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2022 DIGILAW 169 (JK)

Union of India v. Des Raj Nagpal

2022-04-19

TASHI RABSTAN

body2022
JUDGMENT : A. AA No.12/2021 1. The instant appeal has been preferred by the appellants under Section 37 of the Arbitration and Conciliation Act, 1997 (hereinafter referred to as "the Act") against the order dated 15.02.2021 passed by the learned 1st Additional District Judge, Jammu in a petition filed under Section 34 of the Arbitration and Conciliation Act, 1997. Learned 1st Additional District Judge while dismissing the said petition of appellants herein held that the Chief Engineer, who was a party to the arbitration agreement and arbitration proceedings before the arbitrator, did not file the petition under Section 34 of the Arbitration & Conciliation Act, rather the same came to be filed by the Garrison Engineer, who was not a party to the arbitration agreement, as such the Garrison Engineer being an outsider cannot step into the shoes of the Chief Engineer and challenge the arbitral award. 2. The facts, as gathered from the appeal file, are that the respondent-contractor being the successful bidder was allotted a contract for construction of storage sheds and connected works including storage facility at Nagrota. A contract agreement to this effect was executed between the Union of India through Chief Engineer, Udhampur Zone and M/s. Des Raj Nagpal, Engineers and Contractors. Since a dispute arose between the parties to the contract, as such in terms of arbitration clause, one Sh. Satish Chander, Addl. Director General was appointed as the sole arbitrator to adjudicate upon the dispute between the parties to the contract. The sole arbitrator entered upon the reference, made and published the award dated 12.09.2016, which was amended on 22.10.2016, whereby some claims of the contractor were partly sustained and some of them were rejected. Appellants/petitioners feeling aggrieved challenged the award under Section 34 of the Arbitration & Conciliation Act before the 1st Additional District Judge, Jammu. However, the court below vide order dated 15.02.2021 dismissed the same holding that the Chief Engineer, who was a party to the arbitration agreement and arbitration proceedings before the arbitrator, did not file the petition under Section 34 of the Arbitration & Conciliation Act, rather the same came to be filed by the Garrison Engineer, who was not a party to the arbitration agreement, as such the Garrison Engineer being an outsider cannot step into the shoes of the Chief Engineer and challenge the arbitral award. Hence, the present appeal under Section 37 of the Arbitration & Conciliation Act, 1997. 3. Learned counsel appearing for appellants argued that the contract was not between the Chief Engineer and the contractor, but between the contractor and Union of India although through the Chief Engineer. He further argued that under Article 229 of the Constitution of India, all contracts made in the exercise of the executive power of the Union shall be expressed to be made by the President though, in the present case, the same has been signed by the Chief Engineer for and on behalf of the President, which does not make it a contract between the contractor and the Chief Engineer. The finding of the Court below to this effect, as such, is fallacious and unconstitutional and is liable to be set aside. 4. Learned counsel further argued that while Article 299 of the Constitution of India applies only to the execution of contracts in exercise of executive powers of the Union, the authority to sign pleadings is governed by Order XXVII Rules 1 & 2 CPC. He also argued that vide Notification No. G.S.R. 167 dated 14.02.1990 read with Rules 1 & 2 of Order XXVII of the First Schedule to CPC, the Garrison Engineer being one of the authorized officers, specified in the Schedule, has been duly competent and authorized to sign the pleadings and to act for the Union of India. He further argued that the contract-in-question was governed by General Conditions of Contract and in terms of Condition 69 thereof, all notices to be given on behalf of the President of India and all other actions to be taken on his behalf may be given or taken on his behalf by the Garrison Engineer or any officer for the time being entrusted with the functions, duties and powers of the Garrison Engineer. 5. Heard learned counsel appearing for the parties, considered their rival contentions and also perused the file. 6. The arbitration agreement is often referred to as the "foundation stone" of arbitration as it is a method of dispute resolution based on mutual party consent to arbitrate future or current disputes. 5. Heard learned counsel appearing for the parties, considered their rival contentions and also perused the file. 6. The arbitration agreement is often referred to as the "foundation stone" of arbitration as it is a method of dispute resolution based on mutual party consent to arbitrate future or current disputes. Section 7 of Arbitration and Conciliation Act, 1996 defines arbitration agreement as “an agreement by the parties to submit to arbitration all or certain disputes which have arisen or may arise between them in respect of a defined legal relationship, whether contractual or not.” This agreement can be in the form of an arbitration clause in a contract or in a form of a separate agreement and it must be in writing and signed by the parties. The parties who sign the arbitration agreement are bound by the arbitral award under Section 34 of the Act. Admittedly, in the present case, the contract-in-question was got executed between the Chief Engineer and the contractor and it was the Chief Engineer who had signed the contract documents, though on behalf of Union of India; meaning thereby the Chief Engineer had been authorized and given the right to represent Union of India and sign documents on its behalf. Thus, there was a privity of contract between the Chief Engineer and the contractor. The doctrine of privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon any person who is not a party to the contract. Privity of contract occurs only between the parties to the contract. Therefore, I do not find any force in the argument of learned counsel for appellants that although the Chief Engineer had signed the contract agreement with the contractor, however, the work of the contract had been looked after by the Garrison Engineer right from the handing over of the site for start of contract work upto the finalization of the whole contract, payments of RARs, even final bill payments have been made by the Garrison Engineer, because there was no privity of contract between the Garrison Engineer and the contractor nor there was delegation of power to the Garrison Engineer. Garrison Engineer had been looking after the whole contract and making payments only for and on behalf of the Chief Engineer and nobody has a right to go beyond the terms of contract. Garrison Engineer had been looking after the whole contract and making payments only for and on behalf of the Chief Engineer and nobody has a right to go beyond the terms of contract. Admittedly, Garrison Engineer was not a “party” to the contract/arbitration agreement in terms of Section 2(1)(h) of the Arbitration and Conciliation Act, rather, in the present case, Garrison Engineer was a third party and a third party has no locus standi to challenge the award under Section 34 of the Act. As such, I am in agreement with the view taken by the court below that the arbitral Tribunal is a private forum and gets jurisdiction to adjudicate upon the disputes between the parties to the arbitration agreement and not the persons who are not parties to the arbitration agreement. 7. The case law cited by the learned counsel for appellants is clearly distinguishable on facts and is of no help to the appellants. 8. Therefore, in view of what has been discussed above, I do not find any merit in the appeal and the same is, accordingly, dismissed along with connected CMs. However, the Union of India is at liberty to challenge the award in accordance with law, if it is so advised. B. AA No.31/2012 & AA No.5/2022 9. Since common question of law and facts are involved in both the matters as well as the issue involved is the same as in AA No.12/2021, as such I do not find any merit in these two matters too and the same are, accordingly, dismissed along with connected CMs in view of what has been discussed above in AA No.12/2021. 10. Registry to send down a copy of this order to the subordinate court.