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2022 DIGILAW 1000 (ALL)

Bundelkhand University Jhansi v. Woodfun

2022-07-04

JAYANT BANERJI, SURYA PRAKASH KESARWANI

body2022
JUDGMENT : 1. This is an arbitration appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short 'Act, 1996') challenging the judgment dated 21.08.2021 passed by the Commercial Court, Jhansi in Arbitration Misc. Case No. 3 of 2017 under Section 34 of the Act, 1996. 2. Briefly stated facts of the present case are that the appellant-herein invited tenders for the work of Modernization, Interior, Electrical and other allied work at Auditorium, Convention Centre and at Conference Room in the Bundelkhand University, Jhansi. The contract was awarded to the respondent-claimant and an agreement dated 27.05.2004 was entered into between the parties. The agreement provides for additional work also. As per agreement, the schedule of rates were made part of the agreement. Copy of agreement has been appended as Annexure-1 to the appeal. The agreement contains an arbitration clause. Since, despite notice of the claimant-respondent, the appellant-University could not appoint any Arbitrator, therefore, the claimant filed an application under Section 11(6) of the Act, 1996 and the Arbitrator was appointed by the High Court. Before the Arbitrator, the claimant filed his claim and the appellant herein also filed their objections/written statement. The Arbitrator passed the award dated 04.02.2017 being Arbitration Case No. 1 of 2015 (M/s Woodfun vs. Bundelkhand University, Jhansi). Against the award, the appellant herein filed an application being Misc. Case No. 3 of 2017 before the Commercial Court, under Section 34 of the Act, 1996 which was rejected by the impugned judgment dated 21.08.2021. Aggrieved with this judgment, the appellant herein has filed the present appeal under Section 37 of the Act, 1996. SUBMISSIONS 3. Learned counsel for the appellant-University submits as under: (i) the additional work done by the respondent-claimant was not covered by the contract and as such, the arbitration award is against public policy. (ii) the arbitration clause contained in the agreement provides that the Vice-Chancellor of the University shall be the Arbitrator, therefore, no other Arbitrator could have been appointed under Section 11(6) of the Act, 1996. 4. (ii) the arbitration clause contained in the agreement provides that the Vice-Chancellor of the University shall be the Arbitrator, therefore, no other Arbitrator could have been appointed under Section 11(6) of the Act, 1996. 4. Learned counsel for the respondent-claimant submits as under: (i) the additional work was directed by the appellant herein to be completed by the claimant-respondent and pursuant to the order/direction of the appellant, the respondent-claimant completed the work and raised the bill for payment, which fact has been acknowledged by the appellant herein vide their minutes dated 14.01.2005, which is part of the arbitral award. The fact of minutes of the meeting dated 14.01.2005 is wholly undisputed. (ii) since as per agreement, additional work was to be carried out and it was infact ordered to be carried out by the appellant herein, therefore, non-payment for additional work by the appellant herein to the claimant was a dispute arising out of the agreement. Consequently, the claimant has requested the appellant herein to appoint the Arbitrator to resolve the dispute. Since Arbitrator was not appointed despite written request, therefore, the claimant-respondent moved an application before the High Court under Section 11(6) of the Act, 1996 and in that proceeding, a retired Hon'ble Judge of the High Court was appointed as Arbitrator who passed the impugned arbitral award after following due process of law. (iii) the scope of interference with the award under Section 34 of the Act, 1996 is limited. (iv) the learned Judge, Commercial Court has lawfully passed the impugned judgment which does not suffer from any infirmity. Analysis 5. The scope of appeal under Section 37 of the Act, 1996 is limited to examination of the matter, that whether the appellant was able to make out a case before the commercial court to entitle it to the benefit of the provisions of Section 34 of the Act, 1996. 6. As far as the first argument advanced on behalf of the appellant-University that since the additional work done by the respondent-claimant was not covered by the contract and as such, arbitration award is against public policy, is concerned, the documents enclosed with the present appeal has been carefully perused. 6. As far as the first argument advanced on behalf of the appellant-University that since the additional work done by the respondent-claimant was not covered by the contract and as such, arbitration award is against public policy, is concerned, the documents enclosed with the present appeal has been carefully perused. In the award dated 4.2.2017 passed by the sole Arbitrator who was appointed by this Court under the provisions of the Act, 1996, the question whether the respondent-claimant had executed the additional work over and above the scope of work mentioned in the agreement, was dealt with by the learned Arbitrator at length. In its stand before the learned Arbitrator the University denied extra work done by the respondent-claimant and issue of any work order for the extra work. It was noted by the learned Arbitrator that as per the agreement, the value of the work was Rs. 1,42,38,469.00 while the payment was made to the extent of Rs. 2,30,00,000/-that in the written statement the appellant-University agreed to the execution of work for Rs. 2,25,00,000/-and claimed refund of excessive amount of Rs. 5,00,000/-. Therefore, a categorical finding was recorded by the learned Arbitrator that the claim of the University that no extra work had been executed stood falsified on the basis of their own record. The learned Arbitrator has referred to various letters/correspondence that revealed that apart from the scope of the work award under the agreement, some extra items were executed and some left out items by the previous contractor M/s Jal Nigam had been executed. The findings of the learned Arbitrator in its award dated 4.2.2017 may be referred to with profit: “......In the various letters written by the Claimant referred hereinabove, there is a reference of execution of the extra item and the left out work. Such averments have not been disputed by the University in any of the letter. In the letter dated 20th December, 2004 the 6th bill dated 8th December, 2004 for Rs.4,44,83,737.50P was processed and in respect thereof it is observed that it is abnormally an high amount and is to be verified at site by the Architect and Engineering staff of the University and the above bill has been bifurcated in the following sub-heads: (1) The amount of work which has been executed against the agreement. (2) The amount of works for extra item. (2) The amount of works for extra item. (3) The amount of such items which have been executed but not provided in the agreement and designs. This letter is the complete acknowledgement of the execution of the extra work and the other items which have not been provided in the agreement. The minutes of the meeting dated 14th January, 2005 also reveals that the extra items and extra works have been executed which were not provided in the agreement. Therefore, it is fully established that apart from the works provided in the agreement the extra works have been executed on the oral direction of the respondent. It appears that after the execution of the agreement it was found that certain items which were required to be executed were not mentioned in the agreement inasmuch as the left out works by M/s. Jal Nigam were asked to be executed by the appellant in respect of which although the Claimant was repeatedly requesting for the written work order, but the same could not be provided and on the verbal instructions the works have been executed which have been duly acknowledged. In view of the above facts and circumstances, I am of the view that although no written work orders have been issued for the execution of the extra work items and the left out items by M/s. Jal Nigam, but since they were found to have been executed, on the oral instructions, which has been duly acknowledged by the respondent the Claimant is entitled for the payment of such extra works executed. The Order sheet entry dated 7th October, 2004 which is reproduced hereinabove, reveals that the Vth running bill was placed for Rs. 2,77,77,429.71 and a request was made for the payment of Rs. 75 lakhs. It also appears that as against the outstanding dues of Rs.59,58,402/- only a sum of Rs. 30 lakhs has been recommended. The Claimant further submitted the 6th running bill dated 8 December, 2004 for Rs. 4,44,83,737.60p. The said bill was processed which is apparent from the letter dated 20th December, 2004 written by the Registrar which is reproduced here in above. The minutes of the meeting dated 14th January, 2005 reveals that the work for Rs. 3,28,66,000/-have been executed. This figure has been arrived on the basis of the measurement of the work executed and the report of the engineers against which 70%, i.e. Rs. The minutes of the meeting dated 14th January, 2005 reveals that the work for Rs. 3,28,66,000/-have been executed. This figure has been arrived on the basis of the measurement of the work executed and the report of the engineers against which 70%, i.e. Rs. 230 lakhs was directed to be paid. Since Rs. 193 lakhs has already been paid, the direction was to pay Rs.37 lakhs in instalment. The various order sheet entries reveal that on the execution of the further work payment of Rs. 37 lakhs was made. From the minutes of the meeting dated 14th January, 2005 it is clear that the extra work has been executed and the work amounting to Rs.3,28,66,000/-have already been executed. It appears that after execution of the work for Rs. 3,28,66,000/-some of the works were left to be executed. It also appears that at this stage some problem arose, claimant was asking for outstanding payment, while the respondent was insisting for completion of work. The claimant was demanding payment while the university was reluctant to pay and paid a small amount as against the outstanding amount. It also appears that the management of the University might have fixed 21st February, 2005 for inauguration of the auditorium and, therefore, they were in urgent need for execution of the work. Therefore, they put the pressure upon the contractor for completion of the remaining work relating to auditorium. The Claimant did executed the work which resulted the inauguration of the auditorium. Admittedly, after the execution of the work for Rs. 3,28,66,000/-the Claimant has executed some work. From a perusal of the letter it appears that at the last stage only three items, namely, two toilets, auditorium and seminar room were left to be executed. By letter dated 23rd February, 2005 the Claimant informed about the completion of the two toilets, auditorium and seminar room on 18th February, 2005. Admittedly the auditorium was inaugurated on 21 February, 2005. Inauguration could be possible when it was ready, may be some minor work remains to be executed. By the letter dated 25th February, 2015 the Registrar of the University has pointed out some incomplete work which has been replied by the Claimant vide letter dated 26th February, 2015. From the perusal of both the letters it appears that some minor work remained to be executed. By the letter dated 25th February, 2015 the Registrar of the University has pointed out some incomplete work which has been replied by the Claimant vide letter dated 26th February, 2015. From the perusal of both the letters it appears that some minor work remained to be executed. The claim of the Claimant was all along that 95% work have been executed and some of the work could not be executed because of non-payment and shortage of fund. The Claimant even assured for completion of work on the payment being made but it appears that the payment could not be made and the balance work could not be executed. However, the claim of the Claimant that 95% of the works have been executed, at no stage, the same has been disputed by the University and from the perusal of the letter dated 25 February, 2005 is also reveals that only a minor work was left, the reason for which has been duly explained by the Claimant in its letter dated 25th February, 2005. From the correspondence and minutes of the meeting dated 14th January, 2005 it appears that the work executed by the Claimant has been got verified by the Engineers and that have also been recorded. It also appears that despite the date was being fixed, the Architect could not verified the claim of the Claimant. In case if the Architect failed to verify the measurement of the executed work, the Claimant cannot be held responsible. Even in the arbitration proceeding the University has not come out with the case that the measurement and valuation made by the Engineer which is duly recorded in the minutes of the meeting dated 14th January, 2005 was incorrect. The University has also not come out with the case disputing that after the meeting of the high level committee further works have been executed by the Claimant. Further work executed by the Claimant is fully established by the various notings in the order sheet referred hereinabove. The claim of the Claimant is for payment of Rs. 4,47,83,337.50p. Which is claimed as per 6th running bill out of which a sum of Rs. 230 lakhs have been paid. The claimant is claiming the balance amount of Rs. 2,16,29,250/-. I am of the view that the work executed for Rs. The claim of the Claimant is for payment of Rs. 4,47,83,337.50p. Which is claimed as per 6th running bill out of which a sum of Rs. 230 lakhs have been paid. The claimant is claiming the balance amount of Rs. 2,16,29,250/-. I am of the view that the work executed for Rs. 3,28,66,000/-is established from the minutes of the meeting dated 14th January, 2005, although the record reveals that after 14th January, 2005, the Claimant has executed further work. Such work has not been separately quantified. No details in respect of such works has been submitted inasmuch as they have also not subjected to measurement. The Claimant during the course of hearing also submitted that payment at least against the executed work of Rs. 3,28,66,000/- which was proved and found to have been executed in the meeting dated 14th January, 2005 should be made. I find substance in the claim of the Claimant and having regard to the entire facts and circumstances, I hold that the Claimant is entitled for the payment of Rs. 3,30,00,000/-. As against the aforesaid amount a sum of Rs. 2,30,00,000/-have been paid and the balance comes to Rs. One Crore only. The Claimant is accordingly entitled for payment of Rs. One Crore only which the Respondent University is directed to pay within one month.” 7. In view of the aforesaid finding, although no written work orders were issued for the execution of the extra work items and the left out items by M/S Jal Nigam but since they were executed on the oral instructions which was duly acknowledged by the appellant-University, the respondent-claimant was entitled for payment of such extra work executed and therefore, the Arbitrator award cannot be said to be against public policy. In the present case, the findings of fact recorded by the Arbitrator has been upheld by the commercial court in the Application under Section 34 by means of the order dated 21.8.2021 and we see no reason to take a contrary view. There is no material before us, nor has it been demonstrated by aid of the tender documents or otherwise that the contract/agreement dated 27.5.2004 was not modified by the conduct of the parties. There is no material before us, nor has it been demonstrated by aid of the tender documents or otherwise that the contract/agreement dated 27.5.2004 was not modified by the conduct of the parties. As a matter of fact, the findings of the Arbitrator and the court below reveal that the respondent-claimant was rightly found to be entitled for payments of the extra works executed even though no written work orders were issued for the execution of the extra work items and the left out items by the M/S Jal Nigam. Accordingly, the first submission on behalf of the appellant-University is rejected. 8. As far as the second submission is concerned that since the arbitration clause contained in the agreement provides that the Vice-Chancellor of the University shall be the Arbitrator, and therefore, no other Arbitrator could have been appointed under Section 11(6) of the Act, 1996, it would be prudent to refer to the terms of the agreement, the conduct of the parties and the applications filed before this Court regarding appointment of Arbitrator. 9. The clause for Arbitrator reads as follows: “Arbitration: Arbitration is a constituent part of the main contract. All disputes and differences of any kind whatever arising out of or in connection with the contract or the carrying out of the works (whether during the progress of the works or after their completion and whether before or after the determination abandonment or breach of the contract) shall be referred to and settled by the Vice-Chancellor as arbitrator whose decision shall be final and binding on both parties......” 10. The issue no. 1 that was framed by the Arbitrator with the agreement of both the parties was whether the Arbitrator had jurisdiction to adjudicate the matter and it has been decided in the affirmative. It has not been disputed by the appellant-University that by the letter dated 21.6.2006, the respondent-claimant invoked the arbitration clause and requested for appointment of the Arbitrator. By a letter dated 19.9.2006, the appellant-University informed the respondent-claimant that in case of dispute and difference between the parties, they are referred to and settled by the Vice-Chancellor as Arbitrator and that in view of that clause, there was no need for appointing any Arbitrator. By means of Fax dated 15.1.2007, the appellant-University required the respondent-claimant to come for a meeting with the Vice-Chancellor on 19.1.2007 but in that meeting nothing was resolved. By means of Fax dated 15.1.2007, the appellant-University required the respondent-claimant to come for a meeting with the Vice-Chancellor on 19.1.2007 but in that meeting nothing was resolved. By a letter dated 5.3.2007, the claimant requested the Accounts Officer of the appellant-University for furnishing the details of the payment made, TDS deducted, stamp duty deducted, for supply of TDS certificate etc. By means of the letter dated 3.10.2008 the Vice-Chancellor of the respondent-University sent a letter to the respondent-claimant stating that there is nothing payable to the claimant. However, this was replied by the respondent-claimant by a letter dated 20.10.2008 and various amounts payable were demanded. Again a request was made for appointment of Arbitrator. Again by letter dated 4.4.2009 received from the Vice-Chancellor of the appellant-University it was stated that the work was not executed as required according to the specification and as such no payment can be made to the respondent-claimant. Since, the appellant-University failed to appoint an independent person as Arbitrator, the respondent-claimant filed an application under Section 11(4) of the Act, 1996 being Arbitration and Conciliation Application U/S 11(4) No. 48 of 2009 before this Court in which the following order was passed on 6.2.2015: “1. Heard Sri Vinod Sinha, Advocate, for applicant and Sri Neeraj Tiwari, Advocate, for opposite party. 2. This is an application filed under Section 11 (6) of Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Act, 1996”) requesting this Court to appoint an independent person as an Arbitrator for adjudication of the dispute between the parties. 3. Applicant is a registered partnership Firm engaged in interior decoration and furnishing work and being an interior decorator and contractor, entered into an agreement with the respondent-Bundelkhand University (hereinafter referred to as “University”) for execution of certain work like modernization, interior, electrical and other allied work at Auditorium, Convention Centre and at Conference Room. Copy of agreement dated 27.5.2004 is on record as Annexure No. 1 to this application. It is said that most of the work has been completed by the applicant but its due payment has not been made and a dispute has been raised in respect thereto, for settlement whereof applicant sent notice dated 18.6.2009 requesting Vice-Chancellor of University to refer the matter for arbitration by appointing an independent Arbitrator. Since nothing has been done, hence this application. 4. Since nothing has been done, hence this application. 4. Learned counsel for parties, after some arguments, stated that since there exist a dispute between the parties which is liable to be settled by Arbitration in terms of “arbitration clause” in the agreement, therefore, this Court may appoint an independent Arbitrator, who may settle the matter expeditiously, but within a reasonable time. Learned counsels for parties did not dispute that all the circumstances, as required under the statute, exist justifying appointment of Arbitrator by this Court. 5. In view thereof and with the consent of the parties, I appoint Hon'ble Mr. Justice Muneedra Kumar Mittal (Retired Judge of this Court) as sole Arbitrator. The applicant is permitted to submit his claim within a month to the Arbitrator, whereafter Arbitrator shall enter into the arbitration proceedings and submit award within six months. The remuneration payable by the parties to the Arbitrator would be Rs. 50,000/- besides Rs. 10,000/-towards expenses, for each effective sitting/proceeding/hearing. The aforesaid amount of remuneration and expenses shall be borne equally by both the parties. 6. The application stands disposed of accordingly.” 11. Thereafter, a new Arbitrator was appointed with the consent of both the parties by the order of this Court dated 16.10.2015 in the aforesaid case which is as follows: “1. This is an application filed under Section 11(6) of Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Act, 1996”) seeking change of the Arbitrator. Hon'ble Mr. Justice M.K. Mittal (Retired Judge), was appointed Arbitrator in this matter by order dated 06.02.2015. It is stated that wife of Arbitrator has some dispute with University and, therefore, the applicant-University has apprehension of lack of fairness on the part of Arbitrator. 2. However, counsel for both the parties stated at the bar that for fair consideration of the matter, the Arbitrator may be changed. 3. This Court does not admit the allegation, but to ensure fair proceedings in the matter, in which both the parties have confidence and faith, and, in the interest of justice, I find it expedient to change the Arbitrator. 4. The application is allowed. Order dated 06.02.2015 passed by this Court is hereby modified. I hereby appoint Hon'ble Mr. Justice Rajes Kumar (Retired Judge of this Court) as Arbitrator. Rest of terms of payment etc. shall remain the same as contained in the order dated 06.02.2015.” 12. 4. The application is allowed. Order dated 06.02.2015 passed by this Court is hereby modified. I hereby appoint Hon'ble Mr. Justice Rajes Kumar (Retired Judge of this Court) as Arbitrator. Rest of terms of payment etc. shall remain the same as contained in the order dated 06.02.2015.” 12. Therefore, a perusal of the aforesaid two orders passed by this Court under Section 11(4) of the Act, 1996 reveals that the Arbitrator was appointed with the consent of the parties. Accordingly, it does not lie in the mouth of the appellant-University to submit that in view of the arbitration clause contained in the agreement, no other arbitrator could have been appointed under Section 11(6) of the Act, 1996. 13. The factual issues have been duly settled by the learned Arbitrator in the findings recorded and also by the court below in proceedings under Section 34 of the Act, 1996 and as such call for no interference. 14. This appeal is devoid of merit and is, accordingly, dismissed.