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Madhya Pradesh High Court · body

2014 DIGILAW 566 (MP)

Rajendra Kumar v. Union of India

2014-05-08

PRAKASH SHRIVASTAVA

body2014
ORDER 1. This arbitration case under section 11 of the Arbitration and Conciliation Act, 1996 (for short “the Act”) has been filed by applicant for referring the dispute to an independent Arbitration. 2. The case of the applicant is that he is a Railway Contractor and had entered into an agreement with Railway on 21.9.1992. According to the applicant, the general conditions of contract are applicable and clauses 63 and 64 provide for referring the dispute to the arbitration. The work, cost of which was approximately Rs.17,24,525/- was to be completed by the applicant by 27.11.1992 but there was a breach of contract by respondents and, therefore, the work could not progress and running bills were not paid. The dispute was not referred by the respondents for arbitration, therefore, on 22.4.1999 the applicant had filed MJC No.16/99 (later renumbered as MJC No.29/2007) under section 11 of the Act before the Additional District Judge Ratlam which was returned on 14.9.2007 for filing before the competent Court in view of judgment of the Supreme Court in the matter of SBP and Company v. Patel Engineering Ltd. and another, reported in (2005)8 SCC 618 , whereas in terms of said judgment Additional District Judge should have transferred the pending application to the High Court, therefore, the applicant had filed an application under section 151 of CPC which was rejected on 4.2.2008 and thereafter the present application has been filed for appointing an independent Arbitrator. 3. The respondents have filed their reply and have raised the objection that once the application is decided by the Court of Additional District Judge, the fresh application under section 11 of the Act is not maintainable before this Court. They have raised further objection that the claim filed by the applicant has become barred by time and that the applicant had given no claim certificate, therefore, he is precluded from reagitating the claim in the arbitral proceeding and that the claim is not arbitrable since it falls under ‘excepted matter’ and that no demand in terms of the clause 64(1) of the Act was made by the applicant within 180 days for appointment of Arbitrator. 4. Learned counsel appearing for applicant submits that since the application under section 11 of the Act was not decided by the Additional District Judge on merit, therefore, the fresh application before this Court is maintainable. 4. Learned counsel appearing for applicant submits that since the application under section 11 of the Act was not decided by the Additional District Judge on merit, therefore, the fresh application before this Court is maintainable. He has further submitted that the limitation will commence from the date of notice i.e. 2.5.1998 and the claim is not a time barred claim in view of the Division Bench judgment of this Court in the matter of Prashant Kumar Sahu v. M/s. Optel Telecommunication Ltd. Bhopal and others, reported in 2008(2) MPLJ 481 , since no claim certificate was obtained under duress and undue pressure, therefore, the same would not come in way of the appointment of arbitrator and that since the application is within time, therefore, even if within 180 days no demand for appointment of arbitrator was made that will not have any adverse effect on the applicant’s request for appointment of arbitrator and that plea relating to “excepted” matter has no merit. 5. As against this, counsel for respondents has reiterated the objections which have been raised in the reply and has opposed the prayer for appointment of arbitrator. 6. I have heard the learned counsel for the parties and perused the record. 7. In the present matter, it is not in dispute that the agreement was executed between the parties and clauses 63 and 64(i) of the agreement provide for settlement of the dispute which read as under : “63. All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the work or after its completion and whether before or after the determination of the contract, shall be referred by the contractor to the Railway and the Railway shall within a reasonable time after receipt of the contractor’s presentation make and notify decisions on all matters referred to by the contractor in writing, provided that matters for which provision has been made in clauses 18, 22(5), 39, 45(a), 55, 55A(5), 60(2) and 62(1)(xiii)(B)(e), 62 (1)(b) of the General Conditions of Contract or any clause of the Special Conditions of the Contract shall be deemed as ‘excepted matters’ and decisions thereon shall be final and binding on the contractor; provided further that ‘excepted matters’ shall stand specifically excluded from the purview of the arbitration clause and shall not be referred to arbitration. 64(1)(i). 64(1)(i). In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account, or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled by the Railway of any certificate to which the contractor may claim to be entitled to or if the Railway fails to make a decision with in a reasonable time, then and in any such case, save the excepted matters referred to in clause 63 of these conditions, the contractor, after 90 days but within 180 days of his presenting his final claim on disputed matters, shall demand in writing that the dispute or difference to be referred to arbitration.” 8. So far as the first objection about filing of the earlier application before the Additional District Judge under section 11 of the Act is concerned, the record reveals that earlier application filed by applicant under section 11 of the Act was initially registered as MJC No.16/99 and was later renumbered as MJC No.29/2007. The said application was not decided on merit and after the judgment of the Supreme Court in the matter of SBP and Co. (supra), it was returned to the applicant for filing before the Court of competent jurisdiction. Since as per the paragraph 47(xi) of the judgment of the Supreme Court in the matter of SBP and Co. (supra), the pending application should have been transferred by the District Judge to the High Court but the same was returned to the applicant for filing it before the competent Court, therefore, the applicant had filed the application under section 151 of CPC for same purpose which was rejected on 4.2.2005 and thereafter the applicant had filed the present application before this Court on 15.5.2008. In these circumstances, it cannot be held that the claim of the applicant has been adjudicated by the District Judge and the present application is not maintainable. In this view of the matter the objection in respect of maintainability of the application is rejected. 9. The second objection has been raised by the respondents that the claim of the applicant is barred by time. In this view of the matter the objection in respect of maintainability of the application is rejected. 9. The second objection has been raised by the respondents that the claim of the applicant is barred by time. The facts on record reveal that the agreement was executed on 21.9.1992 and work was to be completed on 27.11.1992 but some dispute had arisen and the work could not progress. According to the applicant, the last bill was paid on 24.9.1996. The notice for appointment of arbitrator was sent on 2.5.1998 and the application under section 11 of the Act was filed before the Additional District Judge on 22.4.1999 which remained pending before the Additional District Judge till 14.9.2007 when it was returned by the Additional District Judge for filing before appropriate competent Court. Thereafter the application under section 151 of CPC was filed by applicant which was rejected on 4.2.2008 and soon thereafter on 15.5.2008 the present application under section 11 of the Act has been filed before this Court. In these circumstances it cannot be held that the claim which is raised by applicant is a dead claim or a long time barred claim. In view of this, the issue relating to the limitation needs to be decided in the present case on the basis of evidence led by the parties by the Arbitrator, therefore, in terms of law laid down by the Supreme Court in the matter of Anil Kumar v. B.S. Neelkanta and others, reported in AIR 2010 SC 2715 , the objection for appointment of arbitrator at this stage cannot be upheld and the same is accordingly rejected. 10. The third objection is that the applicant had submitted no claim certificate Annexure R-3, therefore, the prayer for appointment of arbitrator cannot be entertained. In this regard, the plea of applicant is that no claim certificate was given by the applicant under coercion and undue influence by the respondents because in absence thereto the respondents would not have released the security amount which was deposited by the applicant. This Court in A.C. No.3/2011 (M.A.P. Projects v. Sahara Prime City Limited) decided on 3rd September 2012 considering the similar issue has held as under : “7. This Court in A.C. No.3/2011 (M.A.P. Projects v. Sahara Prime City Limited) decided on 3rd September 2012 considering the similar issue has held as under : “7. The Supreme Court in the matter of National Insurance Company Limited v. Boghara Polyfab Private Limited, reported in 2009(1) SCC 267 , has held that whether a contract has been discharged by performance is a mixed question of fact and law, and if there is a dispute in regard to that question, that is arbitrable. A party which has executed the discharge agreement/voucher alleges fraud/coercion/undue influence practised by the other party and is able to establish the same, then obviously the discharge of such contract by such agreement/voucher is rendered void and cannot be acted upon. Consequently, any such dispute raised by the executor of the discharge agreement/voucher would be arbitrable. In the said judgment, it has been held by the Supreme Court that : “24. What is however clear is when a respondent contends that the dispute is not arbitrable on account of discharge of the contract under a settlement agreement or discharge voucher or no claim certificate, and the claimant contends that it was obtained by fraud, coercion or undue influence, the issue will have to be decided either by the Chief Justice/his designate in the proceedings under section 11 of the Act or by the Arbitral Tribunal as directed by the order under section 11 of the Act. A claim for arbitration cannot be rejected merely or solely on the ground that a settlement agreement or discharge voucher had been executed by the claimant, if its validity is disputed by the claimant. 26. When we refer to a discharge of contract by an agreement signed by both the parties or by execution of a full and final discharge voucher/receipt by one of the parties, we refer to an agreement or discharge voucher which is valid and voluntarily executed. If the party which has executed the discharge agreement or discharge voucher, alleges that the execution of such discharge agreement or voucher was on account of fraud/coercion/undue influence practised by the other party and is able to establish the same, then obviously the discharge of the contract by such agreement/voucher is rendered void and cannot be acted upon. Consequently, any disputed raised by such party would be arbitrable.” 8. Consequently, any disputed raised by such party would be arbitrable.” 8. The Supreme Court in the matter of National Insurance Company Ltd. (supra), after taking note of the previous judgments on the point has held that : “44. None of the three cases relied on by the appellant lay down a proposition that mere execution of a full and final settlement receipt or a discharge voucher is a bar to arbitration, even when the validity thereof is challenged by the claimant on the ground of fraud, coercion or undue influence. Nor do they lay down a proposition that even if the discharge of contract is not genuine or legal, the claims cannot be referred to arbitration. In all the three cases, the Court examined the facts and satisfied itself that there was accord and satisfaction or complete discharge of the contract and that there was no evidence to support the allegation of coercion/undue influence.” 9. It has also been settled by the Supreme Court in the matter of National Insurance Company Ltd. (supra), that either Chief Justice or his designate exercising jurisdiction under section 11 of the Act will consider whether there was really accord and satisfaction or discharge of contract by performance or alternatively on being prima facie satisfied that the matter deserves detailed consideration, he may instead of deciding the issue himself, refer the matter to the Arbitral Tribunal with a specific direction that the said question should be decided in the first instance. 10. In the present matter also there is a serious dispute in respect of the signing of the minutes of meeting dated 31.8.2010 (Annexure R-1) and execution of the undertaking (Annexure P-6) under undue influence and coercion. Such an issue needs to be decided after permitting the parties to lead evidence. Therefore, considering the circumstances of the present case, I deem it appropriate that instead of deciding the issue at this stage, it would be more appropriate to refer the matter to the arbitrator with a specific observation that the said question would be decided by the arbitrator in the first instance. A dispute has also been raised by the respondents in respect of the service of notice dated 19.6.2010 (Annexure P-7) which contains the acknowledgment of receipt said to have been signed by D.K. Singh. A dispute has also been raised by the respondents in respect of the service of notice dated 19.6.2010 (Annexure P-7) which contains the acknowledgment of receipt said to have been signed by D.K. Singh. Though notice appears to have been served upon the respondent but a final finding in this regard can be recorded after the evidence is led by the parties. Therefore, this issue is also left open to be decided by the Arbitrator at the initial stage itself.” 11. In view of the above, and keeping in view the fact that the applicant has raised the plea that no claim certificate Annexure R-3 was submitted under undue influence and coercion and I am of the opinion in the facts of this case, this issue needs to be decided by the arbitrator therefore, this issue is left open for decision by the Arbitrator permitting the parties to lead evidence in this regard. Hence the application under section 11 of the Act cannot be rejected on this ground. 12. Counsel for the respondent has also raised an issue that the claim of the applicant falls under the excepted matter, therefore, it is not arbitrable. It is settled that any claim covered by the “excepted’ matter excluded from arbitration cannot be referred to arbitrator. (See: General Manager, Northern Railway and another v. Sarvesh Chopra, reported in (2002)4 SCC 45 ; Bharat Sanchar Nigam Limited and another v. Motorola India Private Limited, reported in (2009)2 SCC 337 ) and Pawan Kumar Jain v. Union of India, reported in 2010(1) MPLJ 409 ). In the present case, under clause 63, the matters for which provision has been made in the clauses 18, 22(5), 39, 45(a), 55, 55A(5), 60(2), 62(1)(xiii)(B)(e) and 62(1)(b) of General conditions of contract and any claim of special conditions of contract are excepted matter but counsel for the respondent has neither pointed out these clauses from the record nor has he demonstrated as to how the dispute is covered by these excepted clause. Thus the objection in this regard cannot be accepted. 13. The last objection of the respondent is that the no demand was made by the applicant within 180 days for appointment of arbitrator in terms of clause 64(I). Thus the objection in this regard cannot be accepted. 13. The last objection of the respondent is that the no demand was made by the applicant within 180 days for appointment of arbitrator in terms of clause 64(I). In the present case since the notice for appointment of arbitrator was given and application under section 11 was filed within reasonable time therefore, in the facts of the present case this application can not be rejected on the ground of limitation of 180 days prescribed in the arbitration clause. (See: Pluto Shipping Ltd. v. Dharti Dredging and Infrastructure Ltd., reported in 2012(1) ABR (NOC) 27 (Bom.). 14. There is no dispute in the matter about the territorial jurisdiction of the Court. 15. In view of the above analysis and considering the arbitration clause and nature of dispute between the parties I am of the opinion that it is fit case where independent arbitrator needs to be appointed to resolve the dispute between the parties. Accordingly, I appoint Hon’ble Shri Justice V.S. Kokje (Retired Judge, High Court of M.P.) r/o 201, Park Residency, 2/4, Bapna Compound, Racecourse Road, Indore, subject to his consent and such terms as he may deem fit and proper. Parties are directed to appear before the learned arbitrator on 16.6.2014. Registry is directed to communicate the order to the learned arbitrator to enable him to enter upon the reference and give his award as expeditiously as possible. Arbitration application is accordingly disposed off. .............