Chief Project Manager, Railway Electrification, Gorakhpur and others v. Awadh Transformers Pvt. Ltd. , Lucknow through its Power of Attorney
2010-11-08
R.K.AGRAWAL, RAJESH CHANDRA
body2010
DigiLaw.ai
R.K. Agrawal, and Rajesh Chandra, JJ.;- Heard Sri Om Prakash Lohia learned counsel for the appellant Union of India and Sri Shambhavi Nandan advocate for the respondent contractor. 2. In this First Appeal From Order ( In short F.A.F.O.), the order dated 13.7.2010 passed by the District Judge, Allahabad in Misc. Arbitration No. 257 of 2010 ( M/s Awadh Transporters Vs. Chief Project manager and others) under Section 9 of the Arbitration and conciliation Act, 1996 is under challenge. 3. In brief, the facts of the case are that in order to remove the present capacity constraints of increasing the services of passenger and goods trains. the Electrification of Barabanki Gorakhpur Barauni route of Railway track of north Eastern Railway and East Central Railway was sanctioned by Government of India in 2007-08 for increasing the line capacity of the Section. 4. To materialise the proposed project, tenders were invited for design, supply, erection, testing and commissioning of 132/25 KV traction substation feeding post and shunt capacitor banks at Baruachak (Gr.142) in Gorakhpur Barabanki section of northern Railway. 5. The respondent contractor ( M/s Awadh Transformers Pvt. Ltd.) hadalso participated and the contract was awarded to it. The agreement between the appellant Railway Electrification and the respondent contractor was executed on 5.12.2008 which has been filed asAnnexure - 1 to the present F.A.F.O. The work was to be completed within 9 months from the date of issuance of letter of acceptance dated 4.8.2008. 6. As the progress of the work site was not satisfactory, several meeting between the representatives of the parties to the contract took place, but the respondent contractor was not serious about the compliance of those commitments. The respondent contractor stopped the work for the last 10 months as a result of which the contract was terminated. 7. Learned counsel for the Union of India submitted that the agreement entered into between the parties contained Arbitration clause in para 1.2.54 of the conditions of contract being the part of the contract agreement and Clause 64 of the General Conditions of Contract laid down the detailed procedure regarding arbitration. The contractor had an opportunity to raise all the claims before the appellate authority which claims were to be decided by the appellate authority within 120 days since the date of receipt of all those claims. 8.
The contractor had an opportunity to raise all the claims before the appellate authority which claims were to be decided by the appellate authority within 120 days since the date of receipt of all those claims. 8. The respondent contractor moved an application under Section 9 of the Arbitration and Conciliation Act, 1996 ( hereinafter called as the 'Act') making a prayer that the appellants herein,including Union of India may be restrained from terminating the agreement dated 6.12.2008 and also from invoking the bank guarantee Nos. 63/41 and 63/48 issued by the Central Bank of India Sultanpur. The District Judge vide impugned order dated 13.7.2010 issued notice to the Opposite Parties (appellants here in ) for filing objections and hearing but at the same time, restrained the Opposite Parties from terminating the impugned agreement and also from invoking the above said bank guarantee by passing the aforesaid ex-parte order. It is this order dated 13.7.2010 which has been challenged in this F.A.F.O. . 9. The learned counsel for the Union of India argued that a perusal of the application under Section 9 of the Act, reveals that the respondent contractor has not made any averment in the said petition that the arbitration clause has been invoked or the respondent contractor intends to take recourse to the arbitral proceedings. He further submitted that under Section 9 of the Act, the jurisdiction for grant of interim relief can no doubt be invoked even before commencement of the arbitration proceedings but at the same time, there has to be manifest intention on the part of the party seeking recourse to the proceedings under Section 9 of the Act. 10. The learned counsel for the respondent contractor on the other hand, argued that the work could not be completed on account of various lapses on the part of the appellants and as such, the contract could not have been terminated by them. It was also argued that there is no time limit for taking recourse to arbitral proceedings and the impugned order cannot be challenged merely on the ground that the respondent contractor has not started the arbitral proceedings. 11. We have considered the rival arguments. 12.
It was also argued that there is no time limit for taking recourse to arbitral proceedings and the impugned order cannot be challenged merely on the ground that the respondent contractor has not started the arbitral proceedings. 11. We have considered the rival arguments. 12. In Firm Ashok Traders and another vs. Gurumukh Das Saluja and others AIR 2004 SC 1433 the Supreme Court, relying upon its earlier judgment in Sundaram Finance Ltd. v. M/s NEPC India Ltd. AIR 1999 SC 565 has explained the legal position as follows:- "17.There are two other factors which are weighing heavily with us and which we proceed to record. As per the law laid down by this Court in M/s. Sundaram Finance Ltd. an application under S. 9 seeking interim relief is maintainable even before commencement of arbitral proceedings. What does that mean? In M/s. Sundaram Finance Ltd., itself the Court has said - "It is true that when an application under S. 9 is filed before the commencement of the arbitral proceedings there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings." Section 9 permits application being filed in the Court before the commencement of the arbitral proceedings but the provision does not give any indication of how much before. The word 'before' means, inter alia, ahead; of in presence or sight of; under the consideration or cognizance of.' The two events sought to be interconnected by use of the term 'before' must have proximity of relationship by reference to occurrence; the later event proximately following the preceding event as a foreseeable or 'within sight' certainty. The party invoking S. 9 may not have actually commenced the arbitral proceedings but must be able to satisfy the Court that the arbitral proceedings are actually contemplated or manifestly intended (as M/s. Sundaram Finance Ltd. puts it) and are positively going to commence within a reasonable time. What is a reasonable time will depend on the facts and circumstances of each case and the nature of interim relief sought for would itself give an indication thereof. The distance of time must not be such as would destroy the proximity of relationship of the two events between which it exists and elapses.
What is a reasonable time will depend on the facts and circumstances of each case and the nature of interim relief sought for would itself give an indication thereof. The distance of time must not be such as would destroy the proximity of relationship of the two events between which it exists and elapses. The purpose of enacting S. 9, read in the light of the Model Law and UNCITRAL Rules is to provide 'interim measures of protection.' The order passed by the Court should fall within the meaning of the expression 'an interim measure of protection' as distinguished from an all-time or permanent protection." 13. Today Sri Shambhavi Nandan advocate appearing for the respondents made a statement at bar that till today, no notice has been given by the respondent contractor expressing his intention to invoke the arbitration clause. 14. Seven days notice as required under Clause 1.2.29 of the agreement intending to terminate the contract was published by the appellants in daily newspaper 'Dainik Jagran' on 10.7.2010 and the application under Section 9 of the Act was moved by the respondent contractor on 13.7.2010 and since then, almost 4 months have passed but the respondent contractor has not made any effort to invoke the arbitration clause. 15. There is no averment in the application under Section 9 of the Act nor any other material has been placed before us showing that the respondent contractor intends to invoke the arbitration clause. In the absence of any material showing the intention of the respondent contractor for invocation of the arbitration clause, we are satisfied that the respondent contractor has dis entitled itself to get any indulgence of the Court under Section 9 of the Act. 16. As laid down by the Apex Court in the aforesaid judgment, the party invoking Section 9 may not have actually commenced the arbitral proceedings but must be able to satisfy the court that the arbitralproceedings are actually contemplated or manifestly intended and are positively going to commence within a reasonable time. 17. The averments made in para-32 of the application moved under Section 9 of the Act are as Under:- "32. That as the arbitrator has not been appointed and the dispute has not beendecided between the parties hence, it is expedient in the interest of justice that theopposite parties be restrained from terminating the contract and also from invoking the Bank Guarantee Nos.
That as the arbitrator has not been appointed and the dispute has not beendecided between the parties hence, it is expedient in the interest of justice that theopposite parties be restrained from terminating the contract and also from invoking the Bank Guarantee Nos. 63/41 and 63/48 which had been issued by Central Bank of India, Sultanpur." 18. A perusal of the above said paragraph clearly indicates that the same has been couched in such a manner so as to give an impression as if the arbitration clause has been invoked by the respondent contractor and it is the default of the appellants that the arbitrator has not been appointed and the dispute has not been decided. However, the fact is that the respondent contractor has not taken any steps for starting the arbitral proceeding. 19. We may mention here that in some what similar circumstances, where the court below had exercised the powers under Section 9 of the Act and the contractor had not expressed his intention to get the arbitrator appointed, this court in F.A.F.O. No.2384 of 2010 ( Union of India and others Vs. Awadh Transport Pvt. Ltd. and another) decided on 16.9.2010, which incidentally is inter-parties, has been pleased to set aside the order passed by the learned District Judge. We are in respectful agreement with the view taken by the Division Bench in the aforesaid case. 20. In view of the entire discussion and relying upon the judgment rendered in the case of Firm Ashok Traders ( Supra) we are of the opinion that the order of the District Judge, Allahabad passed on the application under Section 9 of the Arbitration and Conciliation Act be set aside. 21. The First Appeal From Order is allowed with costs. The order of the learned District Judge Allahabad dated 13.7.2010 is set aside.