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2007 DIGILAW 78 (RAJ)

Pragati Construction Co. v. Union of India

2007-01-11

PRAKASH TATIA

body2007
Prakash Tatia, J.— Heard learned counsel for the parties. 2. The petitioner is aggrieved against the order 26th October, 2005, by which the learned District Judge, Chittorgrarh dismissed the petitioner as application filed under Sec. 8 of the Arbitration and Conciliation Act, 1996, for staying the suit proceedings in a suit which was filed by the non-petitioner against the petitioner. 3. Brief facts of the cases are that a supplementary agreement was executed for work contract, having consideration of Rs. 12,47,427.32 According to the non-petitioner-applicant, the defendant petitioner failed to complete the work and, therefore, the contract was terminated and the work order was given to the other party to complete the work left out by the defendant-petitioner at the cost of the defendant by the third party. According to the plaintiff-non-petitioner, the defendant since completed the work of Rs. 6,71,782/-, therefore, the remaining work was given to the third party. In that transaction, the plaintiff-non-petitioner had to pay more amount to the third party and thereby the plaintiff-non-petitioner- Union of India suffered loss of Rs. 1,58,489/-. The plaintiff-non-petitioner, therefore, filed the suit for recovery of Rs. 1,58,489/-. 4. The petitioner-defendant before filing of the suit by the non-petitioner submitted an application under the Arbitration Act (Old Act) for appointment of Arbitrator for adjudication of same dispute. The Petitioner-defendant’s application for appointment of arbitrator was dismissed by the Civil Court on the ground that as per the General Conditions No.63 and 64 read with Specific Condition No.21, “the dispute” or “Claim” in relation to amount upto 20% only is covered under the arbitration agreement and in case there is a “dispute” or “claim” beyond 20% of the contract amount, the arbitration clause shall have no application. That decision given on the application of the petitioner-defendant became final and otherwise also, there is no dispute that the matter can be referred to Arbitrator in case it is within 20% of the value of the contract. 5. In the suit filed by the plaintiff-non-petitioner, the defendant submitted the application under Sec. 8 of the Arbitration and Conciliation Act as by that time, the suit was filed, the new Arbitration Act came into force. 5. In the suit filed by the plaintiff-non-petitioner, the defendant submitted the application under Sec. 8 of the Arbitration and Conciliation Act as by that time, the suit was filed, the new Arbitration Act came into force. The petitioner-defendant’s said application was dismissed by the trial Court holding that the dispute is with respect to more than 20% of the contract value and there is no arbitration agreement between the parties for referring such dispute to the Arbitrator. The trial Court also took note of the fact that earlier, the petitioner-defendant’s application for appointment of Arbitrator has already been dismissed. 6. The learned counsel for the petitioner relied upon an order passed by this Court in Arbitration Application No. 21/2002 in the case of Kedar Nath Khandelwal vs. Union of India and Ors., decided on 9th August 2002, wherein according to the learned counsel for the petitioner, the idential preliminary objection was dismissed by the High Court. 7. Learned counsel for the non-petitioner vehemently submitted that from the plain reading, it is clear that the contract amount was Rs. 12,47,427.32 The petitioner completed work of Rs. 6,71,782/- only. Thus, the dispute remained for the work of Rs. 5,75,642/-. For this work, as per the condition agreed between the parties in the relevant contract, the work order was given to the third party, who completed the work on higher cost and because of that, the plaintiff-non-petitioner suffered loss of Rs. 1,58,489/-. Therefore the dispute with respect to the amount of Rs. 5,71,782/ arose. Though claim of the non-petitioner-plaintiff is of Rs. 1,58,489/- but in view of the fact that the dispute between the parties is in relation to award of work of Rs. 5,75,642/- which is the amount more than 20% of the contract amount, therefore, as per condition No.21, there is no arbitration agreement between the parties for referring matter to arbitrator for such dispute. 8. I considered the submissions of the learned counsel for the parties. 9. 5,75,642/- which is the amount more than 20% of the contract amount, therefore, as per condition No.21, there is no arbitration agreement between the parties for referring matter to arbitrator for such dispute. 8. I considered the submissions of the learned counsel for the parties. 9. The condition No.21 of the Special Conditions is relevant, which reads as under:- “21.0 The provision of Clauses 63 and 64 of the General Conditions of Contract will be applicable only for settlement of claims or disputes between the parties for values less than or equal to 20% of the contract and when claims or disputes are of values more than 20% of the value of contract provisions of Clauses 63 and 64 and other relevant clauses of the General Conditions of Contract will not be applicable and arbitration will not be a remedy for settlement of such disputes. Having been given one arbitration, he will have no right to any other arbitration under this contract.” The Condition No.21 of the said Conditions clearly provides that Clauses 63 and 64 of the General Conditions of contract, under which the dispute can be settled by the Arbitrator, shall have no application in a case where claims or disputes between the parties for value more than 20% of the contract. Meaning thereby that in a case where dispute or claim is having valuation more than 20% of the contract amount, then the clause 21 provides non-application of the arbitration clause itself, meaning thereby, it is deemed that there is no arbitration agreement between the parties in a case where the amount of dispute or claim is more than 20% of the contract amount. 10. In view of the above, the Court below was right in holding that the matter cannot be referred to the arbitration as there is no arbitration agreement of settlement of dispute through arbitration when the amount of dispute or claim exceeds 20% of the contract amount. 11. Learned counsel for the petitioner further vehemently submitted that whether the dispute is covered under the arbitration agreement or not, can be decided by the arbitrator and not by the Court. 11. Learned counsel for the petitioner further vehemently submitted that whether the dispute is covered under the arbitration agreement or not, can be decided by the arbitrator and not by the Court. The abstract proposition of law submitted by the learned counsel for the petitioner has no application to the facts of the case where the petitioner failed to establish that there is arbitration agreement for referring the matter to the arbitrator for a claim having dispute beyond the amount of 20% of the original contract. In view of the above, the said proposition cannot be applied to the facts of the present case. 12. So far as order of this Court delivered in the case of Kedarnath refereed to above, the facts of that case are entirely different. In that case, the total value of the original contract was Rs. 2.80 Crore and that was bifurcated with the consent of the parties and the subject-matter in relation to the dispute arose out of a separate contract having value of Rs. 1,83,63,000.00 only. Not only this, in that case, the contract for the value of Rs. 1,60,62,850/- was given to some other party. This Court held that in view of the fact, the claim under dispute relates to the amount of Rs. 1,83,63,000.00 and that was found to be more than 20% of the acutal contract amount. In that case, the preliminary objection raised by the Union of India was rejected by this Court. The facts of the said order have no application to the facts of the present case, because of the reason here, in this case, the applicant- petitioner-defendant before the Court below failed to show that there is an agreement of settlement of dispute through arbitration as there is no application of Clauses 63 and 64 in the present controversy in view of condition No.21. 13. In view of the above discussion, the revision petition is dismissed. Since the matter is pending, therefore, the opportunity is granted to the petitioner to file written statement, if it has not been filed before the Court below, the petitioner may file the written statement within a period of 30 days from today. * * * * *