Research › Search › Judgment

Gauhati High Court · body

2017 DIGILAW 71 (GAU)

Associated Builders v. Simaluguri Town Committee

2017-01-17

A.K.GOSWAMI

body2017
JUDGMENT AND ORDER : 1. Heard Mr. K.H. Choudhury, learned counsel for the petitioner. Also heard Mr. S.B. Rahman, learned counsel appearing for Simaluguri Town Committee (STC) and Ms D. Das Barman, learned State counsel appearing for the respondent No. 4. None appears for the Union of India. 2. By this application under Section 11 of the Arbitration and Conciliation Act, 1996, for short, the 1996 Act, the petitioner has prayed for appointment of an Arbitrator in terms of Clause 26 of the Agreement dated 18.2.2008 entered into by and between the petitioner and the respondent No. 1. 3. The petitioner was entrusted to prepare a Detailed Project Report (DPR) for Storm Water Drainage Scheme of Simaluguri Town under Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT) by a letter dated 7.6.2007 issued by the Chairman of SMC. The petitioner accepted the offer and consequent thereto the agreement dated 18.2.2008 was entered into. 4. By a notice dated 18.7.2011 (Annexure-K) the petitioner raised a dispute with regard to payment of its legitimate fees as well as payment of interest because of delayed payment of fees. The petitioner requested STC to send a panel of three names of persons who were unconnected with STC or the petitioners to be appointed as the arbitrator within a period of thirty days. 5. The petitioner issued another notice on the subject of appointment of arbitrator on 23.9.2011 (Annexure-L) with regard to the same dispute. This was followed by another letter dated 14.2.2012 (Annexure-M) wherein the petitioner, in addition to the earlier disputes regarding payment of fees and interest, also raised a dispute relating to non-reimbursement of service tax deposited by the petitioner. By the same letter, the petitioner also requested the SMC to send a panel of three names of persons who were unconnected with STC or the petitioner to be appointed as the arbitrator within 30 days of the arbitration notice, i.e. within 15.3.2012. 6. The STC did not respond to any of the three notices dated 18.7.2011, 23.9.2011 and 14.2.2012 within the stipulated period of time and therefore, the petitioner, by letter dated 31.3.2012 furnished a panel of three names of persons to STC to select any one of the three persons suggested by the petitioner. As no action was taken, a reminder was also issued by the petitioner on 18.5.2012. As no action was taken, a reminder was also issued by the petitioner on 18.5.2012. Thereafter, the petitioner filed this application on 26.11.2012 for appointment of an arbitrator. 7. Objection was filed by the Chairman of STC stating that an amount of Rs. 4,47,419/- was already paid to the petitioner as first installment of fee after deducting Rs. 53,386/- for the purpose of payment of income tax. It is also stated that the second installment of fees of Rs. 4,47,419/- was also paid after deducting income tax of Rs. 53,386/-. It is also pleaded that the petitioner itself did not take steps as required under Clause 26 of the agreement by appointing a person as an arbitrator. 8. In the reply affidavit filed, at paragraph 8, the petitioner has claimed Rs. 1,93,804/- by giving a break-up. The chart is reproduced herein below:- (a) Interest on delayed payment : Rs. 33,149 Rs. 15,971 being interest @ 4% for 291 days on Government release amount in the 1st instance/installment amounting to Rs. 5,00,805 + Rs. 17,178 being interest @ 4% for 313 days on Government release amount in the 2nd instance amounting to Rs. 5,00,805. (b) Income Tax deducted in the 1st installment/instance including interest therein Rs. 59,564 Rs. 53,386 being the Income Tax deducted in the installment /instance of payment but not reflected in Form No. 26AS + Rs. 6,178 being interest @ 4% for 1056 days (c) Service Tax for the 1st installment/ instance of the payment Rs. 52,070 Rs. 46,766 being Service Tax of 1st instance/installment payment + Rs. 5,304 being interest @ 4% for 1035 days (d) Service Tax for the 2nd installment/ instance of the payment Rs. 49,021 Rs. 46,766 being Service Tax of 2nd instance/installment of payment + Rs. 2,255 being interest @ 4% for 440 days. Total of above Rs. 1,93,804 9. Mr. Choudhury has submitted that in view of the failure on the part of the STC to appoint an arbitrator, this Court may appoint an arbitrator out of the three names suggested by the petitioner in the letter dated 31.3.2012. He has submitted that there is no denial of the fact that there is a dispute raised by the petitioner which needs to be adjudicated by an arbitrator. 10. Mr. He has submitted that there is no denial of the fact that there is a dispute raised by the petitioner which needs to be adjudicated by an arbitrator. 10. Mr. Rahman, on the other hand, has submitted that this petition is not maintainable as no role is envisaged for the Court to appoint an arbitrator in terms of Section 11 of the 1996 Act. It is submitted by him that on the admitted facts, the petitioner ought to have appointed an arbitrator. It is submitted by him that the stand taken in the affidavit-in-reply that the petitioner did not appoint an arbitrator on the alleged ground that if the petitioner had appointed an arbitrator the respondent No. 1 would not have responded, is based on mere surmises and conjectures and no credence can be placed on such statements. He has placed reliance in the cases of India Household and Healthcare Ltd. vs. LG Household and Healthcare Ltd. reported in AIR 2007 SC 1376 and The Iron and Steel Company Limited vs. Tiwari Road Lines, reported in AIR 2007 SC 2064 . 11. I have considered the submissions of the learned counsel for the parties and have perused the materials on record. 12. For better appreciation, Section 11 (1), (2), (3), (4), (5) and (6) of the Act are quoted herein below: 11. Appointment of arbitrators – (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in sub-section (3) applies and:- (a) A party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; (b) The two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (6) Where, under an appointment procedure agreed upon by the parties:- (a) A party fails to act as required under that procedure; (b) The parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; (c) A person, including an institution, fails to perform any function entrusted to him or it under that procedure; A party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.” 13. Clause 26 of the Agreement is also quoted herein below: “26. If any dispute, difference or question shall at any time arise between the parties as to the construction of this Agreement or concerning anything or as to the rights, liabilities and duties of the parties hereunder for which it is provided hereunder that the decision of the STC or its Chairman is final and binding, the same shall be referred to conciliation or arbitration after giving at least 30 (thirty) days notice in writing to the other (hereinafter referred to as the “Notice for Conciliation/Arbitration”) clearly setting out the items of dispute to a Conciliator or Sole Arbitrator who shall be appointed as hereinafter provided. For the purpose of appointing the conciliator or sole arbitrator referred to above, STC shall send to the Consultant within 30 (thirty) days of “Notice for Conciliation/Arbitration” a panel of three names of persons who shall be presently unconnected with STC or the Consultant. The Consultant shall on receipt of the names as aforesaid select any one of the persons so named to be appointed as Conciliator or Sole Arbitrator, as the case may be, and communicate his name to STC within 15 (fifteen) days of the receipt of the names. STC shall thereupon without any delay appoint the same person as the Conciliator or the Sole Arbitrator. STC shall thereupon without any delay appoint the same person as the Conciliator or the Sole Arbitrator. If STC fails to send to the Consultant the panel of three names as aforesaid within the period specified, the Consultant shall send to the STC a panel of three names of persons who shall be unconnected with either party. The STC shall on receipt of the names as aforesaid, select any one of the persons and appoint him as the Conciliation or Sole Arbitrator. If STC fails to select the person and appoint him as the Conciliator or Sole Arbitrator within 30 (thirty) days of the receipt of the panel and inform the Consultant accordingly, the Consultant shall be entitled to appoint one of the persons from the panel as Conciliator or the Sole Arbitrator and communicate same to STC. If the person so appointed is unable or unwilling to act or refuses his appointment or vacates his office due to any reason whatsoever, another person shall be appointed as aforesaid. The conciliation/arbitration shall be as per the Conciliation and Arbitration Act, 1996 as in force from time to time. Where the parties do not agree with the Conciliator and appoint an Arbitrators the award of Arbitrators shall be binding and final on the parties. It is hereby agreed that in all disputed referred to Arbitration, the Arbitrator shall give a separate award in respect of each dispute or difference in accordance with the terms of reference and the award shall be a reasoned award.” 14. One of the prime considerations that has to be weighed while considering an application for appointing an arbitrator is as to whether the applicant has satisfied the conditions under sub-section 6 of Section 11of the 1996 Act. 15. In India Household and Healthcare Ltd., (supra), the Apex Court had laid down that an application for appointment of an arbitrator is not maintainable unless the procedure and mechanism agreed to by and between the parties is complied with. 16. The Apex Court had occasion to consider the provisions contained in Section 11 of the 1996 Act in Iron and Steel Company Limited (supra). 16. The Apex Court had occasion to consider the provisions contained in Section 11 of the 1996 Act in Iron and Steel Company Limited (supra). Taking note of the beginning words of sub-sections (3) and (5) of Section 11 of the 1996 Act, which use the expression “failing any agreement” referred to in sub-section (2), it was held that sub-sections (3) and (5) will come into play only when there is no agreement between the parties as is referred to in sub-section (2) of Section 11 of the 1996 Act. If the parties had agreed on a procedure for appointing an arbitrator or arbitrators, sub-section (3) and (5) of Section 11 of the 1996 Act would have no application. A request can be made to the Chief Justice under sub-section 6 of Section 11 of the 1996 Act or to an institution designated by him if the conditions enumerated in Clause (a) or (b) or (c) of sub-section 6 of Section 11 of the 1996 Act are satisfied. It was held that a plain reading of various sub-sections of Section 11 of the 1996 Act show that the request can be made in terms of sub-sections (4) and (5) of Section 11 where parties have not agreed on a procedure for appointing an arbitrator as contemplated by sub-section (2) of Section 11. A request to the Chief Justice for appointment of an arbitrator can also be made under sub-section (6) where the parties have agreed on a procedure for appointment of an arbitrator as contemplated in sub-section (2) of Section 11, but certain consequential measures which are required to be taken as enumerated in clause (a), (b) and (c) of sub-section 6 of section 11 are not taken or performed. 17. In paragraph 6 of Iron and Steel Company Ltd. (supra) it was observed as follows: “6. In the present case the agreement executed between the parties contains an arbitration clause and clause 13.1 clearly provides that all disputes and differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or effect of the contract or the breach thereof shall be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties. This clause is in accordance with sub-section (2) of Section 11 of the Act. This clause is in accordance with sub-section (2) of Section 11 of the Act. There being an agreed procedure for resolution of disputes by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration sub-sections (3), (4) and (5) of Section 11 can have no application. The stage for invoking sub- section (6) of Section 11 had also not arrived. In these circumstances, the application moved by the respondent before the City Civil Court, Hyderabad, which was a designated authority in accordance with the scheme framed by the Chief Justice of the Andhra Pradesh High Court, was not maintainable at all and the City Civil Court had no jurisdiction or authority to appoint an arbitrator. Thus the order dated 31.03.2004 passed by the Chief Judge, City Civil Courts, Hyderabad, appointing a retired juridical officer as arbitrator is clearly without jurisdiction and has to be set aside.” 18. In the instance case, on the failure of the STC to select any one of the three names suggested by the petitioner, the petitioner, in terms of Clause 26 of the Agreement, could have legitimately and validly appointed a sole arbitrator out of the three names which it had furnished to the STC but the petitioner did not do so. 19. In paragraph 7 of Iron and Steel Company Ltd. (supra) it was observed as follows: “7. The legislative scheme of Section 11 is very clear. If the parties have agreed on a procedure for appointing the arbitrator or arbitrators as contemplated by sub-section (2) thereof, then the dispute between the parties has to be decided in accordance with the said procedure and recourse to the Chief Justice or his designate cannot be taken straightaway.” 20. Clause 26 of the agreement is self-contained and enables either of the parties to appoint arbitrator should there be any failure on the part of one party. 21. The ground cited in the affidavit-in-reply and also argued by Mr. Choudhury that nothing would have come out of appointment of arbitrator because of the conduct of the STC is without any merit. If the petitioner had appointed an arbitrator, the matter would have been taken to a logical end by the arbitrator. The petitioner cannot take shelter of a self-serving statement that appointment of an arbitrator by the petitioner would not have evoked any response from STC. 22. If the petitioner had appointed an arbitrator, the matter would have been taken to a logical end by the arbitrator. The petitioner cannot take shelter of a self-serving statement that appointment of an arbitrator by the petitioner would not have evoked any response from STC. 22. The parties had entered into an agreement and the terms and conditions having been agreed to, it will be impermissible to permit the parties to deviate from the agreement entered into. Admittedly, the petitioner had taken the requisite steps for appointment of arbitrator as agreed upon but had stopped short in its tracks and therefore, I am of the considered opinion that this application at the instance of the petitioner is not maintainable. 23. The core issue having been decided against the petitioner, it will not be necessary for this Court to express any opinion on the disputes raised by the petitioner. 24. Accordingly, this writ petition is dismissed.