G. D. Engineering Co. (India) Private Limited v. Howrah Zilla Parishad
2017-03-16
SOUMEN SEN
body2017
DigiLaw.ai
JUDGMENT : This is an application for appointment of an arbitrator based on a noting purported to have been made by the then executive engineer on the letter dated 1st November, 2013 of the petitioner seeking extension of the time to complete the work. There is no dispute that the work order does not contain any arbitration clause. The respondent no.1 is a juristic entity. The executive engineer is an appointee from the State Government. The said executive engineer was on deputation. The terms and conditions of the tender are all settled by the Zilla Parishad. No one has any right to alter the terms of the agreement without the approval of the Zilla Parishad. The Sabhadhipati has filed an affidavit in which the Sabhadhipati has categorically stated that all tenders for work are invited on the basis the terms and conditions as incorporated therein and there is no arbitration clause in any of the tender of Howrah Zilla Parishad. The Sabhadhipati is the tender accepting authority prior to which it has to be passed upon acceptance of all members in a meeting. 2. The executive engineer in his affidavit has categorically stated that he has no power to alter the printed terms and conditions nor could agree for reference to arbitration. It is categorically stated that he has only approved the proposal for extension of time. Any alteration in the terms and conditions of the contract has to emanate from the Zilla Parishad under the guidelines of Sabhadhipati, Karmadhakshya and other office bearers, without them no amendment cannot be made by him. It is stated that the endorsement made in the letter is only in respect of extension of time which has been initially granted upto 30th June, 2014. The letter dated 1st September, 2014 is only a communication of the extension of work. The arbitration agreement was never agreed upon. 3. The petitioner has relied upon the endorsement made on behalf of the letter dated 1st November, 2013 issued by the executive engineer. In the letter dated 1st November, 2013, there is an endorsement purported to have been made by the executive engineer which reads as follows: “The proposal suggested by you in this letter is hereby accepted by me on behalf of the Howrah ZP. It is made clear that the balance work entrusted to you should be completed within eight months, i.e., within 30/06/14” 4.
It is made clear that the balance work entrusted to you should be completed within eight months, i.e., within 30/06/14” 4. The said endorsement was followed by a letter dated 1st November, 2013 which reads as follows: “The proposal suggested by you in your letter vide memo #GD/11-12/HZP-RIDF-XVI 77(A)/W-128/A Date: 1st November, 2013 under reference above is accepted on behalf of Howrah Zilla Parishad. It is made clear that the balance work entrusted to you is to be completed within 8 months, i.e. within 30th June, 2014.” 5. The basis of the argument on behalf of the petitioner is that in the last but third paragraph of the letter of the petition dated 1st November, 2013 the petitioner has categorically stated that all questions and disputes relating to the said contract shall be referred to arbitration. The petitioner submits that the said endorsement on the letter dated 1st November, 2013 was followed by a reply of the executive engineer of even date. The respondents have accepted the arbitration agreement and the disputes are now required to be resolved through arbitration. The petitioner has also referred to a similar letter dated 1st September, 2014 followed by a letter of the executive engineer of even date to argue that in the letter dated 1st September, 2014, the petitioner has, in paragraph 12, referred to an arbitration agreement and the same has been accepted by the executive engineer. 6. The said submission is based on the existing definition of an ‘arbitration agreement’ under Section 7 of the Arbitration and Conciliation Act, 1996. 7. The arbitration agreement constitutes the separate contract. The NIT followed by the contract document does not contain any arbitration clause. 8. The Clause 5 of the terms and conditions of the contract deals with extension of time. The said clause reads as follows: “If the contractor shall desire an extension of the time for completion of the works on the grounds of his having been unavoidable hindered in its execution, the contractor shall vide an immediate report of such hindrance to the Zilla Parishad, and if the Zilla Parishad finds reasonable grounds be shown thereof, authorize such extension of time, if any, as may, in his opinion be necessary or proper.
But the contractor shall not be relived of the demand for compensation that may be imposed on claim for delay as per clause 2 that is, the compensation if the work is not completed within the time stipulated, or if any portion/portions of work is not completed within stipulated period/periods of time, fixed as per clause 2 for the aforesaid quantum/s of work.” 9. Clause 13 of the said terms and conditions permitting District Engineer/Engineer-in-Charge to make any alterations in, omissions from, additions to or substitutions from the original specifications drawings, designs and instructions that may appear to him to be necessary and such alterations, omissions additions or substitutions shall not invalidate the contract but shall be deemed to have formed as work included in the original tender. 10. The said clauses are referred in view of the submission made on behalf of the petitioner that the Executive Engineer is authorised to grant such extension. 11. Section 140 Sub-section 4 clearly says that every Zilla Parishad shall be a body corporate having perpetual succession and a common seal and shall by its corporate name sue and be sued. The composition of a Zilla Parishad is given in Section 140 Sub-section 5. The clauses refer to above makes a clear that the extension of time for completion of the work can be granted by the Zilla Parishad whereas under Clause 13 the Executive Engineer can make alterations and/or omissions and/or additions to the specifications. The clause sought to be inserted by the two letters on which much reliance has been placed by the petitioner results in a substantive variation of the original terms of the contract. If the said clause is upheld it would mean that the Zilla Parishad has agreed to confer a substantive right upon the petitioner to seek a particular remedy. On a reading of the terms and conditions of the contract there cannot be any doubt that the Executive Engineer was not authorised under the contract to agree to such variation. The power of the Executive Engineer is confined to clause 13 only. Although the endorsement on the first letter of extension dated 1st November, 2013 has been doubted by the Zilla Parishad but irrespective of the fact as to whether there was any endorsement on the said letter the Executive Engineer had no authority to agree to any terms containing the Arbitration Clause.
Although the endorsement on the first letter of extension dated 1st November, 2013 has been doubted by the Zilla Parishad but irrespective of the fact as to whether there was any endorsement on the said letter the Executive Engineer had no authority to agree to any terms containing the Arbitration Clause. The Executive Engineer can only permit what he is authorised to do. The arbitration agreement constituted a separate contract between the parties. The letters on which much reliance have been placed by the petitioner to show that the Zilla Parishad has agreed to the Arbitration Clause in response to the letters seeking extension of time is unacceptable as a tenore and import of the said letter is clear that it is only extension of time to complete the job and the parties were never ad idem with regard to the substantive clause namely the arbitration agreement. 12. Any variation of the terms and conditions can only be done by the Howrah Zilla Parishad with the approval of the Sabhadhipati. The act of an executive engineer cannot bind the Zilla Parishad even if it is assumed that the executive engineer has made the said endorsement on the letter dated 1st November, 2014. In its reply of even date, the executive engineer has not categorically accepted the arbitration clause. The said letter is quite clear when it says that the balance work entrusted to you is to be completed within four months. Moreover, the executive engineer cannot bind the corporation as the executive engineer did not have the authority to enter into such contract. Even if it is accepted that the executive engineer has made the said endorsement, in my view, the action of the executive engineer cannot bind the corporation as he was not authorised and competent to do so. The letter of the executive engineer extending the time for completion cannot be construed as acceptance of the arbitration clause. The acceptance of such clause should be clear and unambiguous. 13. The authority of the executive engineer to enter into the agreement is flowing from the powers conferred upon him by the Zilla Parishad and it cannot be implied that he would have similar power to alter the terms of the agreement. He was merely the signatory to the contract document and signed it on behalf of the respondent no.1.
13. The authority of the executive engineer to enter into the agreement is flowing from the powers conferred upon him by the Zilla Parishad and it cannot be implied that he would have similar power to alter the terms of the agreement. He was merely the signatory to the contract document and signed it on behalf of the respondent no.1. The executive engineer has no implied power to refer the dispute of the arbitration and alter the terms of the agreement unilaterally. The act of the executive engineer cannot bind the Zilla Parishad. 14. Under such circumstances, this Court is of view that there is no arbitration agreement between the parties. The application accordingly stands dismissed. However, this order shall not prevent the petitioner to take appropriate steps in accordance with law and the time spent in this proceeding, may be excluded under Section 14 of the Limitation Act, 1963. 15. Any observation made in this order shall not influence any proceeding initiated by the petitioner for enforcement of its right under the contract. The observations shall only for the purpose of deciding as to whether the parties should be sent to arbitration and should not be read out of context. 16. AP No.583 of 2016 is dismissed.