Punjab-Haryana High Court
Mogul India vs Indian Railway Construction Company ... on 9 May, 2000
Equivalent citations: (2000)126PLR309
Author: M.L. Singhal
Bench: M.L. Singhal
JUDGMENT M.L. Singhal, J.
1. Through this revision, M/s Mogul India Construction Company Limited, Palika Bhawan, Sector 13, R.K. Puram, New Delhi has assailed the order of Additional District Judge, Kapurthala dated 1.9.1997, who had dismissed their appeal against the order of Senior Sub Judge, Kapurthala date 19.7.1994 whereby he (Senior Sub Judge, Kapurthala) had declined their (M/s Mogul India) prayer for the appointment of arbitrator.
Facts:
M/s Mogul India made application under Section 20 of the Indian Arbitration Act, 1940. There was contract between M/s Mogul India and Indian Railway Construction Company Limited for fabrication of steel structural steel work for M/s IRCON, RCF site Kapurthala. Work was allotted on 31.3.1987 and was required to be completed within 5 months but the work was actually completed in about 18 months due to failure on the part of Indian Railway Construction Company Limited to fulfil the conditions of the agreement. It was alleged that the Managing Director of Indian Railway Construction Company Limited, failed to make timely payments as per agreement for the work executed at site. Due to the tight financial position of M/s Mogul India, the irritated labour damaged and stole the office equipments tools from store including tools issued by the Indian Railway Construction Company Limited to them were damaged and stolen. The recovery of Rs. 18,000/- made from M/s Mogul India's bills was illegal on account of damage/loss of tools due to the irritated labour for non-payment by the Indian Railway Construction Company Limited. M/s Mogul India claimed to be entitled to the payments which they have detailed in the arbitration application. It was alleged that they are entitled to interest at the rate of 24% on all the payments from the date of completion of work i.e. 20.10.1989 to the date of final payment. It was alleged that there was arbitration clause in the agreement and therefore the matter in dispute was liable to be referred to the arbitrator. The Central Government should appoint arbitrator.
2. Respondents No. 2 and 3 opposed this application urging that there was no subsisting arbitration agreement between the parties in respect of contract agreement No. IRCR/KPT/124/M/s Mogul India Ltd. dated 28.4.1987 in view of the accord and satisfaction arrived at between the parties duly confirmed by the petitioner by issuance of certificates dated 31.5.1989 and 1.6.1989 followed by their letter dated 6.6.1989 and they were receiving payment thereunder. It was also alleged that no legal, valid or cognizable dispute was available with the petitioner. No legal or valid dispute had been framed by the respondents in view of submission of full and final/no claim certificate signed by M/s Mogul India. The alleged arrears referred to in para 4 of the petition is out of contract and the petitioner had already received full and final payment with regard to the completion of work. It was admitted that the work for fabrication and erection of 200 MT Steel valued at Rs. 5 lacs was awarded to the petitioner. Material comprising of steel, tools plants consumable and electricity were to be supplied by the respondents to the petitioner free of costs. Rates quoted by the petitioner in the agreement were confirmed and no claim for fluctuation in price was available under Clause 30 of the Contract Agreement. The petitioner completed work in November, 1988 though under the contract it was to be completed by 30.8.1987. There was no failure on the part of the respondents to fulfil any condition of the agreement. Recovery of Rs. 17920/- was made on account of depreciated costs for loss of Iron's plant etc. by the petitioner and thus the recovery of was made under para 32.3 of the Contract Agreement. It was alleged that petition was liable to be dismissed as there was no dispute which was liable to be referred to the arbitrator.
3. On the pleadings of the parties, following issues were framed:
1-Whether there is arbitration agreement between the parties and the matter in suit is liable to be referred to the Arbitrator? OPP 2-Whether the petitioner is estopped to file the present suit by his act and contract?
3-Whether the petition is liable to be dismissed for want of notice under section 8 of the Arbitration Act? OPR 4-Relief.
4. Senior Subordinate Judge, Kapurthala dismissed this application vide order dated 19.7.1994 in view of his finding that there is no arbitration agreement between the parties and the matter in dispute is not liable to be referred to the: arbitrator and the petitioner is estopped from filing the present petition by his act and conduct as the petitioner had given certificate Ex.D.1 to the respondents that it had received the entire amount towards full and final settlement of the work done by it under the contract.
5. M/s Mogul India went in appeal against this order. Additional District Judge, Kapurthala dismissed the appeal vide order dated 1.9.1997.
6. Learned counsel for the petitioner submitted that there was arbitration agreement between the parties. Arbitration clause 62.2 is contained in the letter of offer dated 31.3.1987. Letter of offer dated 31.3.1987 forms part of contract agreement between the parties. Annexures A and B also form part of the contract agreement. Vide letter No. IRCF/KPT/2407 dated 31.3.1987. M/s Indian Railway Construction Company Ltd. accepted the offer of the petitioner and awarded the work of fabrication, cleaning, painting and erection of steel work in connection with the construction of factory sheds under terms and conditions mentioned therein. Annexure A to the said letter contained schedule of quantities as per quoted rates. Annexure-D to the said letter contained special condition of the contract. Both Annexures A and D form part of the acceptance letter and the agreement entered into between the parties. In clause 62.1 under the heading "demand for arbitration", it is recorded that if the contractor be dissatisfied with the decision of the company (IRCON) on any matter in question, dispute or difference, on any account or as to the with holding by the company (IRCON) of any certificates to which the contractor may claim to be entitled to or if the company (IRCON) fails to make a decision within a reasonable time, then and in any such case but except in any of the accepted matters referred to in these conditions the contractor may within 10 days of the receipt of communication of such decision or after the expiry of the reasonable time as the case may be, demand in writing that such matter in question, dispute or difference be referred to arbitration. Such demand for arbitration shall be delivered to the Managing Director of the Company (IRCON) by the contractor and shall specify the matters which are in question, dispute or difference and only such dispute or difference of which the demand has been made and no other shall be referred to arbitration.
7. In the general condition of contract Annexure-C, the methodology by which disputes are to be settled has been given. It was submitted that it was an application whereby the jurisdiction of the Court under Section 20 of the Arbitration Act, 1940 had been sought to be invoked and the applicant was to call upon the respondents to produce arbitration agreement and to refer the matter to arbitrator for decision. According to Section 20 where any persons have entered into arbitration agreement and where a difference has arisen to which the agreement applies, they may apply to the Court having jurisdiction in the matter. It was submitted that since it was an application under Section 20 of the Arbitration Act through which jurisdiction of the Court was sought to be invoked to refer the matter to arbitrator and the respondents were also called upon to produce the arbitration agreement. Senior Sub Judge should have called upon the respondents to produce arbitration agreement and the failure of the petitioner to produce arbitration agreement should not have been made the basis for declining the prayer of the petitioner to refer the matter to arbitrator. It was submitted by the learned counsel for the petitioner that there is an arbitration clause embodied in clause 62.2 under the heading "DEMAND FOR ARBITRATION" in the general conditions of contract, which forms; the basis of this contract. Petitioner's prayer should have been allowed and the matter in dispute: which the petitioner had set out in part 4 of the petition should have been referred to the arbitrator for decision.
8. Faced with this position, learned counsel for the respondents submitted that there was no subsisting arbitration agreement between the parties as full and final payment had been made to the petitioner and the petitioner had confirmed this fact by issuance of certificates dated 31.5.1989 and 1.6.1989. It was submitted that since there was no dispute which could be referred to arbitrator, this application was rightly declined by the Courts below. It was submitted that after the petitioner had received full and final payment, petitioner received extra amount of Rs. 7610/- and after the receipt of that payment, there was no dispute left.
9. Learned counsel for the petitioner on the other hand submitted that the Court could not have refused to refer the dispute to arbitrator the moment the petitioner had urged that there was dispute between the parties. It was submitted that the court could not have entered into determining where some amount was due or not as the determination where some amount was due or not was within the purview of the arbitrator.
10. Learned counsel for the petitioner drew my attention to Union of India v. M/s L.K. Ahuja & Company, AIR 1988 SC 1172 where it was held that in order to be entitled to ask for a reference under Section 20, there must be an entitlement to money and a difference or dispute in respect of the same. It will be entirely wrong to mix-up the two aspects, namely, whether there was any valid claim for reference under Section 20 and secondly, whether the claim to be adjudicated by the arbitrator, was barred by lapse of time. The second is a matter which the arbitrator would decide unless, however, if on admitted facts a claim is found at the time of making an order under Section 20, to be barred by limitation. In matters of this nature, the main question is whether the application under Section 20 was within time.
11. In AIR 1988 SC 1172 (supra) four agreements were entered into between the contractor and Union of India represented by the Executive Engineer, Northern Railway, Allahabad for the construction of certain quarters. All the four contracts were executed and completed by the contractor on diverse dates. The contractor accepted the four final bills and gave no claim declaration in respect of the four contracts. The contractor wrote a letter to the Additional Chief Engineer stating that certain amount was due on account of the work executed and requested him to refer the dispute to the Arbitrator. A reply was sent to the above letter stating that there was no dispute between the parties and hence no question of appointment of any Arbitrator arose. The claim for reference was made within three years and, subsequently, an application under Section 20 was filed. It was contended before the Trial Judge that the work under all the four contracts had been fully executed on different dates and the contractor had accepted full and final payment of the agreements which had been executed by it and no claim declaration in respect of the same had been given by him. It was, therefore, submitted that since there was no dispute, the application filed under Section 20 was misconceived. The Trial Court held that the Court had no jurisdiction under Section 20.
12. It was held that it is true that on completion of the work, right to get payment would normally arise and it is also true that on settlement of the final bill, the right to get further payment gets weakened but the claim subsists and whether it does subsist, is a matter which is arbitrable.
13. Learned counsel for the petitioner also drew my attention to The Vulcan Insurance Co. Ltd. v. Maharaj Singh and Anr., AIR 1976 SC 287 where it was held that if the difference which had arisen between the parties was the one to which the arbitration clause in question applied then the application under Section 20 could not be dismissed on the ground that the claim would not ultimately succeed either on facts or in law. The matter was to be left for the decision of the arbitrator.
14. In M/s Bharat Heavy Electricals Limited, Kanpur v. Amar Nath Bhan Prakash, AIR 1982(1) SC 625 the Hon'ble Supreme Court observed that question whether there was discharge of the contract by accord and satisfaction or not, is a dispute arising out of the contract and to be referred to arbitration. Hence, application under Section 20 of a party to the contract must be allowed and the dispute between the parties including the said question referred to arbitration.
15. Learned counsel for the petitioner submitted that when the petitioner had raised dispute with regard to certain payments which had been claimed to be due from IRCON, the Court was bound to refer the matter to the arbitrator in terms of clause 62.1 of the contract agreement. Petitioner had claimed interest also at the rate of 24% on the said payments from the date of completion of work i.e. 20.10.1989 to the date of final payment.
16. Learned counsel for the respondents submitted that there was no subsisting arbitration agreement between the parties in resect of this contract as the petitioner had accorded full and final satisfaction after receiving the payment and in token thereof, he had issued certificates dated 31.5.1989, and 1.6.1989 followed by their letter dated 6.6.1989. In reply to the arbitration agreement, respondents urged that no claim for fluctuation in price was available under clause 30 of the Contract Agreement. The petitioner completed the work by November, 1988 though under the contract, it was to be completed by 30.8.1987. There was no failure on the part of respondents to fulfil any condition of the agreement. Recovery of Rs. 17920/- was made by the respondents under clause 32.3 of the contract agreement. In the certificate Ex.D-1 which was signed by Sh. Baldev Singh Bhatia, sole proprietor of M/s Mogul India it was recorded that he had accepted amount of Rs. 29265/- as full and final payment from M/s IRCON against the work order No. IRCF/KPT/124/M/s Mogul India Ltd. dated 28.4.1987 and he had no other claim outstanding against IRCON for work done or for labour or any other account. After receiving the payment, the petitioner found that another sum of Rs. 7610/was due against the respondents and then he wrote letter Ex. D-2 to the respondents in which he mentioned as under:
"We are thankful to you for the release of payment against bills. As informed you on telephone on 3.6.89, our due payment of Rs. 7610/- against the small and odd jobs done by us, was not made, although all the relevant notes were made ready by the APM-SF, signed and accepted by us and finally approved by your goodself.
We request you to instruct the concerned account department to release this payment at the earliest possible. We shall be highly thankful to you for this favour,"
17. When this letter was received by the respondents, they checked the record and found that claim of the petitioner was correct. Draft for Rs. 7610/- was given to the petitioner on 10.6.1989. It was submitted by the respondents that after this payment of Rs. 7610/- was received, there was no dispute whatsoever between the parties. When there was no dispute between the parties, what dispute was to be referred to arbitrator. Learned counsel for the respondents further submitted that this application was made after limitation.
18. Suffice it to say, this application was made on 8.5.1992. Final payment of Rs. 7610/- was made on 10.6.1989. That means this application was within time. This application could be made within three years of the date when the last payment was made.
19. Learned counsel for the respondents submitted that three years period shall run from the date when the work was completed. Work was completed in November, 1988 and therefore three years limitation ended in November, 1991.
20. Suffice it to say, limitation point has also to be, seen by the arbitrator. In M/s Joginder Singh & Co. v. Union of India, (1998-2)119 P.L.R. 839 it was held by a Single Bench of this Court that the Court has only to see that there are disputes and those disputes are to be referred to arbitration as per agreement between the parties and the arbitrator can decide those questions.
21. Article 137 of the Limitation Act would apply to this application. Period of liminatation has to be computed from the date claim is asserted and payment is denied is the observation made by the Hon'ble Supreme Court in Inder Singh Rekhi v. Delhi Development Authority AIR 1998 SC 1007.
22. In view of what has been said above the conclusion is that this revision must succeed. This revision is accordingly allowed and the orders of the Courts below are set aside. The respondents are directed to refer the matter in dispute which the petitioner has raised in his application under Section 20 of the Arbitration Act to the arbitrator.