Delhi High Court
Earnest Builders (Pvt.) Ltd. vs Union Of India (Uoi) And Ors. on 2 May, 2007
Equivalent citations: 2007(3)ARBLR183(DELHI)
Author: Vipin Sanghi
Bench: Vipin Sanghi
JUDGMENT Vipin Sanghi, J.
1. This petition under Section 11(6) of the Arbitration and Conciliation Act (The Act) has been filed by the petitioner to seek reference of its disputes with the respondent to arbitration in terms of an arbitration agreement contained in the contract agreement number CWE/PM/N.18/98-99.
2. It is the admitted position that the parties had entered into the aforesaid agreement which contains an arbitration agreement in clause 70 of the IAFW-2249. Under this clause disputes between the parties to the contract shall, other than disputes in respect of which the decision of the CWE or any other person is, by the contract expressed to be final and binding, after written notice by either party to the contract to the other, be referred to the sole arbitration of any serving officer having degree in engineering or equivalent on having passed final/direct final examination of subdivision II of Institute of Surveyor (India) recognized by the Government of India, to be appointed by the authority mentioned in the tender document.
3. In relation to the works done by the petitioner under the aforementioned contract, disputes arose and the petitioner sought reference of its seven claims to Arbitration. The chief engineer who is the appointing authority appointed an arbitrator by his communication dated the 9th September, 2003 in relation to two claims of the petitioner deleting five other claims made by it. The petitioner protested against the non-reference of some of its claims by the chief engineer.
4. The arbitrator entered upon the reference on the 16th September, 2003. However, he resigned from the post of arbitrator vide his communication dated 12th April, 2004. The petitioner thereafter once again requested the chief engineer to refer all his claims to a new arbitrator vide his communication dated 24th April, 2004 and reminder dated 25th April, 2005 but to no avail.
5. The petitioner thereafter filed the present application on the 1st September, 2005 in the Court of the District Judge, Delhi which has been transferred to this Court after the decision of the Hon'ble Supreme Court in the case of SBP v. Patel Engineering.
6. The respondent in its reply has stated that it has already appointed a substitute arbitrator on the 21st September 2005. It is further stated that the petitioner had submitted its final bill on 5th March, 2001 without any protest. Under the terms of the agreement, as per condition 65 of the IAFW-2249, no further claim can be made by the contractor after submission of the final bill and all other claims shall be deemed to be waived and extinguished. Therefore the claim of the petitioner for damages could not be referred to arbitration. It is further stated that the other claims, of which reference was sought by the petitioner, and which were not referred to Arbitration, the decision of the CWE is final and binding and therefore not referable to arbitration under condition 70 of the IAFW-2249. It is claimed that the earlier appointed Arbitrator had already ruled that the other claims raised by the petitioner were excepted matter. Counsel for the respondent also contended in the alternative, that if the court was inclined to appoint an independent arbitrator in exercise of its power under Section 11 of the Act, the appointee should have the requisite qualification as is prescribed under the arbitration clause.
7. Petitioner had sought reference of seven claims to arbitration. They read as follows:
Sl. Brief of description of Claims Approx. Amount
No.
1. Reimbursement of Sale Tax on works
contract made applicable by Delhi
Govt. w.e.f. 01-12-1999. Not known
to the contracting parties
(Recovered from our final bill vr.
No. E/22/526/EM dated 05-03-2001) 42421.00
2. Damage due to Breach of Contract
by M.E.S. By non-handling over of
sites, delay in RAR payments, delay
in decisions, delay in decision of
commission of HT Panels and HT
Cables, Illegal cancellation of
contract for certain period beyond
the provision of contract
conditions. 4,50,000.00
3. Interest on blocked amount for sl.
Item No. 1 & 2 @24%P.A.
4. Refund of unauthorized recoveries
made by MES for others CA's from
RAR's and final bill.
CWE/D-2/93-94 Rs. 1143/-
CWE/D-18/95-96 Rs. 510/-
CWE/PM/N-18/98-99 Rs. 1000/-
Rs. 2653/- 2653.00
5. Damages due to delay in payment of
RAR's and Restriction of amount. @24%P.A.
6. Interest past, pendantelite and
future @24%P.A.
7. Cost of Arbitration 30,000.00
8. The respondent agreed to refer only two of the aforesaid claims to arbitration, namely:
Sl. Brief of description of Claims Approx. Amount
No.
1. Reimbursement of Sale Tax on works
contract made applicable by Delhi
Govt. w.e.f. 01-12-1999. Not known
to the contracting parties
(Recovered from our final bill vr.
No. E/22/526/EM dated 05-03-2001) 42421.00
7. Cost of Arbitration 30,000.00
9. One counter claim, of rupees 50,000 towards costs of arbitration, of the respondent was also referred to arbitration.
10. Having considered all the submissions of the parties, I am of the view that the present application deserves to be allowed. The appointment made by the respondent on 21st September, 2005 is of no avail, since the petitioner had already filed the present application on the 1st September, 2005.
11. Apart from stating that the decision of the CWE is final and binding in respect of the aforesaid five claims not referred to arbitration, and that they are excepted matter, the respondent has not been able to point out as to how it is being so claimed.
12. The arguments of the respondent primarily stems from Condition No. 65 of IAFW-2249, which is stated to form part of the contract. This Clause reads as follows:
65 Final Bill (Applicable only to Measurement and Lump Sum Contracts). The Final Bill shall be submitted by the Contractor on IAFW-2262 in duplicate within three months of physical completion of the works to the satisfaction the Engineer-in-Charge.
It shall be accompanied by all abstracts, vouchers, etc. supporting it and shall be prepared in the manner prescribed by the G.E. No further claims shall be made by the Contractor after submission of the Final Bill and these shall be deemed to have been waived and extinguished.
The Contractor shall be entitled to be paid the final sum less the value of payments already made on account, subject to the certification of the final bill by the G.E. No charges shall be allowed to the Contractor on account of the preparation of the final bill.
13. It is one thing to say that the decision of the CWE on a particular dispute is final and binding and therefore the same is not referable to arbitration under Condition No. 70 of the IAFW-2249 being an excepted matter, and it is quite another thing to say that the claim is barred under an other provision of the contract, such as Condition No. 65 aforesaid. The respondent has not brought to my notice any term of the contract which empowers the CWE to take a final and binding decision with regard to the applicability and effect of condition No. 65 as aforesaid. It cannot be said that the defense that the respondent may have to the claim of the petitioner based on Condition No. 65, dis-entitles the petitioner from even seeking reference of its claim to arbitration. It would be for the Arbitrator to consider the claims, counter claims and the respective defenses of the parties based on the terms and the conditions of the contract, and to interpret and apply the terms of the contract while arriving at his decision. Prima facie, it cannot be said that the aforesaid 5 claims, withheld by the respondent and not referred to arbitration constitute excepted matters. As submitted by the respondent in their reply, it would be for the Arbitrator to rule whether he has jurisdiction to decide a particular dispute or claim. It could be open to the respondent to raise all its defenses, including those based on Condition No. 65 as aforesaid and the Arbitrator shall be bound to arrive at his decision on the basis of the pleadings, the contract, and by applying the law of the land.
14. There is no force in the argument that the arbitrator has ruled that the other five claims of the petitioner are excepted matters. There is no such decision of the Arbitrator, since he took the view that he would have jurisdiction only to adjudicate those claims that are specifically referred to him. (See Arbitrators Letter dated 25th September 2003). The submission of the respondent that the Court while making appointment under Section 11 of the Act is bound to appoint an Arbitrator in terms of the arbitration agreement between the parties also does not appear to be correct.
15. I may only refer to Full Bench Decision of this Court in HBHL-VKS (JV) v. Union of India and Ors. 2007 (1) Arbitration Law Reporter (Delhi)(FB), wherein the Full Bench has taken view that the forfeiture of its right by the appointing authority to make the appointment, upon its refusal/failure to make such appointment is absolute, and the designate of the Chief Justice is thereafter empowered to make appointment of an independent and impartial arbitrator with reference to the arbitration agreement. The decision cited by the respondent in the case of Union of India and Ors. v. M.D. Gupta 2005 (1) Arbitration Law Reporter 368 (SC) is a decision taken by the Court in the light of Sections 8 & 20 of the Arbitration Act, 1940 and therefore the same is not applicable to the present case which is governed by the 1996, Act. However, considering the fact that the claims raised by the claimant arise out of an Engineering Contract, I appoint Mr. G. C. Gupta, Retired Engineer-in-Chief, 61, Munirka Enclave, New Delhi-110067 (Phone 26102284) as the Sole Arbitrator to adjudicate the claims and counter claims of the parties.
16. Considering the quantum of the claims and counter claims, I fix the fees of the arbitrator at Rs. 30,000/- to be shared equally by the parties apart from all other out of pocket expenses.
17. The application stands allowed. Parties are left to bear their respective costs.