Madhya Pradesh High Court
Backbone Construction Pvt. Limited vs Northern Coalfields Limited on 22 November, 2022
Author: Vijay Kumar Shukla
Bench: Vijay Kumar Shukla
1
IN THE HIGH COURT OF MADHYA PRADESH, AT JABALPUR
BEFORE
(HON'BLE SHRI JUSTICE VIJAY KUMAR SHUKLA)
ON THE 22nd OF NOVEMBER, 2022
Arbitration Case No. 74/2019
Between:-
Backbone Construction Pvt. Limited, a
Company incorporated under the
Companies Act, 1956 "Ekta House", Nr.
Shripanth Apartment, Jalaram-2,
University Road, Rajkot-360007
.....PETITIONER
(BY SHRI SHEKHAR SHARMA-ADVOCATE)
AND
Northern Coalfields Limited,
A Miniratna Company & Subsidiary of
Coal India Limited, A Government of
India Undertaking, Office of the
General Manager (Civil), Civil
Engineering Department, P.O. Singrauli
Colliery, District-Singrauli (M.P.)-
465889
.....RESPONDENT
(BY SHRI GREESHM JAIN-ADVOCATE)
...........................................................................
This petition coming on for final hearing this day, the court
passed the following:
2
ORDER
The present petition is filed under Section 11 of Arbitration and Conciliation Act, 1996 (hereinafter referred in short as Act, 1996) for appointment of an arbitrator to resolve the dispute that has arisen between the parties.
2. The applicant is a Company incorporated under the Companies Act, 1956, which carries on business as Government approved Contractor in the field of construction of Civil Construction. Non-applicant had issue notice inviting tender (in short "NIT") for providing Gabion Walls & Gunny Bags at Rain Cuts, Drains, Culverts, Sumps, Toe of OB Dump etc. on as when and wherever required basis in Coal Section at Jayant Project. The tender of the applicant was accepted and an agreement was executed between the parties. The work order was issued to the applicant, however, the respondent directed to stop the work and terminated the contract. As per Clause 10(e) of the agreement. The applicant raised the dispute and challenged the termination of the contract agreement. He has issued notice for appointment of arbitrator under the Act 1996. Non-applicant did not response to the same.
3. Non-applicant filed a reply and submitted that the non- applicant-Northern Coalfields Limited is a Government Company 3 for carrying in exclamation of coal. It is submitted that the applicant was lethargic in performing the work and inspite of various letters written to it to complete the work, it has not completed the work. The progress of the work was very poor, the actual progress of the work in question was less than 27% within stipulated period. Because of the incomplete work, the non-applicant has been put to heavy loss. It is specifically submitted that there is no arbitration clause in the agreement. The clause 16 of the agreement is not an arbitration clause and in fact it is a settlement of dispute clause in which procedure/in house of mechanism has been provided to resolve the dispute. It is also submitted that the petitioner has even failed to take steps as per clause 16. The applicant filed rejoinder and denied the aforesaid assertion that he has not taken steps under the clause 16 of the agreement and submitted that he has taken steps before the Government Authorities as per the procedure prescribed under clause 16. According to him, Clause 16 of the agreement is an 'arbitration clause', therefore, he has filed present application for appointment of sole arbitrator.
4. Clause 16 provides that it is incumbent upon the contractor to avoid limitation and disputes during the course of execution. However, if such disputes takes place between the 4 contractor and the department, effort shall be made first to settle the disputes at Company level. The Contractor should make request in writing to the Engineer-in-charge for settlement of such disputes/claims within 30 days of arising of the cause of dispute/claim failing no disputes/claims of the contractor shall be entertained by the company. Efforts shall be made to resolve the dispute in two stages:- In first stage dispute shall be referred to Area GM or GM/HOD ©. If difference still persist the dispute shall be referred to a committee constituted by the owner. The committee shall have one member of the rank of Director of the Company, who shall be chairman of the committee. If differences still persist, the settlement of the dispute shall be resolved in the following manner: Disputes relating to the commercial contracts with Central Public Sector Enterprises/Government Departments (except Railways, Income Tax, Customs and Excise Duties)/State Public Sector Enterprises shall be referred by either party for Arbitration to the PMA (Permanent Machinery of Arbitration) in the department of Public Enterprises. In case of parties other than Govt. Agencies, the redressal of the dispute may be sought in the Court of Law. Hence, Clause 16 does not reflect the 5 intention of the parties for resolving the dispute through constitution of Arbitral Tribunal.
5. Counsel for the applicant submits that he filed a writ petition No. 4136/2019 before this Court and the said petition was withdrawn permitting the petitioner to avail the remedy under the provisions of the Act, 1996 and therefore, the non- applicant is estopped from raising the plea that there is no arbitration clause and therefore the application is not maintainable. The following order was passed by the division bench in the said writ petition is reproduced here as under:
"Mr. Shekhar Sharma, Advocate for the petitioner. Mr. Greeshm Jain, Advocate for the respondent. Learned counsel for the petitioner states that the petitioner has already availed the remedy under the provisions of Arbitration and Conciliation Act, 1996.
A prayer is made that he may be allowed to withdraw the petition with liberty to pursue remedies under the said Act.
Learned counsel for the respondent has no objection. Accordingly, writ petition is dismissed as withdrawn with aforesaid liberty."
6. Upon perusal of the order passed in the writ petition, it is crystal clear that the petitioner had withdrawn the said petition stating that he has already availed the remedy under the Act, 1996 and made a prayer for withdrawal of the petition with 6 liberty to pursue the remedy under the said Act. The respondent had no objection to the withdrawal of the petition and the petition was dismissed as withdrawn with the liberty. There is no adjudication on the issue regarding existence of arbitration clause in the agreement and there is no admission by the non-applicant regarding existence of arbitration clause in the agreement. The said order cannot be construed to mean that the issue of existence of arbitration clause in the agreement has been decided in the said writ petition.
7. I have heard learned counsel for the parties and the question which arises for consideration is that whether clause 16 can be construed as an 'arbitration clause' in terms of Section 7 of the Act. The relevant clause 16 reads as under:-
"Settlement of Disputes:-
It is incumbent upon the contractor to avoid limitation and disputes during the course of execution. However, if such disputes takes place between the contractor and the department, effort shall be made first to settle the disputes at Company level.
The Contractor should make request in writing to the Engineer-in-charge for settlement of such disputes/claims within 30 days of arising of the cause of dispute/claim failing no disputes/claims of the contractor shall be entertained by the company.7
Efforts shall be made to resolve the dispute in two stages:-
In first stage dispute shall be referred to Area GM or GM/HOD (C). If difference still persist the dispute shall be referred to a committee constituted by the owner. The committee shall have one member of the rank of Director of the Company, who shall be chairman of the committee.
If differences still persist, the settlement of the dispute shall be resolved in the following manner: Disputes relating to the commercial contracts with Central Public Sector Enterprises/Government Departments (except Railways, Income Tax, Customs and Excise Duties)/State Public Sector Enterprises shall be referred by either party for Arbitration to the PMA (Permanent Machinery of Arbitration) in the department of Public Enterprises.
In case of parties other than Govt. Agencies, the redressal of the dispute may be sought in the Court of Law."
8. According to the counsel of the applicant aforesaid clause 16 provides for arbitration clause. He has submitted that as per the provision 12(5) of the Act, a declaration is to be given by the non-applicant that any person, who falls in any of the categories specified in 7 th Schedule shall be ineligible to be appointed as the arbitrator.
9. He referred the judgment passed in the case of Trf Ltd. vs. Energo Engineering Projects Ltd., (2017) 8 SCC 377 and also 8 the judgment passed by the apex Court in the case of Bharat Broadband Network Limited Versus United Telecoms Limited, (2019) 5 SCC 755. He also cited the judgment of Hon'ble Supreme Court in the case of Northern Coalfields Limited Vs. Heavy Engineering Corporation Limited and Another, (2016) 8 SCC 685 and also the judgment of Hon'ble apex Court in the case of Uttarakhand Purv Sainik Kalyan Nigam Limited Vs. Northern Coal Field Limited, (2020) 2 SCC 455.
10. Counsel for the non-applicant submitted that there is no arbitration clause as required under Section 7 of the Act and since there is no arbitration clause, this Court cannot exercise its power to appoint arbitrator in the present case. He also submitted that the later part of Clause 16 provides only for arbitration to the PMA (Permanent Machinery of Arbitration) of arbitration in the department of public enterprises, where both parties are government agencies. The PMA is established to adjudicate the dispute between the Government parties. In case, parties other than government agencies, the redressal of the dispute would be in the court of law. The word "Court of law" has been interpreted by this Court in the case of M/s. Goyolene Fibres (India) Pvt. Limited v. M.P. State Electricity Board and another (2011) 4 MPLJ 683. He further relying on 9 a judgment passed by the Apex Court in the case of Jagdish Chander Vs. Ramesh Chander and Others, (2007) 5 SCC
719.
11. In the case of Jagdish Chandra (supra), the Apex Court and Coordinate Bench in the case of M/s. Goyolene Fibres (India) Pvt. Limited (supra) held that to constitute an arbitration agreement the intention of the parties entering into the agreement has to be clear and specific in terms. The agreement should indicate that the parties intend to resolve all their disputes by referring to an arbitration Tribunal for adjudication and the willingness of the parties to be bound by such a decision of the arbitral tribunal. The Supreme Court has held that no specific form subscribed for such an agreement but the existence of the arbitration agreement has to be gathered from the intention of the parties and the correspondence between them. Section 7 of the Act, 1996 was taken into consideration in the aforesaid judgment, 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 10 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 clause 16 provides only in-house mechanism and when there is a dispute between two government agencies, the arbitration can be referred to the PMA (Permanent Machinery of Arbitration) in the terms of Public Enterprises The said mechanism has been provided only to the government agencies and PMA has been established for the said purpose. In case of parties other than government agencies the redressal 11 of the dispute may be sought in the Court of law.
13. In view of the aforesaid enunciation of law, it is held that there is no arbitration agreement between the parties and in the absence of arbitration clause in the agreement, the application under Section 11(6) is not maintainable. In the result, the application fails and is hereby dismissed.
(Vijay Kumar Shukla) JUDGE skt SANTOSH KUMAR TIWARI 2022.11.23 17:43:04 +05'30'