Research › Search › Judgment

Andhra High Court · body

2005 DIGILAW 1009 (AP)

Harsha Constructions, Hyderabad v. Union of India

2005-10-27

T.CH.SURYA RAO

body2005
( 1 ) APPLICANT seeks the appointment of a sole arbitrator in view of section 11 (6) of the Arbitration and conciliation Act, 1996 to resolve the disputes between the parties inter se. ( 2 ) PURSUANT to tenders called for by the respondents for construction of new bridge of 9 x 18. 3m (clear span) with PSC girders on permanent diversion at KM 257/26-34 with SKM and UPD stations on vijayawada-Gudur section of South Central railway, the applicant submitted its tender, and the respondents accepted the tender on 7-1-2004. The initial value of the work was Rs. 7,48,92,753/ -. The work shall be completed within 165 days from the date of acceptance letter i. e. , it shall be completed on or before 21-6-2005. An agreement to that effect was executed on 1-3-2004 in between the parties. During the execution of work, due to peculiar site conditions, according to the applicant, the scope of work was changed, on account of which certain additional works became necessary and the applicant had executed the said additional works also. During the period of execution of work, the price of steel was increased by almost 100%. Since the work pertains to the construction of a bridge with PSC girders, the quantity of steel consumption was enormously increased and on account of the increase in the price of the steel, the rates quoted by the applicant in the tender became unviable and therefore the applicant made several representations to the respondents to increase the rates. However, at the instance of the site engineer, who promised to take necessary steps to alleviate the applicant from the difficulties, the applicant had to complete the work by 19-7-2004. The respondents took over the bridge on the very same day. However, the request of the applicant was not considered by the respondents. Therefore, the applicant raised certain disputes on 9-7-2004 and requested the respondents to arrange payment and eventually the said disputes culminated in claims. On 2-12-2004 the applicant raised some more disputes and requested the respondents to settle the same. In response to the requests of the applicant the respondents constituted a pre-arbitration committee to resolve the dispute with regard to increase in steel and extra rates for pile driving and other disputes were not considered. The applicant, therefore, invoked the arbitration clause on 29-1-2005 and requested the first respondent to constitute an arbitral tribunal. In response to the requests of the applicant the respondents constituted a pre-arbitration committee to resolve the dispute with regard to increase in steel and extra rates for pile driving and other disputes were not considered. The applicant, therefore, invoked the arbitration clause on 29-1-2005 and requested the first respondent to constitute an arbitral tribunal. The applicant presented its claim before the said committee, but however, it rejected the decision of the pre-arbitration committee. A request of the applicant in its notice dated 29-1-2005 was considered by the respondents and informed the applicant on 24-2-2005 that it was under consideration and the arbitral tribunal should be constituted strictly in terms of clause 64 of General Conditions of Contract (for short g. C. C. ). However, on 16-5-2005 the respondents rejected all the claims of the applicant and therefore, the disputes remained unresolved. Hence, the petition. ( 3 ) THE respondents resisted the petition by filing a counter-affidavit. ( 4 ) THE core of the contention of the respondents seems to be that the application filed by the applicant is pre-mature inasmuch as the applicant having appeared before the pre-arbitration committee and submitted his claim statement and participated in the sittings, which tantamount to waiving his rights in demanding the constitution of the arbitral tribunal and when the pre-arbitration committee submitted its report on 15-4-2005 and the recommendations of the committee were when sent to the applicant by a letter darted 6-6-2005 for expressing his willingness, the applicant having not been satisfied with the recommendations of the committee, rejected the same on 7-6-2005 and filed the present application on 8-6-2005 without following the procedure envisaged under clause 64 of G. C. C. ( 5 ) HEARD the learned Counsel for the applicant and the learned standing Counsel for the respondents. ( 6 ) THE material facts are not in dispute. The applicant submitting its tender pursuant to the tender notice got issued by the respondents; its acceptance by the respondents and the consequent execution of the work by the applicant are not in dispute. A claim had been made by the applicant for increasing the rates on the premise that the steel rates had been increased 100% and certain additional works, which became necessary on account of the peculiar site conditions, were carried out. By his letter dated 9-7-2004 the applicant made as many as four main items of claim viz. A claim had been made by the applicant for increasing the rates on the premise that the steel rates had been increased 100% and certain additional works, which became necessary on account of the peculiar site conditions, were carried out. By his letter dated 9-7-2004 the applicant made as many as four main items of claim viz. , (1) Reimbursement of extra cost due to increase in steel prices, (ii) Extra rate over item 1 of Schedule A, for drilling piles through rock, (iii) Payment of removal of boulders, ballast etc. , and clearing pier 5 location, by under water excavation considering islands two times extra and idling charges of piling rigs, and (iv) Design charges of substructure and foundations and design charges of superstructure to seismic loads and extra span rate of superstructure of seismic loads. On 29-1-2005 the applicant by its letter of even date requested the respondents to consider its claims finally as detailed in its earlier letter dated 9-7-2004 and requested the respondents to constitute an arbitral tribunal in terms of clause 64 of g. C. C. within 30 days. A reply was given by the respondents on 24-2-2005 to the letter of the applicant dated 29-1-2005, whereunder it had been mentioned that the claim in respect of items 1 and 2 of the letter dated 9-7-2004 had been referred to pre-arbitration committee and other claims mentioned in the letter were under examination and reply would be sent within the time frame prescribed in the arbitration clause. The respondents categorically rejected the request of the applicant to refer the matter to the arbitrator within thirty days on the ground that appointment of arbitration shall be within the frame work of arbitration clause stipulated in the contract agreement. Finally on 16-5-2005 the respondents sent a letter to the applicant that the report sent by the pre-arbitration committee was under examination in respect of first two items of the claim of the applicant and rejected the claim of other two items. ( 7 ) IT is obvious from the first letter addressed by the applicant dated 2-11-2004 annexed to the counter that the applicant initially made a request for pre-arbitration as per the instructions issued under Engineering standing Order No. 31 and admittedly the applicant participated in the proceedings before the pre-arbitration committee and the committee submitted its report. ( 7 ) IT is obvious from the first letter addressed by the applicant dated 2-11-2004 annexed to the counter that the applicant initially made a request for pre-arbitration as per the instructions issued under Engineering standing Order No. 31 and admittedly the applicant participated in the proceedings before the pre-arbitration committee and the committee submitted its report. However, the applicant by its letter dated 7-6-2005 not inclined to accept the recommendations of the pre-arbitration committee. The thrust of the contentions of the learned Counsel for the respondents seems to be that when once the applicant did not accept the report of the pre-arbitration committee, it should again demand for the resolution of the dispute by arbitration in terms of clause 64 of G. C. C. and without doing so on the very next date the applicant filed the present application, therefore, it was pre-mature. It may be reiterated here that although the applicant by his letter dated 29-1-2005 specifically requested the respondents to constitute an arbitral tribunal in terms of clause 64 of g. C. C within 30 days from the date of receipt of the said letter, what was objected to by the respondents to that letter is obviously the period set-forth therein inter alia i. e. , 30 days for constitution of the tribunal, but not the request of the applicant for constitution of such tribunal. Although a pre-arbitration committee was constituted in terms of the request made by the applicant earlier by his letter dated 2-11-2004 that may not be a bar when he made a specific request later on 29-1-2005 for the constitution of the arbitral tribunal. The request has neither been rejected nor accepted while constituting the tribunal. Although a pre-arbitration committee was constituted in terms of the request made by the applicant earlier by his letter dated 2-11-2004 that may not be a bar when he made a specific request later on 29-1-2005 for the constitution of the arbitral tribunal. The request has neither been rejected nor accepted while constituting the tribunal. In that view of the matter, the constitution of the pre-arbitration committee cannot come in the way of the demand by the applicant for resolution of the disputes by means of arbitral tribunal constituted in terms of clause 64 of G. C. C. Therefore, when the applicant is not inclined to accept the report given by the pre-arbitration committee, it cannot be said that it is again necessary for him to issue another notice for the constitution of arbitral tribunal in terms of clause 64 of G. C. C. There has been demand for the constitution of a pre-arbitration committee and there has also been demand for constitution of arbitral tribunal in terms of clause 64 of G. C. C. separately by the applicant under two separate letters. Now, out of four claims made by the applicant, it is the stand taken by the respondents that the dispute in regard to the first two claims is being examined with reference to the report given by the pre-arbitration committee and a dispute in regard to other two items has been squarely and specifically rejected. At least in respect of those two latter items, the pendency of the dispute in between the parties inter se is obvious and cannot be disputed and that is got to be resolved by means of arbitration by appointing an arbitrator. Since the respondents failed to constitute the arbitral tribunal in terms of Section 64 of G. C. C. in respect of those two items, the request of the applicant for appointment of the arbitrator in that view of the matter cannot be found fault with. An arbitrator shall have to be appointed at least in respect of those two items. Now as the applicant is not inclined to accept the recommendations of the committee, which is not covered by the arbitration clause viz. , clause 64 of G. C. C. , the validity of the report can be doubted and in that view of the matter those two items can also be covered by the same arbitral tribunal. Now as the applicant is not inclined to accept the recommendations of the committee, which is not covered by the arbitration clause viz. , clause 64 of G. C. C. , the validity of the report can be doubted and in that view of the matter those two items can also be covered by the same arbitral tribunal. ( 8 ) THE learned Counsel for the respondents seeks to place reliance upon the judgment of the Apex Court in Union of India and another v. M. P. Gupta, (2004) 10 SCC 504 . That was a decision rendered under the provisions of the old arbitration Act, 1940. When the agreement provides for the appointment of two Gazetted railway Officers of equal status as arbitrators, the appointment of a retired judge in deviation thereof by the High Court was held to be erroneous under the said judgment. ( 9 ) THE learned Counsel further seeks to place reliance upon an unreported judgment of this Court in Sun Techno constructions (P) Ltd. v. Union of India. In that judgment the request for appointment of an arbitrator was rejected on the premise that it was pre-mature. A demand for appointment of arbitrator was made in the said case even before singing of the final bill without making it clear that he was making final claim in all disputed matters. ( 10 ) BOTH the judgments, sought to be relied upon by the learned Counsel, do not cover the fact situation obtaining in between the parties inter se in the instant case. ( 11 ) FOR the above reasons, the request of the applicant for the appointment of arbitrator shall have to be considered. ( 12 ) IN the result, the Arbitration application is allowed and Sri Justice P. L. N. Sharma (Rtd.) is appointed as an arbitrator to resolve the dispute and the arbitrator is entitled to fix his fees as per the usual practice.