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2014 DIGILAW 1072 (RAJ)

State of Rajasthan v. District Judge Kota

2014-05-01

ALOK SHARMA

body2014
JUDGMENT 1. - This miscellaneous appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the 1996 Act') has been filed against the order dated 26-9-2002 passed by District Judge, Kota under Section 9 of the Arbitration and Conciliation Act, 1996 ('Act of 1996') whereby the order dated 3-9-2002 passed by the appellant for recovery of penalty from the respondent No. 2, the contractor, for reasons of his breach of contract was stayed till the determination of disputes between the parties under the contract dated 6-6-2001. 2. Counsel for the appellant has raised two fold submissions. One, that there was no arbitration agreement between the parties, consequently the application under Section 9 of the 1996 Act was not maintainable nor power available thereunder to the District Judge. The impugned order dated 26-9-2002 being without jurisdiction was liable to be set aside, submitted counsel. The second submission of the appellant's counsel is that even otherwise at no point of time, prior to the order dated 26-9-2002 or thereafter, even after lapse of 11 years period as of now, since the passing of the impugned order dated 26-9-2002 any application for referring the dispute with regard to the recovery of penalty was raised by the respondent-applicant before the Standing Committee under clause 23 of the contract between the parties, which is stated to be the arbitration clause. Counsel submits that the invoking of jurisdiction of the civil court under Section 9 of the 1996 Act necessarily entails a corresponding obligation on the applicant to seek reference of dispute, in respect of which interim protection of the court is sought, to arbitration under the contract between the parties. In support of his submission, reference has been made by the applicant's counsel to the judgment in the case of Firm Ashok Traders v. Gurumukh Das Saluja, [ AIR 2004 SC 1433 ] . 3. Mr. S.C. Mittal, appearing on behalf of respondent-applicant has submitted that clause 23 of the agreement between the parties is an arbitration clause and this no more res-integra. To support the contention, reference has been made to the judgment of this court in case of Suri Construction v. State of Rajasthan [, 2006(1) RLW 219] , wherein an identical clause was construed by this court as an arbitration clause. To support the contention, reference has been made to the judgment of this court in case of Suri Construction v. State of Rajasthan [, 2006(1) RLW 219] , wherein an identical clause was construed by this court as an arbitration clause. Counsel submitted that in this view of the matter power under Section 9 of the 1996 Act was rightly invoked by the respondent contractor and jurisdiction appropriately exercised by the court below. Mr. Mittal, however, is not in a position to state as to whether subsequent to grant of the order dated 26-9-2002 by the trial court resorting to its power under Section 9 of the 1996 Act or at any time prior thereto, the respondent contractor had invoked clause 23 of the contract between the parties and seek reference the dispute pertaining to demand for penalty under letter dated 3-9-2002 under the hand of Additional Chief Engineer, PWD Kota Region, Kota. 4. Heard learned counsel for the parties and perused the impugned order dated 26-9-2002. 5. The impugned order dated 26-9-2002 is per emptory in its tenor and is not a speaking order. It is mechanical in nature, inasmuch as the court below has proceeded to stay the demand of the appellant state under letter dated 3-9-2002 only on the fact of dispute between the parties being purportedly covered by an arbitration agreement in view of clause 23 of the contract between the parties. It is trite that power under section 9 of the 1996 Act is to be exercised on grounds similar to those relevant for the exercise of power under Order 39, Rule 1 and 2 CPC and it is incumbent upon the court to address the aspects of prima facie case, balance of convenience and irreparable loss. That has not been done in the instant case by the court below in its order dated 26-9-2002. The order is liable to be set aside on this count alone. Aside of aforesaid, as reference of dispute to the Standing Committee qua the demand letter dated 3-9-2002 under obtaining arbitration clause has not been made by the respondent applicant who has invoked Section 9 of the 1996 Act, in spite of lapsing of over 11 years, the order cannot stand. An applicant seeking to invoke Section 9 of the Act of 1996 is under an obligation to refer the alleged dispute to arbitration within reasonable time. An applicant seeking to invoke Section 9 of the Act of 1996 is under an obligation to refer the alleged dispute to arbitration within reasonable time. Reasonable time has been construed by the Hon'ble Supreme Court to be a few months from the date of order under Section 9 of the Act of 1996 more so where a beneficial order has been obtained. In the instant case, over 11 years have lapsed since passing of the order dated 26-9-2002 by the court below, and the live link between order of interim protection under Section 9 of the 1996 Act and the arbitration proceedings has snapped. [See Firm Ashok Traders v. Gurumukh Das Saluja [, (2004)3 SCC 155 ] . Counsel for the respondent contractor is not in a position to state as to whether a reference at all was made by the contractor qua the dispute pertaining to demand under letter dated 3-9-2002 by resort to clause 23 of the agreement--is putatively the arbitration clause. This is an additional ground as to why the impugned order dated 26-9-2002 cannot be sustained. 6. Consequently, the appeal is allowed. The impugned order dated 26-9-2002 is set aside. The appellant department is entitled to recover the amount of penalty under the letter dated 3-9-2002 from the contractor in terms of its demand.Appeal Allowed. *******