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2014 DIGILAW 1348 (AP)

Sew Infrastructure Limited v. Andhra Bank Limited

2014-11-07

KALYAN JYOTI SENGUPTA

body2014
Order Kalyan Jyoti Sengupta, J. 1. This is an application for appointment of an Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act). 2. The applicant says that there has been a contractual relationship between the parties, and disputes and grievances have arisen and a disputes resolution mechanism has been provided in the signed agreement dt. 18.2.2008 itself. The dispute resolution mechanism is in Clause-45 of the agreement, which is set out hereunder: 45. ARBITRATION The employers decisions, opinions, directions, certificates with respect to all or any of the matters under clause No. 2, 9, 12, 13, 14, 22, 23, 27, 32 and 43 of GENERAL CONDITIONS OF CONTRACT shall be final, conclusive and binding on the parts hereto and shall be without any appeal. Settlements of Disputes and Arbitration Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, design, drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions orders, or these conditions or otherwise concerning the work or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter. (i) If the contractor considers that he is entitled to any extra payment or compensation in respect of the works over and above the amounts admitted as payable by the Architect or in case the contractor wants to dispute the validity of any deductions or recoveries made or proposed to be made from the contract or raise any dispute, the contractor shall forthwith give notice in writing of his claim or dispute to the Assistant General Manager (Services Department), Andhra Bank, Head Office, Saifabad, Hyderabad and endorse a copy of the same to the Consultant within 30 days from the date of disallowance thereof or the date of deduction or recovery. The said notice shall give full particulars of the claim, grounds on which it is based and detailed calculations of the amount claimed and the contractor shall not be entitled to raise any claim nor shall the Employer be in any way liable in respect of any claim by the contractor unless notice of such claim shall have been given by the contractor to the Asst. General Manager (Services Department) in the manner and within the time as aforesaid. The contractor shall be deemed to have waived and extinguished all his rights in respect of any claim not notified to the Asst. General Manager (Services Department) in writing in the manner and within the time aforesaid. (ii) The Asstt. General Manager (Services Department) shall give his decision in writing on the claims notified by the contractor. The contractor may within 30 days of the receipt of the decision of the Asst. General Manager (Services Department) submit his claims to the conciliating authority namely, the General Manager (Services Department), Andhra Bank Head Office, Saifabad, Hyderabad, for conciliation along with all details and copies of correspondence exchanged between him and the Asst. General Manager (Services Department). (iii) If the conciliation proceedings are terminated without settlement of the disputes, the contractor shall, within a period of 30 days of termination thereof shall give a notice to the Chairman and Managing Director of the bank for appointment of an arbitrator to adjudicate the notified claims falling which the claims of the contractor shall be deemed to have been considered absolutely barred and waived. (iv) Except where the decision has become final, binding and conclusive in terms of the contract, all disputes or differences arising out of the notified claims of the contractor as aforesaid and all claims of the Bank shall be referred for adjudication through arbitration by the Sole Arbitrator appointed by the Chairman and Managing Director. It will also have no objection to any such appointment that the Arbitrator so appointed is a Bank Officer and that he had to deal with the matters to which the Contract relates in the course of his duties as Bank Officer. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever another sole arbitrator shall be appointed in the manner aforesaid by the said Chairman and Managing Director. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever another sole arbitrator shall be appointed in the manner aforesaid by the said Chairman and Managing Director. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. (v) It is a term of this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respect of each dispute along with the notice for appointment of arbitrator. (vi) It is also a term of this contract that no person other than a person appointed by such Chairman and Managing Director as aforesaid should act as arbitrator. (vii) The conciliation and arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act 1996 or any statutory modification or re-enactment thereof and the rules made thereunder. (viii) It is also a term of this contract that if any fees are payable to the arbitrator these shall be paid equally by both the parties. However, no fees will be payable to the arbitrator if he is a Bank Officer. (ix) It is also a term of the contract that arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties calling them to submit their statement of claims and counter statement of claims. The venue of the arbitration shall be such place as may be fixed by the arbitrator in his sole discretion. The fees, if any, of the arbitrator shall, if required to be paid before the award is made and published, be paid half and half by each of the parties. The cost of the reference and of the award (including the fees, if any of the arbitrator) shall be in the discretion of the arbitrator who may direct to any whom and in what manner, such costs or any part thereof, shall be paid and fix or settle the amount of costs to be so paid. The venue of arbitration shall be at Hyderabad. All legal matters are to be dealt within the jurisdiction of civil courts, Hyderabad. 3. The venue of arbitration shall be at Hyderabad. All legal matters are to be dealt within the jurisdiction of civil courts, Hyderabad. 3. The applicant says that it has exhausted all avenues as provided in Clause 45, as firstly it approached the Assistant General Manager, before whom the grievance was made and such grievance was not heeded to, thereafter a request for conciliation was asked for. In spite of repeated requests, no conciliation was started. Hence, arbitration mechanism was pressed into action and a letter dt. 28.2.2014 was written by the applicant to the respondent demanding appointment of an Arbitrator. Said letter was received by the respondent on 1.3.2014. Thereafter, the present application was filed on 10.4.2014, after expiry of 30 days from the date of receipt of the letter. 4. A counter has been filed apart from denying the claim on merit. There is no dispute about the existence of the arbitration agreement. There is also no dispute that the two avenues, which have preceded invocation of the arbitration mechanism, failed. There is no dispute of receipt of the letter asking for appointment of an Arbitrator. It is undisputed that appointment of Arbitrator was not made within thirty days from the date of receipt of the letter requesting for appointment of an Arbitrator. However, after this application was filed, appointment of an Arbitrator had been made by the respondent on 23.4.2014. 5. Thus, from the aforesaid narration of fact, the question, which falls for my consideration, is as follows: Whether the appointment of the Arbitrator by the respondent, immediately after filing the present application and after expiry of thirty days under Section 11(4)(a) of the Act, can be accepted by me or not? In other words, whether there is failure on the part of the respondent to appoint an Arbitrator in terms of the agreement in the eye of law? 6. Sri S. Niranjan Reddy, learned counsel appearing for the applicant, says that there is clear failure on the part of the respondent to appoint an Arbitrator and it refused to act in terms of the agreement for constitution of arbitral tribunal and as such the respondent itself has rendered itself disentitled to right, if any, to appoint an Arbitrator. Hence, intervention of this Court is necessary. Hence, intervention of this Court is necessary. In support of his submission he has referred to a decision of the Supreme Court in the case of Union of India v. Bharat Battery Manufacturing Co. (P) Ltd. 7. The learned counsel for the respondent per contra contends that in the arbitration agreement there is no time limit within which the appointment has to be made. The parties have chosen the arbitration mechanism of appointment procedure keeping their eyes open and they have not mentioned any time limit. Therefore, the appointment of the Arbitrator made by the respondent within reasonable time is permissible. According to her, two months time to appoint Arbitrator is not unreasonable. She denies the contention and assertion of the applicant that the appointment of the Arbitrator has been made by the respondent only after having knowledge of this application and in order to render this application infructuous. She submits that such appointment should be accepted by the Court and the applicant be directed to go before the Arbitrator appointed by the Managing Director of the respondent bank. 8. I have heard the contentions of the learned counsel on this issue. As I have already indicated above in substance, the question is whether the respondent is obliged to maintain time schedule mentioned in the Statute. 9. Section 11(4)(a) of the Act provides as follows: 11. Appointment of arbitrators: (4) If the appointment procedure in sub-section (3) applies and,-- (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (emphasis supplied) The Statute provides for the time limit of thirty days. The same does not admit of flexibility of time limit. Any stipulation in terms in any agreement, either expressly or by implication, inconsistent with the Statute, cannot be accepted to be enforceable one for Indian Contract Act does not permit infraction of legal provision. Accordingly, the contention of the learned counsel for the respondent that thirty days time as mentioned in the Statute is not applicable in view of the agreement of the parties not mentioning time limit is not acceptable. Accordingly, the contention of the learned counsel for the respondent that thirty days time as mentioned in the Statute is not applicable in view of the agreement of the parties not mentioning time limit is not acceptable. I think the moment demand for arbitration is made, the appointing authority has no choice but to appoint within thirty days from the date of receipt of demand, failing which aforesaid legal provision is attractable. Moreover, I find in the judgment of the Supreme Court referred to by the learned counsel for the applicant that once the application for appointment of Arbitrator is made the power to appoint Arbitrator in terms of the agreement ceases (see paragraph 9 of the report). 10. In the present case, it is clear factually that the appointment was made after expiry of thirty days of demand for appointment of Arbitrator and even after filing this application. The notice demanding appointment of Arbitrator was received by the respondent on 1st March, 2014 and there was no warrant to wait for appointment till this application is filed in this Court. I am of the view that such belated attempt to make the appointment has been made in order to render this present application infructuous and in order to prevent, if not preempt, the action of the Court under Section 11(6) of the Act. In view of foregoing discussion I am unable to accept the appointment made by the respondent. 11. Therefore, I allow this application and appoint Sri Justice V. Suri Appa Rao, retired Judge of this Court, sole Arbitrator, and the authority of the Arbitrator appointed by the Managing Director of the respondent, is hereby revoked. 12. The learned Arbitrator will fix his own remuneration upon deliberation and consultation with the parties. He will also fix the costs and expenses of the secretarial assistance for the arbitration proceedings upon deliberation and consultation with the parties. All the costs and expenses of the arbitration proceedings shall be borne by both the parties in equal share. The learned Arbitrator is directed to conclude the arbitration proceedings and make publication of Award within five months from the date of entering upon the reference. 13. The arbitration application is accordingly allowed. Application allowed.