Karnataka High Court
M/S Nsc Projects Pvt Ltd vs Union Of India on 26 September, 2019
Author: B.Veerappa
Bench: B. Veerappa
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 26TH DAY OF SEPTEMBER, 2019
BEFORE
THE HON'BLE MR. JUSTICE B. VEERAPPA
C.M.P. No.129/2019
BETWEEN:
M/S NSC PROJECTS PVT. LTD.,
ADDRESS L-87 STREET NO. 07-C,
MAHIPALPUR EXTENSION
NEW DELHI -110037.
... PETITIONER
(BY SRI BHUPESH NARULA, ADVOCATE)
AND:
UNION OF INDIA
BY ITS CHIEF ENGINEER (AIR FORCE),
MILITARY ENGINEERING SERVICES
NO. 2, DC AREA,
MES ROAD, YESHWANTHPUR POST,
BANGALORE - 560022.
... RESPONDENT
(BY SRI UNNIKRISHNAN M., ADVOCATE )
*****
2
THIS CMP IS FILED UNDER SECTION 11(6) OF THE
ARBITRATION AND CONCILIATION ACT 1996, PRAYING TO
APPOINT SOLE ARBITRATOR UNDER THE ARBITRATION
CLAUSES AS PER WORK ORDER DATED: 23.11.2015 AS
PER ANNEXURE - 'B' AND AGREEMENT DATED 14.01.2016
AS PER ANNEXURE - 'Q' AND GENERAL CONDITION OF
CONTRACTS (IAFW - 2249-1989 PRINT) ANNEXURE -'R' TO
ADJUDICATE THE ISSUES PREFERABLE WITH THE
TECHNICAL BACKGROUND/ EXPERTISE AS THE CONTRACT
IN QUESTION WAS OF TECHNICAL NATURE IN THE
INTEREST OF JUSTICE AND EQUITY.
THIS CMP COMING ON FOR ADMISSION THIS DAY,
THE COURT MADE THE FOLLOWING:
ORDER
The petitioner has filed the present Civil Miscellaneous Petition under the provisions of Section 11(5) & (6) of the Arbitration & Conciliation Act, 1996 ('the Act' for short) to appoint the sole Arbitrator to adjudicate the dispute between the parties, in terms of Clause 70 of the General Conditions of Contracts (I.A.F.W-2249) as per the work order dated 23.11.2015 and the agreement dated 14.1.2016 entered into between the parties. 3
2. It is the case of the petitioner that on 23.11.2015 the respondent - Union of India has invited tenders for the work of "CA No.CE (AF)/BAN/03 of 2015-16 for completion of incomplete items for widening of taxi tracks and resurfacing of Runways including construction of Roads, Culverts and Drainage systems in the Airfield at Tambaram". The work was awarded to the petitioner through acceptance letter dated 23.11.2015 for which a proper agreement was also executed between the parties. The stipulated date of start and completion for the above work was 11.1.2016 and 10.10.2016 respectively. The time allowed for completion of the work as per the contract agreement was nine months. The complete scope of work could not be executed/completed due to various hindrances on the part of the respondent, which were cropped up at site of work and the work was actually completed on 15.6.2018 and complete work was handed over to the department on the said date i.e., 15.6.2018. On 4 7.12.2018, the petitioner sent a letter Ref.No.NSC/MES- Tambram/2018-19/795-796 to the Garrison Engineer (AF), MES, Air Force Station, Tambram, Chennai, wherein the department/respondent refuted to pay the amount so due against the work and also denied all the major claims. On 21.12.2018 the petitioner sent a letter to the Chief Engineer (AF), Yeshwantpur, Bangalore, for the release of the payments within 15 days from the receipt of the said letter, but the Chief Engineer was remained uncommunicative to the said letter, as a result thereto the disputes and differences arose between the parties out of the said contract agreement, and the said amount became due and payable by the respondent and remained unpaid to the petitioner.
3. It is further case of the petitioner that on 12.1.2019 the petitioner requested the Engineer-in-Chief's branch, Military Engineering Services, Dte of Contract Management, Kashmir House, Rajaji Marg, New Delhi to appoint an 5 independent, impartial and sole Arbitrator to adjudicate the disputes and refer the same for adjudication under arbitration Clause-70 of the agreement. The respondent/department by letter dated 25.1.2019 and another letter dated 4.2.2019 sent by the Chief Engineer (AF), Bengaluru acknowledged the receipt of letter dated 12.1.2019 of the petitioner and assured the petitioner to resolve the dispute through appointment of departmental Arbitrator in the matter. On 28.1.2019, the petitioner sent a reminder letter regarding appointment of the Arbitrator. But no appointment of arbitrator was done to resolve the dispute between the parties. Therefore, the petitioner is before this Court for the reliefs sought for.
4. I have heard the learned counsel for the parties to the lis.
5. Sri Bhupesh Narula, learned counsel for the petitioner reiterating the averments made in the Civil 6 Miscellaneous Petition has contended that in pursuance of the tender invited by the respondent on 23.11.2015, after considering the application, the work was awarded to the petitioner as per the work order dated 23.11.2015. It is also not in dispute that subsequently, the parties entered into agreement on 14.1.2016. There is no dispute between the parties with regard to the existence of the work order and the agreement stated supra. He would further contend that Clause-70 of the General Conditions of Contracts stipulates that the disputes between the parties to the Contract shall be referred to arbitration. Therefore, the petitioner has issued the legal notice on 12.1.2019 invoking the arbitration clause. In response to the same, the respondent - Central Government issued reply on 4.2.2019 requesting the petitioner to forward his willingness/agreement for appointment of departmental Arbitrator in writing in order to take up the matter with appointing authority. The same is disputed by the 7 petitioner on 14.2.2019 and contended that in view of the amended provisions of sub-section (5) of Section 12 of the Act r/w 5th and 7th Schedules, there is a prohibition to appoint departmental arbitrator. Inspite of the same, the respondent has not initiated any further proceedings. Therefore, he sought to allow the present Civil Miscellaneous Petition as prayed for.
6. Per contra, Sri Unnikrishnan, learned counsel for the respondent submits that on the request made by the petitioner, the department came forward to appoint the departmental arbitrator in terms of Clause 70 of the General Conditions of Contracts as per the work dated 23.11.2015 and the agreement dated 14.1.2016. He would further contend that the arbitration clause stipulates that a Serving Officer having degree in Engineering or equivalent or having passed final/direct final examination of Sub- Division II of Institution of Surveyor (India) recognized by the Government of India, to be appointed as Arbitrator by 8 the Authority mentioned in the tender documents. Therefore, he sought to dismiss the present Civil Miscellaneous Petition.
7. Having heard the learned counsel for the parties, it is an undisputed fact that in pursuance of the tender invited by the respondent on 23.11.2015, after considering the application, the work was awarded to the petitioner as per the work order dated 23.11.2015. It is also not in dispute that subsequently the parties entered into agreement on 14.1.2016. It is also not in dispute that the general conditions of contract apply to the work order and the agreement stated supra and the parties follow Clause-70 of the general conditions of contracts for arbitration, which reads as under:
"70. Arbitration.- All disputes, between the parties to the Contract (other than those for which the decision of the C.W.E. or any other person is by the Contract expressed to be final and binding) shall, 9 after written notice by either party to the Contract to the other of them, be referred to the sole arbitration of an Serving officer having degree in Engineering or equivalent or having passed final/direct final Examination of sub-Division II of Institution of Surveyor (India) recognized by the Government of India to be appointed by the authority mentioned in the tender documents.
Unless both parties agree in writing such reference shall not take place until after the completion or alleged completion of the Work or termination or determination of the Contract under Condition Nos. 55, 56 and 57 hereof.
Provided that in the event of abandonment of the Works or cancellation of the Contract under Condition Nos. 52, 53 or 54 hereof, such reference shall not take place until alternative arrangements have been finalized by the Government to get the Works completed by or through any other Contractor or Contractors or Agency or Agencies.
Provided always that commencement or continuance of any arbitration proceeding hereunder or otherwise shall not in any manner militate against 10 the Governments right of recovery from the contractor as provided in Condition 67 hereof.
If the Arbitrator so appointed resigns his appointment or vacates his office or is unable or unwilling to act due to any reason whatsoever, the authority appointing him may appoint a new Arbitrator to act in his place.
The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties, asking them to submit to him their statement of the case and pleadings in defence.
The Arbitrator may proceed with the arbitration, exparte, if either party, inspite of a notice from the Arbitrator fails to take part in the proceedings.
The Arbitrator may, from time to time with the consent of the parties, enlarge, the time for making and publishing the award.
The Arbitrator shall give his award within a period of six months from the date of his entering on the reference or within the extended time as the case may be on all matters referred to him and shall indicate his findings, along with sums awarded, 11 separately on each individual item of dispute. The arbitrator shall give reason for the award in each and every case irrespective of the value of claims or counter claims.
The venue of Arbitration shall be such place or places as may be fixed by the Arbitrator in his sole discretion.
The award of the Arbitrator shall be final and binding on both parties to the Contract."
8. It is also not in dispute that the petitioner has issued legal notice to the respondent on 12.1.2019 as contemplated under the provisions of Section 7(5) of the Act. Clause 70 of the general conditions of Contracts stipulates that a Serving Officer having degree in Engineering has to be appointed as an Arbitrator by the authority mentioned in the tender documents. At this stage, it is relevant to refer to the amended provisions of sub-section (5) of Section 12 of the Act, which came into force on 23.10.2015. A careful perusal of the said 12 provisions make it clear that 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. In view of the amended provisions of Section 12(5) of the Act r/w Entry-1 of the Seventh Schedule of the Act, a person who is related to a party as an employee, consultant, advisor or has any other past or present business relationship with a party, is disqualified to act as an Arbitrator. A reading of Entry-1 of the 7th Schedule of the amended provisions of Section 12(5) of the Act clearly prohibited appointment of Serving Officer of the Department as an Arbitrator, in terms of Clause - 70 of the General Conditions of the Contracts.
9. Admittedly in the present case, the work order issued on 23.11.2015 and the agreement entered into between the parties on 14.1.2016 and the legal notice came 13 to be issued on 12.1.2019 only after the amendment of the provisions of sub-section (5) of Section 12 of the Act. Therefore, the appointment of the department officer/Engineer as agreed by the parties, is prohibited. In the peculiar facts and circumstances of the case, there is no impediment for this Court to appoint an independent sole Arbitrator to adjudicate the dispute between the parties. My view is fortified by the judgment of the Hon'ble Supreme Court in the case of HRD Corporation vs. Gail (India) Limited reported in (2018)12 SCC 471.
10. At this stage, learned counsel for the parties submit that the issue involved in the present case is technical in nature and therefore Lt. Col (Retd) A.N. Karumbaiah, former Chief Engineer, HAL may be appointed as sole arbitrator to adjudicate the dispute between the parties.
11. The said fair submission is placed on record. 14
12. In view of the above, the Civil Miscellaneous Petition is allowed. Lt. Col (Retd) A.N. Karumbaiah, Former Chief Engineer - HAL is appointed as the sole Arbitrator to adjudicate the dispute between the parties, in terms of Clause 70 of the general conditions of contracts (IAFW-2249) as per the work order dated 23.11.2015 (Annexure-B) and the agreement dated 14.1.2016 (Annexure-Q) entered into between the parties.
13. The Registry is directed send copy of the order to Lt. Col (Retd) A.N. Karumbaiah, Former Chief Engineer - HAL as well as to the Arbitrator Centre forthwith.
Sd/-
JUDGE Gss/-