Delhi District Court
I.P. Pathak vs Rural Electrification Corporation Ltd on 7 August, 2013
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IN THE COURT OF DR. NEERA BHARIHOKE : ADDITIONAL DISTRICT
JUDGE01 : SOUTH DISTRICT : SAKET COURTS : NEW DELHI
Suit No. 118/13
In the matter of :
I.P. Pathak ....Plaintiff
Vs.
Rural Electrification Corporation Ltd. ......Defendant
08.08.2013
ORDER :
Vide this order, I shall dispose off the application under Section 8 of Arbitration & Conciliation Act.
2 Plaintiff has filed the present suit with respect to earnest money and retention money (Security Deposit). Defendant has submitted that the work was allotted by the defendant to the plaintiff vide letter of award dated 12.10.2007 and on 14, November 2007 the plaintiff and the defendant entered into a contract with respect to the same. Clause 8 of the General Conditions of the contract, which was modified by clause 28 of Special Conditions of the Contract provided for the resolution of disputes through arbitration. 3 Certain differences and disputes arose between the parties during I.P. Pathak Vs. Rural Electrification Corporation Ltd Contd.....P...1 of 12 : 2 :
the execution of the work and the plaintiff served a legal notice dated March, 31, 2009 calling upon the defendant to make payment of certain alleged dues with interest and stated that "I put you to Noticee to Notice for appointment of Arbitrator as per appropriate legal recourse of law to resolve the dispute... to get his claims".
4 Defendant replied that aforesaid notice vide letter dated Apri, 15, 2009 and requested the plaintiff's counsel to advise his clients to submit the list of the disputes with details of amounts claimed in respect of each such dispute as per the provisions of the Arbitration Agreement.
5 Counsel for the plaintiff vide letter dated April, 22, 2009 intimated the list of the disputes and requested that an independent Arbitration be appointed to adjudicate the dispute.
6 Defendant vide its letter dated May 1, 2009 intimated the counsel for the plaintiff that they had received his legal notice dated April, 22, 2009 and they are processing the request of the plaintiff for the appointment of the arbitrator and also gave the notice to refer the counter claims of the defendant. I.P. Pathak Vs. Rural Electrification Corporation Ltd Contd.....P...2 of 12 : 3 :
7 Defendant vide its letter dated May 21,2009 intimated the list of the counter claims of the defendant to the plaintiff. 8 Chairman and the Managing Director of the defendant appointed Mr. V. K. Arora, General Manger (Finance) as Sole Arbitrator and the letter of Appointment was issued to the Sole Arbitration vide letter dated May 26, 2009 with intimation to the plaintiff and their counsel.
9 Plaintiff filed a petition under Section 11 (6) of the Arbitration and Conciliation Act, 1996.
10 Defendant filed its written statement to the said Arbitration Petition. Subsequently, the plaintiff had filed had filed an I. A. No. 14844 of 2009 in the said petition praying that to grant an ad interim exparte stay of the further proceedings of the arbitration proceedings before Sh. V. K. Arora, Sole Arbitration during the pendency and the disposal of the Arbitration Petition. 11 On November 18, 2009, the Hon'ble Mr. Justice Manmohan of Delhi dismissed the said arbitration petition as withdrawn. 12 Plaintiff filed its Statement Of Claim before Mr. V. K. Arora, the learned Arbitrator in the sum of Rs.1,42,23,029/. The defendant has filed its I.P. Pathak Vs. Rural Electrification Corporation Ltd Contd.....P...3 of 12 : 4 :
written statement to the statement of claim filed by the plaintiff before learned Arbitrator and also filed its counter claims before the learned Arbitrator. Plaintiff has filed the rejoinder to the written statement to the counter claims of the defendant.
13 Plaintiff filed the reply to the counter claim of the defendant and in paragraph 9 stated as under:
"The respondent has not even released the Security Deposit amount which is illegally withheld without any cause or reason since 2008 and not even adjusted anywhere clearly depicting the malafide intention of the respondent in causing undue loss and injury to the claimant."
14 The defendant also filed rejoinder to the written statement filed by the plaintiff to the counter claim filed by the rejoinder. In paragraph 9 of the reply to merits the defendant has stated as under:
"The reference to the security deposit is beyond the scope of the present arbitration and the same cannot be adjudicated upon by the learned arbitrator."
15 The plaintiff of June 13, 2012 submitted an application for the release of security deposit to the learned arbitrator. The learned arbitrator after I.P. Pathak Vs. Rural Electrification Corporation Ltd Contd.....P...4 of 12 : 5 :
hearing the arguments for the counsel for the parties on June 13, 2012 ordered that the application for release of security deposit is not admitted at this stage.
16 The plaintiff filed the present suit in this Court for a sum of Rs. 7,31,896/ (Rs.5,23,291/ as security deposit + Rs.2,06,605/ as VAT deducted) together with interest of 24% per annum and defendant has submitted that the subject matter of the suit is the subject matter of the arbitration agreement between parties. Defendant has submitted that the present suit has been filed in contravention of the arbitration clause as mentioned in para 4 above. It is submitted that the arbitration clause is very wide and all the disputes and differences between the parties arising out of the contract or in relation to the contract have to be resolved through arbitration. The disputes and differences of any nature arising out of the contract have to be adjudicated as per the arbitration agreement and the plaintiff can not resort to a Civil Suit. 17 Defendant has submitted that learned arbitrator in his order June 13, 2012 had only stated that the present application is not admitted at this stage and the said application has not been finally decided. The dispute are arising under the contract and the same have to be resolved as per the arbitration clause only and the plaintiff cannot file the present suit. 18 Defendant has prayed that the present suit may not be adjudicated I.P. Pathak Vs. Rural Electrification Corporation Ltd Contd.....P...5 of 12 : 6 :
and the plaintiff be directed to resort to arbitration as per the arbitration agreement.
19 Reply to the application filed by plaintiff and he has submitted that present suit is not barred under Section 8 of Arbitration and Conciliation Act. It is further submitted that the suit pertains to the issue of earnest money and the retention money (security deposit) which is outside the ambit and perview of the clause 28.1 of the tender document. It is submitted that the single sentence opening para of clause 28.1 and ParaI and II of Clause 28.1 of tender documents describe the cases and procedure that is required to be followed in cases where the disputes or difference have to be referred for adjudication through arbitration. It is submitted that the issue under the present suit for recovery of amount of earnest money and the retention money (security deposit) particular after the expiry of defect liability period of 1 year on 11.07.2009, during which tenure no claim of whatsoever nature was raised by the defendant, is outside the ambit of the said 28.1 clause. 20 The defendant has admitted and acknowledged the issue of security deposit to be outside the preview of arbitration and therefore, now estopped to raise the same in the present application. Plaintiff has prayed for dismissal of present application.
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21 Detailed arguments were advanced by Ld. counsels for both the parties. Arguments heard. Record perused carefully. 22 Applicant has relied on clause 28, whose subclause 28.1 provides for arbitration clause which reads as "The clause 8.00 on page 50 of is modified as below:
Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, design, drawings and instructions herein before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, design, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt as mentioned hereinafter:
(i) If the Contractor considers any work demanded of him to be outside the requirement of the contract, or disputes and drawings, recorded of decision given in writing by the EngineerinCharge on any matter in connection with or arising out of the contract or carrying out of the work, to be unacceptable he shall promptly within '15 days' request the Owner in writing for written I.P. Pathak Vs. Rural Electrification Corporation Ltd Contd.....P...7 of 12 : 8 :
instructions or decision. Thereupon, the Owner shall given his written instruction or decision within a period of 01 moth from the receipt of Contractor's letter.
If the Owner fails to give his instructions or decisions in writing within the aforesaid period or if the Contractor is dissatisfied with the instructions or decisions of the Owner, the Contractor may, within 15 days of the receipt of owners decision, appeal to the DG who shall afford an opportunity to the Contractor to be hard, if the latter so desires, and to offer the evidence in support of his appeal. The DG shall give his decision within 30 days of receipt of Contractor's appeal. If the Contractor is dissatisfied with the decisions, give notice to the DG for appointment of Arbitrator failing which the said decision shall be final binding and conclusive and not referable to adjudication by the Arbitrator."
Defendant has submitted that the claim for security deposit is covered under the above quoted clause as the same is covered under the expressions after the cancellation, termination, completion or abandonment thereof. The defendant / applicant has relied on Union of India v. Salween Timber and Construction Co., (India) and others, AIR 1969 SUPREME COURT 488; wherein it has been observed as "In our opinion, the claim made by the respondent firm was a claim arising out of the contract. The test for determining the question is whether I.P. Pathak Vs. Rural Electrification Corporation Ltd Contd.....P...8 of 12 : 9 :
recourse to the contract by which both the parties are bound is necessary for the purpose of determining whether the claim of the respondent firm is justified or otherwise. If it is necessary to take recourse to the terms of the contract for the purpose of deciding the matter in dispute, it must be held that the matter is within the scope of the arbitration clause and the arbitrations have jurisdiction to decide this case. In Heyman v. Darwins Ltd., 1942 AC 356 at p. 866 the law on the point is very clearly stated in the following passage:
"An arbitration clause is a written submission agreed to by the parties to the contract, and , like other written submissions to arbitration, must be construed according to its language and in the light of the circumstances in which it is made. If the dispute is whether the contract which contains the clause has ever been entered into at all, that issue cannot go to arbitration under the clause, for the party who denies that he has ever entered into the contract is hereby denying that he has ever joined in the submission. Similarly if one party to the alleged contract is contending that it is void ab initio (because, for example, the making of such a contract is illegal), the arbitration clause cannot operate, for on this view the clause itself also is void. But in a situation whether the parties are at one is asserting that they entered into a binding contract, but a difference has arisen between them whether there has been a breach by one side or the other, or whether circumstances have arisen which have discharged one or both parties from further performance, such differences should be regarded as differences which have arisen 'in respect of' or "with regard to", or "under" the contract, and an arbitration clause which uses these or similar expressions should be construed accordingly."
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23 In view of the law laid down herein, the defendant has submitted that the subject matter is covered by arbitration clause and the matter should be referred to arbitration. Perusal of first para of clause 28.1 reveals that the disputes which are referable under clause 28.1 are the disputes relating to the meaning of the specifications, design, drawings and instructions herein before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, design, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same. None of these expressions cover the claim for refund / return of security deposit. Accordingly, the relief claimed through the present suit is not covered by the arbitration clause.
24 Plaintiff had mentioned the claim for return of security amount in the reply to counterclaim in arbitral proceedings wherein he stated as under:
"The respondent has not even released the Security Deposit amount which is illegally withheld without any cause or reason since 2008 and not even adjusted anywhere clearly depicting the malafide intention of the respondent in causing undue loss and injury to the claimant."
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25 The defendant in response stated as under:
"The reference to the security deposit is beyond the scope of the present arbitration and the same cannot be adjudicated upon by the learned arbitrator."
26 The plaintiff on June 13, 2012 submitted an application for the release of security deposit to the learned arbitrator. The learned arbitrator after hearing the arguments for the counsel for the parties on June 13, 2012 ordered that the application for release of security deposit is not admitted at this stage. Thus, the issue with respect to security deposit has not been admitted by ld. Arbitrator and even otherwise, the defendant in the pending arbitral proceedings has specifically stated that claim of security deposit is beyond the scope of arbitration cannot be adjudicated upon by Ld. arbitrator. During the course of the arguments, ld. counsel for defendant / applicant submitted that the dispute of security deposit is covered by the arbitration clause but is beyond the scope of pending arbitral proceedings and plaintiff is at liberty to initiate fresh arbitral proceedings for the same. Ld. counsel for defendant stressed that the defendant has not stated that the dispute is beyond the scope of arbitration but only that it is beyond the scope of present arbitration. Ld. Arbitrator has admittedly after hearing the arguments of the parties with respect to release of security deposit observed that the application of the plaintiff for release of the same is not admitted by Ld. Arbitrator. As observed earlier, the claim with I.P. Pathak Vs. Rural Electrification Corporation Ltd Contd.....P...11 of 12 : 12 :
respect to security deposit is not covered under the arbitration clause. Defendant by making submissions like that the dispute with respect to security deposit is covered by arbitration clause while at the same time opposing the same before ld. Arbitrator is blowing hot and cold and is making the plaintiff shuttle from arbitration to civil suit and then from civil suit to arbitration. The same are harassing tactics adopted on the part of defendant.
27 In view of these observations, there is no merit in the present application and it is accordingly dismissed with cost of Rs.5,000/ to be paid by the defendant to the plaintiff. Defendant has yet not filed the WS despite appearing for the first time on 14.01.2013.
28 To come up for further proceedings on 24.08.2013.
Dictated and announced in the open court on 07.08.2013 (Dr. Neera Bharihoke) ADJI(South) Saket Courts 07.08.2013 I.P. Pathak Vs. Rural Electrification Corporation Ltd Contd.....P...12 of 12