SMS Paryavaran Ltd v. State of Jharkhand through Secretary
2025-08-27
TARLOK SINGH CHAUHAN
body2025
DigiLaw.ai
JUDGMENT : Tarlok Singh Chauhan, C.J. 1. The petitioner has filed the instant application under Section 11(6)(c) of the Arbitration and Conciliation Act, 1996 for appointment of an independent Arbitrator and for reference of the dispute arising out of Agreement No. SBD No. 52 of 2015-2016 dated 18.03.2016 for detailed survey, design and drawing, construction of infiltration galleries, infiltration cum jack well cum pump house, approach bridge from intake to WTP (Gangway), elevated service reservoir-7 Nos., clear water reservoir-1 No., supplying and laying raw/clear water rising main & distribution network, supplying and installation of vertical turbine pump and centrifugal pumps, power transformer, house connection with allied works etc. and two years O & M all complete job for Medininagar (Phase-2) Urban Water Supply Scheme under D.W. & S. Division, Medininagar on turnkey basis. 2. It has been averred that the petitioner is a registered company incorporated under the Companies Act, 1956 and is a Category-A Government Contractor. Pursuant to a notice inviting tender for the purpose detailed above, a tender was issued by the respondents and eventually, the bid of the petitioner was found to be the most responsive, hence, the tender awarded to it. The parties entered into an agreement on 18.03.2016 for a total agreement value of Rs. 52,17,08,678.14 against which the petitioner deposited the initial security deposit of Rs.1,04,34,200/-. 3. According to the petitioner, the respondents failed to carry out its fundamental duties under the agreement. Particularly, the respondents failed to: “ a . Provide proper planning while making DPR and estimate required for the project. b. Provide work site free from all encumbrances. c. Provide congenial or at least safe working environment in and around the worksite. d. Provide requisite fund for the project. e. Provide timely payment of money. f. Provide timely approval design and drawings.” 4. It is further averred that the respondents committed persistent breaches by not performing its responsibility. The petitioner made several attempts for resolution of the dispute. However, the respondents never took any action against the same. The petitioner submitted a claim of Rs. 23,66,92,335/- along with interest at the rate of 18% vide its notice dated 04.06.2019. However, the respondents paid no heed to the request of the petitioner and therefore, the petitioner invoked an arbitration clause vide its letter dated 04.06.2019 claiming the aforesaid amount. The petitioner also served a notice on 04.06.2019 for the payment withheld.
23,66,92,335/- along with interest at the rate of 18% vide its notice dated 04.06.2019. However, the respondents paid no heed to the request of the petitioner and therefore, the petitioner invoked an arbitration clause vide its letter dated 04.06.2019 claiming the aforesaid amount. The petitioner also served a notice on 04.06.2019 for the payment withheld. Thereafter, IBC proceedings were initiated against the petitioner and thereafter, moratorium was in place for the period with effect from 03.01.2020 to 21.02.2023. Furthermore, the time period was exempted from limitation by the Hon’ble Supreme Court from 31.03.2020 to 28.02.2022 due to COVID-19 pandemic and since the respondents have failed to appoint an Arbitrator, this Application has been filed. Arbitration Application No. 34 of 2023 5. The petitioner has filed the instant application under Section 11(6)(c) of the Arbitration and Conciliation Act, 1996 for appointment of an independent Arbitrator and for reference of the dispute arising out of Agreement No. SBD 01 of 2013-2014 dated 26.04.2013 for detailed survey, design and drawing, construction of 16.0 MLD capacity water treatment plant, intake well with pump house, R.C.C. Gangway, 19 lakh liters capacity R.C.C. clear water reservoir, UGR-3 Nos. (capacity of 6.5 lakh liters, 2.6 lakh liters and 1.0 lakh liters), elevated service reservoir 3 Nos. (capacity of 18,16,000 liters, 14 mtr. staging; 6,81,000 liters, 12 mtr. staging and 4,54.000 liters, 12 Mtr. staging). supplying and installation of Bulk Meter, supplying and laying Raw/Clear water rising main & distribution network, boundary wall, approach road, supplying and installation of vertical turbine pump and centrifugal pump, HT line, power transformer, house connection with allied works etc. all complete job for Chaibasa Urban Water Supply Scheme under D.W. & S. Division, Chaibasa on turnkey basis. 6. It has been averred that the petitioner is a registered company incorporated under the Companies Act, 1956 and is a Category-A Government Contractor. Pursuant to a notice inviting tender for the purpose detailed above, issued by the respondents, the petitioner and the Department entered into an agreement on 26.04.2013 for a total agreement value of Rs. 38,18,97,879.82 against which the petitioner deposited the initial security deposit of Rs.76,38,000/-. 7. According to the petitioner, the respondents failed to carry out its fundamental duties under the agreement. Particularly the respondents failed to: “a. Provide proper planning while making DPR and estimate required for the project. b. Provide work site free from all encumbrances.
38,18,97,879.82 against which the petitioner deposited the initial security deposit of Rs.76,38,000/-. 7. According to the petitioner, the respondents failed to carry out its fundamental duties under the agreement. Particularly the respondents failed to: “a. Provide proper planning while making DPR and estimate required for the project. b. Provide work site free from all encumbrances. c. Provide congenial or at least safe working environment in and around the worksite. d. Provide requisite fund for the project. e. Provide timely payment of money. f. Provide timely approval design and drawings. g. Timely execution of supplementary agreement on account of extra works.” 8. It is further averred that the respondents committed persistent breaches by not performing its responsibility. The petitioner made several attempts for resolution of the dispute. However, the respondents never took any action against the same. Since the respondents paid no heed to the request of the petitioner, the petitioner invoked the arbitration clause, claiming an amount of Rs.31,98,11,000/- along with interest at the rate of 18% vide its notice dated 21.09.2023. IBC proceedings were also initiated against the petitioner and thereafter, moratorium was in place for the period with effect from 03.01.2020 to 21.02.2023. Furthermore, the time period was exempted from limitation by the Hon’ble Supreme Court from 31.03.2020 to 28.02.2022 due to COVID-19 pandemic and since the respondents have failed to appoint an Arbitrator, this application has been filed. Averment in the counter affidavit 9. The respondents have filed counter affidavits wherein it has been averred that there is no arbitration clause in the agreement dated 18.03.2016 and also the agreement dated 26.04.2013, as relied upon by the petitioner in respective cases and in absence of any arbitration clause, the instant Applications are not tenable. Consideration by the Court 10. I have heard learned counsel for the parties and gone through the material placed on record. The learned counsel for the petitioner has relied upon Clause 1.1 of the Conditions of Contract which reads as under: “1.1. Terms which are defined in the Contract data are not also defined in the Conditions of Contract but keep their defined meanings. Capital initials are used to identify defined terms. The Adjudicator/Arbitrator synonymous with (Dispute Review Expert) is the person appointed jointly by the employer and the contractor to resolve disputes in the first instance, as provided for in clause 24 and 25.
Capital initials are used to identify defined terms. The Adjudicator/Arbitrator synonymous with (Dispute Review Expert) is the person appointed jointly by the employer and the contractor to resolve disputes in the first instance, as provided for in clause 24 and 25. It is to be conducted under the rules of Indian Arbitration and Conciliation Act, 1996 (26 of 1996) any statutory modifications or re-enactment thereof.” 11. It would be noticed that as regards Clauses 24 and 25, the same have been mentioned as “deleted”. 12. On 25.04.2025, the Court directed the petitioner to produce Clauses 24 and 25 in the Conditions of Contract which are omitted in the subject contract. In compliance with the aforesaid directions, a supplementary affidavit has been filed and placed on record Clauses 24 and 25 of the Conditions of Contract that had been omitted and the same read as under: “24. Disputes 24.1 If the Contractor believes that a decision taken by the Engineer was either outside the authority given to the Engineer by the Contract or that the decision was wrongly taken, the decision shall be referred to the Adjudicator within 14 days of the notification of the Engineer's decision. 25. Procedure for Disputes 25.1 The Adjudicator shall give a decision in writing within 28 days of receipt of a notification of a dispute. 25.2 The Adjudicator shall be paid daily at the rate specified in the Contract Data together with reimbursable expenses of the types specified in the Contract Data and the cost shall be divided equally between the Employer and the Contractor, whatever decision is reached by the Adjudicator. Either party may refer a decision of the Adjudicator to an Arbitrator within 28 days of the Adjudicator's written decision. If neither party refers the dispute to arbitration within the above 28 days, the Adjudicator's decision will be final and binding. 25.3 The arbitration shall be conducted in accordance with the arbitration procedure stated in the Special Conditions of Contract.” 13. It is vehemently argued by Mr. Rohitashya Roy, learned counsel for the petitioner that in terms of Clause 1.1, it is evidently clear that the arbitration clause still exists on the document and Clauses 24 and 25 that have been omitted only provided for the procedure for conducting the arbitration.
It is vehemently argued by Mr. Rohitashya Roy, learned counsel for the petitioner that in terms of Clause 1.1, it is evidently clear that the arbitration clause still exists on the document and Clauses 24 and 25 that have been omitted only provided for the procedure for conducting the arbitration. I, however, find no merit in this contention as it would be evidently clear from the perusal of the omitted Clause-24.1 that if the Contractor i.e. the petitioner believed that a decision taken by the Engineer was either outside the authority given to the Engineer by the Contract or the decision was wrongly taken, then the decision was to be referred to the Adjudicator within 14 days of the notification of the Engineer's decision. Thus, this is not a procedure, rather a cause of action for the petitioner to invoke the arbitral proceedings. 14. Thereafter, the procedure of dispute has been settled in Clause 25 which stands omitted. 15. As regards Clause- 1.1, it has been clearly envisaged therein that the Adjudicator/Arbitrator synonymous with (Dispute Review Expert) is the person appointed jointly by the employer and the contractor to resolve the disputes in the first instance that have been provided in Clause 24 and 25. Clauses 24 and 25 have been deleted and obviously, therefore, there is no question of referring the so-called dispute to the Arbitrator. 16. In other words, it would only be the dispute as covered by the Clauses 24 and 25 that could have been referred to the Adjudicator/Arbitrator synonymous with (Dispute Review Expert). 17. No doubt, as contended by the learned counsel for the petitioner, a contract must be interpreted in a manner so as to give effect to the agreement rather than invalidated it. However, the petitioner herein is erroneous in assuming the existence of an arbitration agreement where the parties have consciously adopted standard form of contract, albeit, with the deletion of the arbitration clause. Undoubtedly, this is a case of inartistic drafting. However, it is not a case of an inartistic drafting of an arbitration clause; rather it is a case of deletion of an arbitration clause in an unartistic manner.
Undoubtedly, this is a case of inartistic drafting. However, it is not a case of an inartistic drafting of an arbitration clause; rather it is a case of deletion of an arbitration clause in an unartistic manner. Clauses 24 and 25 have been consciously deleted and the contract with the petitioner was entered into after such deletion and hence, the requirement of essential ingredient of an arbitration agreement to have the dispute resolved by an Arbitrator who could decide the dispute, is absent. 18. Moreover, it is judicially settled that the terms of contract must be strictly construed. Reference in this regard can be made from the decision of Oriental Insurance Company Limited Vs. M/s Narbheram Power and Steel (P) Limited, reported in (2018) 6 SCC 534 19. Furthermore, when the respondents-State Government has consciously and intentionally deleted the provision for arbitration from its contract, it would be a travesty of justice to read another clause in the contract to conclude that there is a provision for arbitration. 20. For the reasons stated above, this Court cannot accept that an arbitration clause exists between the parties. The Arbitration Applications are, accordingly, dismissed. Pending Application, if any, stands disposed of.