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2011 DIGILAW 440 (MP)

Makhija Construction Co. v. Madhya Pradesh Rural Road Development Authority, Bhopal

2011-04-07

S.C.SHARMA

body2011
JUDGMENT ( 1. ) MR. Ajay Assudani, learned counsel for the applicant. MR. Prakash Verma, learned counsel for respondents. Arguments heard on merits. ( 2. ) THE applicant before this Court has filed this present application for appointment of an arbitrator under section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act, 1996'). Contention of applicant-company is that an agreement was executed between the parties in respect of works contract on 16-11-2005 and Clause 24 and 25 of the agreement deals with arbitration. The applicant has further stated that as per the provisions of Clause 24 of the agreement dated 16-11-2005, a claim was raised under the Dispute Redress System and the same was rejected on 31-12-2009 and thereafter the applicant company in the light of judgment delivered by the Apex Court in the case of V. A. Tech Escher Wyass Flovel Ltd. vs. MPSE Board and another served a notice to the non-applicant authority on 18-2-2010 for appointment of an arbitrator. However, no arbitrator was appointed by the respondents and, therefore, the applicant-company left with no other choice, has approached this Court for appointment of an arbitrator. ( 3. ) A reply has been filed on behalf of respondents and the stand of the respondents is that the agreement executed between the parties provides a Forum for adjudication of the dispute between them and there was no cause for giving their consent for appointment of some other arbitrator. ( 4. ) LEARNED counsel for the respondents has vehemently argued before this Court, that the arbitration Clause in the agreement provides for arbitration by M. P. Arbitration Tribunal constituted under the M. P. Madhyastham Adhikaran Adhiniyam, 1983 (hereinafter referred to as the 'Adhiniyam, 1983') in case the amount of claim is more than Rs. 50,000/- and in the present case the claim is more than Rs. 50,000/- and, therefore, by no stretch of imagination, an arbitrator can be appointed in the peculiar facts and circumstances of the case and at the most the applicant company can approach the M. P. Arbitration Tribunal for adjudication of the dispute keeping in view the provisions of M. P. Madhyastham Adhikaran Adhiniyam, 1983. 50,000/- and, therefore, by no stretch of imagination, an arbitrator can be appointed in the peculiar facts and circumstances of the case and at the most the applicant company can approach the M. P. Arbitration Tribunal for adjudication of the dispute keeping in view the provisions of M. P. Madhyastham Adhikaran Adhiniyam, 1983. Learned counsel appearing for respondents has also informed this Court that in similar circumstances an arbitrator was appointed by this Court in respect of a contract executed with Rural Road Development Authority and the Apex Court has stayed the arbitration proceedings by passing an order dated 6-1-2011 in the case of M. P. Rural Road Development Authority and anr., Civil Appeal No. 19782 of 10. He prayed for dismissal of the present application. ( 5. ) HEARD learned counsel for the parties at length and perused the record. ( 6. ) IN the present case, it is an admitted fact that a work order for Construction and maintenance of roads under ADB package No. MP 1551 District Harda worth Rs. 6,82,12,516.89 was awarded to the applicant-company. An agreement was executed on 16-11-2005 and Clause 24 and 25 of the aforesaid agreement reads as under :- "24. Dispute Redress System 24.1. if any dispute or difference of any kind whatsoever shall arise in connection with or arising out of this Contract or the execution of Works or maintenance of the Works there under, whether before its commencement or during the progress of Works or after the termination, abandonment or breach of the Contract, it shall, in the first instance, be referred for settlement to competent authority, described along with their powers in the Contract Data, above the rank of the Engineer. The competent authority shall, within a period of forty-five days after being requested in writing by the Contractor to do so, convey his decision to the Contractor. Such decision in respect of every matter so referred shall, subject to review as hereinafter provided, be final and binding upon the Contractor. IN case the Works is already in progress, the Contractor shall proceed with the execution of the Works, including maintenance thereof, pending receipt of the decision of the competent authority as aforesaid, with all due diligence. 25. Arbitration 25.1. IN case the Works is already in progress, the Contractor shall proceed with the execution of the Works, including maintenance thereof, pending receipt of the decision of the competent authority as aforesaid, with all due diligence. 25. Arbitration 25.1. Either party will have the right of appeal against the decisions of the competent authority, nominated under Clause 24 to the Madhya Pradesh Arbitration Tribunal constituted under Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 provided the amount of claim is more than Rs. 50,000/-." The aforesaid agreement has not been disputed by the respondents. It is pertinent to note that the applicant company has submitted an application under Clause 24 i.e. under the Dispute Redress System and the same was turned down by an order dated 31-12-2009. Clause 25 provides for an arbitration against the decision of the competent authority nominated under Clause 24 and, therefore, a notice was served to the respondents for appointment of an arbitrator under the provisions of the Act, 1996 on 18-2-2010. The same has also not been disputed by the respondents. ( 7. ) THIS Court has carefully gone through the judgment delivered by Hon'ble the Supreme Court in the case of V. A. Tech Escher Flovel Ltd. (supra) and the same reads as under :- "Civil Appeal No. 3746 of 2005. Heard learned counsel for the parties. THIS Appeal has been filed against the impugned judgment of the High Court of Madhya Pradesh dated 5th March, 2003. It appears that the appellant was awarded a work contract by the respondents. There was some dispute between the parties and there is an arbitration Clause in the agreement. Appellant filed an application under section 9 of the Arbitration and Conciliation Act, 1996 (for short 'the 1996 Act') which was rejected by the learned Additional District Judge and that order has been upheld by the High Court. Hence this appeal. Section 7(1) of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 provides as follows : "7. Reference to Tribunal (1) Either party to a works contract shall irrespective of the fact whether the agreement contains an arbitration Clause or not, refer in writing the dispute to the Tribunal". Subsequently, the Parliament enacted the 1996 Act. The 1996 Act only applies where there is an arbitration Clause but it does not apply where there is none. Reference to Tribunal (1) Either party to a works contract shall irrespective of the fact whether the agreement contains an arbitration Clause or not, refer in writing the dispute to the Tribunal". Subsequently, the Parliament enacted the 1996 Act. The 1996 Act only applies where there is an arbitration Clause but it does not apply where there is none. The 1996 Act covers all kinds of disputes including the dispute relating to work contracts. In our opinion, the 1983 Act and 1996 Act can be harmonized by holding that the 1983 Act only applies where is no arbitration Clause but it stands impliedly repealed by the 1996 Act where there is an arbitration Clause. We hold accordingly. Hence, the impugned judgment cannot be sustained and we hold that the application under section 9 of the 1996 Act was maintainable. The Appeal is allowed accordingly. No costs. Civil Appeal No. 3747 of 2005 In view of our order passed today in Civil Appeal No. 3746 of 2005, this appeal is also allowed on the same terms. No costs." ( 8. ) THE Apex Court in the aforesaid case has held that the provisions of the Adhiniyam, 1983 are applicable only when there is no arbitration Clause between the parties and in cases where there is an arbitration Clause, the Adhiniyam, 1983 stands impliedly repealed by the Act, 1996. THE Apex Court has again considered the judgment delivered in the case of V. A. Tech Escher Flovel Ltd. (supra) while deciding another case i.e. M/s APS Kushwaha vs. Municipal Corporation, Gwalior and ors., Civil Appeal Nos. 1888-1889 of 2011 and para Nos. 7, 8, 9 and 10 of the aforesaid judgment dated 17-2-2011 reads as under :- "7. THE only question that arises for consideration in this appeal by special leave is whether there was inherent lack of jurisdiction in the Arbitrator, thereby nullifying the award. 8. This Court, in V. A. Tech Escher Wyass Flovel Ltd. vs. MPSE Board, C. A. No. 3746/2005 decided on 14-1-2010 held that the provisions of the Act would apply where there was an Arbitration Clause and the provisions of the 1983 Adhiniyam would apply where there was no Arbitration Clause. In this case it is not in dispute that the contract between the parties contained an arbitration Clause (Clause 29). In this case it is not in dispute that the contract between the parties contained an arbitration Clause (Clause 29). THE decision of the High Court that the provisions of the 1983 Adhiniyam would apply and sole arbitrator appointed by the designate of the Chief Justice lacked inherent jurisdiction, cannot therefore be sustained. Though the said Arbitration Clause provided for reference of disputes to a three member Arbitration Board, the designate chose to appoint a sole arbitrator and that order dated 11-5-2007 attained finality. 9. In SBP and Co. vs. Patel Engineering Ltd., 2005(3) SCC 618 , a Constitution Bench of this Court held that once the Chief Justice or his designate appoints an Arbitrator in an application under section 11 of the Act, after satisfying himself that the conditions for exercise of power to appoint an arbitrator are present, the arbitral tribunal could not go behind such decision and rule on its own jurisdiction or on the existence of an arbitration Clause. Therefore the contention of the respondents that the arbitrator ought to have considered the objection relating to jurisdiction and (nor readable). 10. THE appeals are therefore allowed and the impugned order of the High Court dated 26-11-2009 is set aside. As a consequence the learned District Judge Gwalior will now proceed with the consideration of the application [Misc. Application (Arbitration) No. 29/2008) under section 34 of the Act on merits in accordance with law." Keeping in view the aforesaid judgment, as there is an arbitration Clause-25 in the contract between the parties, the provisions of the Adhiniyam, 1983 would not be applicable and an arbitrator has to be appointed keeping in view the provisions of section 11(6) of the Act, 1996. ( 9. ) RESULTANTLY, the application is allowed. Hon. Mr. Justice D. M. Dharmadhikari (Retired Judge of Supreme Court) r/o Bakul, House No. 1169, Wright Town, Stadium Road, Jabalpur is appointed as an Arbitrator in the present case. Parties are directed to appear before the Arbitrator on 2nd May, 2011. CC as per rules Application allowed.