Jagannathdham Superstructures Pvt. Ltd. v. General Manager, East Coast Railways
2015-01-16
AMITAVA ROY
body2015
DigiLaw.ai
ORDER : Appointment of an arbitrator under section 11(6) of the Arbitration and Conciliation Act, 1996 (for short hereinafter called the Act) has been sought for in the instant petition. 2. I have heard Mr. B. B. Mishra, learned counsel for the Mr. P. K. Mishra, learned counsel for the opposite parties. 3. The factual backdrop in short, indispensable for adjudication of the instant petition, is that the petitioner was awarded the work Additional Loop at Baitarini Road & Manjuri Road under Khurda Road Division in East coast Railways; Execution of Earth work; Minor Bridges and other Misc. works at Baitarini Road and Manjuri Road. The total value of the work was Rs. 1,59,84,198.00 and was to be completed within a period of 08 months i.e. between 19-01-2006 and 18.09.2006. The petitioner has admitted that the works got delayed for various reasons, which according to it, were due to the lapses of the opposite party. It has averred that the opposite party not only introduced occasional variations in the nature and scope of the works, but also created hindrances in payment. The petitioner therefore being without any alternative, had to seek extension of time which was granted till 15.06.2007. According to it, though from time to time it brought the impediments caused by the opposite party to their notice for early resolutions, instead of resolving the same, the opposite party by their letter dated 3.7.2007 terminated the contract. Eventually the petitioner addressed the notice dated 20.08.2007 to the General Manager, East Coast Railway, Rail Vihar, Chandrasekharpur, Bhubaneswar (opp. party No. l) detailing the essential facts bearing on the contract, the difficulties faced by it, and its outstanding dues, which on its assessment did amount to about Rs. 1.00 crore. By the said notice, apart from highlighting the impediments in the timely execution of the work caused due to the frequent variations in the scope and nature of work and unjustified withholding of payments, the petitioner impeached as well the termination of the contract. It did thereby request the opposite party No.1 to refer the dispute to arbitration under Clause-64 of the General Conditions of Contract (for short hereinafter referred to as the GCC) read with Section ll of the Act and appoint an impartial person as an arbitrator.
It did thereby request the opposite party No.1 to refer the dispute to arbitration under Clause-64 of the General Conditions of Contract (for short hereinafter referred to as the GCC) read with Section ll of the Act and appoint an impartial person as an arbitrator. According to the petitioner, in spite of the receipt of the said notice, as no endeavour was made by the opposite party to take any steps to either settle its dues or to appoint an arbitrator to resolve the subsisting dispute between the parties, it has approached this Court. 4. The opposite party, in their counter has not denied the entrustment of the work involved to the petitioner for execution, but have stoutly controverted the allegation that the delay in the execution thereof was due to the frequent variations in the nature and scope of the work and non-payment of the petitioners bills for the works done. 5. It has been averred by the opposite party that in spite of repeated extensions given to the petitioner up to 15.06.2007, to complete the work, it could only achieve 40% of the work, whereafter it prayed for further extension of time up to 30.08.2007. According to the answering opposite party, as this request for further extension of time was not accompanied by any work programme they (opposite party) requested it provide the same, but the petitioner did not submit such programme for which the opposite party, in larger public interest, were constrained to terminate the contract as per the agreement. The opposite party have maintained that the petitioner did lack in expertise to tackle the work entrusted and in spite of several notices to it, to improve the progress, it could not achieve the same. The answering opposite party stated further that after the cancellation of the works contract, the petitioner was requested to take final measurement of the work for settlement of its dues, but it did neither arrange for its representative nor co-operated in the process of measurement. 6. While reiterating that the petitioner had been paid for the works executed as per the bills submitted by it, the opposite party reiterated that in spite of several extensions given to it, it did neither complete the work nor did respond to the request of the opposite party to participate in the measurement of the work executed, which was a condition precedent for releasing further payment.
According to the opposite party, after receipt of the notice of the petitioner, they appointed arbitrators to adjudicate the dispute vide letter dated 19. 11.2007 and in spite thereof, the petitioner, instead of submitting its claim before the arbitrators, has been pursuing the instant proceeding. The opposite party have also taken the stand that in case the petitioner was not satisfied with the constitution of the Arbitral Tribunal, it could have brought its reservation to the knowledge of the opposite party No. l for necessary modification. 7. In its rejoinder, the petitioner has asserted that it had approached this Court after waiting for more than two months from the date of its notice dated 20.08.2007 and that the constitution of the Arbitral Tribunal, as represented by the opposite party, has been made vide letter dated 19.11.2007 during the pendency of the instant proceeding, which is non-est and wholly inconsequential. The petitioner has insisted that after the present proceeding has been instituted, it was beyond the authority of the opposite party to constitute any Arbitral Tribunal and that their insistence to have the dispute adjudicated before their appointed officers and not by any independent arbitrator appointed by this Court lacks bona fide. 8. Mr. Mishra has assiduously argued that the notice dated 20.08.2007 by the petitioner to the opposite party No.1 raising the dispute as contemplated under Clause-64 of the GCC having been issued demanding the same to be referred to arbitration and the opposite party having been failed to respond thereto, in terms of the relevant provisions of the GCC pertaining to settlement of disputes, the present application u/S. 11 of the Act is maintainable in law. Learned counsel has argued further that the purported constitution of the Arbitral Tribunal by the opposite party vide notice dated 19.11.2007, during pendency of the instant proceeding, is clearly impermissible in law and is thus void ab-initio. Mr. Mishra has thus urged that in the facts and circumstances of this case, this Court ought to appoint an independent and impartial arbitrator as contemplated by the Act. 9. Per contra, Mr. Mishra has urged that the opposite party having constituted an Arbitral Tribunal in terms of Clause 64 of the GCC within 120 days from the receipt of the notice dated 20.8.2007 of the petitioner, the instant petition is misconceived and as such is liable to be dismissed on that count alone. 10.
9. Per contra, Mr. Mishra has urged that the opposite party having constituted an Arbitral Tribunal in terms of Clause 64 of the GCC within 120 days from the receipt of the notice dated 20.8.2007 of the petitioner, the instant petition is misconceived and as such is liable to be dismissed on that count alone. 10. The recorded facts, documents and the arguments advanced on behalf of the parties have been duly analyzed by this Court. Admittedly, by notice dated 20.08.2007 addressed to the opposite party No. 1 narrating the essential facts, disputes on various counts culminating in payment of about Rs. 1.00 crore towards its outstanding dues the petitioner had requested the opposite party to appoint an arbitrator under clause-64 of the GCC read with section 11 of the Act to adjudicate the disputes. That the said notice was received by the opposite party is a matter of record. The instant petition was filed on 3.10.2007 i.e. nearly after six weeks of the notice dated 20.08.2007. The notice/communication dated l9.11.2007, whereby the opposite party constituted the Arbitral Tribunal of three arbitrators, is thus apparently during the pendency of the instant proceeding. On a plain perusal of the notice/communication dated 19.11.2007, it transpires that the Arbitral Tribunal had been constituted to adjudicate the disputes between the parties and the Tribunal was thereby requested to initiate the arbitral proceedings as per the Act. The notice/communication also refers to the claims preferred by the contractor and the Railway as embodied in Annexures-A and B thereto. The Arbitral Tribunal was requested to pronounce its award excepting the matters which fell under the EXCEPTED MATTERS as per the Agreement and publish the award within a reasonable period. A copy of this notice/communication was forwarded along with Annexures-A & B thereof to the petitioner. 11. The notice/communication dated 19.11.2007 at the first place demonstrates the acceptance by the opposite party that an arbitrable dispute is subsisting between the parties as contemplated under the agreement and the GCC. In course of the arguments, attention of this Court was drawn to the Correction Slip No.3 to the GCC circulated vide letter No.2003/CE-I/CT/4 dated 9.10.2003 of the Government of India, Ministry of Railways (Railway Board) incorporating addition/deletion/modification of Clauses 63 and 64 of the GCC. For ready reference Clauses 63 and 64 (relevant excerpts) as revised are quoted here-in-below: 63.
In course of the arguments, attention of this Court was drawn to the Correction Slip No.3 to the GCC circulated vide letter No.2003/CE-I/CT/4 dated 9.10.2003 of the Government of India, Ministry of Railways (Railway Board) incorporating addition/deletion/modification of Clauses 63 and 64 of the GCC. For ready reference Clauses 63 and 64 (relevant excerpts) as revised are quoted here-in-below: 63. Matters finally determined by the Railway-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 GM and the GM shall within 120 days after receipt of the Contractors representation 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 8, 18, 22(5), 39, 43(2), 45(a), 55, 55-A(5), 57, 57A, 61(1), 61(2) and 62 (1) to (xiii)(B) of General Conditions of Contract or in any cause of the special conditions of the contract shall be deemed as excepted matters(matters not arbitrable) and decisions of the Railway authority, 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. xxx xxx xxx 64(1)(i) Demand for Arbitration : 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 to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the excepted matters-referred to in clause 63 of these conditions, the contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters, shall demand in writing that the dispute or difference be referred to arbitration. xxx xxx xxx 64(3)(a)(i) - In cases where the total value of all claims in question added together does not exceed Rs.
xxx xxx xxx 64(3)(a)(i) - In cases where the total value of all claims in question added together does not exceed Rs. 10,00,000/- (rupees ten lakhs only), the Arbitral Tribunal shall consist of a sole arbitrator who shall be a gazettle officer of Railway not below JA grade, nominated by the General Manager. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by GM. xxx xxx xxx 64.(3)(a)(ii) In cases not covered by clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Rly. Offices not below JA grade, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Rly. Officers of one or more departments, of the Rly. to the contractor who will be asked to suggest to General manager upto 2 names out of the panel for appointment as contractors nominee. The General Manager shall appoint at least one out of them as the contractors nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the presiding arbitrator-from amongst the 3 arbitrators so appointed. While nominating the arbitrators it will be necessary to ensure that one of them is from the Accounts department. An officer of Selection Grade of the Accounts department shall be considered of equal status to the officers in SA grade of other departments of the Railways for the purpose of appointment of arbitrators. 12. A conjoint reading of the above provisions in vogue at the time of settlement of the contract by the opposite party with the petitioner would evince that in terms of Clause-63 of the GCC, all disputes and differences arising out of and in connection with the contract the same would have to be referred by the contractor to the General Manager who within 120 days of the receipt of contractors representation/notice, would make and notify decision on the matter referred, except the excepted matters, which would be final and binding on the contractor. Clause 63 also clarifies that excepted matters would stand specifically excluded from the purview of the arbitration clause. To state differently, disputes and differences vis-a-vis excepted matters-would be beyond the ambit of arbitration. 13.
Clause 63 also clarifies that excepted matters would stand specifically excluded from the purview of the arbitration clause. To state differently, disputes and differences vis-a-vis excepted matters-would be beyond the ambit of arbitration. 13. As per Clause 64(l)(i), in the event of any dispute and differences as contemplated therein or on the failure of the Railways in taking a decision within l20 days, the contractor except the issues covered by excepted matters referred to under clause 63 for after 120 days and within 180 days of its presentation of the final claim on the disputed matters can demand in writing that the disputes and differences be referred to arbitration. 14. Noticeably, in the instant case, there is nothing overwhelming presently on record to conclude that the total value of the claims in question of the petitioner added together, even if disputed, does not exceed Rs.10,00,000/- to attract Clause 64(3)(a)(i). As envisaged in Clause 64(3)(a)(ii), the Railway would send a panel of more than 3 names of Gazetted Railway Officers of one or more departments of the Railways to the contractor, who would be asked to suggest to the General Manager, up to two names out of the said panel for appointment as contractors nominee. The General Manager, as stipulated by this clause, would appoint at least one out of them and also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel duly indicating the Presiding Arbitrator-from amongst the three arbitrators so appointed. This clause further enjoins that while nominating, it would be necessary that one of them is the accounts department and for this an officer of the Selection Grade of the accounts department shall be considered of equal status to the officers in SA grade of other departments of the Railways. The ultimate mandate of Clause 64(3)(a)(ii) is that the Arbitral Tribunal shall consist of a panel of three Gazetted Rly. Officers not below JA grade. 15. The records would not testify that the Railway had within 120 days of the receipt of the notice of the petitioner did notify its decision on the claims as detailed therein.
The ultimate mandate of Clause 64(3)(a)(ii) is that the Arbitral Tribunal shall consist of a panel of three Gazetted Rly. Officers not below JA grade. 15. The records would not testify that the Railway had within 120 days of the receipt of the notice of the petitioner did notify its decision on the claims as detailed therein. If the notice dated 20.08.2007 is construed to be one, by which the petitioner had presented its final claim of disputed matters, and had demanded that the dispute and differences be referred to arbitration as contemplated by Clause 64(3)(a)(i), having regard to the amount of its outstanding dues as claimed, the procedure as detailed in clause 64(3) (a)(ii) ought to have been applied by the Railways. Neither there is any pleading to this effect in the counter of the opposite party nor is in the notice dated 19.11.2007 any indication of adherence thereto. 16. In that view of the matter, having regard to the frame work of the settlement of the disputes by arbitration as outlined by the GCC, it is apparent that the opposite party had failed to act as required under Clause 64(3)(a)(ii) of the GCC prescribing the procedure for constitution of an Arbitral Tribunal as warranted in the facts and circumstances of the present case. The opposite party thus, as referred to in Section 11(6) of the Act, had failed to act as per the appointment procedure agreed upon by the parties and it is thus open for the petitioner to invoke Section 11 of the Act to take necessary measure as stipulated therein. 17. Vis-a-vis the constitution of the Arbitral Tribunal by the opposite party, suffice it to state that in terms of the decision of the Hon’ble Supreme Court in Deep Trading Co. v. Indian Oil Corporation & Ors. (2013) 4 SCC 35 : ( AIR 2013 SC 1479 ), the same having been effected by notice/letter dated 19.11.2007 i.e. after institution of the instant proceeding, it is of no consequence, The opposite party, having failed to act in terms of the procedure as contained in Clause 64 of the GCC, as agreed upon by the parties, the appointment of Arbitral Tribunal by them (opposite party) after the petitioner had made the instant application u/S. 11 of the Act for appointment of arbitrator, is non-est.
As held by their Lordships in Deep Trading Co, (supra) placing reliance on Datar Switchgears Ltd. v. Tata Finance Ltd. (2000) 8 SCC 151 : (2000 AIR SCW 3925) the opposite party, having failed in making appointment of the Arbitral Tribunal in terms of Clause 64 of the GCC, before the instant application was filed, they had forfeited their rights to do so. To reiterate, this Arbitral Tribunal referred to in the notice/communication dated 19.11.2007 is to be construed to be non-existent in law and on facts. 18. On a cumulative consideration of the above aspects, I am of the considered opinion that the instant application is maintainable in law and it is fit case where this Court, in exercise of its power u/S. 11 of the Act, ought to, for early resolution of the disputes between the parties, appoint an independent and impartial arbitrator. The instant application is thus allowed. At this juncture, this Court, in the interest of fairness and as an initiative towards early resolution of the differences between the parties, enquired of their learned counsel as to whether they could suggest a common name as an arbitrator. On this, learned counsel for the parties suggested the name of Mr. Sanatan Das, Advocate enlisted in the panel of Arbitrators of the Orissa High Court prepared under the High Court of Orissa (Arbitrators-Panel & Fee) Order, 2014. In the above view of the matter, Mr. Sanatan Das is appointed as the Arbitrator for the disputes involved. The learned Arbitrator would enter upon the reference and complete the proceedings in terms of the relevant Rules of the High Court of Orissa Arbitration Centre. Necessary follow up steps be taken by the parties. The ARBP stands disposed accordingly. Petition allowed.