nominating the Arbitrators, it will be necessary to ensure that one of them is from the Accounts Department. An officer of selection Grade of the accounts department shall be considered of equal status to the officers in SA Grade of other departments of the Railway for the purpose of appointment of Arbitrators. ( 11 ) AS per Clause 63 of GCC, Railways is required to make and notify its decisions on all matters referred to by the contractor in writing within 120 days after the receipt of contractor s representation. Admittedly, on 25-6-2003 claim was made by the petitioner and there is no dispute that on 9-9-2003 railways made and notified its decision to the petitioner rejecting its claims. In view of the said rejection by respondents-Railways of the petitioner s claims, obviously, disputes and differences arose. Therefore, the petitioner under Clause 64 (1) (i) was required to make a demand in writing that disputes or differences be referred for arbitration. According to the petitioner, this demand was made by it on 22-10-2003. In view of the said rejection by respondents-Railways of the petitioner s claims, obviously, disputes and differences arose. Therefore, the petitioner under Clause 64 (1) (i) was required to make a demand in writing that disputes or differences be referred for arbitration. According to the petitioner, this demand was made by it on 22-10-2003. Respondent-railways case is that it was not a demand within the terms of Clause 64 for reference of disputes to arbitration or in any case it was a premature demand and till date demand has not been made. It is also the case of the Railways that on 26-12-2003 reply was sent to the letter dated 22-10-2003 by the Railways informing the petitioner that steps were being taken to have the matter referred for arbitration. Railways case is also that even assuming that 22-10-2003 is the date for making a valid request, even in that case, on the part of the respondents there has been no failure to take steps and thus a sole arbitrator cannot be appointed and parties will have to proceed to make appointment of arbitrators as per the agreed procedure. ( 12 ) CLAUSE 64 (1) (i) enjoins upon the contractor to make a demand after 120 days but within 180 days of his presenting final claim on disputed matters. Whether demand alleged to have been made on 22-10-2003 by the petitioner can be said to be a valid demand as per Clause 63 (a) (i) is the question arises for consideration. Petitioner has nowhere in the petition filed on 29-12-2003, stated that demand made by him in letter-dated 22-10-2003 was his final claim on the disputed matters. It may be noted herein that the petitioner in its initial demand made on 25-6-2003 specifically notified to the respondent-Railways that the petitioner reserve its right to add or modify its claim, if necessary, at the time of signing the final bill, which was yet to be signed. Respondent-Railways appears to have gone by that representation made by the petitioner. Admittedly, the final bill was signed only on 22-10-2003. The fact has not been so stated by the petitioner in the petition that the final bill was signed on 22-10-2003. The petitioner nowhere stated that the claim raised by it was the final claim on which it was seeking reference for appointment of an arbitrator and it is the final claim of disputed matters. The fact has not been so stated by the petitioner in the petition that the final bill was signed on 22-10-2003. The petitioner nowhere stated that the claim raised by it was the final claim on which it was seeking reference for appointment of an arbitrator and it is the final claim of disputed matters. Clause 64 (1) (i) lays emphasis about the time that "the contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters shall demand in writing that the dispute of difference be referred to arbitration. ( 13 ) IT has to be presumed that this letter dated 22-10-2003 was sent by the petitioner prior to signing of the final bill since nothing is stated in the petition on the final bill and there is nothing on record to suggest that final bill was signed by the petitioner before sending the letter dated 22-10-2003. Otherwise, there would have been a mention made by the petitioner in his letter- dated 22-10-2003 that it was making this request, which was its final claim on all the disputed matters. Having not stated so, the respondents were justified in assuming that the petitioner had not yet made demand in writing for its final claim or for reference of disputes TO arbitration in terms of clause 64 (1) (i) ). As per the procedure contemplated in Clause 63 (3) (a) (i), respondent was required to make appointment of arbitrator within sixty days from the date of making a valid demand for arbitration. Respondents rightly considered the petitioner s demand made in letter dated 22-10-2003 as premature demand and as such they are justified in praying for rejecting the petitioner s application for appointment of an arbitrator under Section 11 (6) of the Act and for that reason it will not be permissible to make appointment of a sole arbitrator in terms of the decisions of the Supreme Court in Sohanlal Puglia s case (5 supra ). ( 14 ) THE petition accordingly is dismissed as not maintainable making it clear that it is open for the parties to proceed to act in accordance with the procedure laid down in clause 64 (3) (a) (ii) of GCC for appointment of arbitrators. ( 15 ) ARBITRATION Application is disposed of accordingly.