Gain Singh Gehlot v. Managing Director, State Industrial Development & Investment Corporation
2017-04-19
SANGEET LODHA
body2017
DigiLaw.ai
JUDGMENT : Sangeet Lodha, J. These arbitration applications have been filed by the applicant under Section 11 (6) of the Arbitration and Conciliation Act, 1996 ("the Act") for appointment of Sole Arbitrator on account of the respondents failing in appointing the Arbitrator in terms of the arbitration clause in the contract. 2. The applicant was awarded two contracts relating to maintenance/repair of road at the Industrial Area, Rajasthan State Industrial Development & Investment Corporation (RIICO) vide work order No.9975-76 dated 21.2.11 and 9979-82 dated 21.2.11 issued by the Regional Manager, RIICO Limited, Jodhpur. A dispute having been arisen regarding the revision of the rates of the item no.7 in the G Schedule and consequential denial of the petitioner's claim for Rs.7,31,839.29 and Rs.5,50,563/- in respect of the two contracts, the petitioner invoking the clause no.23 of the contract demanded the reference of the dispute for settlement to arbitration, which has not been acceded to by the respondents. Hence, these applications. 3. Learned counsel appearing for the respondent contended that clause 23 as contained in the contract is not an arbitration clause and therefore, the applicant is not entitled to invoke the jurisdiction of this court under Section 11 of the Act for appointment of arbitrator. In support of the contention, learned counsel for the respondent has relied upon a decision of this court in the matter of M/s. Mohammed Arif Contractor Vs. State of Rajasthan & Anr., 2015(3) CDR 1351 (Raj.). 4. Replying the objection raised on behalf of the respondent, learned counsel for the applicant contended that relying upon the self same arbitration clause in the contract, a coordinate Bench of this court vide order dated 21.2.14 passed in S.B.C. Misc. Arbitration Application No.146/11 "Chhagni Ram Gehlot v. State of Rajasthan & Ors.", has allowed the application seeking appointment of arbitrator accepting the said clause to be an arbitration clause and therefore, the objection raised on behalf of the respondent is not sustainable. 5. I have considered the rival submissions and perused the material on record. 6. The Clause 23 of the contract which is said to be the arbitration clause reads as under: "23.
5. I have considered the rival submissions and perused the material on record. 6. The Clause 23 of the contract which is said to be the arbitration clause reads as under: "23. If any question, difference or objection whatsoever shall, arise in any way in connection with or arising out of this instrument or the meaning of operation of any part thereof or the rights, duties of liabilities of either party, then save in so far as the decision of any such matter as herein before provided for and been so decided, every such matter constituting a total claim of Rs.50,000/- or above, whether its decision has been otherwise provided for and whether it has been finally decided accordingly, or whether the contract should be terminated or has been rightly terminated and as regards the rights or obligations of the parties as the result of such termination shall be referred for decision to the empowered standing committee which would consist of the following:- i. Executive Officer ii. F.A. & his nominee not below the rank of DGM (F-IPI) iii. Advisor (Law) iv. AGM v. Sr. D.G.M./Sr. R.M./R.M.- Member Secretary The unit head on receipt of application along with prescribed fee (the fee would be two percent of the amount in dispute not exceeding Rs. One Lakh) from the contractor shall refer the disputes to the committee within a period of two months from the date of receipts of application." 7. Section 2(b) of the Act defines 'arbitration agreement' means an agreement referred to in Section 7. As per sub-section (1) of Section 7, 'arbitration agreement' means an agreement by the parties to submit to arbitration, which as laid down by the Hon'ble Supreme Court in Wellington Associates Vs. Kirit Mehta, AIR 2000 SC 1379 , postulates an agreement which necessarily rather mandatorily requires the appointment of arbitrator/arbitrators. 8. In Jagdish Chander Vs. Ramesh Chander & Ors., 2007(5) SCC 719 , the Hon'ble Supreme Court while considering its earlier decisions, summarised the principles in regard to what constitute an arbitration agreement: "(i) The intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement.
8. In Jagdish Chander Vs. Ramesh Chander & Ors., 2007(5) SCC 719 , the Hon'ble Supreme Court while considering its earlier decisions, summarised the principles in regard to what constitute an arbitration agreement: "(i) The intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication and a willingness to be bound by the decision of such tribunal on such disputes, it is arbitration agreement. While there is no specific form of an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration. Where there is merely a possibility of the parties agreeing to arbitration in future, as contrasted from an obligation to refer disputes to arbitration, there is no valid and binding agreement. (ii) Even if the words "arbitration" and "Arbitral Tribunal (or arbitrator)" are not used with reference to the process of settlement or with reference to the private tribunal which has to adjudicate upon the disputes, in a clause relating to settlement of disputes, it does not detract from the clause being an arbitration agreement if it has the attributes or elements of an arbitration agreement. They are : (a) The agreement should be in writing. (b) The parties should have agreed to refer any dispute (present or future) between them to the decision of a private tribunal. (c) The private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it. (d) The parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them. (iii) Where the clause provides that in the event of disputes arising between the parties, the disputes shall be referred to arbitration, it is an arbitration agreement. Where there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement.
Where there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement. But where the clause relating to settlement of disputes, contains words which specifically exclude any of the attributes of an arbitration agreement or contains anything detracts from an arbitration agreement, it will not be an arbitration agreement. For example, where an agreement requires or permits an authority to decide a claim or dispute without hearing, or requires the authority to act in the interests of only one of the parties, or provides that the decision of the authority will not be final and binding on the parties, or that if either party is not satisfied with the decision of the authority, he may file a civil suit seeking relief, it cannot be termed as an arbitration agreement. (iv) But mere use of the word 'arbitration' or 'arbitrator' in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. For example, use of the words such as "parties can, if they so desire, refer their disputes to arbitration" or "if any disputes arise between the parties, they should consider settlement by arbitration" in a clause relating to settlement of disputes, indicate that the clause is not intended to be an arbitration agreement. Similarly, a clause which states that "if the parties so decide, the disputes shall be referred to arbitration" or "any disputed between parties, if they so agree, shall be referred to arbitration" is not an arbitration agreement. Such clauses merely indicate a desire or hope to have the disputes settled by arbitration, or a tentative arrangement to explore arbitration as a mode of settlement if and when a dispute arises. Such clauses require the parties to arrive at a further agreement to go to arbitration, is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future." (emphasis added) 9.
Such clauses require the parties to arrive at a further agreement to go to arbitration, is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future." (emphasis added) 9. In M/s. Mohammed Arif Contractor's case (supra), relied upon by the counsel appearing for the respondent, a coordinate Bench of this court while considering clause 23 of the agreement therein, couched in identical words as contained in clause 23 of the agreement in question herein, applying the settled principle noticed herein above, held: "17. If the afore stated principles/guidelines are applied to the facts of the present case, it appears that the Standing Committee for settlement of disputes as mentioned in the said clause 23 consists of the members, who are the concerned Secretaries and the Engineers of the concerned department of the government, and therefore, such committee could not be termed to be a private tribunal by any stretch of imagination. There is nothing in the said clause 23 to suggest that both the parties to the contract had any intention to be bound by the decision of the said committee. On the contrary, Clause 51 of the said agreement states that in the event of any differences arising between the parties in respect of any matters comprised in the agreement, the same shall be settled by the competent Court having jurisdiction over the place, where the agreement is executed and by no other Court, after completion of proceedings under Clause 23 of the contract, From the bare perusal of the said clause 51, it clearly transpires that it was kept open for both the parties to approach the competent court having jurisdiction for settling the disputes, after the completion of proceedings under Clause 23 of the agreement in question. The non adjudicatory decision of the empowered committee under clause 23, was made subject to the right of the parties to seek remedy as per Clause 51. Therefore such Clause 23 could not be termed as the arbitration Clause, as held by the Apex Court in case of P. Dasaratharama Reddy Complex (supra). 18.
The non adjudicatory decision of the empowered committee under clause 23, was made subject to the right of the parties to seek remedy as per Clause 51. Therefore such Clause 23 could not be termed as the arbitration Clause, as held by the Apex Court in case of P. Dasaratharama Reddy Complex (supra). 18. It is to also interesting to note that as transpiring from the said Clause itself and the procedure contained in Form RPWA90, the said clause could be invoked by the contractor alone, after making payment of the non-refundable prescribed fee, and that the same could not be invoked by the other party i.e. the concerned department of the government. As per the procedure prescribed in Form RPWA90 also, the application is required to be filed by the contractor to the Chief Engineer concerned accompanied by the statement of claims and it is the concerned department who can file statement of counter claims. There is nothing in the said form which would enable the concerned department also to file the statement of claims in case of dispute with the contractor. Such an inhouse mechanisum created in the agreement for settlement of disputes, by one of the parties i.e. the Government of Rajasthan, could not be termed as a private Tribunal, nor its decision could be said to be binding to both the parties. Further, there is also no provision empowering the said committee have to record the evidence, let apart making its decision final and binding to the parties. 19. In order to construe a clause to be an arbitration clause, it should have the attributes of an arbitration agreement, i.e. the parties should agree to refer the disputes, present or future, to the private tribunal; the private tribunal should be able to adjudicate upon the disputes in an impartial manner giving due and equal opportunity to the parties to put forth their case before it, and the parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them. Thus, the very trappings or essentials of the arbitration agreement being missing in the Clause 23 in question, the same cannot be treated as the arbitration clause." (emphasis added) 10.
Thus, the very trappings or essentials of the arbitration agreement being missing in the Clause 23 in question, the same cannot be treated as the arbitration clause." (emphasis added) 10. Thus, keeping in view the pronouncement of this court in Mohammed Arif Contractor's case (supra), it stands concluded that clause 23 of the agreement in question cannot be construed to be an arbitration clause or an arbitration agreement contemplated under Section 7 of the Act and thus, the applications preferred by the applicant under Section 11 of the Act seeking appointment of arbitrator deserve to be dismissed as not maintainable. 11. Coming to the order passed by this court in Chhagni Ram Gehlot's case (supra), suffice it to say that in the said matter, the question whether clause 23 of agreement constitutes "arbitration agreement" was never raised and decided by the court and the appointment of arbitrator was made presuming the clause 23 of agreement to be an arbitration clause. In this view of the matter, the said decision of the court cannot be said to be a precedent on the issue raised before this court in these applications. 12. In the result, the arbitration applications fail, the same are hereby dismissed. No order as to costs.