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2010 DIGILAW 986 (AP)

Madhucon Projects Limited v. B. Girijapathi Reddy

2010-10-06

GODA RAGHURAM, NOUSHAD ALI

body2010
ORDER: (per Hon'ble Sri Justice Noushad Ali) Defendant No.1 in the suit O.S.No.1153 of 2009 instituted by the respondent No.1 herein (plaintiff) in the Court of the IV Senior Civil Judge, City Civil Court, Hyderabad aggrieved by the common order in I.A.No.709 of 2009 and I.A.No.562 of 2009 dated 19.02.2010 has filed these Civil Revision Petitions. 2. C.R.P.No.3335 of 2010 has been filed against the orders in I.A.No.709 of 2009 rejecting the application filed under Section 8 (1) and (3) of the Arbitration and Conciliation Act, 1996 (for short 'the Act') to refer the parties to participate and continue the proceedings before the Sole Arbitrator (the second respondent herein/Defendant No.2), who has been appointed in terms of Clause 21.3 of the Agreement dated 18.02.2006. 3. C.R.P.(SR) No.16466 of 2010 has been filed against the orders in I.A.No.562 of 2009 whereby the court below granted injunction restraining the second respondent (Defendant No.2) from continuing the arbitration proceedings till the disposal of the suit. As an appeal under Order 43 Rule 1 C.P.C., would lie against an order passed under Order 39 Rule 1 C.P.C., on the objection taken by the Registry on the maintainability of this Civil Revision Petition under Article 227 of the Constitution of India, this revision petition was not assigned regular number. 4. For the sake of convenience, the petitioner (Defendant No.1) would be referred as Principal Contractor, Respondent No.1 herein (Plaintiff) as Sub-Contractor and Respondent No.2 herein (Defendant No.2) as Arbitrator. 5. Brief facts as per the plaint averments are; Irrigation and CAD Department, Government of A.P., awarded a contract and entrusted to the Principal Contractor, the work relating to investigation, soil exploration, preparation of designs and drawings, estimates including construction of spillway for Indira Sagar Project across river Godavari at Ramayyapeta Village in West Godavari District. 6. The principal contractor, in turn, entrusted part of the said work described as "Earth Work Excavation" to the sub-contractor under Piece Rate Contract Agreement dated 18.02.2006. The value of the work was Rs.70,68,60,000/-, out of which an extent of Rs.67,21,72,078/- value of work was executed and bills were partly paid up to 30.01.2008. An amount of Rs.7,01,08,688/- is due from the principal contractor. The value of the work was Rs.70,68,60,000/-, out of which an extent of Rs.67,21,72,078/- value of work was executed and bills were partly paid up to 30.01.2008. An amount of Rs.7,01,08,688/- is due from the principal contractor. Without paying the said amount, the principal contractor addressed a letter dated 1.02.2008 with false allegations and requested to remobilize the machinery and vehicles on the site to achieve the required progress in the execution of work. The principal contractor, thereafter, terminated the contract vide letter dated 8.2.2008 purportedly as per Clause 20.1 of the Agreement dated 18.02.2006 to which the sub-contractor submitted a reply letter dated 22.02.2008, requesting the principal contractor to settle the issues stated therein. There was no amicable settlement, but unilaterally the principal contractor addressed a letter dated 1.04.2009 to the Arbitrator requesting his acceptance for his appointment as Arbitrator as per Clause 21.3.1 of the said Agreement. A second letter dated 27.04.2009 was addressed to the second respondent herein appointing him as the Arbitrator to conduct arbitral proceedings at Hyderabad. Pursuant thereto, the Arbitrator conducted preliminary meeting on 19.05.2009. A representative of the sub-contractor attended the said meeting and opposed continuance of proceedings. The sub-contractor also submitted objections dated 28.07.2009 objecting to the constitution of the Arbitral Tribunal and requested the Arbitrator not to insist upon its participation, and to terminate all further arbitral proceedings. Despite the said objections, the Arbitrator proceeded to hear the matter on 13.09.2009. 7. Since the Arbitrator was insisting to continue the proceedings, the sub- contractor filed the suit, inter alia, contending that the appointment of second respondent as Arbitrator is without any pre-existing arbitrable dispute/claims and without notifying to the sub-contractor as to which dispute/claims were sought to be resolved in the said arbitral proceedings and that there is no express consent or request of the sub-contractor for appointing the Arbitrator, and the appointment is mala fide. 8. 8. The sub-contractor sought for a decree against the Principal Contractor and the Arbitrator (Defendants 1 and 2) as follows:- (A) That a decree be passed against the defendants 1 and 2, declaring the letters (1) No.MPL/HYD/100/4/2009/6614, dated 01.04.2009 and (2) No.MPL/HYD/100/4/2009/6984, dated 27.04.2009 of 1st defendant for appointing 2nd defendant as Sole Arbitrator, as arbitrary and illegal and the defendant No.2 is not entitled to conduct Arbitration Proceedings between the defendant No.1 and plaintiff; (B) that a decree of consequential injunction be passed against the defendants from proceeding with Arbitration pursuant to the letter No.MPL/HYD/100/4/2009/6984, dated 27.04.2009, appointing the 2nd defendant as Sole Arbitrator by the 1st defendant; (C) that to award costs of the suit to the plaintiff; and (D) that to grant such other better relief/s in favour of the plaintiff which this Hon'ble Court may deem it just and proper under the circumstances of the case. 9. Upon filing the said suit, the sub-contractor also filed I.A.No.562 of 2009 under Order XXXIX Rule 1 and 2 CPC to restrain the Arbitrator from proceeding with the arbitration proceedings. 10 .The principal contractor on his part filed I.A.No.709 of 2009 under Section 8 (1) and (3) of the Act seeking to refer the parties to participate and continue the arbitral proceedings before the Arbitrator. The principal contractor pleaded that the parties are governed by the Agreement dated 18.02.2006 and Clause 21.3 thereof provides for resolution of disputes through Arbitration. The sub-contractor entered appearance before the Arbitrator on 19.05.2009. The Arbitration proceedings are properly initiated in terms of the Agreement and initially the sub-contractor accepted the appointment of the Arbitrator and voluntarily participated in the proceedings, thereafter raised objections on false and frivolous grounds vide letter dated 28.07.2009. The Arbitrator registered the said objection as I.A.No.1 and fixed the date of hearing on 12th and 13th of September, 2009. Existence of agreement, appointment of Arbitrator, conduct of arbitral proceedings and the other issues ancillary thereto, are all the issues which would fall for consideration before the Arbitrator and such issues are not amenable to the jurisdiction of the Civil Court. 11. Existence of agreement, appointment of Arbitrator, conduct of arbitral proceedings and the other issues ancillary thereto, are all the issues which would fall for consideration before the Arbitrator and such issues are not amenable to the jurisdiction of the Civil Court. 11. The sub-contractor filed counter in I.A.No.709 of 2009 and opposed the relief sought in the said I.A., pleading that the subject matter of the suit is not the same as the dispute/claim between the parties but the suit is filed questioning the propriety and legality of appointment of the second respondent herein as Sole Arbitrator unilaterally without raising/notifying the dispute and compelling to agree for Arbitration to resolve such a dispute/claim in terms of Clause 21.3 of the Agreement. The appointment of Arbitrator is in violation of the procedure contemplated under Section 11 (5) and (6) of the Act, and its appearance on 19.05.2009 would not take away its right to object to the constitution of the Arbitral Tribunal and the objections filed on 28.07.2009 before the Arbitrator would not affect its right to file the suit. Section 8 of the Act is not applicable to the subject matter of the suit as it is not the subject matter of Arbitration Agreement. The appointment of Arbitrator is under challenge in the suit and as such, the Arbitrator is not competent to adjudicate the alleged disputes raised by the principal contractor. The principal contractor selected the second defendant, who hails from the State of Madhya Pradesh as Arbitrator due to some nexus between them. The appointment of the second respondent as Sole Arbitrator is mala fide and wrongful. 12. In the affidavit filed in support of I.A.No.562 of 2009 the sub-contractor while reiterating the above pleas also pleaded that if the Arbitrator is allowed to continue the Arbitration proceedings, it would suffer irreparable loss and injury as it would be constrained to wait till the award is passed to challenge the same under Section 34 of the Act. 13. Both parties marked documents in I.A.No.562 of 2009. Particularly, the principal contractor marked Exs.R.1 and R.2 and the sub-contractor marked Exs.P.1 to P.26. The Court below clubbed both I.A.Nos.562 and 709 of 2009 and disposed of the same by common order dated 19.02.2010. 13. Both parties marked documents in I.A.No.562 of 2009. Particularly, the principal contractor marked Exs.R.1 and R.2 and the sub-contractor marked Exs.P.1 to P.26. The Court below clubbed both I.A.Nos.562 and 709 of 2009 and disposed of the same by common order dated 19.02.2010. The Court below allowed I.A.No.562 of 2009 and granted injunction, but dismissed I.A.No.709 of 2009, declining to refer the matter for Arbitration on the only ground that the principal contractor failed to refer the matter for conciliation before appointing the Arbitrator as per Clause 21.3.1 of Ex.R.1-Agreement dated 18.02.2006 so as to enable the sub-contractor to ventilate his grievances before the conciliators. As a consequence of dismissal of the said I.A.No.709 of 2009, the Court below allowed I.A.No.562 of 2009 and granted injunction. 14. We may at the outset point out that the approach of the Court below and the reasons assigned in dismissing the application filed under Section 8 of the Act in I.A.No.709 of 2009 does not commend acceptance. While deciding an application filed under Section 8 of the Act, the Court would consider to the extent whether the matter brought before it is the subject matter of the Arbitration Agreement and whether such an application is accompanied by the original Arbitration Agreement or a duly certified copy thereof. It is not open to the Court to enter into any other area of dispute and adjudicate on the propriety or legality of the procedure adopted for the appointment of the Arbitrator. We are of the considered opinion that the Court below misdirected itself in rejecting the application on the ground that the appointment of Arbitrator was not preceded by referring the matter for conciliation. The order in I.A.No.709 of 2009, in our considered view, is unsustainable on this ground. The learned Senior Counsel appearing for the sub-contractor fairly would not dispute this position. Having held so, ordinarily we would have remanded the matter for reconsideration on the question of referring the parties to Arbitration, but both the learned counsel would pursue for a decision on this issue in order to avoid multiplicity of proceedings. We would, therefore, proceed to consider. 15. Heard Sri S. Niranjan Reddy, learned counsel on behalf of the principal contractor and Sri E. Manohar, learned Senior Counsel instructed by Sri Ch. Poornachandra Rao on behalf of the sub-contractor. 16. We would, therefore, proceed to consider. 15. Heard Sri S. Niranjan Reddy, learned counsel on behalf of the principal contractor and Sri E. Manohar, learned Senior Counsel instructed by Sri Ch. Poornachandra Rao on behalf of the sub-contractor. 16. The learned counsel for the principal contractor while reiterating the facts, would submit that the parties are governed by the terms and conditions of the Agreement dated 18.02.2006. Noticing the shortcomings in the execution of work, the principal contractor addressed a letter No.MPL/HYD/CA/2/Spillway /2008/109/462, dated 1.02.2008 to the sub-contractor drawing its attention to the shortcomings and the obligations as per Clauses 2.0, 6.0, 12.0, 13.0, 15.0, 21.0, 22.0 and 23.0 of the Agreement, inter alia, called upon the sub-contractor to honour the Agreement, to take serious note of the issues, to mobilize the machinery and vehicles on the site immediately within seven days and start works without further delay and show the required progress duly cautioning that upon failure, the principal contractor would be compelled to enforce all contractual rights to deal with the issues mentioned in the said letter. The sub-contractor did not act as per the directions. Therefore, the principal contractor by a further letter dated 8.02.2008, terminated the Agreement as per clause 20.1 of the Agreement. By the said letter the sub-contractor was duly informed that as per Clause 20.2 it had absolute authority to appoint another agency to execute leftover work and all the costs incurred thereon would be recovered from the sub-contractor. In reply to the said letter, the sub-contractor addressed a letter dated 22.02.2008 denying that it had not remobilized the machinery, further stating that the machinery was under repairs and would be redeployed soon after the repairs were carried out. The sub-contractor questioned the termination of contract as not warranted and demanded to release all payments for the works done. The sub-contractor also demanded that the site should not be entered till the accounts were settled. The learned counsel would therefore submit that the aforesaid letters dated 1.02.2008 and 8.02.2008 addressed by the contractor, and the reply letter dated 22.02.2008 of the sub-contractor, gave raise to a dispute between the parties. As the mutual settlement of the said dispute could not be resolved, one, Sri H. P. Jaiswal of Bhopal, Madhya Pradesh, was appointed as conciliator by invoking Clause 21.2 of the Agreement. As the mutual settlement of the said dispute could not be resolved, one, Sri H. P. Jaiswal of Bhopal, Madhya Pradesh, was appointed as conciliator by invoking Clause 21.2 of the Agreement. On failure of the conciliation proceedings, the Managing Director of the principal contractor appointed one G.S. Palnitkar (the second respondent herein) as the Sole Arbitrator as per Clause 21.3.1 by letter dated 1.04.2009 to conduct proceedings in accordance with the provisions of the Act, and to hold the proceedings at Hyderabad, A.P., and the said appointment was duly communicated to the sub-contractor and sought for acceptance of the same by the second respondent herein. On acceptance, the Managing Director appointed the second respondent herein as the Arbitrator by letter dated 27.04.2009, which was also communicated to the sub-contractor. The Arbitrator entered reference and held preliminary hearing on 19.05.2009. Both the parties appeared before the Arbitrator. Later the sub-contractor filed objections dated 28.07.2009, inter alia opposing constitution of the Arbitral Tribunal on the ground that the appointment of the Arbitrator was without notice to it and without there being a pre-existing "dispute" or "disputes" raised and notified by the principal contractor, thereby the appointment is not lawful. The said objection was numbered as I.A.No.1. The Arbitrator, thereupon, after issuing notice dated 5.08.2009 heard the parties on 12/13.09.2009. In the meanwhile, the sub- contractor filed the above suit and submitted written arguments dated 23.12.2009 raising further objections before the Arbitrator, contending that the Arbitral Tribunal did not follow the procedure provided under Section 12 of the Act and the matter is subjudice before the civil Court and the dispute, which pertains to assessing the quantities of earth work executed and leftover work, required voluminous evidence, which can only be adjudicated by the civil Court. Similarly, the principal contractor also submitted written arguments opposing the said objections of the sub-contractor. The Arbitrator overruled the objections and accordingly passed orders on 6.02.2010. The learned counsel would submit that the subject matter of the suit is thus same as in the arbitration and since the arbitrator is seized of the same subject matter, the civil Court cannot legally proceed with the suit, but refer the matter to Arbitration in terms of Section 8 of the Act. He would also contend that on such reference, the order in I.A.No.562 of 2009 would, as a consequence, become unsustainable. 17. He would also contend that on such reference, the order in I.A.No.562 of 2009 would, as a consequence, become unsustainable. 17. The learned counsel would place reliance on the judgments of the Apex Court in P. Anand Gajapathi Raju and others v. P.V.G. Raju (dead) and others1; Hindustan petroleum Corporation Limited v. Pinkcity Midway Petroleums2; SBP & Co. v. Patel Engineering Limited and another3; Citibank, N.A. v. TLC Marketing PLC and another4; and Branch Manager, Magma Leasing and Finance Limited and another v. Potluri Madhavilata and another5. 18. On the other hand, Sri E. Manohar, learned Senior Counsel for the sub-contractor would submit that there is no arbitral dispute between the parties. In the absence of an arbitral dispute, Arbitrator cannot be appointed by invoking Clause 23 of the Agreement. In the suit, the very appointment of Arbitrator is challenged as illegal and the said relief cannot be an arbitrable issue to be decided by the Arbitrator. The subject matter of the suit is thus different from the subject matter covered by the Agreement, and as such, the provisions of Section 8 of the Act cannot be applied. Though the Agreement was terminated vide letter dated 8.02.2008, the sub-contractor submitted a reply thereto vide letter dated 22.02.2008 justifying the execution of large volume of work and hence termination of Agreement was not warranted. The principal contractor after receipt of the said notice did not react intending to implement the termination of Agreement nor made any further demands, nor indicated the existence of any dispute. The principal contractor unilaterally appointed the Arbitrator without the consent of the sub-contractor. The Civil Court is therefore competent to entertain the suit as presented. The said suit is neither expressly nor impliedly barred under the provisions of Section 9 of C.P.C., as such the Civil Court rightly declined to accept the relief sought for by the principal contractor to refer the matter for arbitration under Section 8 of the Act. Reliance has been placed on Superintending Engineer, N.S. Left Canal Circle and another v. International Constructions Company, Governerpet6. 19. Reliance has been placed on Superintending Engineer, N.S. Left Canal Circle and another v. International Constructions Company, Governerpet6. 19. In reply to the aforesaid contentions, Sri S. Niranjan Reddy, learned counsel for the principal contractor would submit that the consequences which emanated from the letter dated 1.02.2008 and the subsequent exchange of letters dated 8.02.2008 and 22.02.2008 and the objections dated 28.07.2009 raised by the sub- contractor before the Arbitrator would unequivocally disclose existence of an arbitrable dispute and the subject matter of the said dispute is the same as presented in the suit. In any event, whether such dispute in fact exists, whether the Arbitrator has been validly appointed and whether the Arbitrator has jurisdiction to adjudicate on the dispute - all such questions could be validly raised before the Arbitrator himself and the Arbitrator might rule on his own jurisdiction as provided under Section 16 of the Act. 20. The undisputed facts are that there is an agreement dated 18.02.2006 between the parties in pursuance of which the Principal Contractor entrusted for execution the "Earth Work Excavation" work under piece rate contract to the Sub- Contractor subject to the conditions contained therein. The said agreement provides for Dispute Resolution Mechanism in Clause 21.0 through mutual settlement, conciliation and arbitration and the Managing Director, Madhucon is authorized to appoint a Conciliator/Arbitrator. The relevant clauses are as under : "21.0 DIFFERENCES OR DIPSUTES 21.1 Mutual Settlement of Disputes 21.1.1 Except where otherwise provided for in the contract, all disputes shall in the first place be resolved through mutual discussions, negotiations, deliberations and consultations associating senior executives of both the parties to dispute. 21.2 Conciliation 21.2.1 If the efforts to resolve all or any of the disputes through mutual settlement fail, such disputes shall be referred to the sole conciliator to be appointed by the Managing Director of Madhucon under the Arbitration and Conciliation Act, 1996. 21.2.2 The settlement agreement shall be final and binding on the parties. The settlement agreement shall have the same status and effect of an arbitration award. 21.3 Arbitration 21.3.1 If the efforts to resolve all or any of the disputes through conciliation fails, such disputes shall be referred to the sole Arbitrator to be appointed by the Managing Director, Madhucon. There shall be no objection to the PRC if the sole Arbitrator so appointed is an employee of Madhucon. 21.3 Arbitration 21.3.1 If the efforts to resolve all or any of the disputes through conciliation fails, such disputes shall be referred to the sole Arbitrator to be appointed by the Managing Director, Madhucon. There shall be no objection to the PRC if the sole Arbitrator so appointed is an employee of Madhucon. In case the Arbitrator so appointed is unable to act for any reason, Managing Director of Madhucon in the event of such inability, shall appoint another person to act as an Arbitrator in accordance with the terms of the contract. Such persons shall be entitled to proceed with reference from the stage at which it was left incomplete by his predecessor. 21.3.2 Subject to the aforestated conditions, the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the conciliation and arbitration proceedings under this clause. 21.4 Pending resolution of disputes and differences, the work shall continue without hindrance as per schedules and shall not be either slowed down or stopped. If the work is slowed down or stopped during the period of dispute, the PRC shall be responsible for the loss of work or delays and any loss sustained by Madhucon due to such actions by the PRC, shall be made good by the PRC either by direct payment or through deductions from any payments due to the PRC." 21. It is also not in dispute that the Principal Contractor by Ex.P1 Letter No.MPL/HYD/CA/2/Spillway/2008/109/462, dated 01-02-2008 apprised the Sub- Contractor of the relevant clauses of the agreement viz., 2.0, 6.0, 12.0, 13.0, 15.0, 21.0, 22.0 and 23.0 and called upon the Sub-Contractor to remobilize the machinery within seven days and show progress in the execution of work and in case of failure, the contractor would be under compulsion to enforce all the contractual rights. The Sub-Contractor allegedly failed to recommence the execution of the work, as a result of which the Principal Contractor vide letter No.MPL/HYD/CA/2/Spillway/ 2008/112/511, dated 08-02-2008 terminated Ex.R.2- agreement dated 18.02.2006. The Sub-Contractor allegedly failed to recommence the execution of the work, as a result of which the Principal Contractor vide letter No.MPL/HYD/CA/2/Spillway/ 2008/112/511, dated 08-02-2008 terminated Ex.R.2- agreement dated 18.02.2006. Responding to the said letter of termination, the Sub-Contractor addressed Ex.P.2-reply letter dated 22.02.2008 stating that the machinery was under repairs and that despite bad payments, which were either delayed or partly paid, a turn over of about 65.00 lakhs cubic meters work had been executed leaving a balance of a meager 1.00 lakh cubic meters alone. Stating that the termination of contract was not warranted, the Sub-Contractor demanded settlement of accounts and release payments for the work done and other amounts due. The Principal Contractor was duly required not to enter the site till the account was settled and such settlement would not bind the termination of the contract. 22. These documents, i.e., Ex.P.1-letter dated 01.02.2008 and letter dated 08.02.2008 addressed by the Principal Contractor to the Sub-Contractor and Ex.P.2-reply letter dated 22.02.2008 addressed by the Sub-Contractor to the Principal Contractor, are the crucial documents, an analysis of which is necessary to determine whether there is an arbitrable dispute between the parties. 23. As mentioned earlier, Ex.P.1 letter dated 01.02.2008 is the origin, through which the Principal Contractor expressed his dissatisfaction on the progress of work and apprised the Sub-Contractor of its obligations under Ex.R.1-Agreement specifically drawing attention to clauses 2.0, 6.0, 12.0, 13.0, 15.0, 21.0, 22.0 and 23.0. 24. Clause 2.0 relates to the general conditions which inter alia provides in clause 2.4 that the work should conform to certain requirements and technical specifications and standards under the relevant manuals, circulars, directions of the Irrigation and CAD Department and all those relevant conditions as are applicable to the Principal Contractor. 25. Based on the said clause, the Sub-Contractor was required to achieve slopes of the canal sites as per the contract documents and in default it would not get full payment for uncompleted works. Clause 6.0 relates to the time frame for completion of work. Clause 6.2 sets out the schedule and under clause 6.3 time being the essence of contract, the sub-contractor was apprised of its failure to adhere to the programme due to which the required rate of progress could not be achieved resulting in financial loss. 27. Clause 13.0 relates to the mode of payments. Clause 6.2 sets out the schedule and under clause 6.3 time being the essence of contract, the sub-contractor was apprised of its failure to adhere to the programme due to which the required rate of progress could not be achieved resulting in financial loss. 27. Clause 13.0 relates to the mode of payments. As per Clauses 13.1.1 and 13.1.3 monthly payments are based on the work actually done at the site as agreed and approved by the principal contractor depending on the drawings submitted and check measurements carried out. Based on the said clause the sub-contractor was informed that the payment for the month of December 2007 was already made and the request for upward revision of unit prices was declined as per Clause 13.3.1 except in respect of items as per Clause 13.3.2. 28. Clause 15.0 relates to retention of 5% of the value of the work executed as security until the completion of the whole of the work. 29. Clause 21.0 relates to disputes resolution mechanism. Clause 21.4 provides that pending such resolution of disputes, the work should continue to be done without hindrance as per schedules without being slowed down or stopped. Based on the said Clause, the sub-contractor was required to honour the Agreement. 30. Clause 22 relates to confidentiality, which the sub-contractor was required to maintain. Clause 23.0 in general and Clause 23.4 in particular provides that the contract would be in force until the completion of execution of work or till its cancellation under Force Majeure or other reasons. 31. Based on all the aforesaid Clauses and the shortcomings, the principal contractor called upon the sub-contractor to remobilize the machinery and commence the work and ensure progress within seven days, duly cautioning that failure to do so, would entail in enforcement of contractual rights. The principal contractor thereupon exercised its right and terminated the contract by letter dated 8.02.2008. The sub-contractor reacted to the same vide letter dated 22.02.2008. Cumulatively these documents Ex.P.1-letter dated 1.02.2008, letter of termination of contract dated 8.02.2008 and Ex.P.2-reply letter dated 22.02.2008, in our considered opinion, have given rise to differences/disputes between the parties. On the one hand the principal contractor after issuing Ex.P.1-letter, exercised its right and terminated the contract as per Clause 20.1, on the other hand, the sub-contractor disputed such termination as not valid and binding and demanded settlement of accounts. On the one hand the principal contractor after issuing Ex.P.1-letter, exercised its right and terminated the contract as per Clause 20.1, on the other hand, the sub-contractor disputed such termination as not valid and binding and demanded settlement of accounts. We are therefore of the opinion that an arbitrable dispute has arisen between the parties. We are also of the opinion that the said letters were sufficient notice to the sub- contractor of the existence the dispute as also to the eventual appointment of Arbitrator. 32. In Citybank, N.A. vs. TLC Marketing PLC (4 supra), while considering the question whether, in view of the various communications and legal notices between the parties whereby certain serious instances of complaints regarding deficiencies in services rendered to the customers and other disputes/differences, an arbitration clause contained in the agreement could be invoked, the Apex Court having regard to the fact that the assertion of claim by the applicant Citibank Limited on such letters and notices issued to the respondents therein and the responses received thereto from the opposite parties, held that the matter would be arbitrable. In the light of the said judgment, in our opinion, the contention on behalf of the sub-contractor that there is no pre-existing dispute nor such dispute notified, is not tenable. The judgment cited on behalf of the sub-contractor in Superintending Engineer, N.S. Left Canal Circle and another v. International Constructions Company, Governerpet (6 supra) is therefore not applicable to the facts and circumstances of the case. 33. The learned counsel for the sub-contractor would, however, contend that the suit as presented for the reliefs sought for therein is not either expressly or impliedly barred as per the provisions of Section 9 of C.P.C., and as such, the suit is perfectly maintainable despite the existence of arbitration clause in the Agreement. The said contention does not commend acceptance. 34. Section 5 of the Act provides that notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part (Part- I), no judicial authority shall intervene except where so provided in the said Part. 35. The said provision not only contains a non-obstante clause but also expressly prohibits intervention by any Judicial Authority in the matters contained in Part-I of the Act, subject only to the exceptions provided in the said Part. 36. 35. The said provision not only contains a non-obstante clause but also expressly prohibits intervention by any Judicial Authority in the matters contained in Part-I of the Act, subject only to the exceptions provided in the said Part. 36. Section 8 of the Act provides that a judicial authority before which action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. It also provides that the application shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof; and notwithstanding that an application having been made and the issue is pending before the judicial authority, arbitration may be commenced or continued and an arbitral award be made. 37. While considering the scope of Sections 5 and 8 of the Act, the Apex Court in P. Anand Gajapathi Raju and others v. P.V.G. Raju (dead) and others (1 supra) observed - "Section 5 of the Act brings out clearly the object of the new Act, namely, that of encouraging resolution of disputes expeditiously and less expensively and when there is an arbitration agreement, the court's intervention should be minimal. Keeping the legislative intention in mind, Section 8 of the new Act may be construed" 38. Explaining the scope of Section 8 of the Act, the Apex Court further observed in paragraph-5 as follows : "The conditions which are required to be satisfied under sub-sections (1) and (2) of Section 8 before the Court can exercise its powers are: (1) there is an arbitration agreement; (2) a party to the agreement brings an action in the court against the other part; (3) subject-matter of the action is the same as the subject -matter of the arbitration agreement; (4) the other party moves the court for referring the parties to arbitration before it submits his first statement on the substance of the dispute. This last provision creates a right in the person bringing the action to have the dispute adjudicated by the court, once the other party has submitted his first statement of defence. This last provision creates a right in the person bringing the action to have the dispute adjudicated by the court, once the other party has submitted his first statement of defence. But if the party, who wants the matter to be referred to arbitration applies to the court after submission of his statement and the party who has brought the action does not object, as is the case before us, there is no bar on the court referring the parties to arbitration. 39. The Apex Court in Branch Manager, Magma Leasing and Finance Limited and another v. Potluri Madhavilata and another (5 supra) while considering the question whether the Arbitration agreement survives for the purpose of resolution of disputes arising under or in connection with contract even if its performance has come to an end on account of termination due to breach and answering the said question holding that merely because the contract has come to an end by its termination due to breach, the arbitration clause does not get perished nor is rendered inoperative; but it survives for resolution of disputes arising "in respect of" or "with regard to" or "under" the contract, held in paragraphs 16 and 18 as follows: "The next question, an incidental one, that arises for consideration is whether the trial court must refer the parties to arbitration under Section 8 of the Act, 1996." ...................................... "Section 8 is in the form of legislative command to the court and once the prerequisite conditions as afore stated are satisfied, the court must refer the parties to arbitration. As a matter of fact, on fulfilment of the conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration. There is nothing on record that the prerequisite conditions of Section 8 are not fully satisfied in the present case. The Trial court, in the circumstances, ought to have referred the parties to arbitration as per arbitration Clause 22." 40. In SBP & Co v. Patel Engineering Limited and another (3 supra), the Apex Court while considering the nature of functions of the Chief Justice or his designate under Section 11 of the Act, after referring the decisions in P. Anand Gajapathi Raju v. P.V.G. Raju (1 supra) and also Hindustan Petroleum Corporation Limited v. Pinkcity Midway Petroleums (2 supra) held in Paragraph 16 as under. "Where there is an arbitration agreement between the parties and one of the parties, ignoring it, files an action before a judicial authority and the other party raises the objection that there is an arbitration clause the judicial authority has to consider that objection and if the objection is found sustainable to refer the parties of arbitration. A judicial authority is entitled to, has to and is bound to decide the jurisdictional issue raised before it, before making or declining to make a reference. 41. It was further observed in paragraph 19 that - "Section 8 of the Act contemplates that a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement, on the terms specified therein, to refer the dispute to arbitration. A judicial authority as such is not defined in the Act. It would certainly include the court as defined in Section 2 (e) of the Act and would also, in our opinion, include other courts and may even include a special tribunal like the Consumer Forum. When a party to an action before a judicial authority raises the plea that there is an arbitration agreement and the subject matter of the claim is covered by the agreement and the plaintiff or the person who has approached the judicial authority for relief, disputes the same, the judicial authority, in the absence of any restriction in the Act, has necessarily to decide whether, in fact, there is in existence a valid arbitration agreement and whether the dispute that is sought to be raised before it, is covered by the arbitration clause. It is difficult to contemplate that the judicial authority has also to act mechanically or has merely to see the original arbitration agreement produced before it, and mechanically refer the parties to an arbitration." 42. In Hindustan Petroleum Corporation Limited v. Pinkcity Midway Petroleums (2 supra) the Apex Court was dealing with a dispute between the HPCL and its dealer held that the appointment of a dealer was governed by a Dealership Agreement executed by the parties. Certain obligations were cast on the dealers to observe marketing discipline and also to comply with the statutory provisions of Petroleum Act, Explosives Act, Weights and Measures Act, 1976 the agreement also empowered the HPCL to stop supply of the products to the dealer for breach of conditions contained in the agreement. Certain obligations were cast on the dealers to observe marketing discipline and also to comply with the statutory provisions of Petroleum Act, Explosives Act, Weights and Measures Act, 1976 the agreement also empowered the HPCL to stop supply of the products to the dealer for breach of conditions contained in the agreement. The agreement provided for reference to the sole arbitrator. The dealer was found in the activities of short delivery of petroleum products and indulged in tampering with the seals of the dispensing units. Consequently, the HPCL suspended the sales and supply of petroleum products to the dealer and also levied penalty. The dealer filed a civil suit for a declaration that the said order was illegal and arbitrary and also sought for stay of suspension of supplies by filing an application under Order 39 Rules 1 and 2 C.P.C., the Civil Court stayed the suspension of supplies. The HPCL filed an application under Sections 5 and 8 of the Arbitration and Conciliation Act, 1996 for referring the dispute to Arbitration as provided in the Dealership Agreement. The civil Court dismissed the said application holding that the dispute was not covered by the arbitration agreement. And the said order was also confirmed by the High Court. While considering the issues involved therein, the Apex Court in Paragraphs 13 and 14 of the judgment held as follows. A perusal of this clause clearly shows that the parties to the Dealership Agreement had agreed to refer their dispute arising out of the Agreement, of whatever nature it may be, to an arbitrator as contemplated in that Agreement. Section 8 of the Act in clear terms mandates that a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement to refer such parties to arbitration, the language of this Section is unambiguous. This Court in the case of P. Anand Gajapathi Raju v. P.V.G. Raju (2 supra) held that the language of Section 8 is peremptory in nature. Therefore, in cases where there is an arbitration clause in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an arbitrator. Therefore, in cases where there is an arbitration clause in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an arbitrator. Therefore, it is clear that if, as contended by a party in an agreement between the parties before the civil court, there is a clause for arbitration, it is mandatory for the civil court to refer the dispute to an arbitrator. In the instant case the existence of an arbitral clause in the Agreement is accepted by both the parties as also by the courts below but the applicability thereof is disputed by the respondent and the said dispute is accepted by the courts below. Be that as it may, at the cost of repetition, we may again state that the existence of the arbitration clause is admitted. If that be so, in view of the mandatory language of Section 8 of the Act, the courts below ought to have referred the dispute to arbitration." 43. It is therefore manifest that notwithstanding the absence of either express or implied prohibition under Section 9 C.P.C. to entertain a suit, the Civil Court, is under a legislative command to refer the parties to arbitration, if an agreement between the parties provides for Arbitration. 44. In the instant case, it has already been noticed that there is an Agreement between the parties, which contains an arbitration clause for resolution of disputes. Further, the cause of action pleaded for filing the suit are, Ex.R.2- Agreement dated 18.02.2006, Ex.P.1-letter dated 1.2-2008, termination latter dated 8.02.2008, Ex.P.2-reply letter dated 22.02.2008, letter dated 1.04.2009 whereby consent of the second respondent for his appointment as Arbitrator was asked for, letter dated 27.04.2009 whereby the Arbitrator has been appointed after consent was received, the arbitral proceedings dated 19.05.2009, objections dated 28.07.2009 filed by the sub-contractor before the Arbitrator and the letter dated 5.08.2009 of the Arbitrator fixing the date for hearing of the matter. 45. 45. From a conjoint reading of the said cause of action leading to the filing of the suit and the plaint averments in juxtaposition of the facts leading to the appointment of Arbitrator, we are of the considered opinion that the subject matter of the suit is same as the subject matter in the Arbitration and the prerequisite conditions contemplated under Section 8 of the Act are satisfied. Therefore, the Court below should have referred the parties to arbitration as per the mandate of Section 8 of the Act. 46. The learned counsel for the sub-contractor would, however, contend that the reliefs as sought for in the suit intrinsically are not amenable to adjudication by Arbitrator, instead such reliefs are exclusive and within the jurisdiction of the civil Court. In our considered view the said contention is without substance. As noted above, in the suit the sub-contractor questioned the appointment of Arbitrator as arbitrary, illegal and mala fide and for a consequential injunction to restrain the Arbitration proceedings pursuant to the said appointment. 47. Such objections as to the validity of the appointment of Arbitrator and the jurisdiction of Arbitral Tribunal are amenable to challenge before the Arbitral Tribunal itself. Section 16 of the Act provides that the Tribunal may rule on its own jurisdiction, including ruling of any objections with respect to the existence or validity of the Arbitration Agreement and an aggrieved party on a decision, may challenge the decision in accordance with Section 34 of the Act. 48. In Hindustan Petroleum Corporation Limited v. Pinkcity Midway Petroleums (2 supra), the Apex Court while considering the provisions of Section 16 of the Act held as follows. "The question then would arise: what would be the role of the civil court when an argument is raised that such an arbitration clause does not apply to the facts of the case in hand? Learned counsel for the appellant contends that it is a matter which should be raised before the arbitrator who is competent to adjudicate upon the same and the civil court should not embark upon an inquiry in regard to the applicability of the arbitration clause to the facts of the case. Learned counsel for the appellant contends that it is a matter which should be raised before the arbitrator who is competent to adjudicate upon the same and the civil court should not embark upon an inquiry in regard to the applicability of the arbitration clause to the facts of the case. While learned counsel appearing for the respondent contends that since the applicability of the arbitration clause to the facts of the case goes to the very root of the jurisdiction of the reference to arbitration, this question will have to be decided by the civil court before referring the matter to arbitration even in cases where there is admittedly an arbitration clause. The answer to this argument, in our opinion, is found in Section 16 of the Act itself. It has empowered the Arbitral Tribunal to rule on its own jurisdiction including rule on any objection with respect to the existence or validity of the arbitration agreement. That apart, a Constitution Bench of this Court in Konkan Railway Corporation Limited v. Rani Construction (P) Limited7 with reference to the power of the arbitrator under Section 16 has laid down thus: (SCC p.405, para 21) "21. It might also be that in a given case the Chief Justice or his designate may have nominated an arbitrator although the period of thirty days had not expired. If so, the Arbitral Tribunal would have been improperly constituted and be without jurisdiction. It would then be open to the aggrieved party to require the Arbitral Tribunal to rule on its jurisdiction. Section 16 provides for this. It states that the Arbitral Tribunal may rule on its own jurisdiction. That the Arbitral Tribunal may rule 'on any objections with respect to the existence or validity of the arbitration agreement' shows that the Arbitral Tribunal's authority under Section 16 is not confined to the width of its jurisdiction, as was submitted by learned counsel for the appellants, but goes to the very root of its jurisdiction. That the Arbitral Tribunal may rule 'on any objections with respect to the existence or validity of the arbitration agreement' shows that the Arbitral Tribunal's authority under Section 16 is not confined to the width of its jurisdiction, as was submitted by learned counsel for the appellants, but goes to the very root of its jurisdiction. There would, therefore, be no impediment in contending before the Arbitral Tribunal that it had been wrongly constituted by reason of the fact that the Chief Justice or his designate had nominated an arbitrator although the period of thirty days had not expired and that, therefore, it had no jurisdiction." (emphasis supplied) It is clear from the language of the section, as interpreted by the Constitution Bench judgment in Konkan Rly. That if there is any objection as to the applicability of the arbitration clause to the facts of the case, the same will have to be raised before the Arbitral Tribunal concerned. Therefore, in our opinion, in this case the courts below ought not to have proceeded to examine the applicability of the arbitration clause to the facts of the case in hand but ought to have left that issue to be determined by the Arbitral Tribunal as contemplated in clause 40 of the Dealership Agreement and as required under Sections 8 and 16 of the Act." 49. In SBP & Co v. Patel Engineering Limited (3 supra), the Apex Court while reiterating the said principle held that in a case where an Arbitral Tribunal has been constituted by the parties without having recourse to Section 11 (6) of the Act, the Arbitral Tribunal will have jurisdiction to decide all matters contemplated by Section 16 of the Act. 50. In the analysis as made above, we are of the considered opinion that the Court below should have referred the parties to Arbitration as per the provisions of Section 8 of the Act. In this view of the matter, the order impugned in C.R.P.No.3335 of 2010 is set side and consequently I.A.No.709 of 2009 in O.S.No.1153 of 2009 on the file of the IV Senior Civil Judge, City Civil Court, Hyderabad, is allowed. C.R.P.No.3335 of 2010 is accordingly allowed. There shall be no order as to costs. 51. In this view of the matter, the order impugned in C.R.P.No.3335 of 2010 is set side and consequently I.A.No.709 of 2009 in O.S.No.1153 of 2009 on the file of the IV Senior Civil Judge, City Civil Court, Hyderabad, is allowed. C.R.P.No.3335 of 2010 is accordingly allowed. There shall be no order as to costs. 51. Since we have taken the view that the parties should be referred to Arbitration and allowed I.A.No.709 of 2009, the order in I.A.No.562 of 2009 in O.S.No.1153 of 2009 impugned in C.R.P.(SR).No.16466 of 2010 has become inconsequential, hence does not require adjudication. C.R.P.S(R).No.16466 of 2010 is accordingly closed as unnecessary. There shall be no order as to costs.