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2005 DIGILAW 1318 (MAD)

Superintending Engineer v. Gammon India Limited & Others

2005-08-10

FAKKIR MOHAMED IBRAHIM KALIFULLA, MARKANDEY KATJU

body2005
Judgment :- (Appeal under Cl.15 of the Letters against the order dated 16-4-2005 in W.P. No.8281 of 2005.) Markandey Katju, C.J. Heard the learned Additional Advocate General for the appellant and the learned senior counsel for the respondents. This writ appeal has been filed against the order dated 16-4-2005 passed by the learned single Judge. We have perused the impugned judgment and the record. 2. The first respondent herein was engaged by the appellant as a contractor for constructing a masonry dam across the river Hanumanathi in pursuance of the tender notified by the appellant. The project was completed by the first respondent but some disputes arose between the parties in the matter of settlement of the final bill. 3. The first respondent, to resolve the disputes, invoked the arbitration clause, viz. Clause 4 of the Special Conditions of the Contract for appointment of an arbitrator. Clause 4 of the Special Conditions of the Contract reads as follows: 4. Arbitration (GCC Clause 25.3) The procedure for arbitration will be as follows: “(a) In case of disputes or difference arising between the employer and a domestic contractor relating to any matter arising out of or connected with this agreement, such disputes or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The arbitral tribunal shall consist of 3 arbitrators one each to be appointed by the employer and the contractor. The third arbitrator shall be chosen by the two arbitrators so appointed by the parties and shall act as Presiding Arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the President of the Institution of Engineers (India). (b) In the case of dispute with a Foreign Contractor the dispute shall be settled in accordance with provisions of UNCITRAL Arbitration Rules. The Arbitral Tribunal shall consist of three Arbitrators one each to be appointed by the Employer and the Contractor. The Third Arbitrator shall be chosen by the two Arbitrators so appointed by the parties and shall act as a Presiding Arbitrator. The Arbitral Tribunal shall consist of three Arbitrators one each to be appointed by the Employer and the Contractor. The Third Arbitrator shall be chosen by the two Arbitrators so appointed by the parties and shall act as a Presiding Arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Officer shall be appointed by the President of the Institution of Engineers (India). (c) If one of the parties fails to appoint its arbitrator in pursuance of sub clause (a) and (b) above within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the Presiding arbitrator shall be nominated by President of the Institution of Engineer (India), both in cases of the Foreign Contractor as well as Indian Contractor, shall appoint the arbitrator. A certified copy of the order of the President of the Institution of Engineers (India) making such an appointment shall be furnished to each of the parties. (d) Arbitration proceedings shall be held at Madurai, India and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English. (e) The decision of the majority of arbitrators shall be final and binding upon both parties. The cost and expenses of Arbitration proceedings will be paid as determined by the arbitral tribunal. However, the expenses incurred by each party in connection with the preparation, presentation, etc. of its proceedings as also the fees and expenses paid to the arbitrator appointed by such party or on its behalf shall be borne by each party itself. (f) Performance under the contract shall continue during the arbitration proceedings payments due to the contractor by the employer shall not be withheld unless they are the subject matter of the arbitration proceedings, such as, but not limited to matters related to quality of works." In the present case, it appears that the first respondent in terms of Clause 4 of the Special Conditions of the Contract appointed its arbitrator and called upon the appellant to nominate their arbitrator, which the appellant failed to do. Hence, the first respondent approached the second respondent viz. The Institute of Engineer's India, who appointed a Presiding Arbitrator and also appointed an arbitrator for the appellant. 4. Hence, the first respondent approached the second respondent viz. The Institute of Engineer's India, who appointed a Presiding Arbitrator and also appointed an arbitrator for the appellant. 4. Learned counsel for the appellant submitted that the arbitrator for the appellant has to be appointed by the presiding arbitrator nominated by the President of the Institute of Engineers' India and not by the President himself. 5. Learned counsel for the appellant also submitted that before approaching the arbitrators, the first respondent should have approached the adjudicator by following the procedure prescribed in Clause 24(1) of the General Contract Conditions, which reads as follows: "24.1 Disputes If the contractor believes that a decision taken by the Engineer was either outside the authority given to the Engineer by the Contractor or that the decision was wrongly taken, the decision shall be referred to the Adjudicator within 14 days of the notification of the Engineer's decision." 6. Learned counsel for the first respondent submitted that in fact the contractor approached the Adjudicator but the Adjudicator stated to him that he has not been consulted for being appointed as an adjudicator and hence he will not act an adjudicator in the matter. 7. In our opinion, all the issues sought to be raised by the appellant can be raised before the 3-Member Board of arbitrators which has been constituted, viz. (i) the arbitrator appointed by the first respondent; (ii) the presiding arbitrator appointed by the President of the Institute of Engineers' of India and (iii) arbitrator appointed by the President of the Institute of Engineer's of India. 8. In SHREE SUBHLAXMI FABRICS PVT. LTD. v. CHAND MAL BARADIA AND OTHERS ( AIR 2005 SC 2161 ), the Supreme Court, following the earlier decisions of its own, observed as follows (vide paragraph 14): "The consistent view taken by this Court, therefore, is that contentious issues should not be gone into or decided at the stage of appointment of an arbitrator and no time should be wasted in such an exercise. The remedy of the aggrieved party is to raise an objection before the arbitral tribunal as under Section 16 of the Act it is empowered to rule about its own jurisdiction. The remedy of the aggrieved party is to raise an objection before the arbitral tribunal as under Section 16 of the Act it is empowered to rule about its own jurisdiction. It is, therefore, open to the plaintiff to raise all the pleas before defendant No.2 including a plea that there is no arbitration agreement between the parties for referring any dispute for arbitration before the Hindustan Chamber of Commerce." (emphasis supplied) 9. We, therefore, substitute the impugned order of the learned single Judge and we direct that the issues which the appellant seeks to raise in the appeal and which he had raised in the writ petition before the learned single Judge should be raised before the 3-Member Arbitral Tribunal mentioned above and these issues will also be decided by the arbitral tribunal apart from the merits With these observations, the appeal is disposed off.