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2017 DIGILAW 728 (MP)

Western Coalfields Limited v. Shristi Developers

2017-05-26

SANJAY YADAV

body2017
JUDGMENT : Sanjay Yadav, J. Plaintiff being aggrieved by judgment and decree dated 06.09.1997 passed in civil suit No.2-B/1996 has preferred this Appeal under Section 96 of the Code of Civil Procedure, 1908. 2. Plaintiff filed a suit for recovery of Rs.103415.40 contending inter alia that for a work of construction of 'Workers Institute' at Nandan Washery in the Kanhan Area, in Chhindwara District in response to the notice inviting tender, the tender given by the defendant was accepted. An agreement was executed on 16.11.1991. As agreed, the date of commencement of work was 07.05.1991 and the work was to be completed on or before 06.02.1992. The valuation of contract was Rs.481097.04. Besides agreeing that the work is to be completed by 06.02.1992, it was also agreed to adhere to maintain proportionate rate of progress as per clause 9 of the agreement. That clause 7 stipulated that the contract may be rescinded and the security deposit and other dues of the work or any other work done under the Coalfields may be forfeited and brought under the absolute disposal of the coalfields, if in the opinion of the coalfield either the work is not progressing satisfactorily or is not likely to be completed within stipulated time or if the contractor fails to comply with the terms and conditions. It was also the term of contract that all disputes and differences whatsoever arising between the parties out of or relating to the constructions, meaning and operation or effect of this contract or breach thereof shall be settled by a sole arbitrator appointed by the CMD of Western Coalfields Limited. 3. As the contractor executed only a part of the construction work of the value of Rs.172420.24 and then abandoned the work. And even after agreeing to complete the work as per work programme by the end of November 1993 did not accomplish the same, the contract was rescinded vide intimation dated 21.4.1995. After cancellation of contract the balance work was required to be completed by another agency on extra cost, for recovery whereof, plaintiff filed the subject writ for recovery of Rs.103415.40 and the interest thereon @ 6% per annum. 4. Defendant was proceeded ex parte. 5. Plaintiff led documentary and oral evidence. Agreement in question was filed as the Ex.P/7. The trial Court vide impugned decree dismissed the suit on three grounds: 6. 4. Defendant was proceeded ex parte. 5. Plaintiff led documentary and oral evidence. Agreement in question was filed as the Ex.P/7. The trial Court vide impugned decree dismissed the suit on three grounds: 6. Firstly, that as per clause 6 of agreement it was beyond the right of the plaintiff to recovery more than ten percent of the agreement value of work. As there is no clause which permits recovery of the excess amount incurred for getting the work complete. In other words, there being clause regarding risk and cost the plaintiff could not recovery more than the amount which find mention in clause 6 of the agreement. 7. Secondly, the claim for damages/compensation to the tune of 10% of the agreement value of the work was barred by time. The trial Court found that the work in question was to be completed within 10 weeks from 06.02.1992 i.e. till 13.03.1992. The cause of action then arose on 13.03.1992 and the suit was to be filed within 3 years, but was filed on 09.08.1996 i.e. after the expiry of three years, therefore, was barred by time. 8. Thirdly, that the agreement contained arbitration clause i.e. clause 9. That by taking into consideration Section 14(2) of the Specific Relief Act, the trial Court declined to entertain the suit being not tenable. 9. Taking up first the third ground on which the suit has been dismissed, it is observed from the agreement Ex.P/7 that clause 9 stipulates "All disputes or difference whatsoever arising between the parties out of or relating to the construction meaning and operation or effected or this contract or breach thereof shall be settled by a sole arbitrator appointed by CMD of Western Coalfields Ltd. and the award of arbitrator shall be final and binding on the parties concerned. The arbitrator may from time to time with the consent of the parties enlarge the time for making and publishing the award the arbitration proceeding shall be in accordance with the Arbitration Act, 1940." 10. Thus, there exists an arbitration clause in the agreement which provides for resolution of dispute arising out of said contract by a sole Arbitrator to be appointed by CMD, Western Coalfields Limited. 11. Thus, there exists an arbitration clause in the agreement which provides for resolution of dispute arising out of said contract by a sole Arbitrator to be appointed by CMD, Western Coalfields Limited. 11. Sub-section (2) of Section 14 of Specific Relief Act envisages that "save as provided by the Arbitration Act, 1940 (10 of 1940), no contract to refer present or future differences to arbitration shall be specifically enforced; but if any person who has made such a contract (other than an arbitration agreement to which the provisions of the said Act apply) and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit" meaning thereby that though a person may not contract himself out of his right to have recourse to Courts of law; but that in the event of any party having made a lawful agreement to refer the matter in difference to arbitration, as a condition precedent to going to law about it, the Courts will recognize the agreement and give effect to it by staying proceedings in the Courts. 12. In the case at hand exactly this is what the trial Court has held while adhering to the stipulations contained under sub-section (2) of Section 14 of Specific Relief Act has declined to entertain the civil suit as there exist an arbitration clause in the agreement which is the basis for filing of suit for recovery/compensation/damages. 13. In this context reference can be had of the decision in P. Anand Gajapathi Raju v. P.V.G. Raju (2000) 4 SCC 539 , wherein, it has been held : "8. In the matter before us, the arbitration agreement covers all the disputes between the parties in the proceedings before us and even more than that. As already noted, the arbitration agreement satisfies the requirements of Section 7 of the new Act. The language of Section 8 is peremptory. It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement. Nothing remains to be decided in the original action or the appeal arising therefrom. There is no question of stay of the proceedings till the arbitration proceedings conclude and the Award becomes final in terms of the provisions of the new Act. Nothing remains to be decided in the original action or the appeal arising therefrom. There is no question of stay of the proceedings till the arbitration proceedings conclude and the Award becomes final in terms of the provisions of the new Act. All the rights, obligations and remedies of the parties would now be governed by the new Act including the right to challenge the Award. The Court to which the party shall have recourse to challenge the Award would be the Court as defined in clause (e) of Section 2 of the new Act and not the Court to which an application under Section 8 of the new Act is made. An application before a Court under Section 8 merely brings to the Courts notice that the subject matter of the action before it is the subject matter of an arbitration agreement. This would not be such an application as contemplated under Section 42 of the Act as the Court trying the action may or may not have had jurisdiction to try the suit to start with or be the competent Court within the meaning of Section 2 (e) of the new Act." 14. In a recent decision by Supreme Court in the case of A. Ayyasamy v. A. Paramasivam (2016) 10 SCC 386 , in the context as the present one, their Lordships were pleased to observe : "13. What would be the position in case a suit is filed by the plaintiff and in the said suit the defendant files an application under Section 8 of the Act questioning the maintainability of the suit on the ground that parties had agreed to settle the disputes through the means of arbitration having regard to the existence of an arbitration agreement between them? Obviously, in such a case, the Court is to pronounce upon arbitrability or non-arbitrability of the disputes." 15. In the instant case, there is no dispute inasmuch as there is arbitration clause in the agreement dated 16.11.1991. 16. In A.Ayyasamy (supra), it is further held by their Lordships : "45. The position that emerges both before and after the decision in N. Radhakrishnan is that successive decisions of this Court have given effect to the binding precept incorporated in Section 8. 16. In A.Ayyasamy (supra), it is further held by their Lordships : "45. The position that emerges both before and after the decision in N. Radhakrishnan is that successive decisions of this Court have given effect to the binding precept incorporated in Section 8. Once there is an arbitration agreement between the parties, a judicial authority before whom an action is brought covering the subject matter of the arbitration agreement is under a positive obligation to refer parties to arbitration by enforcing the terms of the contract. There is no element of discretion left in the court or judicial authority to obviate the legislative mandate of compelling parties to seek recourse to arbitration. ... " 17. The impugned judgment when is tested on the anvil of aforesaid analysis cannot be faulted with. However, as the trial Court was of considered opinion that there exist an arbitration clause, the suit was not tenable, it was improper for the trial Court to have recorded a finding in respect of scope of clause 6 of the agreement which provides for : "6. Date of Commencement, Rate of Progress, Delays, Forfeiture and Penalties: The contractor(s) shall submit a construction schedule showing the order in which they propose to carry at the work the date on which he/her will start the several salient features (including procurement of materials, plant and the contemplated date for completing the same). For the purpose of preparing the schedule, the work shall be deemed to have commenced within ten calendar days of the date of the work order. The work should be commenced within ten days from the date of issue of the letter of acceptance from Administration and be completed on or before the date of completion specified in the agreement. (a) The time allowed for carrying out the work, as entered into the contract Agreement shall be strictly observed by the contractor(s) and the time of completion of work shall be reckoned from ten days after the issue of the letter of the acceptance of tender. (a) The time allowed for carrying out the work, as entered into the contract Agreement shall be strictly observed by the contractor(s) and the time of completion of work shall be reckoned from ten days after the issue of the letter of the acceptance of tender. The work done throughout the stipulated period of the contract be carried on with all due on the part of the contractor(s) and the contractor (s) shall pay as compensation, an amount upto one per cent of the amount of the estimated cost of the whole work as shown by the tender for every day that the work remains uncommenced, unfinished after the proper dates. In the even of contractor(s) failing to comply with rate of progress specified in the agreement, they shall be liable to pay as compensation an amount upto one per cent of the said estimated cost of the whole work for every week that the due quantity of work remains incomplete provided always that the entire amount of compensation to be paid under the provision of this clause shall not exceed 10 percent of the agreement value of the work. If the progress of any particular portion of the work is unsatisfactory the Executive Engineer shall notwithstanding that the general progress is satisfactory in accordance with clause 6(a) be entitled to take action under clause 6 (b) after giving contractor 10 days notice in writing and the contractor will have no claim for compensation for any loss sustained by them owing to such sanction. (b) To employee another agency for prosecuting the job or labour paid by the coalfields and to supply material to carry out the work or any part of the work debiting the contractor with the cost involved in engaging another agency of the cost of the labour and the price of the materials (or the amount of which cost and price certificate of the Executive Engineer shall be final and conclusive against the contractor as the case may be and crediting them with the value of the work done, in all respect in the same manner and at the same rates of the contract the certificate of the Executive Engineer, as to the work done shall be final and conclusive against the contractor." 18. In view whereof, the trial Court was also not justified in dwelling upon the aspect of limitation in context to clause 6 of the agreement. 19. In the considered opinion of this Court the trial Court since was of opinion that suit is not tenable because of availability of forum of arbitration, it ought to have refrained itself from dwelling upon interpretation of clause 6 and aspect of limitation. 20. To that extent, the impugned judgment-decree is not tenable and is set-aside, however, the judgment to the extent that suit was not tenable in view of existence of arbitration clause in the agreement dated 16.11.1991 is up held. 21. Appeal is partly allowed to the extent above. No costs.