Research › Search › Judgment

Himachal Pradesh High Court · body

2005 DIGILAW 372 (HP)

SANDEEP CHAUHAN v. STATE OF H. P.

2005-10-03

V.M.JAIN

body2005
JUDGEMENT V.M. J.: The present petition under Section 9 of the Arbitration; and Conciliation Act, 1996 (referred to as the Act) has been filed by Sandeep Chauhan petitioner against the respondents, namely, the State of Himachal Pradesh through the Secretary (PWD) as respondent No.1 and the Executive Engineer, National Highway Division, HPPWD, Solan as respondent No.2. 2. In the petition under Section 9 of the Act, it has been alleged by the petitioner that the parties had entered into an agreement relating to the execution of the work of improvement of riding quality to Shimla Kangra road NH 88 in Km. 25/0 to 60/00 vide agreement No. 52 of 2001-2002. It was alleged that as per the terms of the said agreement the petitioner was required to execute and complete the work costing a sum of Rs.1,71,03,707/- within a period of four months from the date when it was awarded i.e. 6.11.2001 and it was subject to various reciprocal obligation on the part of the respondents, like supply of material designs, drawings etc. as also regular payments. It was alleged that the said agreement between the parties also contained an arbitration clause embodied in clause 25 of the said agreements, requiring all disputes or difference arising out of the agreement to be referred to the sole arbitration of a person to be appointed by the Engineer-in-Chief/Chief Engineer. HPPWD. It was alleged that inspite of the efforts made by the petitioner, the work could not be completed within the stipulated period or even during the extended period on account of various factors including the failure on the part of the respondents to make payments to the petitioner in time. It was alleged that even though the petitioner was prevented from executing and completing the work within the stipulated period, the respondents vide order-dated 24.4.2003 illegally determined the contract and imposed compensation amounting to Rs.17,10,371/- on the petitioner for alleged delay in execution of the work under clause 2 of the contract. It was further alleged that the contract was illegally rescinded by respondent No.2 vide letter dated 28.5.2004. It was alleged that the said action of the respondents in rescinding the contract has been challenged by the petitioner by filing of a civil suit in the court of District Judge, Solan and the said suit was still pending. It was further alleged that the contract was illegally rescinded by respondent No.2 vide letter dated 28.5.2004. It was alleged that the said action of the respondents in rescinding the contract has been challenged by the petitioner by filing of a civil suit in the court of District Judge, Solan and the said suit was still pending. It was alleged that in addition to the dispute raised by the petitioner in the civil suit, the petitioner had other claims in respect of which he intends to invoke the arbitration agreement between the parties. It was further alleged that on 7.6.2005 respondent No.2 had issued an office order setting out details of the amounts claimed by the respondents from the petitioner and asking all the Executive Engineers in HPPWD to recover a sum of Rs.18,77,424/- from the amounts payable to the petitioner. It was alleged that legality of the said office order dated 7.6.2005 issued by respondents No.2 would also be one of the disputes, which would be sought to be referred to the sole arbitration, as per the arbitration agreement between the parties. 3. It was further alleged in the petition that prima facie the operation of the aforesaid office order was liable to be stayed during the pendency- of the arbitration proceedings. It was alleged that since the legality of the action taken by the respondents in rescinding the contract is already under challenge in the competent court, the respondents should not to have issued said office order for recovering the aforesaid amount from the petitioner. It was alleged that in case the operation of the said office order is net stayed the petitioner would suffer irreparable loss and injury etc. It was alleged that within the next few days the petitioner intends to invoke the arbitration agreement between the parties and to seek reference of the disputes between the parties to arbitration. It was accordingly prayed that the respondents be restrained from giving effect to the order dated 7.6.2005 issued by respondents No 2 and from recovering the amount of Rs.18,77,424/- being claimed by them, till such time as the disputes between the parties are finally adjudicated upon by the arbitral tribunal which may be constituted in terms of the arbitration agreement between the parties. 4. 4. The petition has been contested by the respondents by filing written reply, alleging therein that the petitioner himself had delayed the execution and completion of the work, which was violation of terms and conditions of the contract agreement It was alleged that for the same cause of action the petitioner had already filed a civil suit before the District Judge, Solan and in the said suit relief of injunction had also been sought. It was further alleged that even otherwise the present petition is against the order dated 7.6.2005, which was an order passed under clause 2 of the contract agreement, which clause is a non arbitral clause and as such the present petition under Section 9 of the Act was not maintainable. Various other allegations made by the petitioner were denied. It was also denied that there was any delay or any breach of any condition of the said agreement on the part of the respondents. On the other hand, it was pleaded that infact the petitioner had not completed the work awarded to him, which he was to complete upto .6.11.2001, but he failed to complete the work and left it uncompleted, it was alleged that infact the respondents had requested the petitioner time and again to resume the work and complete the same vide various letters, but the petitioner failed to do so and showed his inability to complete the work. It was alleged that tender such circumstances the authorities were left with no other person option but to take action as per clause 2 of the contract agreement. Accordingly, 10% compensation was levied upon the petitioner on tendered amount of Rs.1,71,03,707/- for the delay in execution of the work, which worked out to be Rs.17,10,371/-. It was alleged that since the petitioner had failed to complete the work even though four years had passed, the respondents were left with no option but to get the remaining work done/completed at the risk and cost of the petitioner. Accordingly, necessary action as provided under clause 3 of the contract agreement was taken on 7.6.2005 and the remaining work had been got executed through Ravinder Kumar contractor. It was further alleged that the work was also rescinded by the respondents as they were left with no other alternative. Accordingly, necessary action as provided under clause 3 of the contract agreement was taken on 7.6.2005 and the remaining work had been got executed through Ravinder Kumar contractor. It was further alleged that the work was also rescinded by the respondents as they were left with no other alternative. It was alleged that the order dated 7.6 2005 was issued in order to secure the amount of Rs.18,77,424/-, which was found recoverable from the petitioner by not completing the remaining work. It was alleged that the order-dated 7.6.2005 was the out come of the order-dated 10.6.2004, which had already been challenged by the petitioner before the District Judge by way of a civil suit 5. In the written reply it was also alleged that ever since the filing of the civil suit, till the filing the present petition the petitioner had not invoked the provision of Clause 25 of the contract agreement relating to arbitration and it was clearly evident that the petitioner was trying to delay or avoid the recovery of the legitimate due of the Government on one pretext or the other. It was further alleged that the order dated 7.6.2005 having been passed under clause 2 of the agreement, was not arbitral as per law laid down by the Honble Supreme Court in the case of Vishwa Nath Sood vs. State of HP. and also in the case of S.S.Goindi vs. State of H.P. by this Court. It was alleged that since no arbitration proceedings could be invoked by the petitioner in respect of the office order dated 7.6.2005, there was no question of staying the operation of the said office order dated 7.6.2005 in the present petition, it was accordingly prayed that the petition be dismissed. 6. The petitioner filed rejoinder to the aforesaid reply filed by the respondent, controvering the allegations contained in the reply and reiterated and stand taken up in the petition. 7. When the petition came up for hearing before me on 28.9.2005, the learned counsel appearing for the petitioner prayed for a short date to place on record the copy of the contract agreement or relevant extract from the same for perusal. Accordingly, the case was adjourned to 3.10.2005 i.e. today. Extract from the standard form of contract was produced before me in support of the arguments by the learned counsel appearing for the petitioner. 8. Accordingly, the case was adjourned to 3.10.2005 i.e. today. Extract from the standard form of contract was produced before me in support of the arguments by the learned counsel appearing for the petitioner. 8. I have heard the learned counsel for the parties and have gone through the record carefully. 9. As referred to above, the present petition under Section 9 of the Act it was alleged by the petitioner that he had already filed a civil suit against the respondents. The petitioner had produced copy of the plaint Annexure C-l with the present petition. A perusal of the copy of the plaint Annexure C-l would show that the suit filed by the petitioner was a suit for declaration, injunction and recovery to the effect that the order dated 10.6.2004 passed by defendant No.2 under clause 3 of the agreement rescinding the work and forfeiting the security deposit for the work in question was illegal and void and not operative against the plaintiff and the defendants be restrained from recovering any compensation as a result of the order dated 24.4.2003 and also for recovery of Rs.6,37,496 which had been forfeited by the defendants in terms of the orders dated 10.6.2004 under Clause 3 of the agreement, in the present petition it was alleged by the petitioner that in addition to the dispute raised by the petitioner in the civil suit, the petitioner had other claims in respect of which he intends to invoke the arbitration agreement between the parties and the said dispute would pertain to the amounts claimed by the petitioner for the works executed, the damages sustained and similar other claims for idle labour and machinery. It was further alleged that similarly the legality of the office order dated 7.6.2005 issued by the respondents would also be one of the dispute which would be sought to be referred to the arbitrator as per the arbitration agreement between the parties. Furthermore, in the present petition it was also alleged by the petitioner that within the next few days the petitioner intends to invoke the arbitration agreement between the parties and to seek reference of the dispute between the parties to the arbitration. 10. From a perusal of the copy of the plaint Annexure C-l it would be clear that the aforesaid plaint is dated 13.3.2005. 10. From a perusal of the copy of the plaint Annexure C-l it would be clear that the aforesaid plaint is dated 13.3.2005. So far as the present petition under Section 9 of the Act is concerned, the same is dated 20.6.2005 and was filed in this court on 22.6.2005. It is not disputed before me by the learned counsel appearing for the petitioner that till today i.e. till 3.10.2005, the petitioner has not taken any steps towards reference of the alleged dispute to arbitration, as provided in clause 25 of the contract agreement between the parties. This is inspite of the fact that in the present petition the petitioner had taken up the plea that besides the dispute raised in the civil suit the petitioner had other claims in respect of which he intends to invoke the arbitration agreement between the parties including the legality of the office order dated 7.6.2005 issued by the respondents and that within the next few days the petitioner intends to invoke the arbitration agreement between the parties. However, more than six months have elapsed since the present petitioner had filed the civil suit before the District Judge, Solan and more than three months have elapsed since the petitioner had filed the present petition under Section 9 of the Act in this Court but so far no steps whatsoever have been taken by the petitioner to invoke the arbitration agreement between the parties. 11. In Firm Ashok Traders and another etc. v. Gurumukh Das Saluja and others, AIR 2004 SC 1433 while considering the provisions of Section 9 of the Act, it was held by the Honble Supreme Court that Section 9 of the Act permits application being filed in the Court before the commencement of the arbitral proceedings but the provisions does not give any indication of how much before. It was held that the parties invoking Section 9 of the Act may not have actually commenced the arbitral proceedings but must be able to satisfy the Court that the arbitral proceedings are actually contemplated or manifestly intended and are positively going to commence within a reasonable time. In the present case, as referred to above, so far no steps have been taken by the petitioner to invoke the arbitration agreement between the parties. In the present case, as referred to above, so far no steps have been taken by the petitioner to invoke the arbitration agreement between the parties. This is inspite of the fact that in the present petition dated 20.6.2005 filed on 22.6.2005 it was alleged by the petitioner, in para 10 of the petition, that within next few days the petitioner intends to invoke the arbitration agreement between the parties. In this view of the matter, in my opinion, it would be clear that the petitioner had failed to satisfy the court that arbitral proceedings are actually contemplated or manifestly intended and/or are positively going to commence within a reasonable time. It is no doubt true that in case an order under Section 9 of the Act is passed, the Court may also put the parties on terms, as held by the Honble Supreme Court in Firm Ashok Traders case (supra). However, in the present case the petitioner has miserably failed to satisfy the Court that arbitral proceedings are actually contemplated or manifestly intended and are positively going to commence within reasonable time. That being so, in my opinion, on the facts and circumstances of the present case, no case for passing an order invoking the powers under Section 9 of the act is made out, seeing the past conduct of the petitioner. 12. There is another aspect of the matter, which requires consideration in this case. It is not disputed before me that an order invoking the powers under Section 9 of the Act could be passed only if arbitration proceedings are competent by virtue of the arbitration clause in the contract agreement between the parties. With regard to the dispute between the parties covered by clause 3 of the said agreement, admittedly the plaintiff had already filed a civil suit in the court of District Judge, Solan. According to the learned counsel for the petitioner the present dispute between the parties is covered by clause 2 of the agreement. The question that comes up for consideration is as to whether any dispute covered by clause 2 of the agreement is subject to the arbitration proceedings or not? In Vishwanath Sood vs. Union of India and another, AIR 1989 SC 952 the Honble Supreme Court was considering similar clauses in the contract agreement between the parties. The question that comes up for consideration is as to whether any dispute covered by clause 2 of the agreement is subject to the arbitration proceedings or not? In Vishwanath Sood vs. Union of India and another, AIR 1989 SC 952 the Honble Supreme Court was considering similar clauses in the contract agreement between the parties. After considering clauses 2 and 25 of the said agreement it was held by the Honble Supreme Court as under: "9. We are therefore inclined to hold that the opening part of clause 25 clearly excludes matters like those mentioned in clause 2 in respect of which any dispute is left to be decided by a higher official of the Department. Our conclusion, therefore, is that the question of awarding compensation under clause 2 is outside the purview of the arbitrator and that the compensation, determined under clause 2 either by the Engineer-in-charge capable of being called in question before the arbitrator." "10. Reading clauses 2 and 25 together we think that the conclusion is irresistible that the amount of compensation chargeable under clause 2 is a matter which has to be adjudicated in accordance with that clause and which cannot be referred to arbitration under clause 25." 13. The law laid down by the Honble Supreme Court in the aforesaid judgment came up for consideration before a Division Bench of this Court in FAO No. 142 of 1985 titled as State of HP. vs. Surinder Singh decided on November 13, 1996. The Division Bench after considering the law laid down by the Honble Supreme Court in Vishwanath Soods case (supra) had held as under: "it is held clauses 2,3 and 10-C of the agreement between the parties were out side the scope of the arbitrators jurisdiction." 14. So far as Single Bench Authority of this Court in the case Aggarwal and Company vs. State of HP. 2000(1) Arb. So far as Single Bench Authority of this Court in the case Aggarwal and Company vs. State of HP. 2000(1) Arb. Law Reporter 469 (H.P.) relied upon by the learned counsel for the petitioner, is concerned in my opinion, the law laid down in this authority would have no application to the facts of the present case, considering that my lord justice R.L. Khurana (as his lordship then was) in the aforesaid judgment had not considered the law laid down by a Division Bench of this Court in State of H.P. vs. Surinder Singhs case (supra), in which the Division Bench had specifically held tat clause 2,3 and 10-C of the agreement between the parties were outside the scope of the arbitrators jurisdiction, following the law laid down by the Honble Supreme Court in Vishwanath Soods case (supra). 15. In view of the law laid down by the Honble Supreme Court in Vishwanath Soods case (supra) followed by a Division Bench of this Court in Surinder Singhs case (supra), in my opinion, prima facie, it would be clear that the present dispute between the parties, stated to be covered under clause 2 of the contract agreement between the parties, could not be made the subject matter of arbitration by virtue of Clause 25 of the contract agreement between the parties. That being so, in my opinion, no case for invoking the powers under Section 9 of the Act is made out, on the facts and circumstances of the present case. In Smt. Baby Arya v. Delhi Vidyut Board, AIR 2002 Delhi 50 a similar view was taken by the Delhi High Court and it was held as under: "9. A party is entitled to a relief under S. 9 of the Act if there is a condition precedent to the relief and such a relief emanates from the terms of the agreement. Any dispute which is not subject matter of the terms of agreement, is beyond the purview of arbitration. A party or a person is entitled to interim protection if action of the other party is either in breach of the terms of the agreement or militates against equity, fair play or principles of natural justice, otherwise not." 16. Any dispute which is not subject matter of the terms of agreement, is beyond the purview of arbitration. A party or a person is entitled to interim protection if action of the other party is either in breach of the terms of the agreement or militates against equity, fair play or principles of natural justice, otherwise not." 16. In view of the above, on the facts and circumstances of the present case, in my opinion, no case for granting any interim relief to the petitioner, as provided under Section 9 of the Act, is made out. Resultantly, finding no merit in this petition, the same is hereby dismissed.