Karnataka High Court
Bvg India Ltd vs Bruhat Bengaluru Mahanagara Palike on 27 September, 2018
Author: Chief Justice
Bench: Dinesh Maheshwari
1
CMP No.75/2015
& connected matters
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF SEPTEMBER, 2018
BEFORE
HON'BLE MR.JUSTICE DINESH MAHESHWARI, CHIEF JUSTICE
CIVIL MISCELLANEOUS PETITION NO.75/2015 C/W
CIVIL MISCELLANEOUS PETITION NOS. 202/2016,
208/2016, 209/2016 AND 210/2016
IN CMP NO.75/2015
BETWEEN:
BVG INDIA LTD
A COMPANY INCORPORATED UNDER
COMPANIES ACT, 1956
HAVING ITS OFFICE AT
#47, BVG HOUSE, 1ST AND 2ND FLOOR
MILLERS TANK BUND ROAD
VASANTHNAGAR
BENGALURU - 560 052
REPRESENTED BY ITS
AUTHORISED SIGNATORY
MR. S K PATIL
... PETITIONER
(BY SRI: K.N.PHANINDRA, ADVOCATE FOR
SRI:MANU KULKARNI, ADVOCATE)
AND:
BRUHAT BENGALURU MAHANAGARA PALIKE
A CORPORATION ESTABLISHED UNDER THE
KARNATAKA MUNICIPAL CORPORATIONS ACT, 1976
N R SQUARE, CENTRAL OFFICE
BENGALURU - 560 002
REPRESENTED BY ITS
EXECUTIVE ENGINEER
YELAHANKA DIVISION
... RESPONDENT
(BY SRI: K N PUTTEGOWDA, ADVOCATE)
2
CMP No.75/2015
& connected matters
THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER
SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT
1996, PRAYING TO APPOINT A SOLE ARBITRATOR TO
ARBITRATE THE DISPUTE RAISED BY PETITIONER AGAINST
RESPONDENT UNDER THE TERMS AND CONDITION OF THE
AGREEMENT DATED 29-11-2012 (ANNEXURE B) AND ETC.
IN CMP NO.202/2016
BETWEEN:
BVG INDIA LTD
A COMPANY INCORPORATED UNDER
COMPANIES ACT, 1956
HAVING ITS OFFICE AT
#47, BVG HOUSE, 1ST AND 2ND FLOOR
MILLERS TANK BUND ROAD
VASANTHNAGAR
BENGALURU - 560 052
REPRESENTED BY ITS
AUTHORISED SIGNATORY
MR.PRASANNA SHASTRI
... PETITIONER
(BY SRI: K.N.PHANINDRA, ADVOCATE FOR
SRI:MANU KULKARNI, ADVOCATE)
AND:
BRUHAT BANGALORE MAHANAGARA PALIKE
A CORPORATION ESTABLISHED UNDER THE
KARNATAKA MUNICIPAL CORPORATIONS ACT, 1976
YELAHANKA ZONE
BYATARAYANAPURA
BENGALURU - 560 002
REPRESENTED BY ITS
EXECUTIVE ENGINEER
BYATRAYANAPURA DIVISION
YELAHANKA ZONE
... RESPONDENT
(BY SRI: S.J.PURANIK, ADVOCATE)
THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER
SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT
3
CMP No.75/2015
& connected matters
1996, PRAYING TO APPOINT A SOLE ARBITRATOR TO
ARBITRATE THE DISPUTE RAISED BY PETITIONER AGAINST
RESPONDENT UNDER THE TERMS AND CONDITION OF THE
AGREEMENT DATED 30.11.2012 (ANNEXURE-A) AND ETC.
IN CMP NO.208/2016
BETWEEN:
BVG INDIA LTD
A COMPANY INCORPORATED UNDER
COMPANIES ACT, 1956
HAVING ITS OFFICE AT
#47, BVG HOUSE, 1ST AND 2ND FLOOR
MILLERS TANK BUND ROAD
VASANTHNAGAR
BENGALURU - 560 052
REPRESENTED BY
MR.G.SIVARAJU
... PETITIONER
(BY SRI: K.N.PHANINDRA, ADVOCATE FOR
SRI:MANU KULKARNI, ADVOCATE)
AND:
BRUHAT BANGALORE MAHANAGARA PALIKE
A CORPORATION ESTABLISHED UNDER THE
KARNATAKA MUNICIPAL CORPORATIONS ACT, 1976
18TH MAIN, 39TH CROSS
JAYANAGAR 4TH, T BLOCK
BENGALURU - 560 041
REPRESENTED BY ITS
EXECUTIVE ENGINEER
JAYANAGARA DIVISION
... RESPONDENT
(BY SRI: S.J.PURANIK, ADVOCATE)
THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER
SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT
1996, PRAYING TO APPOINT A SOLE ARBITRATOR TO
ARBITRATE THE DISPUTE RAISED BY PETITIONER AGAINST
RESPONDENT UNDER THE TERMS AND CONDITION OF THE
AGREEMENT DATED 18.02.2013 (ANNEXURE-A) AND ETC.
4
CMP No.75/2015
& connected matters
IN CMP NO.209/2016
BETWEEN:
BVG INDIA LTD
A COMPANY INCORPORATED UNDER
COMPANIES ACT, 1956
HAVING ITS OFFICE AT
#47, BVG HOUSE, 1ST AND 2ND FLOOR
MILLERS TANK BUND ROAD
VASANTHNAGAR
BENGALURU - 560 052
REPRESENTED BY
MR.G.SIVARAJU
... PETITIONER
(BY SRI: K.N.PHANINDRA, ADVOCATE FOR
SRI:MANU KULKARNI, ADVOCATE)
AND:
BRUHAT BANGALORE MAHANAGARA PALIKE
A CORPORATION ESTABLISHED UNDER THE
KARNATAKA MUNICIPAL CORPORATIONS ACT, 1976
18TH MAIN, 39TH CROSS
JAYANAGAR 4TH, T BLOCK
BENGALURU - 560 041
REPRESENTED BY ITS
EXECUTIVE ENGINEER
JAYANAGARA DIVISION
... RESPONDENT
(BY SRI: K N PUTTEGOWDA, ADVOCATE)
THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER
SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT
1996, PRAYING TO APPOINT A SOLE ARBITRATOR TO
ARBITRATE THE DISPUTE RAISED BY PETITIONER AGAINST
RESPONDENT UNDER THE TERMS AND CONDITION OF THE
AGREEMENT DATED 18.02.2013 (ANNEXURE-A) AND ETC.
5
CMP No.75/2015
& connected matters
IN CMP NO.210/2016
BETWEEN:
BVG INDIA LTD
A COMPANY INCORPORATED UNDER
COMPANIES ACT, 1956
HAVING ITS OFFICE AT
#47, BVG HOUSE, 1ST AND 2ND FLOOR
MILLERS TANK BUND ROAD
VASANTHNAGAR
BENGALURU - 560 052
REPRESENTED BY
MR.G.SIVARAJU
... PETITIONER
(BY SRI: K.N.PHANINDRA, ADVOCATE FOR
SRI:MANU KULKARNI, ADVOCATE)
AND:
BRUHAT BANGALORE MAHANAGARA PALIKE
A CORPORATION ESTABLISHED UNDER THE
KARNATAKA MUNICIPAL CORPORATIONS ACT, 1976
18TH MAIN, 39TH CROSS
JAYANAGAR 4TH, T BLOCK
BENGALURU - 560 041
REPRESENTED BY ITS
EXECUTIVE ENGINEER
JAYANAGARA DIVISION
... RESPONDENT
(BY SRI: S.J.PURANIK, ADVOCATE)
THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER
SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT
1996, PRAYING TO APPOINT A SOLE ARBITRATOR TO
ARBITRATE THE DISPUTE RAISED BY PETITIONER AGAINST
RESPONDENT UNDER THE TERMS AND CONDITION OF THE
AGREEMENT DATED 12.01.2013 (ANNEXURE-A) AND ETC.
THESE CIVIL MISCELLANEOUS PETITIONS COMING ON
FOR ADMISSION THIS DAY, THE COURT MADE THE
FOLLOWING:
6
CMP No.75/2015
& connected matters
ORDER
These five applications under Section 11 of the Arbitration and Conciliation Act, 1996 ('the Act of 1996'), involving the same contesting parties and similar issues, have been considered together; and are taken up for disposal by this common order.
By way of these applications, the petitioner has made the request for appointment of Arbitrator to adjudicate upon and decide all its disputes with the respondent - Bruhat Banglore Mahanagar Palike ('BBMP'), arising out of, and relating to 5 Agreements for Management, Handling and Transportation of Municipal Solid Waste dated 29.11.2012, 30.11.2012, 18.02.2013 (two in number) and 12.01.2013 respectively.
Put in brief, the relevant background aspects of the matters are as follows:
The petitioner had entered into the aforesaid agreements with the respondent for 'Management, Handling and Transportation of Municipal Solid Wastes' in various wards of the city of Bengaluru. It is alleged that the petitioner 7 CMP No.75/2015 & connected matters had suffered hostile attitude of the respondent-BBMP right from the very inception of the contracts; and within a span of just 3 days of entering into the first agreement dated 01.12.2012, the respondent issued a 'final intimation letter' to the petitioner. It is submitted that despite the respondent having breached several of the terms of agreements, including the arbitrary action of levying different penalties, the petitioner continued to execute the work in accordance with the terms of the agreements.
The petitioner has further averred that on 15.10.2014, the respondent invoked Clause 8.1 of the respective agreements for amicable settlement of the disputes; and the following day i.e., on 16.10.2014, the petitioner raised certain issues concerning access to landfills for segregation and dumping of waste at various places, as he could not keep the vehicles loaded with garbage stranded for several days. It is submitted that being aggrieved by respondent's failure to co-operate and fearing that the respondent may terminate the services under the agreements, the petitioner filed the respective applications for interim relief in the competent 8 CMP No.75/2015 & connected matters Court, being A.A. No. 25012/2014, A.A. No. 25011/2014 and A.A. No. 359/2015 respectively.
It is further pointed out that the petitioner was served with a series of notices, including the notices for termination dated 29.12.2014 07.10.2014, 22.09.2015 and 24.01.2015 against the respective agreements. The petitioner submits that though the respondent alleged in the said notices that the action for termination was initiated on receipt of certain complaints from the public but then, no information regarding these complaints was provided to the petitioner nor an opportunity of hearing was extended; and, therefore, the said notices were in violation of clauses 7(a)(i) to (vii), which had been common to all the agreements in question.
On receipt of the termination notices, the petitioner issued and served reply notices on various dates to the respondent invoking the arbitration clause to settle the disputes which had arisen. It is submitted that the respondent having failed to reply the notices and having failed to nominate the Arbitrator, this Court may appoint an independent Arbitrator to adjudicate upon the dispute between the parties. 9 CMP No.75/2015
& connected matters Learned counsel for the petitioner has also submitted that insofar as the previous arbitration proceedings conducted by the Commissioner, BBMP is concerned, the Arbitration Suit No.66/2014 is filed by the petitioner, alleging the arbitrariness of the Commissioner, BBMP in such proceedings.
Further, learned counsel for the petitioner has placed reliance on a decision of the Hon'ble Supreme Court in the case of Union of India and Ors v. Uttar Pradesh State Bridge Corporation Ltd.,: (2015) 2 SCC 52, where the issues for consideration had been on the power of the Courts to appoint Arbitrator by overriding the procedure for appointing an arbitrator as mentioned in the contract between the parties, with special reference to Government contracts. The Supreme Court has upheld the powers as envisaged under Section 11 of the Act of 1996, by taking into consideration several decisions, including that in North Eastern Railway v. Tripple Engg. Works: (2014) 9 SCC 288. It has further been observed in the said decision that only those officers, who can function independently, impartially and provide sufficient time 10 CMP No.75/2015 & connected matters to resolve the disputes between the parties, could be appointed by the Government in their contracts.
While opposing the prayer of the petitioner for appointment of an independent Arbitrator in relation to the agreements in question, it has been contended on behalf of the respondent - BBMP that as per the agreements, the dispute resolution has to be conducted by the Commissioner, BBMP and he alone could be appointed as the Arbitrator in the matter. It has further been contended that a previous dispute between the petitioner and the respondent had been resolved by the Commissioner, BBMP; and that referring of the matters to any other Arbitrator after a long lapse of time may cause unnecessary financial burden on the BBMP. It has further been pointed out that the agreements between the parties were terminated as the contract period has expired/lapsed and hence, the arbitration clause in such terminated agreements cannot now be taken recourse of by the petitioner. It is yet further submitted that the petitioner has taken recourse to the remedy before the Civil Court and, 11 CMP No.75/2015 & connected matters therefore, he is not entitled to maintain the present parallel proceedings.
Having given thoughtful consideration to the rival submissions and having examined the records, this Court finds it just and appropriate that an independent Arbitrator be appointed to adjudicate upon and decide all the disputes of the parties relating to the agreements in question.
It remains trite, with reference to sub-section (6-A) of Section 11 of the Act of 1996, that the basic question required to be examined in these applications is about the existence of the arbitration agreement between the parties.
In fact, the existence of arbitration agreements in these matters is apparent on the face of the record. The dispute redressal mechanism in the agreements in question, as contained in Clauses 8.1 and 8.2 thereof, running common to all these cases, could be noticed as under:-
"8.1 Amicable Resolution Save where expressly stated to the contrary in this Agreement, any dispute, difference or controversy of whatever nature between the Parties, howsoever arising under, out of or in relation to this Agreement, shall in the first 12 CMP No.75/2015 & connected matters instance be attempted to be resolved amicably by meetings between the Parties.
8.2 Arbitration Any dispute which is not resolved amicably shall be finally settled by binding arbitration, with the Commissioner BBMP, serving as the sole Arbitrator. The place of arbitration shall ordinarily be the Commissioner's office. The Parties agree that the decision or award resulting from arbitration shall be final and binding upon the Parties.
Pending the submission of and/or decision on a dispute, the Parties shall continue to perform their respective obligations under this Agreement without prejudice to a final adjustment in accordance with such arbitration award."
The petitioner is making several claims against the respondent and the same are denied by the respondent. Any dispute which is not resolved amicably under the agreements in question is to be settled by way of arbitration.
However, the question regarding eligibility of the Commissioner, BBMP to act as an Arbitrator deserves to be examined. As regards ineligibility of certain persons to be appointed as Arbitrator, sub-section (5) of Section 12 of the Act of 1996 reads as under:
13CMP No.75/2015
& connected matters "Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing."
As per Clause 5 of the Seventh Schedule to the Act of 1996, the Manager or Director or any person who is part of the Management or having similar controlling influence is to be treated as a person having such relationship with the party concerned as to be ineligible to be appointed as an Arbitrator.
The net effect of the aforesaid provision in the present matters is that under the agreements in question, the Commissioner of the respondent-BBMP may not be the person eligible to be appointed as an Arbitrator for, he directly falls under the exclusion category provided under the Act of 1996, being the representative of BBMP and as a part of the management, having a controlling influence in BBMP. 14 CMP No.75/2015
& connected matters When as per sub-section (5) of Section 12 ibid. the Commissioner, BBMP, is found ineligible to act as Arbitrator, the appropriate course would be to appoint an independent Arbitrator to adjudicate upon and decide all the disputes between the parties under the agreements in question. The contention on behalf of the respondent that only Commissioner could be the Arbitrator is required to be, and is, rejected.
The other contentions urged on behalf of the respondent have only been noted to be rejected. It is too far- stretched to suggest that for the alleged termination of the agreements, the petitioner cannot take recourse to the arbitration clause therein. Such a dispute as to whether there had been a valid termination or not is itself a matter to be decided in the arbitration proceedings. The suggestion about so-called financial burden on the BBMP is also without any substance and carries no relevance. When there exists dispute and the recourse is to be taken to the dispute redressal mechanism under the agreements in question, the 15 CMP No.75/2015 & connected matters costs of proceedings would, ordinarily, follow the suit and would be in the domain of the Arbitrator to decide.
The contention about the petitioner's recourse to the proceedings of the Civil Court is also without any substance. The said proceedings have been adopted by the petitioner seeking interim relief as per Section 9 of the Act of 1996 and for the reason of taking recourse to such proceedings, the petitioner cannot be denied the right to seek appointment of an independent Arbitrator. On the contrary, the very fact of the petitioner taking recourse to the proceedings under Section 9 of the Act of 1996 strengthens his case that he seeks to take recourse to the dispute redressal mechanism under the agreements in question and in conformity with the Act of 1996 only.
From the material placed on record, it is evident that the petitioner, after having attempted to settle the disputes amicably, issued notices proposing for appointment of Arbitrator. But, the respondent failed to reply the said legal notices and did not even take steps for appointment of Arbitrator.16
CMP No.75/2015
& connected matters Hence, when the parties stand at conflict and the disputes do exist, which have not been resolved; and for the reason of failure of the procedure for appointment of Arbitrator, it is just and proper that an independent arbitrator be appointed to adjudicate upon and decide the disputes between the parties, including their claims, counter-claims and objections.
Now, learned counsel for the parties have fairly agreed to the appointment of a Former Judge of this Court, namely, Hon'ble Shri Justice K.N.Keshavanarayana to act as an Arbitrator to resolve the disputes between the parties under the provisions of the Act of 1996, as per the Rules governing the Arbitration Centre at Bengaluru.
Accordingly, this petition is disposed of by appointing Hon'ble Shri Justice K.N.Keshavanarayana, a Former Judge of this Court, to enter into the said reference and to act as an Arbitrator in the present case in the Arbitration Centre, Bengaluru, as per the Rules governing the said Arbitration Centre.17
CMP No.75/2015
& connected matters In the interest of justice, it is made clear that the Arbitrator shall adjudicate upon and decide all the disputes between the parties, including their claims, counter-claims and objections relating to the agreements in question. The requirements of the Arbitration and Conciliation Act, 1996, [as amended by the Arbitration and Conciliation (Amendment) Act, 2015], shall be complied with by all the concerned.
Needless to observe that all the questions arising between the parties in these matters shall remain open for determination in the arbitration proceedings.
A copy of this order be sent to the Arbitration Centre, Khanija Bhavan, Bengaluru, for proceeding further in the matter on administrative side and also to Hon'ble Shri Justice K.N.Keshavanarayana, on the address available with the said Arbitration Centre, Bengaluru.
Sd/-
` CHIEF JUSTICE *bgn/-