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2006 DIGILAW 296 (MP)

FRIENDS ASSOCIATES v. STATE OF M. P.

2006-02-23

RAJENDRA MENON

body2006
ORDER Rajendra Menon, J. Challenging the Revenue Recovery Certificate Annexure P/l dated 26-3-2002 proposing to recovery from the petitioner a sum of Rs. 2,89,120/-, petitioner has filed this petition and the relief claimed in this petition is that the recovery proposed by the aforesaid R.R.C. be quashed. Petitioner firm had entered into a contract with the State Government for construction of drainage siphon at RD Nos. 48243, 53940 and 55128m of Rajghat L. B. C. The contract was executed and when petitioner did not complete the work within the stipulated period records indicate that the contract was rescinded and vide order Annexure R/5 dated 17-12-1997 orders with regard to rescinding of the contract were passed by the competent authority. Being aggrieved by the aforesaid action petitioner submitted a claim before the Superintending Engineer who is a Arbitrator as per clause 4.3.29.2 of the agreement. Arbitrator rejected the claim of the petitioner vide Annexure R/6 on 18-5-1999. Against this petitioner preferred a revision before the M.P. Arbitration Tribunal u/s 7 of the M.P. Madhyastham Adhikaran Adhiniyam, 1983. Case of the petitioner is that in the reference made by the petitioner and which was pending before the Arbitration Tribunal no counter-claim or any other claim was made by the State Government and without getting the claim in question agitated by any other independent agency action taken for recovery of the amount from the petitioner is illegal. Inter alia contending that State Government does not have any right to recover any amount in pursuance to a contract without adjudication of the dispute between the parties by a independent agency petitioner has sought interference in the matter. In support of the aforesaid contention learned counsel places reliance on a judgment of this Court in the case of Baijnath Singh vs. State of M.P. and others, 2005(3) MPL 540. It is the case of the petitioner that a R.R.C. for recovery of the amount can be issued only after there is proper adjudication of the dispute between the parties and the amount to be recovered in the R.R.C. is arrived at after adjudication by a competent independent agency. Accordingly, contending that the recovery initiated in this manner is unsustainable, petitioner seeks interference in the matter. Accordingly, contending that the recovery initiated in this manner is unsustainable, petitioner seeks interference in the matter. Shri K. B. Chaturvedi, learned counsel representing the State Government has refuted the aforesaid contention and it is pointed out by him that after the contract in question was rescinded on 17-12-1997 vide Annexure R/5 and when reference of the dispute made by the petitioner was pending before the Arbitration Tribunal the State Government got the work in question completed by award of contract to another Contractor and the amount of loss suffered by the State Government because of the aforesaid allocation of work to another contractor was to be recovered from the petitioner. Referring to clause 4.3.3.3 of the agreement Annexure R/7 Shri Chaturvedi contends that the aforesaid clause enables the State Government to carry out work through some other agency and is also enables the Government to claim refund of the aforesaid amount and the loss caused from the petitioner. Accordingly, when the work was done by awarding of contract to a third person, for the purpose of recovery of the amount from the petitioner, it is stated by Shri Chaturvedi that claim was made by the department before the competent Arbitrator in accordance with clause 4.3.29.2 of the agreement Annexure R/9. It is stated that claim petition was filed by the State Government under the aforesaid clause before the Arbitrator namely the Superintendent Engineer vide Annexure R/3. Arbitrator took up the proceedings in arbitration, issued show cause notice to the petitioner vide Annexures R/12 and R/13 and when the petitioner did not appear and participate in the arbitration proceedings, award Annexure R/l 1 was passed by the Arbitrator awarding a sum of Rs. 3,50,223/- in favour of the State Government and against the petitioner. It is the case of the State Government that it is this awarded amount which is now being recovered from the petitioner. Shri Chaturvedi inviting my attention to the provisions of clause 4.3.29.2 of the agreement argues that once a claim is settled by Arbitrator in accordance with the aforesaid provision any person aggrieved has to seek reference of the dispute within 28 days by making appropriate application to the Arbitration Tribunal constituted under the M.P. Madhyastham Adhikaran Adhiniyam, 1982. Shri Chaturvedi inviting my attention to the provisions of clause 4.3.29.2 of the agreement argues that once a claim is settled by Arbitrator in accordance with the aforesaid provision any person aggrieved has to seek reference of the dispute within 28 days by making appropriate application to the Arbitration Tribunal constituted under the M.P. Madhyastham Adhikaran Adhiniyam, 1982. Shri Chaturvedi submitted that in this case after the award Annexure R/ll was passed petitioner has not taken any action seeking reference of the dispute to the Arbitration Tribunal and when the award had attained finality action taken by the State Government for recovery of the amount by issuance of R.R.C. is said to be proper. Shri Chaturvedi submitted that in view of the fact that the amount recovered in the present case is the amount determined by the Arbitrator appointed in accordance with the agreement, the law laid down in the case of Baijnath (supra) will not apply in the present case. Inviting my attention to a judgment rendered by Division Bench in the case of Ch. Chandra Shekhar vs. State of M.P. and others, 2002(1) MPLJ 358 and the observations made in para 8 of the aforesaid judgment Shri Chaturvedi submits that there is no illegality in the order and the action taken warranting interference by this Court. That apart, inviting my attention to certain observations made and the law laid down by a Full Bench of this Court in C. R. 692/98, State of M.P. and another vs. Kamal Kishore, /since reported in 2006(2) MPLJ (F.B.) 113] Shri Chaturvedi argued that it has been held in the aforesaid judgment that a party cannot approach the M.P. Arbitration Tribunal directly, it has to first seek arbitration as per the agreement and after the dispute is decided by the Arbitrator further reference u/s 7 of the Adhikaran of 1982 is permissible. Accordingly, Shri Chaturvedi submits that in the present case there is no question of reference of the claim of the State Government for arbitration to the Arbitration Tribunal as the claim stood settled in favour of the State Government vide Annexure R/l 1 and if aggrieved it was for the petitioner to seek a reference to the Arbitration Tribunal. Accordingly, in the aforesaid facts of the case Shri Chaturvedi submits that action of the State Government is justified and no interference into the matter is called for. Accordingly, in the aforesaid facts of the case Shri Chaturvedi submits that action of the State Government is justified and no interference into the matter is called for. I have heard learned counsel for the parties at length and perused the record. The only ground on which the petitioner seeks interference in the matter is that the amount being recovered by issuance of R.R.C. is not adjudicated upon by any independent agency and without adjudication of the amount it is stated that recovery cannot be affected. Even though in the case of Baijnath (supra) it has been held by the learned Judge that recovery by issuance of R.R.C. without adjudication of the claim by independent agency is not permissible. The Division Bench of this Court in the case of Chadrashekhar (supra) has approved such a procedure for recovery; That apart considering the facts that have come on record this Court is of the considered view that the aforesaid judgment will not apply in the facts and circumstances of the present case. In the aforesaid case after the contract was rescinded certain claim petitions were filed by the Contractor before the Arbitration Tribunal. Arbitration Tribunal dismissed the claim petition and, therefore, State Government directly proceeded to make recovery from the petitioner. In that case there was no adjudication of the claim or dispute by any Arbitrator appointed in accordance with the agreement entered into between the parties nor is there any adjudication of the claim by any other authority. The facts of the present case are entirely different. As indicated herein above after the contract was rescinded and when the work was left incomplete, in accordance with clause 4.3.3.3 of the agreement Annexure R/7 again tender was issued and the incomplete work was awarded to M/s Chadda Construction 2006 (3) M.P.L.J. 411 ] FRIENDS ASSOCIATES vs. STATE OF M.P. Company, Jhansi. Chaddha Construction Company, Jhansi completed the work and for the said work State Government has to pay and incur a further loss of Rs. 3,50,223/-. For recovery of the aforesaid amount from the petitioner in accordance with the terms and conditions of the contract a claim was filed by the State Government before the Superintendent Engineer vide Annexure R/10 on 25-10-2001. At this juncture it would be appropriate to reproduce clause 4.3.29.2 of the agreement as contained in Annexure R/9 which reads as under : 4.3.29.2. At this juncture it would be appropriate to reproduce clause 4.3.29.2 of the agreement as contained in Annexure R/9 which reads as under : 4.3.29.2. Except where otherwise specified in the contract, for the claim valued at Rs. 50,000/- or more the decision of the S. E. of the circle for the time being in respect of all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereto before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever, in any way arising out of, relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the work of execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be final provided that the S. E. shall before giving his decision in writing in the matter gives an opportunity of being heard to the parties to the contract. If any party to the contract is dissatisfied with the final decision of the S.E. in respect of any matter he may within 28 days after receiving notice of such decision may refer such dispute to the Arbitration Tribunal constituted under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1982 (No. 2 of 1983). (Emphasis supplied) From a perusal of the aforesaid clause it is clear that this is a arbitration clause incorporated in the agreement for resolution of dispute between the parties. It is in accordance with the aforesaid clause that the department sought reference and settlement of the dispute by Superintendent Engineer and the Superintendent Engineer after receipt of claim from the department issued show cause notices Annexures R/12 and R/13 to the petitioner. Records indicate that in spite of the aforesaid notice being issued petitioner never participated in the Arbitration proceedings and, therefore, Arbitrator passed the award Annexure R/ll on 15-1-2002 allowing the claim of the department to the tune of Rs. 3,50,223/-. Records indicate that in spite of the aforesaid notice being issued petitioner never participated in the Arbitration proceedings and, therefore, Arbitrator passed the award Annexure R/ll on 15-1-2002 allowing the claim of the department to the tune of Rs. 3,50,223/-. It is this amount after adjustment which is now being recovered by the impugned R.R.C. These facts indicate that in the present case the amount being recovered by the department through the impugned R.R.C. has been adjudicated upon and decided in accordance with the terms and conditions of the agreement by a competent arbitrator and, therefore, the law laid down in the case of Baijnath (supra) will not apply. Even though during the course of hearing Shri Harish Dixit wanted this Court to held that the Superintendent Engineer who had adjudicated the dispute by Arbitration is not a independent agency, this Court is unable to accept the aforesaid contention. Reference to the word 'Independent Agency' made in the judgment of this Court in the case of Baijnath (supra) has to be construed and interpreted in the facts and circumstances of each case. In the present case petitioner is party to arbitration agreement and has accepted for resolution of any dispute by arbitration through the Superintendent Engineer as contained in clause 4.3.29.2. That being so, Arbitrator appointed as per the aforesaid clause has to be construed to be a "independent agency". Once the Arbitrator appointed as per the agreement has given a award and petitioner had a remedy to challenge the award of the Arbitrator by seeking reference to the Arbitration Tribunal and petitioner chose to keep quiet in the matter and did not challenge the award, petitioner has no right to challenge the R.R.C. on the grounds made by him in this petition. In the facts and circumstances of the case it has to be held that in the present case recovery is being effected after due determination of the amount by a Arbitrator appointed in accordance with the Works Contract and, therefore, contention of the petitioner that the amount is being recovered by issuance of R.R.C. without adjudication of the dispute is wholly misconceived. In the facts and circumstances of the case it is clear that the dispute between the parties and the amount now being recovered by the R.R.C. stands adjudicated by the Arbitrator vide award Annexure R/II. Even the Division Bench in the case of Ch. In the facts and circumstances of the case it is clear that the dispute between the parties and the amount now being recovered by the R.R.C. stands adjudicated by the Arbitrator vide award Annexure R/II. Even the Division Bench in the case of Ch. Chandrashekhar (supra) has observed that the party is not obliged to refer each and every dispute. If the party is satisfied by the decision of the final authority as per the terms of the Works Contract it need not approach to the Arbitrator Tribunal. In the present case it is not necessary for the department to approach the Tribunal. The department was required to approach the Tribunal only if its claim was rejected by the Superintending Engineer who is a Arbitrator as per the contract. That being so, keeping in view the observations made by the Division Bench in the case of Ch. Chandra Shekhar (supra) the contention of Shri Dixit to the effect that amount could not be recovered without reference to the Arbitration Tribunal is also misconceived. Even Full Bench in the case of Kamalkishore Sharma (supra) has observed that the final authority in such matters are the authorities contemplated under the Works Contract and if the said observations is taken note of it is Superintendent Engineer who is the final authority as per the clause No. 4.3.29.9 of the Works Contract. Accordingly, taking note of the totality of the facts and circumstances of the case I find no error in the order passed by the State Government and the action taken for recovery of the amount from the petitioner. Accordingly, finding no case made out for interference petition stands dismissed without any order as to cost. Final Result : Dismissed