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2018 DIGILAW 348 (JHR)

Modi Projects Limited v. State of Jharkhand

2018-02-09

APARESH KUMAR SINGH

body2018
ORDER : Heard learned counsel for the parties. 2. Applicant contends that it has satisfactorily executed the agreement dated 16.10.2008 for construction of Flyover, approach road and high level R.C.C. Bridge over river Subarnarekha on NH-33 at Namkum in the State of Jharkhand (Job No. 033-JHR-2007-113) for an agreement value of Rs. 33,60,08,125.36 under agreement No. 09 SBD of 2009-09. The work was completed on 26.03.2013 to the satisfaction of the Respondents as per the certificate of completion contained in letter no. 952 dated 23.09.2014 issued by the Executive Engineer, National Highway Division, Ranchi and also enclosed at page 27 of the rejoinder affidavit of the Respondents. After completion of the work petitioner raised final bill through letter dated 21.03.2014, which is at Annexure-3 to the rejoinder affidavit of the petitioner dated 20.06.2017. The detail account of the total amount payable was submitted as per clause 57.1 “FINAL ACCOUNT” of Section 3 “Conditions of Contract” of the agreement. Annexure-1 is the summary of final accounts to the letter dated 21.03.2014. When the Respondents failed to make good the payment, petitioner had invoked the arbitration clause 25.3(a) and served notice on 13.07.2016 for appointment of nominee arbitrator on behalf of the Respondents. The applicant had proposed the name of Mr. Desh Deepak as their nominee arbitrator who was registered with the Indian Road Congress (IRC). Both arbitrator would select the third presiding arbitrator. Since the Respondents failed to appoint the second nominee arbitrator on their part nor did they make payments, the applicant invoked the jurisdiction of Hon'ble the Chief Justice under Section 11(6) of the Arbitration and Conciliation Act, 1996. 3. Respondents contested the plea by filing counter affidavit on 14.6.2017. As per the averments contained therein, date of commencement of work was on 16.10.2008 and date of schedule completion was 15.10.2010. The execution of the work was monitored by this Court in W.P.(PIL) No. 803 of 2005 and work got actually completed on 26.03.2013. Extension of time was granted to the petitioner company up to 30.09.2011 vide letter dated 18.07.2011 of the Chief Engineer, National Highway Wing, Jharkhand and thereafter up to 31.03.2012 with the condition “without any financial benefits”(Annexure-A). Again extension was granted up to 26.03.2013 with the condition “The price adjustment beyond 31.03.2012 shall be considered only after approval of Ministry of Shipping Road Transport & Highways” vide letter dated 07.09.2013 (Annexure-D). Again extension was granted up to 26.03.2013 with the condition “The price adjustment beyond 31.03.2012 shall be considered only after approval of Ministry of Shipping Road Transport & Highways” vide letter dated 07.09.2013 (Annexure-D). The third revised estimate for the work was sanctioned on 29.06.2015 (Annexure-E) by the Ministry of Shipping, Road Transport & Highways, Government of India. The Respondents denied receipt of letter dated 21.03.2014. According to them petitioner demanded Rs.28,46,703/- vide letter no. 9347 dated 27.03.2014 . It was paid on 28.03.2014 in 32nd running accounts bill. Another demand raised for Rs.12,73,324/- vide letter no. 9348 dated 27.03.2014 was also paid on 28.03.2014. They have referred to I.A. No. 1596 of 2013 filed by the petitioner in W.P.(PIL) No 803 of 2005 before the learned Division Bench, wherein the Hon'ble Court observed that if there is no legal hurdle the contractor's (petitioner company) bill may be processed. According to the Respondents, all the grievance bills, as contained in I.A. No. 1596 of 2013 has been paid on 17.07.2015 after sanction of the Ministry of Shipping, Road Transport and Highway. There is no dispute that all dues including price escalation have been paid to the contractor on 17.07.2015. The retention money deducted from running bill as per SBD clause on 24.06.2013 (50%) and the rest 50% on 29.03.2014 have also been paid after completion of defect liability period. The performance security deposit in the form of bank guarantee were released on 27.03.2014 on completion of defect liability period. According to the Respondents all grievances including all bills, all price escalation as per performance security have been paid to the petitioner. In the absence of any dispute regarding the payment of dues, plea of the petitioner for appointment of an arbitrator is without any valid basis and not maintainable. Respondents have prayed for dismissal of the instant application. 4. Petitioner filed rejoinder thereto and stated that vide letter dated 21.03.2014 payments have been made against two heads (a) outstanding amount of price adjustment bill for work done between 31.03.2012 to 26.03.2013 and (b) release of balance retention money (after 25.03.2014). In terms of clause 57.1; one of the conditions of contract, the final account was to be submitted to “the Engineer”. Petitioner had made the claim on account of final accounts before the Chief Engineer, National Highway Division and not before the Executive Engineer. In terms of clause 57.1; one of the conditions of contract, the final account was to be submitted to “the Engineer”. Petitioner had made the claim on account of final accounts before the Chief Engineer, National Highway Division and not before the Executive Engineer. Reference is made to the letter dated June 4, 2015 enclosed to the rejoinder whereunder petitioner have reiterated their claim for payments against final account submitted on 21.03.2014. Reference is also made to the letter date 07.04.2015 addressed to the Chief Engineer, N.H. Wing, Ranchi, which also refers to the letter dated 21.03.2014. 5. Petitioner through supplementary affidavit filed on 09.08.2017 have again stated that the Respondent Engineer, never suggested any correction in relation to the final accounts submitted by the Claimant on 21.03.2014 as required under clause 57.1. The letter dated 27.03.2014 at page 76 of the counter affidavit was written by the petitioner to the Executive Engineer which was subsequent to the detailed claim notice issued by the claimant, however in the said letter no mention of letter of earlier detailed claim was made owing to the fact that the amount so claimed was under the head of “deduction from 10th running account bills”. The applicant referred to the reminder issued in lieu of the claim made in final accounts on various dates i.e. 20.01.2015, 07.04.2015, 04.06.2015, 25.06.2015 and 13.07.2016 which are on record in their rejoinder affidavit. According to the petitioner-applicant, Respondents have not issued the defect liability certificate till date despite the liability period of 1 year being over after completion of the work. 6. The reply to the rejoinder was filed by the Executive Engineer, N.H. Division, Ranchi thereafter again denying the receipt of the letter dated 21.03.2014 by the office of Chief Engineer, N.H. Wingh, Ranchi. According to them the signature of the receiver in the margin does not belong to the said office. Annexure-A and B being photo copy of the receipt diary are enclosed in support thereof. According to the Respondents, the entire grievance of the petitioner is hypothetical. Respondents have further reiterated that all grievance bills as contained in I.A. No. 1596 of 2013 have been paid on 17.07.2015 after sanction of the same by the Ministry of Shipping, Road Transport & Highways. Therefore no dues of the petitioner is pending. According to the Respondents, the entire grievance of the petitioner is hypothetical. Respondents have further reiterated that all grievance bills as contained in I.A. No. 1596 of 2013 have been paid on 17.07.2015 after sanction of the same by the Ministry of Shipping, Road Transport & Highways. Therefore no dues of the petitioner is pending. Photo copy of clause 57.1, work completion certificate issued to the petitioner and defect liability period of the work are enclosed as Annexure-C, D and E. 7. On the basis of aforesaid materials pleaded and supported by documents on record, learned counsel for the applicant petitioner has sought appointment of an independent arbitrator in terms of Clause 25.3(a) of the condition of the contract asserting that this Court under the provisions of the amended Act of 1996 under Section 11(6A) is required to confine to the examination of existence of the agreement and not get into the merits of the dispute. Respondents are in the stage of denial though petitioner has issued several reminder letters to the letter dated 21.03.2014 addressed to the office of Chief Engineer, N.H. Wing, Ranchi. Payments of outstanding dues on the part of the Respondents is only an indication of acceptance of admitted dues by the Respondents. However claims made under different heads which remained unpaid falls in the realm of dispute which needs to be adjudicated through the forum of arbitration proceedings. The respondents therefore cannot resist the appointment of an arbitrator. 8. Learned counsel for the Respondents have on the other hand placed reliance on the affidavit on their behalf to dispel the contention of the petitioner that any outstanding dues remained to be paid to the petitioner. They have also questioned the genuineness of the letter dated 21.03.2014. Respondents have further referred to clause 25.3(c) where under petitioner should have approached the IRC for appointment of an arbitrator, on failure of the Respondent to nominate their arbitrator. However they straightway approached this Court. 9. I have considered the submission of the parties in the light of the material pleadings on record noted hereinabove. It is not in dispute that the agreement between the parties provides for an arbitration clause for adjudication of their dispute. However they straightway approached this Court. 9. I have considered the submission of the parties in the light of the material pleadings on record noted hereinabove. It is not in dispute that the agreement between the parties provides for an arbitration clause for adjudication of their dispute. Clause 25.3(a) of the agreement provides that in case of dispute or differences arising between the Employer and a domestic contractor relating to any matter arising out of or connected with this agreement, such dispute or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The parties shall make efforts to agree on a sole arbitrator and only if such an attempt does not succeed, the Arbitral Tribunal consisting of 3 arbitrators one each to be appointed by the Employer and the Contractor and the third Arbitrator to be chosen by the two Arbitrators so appointed by the parties to act as Presiding Arbitrator shall be considered. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the Council Indian Road Congress. Clause (b) also provides for an Arbitral Tribunal of 3 arbitrators, one each to appointed by the employer and the contractor. The third arbitrator shall be chosen by the two arbitrators so appointed by the parties and shall act as a presiding arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the presiding arbitrator shall be appointed by the Council, Indian Road Congress. Clause (c) thereof provides that if one of the parties fails to appoint its arbitrator in pursuance of sub-clause (a) and (b) above within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the Council, Indian Road Congress shall appoint the arbitrator. 10. Learned counsel for the Respondent has also raised the plea during course of the argument that petitioner should have approached the Council, Indian Road Congress to nominate an arbitrator in view of clause 25.3(c) of the agreement. 11. 10. Learned counsel for the Respondent has also raised the plea during course of the argument that petitioner should have approached the Council, Indian Road Congress to nominate an arbitrator in view of clause 25.3(c) of the agreement. 11. The relevant sequence of dates which have been taken note of in the preceding paragraphs show that after the periodical extension, the work was completed on 26.03.2017. The defect liability period was for one year i.e. 25.03.2014, date of submission of final accounts was to be done before 25.03.2014 in terms of clause 57.1. Petitioner has relied upon letter dated 21.03.2014 and reminder letters dated 20.01.2015, 07.04.2015, 04.06.2015, 25.06.2015 and 13.07.2016 in support of its contention of submission of statement of final accounts in terms of clause 57.1. These subsequent letters are not specifically denied by the Respondents. On the part of the Respondents it is also accepted that payments were finally made on 17.07.2015 including the price escalation. The bank guarantee towards performance security was released on 27.03.2014 after completion of the defect liability period. 12. These sequence of facts does leave an impression that while according to the Respondents they had paid all admissible dues to the petitioner, but claim under different heads raised under the summary of final accounts by the petitioner were not acknowledged by the Respondents. They may be falling in the realm of dispute. In that case, if the arbitration clause provides for adjudication of difference/dispute between the parties, then on failure of the Respondents to nominate an arbitrator after due service of 30 days notice by the letter dated 13.07.2016, petitioner had a cause of action to seek appointment of an independent arbitrator by invoking the jurisdiction of Hon'ble the Chief Justice of this Court under Section 11(6) of the Arbitration and Conciliation Act, 1996. 13. Learned senior counsel for the petitioner is justified in relying upon the provisions of Section 11(6A) of the act of 1996 as amended in support of his submission that scope of Hon'ble the Chief Justice or his delegate in the matter of appointment of an independent arbitrator under Section 11(6) of the amended Act has been narrowed down from its wider scope as was prevalent after the judgment rendered by the Hon'ble Apex Court in the case of SBP & Co. Vrs. Patel Engineering Ltd. and another reported in (2005) 8 SCC 618 . Vrs. Patel Engineering Ltd. and another reported in (2005) 8 SCC 618 . Reliance has also been placed on the observations made in para 59 of the report in the case of Duro Felguera, S.A. Vrs. Gangavaram Port Limited reported in (2017) 9 SCC 729 . 14. In those circumstances, this Court is of the opinion that necessary ingredients for appointment of an independent arbitrator stands fulfilled in the present case. Learned counsel for the Respondent has referred to the provisions of clause 25.3(a) to (c) where in obligation has been placed on the Council of Indian Road Congress to nominate an arbitrator. List of arbitrators empaneled under the Indian Road Congress has been obtained by the Registry of this Court earlier. I therefore propose to appoint Mr. N.K. Sinha, who has retired in the capacity of D.G.(R.D) & S.S. from the Ministry of Road Transport & Highway, Government of India and whose name appears in the list of arbitrator empaneled under the Indian Road Congress as an arbitrator to adjudicate the dispute between the parties. The details of the proposed arbitrator is given hereunder:- Mr. N.K. Sinha, D.G.(R.D) & S.S. (Retd.) Ministry of Road Transport & Highway Address:-G-1365, C.R. Park New Delhi-110019 Mob No. 09891060052 Land Line No. 011-26270198 15. Learned Registrar General of this Court is directed to communicate the instant order to the proposed arbitrator for submission of declaration under Clause 12(1) of the amended Act 3 of 2016. Let this case appear after 4 weeks on 16th March 2018 as unfixed case. Ordered accordingly.