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Madhya Pradesh High Court · body

2006 DIGILAW 1149 (MP)

State of M. P. v. Manoj Sharma

2006-09-27

SUBHASH SAMVATSAR

body2006
ORDER 1. The petition is filed by the State under Article 227 of the Constitution of India challenging the order dated 16.11.2005 passed by VII Additional District Judge, Gwalior, and for quashing the Execution Proceedings No. 181/05 pending in the Court of III Additional District Judge, Gwalior. 2. Brief facts of the case are that respondent No.1 is a contractor and registered with the Public Works Department. He carries on the business of taking contracts from Public Works Department and other departments of the Government. On 15.10.2001 respondent No.1 entered into an agreement for construction of a road from 1 Km. to 31 Km. Parihar Pagara Road, Annexure P-1. The total cost of the construction was Rs.176.12 lacs. As per the terms of the contract, the respondent No.1 was required to submit running bills. Accordingly, he submitted the running bills from time to time and was paid an amount of Rs.120 lacs. However, the remaining bills were not paid and therefore, the dispute arose. 3. The agreement contained clause 29 which reads as under: Clause 29. -- Except as otherwise provided in this contract all question and dispute relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned and as to thing whatsoever, in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, concerning the works, or the execution or failure to executive the same, whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the Superintending Engineer in writing for his decision, within a period of 30 days of such occurrence. Thereupon the Superintending Engineer shall give his written instructions and/or decisions within a period of 60 days of such request. This period can be extended by mutual consent of the parties. Upon receipt of written instructions or decisions, the parties shall promptly proceed without delay to comply such instructions or decisions. If the Superintending Engineer fails to give his instructions or decisions in writing within a period of 60 days or mutually agreed time after being requested or if the parties are aggrieved against the decision of the S.E., the parties may within 30 days prefer an appeal to the Chief Engineer who shall afford an opportunity to the parties of being heard and to offer evidence in support of his appeal. The Chief Engineer will give his decision within 90 days. If any party is not satisfied with the decision of the Chief Engineer, he can refer such disputes for arbitration by an Arbitration Board to be constituted by the State Government which shall consist of three members of whom one shall be chosen from among the officers belonging to the Department not below the rank of S.E., one retired Chief Engineer of any Technical Department, and one serving officer not below the rank of S E., belonging to another Technical Department. The following are also the terms of this contract namely: (a) No person other than the aforesaid Arbitration Board constituted by the Government (to handle cases of all Technical Departments) shall act as Arbitrator and if for any reason that is not possible, the matter shall not be referred to arbitration at all. (b) The State Government may at any time effect any change in the personnel of the Board, and the new members or members appointed to the Arbitration Board shall be entitled to proceed with the reference from the stage at which it was left by his or their predecessors. (c) The party invoking arbitration shall specify the dispute or disputes to be referred to Arbitration under this clause together with the amount or amounts claimed in respect of each such dispute(s). (d) Where the party invoking arbitration is the contractor, no reference for arbitration shall be maintainable, unless the contractor furnishes a security deposit of a sum determined according to the table given below, and the sum so deposited shall on the determination of Arbitration proceedings be adjusted against the cost, if any, awarded by the Board against the party and the balance remaining after such adjustment or in the absence of the such cost being awarded, the whole of the sum shall be refunded to him within one month from the date of the award. Amount for claim Rate of Security Deposit For claim below Rs.10,000 5% of the amount claimed. For claims of Rs.10,000 & above 3% of the amount claimed but below Rs. 1,00,000 subject to minimum of Rs. 500 For claims of Rs.1,00,000 & above 2% of the amount claimed subject to a minimum of Rs.3,000. Amount for claim Rate of Security Deposit For claim below Rs.10,000 5% of the amount claimed. For claims of Rs.10,000 & above 3% of the amount claimed but below Rs. 1,00,000 subject to minimum of Rs. 500 For claims of Rs.1,00,000 & above 2% of the amount claimed subject to a minimum of Rs.3,000. (e) If the contractor does not make any demand for arbitration in respect of any claim(s) in writing within 90 days on receiving intimation from the executive Engineer that the final bill is ready for payment, the claim of the contractor shall be deemed to have been waived and absolutely barred and the Government shall be discharged or released of all liabilities under the contract in respect of such claims. (f) The Arbitration Board may from time to time, with the consent of the parties extend the time for making the award. (g) A reference to the Arbitration Board shall be no ground for not continuing the work on the part of the contractor and payment as per terms and conditions of the agreement shall he continued by the Department. (h) Except where otherwise provided in this contract, the provisions of the Arbitration Act, 1940 and the rules made thereunder for the time being in force, shall apply to the arbitration proceedings under this clause. 4. The dispute arose between the parties regarding the execution of works and the payment of bills. The respondent No.1 was not paid the amount claimed by him hence he approached the respondent No.2 as per clause 29 mentioned above. Respondent No.2, purported to be acting as an arbitrator, has passed award Annexure P-3, whereby he has accepted the claim No.1 to the tune of Rs.57,67,300/-, towards claim No.2, Rs.31, 14,700/- and towards claim No.3, Rs.2525,365/-. Thus, according to the respondent No.2, respondent No.1 is entitled to Rs.1,14,07,365/-. He has also directed that the State Government should pay the said amount within thirty days from the date of passing of the award. This award was passed on 21.6.2005. 5. It is alleged in the petition that of the said award, the order dated 21.6.2005 passed by the respondent No.2 was not complied with. Hence, ultimately the award was put to execution before the civil Court. This award was passed on 21.6.2005. 5. It is alleged in the petition that of the said award, the order dated 21.6.2005 passed by the respondent No.2 was not complied with. Hence, ultimately the award was put to execution before the civil Court. In the execution proceedings, the present petitioners raised number of objections by filing an application under Order 21 Rule 11 CPC in which a specific objection was raised that the execution proceedings cannot continue as the award passed by respondent No.2 is unexecutable by the civil Court. This objection was rejected by VII Additional District Judge, Gwalior, by order dated 16.11.2005 (Annexure P-13). Petitioners have tiled the present petition under Article 227 of the Constitution of India, being aggrieved by the said order. 6. First contention raised by the counsel for the petitioners is that the award Annexure P-3 passed by respondent No.2 is not executable and therefore, the execution proceedings be quashed. It is also alleged that during the pendency of this petition, an appeal was preferred to the Chief Engineer wherein the award passed by respondent No.2 is set aside, a copy of the said order dated 5.6.2006 is tiled alongwith the rejoinder and marked as Annexure P-14. Counsel for the petitioner submitted that since the order which is put to execution itself is set aside by the appellate authority, the same is not executable and on this ground also this petition deserves to be allowed. 7. In reply to this argument, Shri Y.K. Bhardwaj, the learned counsel for respondent No.1 submitted that the order Annexure P-14 is the ante dated document and this order is prepared by the Chief Engineer himself who is petitioner No.2 in the present petition. He further submitted that the State Government has filed an application for review against the order Annexure P-13 dated 16.11.2005 and the said review application is dismissed on 1.3.2006, copy of which is enclosed as Annexure R-1. According to Shri Bhardwaj, order Annexure R-1 was passed before filing of the present petition. Present petition is filed on 8.3.2006 while the order Annexure R-1 is passed on 1.3.2006. According to Shri Bhardwaj, as per the principles of merger, order Annexure P-13 has merged in the order Annexure R-1 and unless and until the order Annexure R-1 is set aside, petitioner cannot succeed in the present petition. 8. Present petition is filed on 8.3.2006 while the order Annexure R-1 is passed on 1.3.2006. According to Shri Bhardwaj, as per the principles of merger, order Annexure P-13 has merged in the order Annexure R-1 and unless and until the order Annexure R-1 is set aside, petitioner cannot succeed in the present petition. 8. Shri Bhardwaj also contended that the present petition involves disputed questions of facts which cannot be agitated in a petition under Article 227 of the Constitution of India and therefore, this petition deserves to be dismissed. He has also urged that the petition deserves to be dismissed as material facts are concealed by the State Government while filing the present petition. The petitioners have concealed the fact that they have preferred a review application and appeal against the award Annexure P-13 and therefore, this petition deserves to be dismissed. 9. Shri Y.K. Bhardwaj, learned counsel for the respondent No.1 has relied upon a judgment of the apex Court in the case of S.B.P & Co. v. Patel Engineering Ltd. [2006(1) MPHT 61 (SC)]. He invited attention to para 44 of the judgment in which the apex Court has laid down that the orders passed by arbitral tribunal during arbitration proceedings would not warrant interference in exercise of the powers under Article 226/227 of the Constitution. The apex Court has disapproved the approach of various High Courts in interfering with the orders passed by arbitral tribunal in exercise of the powers under Article 226/227 of the Constitution of India. 10. However, in the present case, I find that the fact are quite distinguishable. In the present case, present petitioners have not challenged any order passed by the arbitration tribunal, but have challenged the order passed by civil Court in execution proceedings on the ground that civil Court has no jurisdiction to execute the order, and therefore, the principles laid down in the case of S.B.P & Co. (supra) are quite distinguishable and not applicable in the present case. 11. Shri Y.K. Bhardwaj, learned counsel for respondent No.1 also vehemently urged that the order Annexure P-14 passed by the Chief Engineer is ante-dated and is passed with mala fide intention. However, this Court need not go into the said question as said order is not under challenge before this Court. 12. 11. Shri Y.K. Bhardwaj, learned counsel for respondent No.1 also vehemently urged that the order Annexure P-14 passed by the Chief Engineer is ante-dated and is passed with mala fide intention. However, this Court need not go into the said question as said order is not under challenge before this Court. 12. Shri Y.K. Bhardwaj, learned counsel for respondent No.1 also urged that Shri Prakash Braru, Advocate who has filed an application for intervention has no locus standi to file such application. He submitted that such application is contrary to the provisions of section 30 of the Advocates Act. In the present case, this Court is also not required to go into this question, as the application filed by the Shri Prakash Braru is not maintainable in this petition under Article 227 of the Constitution of India and is hereby dismissed. 13. In the present case, respondent No.2 who is a Government officer and Superintending Engineer has tiled his return and very surprisingly has supported the case of respondent No.1. Shri Brijesh Sharma, the learned counsel for the petitioners has therefore, raised an objection about the conduct of respondent No.2. But this Court is again not required to go into the said question. If respondent No.2 has exceeded its limits in filing the return in support of respondent No.1 or in passing the award, petitioners are free to take appropriate action against him. 14. As regards the objection raised about merger is concerned, the said objection has no force. The principle of merger applies in appeal where the appellate either confirms the correctness of the orders passed by the lower Court or set aside the same. The scope of review is limited to see that the orders suffers from any mistake apparent on record or not and therefore, the question of merger does not arise in the present case. 15. At present, only question is whether award Annexure P-3 is executable by the civil Court? 16. Contention of Shri Brijesh Sharma, the learned counsel for the petitioners is that the contract being a works contract, said contract is governed by the provisions of M.P. Madhyastham Adhikaran Adhiniyam, 1983 (hereinafter, referred to as the "Adhiniyam"), and unless and until the procedure provided in section 7 is followed and the award is passed under section 16 of the Adhiniyam, the same cannot be executed by the civil Court. For this purpose, he has invited attention of this Court to various provisions of the Adhiniyam. 17. Section 2(d) of the said Adhiniyam defines the word "dispute". Dispute as per the said section means claim of ascertained money valued at Rs.50,000/- or more relating to any difference arising out of the execution or non-execution of works contract or part thereof. Section 2(i) defines works contract and "works contract" means an agreement in writing for the execution of any work relating to construction, repair or maintenance of any building or superstructure, dam, veir, canal, reservoir, tank, lake, road, well, bridge, culvert, etc. etc. Present contract being a works contract and as there is a dispute of ascertained money valued exceeding Rs.50,000/- the provisions of Adhiniyam will apply. 18. The contention of Shri Sharma is that as regards present contract is concerned, the term "works contract" is defined in section 2(i) and the dispute is covered by section 2(d), and the Civil Court has no jurisdiction to proceed with the execution, as the jurisdiction of Civil Court is barred under the provisions of the Adhiniyam. 19. In reply to this argument, counsel for respondent No.1 and respondent No.2 submitted that as the agreement contained clause 29, the matter will be governed by the provisions of Arbitration and Conciliation Act, 1996 (hereinafter, referred to as "Conciliation Act"). For this purpose, counsel for the respondents relied on a judgment of this Court in the case of M.P. Housing Board and another v. Satish Kumar Raizada [2003 Arb. WLJ 109 (MP)]. After perusal of the said judgment in the aforesaid case, I find that in that case this Court has considered clause 29 of the contract which is almost identical to present clause 29 as referred above. 20. In that case, this Court held that the provisions of the Adhiniyam will not be applicable only because the Court found that the dispute is not covered by section 2(d). In that case, the dispute between the parties was relating to rate and not about ascertained sum and therefore, this Court has held that the provisions of Conciliation Act will be applicable. In that case, the dispute between the parties was relating to rate and not about ascertained sum and therefore, this Court has held that the provisions of Conciliation Act will be applicable. Moreover, in that case, M.P. Housing Board itself had filed an application under section 34 of the Conciliation Act for setting aside the award on the ground of misconduct by the arbitrator and said application was beyond the prescribed period of limitation and therefore, said application was dismissed by the Civil Court by holding that the application is barred by time and the provisions of section 5 of the Limitation Act are not applicable in the case. Thus, the facts of the aforesaid case are also quite distinguishable and do not help the respondent No.1. 21. In another judgment of this Court in the case of Kamini Malhotra v. State of M.P. [ 2002(3) MPLJ 389 ], an application was filed by the contractor under section 9 of the Conciliation Act before the civil Court and this Court after considering the entire scheme of the Adhiniyam held that section 9 of the Conciliation Act is not applicable in that case as the matter is governed by the provisions of Adhiniyam. 22. Moreover, the para 20 of the judgment, the Court has held as under: "... There is a reference to the provisions of M.P. Madhyastham Adhikaran Adhiniyam, 1983. If the "dispute" is covered by the definition of dispute given in this Adhiniyam of 1983, then naturally the case will go to the Madhyastham Adhikaran for arbitration....." 23. Another judgment relied upon by the counsel for respondent No. 1 is in the case of Mallikarjun v. Gulbarge University [2004 Arb. WLJ 20 (SC)], which is a judgment of the apex Court. In that case also the apex Court has held that if the award is not challenged under section 34 of the Conciliation Act within the stipulated period, then that award become final and can be executed by the Civil Court in accordance with section 35. 24. From perusal of the aforesaid judgment, I find that aforesaid case arose from Gulbarge University and there is nothing in the judgment to indicate that in the State of Karnataka, any State law on Madhyastham Adhikaran is enacted and applicable. 25. 24. From perusal of the aforesaid judgment, I find that aforesaid case arose from Gulbarge University and there is nothing in the judgment to indicate that in the State of Karnataka, any State law on Madhyastham Adhikaran is enacted and applicable. 25. In the State of Madhya Pradesh, the State Government has enacted the Adhiniyam for deciding the disputes in relation to works contract. Provisions of the Adhiniyam were considered by the Division Bench in the case of M/s. Spectra Engineering Corporation Engineers and Contractors v. State of M.P. [ 1988 JLJ 601 = AIR 1988 MP 111 ], and the Division Bench has held that the said Adhiniyam is a special enactment and provides for arbitration by a statutory tribunal of the dispute arising out of works contract, and therefore, it will prevail over the Arbitration Act of 1940. In view of this judgment, it cannot be said that the provisions of Conciliation Act will be applicable in the present case and, the matter will be governed only by the provisions of Adhiniyam. 26. Thus, even as per the judgment relied upon by the learned counsel for the respondent No.1, if a dispute is covered by the definition of "dispute" given under section 2(d) of the Adhiniyam, then the provisions of Adhiniyam will apply and provisions of Conciliation Act will not be applicable. 27. Now I will proceed to examine the relevant provisions of the Adhiniyam. Section 7 of the Adhiniyam provides that either party to a works contract shall irrespective of the fact whether the agreement contains an arbitration clause or not, refer in writing the dispute to the Tribunal. Section 7 A provides for inclusion of whole claim in a reference petition. Section 7B provides that the Tribunal shall not admit a reference petition unless the dispute is first referred for the decision of the final authority under the terms of the works contract. Thus, as per section 7 of the Adhiniyam either party to the works contract can refer the dispute to the Tribunal, but before referring the dispute, it has to approach the final authority in terms of the agreement. Section 8 provides for the procedure for deciding a reference. Sections 11 and 12 relate to the procedure to be adopted by the Tribunal. Section 8 provides for the procedure for deciding a reference. Sections 11 and 12 relate to the procedure to be adopted by the Tribunal. Section 16 provides that the Tribunal shall after recording evidence, if necessary, and after perusing the material on record, afford opportunity to the parties to submit/their arguments and make an award. Section 17 provides that the award passed by the Arbitration Tribunal shall be final subject to revision under section 19. Section 18 provides that the award passed under the Adhiniyam shall be deemed to be a decree within the meaning of section 2 of the Code of Civil Procedure and shall be executable by Civil Court. Section 20 bars jurisdiction of civil Court. It provides that as from the date of the constitution of the Tribunal and notwithstanding anything contained in Arbitration Act. 1940 (No.10 of 1940) or any other law, for the time being in force, or in any agreement or usage to the contrary, no Civil Court shall have jurisdiction to entertain or decide any dispute of which cognizance can be taken by the Tribunal under this Act. Thus, the jurisdiction of the Civil Court is completely barred under section 20 of the Adhiniyam. 28. After perusal of the aforesaid legal provisions, it is clear that the provisions of Madhya Pradesh Madhyastham Adhikaran Adhiniyam will be applicable in the present case. Now this Court will have to examine whether the award passed by the respondent No.2 can be executed by the Civil Court. As per scheme of Madhyastham Adhikaran either party to a works contract shall irrespective of the fact whether the agreement contains an arbitration clause or not, refer in writing the dispute to the Tribunal. As per section 7B of the Adhiniyam, 1983 the Tribunal shall not admit a reference petition unless the dispute is first referred for the decision of the final authority under the terms of the agreement. 29. In the present case, the final authority is respondent No.2 and the matter was referred to respondent No.2 by the present petitioner. The respondent No.2 has on the reference made by the petitioner given a decision in favour of present petitioner. 30. Shri Y.K. Bhardwaj, learned counsel for respondent No.1 submits that as the decision has been given in his favour by the final authority, he is not required to approach Tribunal. The respondent No.2 has on the reference made by the petitioner given a decision in favour of present petitioner. 30. Shri Y.K. Bhardwaj, learned counsel for respondent No.1 submits that as the decision has been given in his favour by the final authority, he is not required to approach Tribunal. For this purpose, he has relied on Full Bench decision of this Court in the case of State of Madhya Pradesh and another v. Kamal Kishore Sharma [ 2006(1) JLJ 322 = 2006(2) MPLJ 113 ]. In para 11 of the said judgment, this Court has held that if any party is not satisfied with the decision of Chief Engineer, he can refer such dispute for arbitration by an Arbitration Board. Relying on para 11 of the said judgment learned counsel for the respondent No.1 submits that as he is not aggrieved by decision of the respondent No.2, he is not required to go to the Tribunal. 31. This argument also appears to be without any merit. It is true that in Kamal Kishore case (supra) in para 11 the Full Bench of this Court has stated that a party who is not satisfied with the decision of Chief Engineer, he can refer the dispute to the Tribunal. But this is not a situation in the present case. In the case of Kamal Kishore (supra), the question which was referred was that whether any of the party have right to approach Tribunal unless and until they have approached final authority. 32. Section 7B of the Adhiniyam 1983 provides that no reference petition shall be admitted unless Tribunal first refer to the decision to final authority. The question whether the aggrieved party has to approach the Tribunal was not there before the Court and the Court while deciding the question about the maintainability of the proceeding before the Tribunal has merely made a passing reference that aggrieved party may approach Tribunal. 33. The scheme of Madhyastham Adhikaran is quite similar to the Arbitration Act, 1940. The scheme of Arbitration Act, 1940 was that the award passed by the arbitrator was executable only after the award was made by the Civil Court. 33. The scheme of Madhyastham Adhikaran is quite similar to the Arbitration Act, 1940. The scheme of Arbitration Act, 1940 was that the award passed by the arbitrator was executable only after the award was made by the Civil Court. From the language of section 7B and section 16 of the Adhiniyam, 1983 it is clear that under section 7B the words used are "decision of the final authority", while section 16 of the Adhiniyam provides that Tribunal shall, after recording evidence, if necessary, and after perusing the material on record and on affording opportunity to parties to submit their arguments, make an award. Thus, words used in section 16 are "make an award", while words used in section 7B are "decision of the final authority". Thus, decision of the final authority becomes executable only after it is converted into an award. Section 18 of the Adhiniyam, 1983 provides that an award of the Board shall be executable in the manner a decree of Civil Court is executable. The decision of the final authority cannot be said to be an award of the Tribunal. 34. In such circumstances, even a person in whose favour the award is made will have to approach Tribunal and then only it can be executable by the Civil Court. This procedure is not followed in the present case. Hence, the decision of respondent No.2 is not executable by the civil Court unless until it is made an award in terms of section 16 of the Adhiniyam, 1983. 35. In the result, the petition is allowed with costs. The impugned order Annexure P-13 is hereby set aside.