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2018 DIGILAW 1624 (GAU)

V. R. GLOBAL PVT. LTD. v. UNION OF INDIA

2018-11-16

UJJAL BHUYAN

body2018
ORDER : 1. Heard Mr. M. Biswas, learned counsel for the petitioner and Mr. B. Sarma, learned Standing Counsel, Railways for the respondents. 2. This is an application under Section 11 of the Arbitration and Conciliation Act, 1996 (1996 Act) for appointment of arbitrator. 3. Case of the petitioner is that it is a private limited company incorporated under the Companies Act, 1956 and having its registered office at Kolkata. Petitioner is engaged in various contract works under the respondents, i.e., NF Railways, Maligaon, 4. Following a tender process, petitioner was awarded the work “Replacement of existing (12.2m span) strengthened MGML girder Br. Nos. 408, 440, 446, 526, 539, 562 on the section LMG-TSK and Br. No. 19 & 22 on the section NRL siding under the jurisdiction of SSE/Bridge/LMG” for the contract value of Rs.3,96,36,037.10 vide letter of acceptance dated 31.05.2013. Thereafter, an agreement was entered into between petitioner and the respondents vide contract agreement No. DCE-26 dated 11.11.2013. 5. As per the contract agreement, the work was to be completed within a period of 18 months from the date of issue of the letter of acceptance dated 31.05.2013, i.e., on or before 30.11.2014. 6. It is stated that the contract agreement provided for a price variation clause as per which the contractor i.e., the petitioner would get the benefit of market price escalation during currency of the contract. However, petitioner would not be entitled to the benefit of the price variation clause if extension of the period for completion of the work is on account of delay of the petitioner. But petitioner would be entitled to the benefit of the price variation clause if extension of the contract period is granted for reasons other than delay on the part of the petitioner. If extension is on account of delay by the petitioner, respondents would be entitled to impose liquidated damages, but the same cannot be imposed if the work is extended for reasons other than delay by the petitioner. 7. In the instant case, execution of the work got delayed, which according to the petitioner was solely for reasons attributable to the Railways. As such, extension of the completion period was provided without imposing liquidated damages. 8. According to the petitioner, it is entitled to price escalation benefit during the extended period of contract execution i.e., from 30.11.2014 to 22.03.2016. 9. As such, extension of the completion period was provided without imposing liquidated damages. 8. According to the petitioner, it is entitled to price escalation benefit during the extended period of contract execution i.e., from 30.11.2014 to 22.03.2016. 9. Clause 18 of the Contract Agreement provides for arbitration and settlement of disputes as per annexure-A attached to the contract agreement. It says that all disputes and differences arising out of or in connection with the contract whether during the progress of the work or after its completion and whether before or after determination of the contract shall be referred by the contractor to the General Manager, NF Railways and the General Manager, NF Railways shall within 120 days of receipt of such representation notify the decision in writing and on demand to the Arbitral Tribunal clarifying that arbitration and settlement of disputes shall be governed under Clauses 63 and 64 of the General Conditions of Contract, NF Railway, 2010. 10. Clause 63 and 64 of the General Conditions of Contract lays down the procedure for settlement of disputes, including demand for arbitration. As per Clause 64 (1) (iv, if the contractor does not refer his specific and final claims in writing within a period of 90 days of receiving the intimation from the Railways that the final bill is ready for payment, the contractor will be deemed to have waived his claim and the Railways shall be discharged and released of all liabilities under the contract in respect of such claims. 11. Petitioner submitted representation dated 20.09.2017 before the General Manager, N F Railways, complaining that the accounts department was not willing to settle petitioner’s bill raised under the price variation clause and also did not release security deposit. General Manager was requested to refer the matter to arbitration. 12. Petitioner was informed by the office of the General Manager (Works), NF Railways, vide letter dated 20.11.2017, seeking the following particulars which it was stated were required for appointment of arbitrator:- (1) Name of the Division, where the contract agreement was executed. (2) Whether work was under open line or construction organization of NF Railways. (3) Details of amount claimed in figures. (4) Postal address of petitioner. 13. It is stated that petitioner submitted the information as sought for vide letter dated 22.11.2017. In so far claim of the petitioner is concerned, it was quantified at Rs. (2) Whether work was under open line or construction organization of NF Railways. (3) Details of amount claimed in figures. (4) Postal address of petitioner. 13. It is stated that petitioner submitted the information as sought for vide letter dated 22.11.2017. In so far claim of the petitioner is concerned, it was quantified at Rs. 20,94,183.00 with interest at the rate of 18% per annum w.e.f. 28.01.2017 till payment. 14. By subsequent letter dated 10.01.2018, petitioner stated that despite furnishing of particulars as above, no arbitrator was appointed by the Railways. It was, therefore, stated that petitioner would have no other alternative than to approach the Court for appointment of arbitrator. 15. Following the same, the present petition came to be filed. This Court by order dated 28.02.2018 had issued notice. 16. On receipt of notice, respondents entered appearance and filed a common affidavit-in-opposition on 20.07.2018. Stand taken in the affidavit is that extension of contract was granted under Clause-17 (A) without liquidated damages and was not granted under Clause 17 (B) which is on contractors’ account. While submitting final bill, petitioner had submitted no claim certificate. Therefore, having submitted such no claim certificate, petitioner is not entitled to raise any further claim. It is stated that the letters of the petitioner dated 20.09.2017 and 27.10.2017 were not valid letters of arbitration. Petitioners’ claim for raising the dispute and seeking reference to arbitration was not made within 180 days of presenting final claim on disputed matters. Further, respondents have denied receipt of any letter dated 22.11.2017 from the petitioner. Therefore, it is contended that claim for arbitration made by the petitioner should be declined. 17. Mr. Biswas, learned counsel for the petitioner submits that claim of the petitioner arises out of the contract agreement which provides an arbitration clause. Petitioner had moved the respondents for referring his claim to arbitration. There is a dispute raised by the petitioner which is required to be referred to arbitration. Since steps have not been taken by the respondents for referring the dispute to arbitration by appointment of arbitrator, Court should invoke its power under Section 11 of 1996 Act. 18. Petitioner had moved the respondents for referring his claim to arbitration. There is a dispute raised by the petitioner which is required to be referred to arbitration. Since steps have not been taken by the respondents for referring the dispute to arbitration by appointment of arbitrator, Court should invoke its power under Section 11 of 1996 Act. 18. On the other hand, Mr Sharma, learned Standing Counsel, Railways submits that claim for arbitration must be made within the period prescribed by the arbitration clause in the contract agreement failing which party claiming arbitration will lose the right to seek his remedy qua arbitration. In support of his submission, Mr Sharma has placed reliance on a decision of the Supreme Court in Indian Oil Corporation Vs. M/s Raja Transport, (2009) 8 SCC 520 . 19. In reply, Mr Sharma has placed reliance on a seven bench judgment of the Supreme Court in SBP Vs Patel Engineering; (2005) 8 SCC 618 and in the case of Duro Felguera Vs Gangavaram Port Limited; (2017) 9 SCC 720. He has also placed reliance on a recent decision of this Court dated 24.08.2018 in Arbitration Petition No. 10/2017 (M/s Jyoti Forge Vs Union of India). 20. Submissions made by learned counsel for the parties have been considered. Also perused the materials on record. 21. The 1996 Act is an act to consolidate and amend the law relating to domestic arbitration, international and commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected there with or incidental there to. 22. It goes without saying that the prime objective of the 1996 Act is to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of specific arbitration and in the process, to minimize the supervisory role of Courts in the arbitral process. Section 2 (b) defines “arbitration agreement” to mea an agreement referred to in Section 7. Arbitration agreement is defined in Section 7 which says that arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. 23. Section 11 deals with appointment of arbitrators. Arbitration agreement is defined in Section 7 which says that arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. 23. Section 11 deals with appointment of arbitrators. Under Sub-section (6) of Section 11, if a party fails to act for appointment of arbitrator as per the appointment procedure agreed upon or the parties fail to reach an agreement, a party may request the Supreme Court or the High Court, as the case may be, to take necessary measure unless the agreement on the appointment procedure provides other means for securing the appointment of arbitrator. Sub-Section (6A) was inserted in Section 11 of the Act in the year 2015 by way of an amendment. It says that Supreme Court or, as the case may be, High Court while considering any application for appointment of arbitrator, shall confine its examination to the existence of an arbitration agreement. 24. Before a conjoint analysis of the aforesaid provisions is made, it would be apposite to briefly refer to Sub-Section (4) of Section 11 as per which if a party fails to appoint an arbitrator within 30 days from the receipt of a request to do so from the other party, appointment shall be made upon request by the party by the Supreme Court or by the High Court or by any person or institution designated by such Court, as the case may be. Therefore, what comes to the fore is that while considering an application made under Section 11 of the Act, Court is not required to enter into an examination of the merits or demerits of the claim. What is required for the Court is to see as to whether there is an arbitration clause in the agreement governing the relationship between the parties. 25. This position has been made crystal clear by the Supreme Court in Duro Felguera (supra), wherein it has been held that having regard to the amended provision of Section 11(6A) of the 1996 Act, as amended, power of the Court is confined only to examine the existence of an arbitration agreement. 26. 25. This position has been made crystal clear by the Supreme Court in Duro Felguera (supra), wherein it has been held that having regard to the amended provision of Section 11(6A) of the 1996 Act, as amended, power of the Court is confined only to examine the existence of an arbitration agreement. 26. In Patel Engineering (supra), Supreme Court declared that power of appointment of arbitrator under Section 11(6) of the 1996 Act is not an administrative power; it is a judicial power. While exercising such judicial power, the Chief Justice or the designated Judge will have the jurisdiction to examine existence of a valid arbitration agreement, existence or otherwise of a live claim etc. 27. M/s Raja Transport (supra) was a case prior to the amendment made in the year 2015. It was a case relating to termination of dealership by the Indian Oil Corporation Limited. In that case, contrary to the procedure for appointment of arbitrator, an application was filed by the dealer before the then Uttaranchal High Court for appointment of independent arbitrator to arbitrate the dispute relating to validity of termination of dealership. The High Court appointed District Judge as the sole arbitrator, contrary to the arbitration agreement as per which Indian Oil Corporation Limited was empowered to appoint arbitrator. On the grounds and reasons mentioned, Supreme Court set aside the order of the High Court and instead, appointed Director, Marketing of Indian Oil Corporation Limited as the sole arbitrator to decide the dispute between the parties. 28. Evidently, this decision is clearly distinguishable from the present case on facts. 29. As noticed above, arbitration is an alternative dispute resolution procedure recognized under Section 89 of the Civil Procedure Code, 1908, where the arbitrator or the Arbitral Tribunal decides the dispute without being bound by strict rules of pleadings, procedure and evidence. 30. It is evident that there is an arbitration clause for settlement of disputes in the contract agreement. Merely because there is some delay in lodging the claim, the aggrieved party should not be deprived of the benefit of arbitration. After all, by appointing an arbitrator grievance of the aggrieved party would be arbitrated upon as per the statute which is the ultimate object of alternative dispute resolution. 31. Merely because there is some delay in lodging the claim, the aggrieved party should not be deprived of the benefit of arbitration. After all, by appointing an arbitrator grievance of the aggrieved party would be arbitrated upon as per the statute which is the ultimate object of alternative dispute resolution. 31. Thus, on a thorough consideration of the matter, Court is of the view that dispute raised by the petitioner is required to be decided by way of arbitration. Accordingly, this Court appoints Sri H.N. Sarma, a retired Judge of this Court as the sole arbitrator to arbitrate on the dispute of the parties subject to his disclosure and consent under Sections 11 (8) and 12 of the 1996 Act. Parties shall appear before the learned arbitrator within 6 (six) weeks from today, where after, learned arbitrator shall commence the arbitral proceeding. 32. This disposes of the arbitration petition.