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2019 DIGILAW 1114 (RAJ)

R. S. Bajaj Tea Company v. Rajasthan State Food and Civil Supplies Corporation Ltd.

2019-04-12

ALOK SHARMA

body2019
ORDER : ALOK SHARMA, J. 1. This application under Section 11 of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act of 1996') has been filed for appointment of an arbitrator under arbitration clause 10 of the agreement dated 7.8.2017 to resolve the disputes and differences between the parties in regard to and relating thereto. 2. Clause 10 of the agreement dated 7.8.2017 reads as under: "All disputes arising out of this agreement and all questions relating to the interpretation of this agreement will be decided by the RSFSCS and the decision of the RSFCSC will be final." 3. That clause was in the backdrop of clause 69 of the E-Tender which provided as under: "In case of any dispute arising between the bidders and the purchasing authority, the Principal Secretary cum Chairman, Rajasthan State Food & Civil Supplies Corporation Limited will act as the arbitrator, and the decision of the arbitrator will be final and binding on all the parties concerned." 4. Mr. Sandeep Taneja, counsel for applicant submitted that the respondent invited bids on 12.4.2017 for supply of CTC Tea for a period of one year to all Fair Price Shops in Rajasthan. The applicant participated in the tender process and submitted its bid. The respondent accepted the bid of the applicant for supply of CTC Tea for one year. An agreement dated 7.08.2017 was executed between the applicant and the respondent. A work order dated 4.9.2017 followed, according to which the applicant was required to supply CTC Tea to various Fair Price Shops in all over Rajasthan. The applicant accordingly contacted the Fair Price Shopkeepers for supply of CTC tea, but they refused to take supply from the applicant on the ground that they were being supplied ample quantity of tea by other firms and they had already stocks in adequate quantity. The applicant by its letter dated 15.12.2017 informed the respondent - non applicant that the applicant was directed to distribute CTC tea to total 25366 Fair Price Shops in 33 districts of Rajasthan, out of which 6000 shops were included by the Government in Annapurna Bhandars, who were stocking and selling the tea of "Fresh" and "Pure" Brands and refused to accept supplies of applicant's Raj Brand CTC tea. In addition to above around 3000 Fair Price Shops were inoperative and hence were not available to receive the supplies to be made under the agreement dated 7.8.2017. The applicant communicated to the respondent vide various letters requesting the respondent that appropriate directions be issued to the Fair Price Shopkeepers to accept the supply from the applicant under the agreement dated 7.8.2017. The respondent issued an order dated 25.5.2018 mentioning that the applicant purportedly mala fidely interpolated condition No. 5(a) of the agreement as under: "The RSFCSC do hereby agree that the RSFCSC will through FPS dealers pay or cause to be paid to the approved supplier at the time and the manner set forth in the said conditions, the amount payable for each and every consignment" 5. Resultantly, for the alleged criminal conspiracy and violation of the terms of the agreement dated 7.8.2017, the applicant was restrained to make supply of CTC tea to the Fair Price Shops under the agreement dated 7.8.2017. In addition to above, they forfeited the earnest money of EPA and CWF as also security amount deposited by the applicant. They directed the applicant to deposit the amount due to the applicant towards EPA and CWF from October, 2017 to May 2018. For the alleged interpolation in condition No. 5(a) of the agreement dated 7.8.2017, the respondent lodged FIR No. 327/2018 at Police Station, Bajaj Nagar, Jaipur against the applicant for the offences under Section 420, 406 and 120B IPC. In the circumstances, disputes relating to the agreement dated 7.8.2017 having arisen, the applicant sent a notice dated 14.6.2018 to the respondent invoking arbitration clause in the agreement in issue for resolution/adjudication of the dispute and for appointing Shri Prem Shankar Shukla, retired Addl. District & Sessions Judge as the Arbitrator. 6. The respondent has failed to consent to the appointment of arbitrator. Thus, application under Section 11(6) of the Act of 1996 has bee filed. 7. Mr. Anil Mehta, AAG appearing for the State opposed the application as filed and submitted that the parties to the agreement dated 7.08.2017 had agreed that all disputes arising out of and all questions relating to interpretation of the agreement dated 7.8.2017 would be decided by the Chairman, Rajasthan State Food & Civil Supplies Corporation (RSFCSC), and his decision would be final. The applicant failed to comply with the terms and conditions of the agreement dated 7.8.2017 and mala fidely interpolated clause 5(a) in the agreement dated 7.8.2017, which was not agreed to by the respondent, therefore, vide office order dated 25.5.2018, the respondent rescinded the applicant's work order and lodged the FIR against it. Mr. Anil Mehta further submitted that the applicant's notice dated 14.6.2018 appointing Shri Prem Shankar Shukla retired Addl. District & Sessions Judge as an Arbitrator was non est, contrary to the terms and conditions of the agreement dated 7.8.2017. He further submitted that till date the applicant has not submitted any claim before the Chairman, RSFCSC as he could have under the agreement dated 7.8.2017. Mr. Anil Mehta however hastened to submit that all the applicant's allegation of the respondent being in breach of its obligations under the agreement dated 7.8.2017 are incorrect and false and in fact the applicant itself was in breach. 8. Heard. Considered. 9. The argument of the counsel for the respondent with regard to appointment of Chairman, RSFCSC as the Arbitrator for addressing the disputes and differences relating to and arising out of the agreement dated 7.8.2017 are in the cross-hair of Section 12(5) of the Arbitration and Conciliation Act, 1996 read with Schedule 5 and 7 thereof. 10. This court, while deciding S.B. Arbitration Application No. 80/2011 - M/s. Rajendra Prasad Bansal Vs. The Union of India and Another, vide judgment dated 14.07.2017, dealt with question as to whether a party to an arbitration clause would have the right to appoint an arbitrator who is connected with in any manner? It was held as under:- "If the un-amended Clause 64.(7) is read, it would abundantly become clear that the intention manifest therein is that any statutory modifications in the Act of 1996 and the rules framed there under, shall apply to the arbitration proceedings in that Clause. The amended Clause 64.(7) of the GCC has not only provided that any statutory modifications of the Act of 1996 and the Rules framed there under, shall apply to the appointment of arbitrator and arbitration proceedings under that Clause, but has also additionally included the General Conditions of Contract therein to say that any statutory modifications thereto shall apply to the appointment of arbitrator. In the first place, modifications unilaterally brought about by the respondent Railways in Clause 64.(7) can not be described as statutory in character and secondly, such unilateral modifications made by the respondent Railways to insist on furnishing the names of retired Railway Officers empanelled to work as arbitrators amongst four names of Gazetted Railway Officers, to the contractor, would still be in direct conflict with the holistic purpose for which sub-section (5) of Section 12 has been inserted with a non obstante clause by providing that notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule, shall be ineligible to be appointed as an arbitrator. The only exception that is provided thereto is engrafted in the proviso to sub-section (5) of Section 12 is that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing, which the Railways themselves have incorporated in Clause 64.(1). But in cases where there has been no waiver by the contractor, the Railways cannot achieve what they failed to achieve by not being able to persuade the contractor to waive the applicability of Section 12(5), by insisting on him to select, if not any serving Gazetted Railways Officer as its nominee arbitrator, at least retired Railways Officer empanelled to work as Railway arbitrator to act as contractor's nominee arbitrator. Moreover, as already held above, once the General Manager has been rendered ineligible to act as Arbitrator, he would also not be competent to nominate any other person as Arbitrator, whether serving or retired. 11. I am of the considered view that the interpolation in the agreement in the FIR No. 327/2018 lodged by Rekha Samraiya, an officer of the respondent at Police Station, Bajaj Nagar, Jaipur in regard thereto cannot be in the facts of the case a ground to circumvent the arbitration of the disputes between the parties in terms of clause 10 of the agreement. It is an admitted fact that agreement was acted upon. So far as the interpolation in condition No. 5(a) of the agreement is concerned, the respondent shall be free to have the said issue also adjudicated as a dispute before the Arbitrator. 12. It is an admitted fact that agreement was acted upon. So far as the interpolation in condition No. 5(a) of the agreement is concerned, the respondent shall be free to have the said issue also adjudicated as a dispute before the Arbitrator. 12. Having regard to the facts of the present case and considering that there exists a dispute between the parties and the parties agreed to resolve the same by way of arbitration as the agreement dated 7.8.2017 contains arbitration clause, such dispute is liable to be resolved through arbitration proceedings. It is not for the court under its jurisdiction under Section 11(6) of the Act of 1996 to address or even consider the merit of the applicant's claim against the respondent or defence thereto. That is a matter of the Arbitrator's sole jurisdiction. 13. At this stage, counsel for both the parties are ad-idem to appoint Hon'ble Mr. Justice Mahesh Bhagwati (Retd.) as a sole arbitrator to adjudicate and resolve the dispute and differences having arisen between the parties for the reason that he has already been appointed as an Arbitrator in a similar case. 14. In this view of the matter, the present arbitration application deserves to succeed and same is allowed. Hon'ble Mr. Justice Mahesh Bhagwati (Retired), (cell No. 9414160666), R/o. "Sukh Shanti", L-44, Income Tax Colony, Tonk Road, Durgapura, Jaipur, is hereby appointed as an independent sole arbitrator to resolve the disputes between the parties. Payment of the costs of arbitration proceedings and the arbitration fees shall be made as per the Fourth Schedule of the Arbitration and Conciliation (Amendment) Act, 2015 read with Manual of Procedure for Alternative Dispute Resolution, 2009 of this Court, as amended from time to time. 15. A copy of this order be sent to Hon'ble Mr. Justice Mahesh Bhagwati (Retired), (cell No. 9414160666), R/o. "Sukh Shanti", L44, Income Tax Colony, Tonk Road, Durgapura, Jaipur, for needful.