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2008 DIGILAW 383 (ORI)

Bengal Builders (P) Ltd. v. State Bank of India

2008-05-07

A.S.NAIDU

body2008
JUDGMENT :- This is an appeal under Section 37 (l)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') assailing the order dated 11th May, 2001 passed by the learned District Judge, Khurda in Arbitration Misc.. Case No. 268 of 2000. By the said order, the learned District Judge has set aside an interim Award passed by the sole Arbitrator Justice J. M. Mohapatra (Retd.). 2. The scenario of facts reveals that the appellant-company had entered into an agreement with the State Bank of India, Local Head Office, Bhubaneswar, respondent No. 1, on 18th January, 1994 undertaking construction of the Local Head Office building of the Bank at Bhubaneswar with an estimated cost of Rs. 7 crores (approx). The construction of the said building was to be completed within a period of four years from the date of issuance of the Work Order. According to the appellant, it had quoted a sum of Rs. 6,85,07,140.00 plus the Price Variation Adjustment (for short 'PVA'). It is stated that the PVA as per Clause 52 of the contract was to be calculated considering the variation in the Consumer Price Index as well as variation in the all-India Price Index in consonance with the formula as stipulated in the said Clause with regard to labour and materials. It is further stated that initially respondent No. 1 allowed cent per cent PVA till 8th running bill, but thereafter reduced the rate of PVA to 80% and also took a decision to deduct extra amount already paid from subsequent running bills. According to the appellant, the said action of respondent No. 1 was contrary to the terms of the agreement and therefore it raised a dispute. 3. In consonance with Clause 52(x) of the agreement, the dispute initially was to be referred to the Deputy Managing Director (Corporate Operation and Surface) of the respondent-Bank and the appellant filed necessary application for such reference. As there was no response from the respondentBank, it is asserted, the appellant took resort to Clause 71 of the agreement which stipulated that all disputes/differences of any kind whatsoever which would at any time arise between the parties touching or concerning any work or execution or maintenance thereof, would, after written notice, by either party to the agreement to the other would be referred for adjudication of a sole Arbitrator. In consonance with that Clause, the respondent-Bank appointed the sole Arbitrator requesting him to enter upon the reference and adjudicate the claim of the appellant, as per a letter dated 4th April, 1998. A preliminary hearing commenced before the Arbitrator on 28th November, 1998. The appellant raised several claims, most important of the same being unpaid sales tax deducted from the running bills and 20% illegal deduction towards PVA. 4. During pendency of the proceeding before the Arbitrator an application was filed under Section 2(c) of the Act, for interim Award on two claim items, i.e. (1) escalation of labour and materials, i.e. PVA; and (2) enhancement of sales tax so as to enable the appellant to complete the work in time. The said application was resisted by the respondent-Bank. The Arbitrator after hearing the parties by order dated 18th May, 2000 allowed the application and passed an interim Award to the extent of Rs. 30,00,000.00 (Thirty lakhs) and further directed that the said interim Award would merge in the final Award and directed the respondent-Bank to pay the amount within one month from the date of the order on the appellant furnishing adequate security. Being aggrieved by the interim Award, the respondent-Bank filed a petition under Section 34 read with Section 2 (l)(c) of the Act in the Court of the District Judge, Khurda at Bhubaneswar which was registered as Arbitration Misc. Case No. 268 of 2000 with a prayer to set aside the said interim Award mainly on the following grounds :- (1) The Arbitrator lacked jurisdiction to entertain the claim relating to general price variation adjustment as his jurisdiction was expressly ousted as per the provisions of sub-clause (x) of Clause 52 of the Agreement; (2) The Award being unreasoned one was violative of sub-section (6) of Section 31 of the Act as there was no stipulation in the arbitration Clause (Clause 71) that no reasons are to be given in the award; and (3) The interim award had been made without deciding the disputes. 5. 5. The appellant appeared before the District Judge and took the stand that the respondent-Bank having not taken recourse to provisions of Clause 52 (x) of the Agreement in spite of requests and having submitted itself to the jurisdiction of the Arbitrator, it was to be deemed that it had waived the embargo envisaged under sub-clause (x) of Clause 52; and that the Arbitrator had assigned reasons while passing the interim Award on both the claims. After examining the rival contentions in extenso the District Judge by the impugned order dated 11-52001 came to the conclusion that the interim Award having been passed without assigning reasons could not be sustained in the eye of law and accordingly set aside the same. 6. According to the appellant, the Arbitrator had jurisdiction to pass the interim Award. After hearing the counsel for the parties the Arbitrator passed the interim Award of Rs. 30,00,000.00 giving reasons therefor. Thus the conclusion arrived at by the District Judge was not just and proper and it is a fit case where the impugned order may be set aside and the respondent Bank may be directed to pay the amount as per the said interim Award. It is also submitted by the learned counsel for the appellant that the claim with regard to PVA is within the terms of reference and has to be decided by the Arbitrator. On the other hand according to learned counsel for the respondent-Bank, the claim with regard to PVA is beyond the terms of reference and in view of sub-clause (x) of Clause 52 of the Agreement the Arbitrator has no scope or authority to decide on such claim. 7. This Court heard learned counsel for the parties patiently, perused the materials diligently and considered the submissions diligently. The controversy is as to whether the claim with regard to PVA is within the terms of reference and the Arbitrator has the scope and authority to adjudicate the same. This aspect of the matter has not been considered by the Arbitrator. That apart, perusal of the interim Award itself reveals that the Arbitrator has not delved into the controversy as to whether the claim with regard to PVA could be adjudicated by him. This aspect of the matter has not been considered by the Arbitrator. That apart, perusal of the interim Award itself reveals that the Arbitrator has not delved into the controversy as to whether the claim with regard to PVA could be adjudicated by him. On the other hand after quoting Clause 52 (iv)(b) of the Agreement has observed "Both the parties agree that on the interpretation of this clause, the payment of 80% or 100% is to be determined". According to the learned counsel for the respondent-Bank there was no such agreement. 8. Be that as it may, as stated earlier, the dispute cropped up way back in the year 1998. Ten years have passed in the meanwhile. The matter is pending with the Arbitrator all these years. That apart, under Section 16 of the Act, the Arbitrator may rule on its own jurisdiction besides ruling on any objection with respect to existence or validity of the arbitration agreement. Thus the Arbitrator has all powers on earth to decide whether a specific dispute can be adjudicated by him or not. In the aforesaid scenario, to avoid piecemeal hearing, without interfering with the impugned judgment passed by the District Judge setting aside the interim Award passed by the Arbitrator, this Court feels that ends of justice and equity will be better served if the Arbitrator is directed to adjudicate the reference and pass Award with respect to all claims as expeditiously as possible preferably within four months, and orders accordingly. This Court grants liberty to the parties to raise all their submissions before the Arbitrator who will duly consider the same in accordance with law. Order accordingly.