Research › Search › Judgment

Rajasthan High Court · body

2017 DIGILAW 1960 (RAJ)

LAXMI NARAYAN AGARWAL v. DIRECTOR, LOCAL SELF DEPARTMENT

2017-09-01

MOHAMMAD RAFIQ

body2017
JUDGMENT : Mohammad Rafiq, J. This application under section 11 of the Arbitration and Conciliation Act, 1996, has been filed by petitioner M/s Laxmi Narayan Agarwal through its Proprietor Laxmi Narayan Agrawal, praying for appointment of sole arbitrator to adjudicate the disputes and differences between the petitioner and respondents arising out of the contract agreement. 2. The respondents invited tender for supply, laying, jointing, testing and commissioning of various trunk sewers and lateral sewers connecting to terminal sewage pumping station along with all necessary manholes, appurtenances, etc. at Bharatpur town under package RUSDIP/TR-03/BPR/WW/01-Lot-1. The date of receipt of technical proposal was 08.09.2010. In compliance of the said notice-inviting-tender, the Government of Rajasthan issued a notice to proceed on 24.02.2011 and in compliance thereof, a contract agreement was arrived in between Projector Director, Rajasthan Urban Infrastructure Development Project and the petitioner. In compliance of the notice to proceed, the petitioner submitted requisite bank guarantee, which was also confirmed. The date of commencement of the work was 24.02.2011 and the contract work was to be completed up to 23.08.2013. 3. Mr. Rajneesh Gupta, learned counsel for petitioner, argued that as per Clause 24.1 of the Contract Agreement, there was a specific provision that if dispute of any kind whatsoever arises between the parties in connection with contract or execution of work, the same shall be referred to Project Manager in writing, who would have jurisdiction over the work specified in contract. The petitioner made a detailed application under Clause 24.1 of the Contract Agreement regarding decision of the respondent to impose provisional liquidity damage for the work of the package. This was in furtherance to the letter dated 04.05.2016, wherein the Executive Engineer has imposed a provisional liquidity damage of 10% of the total cost of work as per contract agreement. As per letter dated 04.05.2016, there was delay but this delay was attributable to the respondents themselves. In the representation, it was also made clear that reasons of delay in construction are described for necessary action. The delay of each and every day has been duly explained. Even then the Executive Engineer has neither calculated liquidity damage on per day basis nor considered Clause 41 of the Contract Agreement. The petitioner therefore requested the Project Director to quash the decision of the Executive Engineer imposing penalty. Reference was made to letter dated 18.08.2016, which contained other dispute, which also requires consideration. Even then the Executive Engineer has neither calculated liquidity damage on per day basis nor considered Clause 41 of the Contract Agreement. The petitioner therefore requested the Project Director to quash the decision of the Executive Engineer imposing penalty. Reference was made to letter dated 18.08.2016, which contained other dispute, which also requires consideration. There was issue No. 1 regarding payment of extra/excess work done by the contract. Issue No. 2 was in respect of decision regarding laying of 6965 meter remaining sewer line and issue No. 3 was in respect of imposition of liquidity damages by the Executive Engineer. 4. It is submitted that on 02.08.2016 the petitioner wrote a letter to the Project Director, RUDIP, demanding arbitration as per Clause 24.4, which provided that in case the parties otherwise agree, the arbitration may be commenced on or after 56th day after the day on which notice of intention to commence the arbitration was given or any attempt for amicable settlement thereof has been made. No heed was paid to the request of the petitioner by the Superintending Engineer, RUDIP, Jaipur, within a period of 28 days according to Clause 24 of the Contract Agreement. In the circumstances, the reference of dispute to arbitration has become necessary as per Clause 24 of the Contract Agreement. Reference is made to letter dated 02.08.2016 demanding arbitration as per Clause 24.4. 5. It is contended that while on the one hand the respondents had written for amicable settlement, on the other hand, they have started execution of the order dated 04.05.2016 imposing penalty of liquidity damages. The petitioner was therefore constrained to approach the Civil Court. The Project Director instead of appointment of arbitrator, has kept the matter in abeyance vide order dated 30.08.2016 only for the reason that suit is pending before the learned District Judge, Bharatpur. Learned counsel submitted that the said suit was filed in the nature of interim relief. The filing of the suit does not in any manner dilute the arbitration clause in the agreement. 6. Mr. Amit Lubhaya, learned counsel for the respondents, opposed the application contending that the petitioner was guilty of suppression of material facts. Learned counsel submitted that the said suit was filed in the nature of interim relief. The filing of the suit does not in any manner dilute the arbitration clause in the agreement. 6. Mr. Amit Lubhaya, learned counsel for the respondents, opposed the application contending that the petitioner was guilty of suppression of material facts. After the petitioner filed application under Clause 24 of the Contract Agreement for amicable settlement on 01.06.2016, which was received by the respondents on 06.06.2016, the Project Manager upon due consideration of all the documents on record and the plea of the petitioner herein, dismissed the application on 01.07.2016 and the same was communicated to the petitioner. Thereafter, if the petitioner was not agreeable with the decision of the Project Manager, he was required to give a notice to the respondents as per Clause 24.2, about his intention to commence arbitration within 28 days from the receipt of the decision of the Project Manager. Clause 24.2 categorically provides that if the Project Manager has given notice of his decision as to a matter in dispute to the employer and the contractor and no written notice to commence arbitration has been given by either the employer or the contractor, on or before the twenty eight day after the day on which the parties received notice a to such decision from the Project Manager, the said decision shall become final and binding upon the employer and the contractor. 7. Learned counsel for the respondents further argued that since the decision by the Project Manager was given on 01.07.2016, the petitioner was required to serve his notice for arbitration by 29.07.2016, failing which the decision of the Project Manager would become final and binding upon the parties as per Clause 24.2 of the contract agreement. However, the petitioner served a notice to commence arbitration belatedly on 02.08.2016. The petitioner filed the suit before the court of the District Judge, Bharatpur, praying for declaration and perpetual injunction. In para 7 of the application, the petitioner has wrongly mentioned that the suit was filed seeking interim protection only till the decision was taken under Clause 24 of the contract agreement. 8. The petitioner filed the suit before the court of the District Judge, Bharatpur, praying for declaration and perpetual injunction. In para 7 of the application, the petitioner has wrongly mentioned that the suit was filed seeking interim protection only till the decision was taken under Clause 24 of the contract agreement. 8. Learned counsel submitted that Clause 24.3 of the contract agreement specifically provides that where notice of intention to commence arbitration has been given in accordance with sub-Clause 24.3, the arbitration shall not be commenced unless an attempt has first been made by the parties to settle the dispute amicably. The notice by the petitioner was given on 02.08.2016, which was required to be given by 29.07.2016 and thus it acted in violation of Clause 24.2 of the Contract Agreement, which is mandatory upon the parties. The arbitral proceedings could be commenced only in the event of failure of settlement on or after 56th day of the notice. 9. I have given my anxious consideration to rival submissions and perused the material on record. Copy of the plaint, which the respondents have annexed with their reply to the application, indicates that the petitioner filed the civil suit for declaration and perpetual injunction but the prayer clause therein clearly shows that the petitioner prayed for a direction to the respondents that till any action is taken on its representation under Clause 24 of the Contract Agreement, now the action be initiated for recovery from it. Mere filing of the said suit would not therefore in any manner dilute the arbitration clause in the present case. Merely because the petitioner failed to serve a notice invoking the arbitration clause within 28 days from the date of decision of the Project Manager, the decision of the Project Manager cannot be taken to have become final and binding on it. This cannot have the effect of forfeiting the right of respondent to seek the direction of arbitration or waiver on his part. 10. This cannot have the effect of forfeiting the right of respondent to seek the direction of arbitration or waiver on his part. 10. This court had the occasion to deal with this issue in its judgment in M/s JIL-Aquafil (JV) v. Rajasthan Urban Infrastructure Development Project and Another 2016 (4) WLC (Raj.) 474, wherein it was held that aforesaid condition contained in Clause 24.2 of the agreement to the effect that upon failure of the contractor/employer to give notice to commence arbitration proceedings within 28 days after decision of the Project Manager would not be valid and enforceable in view of the amended provision of section 28 (b) of the Indian Contract Act read with Article 137 of the Limitation Act. 11. In view of above discussion and analysis of facts and law, condition of Clause 24 or any of its sub-clauses and any such construction thereof, which debars the reference of dispute for arbitration, would be void in view of section 28(b) of the Contract Act. 12. Present application therefore deserves to succeed and is accordingly allowed. Hon'ble Mr. Justice V.S. Dave (Retd.), R/o Flat No. 102, C-22, Block-A, Trimurti Dave Apartment, Sawai Jai Singh Highway, Bani Park, Jaipur, (Phone No. 0141-2202643), is hereby appointed as an independent arbitrator to resolve the disputes between the parties. The cost of arbitration proceedings and the arbitration fees shall be as per the Manual of Procedure for Alternative Dispute Resolution, 2009, of this Court, as amended from time to time. 13. A copy of this order be sent to Hon'ble Mr. Justice V.S. Dave (Retd.), R/o Flat No. 102, C-22, Block-A, Trimurti Dave Apartment, Sawai Jai Singh Highway, Bani Park, Jaipur.