Lion Engineering Consultants Pvt. Ltd. v. Managing Director, Chhattisgarh Road And Infrastructure Development Corporation Limited
2023-07-21
RAMESH SINHA
body2023
DigiLaw.ai
ORDER : 1. This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, the Act of 1996) for appointment of an arbitrator. 2. The facts, in brief, necessary for adjudication of this arbitration application are that the applicant is a Company registered under the Companies Act, 2013 having its registered office at Bhopal, Madhya Pradesh, and engaged in business of providing services related to preparation of detailed project reports (DPR), project management consultancy services (PMC) for roads/expressway/flyovers construction works. Pursuant to a notice inviting tender (NIT) for consultancy services for preparation of DPR including project management of two or more Lane Road projects in the State of Chhattisgarh-package No.2, the applicant submitted its financial proposal on 23.07.2015. The applicant was declared as successful bidder vide letter of acceptance No.246/CGRDC/2015 dated 24.07.2015. A work order for DPR work dated 07.08.2015 and work order for PMC dated 10.02.2017 was issued by the non-Applicant. The total contract amount was Rs.12,37,00,674.25/- including the DPR and PMC services. The parties executed a Contract Agreement No. 01-W/CGRDC/2015-16 dated 07.08.2015 (Contract Agreement) for providing PMC services. During the course of operation of the Contract, a disputes arose as to the non-payment of Applicant's consultancy fee amounting to Rs. 1,11,34,730/-. The respondent have informed the applicant that a penalty of Rs.1,18,11,000/- has been imposed in another project "Fafadih project" as such the amount of penalty is recoverable from the payments due on the instant projects. There being no clause in the present contract empowering the respondent to recover the amount due from another contract, the act of withholding the legitimate claim is non est. With no other choice, the applicant vide letters dated 20.01.2022 and 08.03.2022, had requested the non-applicant for amicable settlement under Special Conditions of Contract (SCC) Clauses 9.2.1(b) & 9.2.2 of the contract agreement. Since, no response was received from non-applicant/CGRDC to the request for amicable settlement. 3. Mr. Tripathi submits that in the aforesaid circumstances, the applicant was left with no other option but to issue notice for invocation of arbitration dated 11.07.2022 in accordance with under SCC Clauses 9.2.1(b) and 9.2.2 of contract agreement. The respondent has neither given any reply to the notice for appointment of Arbitrator nor has taken any steps for amicable settlement of dispute.
The respondent has neither given any reply to the notice for appointment of Arbitrator nor has taken any steps for amicable settlement of dispute. The jurisdiction of State Arbitration Tribunal is limited to the "Works Contract" whereas, the instant contract is for preparation of DPR and PMC services which does not come under the purview of the works contract and therefore, is out of the jurisdiction of the State Tribunal. In this connection, order of this Hon’ble Court in ARBR No. 23/2018 SMEC International v. State of Chattisgarh, a similar view has been taken. The applicant, again vide letter dated 11.07.22 requested the non-applicant to resolve the dispute by appointing an arbitrator under SCC Clause 9.2.1(b) and 9.2.2. Since, no action has been taken by the non-applicant, the applicant is preferring this application under section 11(6) for appointment of Arbitrator. 4. Mr. Tripathi, learned counsel for the applicant submits that the work order for DPR work dated 07/08/2015 and work order for PMC dated 10.02.2017 were issued by the non-Applicant. The time limit for preparation of DPR was 8 months and time limit for PMC was 24 months. Being satisfied with the work of applicant, the non-applicant, vide letter No. 2516/CGRDC/2018 dated 01/08/2018 extended the period of PMC services for 6 months with a direction to furnish bank guarantee of Rs.5,13,330/- and deployment of personnel and sub-professional staff. The non-applicant, without any reason arbitrarily started withholding of payments for the PMC work from May 2018. The applicant has deployed the personnel as per list given and the total remuneration for extended period was approximately 1,02,66,600/-. The applicant, vide letter dated 27/9/2018 requested the non-applicant to release the payment of Rs. 56,84,135/- for disbursement of salary of staff employed in the PMC work. The applicant wrote several letters viz. Dated 20.12.2018, 28.1.2019, 22.6.2019, 28.8.2019 and 16.12.2019 for releasing the payments withheld under various heads such as 5% security deposit, 5 % amount from monthly invoices and also the amount of monthly invoices. Since there was no response from the non-applicant, the applicant vide its letter dated 06.01.2020 and reminder letter 08.02.2020 requested the non-applicant for amicable settlement of issues as per the provisions of GCC, sub-clause 9.1 and 9.2 of the agreement. 5. Mr.
Since there was no response from the non-applicant, the applicant vide its letter dated 06.01.2020 and reminder letter 08.02.2020 requested the non-applicant for amicable settlement of issues as per the provisions of GCC, sub-clause 9.1 and 9.2 of the agreement. 5. Mr. Tripathi submits that after number of written communication and persuasions, a meeting was held on 02.03.2020 with the GM, CGRDC, Raipur wherein the applicant requested to release pending payment of PMC from July, 2019 to February, 2020. The GM,CGRDC also directed the applicant to apply for further time extension upto 09 07.2020. As the non-applicant failed to make the payment to the applicant, finally vide letter dated 22.4.2020, the applicant issued notice to terminate the contract under GCC cause 2.9.2(a), which clearly mandates that the consultant may terminate the contract if the client fails to pay any money due to the consultants pursuant to his contract and not subject to dispute pursuant to clause 8 hereof within forty five (45) days after receiving written notice from the consultants that such payment is overdue". The applicant again vide letter dated 07.8.2020 requested the non applicant to release consultancy fees from Jan 2019 to Oct.2019, 5 % amount withheld monthly from Apr.2018 to May 2019 and consultancy fees for the period Nov. 2019 to Mar 2020, amounting to Rs.90,07,331/-. Despite of non-cooperative conduct of the non applicant, the applicant completed the work and accordingly vide letter dated 26.08.2021 handed over all the documents to the office of non-applicant which was duly acknowledged by vide letter dated 02.09.2021. The applicant, as per the terms and conditions of the Contract Agreement, conducted daily inspections as per RFI, test under the schedule of road safety, roughness surveys and independent technical audit by experts and all the test reports have been found satisfactory and no adverse remarks have been made. 6. Mr. Tripathi further submits that the work of providing consultancy and project management services were carried out with utmost sincerity, good industry practice and within the bounds of the contract agreement by the applicant but without any reasonable cause or explanation, the non-applicant stopped payment of consultancy fees. The non-applicant has also failed to release the security deposit, and retention money and in complete contravention of the provision of the contract agreement, withheld 5% of the total amount of every bill raised.
The non-applicant has also failed to release the security deposit, and retention money and in complete contravention of the provision of the contract agreement, withheld 5% of the total amount of every bill raised. The applicant again vide letter dated 23.10.2021, reiterating all the facts chronologically requested to release the payment of Rs.1,11,34,730/- and also 05 Bank Guarantees worth Rs. 36,57,888/-illegally withheld by the non-applicant. The applicant was also provided with the work completion certificated dated 22.11.20121, by the non-applicant but without any reasonable cause the payment of Rs.1,11,34,730/was not made. On 25.02.2022, a meeting was held between the parties to the contract wherein the applicant's representative was informed that a penalty of Rs.1,18,11,000/- has been imposed on other project named as "Fafadih project", which will be recovered from the present project. The applicant, vide letter dated 08.03.2022 submitted that such recovery against the law settled by Division Bench of Hon'ble High Court of M.P. in W.P.No. 5925/2012 M/s. Telecommunication Consultants India Ltd. v. Madhya Pradesh Rural Road Development Authority and in W.P.No.18193/2015 M/s. Navbharat Buildcon Pvt. Ltd. Vs. State of M.P. and others. The applicant, vide letter dated 08.03.2022 also requested for amicable settlement of the dispute. The SCC provides for settlement of disputes through Arbitration. Sub clause 9.2.1 and 9.2.2 provide the manner for appointment arbitrator and the procedure for arbitration. 7. That, since all the issues/disputes raised by the applicant remained unanswered despite several written communication and discussion, the applicant vide letter dated 24.3.2022 again requested for settlement of disputes. The applicant vide its letter dated 24.03.2022 informed the non-applicant that in compliance of SCC Clause 9.2.1(b) and 9.2.2, it has appointed Mr. Anil Kumar, Former Chief Engineer, UP PWD as Arbitrator and requested to appoint a Co-Arbitrator within 30 days of receipt of the letter. However, the non-applicant neither gave any reply nor took any action for appointment of co arbitrator. The applicant lastly vide letter dated 11.07.2022 referring the earlier communications requested to appoint co-arbitrator to settle the dispute. The non-applicant has not taken any steps to appoint co-arbitrator in the matter. The non-applicant has not given any reply to the request made by the applicant for appointment of the Arbitrator. Hence this application under Section 11(6) of Act of 1996 for appointment of Arbitrator. 8. On the other hand, Mr.
The non-applicant has not taken any steps to appoint co-arbitrator in the matter. The non-applicant has not given any reply to the request made by the applicant for appointment of the Arbitrator. Hence this application under Section 11(6) of Act of 1996 for appointment of Arbitrator. 8. On the other hand, Mr. Rishabh Garg, learned counsel for the respondent denies the contents of the application filed by the applicant stating it to be false and incorrect. He submits that this petition is not maintainable on the ground that the applicant has invoked the arbitration clause under clause 9.2.1(b) and 9.2.2 of the SCC bearing C.O Agreement No. 01-W/CGDRC/2015-16 dated 07.08 2015. The dispute referred to in the instant application by the applicant pertains to recovery of Rs. 67,26,132/- from the contract arising out of agreement No. 10-W/CGRDC/2016-17 for which the applicant had filed an application under Section 11 of the Arbitration & Conciliation Act, 1996 before this Court being ARBR No. 15/2022. As such, since the matter of recovery of Rs 1,18,000/- was already subjudice at the time of filing of instant application which was dismissed vide order dated 04.11.2022 by this Hon’ble Court wherein it was categorically held that the applicant has the only remedy to approach the Chhattisgarh Madhyastham Adhikaran (State Arbitration Tribunal). The instant Arbitration Request for the same cause of action is not maintainable as the applicant is seeking the same relief indirectly which it is not otherwise entitled to for the reasons stated in the order dated 04.11.2022. The said dispute of recovery of Rs. 67,26,132/- in instant application arises out of the dispute of recovery of Rs 1,18,00,000/- which was the subject matter of ARBR No. 15/2022 which can now be adjudicated by the Chhattisgarh Madhyastham Adhikaran (State Arbitration Tribunal) only. The dispute of recovery of Rs 67,26,132/- in instant application is a subject-matter included in the dispute referred to in ARBR No. 15/2022 for recovery of Rs.1,18,00,000/- and thus the dispute in the instant application will be adjudicated by the State Arbitration Tribunal when the reference will be filed for the dispute referred to in ARBR No. 15/2022. Therefore, the dispute referred in the instant application is not arbitrable on the face of record available and the instant application is liable to be dismissed accordingly.
Therefore, the dispute referred in the instant application is not arbitrable on the face of record available and the instant application is liable to be dismissed accordingly. In any case, the Chhattisgarh Madhyastham Adhikaran Adhiniyam, 1983 (for short, the Act of 1983) provides that the disputes arising out of works contract entered into by the government, the claim value for which is above Rs.50,000/-, shall be resolved by an Arbitral Tribunal constituted by the State Government. The relevant provisions are mentioned as below: "2(i) works contract means an agreement in writing 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, transformers, tube well, drilling work, ramp construction and hand pump installation work, water purification plant construction work, intake well construction work, all types of pipe supply and pipeline laying work, pump house construction work, raw/clear water pumps work, supply and establishment of iron removal plant fluoride removal plant work, rain water harvesting work, construction of recharge structures related to ground water enrichment work or such other works of the State Government or Public Undertaking as the State Government may by notification, specify in this behalf at any of its stages, entered into by the State Government or by an official of the State Government or Public Undertaking or its official and on such behalf of such Public Undertaking and includes an agreement for the supply of goods or material and all other matters relating to the execution of any of the said works. 2(d) dispute means claim of ascertained or ascertainable money valued at Rupees 50,000 or more relating to any difference arising out of the execution or non-execution of a works contract or part thereof. 2(h) Tribunal means an Arbitration Tribunal constituted under Section 3 and includes a bench thereof constituted under Section 9: Section 3 Constitution of Tribunal- The State Government shall by notification constitute an Arbitration Tribunal for resolving all such disputes or differences pertaining to works contract or arising out of or connected with execution, discharge or satisfaction of any such works contract.” 9. Mr.
Mr. Garg submits that the said dispute arises out of the contract related to the consultancy of construction of Road/Expressway with BRTS corridor on existing Fafadih-Telibandha-Naya Raipur narrow gauge railway track which is within of term 'other matters relating to the execution to any such works used in the definition and meaning of "Works Contract" as per the Act of 1983 in which the Chhattisgarh Madhyastham Adhikaran (State Arbitration Tribunal) has the exclusive jurisdiction over the said dispute. Further, the applicant in this application has valued its claim at Rs. 67,26,132/-. The said claim value is above the threshold of Rs 50,000/- as provided under 2 (d) of the Act. Therefore, this Hon'ble Court does not have jurisdiction to deal with the disputes as the exclusive jurisdiction to decide the same lies with State Arbitration Tribunal and thus, the instant application is liable to be dismissed. It is admitted position of the applicant in ARBR No. 15/2022 which was dismissed vide order dated 04.11.2022 by the Hon'ble High Court, that the State Arbitration Tribunal has the jurisdiction over such dispute. Clause 6(iv) of the Contract bearing agreement no. 10-W/CGRDC/2016-17 specifically provides that the authority can recover the outstanding dues from the consultant by adjusting it from the outstanding payment that the consultant is entitled to in any other contracts. Therefore, the term any other contracts in the instant application pertains to the Contract bearing Agreement No. 01-W/CGDRC/2015-16 dated 07.08.2015 from which the non-applicant has deducted the outstanding dues of Rs. 67,26,132/- from the Contract arising out of agreement no. 10-W/CGRDC/2016-17. The Contract bearing Agreement No. 01-W/CGDRC/2015-16 dated 07.08.2015 does not specify any clause which allows the non- applicant to adjust/deduct the outstanding dues of the other contracts from this contract is immaterial and irrelevant as the disputed amount of Rs. 67,26,132/- is arising out of the Contract bearing agreement No. 10-W/CGRDC/2016-17 and such disputed amount can be recovered only in accordance with the clauses mentioned therein and not otherwise. In the instant case, the dispute is not related to Agreement No. 01- W/CGDRC/2015-16, and thus, the dispute being beyond the scope of said contract is a non-arbitrable matter which is an admitted position in the application itself. 10. Mr.
In the instant case, the dispute is not related to Agreement No. 01- W/CGDRC/2015-16, and thus, the dispute being beyond the scope of said contract is a non-arbitrable matter which is an admitted position in the application itself. 10. Mr. Garg submits that it is the settled position of law that the arbitrator has to decide the dispute within the four corners of the contract, and the arbitration cannot be invoked for the disputes arising outside the four comers of the contract. Furthermore, the said dispute of Rs. 67,26,132/- is arising out of the Contract bearing agreement no 10-W/CGRDC/2016-17, which is already pending before the Hon'ble High Court of Chhattisgarh bearing Petition No. ARBR/15/2022 in which the applicant has prayed for the appointment of Arbitrator under section 11 of the Arbitration and Conciliation Act, 1996 for dispute pertaining to recovery of Rs. 67,26,132/-, which is exactly the dispute in the instant application for which the applicant is seeking the appointment of Arbitrator under section 11 of the Arbitration and Conciliation Act, 1996. The applicant has not mentioned the status of the matter which is subjudice and has apparently been seeking the relief which cannot be granted being already pending for due consideration. It is alternatively stated that the applicant has failed to exhaust in-house mechanism in accordance with clause 9.2.1(b) and 9.2.2 of the SCC of the Contract bearing Agreement No. 01-W/CGDRC/2015-16 dated 07.08.2015. In view of the factual position pointed out above, it will be apparent and crystal clear that the said application file by the applicant is not maintainable for the reasons stated above. 11. After arguing for sometime at length, learned counsel for the applicant submits that he may be granted liberty to take recourse to remedy available under Section 7 of the Act of 1983. 12. In the return filed by the respondent, it has been categorically stated that the instant application by the applicant pertains to recovery of Rs. 67,26,132/- from the contract arising out of agreement No. 10-W/CGRDC/2016-17 for which the applicant had moved this Court by filing an application under Section 11 of the Act of 1996 being ARBR No. 15/2022. The matter of recovery of Rs 1,18,000/- was already subjudice at the time of filing of instant application which was dismissed vide order dated 04.11.2022 by this Court observing that the applicant has the only remedy to approach the State Arbitration Tribunal.
The matter of recovery of Rs 1,18,000/- was already subjudice at the time of filing of instant application which was dismissed vide order dated 04.11.2022 by this Court observing that the applicant has the only remedy to approach the State Arbitration Tribunal. The instant Arbitration Request for the same cause of action is not maintainable. In any case, the Act of 1983 provides that the disputes arising out of works contract entered into by the government, the claim value for which is above Rs.50,000/-, shall be resolved by an Arbitral Tribunal constituted by the State Government and further since the applicant intends to approach the State Arbitration Tribunal under Section 7 of the Act of 1983, which has not been opposed by the learned counsel for the respondent, this Court deems it appropriate to grant him liberty as aforesaid. 13. In view of the above discussion, this petition is disposed of. However, the applicant is at liberty to take recourse to Section 7 of the Act of 1983 for redressal of his grievances.