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2009 DIGILAW 186 (GUJ)

K. B. Mehta Construction Pvt. Ltd. v. Deepak Cements and Chemicals Ltd.

2009-03-20

M.R.SHAH

body2009
JUDGMENT : M.R. Shah, J. By way of this petition under Section 11 of the Arbitration and Conciliation Act, 1996, the petitioner has prayed for an appropriate Writ, direction and/or order to appoint Arbitrator to resolve the dispute between the parties. 2. It is the case on behalf of the petitioner that the respondent offered Civil work for Cement Plant at Lakhpat, Kutch District. That the petitioner accordingly made offer on 07.11.2006 for civil work for cement plant at Lakhpat, Kutch District. Discussions were held at the office of respondent on 11.11.2006 and 16.11.2006. That as per discussions held on 11.11.2006 and 16.11.2006 the LOI-cum-Work order was issued by respondent by letter No. DCCL/PO/2006 - 2007 dated 21.11.2006. That approximately value of the civil work was around Rs. 463.00 lacs excluding service tax and VAT as applicable. That dispute arose between the parties and as per the petitioner on 24.05.2008, he tried to take out the materials belonging to them but was not allowed to remove the materials and on 25.05.2008 the respondent orally directed the staff of the petitioner who were staying in staff quarter at Lakhpat site to vacate the quarters and since the respondent did not permit to take out their materials, apparatus and machineries lying inside the factory at Lakpat, the petitioner was constrained to file petition under Section 9 of the Arbitration and Conciliation Act, 1996 before the City Civil Court, Ahmedabad being Civil Misc. Application No.328 of 2008. The learned Judge granted interim injunction not to disturb the petitioner from taking away the materials, apparatus and machineries. That according to the petitioner he suffered loss and damages approximately of Rs. 200 lacs towards defaming the petitioner. That an amount of Rs. 2,18,96,995.24 towards work done + Rs. 75,14,819.09 towards escalation + Rs. 48,76,043.55 towards retention amount + Rs. 1,96,426/- towards payment to Sadguru Enterprise on behalf of the respondent + Rs. 5,68,164/- on account of VAT reimbursement till June, 2008 + Rs. 54,50,110.79 towards interest @ 18 per annum on the above amounts + Rs. 31,73,000/- towards idle period of machinery, staging etc.+ Bill No.17 and escalation thereon was due and payable to the petitioner. 1,96,426/- towards payment to Sadguru Enterprise on behalf of the respondent + Rs. 5,68,164/- on account of VAT reimbursement till June, 2008 + Rs. 54,50,110.79 towards interest @ 18 per annum on the above amounts + Rs. 31,73,000/- towards idle period of machinery, staging etc.+ Bill No.17 and escalation thereon was due and payable to the petitioner. Therefore, the respondent was called upon by notice dated 13.08.20008 to make payment of various amounts including damages within period of 10 days from receipt of the notice dated 13.08.20008 failing which the petitioner shall be compelled to invoke the provisions of Arbitration clause. It is the case on behalf of the petitioner that respondent neither replied the notice dated 13.08.20008 nor complied with the requirements of the notice dated 13.08.20008. However, the respondent raised false contentions by letter dated 19.08.2008 to which suitable reply was given on 21.08.2008. It is the case on behalf of the petitioner that disputes which have arise between the parties are required to be resolved as per the provisions of Clause 29 of LOI/Work order. Therefore, the respondent was called upon by notice dated 28.08.2008 to nominate within a period of 30 days from the date of receipt of the notice, any one of the persons named in the said notice to act as sole Arbitrator, to resolve the dispute between the parties. That respondent gave reply dated 24.09.2008 to the notice dated 28.08.2008 raising false contentions and raising the plea that the parties have never agreed that the dispute should be adjudicated by Arbitrator and denying that there is any agreement between the parties that any dispute is to be adjudicated by the Arbitrator. Hence, the petitioner has preferred present petition under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator and refer the dispute to arbitration. 3. Mr. K.G. Sukhwani, learned Advocate appearing on behalf of the petitioner has heavily relied upon Clause 29 of the LOI/Work order and has submitted that as agreed by the parties, all claims and disputes of any kind, if any, arising out of and in connection with work order is required to be resolved through Arbitration only. Relying upon clause 29 of the work order, it is submitted that intention of the parties were to resolve the dispute of any kind, if any arising out of and in connection with work order through Arbitration only. Relying upon clause 29 of the work order, it is submitted that intention of the parties were to resolve the dispute of any kind, if any arising out of and in connection with work order through Arbitration only. It is submitted that work order and all the conditions have been drafted by the respondent and therefore, it is not open for the respondent now to contend that there is no agreement between the parties agreeing, dispute to be adjudicated through Arbitration. It is submitted that while interpreting any clause in contract intention of the parties is required to be considered. 3.1. Mr. Sukwani, learned Advocate for the petitioner has relied upon recent decision of the Hon'ble Supreme Court in the case of Om Construction Co. v. Ahmedabad Municipal Corporation & Anr. dated 13.01.2009 in Civil Appeal No.107 of 2009, 2009 (2) GLR 1145 SC Mr. Sukhwani, learned Advocate has also relied upon decision of the Hon'ble Supreme Court in the case of Indtel Technical Services Private Limited v. W.S. Atkins Rails Limited reported in (2008) 10 SCC 308 . Making above submissions and relying upon aforesaid decisions, it is requested to allow present petition and refer the dispute to Arbitration and appoint any Arbitrator named in the notice of the petitioner dated 28.08.2008. 4. The petition is opposed by Mr. Vimal Patel, learned Advocate appearing on behalf of the respondent. Mr. Patel, learned Advocate has vehemently submitted that from the language of clause 29 of the work order, it cannot be said that intention of the parties was to refer all the claims and disputes arising out and in connection with the work order to the Arbitration. It is submitted that there is no agreement between the parties having already agreed to refer all the claims and disputes arising out of and in connection with work order to be adjudicated by the Arbitrator. It is submitted that in fact it is only where both the parties agree that the dispute should be adjudicated by the Arbitrator, dispute can be referred to the Arbitrator. It is submitted that since there is no agreement between the parties agreeing dispute to be adjudicated through the Arbitration and by the Arbitrator, there is no question of any claim or dispute to be referred to Arbitration. It is submitted that since there is no agreement between the parties agreeing dispute to be adjudicated through the Arbitration and by the Arbitrator, there is no question of any claim or dispute to be referred to Arbitration. It is submitted that considering wordings of clause 29, only in a case where parties agree for referring the claim or dispute to be resolved by Arbitrator, then and then only clause 29 will be attracted. It is submitted that in clause 29 there is nothing that parties have agreed that the claims and disputes arising out and in connection with work order shall be referred to the Arbitrator. It is submitted that what is provided in clause 29 of the work order is 'if referred to an arbitrator, the venue of the arbitration would be Ahmedabad.' Therefore, it is submitted that by clause 29 it cannot be construed that the parties have agreed for referring the dispute arising out of and in connection with the work order and to be resolved through Arbitrator. Therefore, it is submitted that there is no question of appointing Arbitrator and referring the parties to the Arbitration. Mr. Patel, learned Advocate has heavily relied upon decision of the Hon'ble Supreme Court in the case of Jagdish Chander v. Ramesh Chander and Ors. reported in (2007) 5 SCC 719 (sub-para 1,2 and 4 of Para - 8). It is submitted that as held by the Hon'ble Supreme Court in the said decision the existence of an arbitration agreement as defined under Section 7 of the Act is a condition precedent for exercise of power to appoint an arbitrator/Arbitral Tribunal under Section 11 of the Arbitration Act. It is submitted that in the aforesaid decision the Hon'ble Supreme Court has laid down principles as to what constitutes an arbitration agreement viz. (i) The intention of the parties to enter into an arbitration agreement would have to be gathered from the terms of the agreement. It is submitted that as observed in the aforesaid decision mere use of words 'arbitration' and 'arbitrator' in a clause will not make it arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. Relying upon aforesaid decision and making above submissions on interpretation of clause 29 of the work order, it is requested to dismiss present petition. Relying upon aforesaid decision and making above submissions on interpretation of clause 29 of the work order, it is requested to dismiss present petition. In the alternative it is submitted that if this Court is of the opinion that this petition is to be allowed and dispute is to be referred to Arbitration and Arbitrator is to be appointed, in that case, Mr. Justice A.N. Divecha, Retd. Judge, Gujarat High Court may be appointed as Sole Arbitrator and for which the respondent has no objection. 5. Heard the learned Advocates appearing on behalf of the respective parties. 6. The question posed for consideration of this Court is whether clause 29 of the work order could be construed to be an arbitration agreement for resolving and/or adjudicating any claim or dispute arising out of and in connection with the work order through Arbitration ? Clause - 29 of the said work order relates to settlement of claims and disputes - arbitration. Said clause is extracted below: Settlement of claims and disputes - Arbitration: "29. All claims and disputes of any kind if any, arising out of, in connection with the work order, if referred to an arbitrator, the venue of arbitration is Ahmedabad." 7. It cannot be disputed that intention of the parties to enter into arbitration agreement would have to be gathered from the terms of the agreement. Even in a case where words 'arbitration' and 'arbitrator' are not used in clause relating to settlement of disputes with reference to the process of settlement or with reference to the private tribunal which has to adjudicate upon the disputes, in a clause relating to settlement of disputes, it does not detract from the clause being an arbitration agreement if it has the attributes or elements of an arbitration agreement. Therefore, while relying on arbitration agreement intention of the parties to the agreement is relevant paramount consideration. Therefore, while relying on arbitration agreement intention of the parties to the agreement is relevant paramount consideration. Learned Counsel for the respondent has relied upon decision of the Hon'ble Supreme Court in the case of Jagdish Chander (supra) and relying upon sub-para (i),(ii) and (iv) of para - 8 and example mentioned in sub-para (iv) of para - 8 such as 'parties can, if they so desire refer their disputes to arbitration' or 'in the event of any dispute, the parties may also agree to refer the same to arbitration' or 'if any disputes arise between the parties, they should consider settlement by arbitration' in a clause relating to settlement of disputes, it is sought to be submitted that clause -29 of work order cannot be said to be arbitration agreement as contemplated under section 7 of the Arbitration and Conciliation Act, 1996 and that it cannot be said that parties have agreed to resolve the dispute through Arbitration. Now on fair reading of clause - 29, said clause will not fall in any of the examples referred to in sub-para (iv) of para 8 of the aforesaid decision. On fair reading of clause - 29, it can be said that the parties have agreed that claims and disputes of any kind if arising out of and in connection with the work order should be resolved through Arbitration. Even heading of clause 29 of the work order refers to 'settlement of claims and disputes - arbitration'. On considering clause - 29 of the work order, it appears that as such the parties have agreed for resolving any claim or dispute through arbitration only and clause 29 provides that venue of arbitration will be Ahmedabad, if claims and disputes of any kind if any arising out of in connection with the work order, if referred to an arbitrator. Therefore, on considering clause - 29 it cannot be said that the parties have left any option for resolving the dispute through arbitration. Therefore, the contention of the learned Advocate for the respondent that as in clause 29 there is no reference that claims shall be referred to arbitrator and therefore, there is no agreement between the parties to refer the dispute to the arbitrator, cannot be accepted. If such a contention of the respondent is accepted, in that case it would be adding something which is not there in the agreement. If such a contention of the respondent is accepted, in that case it would be adding something which is not there in the agreement. Now so far as the decision of the Hon'ble Supreme Court in the case of Jagdish Chander (supra) relied upon by the respondent is concerned, same will not be applicable to the facts of the present case. In the case before the Hon'ble Supreme Court, in clause 16 of deed which related to settlement of disputes, it was specifically provided that 'if during the continuance of the partnership or at any time afterwards any dispute touching the partnership arise between the partners, the same shall be mutually decided by the partners or shall be referred for arbitration if the parties so determine'. Therefore, considering above clause and wordings 'if the parties so determine' the Hon'ble Supreme Court has held that said clause cannot be construed as an arbitration agreement. In para 9 dealing with aforesaid clause and holding that said clause cannot be said to be 'arbitration clause' the Hon'ble Supreme Court has observed as under: "9. Para 16 of the Partnership deed provides that if there is any dispute touching the partnership arising between the partners, the same shall be mutually decided by the parties or shall be referred to arbitration if the parties so determine. If the clause had merely said that in the event of disputes arising between the parties, they "shall be referred to arbitration", it would have been an arbitration agreement. But the use of the words "shall be referred for arbitration if the parties so determine" completely changes the complexion of the provision. The expression "determine" indicates that the parties are required to reach a decision by application of mind. Therefore, when clause 16 uses the words "the dispute shall be referred for arbitration if the parties so determine", it means that it is not an arbitration agreement but a provision which enables arbitration only if the parties mutually decide after due consideration as to whether the disputes should be referred to arbitration or not. In effect, the clause requires the consent of parties before the disputes can be referred to arbitration. The main attribute of an arbitration agreement, namely, consensus ad idem to refer the disputes to arbitration is missing in clause 16 relating to settlement of disputes. In effect, the clause requires the consent of parties before the disputes can be referred to arbitration. The main attribute of an arbitration agreement, namely, consensus ad idem to refer the disputes to arbitration is missing in clause 16 relating to settlement of disputes. Therefore it is not an arbitration agreement, as defined under section 7 of the Act. In the absence of an arbitration agreement, the question of exercising power under section 11 of the Act to appoint an Arbitrator does not arise." Therefore, on facts said decision would not be of assistance to the respondent. 8. In the recent decision, the Hon'ble Supreme Court in the case of Om Construction Co. (supra) referred the parties to the arbitration under the provisions of Arbitration Act and appointed sole arbitrator by quashing and setting aside the decision of this Court whereby the learned Single Judge of this Court rejected the petition of the contractor for appointment of arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 on the ground that arbitration agreement do not lay down any procedure for appointing arbitrator and arbitrators. Hon'ble Supreme Court considering intention of the parties to resolve the dispute through arbitration while accepting that the dispute will not fall within the jurisdiction of Gujarat Public Works Contracts disputes Arbitration Tribunal Act, 1992 as no notification was issued with respect to Ahmedabad Municipal Corporation within the definition of 'public undertaking', the Hon'ble Supreme Court considering intention of the parties for resolving the dispute through arbitration though there was no specific provision/procedure for appointment of arbitrator/arbitrators referred the parties to arbitration and appointed arbitrator. 9. Considering clause 29 of the work order, I am convinced for the purpose of this application, that the parties to the work order intended to have their disputes resolved by arbitration and the venue of the arbitration would be Ahmedabad and accordingly, present petition is to be allowed. 10. In view of above and name agreed by the learned Counsels appearing on behalf of the respective parties and with the consent of respective parties, Mr. Justice A.N. Divecha, Retd. Judge, Gujarat High Court is to be appointed as Arbitrator to resolve the dispute between the parties as the parties have agreed for his appointment as sole Arbitrator. 11. For the reasons stated above, present petition succeeds. Mr. Justice A.N. Divecha, Retd. Justice A.N. Divecha, Retd. Judge, Gujarat High Court is to be appointed as Arbitrator to resolve the dispute between the parties as the parties have agreed for his appointment as sole Arbitrator. 11. For the reasons stated above, present petition succeeds. Mr. Justice A.N. Divecha, Retd. Judge, Gujarat High Court residing at Classic Villa, Opp. Zarf Dairy, Juhapura - Sarkej Road, Juhapura, Ahmedabad is appointed as Sole Arbitrator for settlement of disputes which have arisen between the parties. The sole Arbitrator shall try and publish his award as expeditiously as possible but positively within a period of 6(six) months from the date of entering upon reference. No costs. Petition allowed.