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Madhya Pradesh High Court · body

2019 DIGILAW 163 (MP)

KEC International Ltd. v. M. P. Madhya Kshetra Vidyut Vitaran Co. Ltd.

2019-02-21

SUJOY PAUL

body2019
ORDER : 1. The applicant has invoked the jurisdiction of this Court under Section 11(6) of Arbitration and Conciliation Act, 1996 (Arbitration Act) for appointment of a suitable Arbitrator to resolve the dispute between the parties. 2. At the outset, learned counsel for the parties fairly submitted that the core issue in the present case is whether the ‘Letter of Award/Contract’ Annexure P/1 falls within the ambit of ‘works contract’ as per Section 2(i) of Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (Adhiniyam)? 3. Shri Jubin Prasad, learned counsel for the applicant placed reliance on clause (2) ‘Scope of work’ which talks about supply, erection, testing and commissioning of Distribution Sub stations. He urged that this clause read with Section 2.1 makes it clear that the end result of applicant’s activity would creation of a ‘Distribution Sub station’. The Distribution Sub station, by no stretch of imagination, can be treated to be a ‘power station’. By taking this Court to the definition of ‘works contract’, Shri Prasad submits that nature of activity to be carried out by the applicant does not fall within the four corners of ‘works contract’. He placed reliance on clause (14) of the ‘Detailed Bill of quantity’ for Supply of Materials for Distribution Sub stations. The clause (14) shows that the activity of supplying, installation, testing and commissioning of 33/11KV power transformer was there on the shoulders of the applicant. Shri Prasad relied on entries 50 and 51 of this Bill which is related with supply and establishment of ACSR Dog conductors. By taking this Court to a recent order passed in AC No.80/2010 decided on 15.2.2018, Shri Prasad submits that limited application of this order of Hon’ble the Chief Justice is that the ACSR conductors are not covered within the definition of ‘works contract’. Thus, these entries relating to ACSR conductors are of no assistance to the other side. 4. Reverting back to the main issue, Shri Prasad submits that a careful reading of the contract makes it clear that it does not fall within the ambit of ‘works contract’ and therefore the applicant cannot be relegated to avail the remedy under the Adhiniyam of 1983. 5. Further more, it is contended that there exists an arbitration clause i.e. 48.6, a living dispute between the parties and the inaction of respondent in appointing an Arbitrator. 5. Further more, it is contended that there exists an arbitration clause i.e. 48.6, a living dispute between the parties and the inaction of respondent in appointing an Arbitrator. Thus, necessary ingredients for exercising powers under sub-section (6) of Section 11 are satisfied. Hence, suitable directions may be issued for appointment of an Arbitrator. 6. Sounding a contra note, Shri Waswani, learned counsel for the respondent relied upon the nature of work mentioned in the ‘Letter of Award’ wherein it was specified that work is of “supply, erection, testing and commissioning of New 11KV Addl. Bays, 11KV & LT Lines and 11/0.4 KV Distribution Sub stations. Shri Waswani placed reliance on clause (1), (2), (3), (5), (6), (8) and (9) of the said Bill wherein requirement of supply, erection & installation are mentioned. By relying on Webster’s Pocket Thesaurus, Shri Waswani submits that the word ‘construct’ includes build, erect, make, fabricate and create. Thus, ‘erection’ is also a construction activity. In the light of this dictionary meaning, it is clear that the applicant is very much involved in an activity of construction which falls within the meaning of ‘works contract’. Next submission of Shri Waswani is that from Distribution Sub stations also, the power is supplied to the consumers. Thus, for all practical purposes, the words ‘Power House’ and ‘Distribution Substation’ is one and the same. Shri Waswani also placed reliance on Section 7 of the Adhiniyam and urged that the only forum where petition can get his grievance redressed is the Tribunal constituted under the Adhiniyam. Thus, application is not maintainable. The Full Bench in Viva Highways Ltd. vs. Madhya Pradesh Road Development Corporation Ltd., AIR 2017 MP 103 made it clear that the amended definition of ‘words contract’ being clarificatory in nature, will be retrospective in operation, thus, it must be presumed that said amended definition was in the Statute Book since inception of the Adhiniyam. The applicant’s activities are squarely covered within the definition of ‘works contract’. 7. To elaborate, Shri Waswani relied on the amended definition of ‘works contract’ wherein it is mentioned that supply of goods, material and other matters relating to execution of the said works are also included. He submits that this definition is wide enough which covers the activities mentioned in the contract and therefore this application is not maintainable. 8. 7. To elaborate, Shri Waswani relied on the amended definition of ‘works contract’ wherein it is mentioned that supply of goods, material and other matters relating to execution of the said works are also included. He submits that this definition is wide enough which covers the activities mentioned in the contract and therefore this application is not maintainable. 8. It is important to mention here that the order dated 4.11.1996 published in M.P. Gazettee dated 26.11.1996 was placed before this Court by Shri Jubin Prasad. Shri Prasad by relying upon the order of this Court dated 14.1.2019 pointed out that respondent has already taken a stand that this notification will not change the definition of ‘works contract’. On a specific query from the Bench, Shri Waswani fairly submits that he is not pressing this notification dated 26.11.1996 and is keen to confine his arguments on the amended definition of ‘works contract’. 9. No other point is pressed by the parties. 10. I have heard the parties at length and perused the record. 11. The pivotal question which will decide the aspect of maintainability of this case is whether the contract in question falls within the ambit of ‘works contract’ as defined under the Adhiniyam. It is apposite to quote that definition: “2(i) “Work-contract” means an agreement in writing or a letter of intent or work order issued for the execution of any work relating to construction, repair or maintenance of any building or superstructure, dam, weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory, work-shop, powerhouse, transformer or such other works of the State Government or public undertakings or of the Corporations of the State as the State Government may, by notification, specify in this behalf at any of its stages, entered into by the State Government or by any official of the State Government or by public undertakings or Corporation or by any official of the State Government for and on behalf of such Corporation or public undertakings and includes an agreement for supply of goods or material and all other matters relating to execution of any of the said works and also includes the services so hired for carrying out the aforesaid works and also include all concession agreement, so entered into by the, State Government or public undertakings or Corporation, wherein an State support is involved or not,”. (Emphasis supplied) Section 7 of the Adhiniyam is also relevant for adjudication of this matter which reads as under: 7. Arbitration agreement-(1) In this part, “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. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in – (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. 12. The relevant portion of the present contract needs to be examined in the teeth of definition of ‘works contract’. Certain clauses of ‘Letter of Award’/contract on which reliance is placed by learned counsel for the parties reads thus: ‘LETTER OF AWARD’ (FOR ERECTION) TO M/S.KEC International ltd. Gurgaon For turnkey Works of ‘’Supply, Erection, Testing and Commissioning of New 11 KV Addl. Bays, 11KV & LT Lines and 11/0.4 KV Distribution Substations” package of works in Morena District under RGGVY Scheme (2) SCOPE OF WORK Detailed scope of Erection portion of works for “Supply, Erection. Testing and Commissioning of New 11 KV Addl. Bays, 11KV < Lines and 11/0.4 KV Distribution Sub stationsin MORENA district to be implemented on turnkey basis under RGGVY Scheme” covered in this award is given in ‘Section-1;General Information & Scope of work’, of Bid Document Vol.-II The scope of work includes execution on turnkey basis with complete Erection. Testing and commissioning and transportation, storage of all items & materials as elaborated below including all associated activities that though not exclusively specified herein but are required of the completion of the entire works under this package. Testing and commissioning and transportation, storage of all items & materials as elaborated below including all associated activities that though not exclusively specified herein but are required of the completion of the entire works under this package. This specification intends to cover but shall not be restricted to the following activities, services and works: (i) All civil and structural works to include equipment and structure foundation earthing, pipes, cable trenches etc, as required. 2.1 The Detailed Scope of Works of Key Area is listed as under The scope shall include but not be limited to the following: (a) Erection, Testing and commissioning of equipments, earthling pipes/rod support & gantry structures etc. and civil & structural works to include equipment & Gantry foundations (including those of transformers), (b) Transportation, storage, and insurance, Erection, Testing and commissioning of following items at various 33/11 KV Sub stations: (i) 11 KV Circuit breaker, Power Transformer, AB Switch, Current Transformer, Voltage Transformer, CT/PT Unit, Surge Arresters including relevant Conductor, Insulator, Hardware & Structures. 2.2 Civil Works 2.2.1 The Civil works shall include but not limited to the following: (a) Strengthening the Foundation of 33/11 KV Power Transformers. (b) Foundation for structures and equipments. (c) Foundation for lighting poles. Control panels, cubicles of equipment, wherever required. (d) Stone filling of substation area as prescribed. (e) Cable trenches along with cover. (f) Spreading of B.T. Metal in yard area of additional 11 KV Bay. (g) For Civil works you shall supply all materials required for construction/installation works. You shall also supply the cement and steel. 2.2.2 Before proceeding with the construction work of the Augmentation of Power Transformers in existing 33/11 KV substation. You shall fully familiarize yourself with the site conditions and general arrangements & scheme etc. Though you shall endeavor to provide the information, it shall not be binding for the Employer to provide the same. You are adviser to visit the substation site and acquaint yourself with the topography, infrastructure and also the design philosophy. You shall be fully responsible for providing all equipments, material, systems and services specified or otherwise required to complete the construction and for successful commissioning. Operation & maintenance of the substation in all respects. 2.2.3 You shall do the complete design and details engineering based on conceptual tender drawings. 2.3 Erection Works You Shall construct, erect and install all equipment and material of Sub stationscovered under the project. Operation & maintenance of the substation in all respects. 2.2.3 You shall do the complete design and details engineering based on conceptual tender drawings. 2.3 Erection Works You Shall construct, erect and install all equipment and material of Sub stationscovered under the project. You shall be responsible for provision of all labour, tools & plants, and supervisory staff for safe, reliable, proper and correct erection of project components. You shall be responsible for making all connections at terminal points, and shall supply necessary jointing material, connectors, nuts, bolts, etc. You Shall ensure regular periodic cleaning of work sites and removal of all waste material, packing material, surplus earth and left-over and their proper disposal. Detailed Bill of Quantity for “Supply of materials for New 11KVAddl. Bays,11KV < Lines and 11/0.4 KV Distribution Substations” under RGGVY Scheme in Morena District awarded to M/S. KEC International LTD. DLF Infinity Towers, 7th floor, Tower “B” DLF City, phase II, Gurgaon. NIT NO. : CMD/CZ/02/RGGVY/MRN/100, Dated 04-05-09 T.S. No. :CMD/CZ/02/RGGVY/MRN.01/09.10 Sr.No. PARTICULARS Unit Total QTY of Pack age Charges towards Transportation, Storage, Erection. Testing & Commissioning (inclusive of insurance & all applicable taxes) Unit Rate Total Cost 1. Supply and erection of 9 meter long H Beam size MB 152x152 mm. as per specification aligning and keeping it in truly vertical position including digging of pit in all type of soil/rock of required size of minimum 1/6th length of pole filling with 1:3:6 cement concrete of 0.8 meter dia of required length including muffeing with plaster up to 45 cm above ground level with 20 cm thick base foundation complete with painting of pole with 2 coat of bitumen paint on portion buried under ground and 2 coats of Redoxide and 2 coat of Aluminum paint on portion above ground level complete as specified in MPSEB technical specifications and as per requirement. No 44 4000 176000 2. Supply and erection of DC cross arm made of MS Channel size MC 100x50 mm suitable for 408 meter center (total 5.1 meters in length)double box bus bar with suitable clamp and G>I. nuts/bolts for fixing with existing gantary structure. All chanels, angles, clamps etc. must be painted with two coats of red oxide and two coats of aluminum paints. Set 132 348 45936 3. All chanels, angles, clamps etc. must be painted with two coats of red oxide and two coats of aluminum paints. Set 132 348 45936 3. Supply & installation, testing & commissioning of 11KV 400 Amp Air Break Switch with 2 pole in each phase manually gang operated and vertical break and horizontal mounting type with phase coupling shaft operating down pipe with fixing arrangement of handle for fixing on RSJ size MB 175x85 mm 1.5 meter long duly grouted with concreting and clamping arrangements for AB Switch handle. Set 22 783 17226 4. Supply installation, testing and commissioning of triple pole outdoor type 11KV, 630 Amp Vaccum circuit Breaker for Feeder control with structure, control panel, 3 no. CYs (200-100/5-5 Amp) complete with necessary control. The installation of VCB shall be carried out in accordance with IS 3072.The VCB shall be mounted on structure of suitable size made of galvanized MS channel/angle iron with galvanized nuts/bolts and washers, including construction of suitable foundation as per drawing no. SEC/BPL/1081 Set 22 7827 172194 5. Providing earthing of structure /equipments/fencing and breaker by excavation in all type of soil/rocks up to 3 meter depth by providing by 25 mm dia GI rod 3 mts. Length covered with 40mm B Class GI pipe (holes on peripheral) fitting with bentonite powder and arrangement of pouring water from top including all necessary civil work (450x450x450mm bricks masonry chamber with frame hinged cover. Wire mesh funnel reducer etc.) all connecting clamps. nut/bolt connected with each either and existing earthing system by GS flat size 50x6 mm. Set 106 696 73776 6. Providing earthing of structure/equipment by excavation in all type of soil/rocks up to 3 meter depth by providing 40mm. B class GI pipe (holes on peripheral) filling with Black cotton soil, Charcoal and arrangement of pouring water from top. All connecting clamps, nut/bolts connected with each other by GI Wire 8SWG Set 6045 870 5259150 7. Supply and installation testing/ commissioning of 3 phase 4 Wire, 63.5 V (110 V P-P), 5 Amp ISI marked Static HT Trivector 0.55 Class meter for 11KV and 33 KV system with GSM/GPRS enabled modem complete with Base computer Software as per technical specifications suitable for meter end with software and accessories along with 11 KV/110 volt 3 phase 4 wire capacity 300- 150/5-5 Amp metering equipment (CT/PT unit) complete with meter box, control cable. Fixing arrangement etc. Fixing arrangement etc. on take off DP structure. No. 22 1391 30602 8. Supply and erection of metering on distribution transformer with LT whole current. 20-100 Amp. 1ph 2 Wire electronic trivector meter along with meter box with necessary cable and glands, with GSM/GPRS enabled Modem complete with Base Computer Software as per technical specifications suitable for meter end with software and accessories etc. complete in all respect. No 616 522 321552 9. Supply and erection of metering on distribution transformer with LT whole current, 20-100 Amp 3 Ph, 4 Wire electronic trivector meter along with meter box with necessary cable and glands, with GSM/GPRS enabled Modem complete with Base Computer Software as per technical specifications suitable for meter end with software and accessories etc. complete in all respect. No 1399 522 730278 10. Supplying installation testing and commissioning of 33/11 KV power transformer. The installation shall be carried out in mounted on the existing concrete foundation with providing wedge of any other means to prevent accidental movement of transformer. The complete work should be done as specified in technical specifications with all necessary bimetallic clamps. Earthing arrangements. jumpering etc. along with panel to be commissioned in control room having indication (LED) for buchholz relay. Oil temperature, winding temperalure and MOG along with all necessary control cables, and indication paneal for transformer. 13. A conjoint reading of aforesaid clauses of the contract shows that applicant was required to undertake the exercise of supply, erection, commissioning and construction work of augmentation of power transmission, etc. The clause 2.2 and 2.3 shows that in order to translate the contract into reality, the applicant was required to undertake the civil work which includes construction. Shri Waswani has pointed that the word ‘erect’ has definite meaning which covers within itself the activity of construction, building, fabrication, creation, etc. The Full Bench in Viva Highways (Supra) considered the ambit and scope of definition of ‘works contract’ and opined as under: “49. Reverting back to the unamended definition of 'works contract', it is noteworthy that works contract means an agreement which must be in writing for the execution of any work relating to construction, repair or maintenance of any building or super structure or other entities mentioned in the said definition. In the definition, it was made clear that other matters relating to execution of any of the said work are also included. In the definition, it was made clear that other matters relating to execution of any of the said work are also included. In our considered view, whether a concession agreement or any agreement by whatever name called is a works contract or not will depend whether essential ingredients of works contract are available in the said agreement. The essential ingredients in the definition of “works contract” are that the agreement must be in writing, it must be for execution of “any work” relating to construction, repair or maintenance of any building, super structure or other entities mentioned in the definition. The words “any work relating to construction, repair or maintenance” are very wide. If activity of construction, repair or maintenance is involved, nature of construction, repair or maintenance is immaterial. If aforesaid essential ingredients of works contract are available in the agreement and in addition thereto certain other elements are added in the agreement which are not included in the definition of “works contract”, it will not take out the agreement outside the purview of works contract. If present agreement is tested on the anvil of aforesaid principle, it will be clear like noon day that the agreement fulfills the said requirement i.e. there exists an agreement in writing for execution of work relating to construction, repair and maintenance of building and other entities.” (Emphasis supplied) The Full Bench in aforesaid case, considered the expression “any work relating to construction, repair or maintenance” used in the definition of ‘works contract’ and opined that the said expression is very wide. If activity of construction, repair or maintenance is required to be undertaken, nature of construction, repair or maintenance is insignificant. As per this litmus test, I have gone through the aforesaid clauses of the contract which shows that as per the contract, the applicant is required to execute a work relating to construction and said activity of construction is directly related with installation of transformer. Apart from this, the amended definition of ‘works contract’ is much wider which covers all other matters relating to execution of any of said works. In Viva Highways (Supra), it was poignantly held that Act No.7 of 2007 whereby definition of ‘works contract’ was amended is clarificatory in nature and is applicable to pending and future contracts. Apart from this, the amended definition of ‘works contract’ is much wider which covers all other matters relating to execution of any of said works. In Viva Highways (Supra), it was poignantly held that Act No.7 of 2007 whereby definition of ‘works contract’ was amended is clarificatory in nature and is applicable to pending and future contracts. Thus, even if as a result of execution of the contract, a Distribution Sub station comes into existence, it will not make any difference for the simple reason that various clauses mentioned above makes it clear that applicant is required to undertake the exercise of construction in relation to installation of transformer. Thus, the contract in question is covered within the definition of ‘works contract’ under the Adhiniyam. So far argument of Shri Prasad in relation to various clauses of contract which deal with ACSR conductors are concerned, suffice it to say that since other clauses mentioned herein above deal with construction activity and are covered under ‘works contract’, the order passed in AC No.80/2010 will not make any material difference in the present case. Putting it differently, even if activity relating to ACSR conductors is taken out, the remaining portion of contract does fall within the purview of ‘works contract’ under the Adhiniyam. 14. The finding of Full Bench in Viva Highways (Supra) in relation to applicability and effect of Section 7 of the Adhiniyam is relevant which reads as under: 56. Section 7 of the Adhiniyam, 1983 reads as under: “7. Reference to Tribunal (1) Either party to a works contract shall irrespective of the fact whether the agreement contains an arbitration clause or not, refer in writing the dispute to the Tribunal. (2) Such reference shall be drawn up in such form as may be prescribed and shall be supported by an affidavit verifying the averments. (3) The reference shall be accompanied by such fee as may be prescribed. (4) Every reference shall be accompanied by such documents or other evidence and by such other fees for service or execution of processes as may be prescribed. (3) The reference shall be accompanied by such fee as may be prescribed. (4) Every reference shall be accompanied by such documents or other evidence and by such other fees for service or execution of processes as may be prescribed. (5) On receipt of the reference under sub-section (1), if the Tribunal is satisfied that the reference is a fit case for adjudication, it may admit the reference but where the Tribunal is not so satisfied it may summarily reject the reference after recording reasons therefor.” Sub-section (1) makes it clear that the aggrieved party to a works contract may refer its dispute in writing to the Tribunal irrespective of the fact whether there exists any agreement between the parties which contains an arbitration clause or not. Indisputably, the Adhiniyam of 1983 was held to be intra vires. A Full Bench of this Court in 2007 (4) MPHT 444 , (Shri Shankarnarayan Construction Co. vs. State of M.P.) held as under: “Thus, if a works contract, as defined in Section 2(1)(i) of the 1983 Adhiniyam contains an arbitration clause, either party to the woks contract will have to refer the dispute to the Arbitration Tribunal as constituted under Section 3 of the 1983 Adhiniyam and cannot refer it to any other arbitrator for arbitration. The 1983 Adhiniyam is, therefore, a law for the time being in force relating to arbitration pursuant to an arbitration agreement between the State Government or its Undertaking and the contractor and is saved under sub-section (5) of Section 2 of the 1996 Act from the provisions of Part-I of the 1996 Act which are inconsistent with the provisions of the 1983 Adhiniyam.” 15. In the light of this authoritative pronouncement in the case of Viva Highways (Supra), I have no scintilla of doubt that appropriate remedy for the petitioner is to approach the Madhyastham Adhikaran constituted under the Adhiniyam. 16. In view of foregoing analysis, the contract in question is a ‘works contract’ and; therefore, this application filed under Section 11(6) of Arbitration and Conciliation Act, 1996 is not maintainable. The applicant may approach the appropriate forum. 17. With the aforesaid liberty, the application is dismissed.