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2016 DIGILAW 320 (MP)

Union of India v. Pawan Jethwani

2016-04-21

ALOK ARADHE, VIVEK AGARWAL

body2016
JUDGMENT Aradhe, J. – 1. In this appeal under section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to “the Act”), the appellants have assailed the validity of the order dated 9.8.2011 passed by the trial Court by which objections preferred by the appellants under section 34 of the Act to the Award dated 1.11.2010 passed by the arbitrator have been rejected. 2. The facts giving rise to filing of the appeal, briefly stated, are that in pursuance of the NIT issued by the appellants, the respondent submitted his tender for execution of the work of extension of shades, construction of road etc. for Fiat Project in Rail Spring Karkhana Sithauli, Gwalior. The work was awarded to the respondent on 23.1.2003 and was required to be completed within the stipulated period of six months i.e. 22.7.2003. However, the respondent did not complete the work within the stipulated time, as a result of which the contract awarded to the respondent was rescinded. The respondents invoked the arbitration clause under the general conditions of the contract. There upon an arbitration Tribunal consisting of three members was constituted by the appellants. 3. However, the Arbitral Tribunal did not proceed with the case, therefore, it appears that the respondent filed an application under section 11(6) of the Act, which was registered as Arbitration Case No.3/09. A Bench of this Court by order dated 4.11.2009 appointed Mr. Justice R.B. Dixit as Sole Arbitrator to arbitrate the dispute between the parties. 4. Pursuant to the aforesaid order, the parties appeared before the arbitrator. The respondent filed his statement of claims whereas the appellants also filed their statements of claims in which an objection was taken that since the claim submitted by the respondent is to the tune of Rs.47.00 lacs, i.e., more than 20% of the valuation of the contract, therefore, the dispute raised by the respondent does not fall within the scope and ambit of clauses 63 and 64 of the General Conditions of Contract, as the dispute under the aforesaid clauses can be raised only in respect of the claims which are less or equal to 20% of the valuation of the contract. However, the objection raised by the appellants did not find favour with the arbitrator and the arbitrator by an award dated 1.11.2010 decreed the claim of the respondent to the tune of Rs.17,86,804/-. However, the objection raised by the appellants did not find favour with the arbitrator and the arbitrator by an award dated 1.11.2010 decreed the claim of the respondent to the tune of Rs.17,86,804/-. Being aggrieved, the appellants filed an objection under section 34 of the Act before the trial Court. The trial Court by order dated 9.8.2011 rejected the objection preferred by the appellants. In the aforesaid factual background, the appellants have approached this Court. 5. Shri Vinod Kumar Bharadwaj, learned senior counsel for the appellants while inviting the attention of this Court to clauses 63 and 64 of the General Conditions of Contract as well as clause 2 of the Special Conditions of Contract submitted that the dispute which was submitted by the respondent before the arbitrator did not fall within the purview of clauses 63 and 64 of the General Conditions of the Contract. However, neither the Arbitrator nor the trial Court has appreciated the aforesaid aspect of the matter. It is further submitted that the award passed by the arbitrator suffers from patent illegality. In support of his submissions, learned senior counsel for the appellants has placed reliance on the decision of the Supreme Court in the case of Union of India v. M.P. Gupta [ (2004)10 SCC 504 ]. On the other hand, learned counsel for the respondent has supported the order passed by the trial Court and has submitted that in proceeding under section 11(6) of the Act the appellants did not raise an objection that dispute is beyond the purview of arbitration clause and since the order dated 4.11.2009 by which Mr. Justice R.B. Dixit was appointed as an arbitrator, has attained the finality, therefore, the same is binding between the parties. 6. We have considered the submissions made by the learned counsel for the parties and have perused the record. 7. Before proceeding further it is apposite to refer to relevant extract of clause 64 of the General Conditions of Contract : “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 lacs only), the Arbitral Tribunal consist of a sole arbitrator who shall be either the General Manager or a Gazetted Officer or railway not below the Grade of J.A. Grade nominated by the General Manager in that behalf. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by Railway. (ii) In cases not covered by clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below J.A. Grade, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway Officers of one or more Departments of the Railway to the Contractor who will be asked to suggest to General Manager upto 2 names out of the panel for appointment as contractor’s nominee. The General Manager shall appoint atleast one out of them as the contractor’s 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 till be necessary to ensure that one of them is from 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.” Clause 2 of Special Conditions of Contract reads as under : “2. Claims to be restrained to 20% of contract value. -- The provision of clause 63 and 64 of General Conditions of Contract will be applicable only for settlement of claims or disputes between the parties for value less than or equal to 20% of the value of the contract and when claims of disputes are of value more than 20% of the value of the contract, provision of clause 63 and 64 and other relevant clause of the General Conditions of Contract will not be applicable and arbitration will not be remedy for settlement of such disputes.” A conjoint reading of clause 64 of the General Conditions of Contract and clause 2 of the Special Conditions of Contract discloses that the dispute only to the tune of 20% of the value of the contract can be referred for adjudication. The aforesaid objection was admittedly raised by the appellants in the statement of claims in view of section 16(2) of the Act, which reads as under : “16(2). The aforesaid objection was admittedly raised by the appellants in the statement of claims in view of section 16(2) of the Act, which reads as under : “16(2). A plea that the Arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a pleas merely because that he has appointed, or participated in the appointment of, an arbitrator.” 8. Similar objection was raised by the appellants before the trial Court. However, the trial Court in paragraph 14 of the order has dismissed the same by simply stating that since the arbitrator has been appointed by a Bench of this Court and the aforesaid order is a judicial order, which has attained the finality, therefore, the question with regard to competence of the arbitrator to adjudicate the dispute between the parties can not be questioned. 9. From close scrutiny of the statement of claims filed by the appellants before the arbitrator it is evident that the trial Court has completely misconstrued the objection raised by the appellants and has rather not dealt with it. The appellants have the authority to raise an objection before the arbitrator that he did not have the jurisdiction to try the dispute. In other words, a party can always raise a question with regard to competence of the arbitrator to deal with the subject matter of the arbitration. In this connection, reference may be made to decision of the Supreme Court in the case of SBP and Co. v. Patel Engineering Ltd. and another [ (2005)8 SCC 618 ]. However, as stated supra, since the trial Court has failed to advert to aforesaid aspect of the matter and has not dealt with the objections raised by the appellants, the impugned order dated 9.8.2011 is hereby quashed. The trial Court is directed to decide the objection raised by the appellants with regard to the award in the context of clause 64 of the General Conditions of Contract read with clause 2 of the Special Conditions of the Contract and to decide the objections afresh by a speaking order. Let the aforesaid exercise be carried out within a period of four months from the date of receipt of certified copy of the order passed today. 10. Let the aforesaid exercise be carried out within a period of four months from the date of receipt of certified copy of the order passed today. 10. Learned counsel for the parties agreed that the parties shall appear before the trial Court on 12.5.2016. On appearance of the parties the trial Court shall fix the date for argument and shall proceed to decide the objection preferred by the appellants within the time limit as stipulated in the preceding paragraphs. 11. With the aforesaid directions, the appeal is disposed of.