Executive Engineer vs Aakash Construction Company & Anr. on 21 August, 2024

[Cites 25, Cited by 0]

Delhi High Court

Executive Engineer vs Aakash Construction Company & Anr. on 21 August, 2024

1. The instant regular first appeal has been filed under Section 96 of the Code of Civil Procedure, 1908 (hereinafter "CPC") on behalf of the appellant seeking setting aside of the impugned order dated 18 th December, 2021 passed by the learned ADJ-01 (Central), Tis Hazari Courts in case bearing CS No.20450/2016.

2. The appellant is part and parcel of Haryana Government, being owner and maintaining Delhi Sub-Branch and CLC Canal to supply water Signature Not Verified RFA 171/2022 Page 1 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 in Delhi and having its division office at Delhi. Government of Haryana is the owner of Delhi Sub Branch and CLC Canal and the appellant Department is responsible for maintaining the same to supply raw water to the State of Delhi.

3. The appellant, under its official capacity, invited a tender for the work of cement concrete lining of Delhi Sub Branch in reach RD 44000 to 54450 and the same was published in newspapers.

4. The respondent No.1, namely M/s Aakash Construction is a contractor agency, who was a successful bidder of the tender invited by the appellant.

5. The respondent No. 2, namely, Delhi Jal Board is a statutory authority of Government of Delhi and the appellant supplies water in the territory of Delhi through respondent No. 2.

6. It is stated that a Memorandum of Understanding was executed between the Government of Haryana and the Government of Delhi on 5 th February, 1993, as per which, the respondent no. 2 shall bear the entire cost of Delhi Sub Branch for maintaining/repairing whereas the appellant shall maintain and operate the carrier on behalf of the Government of Delhi and annual charges for the same shall be paid by the Government of Delhi.

7. Subsequent to the bid of the respondent No.1 being accepted by the appellant, an Agreement/Contract bearing No. 18 dated 19th January, 2012 (hereinafter "Agreement") was executed between the appellant and the respondent No. 1. Thereafter, the respondent No. 1 began the work on site.

Signature Not Verified RFA 171/2022 Page 2 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18

8. Due to some formalities, the work was suspended on 31st March, 2012, however, the work was restarted at the site from 26th May, 2012, and the bund (to divert the water) across CLC was almost completed and actual work was to be started.

9. Thereafter, on 27th May, 2012, officials from Delhi Jal Board along with Delhi Police reached the site and asked the respondent No. 1 to stop the work, and therefore, the work was completely stopped at site.

10. It is stated by the appellant that due to the hindrance created by the respondent No. 2, the work could not be done on site and subsequently, the appellant terminated the contract of the respondent No. 1 on 17th February, 2012 and requested the respondent No. 1 to submit its bills.

11. Subsequently, the respondent No. 1 submitted its final bill and the appellant made a payment of Rs. 9,00,949/- (CC first and running bill of Rs.7,06,609/-, and second and final bill of Rs. 1,94,340/-) for actual work executed at site. The respondent No. 1 also submitted other claims pertaining to loss and damages which were rejected by the appellant. Consequently, the respondent No. 1 issued a legal notice dated 15th February, 2012 for the constitution of an Empowered Standing Committee.

12. The aforesaid Empowered Standing Committee passed an order dated 9th May, 2014, thereby, directing the appellant to pay Rs. 49,60,370/- along with the interest @12% to the respondent No. 1.

13. Subsequently, the respondent No. 1 filed a petition bearing EX No. 24167/215 under Section 36 of the Arbitration and Conciliation Act, 1996 (hereinafter "the Act") seeking execution of the order dated 9th May, 2014.

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14. Pursuant to the above, the appellant filed a civil suit bearing CS No. 20450/2016 before the learned Trial Court, thereby, seeking setting aside of the order dated 9th May, 2014 passed by the Empowered Standing Committee (hereinafter "ESC") and further seeking direction to the learned Trial Court to direct the respondent No. 2 to pay the amount to the respondent No. 1. In the said civil suit, the respondent No. 1 and 2, both filed separate application under Order VII Rule 11 of the CPC seeking rejection of the plaint.

15. Further, vide order dated 15th December, 2017, the learned Trial Court framed the following preliminary issue;

―Whether the decision of the Empowered Standing Committee dated 09.05.2014 is arbitration award or not, in view of clause 19 of the Agreement and its effects on maintainability of the present suit?‖

16. Thereafter, the learned Trial Court passed the impugned order dated 18th December, 2021, deciding the aforesaid preliminary issue and the application under Order VII Rule 11 of the CPC, against the appellant and in favour of the respondents, thereby, rejecting the plaint.

17. Being aggrieved by the impugned order dated 18 th December, 2021, the appellant has filed the instant appeal, seeking setting aside of the same.

PLEADINGS BEFORE THIS COURT

18. The instant appeal has been filed challenging the impugned order on the following grounds:

―II. Because the Ld. District Judge wrongly ascertained Empowered Standing Committee order dated 09.05.2014 as an Arbitration award.

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III. Because the Agreement between the Appellant and Respondent No. 1 herein at Clause 19.4 specifically recited that ―There will be No Arbitration for the settlement of any dispute between parties‖ IV. Because As per Clause 19.4 any decision by the Empowered Standing Committee cannot be an Arbitral Award.

V. Because the Ld. District Judge on whims and fancies has mentioned in its impugned order that the Appellant herein was treating orders passed by the empowered standing committed prior to 2007 as Arbitral awards. However, the Ld. District Judge failed to specifically interpret Clause

19.4.

VI. Because the Ld. District Judge ought to have decided the Order impugned herein on its own facts and situation therein.

VII. Because the Ld. District Judge has wrongly rejected the plaint of the Appellant/Plaintiff under Order VII Rule 11, CPC 1908. For the kind perusal of this Hon'ble Court Order VII Rule 11 is reproduced hereunder,

11. Rejection of plaint.-- The plaint shall be rejected in the following cases:--

(a) where it does not disclose a cause of action;

(b) where the relief claimed is undervalued, and the plaintiff, on being required by the Court to correct the valuation within a time to be fixed by the Court, fails to do so;

(c) where the relief claimed is properly valued, but the plaint is returned upon paper insufficiently stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a time to be fixed by the Court, fails to do so;

(d) where the suit appears from the statement in the plaint to be barred by any law;

[(e) where it is not filed in duplicate;] [(f) where the plaintiff fails to comply with the provisions of rule 9] [Provided that the time fixed by the Court for Signature Not Verified RFA 171/2022 Page 5 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 the correction of the valuation or supplying of the requisite stamp-paper shall not be extended unless the Court, for reasons to be recorded, is satisfied that the plaintiff was prevented by any cause of an exceptional nature from correcting the valuation or supplying the requisite stamp-paper, as the case may be, within the time fixed by the Court and that refusal to extend such time would cause grave injustice to the plaintiff.] A bare perusal of Order VII Rule 11 above mentions the reasons, as to, on what grounds a plaint may be rejected. In the present Appeal before this Hon'ble Court, the Appellant herein, submits that none of the ingredients of Order VII Rule 11 starting from Clauses a, b, c, d, e and f attract the rationale given by the Ld. District Judge below. The Appellant/plaintiff's plaint was not rejected on the ground of I. not having a cause of action II. The plaint not being properly valued.

III. The plaint not being properly stamped;

IV. The plaint was not barred under any other law (because Arbitration was barred as per Clause 19.4 of the Agreement between the Appellant and Respondent No.1 ) V. The plaint not being filed in duplicate.

VI. The plaintiff failing to comply with Provisions of Rule 9.

Based on the submissions made above the Ld. District Judge below has rejected the plaint without carefully examining Order VII Rule 7 from Clauses a to f.

In the impugned Order the rejection of plaint is not based on Clauses (a) to (f).

VIII. Because the remedy under Order VII Rule 11 is independent and special remedy. The impugned ordermay kindly be revisited by this Hon'ble Court simply on the ground that the Ld. District Judge has failed to give reasons on rejecting the plaint based on Order VII Rule 11.

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IX. Because the Ld. District Judge Below has wrongly mentioned Section 89 CPC. For the kind perusal of this Hon'ble Court Section 89, CPC 1908 is reproduced below :

89. Settlement of disputes outside the Court.--(1) Where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the Court may reformulate the terms of a possible settlement and refer the same for:--

(a) arbitration;

(b) conciliation;

(c) judicial settlement including settlement through Lok Adalat:or

(d) mediation.

(2) Where a dispute has been referred-

(a) for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply as if the proceedings for arbitration or conciliation were referred for settlement under the provisions of that Act;

(b) to Lok Adalat, the Court shall refer the same to the Lok Adalat in accordance with the provisions of sub-section (1) of section 20 of the Legal Services Authority Act, 1987 (39 of 1987) and all other provisions of that Act shall .apply in respect of the dispute so referred to the Lok Adalat;

(c) for judicial settlement, the Court shall refer the same to a suitable institution or person and such institution or person shall be deemed to be a Lok Adalat and all the provisions of the Legal Services Authority Act, 1987 (39 of 1987) shall apply as if the dispute were referred to a Lok Adalat under the provisions of that Act;

(d) for mediation, the Court shall effect a compromise between the parties and shall follow such procedure as may be prescribed.

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A bare perusal of Section 89 clearly shows that in what situations the Court can refer for Alternative Dispute Redressal mechanisms amongst the parties, however, the Ld. District Judge below has wrongly invoked this Section in the impugned order because as per Clause 19.4, Arbitration was strictly prohibited and no other Alternative Dispute redressal mechanism was mentioned in the Agreement between the Appellant and the Respondent No. 1 herein.

X. Because the Respondent No. 1 had moved an Application before the Ld. District Judge praying to not frame the issue viz-a-viz ―Whether the decision of the Empowered Standing Committee dated 09.05.2014 is arbitration award or not, in view of clause 19 of the Agreement and its effects on maintainability of the present suit?‖ however later on that application was not pressed by the Respondent No. 1. As per the records the application filed by the Respondent no. 1 under Order XLVII Rule 1 was not decided by the Ld. District Judge. It is pertinent to mention here that the Ld. District Judge in number of proceedings subsequent to 15.12.2017 has finally on 18.12.2021 rejected the plaint of the Appellant under Order 7 R11. By this act of the Ld. District Judge, prejudice has been caused to the Appellant herein because had that application under Order XLVII Rule 1 been decided, the basis on which the Order dated 18.12.2021 has been decided, would have first decided the issue of ―Whether the decision of the Empowered Standing Committee dated 09.05.2014 is arbitration award or not, in view of clause 19 of the Agreement and its effects on maintainability of the present suit?‖ XI. Because the Ld. District Judge while passing the impugned order has failed to consider that the Respondent No. 2 was responsible for payment of the work done by the Respondent No.1 as per MOU signed between the Government of Haryana and Government of Delhi(see Annexure P-2) . Moreover, it was the hindrances created by the Respondent No. 2 which led to the work being stopped completely and if any loss/damages were incurred to the Signature Not Verified RFA 171/2022 Page 8 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 Respondent No.1, only Respondent No.2 would be liable to pay the same.‖

19. The respondent No. 1 has filed its written submissions dated 14th May, 2024, refuting the case of the appellant on the following grounds:

―a) That the Appellant has filed an Appeal under section 96 of Civil Procedure Code against an order dated 18.12.2021 whereby the Suit of the Plaintiff was rejected on the Application under Order VII Rule 11 CPC filed by the Respondent no. 1. In this regard it is submitted that no appeal lies against an order passed under Order VII Rule 11 CPC.

b) That an Agreement was entered into between the parties on 19.01.2012 with respect to the work of concrete lining of Delhi Sub Branch in reach RD 44000 to 53350. The said Agreement contained an Arbitration Clause being clause no. 28. However, the Appellant while filing the Appeal surreptitiously removed Arbitration clause from the document filed with Appeal with the only intention to conceal the material facts from the Court. As per law if a person does not come to the Court with clean hands his case is liable to be rejected. Copy of the Agreement dated 19.01.2012 is annexed hereto as Annexure R-1.

c) That it will not be out of place to mention here that the Appellant has purposely and deliberately not filed the copy of Application under Order VII Rule 11 CPC filed by Respondent No. 1 on the basis of which the Suit of the Plaintiff (Appellant herein) was rejected vide impugned order 18.12.2021. Copy of Application under Order VII Rule 11 filed by the Respondent no. 1 is annexed hereto as Annexure R-2.

d) That it is pertinent to mention here that not only the Appellant concealed the vital facts from the Court, the Appellant has also not filed complete documents with the Appeal. On the contrary filed a certificate with Appeal stating that all the relevant documents to answer the question of law raised in the Appeal are attached. It further Signature Not Verified RFA 171/2022 Page 9 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 submitted that the Ld, ADJ during the proceedings directed the Plaintiff (Appellant herein) "as to what procedure is adopted by them with regard to the Redressal of all the issues similar to this with the other contractor and is also asked to file all or any relevant documents to show the procedure adopted by them for Redressal of all such disputes." The Appellant did not comply with the order and also did not file any such document with the court. The said fact was also recorded by Ld. ADJ in his impugned order dated 18.12.2021. On the other hand, the Respondent no. 1 herein filed an RTI dated 21.05.2019 with the Irrigation Department Haryana i.e Appellant eliciting the information/documents pertaining to the procedure adopted by the Irrigation Department Haryana for Redressal of dispute between the contractors and the department arising out of contract. In response to the same State Public Information Officer Cum Executive Engineer DPU, Irrigation Haryana vide letter dated 26.06.2019 provided an information which explained the existing arbitration procedure for redressal of disputes. Copy of the letter dated 26.06.2019 along with relevant documents and typed copies of the same are annexed hereto as Annexure R-3 (colly). The said documents clearly reveal that since 01.03.2007 the clause 19 of the work contract provides for a redressal of dispute mechanism in between the parties. It further states that till 2007 all such orders of Empowered Standing Committee were considered in the form of an award and it was executable as per Arbitration Act. In the year 2007 certain changes have taken place in the Arbitration procedures adopted by the Appellant but the nature of such committee and passing of its order and applicability of Arbitration Act upon its order has not changed. It is submitted that there is an Amendment in Arbitration procedure. The same Arbitration procedure is mentioned in Condition of Contract between the Parties. From the aforesaid it is amply clear that the decision given by the Empowered Standing Committee Appointed under Dispute Redressal System is to be treated as an Award. From no Signature Not Verified RFA 171/2022 Page 10 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 stretch of argument, it can be said that there is no Arbitration clause between the parties. Against the award, the only remedy available with the Appellant was to file Petition under section 34 of Arbitration and Conciliation Act 1996 and not the suit.

e) That it is important to mention here that the Appellant completely concealed the fact that full-fledged Arbitration proceedings took place before the Empowered Standing' Committee.. In this regard it is submitted that Respondent No.1 filed the Statement of Claim before the Empowered Standing Committee. In turn the Appellant filed reply to the statement of claim the matter was fixed for Admission Denial of documents. The same is recorded in minutes of meeting of Empowered Standing Committee dated 22.01.2014. Thereafter the Respondent no.l being Claimant filed Evidence by way of Affidavit and witness of the Respondent no. I was cross examined by the Appellant on 04.04.2014. Thereafter the Appellant filed Evidence by way of Affidavit and witness of the Appellant was cross examined by the Respondent no. 1 on 21.04.2014. On the same day it is recorded that the Respondent no. 1 deposited fees of the Arbitrator and Appellant was also directed to deposit .the fees of Arbitrator. Prior to that the Respondent no.. ~ :after invoking the Arbitration clause and constitution of Empowered Standing Committee, deposited 2% i.e. 2,50,000/- vide FDR no. 287122 dated 20.05.2013 in the name of the Appellant towards Arbitration fees. Copy of minutes of Arbitration meeting of Empowered Standing Committee dated 22.01.2014, 04.04.2014 and 21.04 2014 are annexed hereto as Annexure R-4 to R-6 respectively.

f) That it will not be out of place to mention here that after passing of the Award dated 09.05.2014 Empowered Standing Committee, the Appellant wrote a letter dated 08.07.2014 to the Law Secretary of the Government of Haryana seeking the opinion for the further course of action in the aforesaid Arbitration. The Law Secretary in its reply dated 01.10.2014 clearly advised the Appellant it is not a fit case for challenging the Award, however, if department desires Signature Not Verified RFA 171/2022 Page 11 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 to challenge the same, the same be done by filing Application under section 34 of Arbitration Act 1996. Copy of Letter dated 08.07.2014 and 01.10.2014 are annexed hereto as Annexure R-7 & R-8 respectively.

g) That the Suit filed by the Appellant in the Lower Court has rightly been dismissed by the Ld. ADJ since there is no infirmity in the impugned order passed by Ld. ADJ. A bare perusal of the copy of the Suit would reveal that on one hand Plaintiff (Appellant herein) is seeking setting aside of Award dated 09.05.2014 of Empowered Standing Committee and on the other hand seeking directions from the Court that the Defendant no.2 (Respondent no.2 herein) be directed to make the payment to the Respondent no.1, knowing fully well that there is no privity of contract between Respondent no. 1 and Respondent no. 2.‖

20. The appellant‟s written submissions dated 24th May, 2022 is also on record. Relevant extracts of the same is as under:

―1. That the the Impugned Order Dated 18.12.2021 passed by the Ld. District Judge is liable to be set aside.

2. That the Ld. District Judge has wrongly ascertained the order dated 09.05.2014 passed by the Empowered Standing Committee as an Arbitration award.

It is pertinent to mention here that the Agreement bearing No. 18 Dated 19.01.2012 (ANNEXURE P-3) between the Appellant and Respondent No. 1 herein, at Clause 19.4 specifically recited that "There will be No Arbitration for the settlement of any dispute between parties" and therefore, the Ld. District Judge is gravely mistaken in assessing the Order passed by the Empowered Standing Committee as an Arbitral Award.

3. That the Ld. District Judge ought to have decided the Order impugned herein on its own facts and situation therein. However, the Ld. District Judge on whims and fancies has mentioned in the impugned order that the Appellant herein was treating orders passed by the empowered standing committee prior to 2007 as Arbitral awards. Whereas, the Ld. District Judge should have Signature Not Verified RFA 171/2022 Page 12 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 properly interpreted the recitals of the Agreement between the Appellant and Respondent No.1. A bare perusal of Clause 19.4 shows that there shall be no Arbitration between the parties.

4. That the Ld. District Judge has wrongly rejected the plaint of the Appellant/Plaintiff under Order VII Rule 11, CPC 1908. A bare perusal of Order VII Rule 11 mentions the reasons, as to, on what grounds a plaint may be rejected. In the present Appeal before this Hon'ble Court, the Appellant herein, submits that none of the ingredients of Order VII Rule 11 starting from Clauses a, b, c, d, e and f attract the rationale given by the Ld. District Judge below.

The Appellant/plaintiff's plaint was not rejected on the ground of I. not having a cause of action II. The plaint not being properly valued.

III. The plaint not being properly stamped;

VI. The plaintiff failing to comply with Provisions of Rule 9.

Based on the submissions made above the Ld. District Judge below has rejected the plaint without carefully examining Order VII Rule 7 from Clauses a to f. In the impugned Order the rejection of plaint is not based on Clauses (a) to (f).

5. That the Ld. District Judge Below has wrongly mentioned Section 89 CPC. A bare perusal of Section 89 clearly shows that in what situations the Court can refer for Alternative Dispute Redressal mechanisms amongst the parties, however, the Ld. District Judge below has wrongly invoked this Section in the impugned order because as per Clause 19.4, Arbitration was strictly prohibited and no other Alternative Dispute redressal mechanism was mentioned in the Agreement between the Appellant and the Respondent Signature Not Verified RFA 171/2022 Page 13 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 No. 1 herein.

6. That it is pertinent to mention that the Respondent No. 1 had moved an Application before the Ld. District Judge praying to not frame the issue viz-a-viz "Whether the decision of the Empowered Standing Committee dated 09.05.2014 is arbitration award or not, in view of clause 19 of the Agreement and its effects on maintainability of the present suit?" however later on that application was not pressed by the Respondent No. 1. As per the records the application filed by the Respondent no. 1 under Order XLVII Rule 1 was not decided by the Ld. District Judge. It is pertinent to mention here that the Ld. District Judge in number of proceedings subsequent to 15.12.2017 has finally on 18.12.2021 rejected the plaint of the Appellant under Order 7 R11. By this act of the Ld. District Judge, prejudice has been caused to the Appellant herein because had that application under Order XLVII Rule 1 been decided, the basis on which the Order dated 18.12.2021 has been decided, would have first decided the issue of "Whether the decision of the Empowered Standing Committee dated 09.05.20N is arbitration award or not, in view of clause 19 of the Agreement and its effects on maintainability of the present suit?"

7. That the Ld. District Judge while passing the impugned order has failed to consider that the Respondent No. 2 was responsible for payment of the work done by the Respondent No.1 as per MOU signed between the Government of Haryana and Government of Delhi (see Annexure P-2) . Moreover, it was the hindrances created by the Respondent No. 2 which led to the work being stopped completely and if any loss/damages were incurred to the Respondent No.1, only Respondent No.2 would be liable to pay the same.‖ SUBMISSIONS (on behalf of the appellant)

21. Learned counsel appearing on behalf of the appellant submitted that the impugned order is bad in law and liable to be set aside as the Signature Not Verified RFA 171/2022 Page 14 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 same has been passed without taking into account the entire facts and circumstances of the case.

22. It is submitted that the learned Trial Court wrongly ascertained the order dated 9th May, 2024 passed by the ESC as an arbitration award as the Agreement between the appellant and the respondent No. 1, at Clause 19.4 specifically states that „there will be no arbitration for settlement of any dispute between parties‟. Therefore, as per the said Clause, any decision of the ESC cannot be an arbitral award.

23. It is submitted that the learned Trial Court has erroneously mentioned in the impugned order that prior to the year 2007, the appellant was treating orders passed by the ESC as arbitral awards, however, the learned Court below failed to appreciate and interpret the content of Clause 19.4.

24. It is submitted that the learned Trial Court ought to have decided the civil suit on its own facts and circumstances, instead, it passed the impugned order without taking into account the terms of the Agreement in totality.

25. It is submitted that the scope of Order VII Rule 11 of the CPC states that only the averments made in the plaint are to be seen and looked into. However, in the present case, none of the ingredients mentioned under Clauses a, b, c, d, e and f of Order VII Rule 11 of the CPC is made out.

26. It is submitted that in order to decide an application under the aforesaid provision, the content in the plaint is to be looked into, however, the learned Trial Court erred by passing the impugned order as Signature Not Verified RFA 171/2022 Page 15 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 upon a bare reading of the plaint it is evident that the suit is not barred under the law.

27. It is submitted that a bare perusal of Section 89 of the CPC clearly prescribes for the situations in which the Court can refer for alternative dispute redressal mechanisms amongst the parties, however, the learned Trial Court has wrongly invoked this Section in the impugned order because as per Clause 19.4 of the Agreement, arbitration was strictly prohibited and no other alternative dispute redressal mechanism between the appellant and the respondent No. 1 was mentioned in the Agreement.

28. It is submitted that while passing the impugned order, the learned Trial Court failed to consider that the respondent No. 2 was responsible for payment of the work done by the respondent No. l as per the MOU signed between the Government of Haryana and Government of Delhi. Moreover, it was the hindrances created by the respondent No. 2 which led to the work being stopped completely and if any loss/damages were incurred to the respondent No. l, only the respondent No.2 would be liable to pay the same.

29. Therefore, in view of the foregoing submissions, it is prayed that the instant appeal may be allowed and the impugned order be set aside. (on behalf of the respondents)

30. Per Contra, the learned counsel appearing on behalf of the respondent No. 1 vehemently opposed the instant appeal submitting to the effect that the same is liable to be dismissed being devoid of any merits.

31. It is submitted that an Agreement was entered into between the appellant and the respondent No. 1, with respect to the work of concrete lining of Delhi Sub Branch in reach RD 44000 to 53350. The said Signature Not Verified RFA 171/2022 Page 16 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 Agreement contained a provision for Arbitration at Clause No. 28, however, while filing the appeal, the appellant surreptitiously removed arbitration clause from the document filed with the appeal with the only intention to conceal the material facts from the Court.

32. It is submitted that the appellant has purposely and deliberately not filed the copy of the application under Order VII Rule 11 of the CPC which was filed by the respondent No. 1 on the basis of which the suit of the plaintiff was rejected vide the impugned order.

33. It is submitted that not only the appellant concealed the vital facts from this Court, the appellant has also not filed the complete set of documents. On the contrary, the appellant filed a certificate with the appeal stating that all the relevant documents to answer the question of law raised in the appeal are attached.

34. It is submitted that despite the directions of the learned Trial Court, the appellant failed to bring on record the documents stating as to what was the procedure adopted by the appellant prior to the year 2007, however, it failed to do so.

35. It is also submitted that on the other hand, the respondent No. 1 herein filed an RTI dated 21st May, 2019 with the Irrigation Department, Haryana, i.e., the appellant herein, eliciting the information/documents pertaining to the procedure adopted by it for the redressal of dispute between the contractors and the department arising out of a contract. In response to the same, the State Public Information Officer-Cum- Executive Engineer DPU, Irrigation Haryana provided an information explaining the existing arbitration procedure for redressal of disputes vide letter dated 26th July, 2019.

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36. It is further submitted that the said documents clearly reveal that since 1st March, 2007, the Clause No. 19 of the work contract provides for a redressal of dispute mechanism in between the parties. It states that till the year 2007, all such orders of ESC were considered in the form of an award and it was executable as per the Act.

37. It is submitted that in the year 2007, certain changes took place in the arbitration procedures adopted by the appellant but the nature of such committee and passing of its order and applicability of the Act upon its order has not changed.

38. It is further submitted that there is an amendment in arbitration procedure. The same arbitration procedure is mentioned in condition of contract between the parties and from the aforesaid, it is amply clear that the decision given by the ESC appointed under the dispute redressal system is to be treated as an award. Moreover, it cannot be said that there is no arbitration clause between the parties. Further, against an award of the ESC, the only remedy available with the appellant was to file a petition under Section 34 of the Act and not the suit.

39. It is submitted that the suit filed by the appellant has been rightly dismissed by the learned Trial Court and there is no infirmity in the impugned order as the said suit is clearly barred by the law.

40. Therefore, in view of the foregoing submissions, it is prayed that the instant appeal may be dismissed.

SCHEME OF THE ACT

41. It is a settled position of law that while dealing with an application under Order VII Rule 11 of the CPC, the Court ought to determine the dispute by scrutinising the averments made in the plaint, read in Signature Not Verified RFA 171/2022 Page 18 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 conjunction with the documents relied upon. Similar views have been taken by the Hon‟ble Supreme Court in Liverpool & London S.P. & I Assn. Ltd. v. M.V. Sea Success I1, wherein the following was observed:

"...146. It may be true that Order 7 Rule 11(a) although authorises the court to reject a plaint on failure on the part of the plaintiff to disclose a cause of action but the same would not mean that the averments made therein or a document upon which reliance has been placed although discloses a cause of action, the plaint would be rejected on the ground that such averments are not sufficient to prove the facts stated therein for the purpose of obtaining reliefs claimed in the suit. The approach adopted by the High Court, in this behalf, in our opinion, is not correct..."

42. In regard to the aforesaid, it also clarified that while making such a determination, courts would have to disregard the pleas taken by the defendant in the written statement and application for rejection of the plaint on merit. The Hon‟ble Supreme Court has clarified time and again that while determining any application filed under Order VII Rule 11, the Courts ought to restrict itself to the plaint and should not go into the detail facts as provided under the written statement or even the application filed under the said provision.

43. With regard to the same, the Hon‟ble Supreme Court in Sopan Sukhdeo Sable v. Asstt. Charity Commr.2 held that the basic question to be decided while dealing with an application filed under Order VII Rule 11, only the averments made in the plaint are germane. Relevant portion of the same is as under:

"..10. In Saleem Bhai v. State of Maharashtra [(2003) 1 SCC 557] it was held with reference to Order 7 Rule 11 of the 1 (2004) 9 SCC 512 2 (2004) 3 SCC 137 Signature Not Verified RFA 171/2022 Page 19 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 Code that the relevant facts which need to be looked into for deciding an application thereunder are the averments in the plaint. The trial court can exercise the power at any stage of the suit -- before registering the plaint or after issuing summons to the defendant at any time before the conclusion of the trial. For the purposes of deciding an application under clauses (a) and (d) of Order 7 Rule 11 of the Code, the averments in the plaint are germane: the pleas taken by the defendant in the written statement would be wholly irrelevant at that stage.."

44. In Samar Singh v. Kedar Nath3, the Hon‟ble Supreme Court, while dealing with an election petition held that the power to summarily reject the plaint as conferred by Order VII Rule 11 of the CPC can be exercised at the threshold of the proceedings and is also available in the absence of any restriction statutorily placed, to be exercised at any stage of subsequent proceedings. The Hon‟ble Court has also emphasized the need of raising a preliminary objection as to maintainability as early as possible, however, it is pertinent to mention here that the power of the Court to consider the said issue at a subsequent stage is not taken away.

45. In the instant case, the issue is with regard to the alleged non- maintainability of the suit due to the alleged existence of arbitration clause in terms of which the respondents/defendants had filed application under Order VII Rule 11 of the CPC, stating the suit to be non- maintainable as the same is barred by law since the only remedy available, if any, to the appellant/plaintiff is to file an objection petition under the Act.

46. With regard to the above, this Court finds it appropriate to refer to 3 1987 Supp SCC 663 Signature Not Verified RFA 171/2022 Page 20 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 the decision of the Hon‟ble Supreme Court passed in Bhushan Steel Ltd. v. Singapore International Arbitration Centre4, relevant paragraphs of which are as under:

"..19. ............Thus we see that it is the view of this Court that a step in the proceeding which would disentitle the defendant from invoking Section 34 of the Arbitration Act should be a step in aid of the progress of the suit or submission to the jurisdiction of the court for the purpose of adjudication of the merits of the controversy in the suit. The step must be such as to manifest the intention of the party unequivocally to abandon the right under the arbitration agreement and instead to opt to have the dispute resolved on merits in the suit. The step must be such as to indicate an election or affirmation in favour of the suit in the place of the arbitration. The election or affirmation may be by express choice or by necessary implication by acquiescence. The broad and general right of a person to seek redressal of his grievances in a court of law is subject to the right of the parties to have the disputes settled by a forum of mutual choice. Neither right is insubstantial and neither right can be allowed to be defeated by any manner of technicality. The right to have the dispute adjudicated by a civil court cannot be allowed to be defeated by vague or amorphous mis-called agreements to refer to ‗arbitration'. On the other hand, if the agreement to refer to arbitration is established, the right to have the dispute settled by arbitration cannot be allowed to be defeated on technical grounds..."

47. Perusal of the above excerpt states that the right to go to Court and the right to arbitration are important, and should not be dismissed due to technicalities. Further, if an arbitration agreement is proven, the case should not be resolved in Court on mere technical grounds, and similarly, a vague or poorly defined arbitration agreement shouldn‟t prevent a dispute from being heard in a Court.

2010 SCC OnLine Del 2236 Signature Not Verified RFA 171/2022 Page 21 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18

48. It is pertinent to note that in Sara International Ltd. v. Golden Agri International (P) Ltd.5, a Coordinate Bench of this Court categorically observed that the words used in an alleged arbitration clause should disclose a determination and obligation to go to arbitration, and not merely contemplation of the possibility of going to arbitration. Further, if the wording of the said clause is vague and uncertain, the same cannot become the basis for arbitration as there cannot be any ambiguity regarding the same. The relevant extracts of the said judgment are as under:

"38. The next submission of Mr. Jain is that an arbitration clause is independent of the underlying contract and the plaintiff's acceptance of the contract cannot be treated as its acceptance/acquiescence of the vague arbitration clause in view of the separate identity of both. He states that the plaintiff is not attempting to forestall the arbitration proceedings and in fact the said proceedings have been initiated by the defendant No. 1 wrongly as the arbitration clause on the basis of which the proceedings have been initiated is unenforceable.

39. The contention of the plaintiff is that the arbitration clause is vague and unenforceable and the suit cannot be held as barred unless this Court, under Section 45 which falls within Part II of the Act, adjudicates upon the validity and existence of the arbitration agreement. The vagueness in the clause has been attributed to the use of the words ―Arbitration, if any‖ in the clause of the sale contract dated 24.7.2008.

40. Mr. Jain's contention was that Section 5 cannot be construed by the defendants counsel in such a way that Section 45 is rendered otiose. Further, he submitted that if the two provisions are read in a harmonious manner, it would be evident that the defendant's application is actually 5 2010 SCC OnLine Del 2238 Signature Not Verified RFA 171/2022 Page 22 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 an application under Section 45 of the Act and not under Order VII Rule 11 and in fact, the said application should have been filed under Section 45 of the Arbitration Act. Section 45 overrides the provisions of Part I, starting with a non-obstante clause, giving the civil courts jurisdiction to refer the parties to arbitration when it is approached by one of the parties, unless it find the arbitration agreement null and void, inoperative or incapable of being performed. With regard to the construction of the two sections, learned senior counsel for the plaintiff has referred to the judgment in Sultana Begum v. Prem Chand Jain, (1997) 1 SCC 373. ***

49. A perusal of the above quoted clause shows that the parties to the agreement were not sure or determined at the time of the sale contract about reference of the dispute to arbitration. While reading the words ―Arbitration if any‖ in the clause it appears that the parties were yet to decide whether the future disputes between them were to be referred or not. Where there is merely a possibility of the parties agreeing to arbitration in future as contrasted with an obligation to refer disputes to arbitration, there would be no valid and binding arbitration agreement as per settled law. The words used in a said clause should disclose a determination and obligation to go to arbitration and not merely the contemplation of the possibility of going to arbitration. It appears that the said clause of arbitration is vague and uncertain and cannot be the basis for arbitration or binding on the parties as is clear from the language in which the clause is couched. The wording of the said clause does not leave room for any ambiguity inasmuch as it uses the words ―Arbitration, if any‖..."

49. Further, with regard to the scope of deciding a preliminary issue in a civil suit, the Hon‟ble Supreme Court in Kuldeep Singh Pathania v. Bikram Singh Jaryal6, noted that the extent of deciding an application under Order XIV Rule 2(2) of the CPC (preliminary issue) is limited only 6 (2017) 5 SCC 345 Signature Not Verified RFA 171/2022 Page 23 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 to two areas, one is jurisdiction of the Court, and the other, bar to the suit as created by any law for the time being in force. Relevant extracts of the same are as under:

"6. Order 14 deals with settlement of issues and determination of suit on issues of law or on issues agreed upon. Order 14 Rule 2 provides for disposal of a suit on a preliminary issue and under sub-rule (2) of Rule 2, if the court is of opinion that a case or part thereof can be disposed of on an issue of law only, it may try that issue first, in case it relates to jurisdiction of the court or bar to entertaining the suit. After the 1976 amendment, the scope of a preliminary issue under Order 14 Rule 2(2) is limited only to two areas, one is jurisdiction of the court, and the other, bar to the suit as created by any law for the time being in force.

7. The whole purpose of trial on preliminary issue is to save time and money. Though it is not a mini trial, the court can and has to look into the entire pleadings and the materials available on record, to the extent not in dispute. But that is not the situation as far as the enquiry under Order 7 Rule 11 is concerned. That is only on institutional defects. The court can only see whether the plaint, or rather the pleadings of the plaintiff, constitute a cause of action. Pleadings in the sense where, even after the stage of written statement, if there is a replication filed, in a given situation the same also can be looked into to see whether there is any admission on the part of the plaintiff. In other words, under Order 7 Rule 11, the court has to take a decision looking at the pleadings of the plaintiff only and not on the rebuttal made by the defendant or any other materials produced by the defendant."

ANALYSIS AND FINDINGS

50. Heard the learned counsel appearing on behalf of the parties and perused the material available on record. This Court has meticulously Signature Not Verified RFA 171/2022 Page 24 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 examined all the annexures filed with the instant appeal including the Lower Court‟s Record.

51. It is the case of the appellant that the learned Trial Court erred in passing the impugned order as it failed to take into consideration that the order dated 9th May, 2024 cannot be taken as an arbitral award under the Act. The appellant contends that the impugned order, passed by the learned Trial Court, is legally unsound and should be set aside as it fails to consider the complete facts and circumstances of the case. It has been submitted that the learned Trial Court identified the order dated 9 th May 2024, issued by the ESC, as an arbitration award, despite Clause 19.4 of the Agreement executed between the appellant and respondent No. 1, which explicitly states that „there will be no arbitration for settlement of any dispute between the parties.‟

52. The appellant further asserts that the learned Trial Court misinterpreted the aforesaid Clause and incorrectly concluded that prior to the year 2007, the appellant treated ESC orders as arbitral awards, neglecting the true intent of the Agreement.

53. The appellant further submits that the learned Trial Court ought to have adjudicated the civil suit based on its facts and circumstances, instead of disregarding the terms of the Agreement in totality. It is argued that under Order VII Rule 11 of the CPC, the learned Trial Court is required to consider only the averments in the plaint when deciding on an application. However, the appellant contends that the learned Trial Court wrongly invoked this provision, as a plain reading of the plaint reveals that the suit is not barred by law.

54. Moreover, it has been argued on behalf of the appellant that Signature Not Verified RFA 171/2022 Page 25 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 Section 89 of the CPC, which pertains to the referral of cases to alternative dispute resolution mechanisms, was incorrectly applied by the learned Trial Court. The appellant argues that Clause 19.4 of the Agreement prohibits arbitration and does not mention any alternative dispute resolution methods, making the learned Trial Court's reliance on this provision unjustified. Lastly, the appellant has submitted that the learned Trial Court overlooked the fact that as per the MOU between the Governments of Haryana and Delhi, the respondent No. 2 was responsible for payment for the work completed by respondent No. 1 and that it was the actions of respondent No. 2 that led to the stoppage of work, and thus, any damages incurred by the respondent No. 1 should be borne solely by respondent No. 2.

55. In rival submissions, the case of the appellant has been completely refuted by the respondents to the effect that the appellant entered into an Agreement with the respondent No. 1 for the concrete lining of Delhi Sub Branch, which included an arbitration clause under Clause 28. However, the appellant allegedly removed this clause when filing the appeal, intending to conceal material facts from the Court.

56. The respondent No. 1 has alleged that the appellant has concealed vital facts by not submitting a complete set of documents, despite filing a certificate claiming that all relevant documents were attached.

57. Furthermore, the appellant also failed to produce records, as directed by the learned Trial Court, regarding the procedures followed before the year 2007 in execution of the decisions passed by the ESC. Moreover, the respondent No. 1, through an RTI dated 21st May, 2019, obtained information from the Irrigation Department of Haryana, which Signature Not Verified RFA 171/2022 Page 26 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 revealed that since 1st March, 2007, Clause 19 of the Agreement provided a dispute redressal mechanism. The response provided via a letter dated 26th July, 2019 indicated that prior to the year 2007, decision of the ESC were treated as awards and were executable under the Act.

58. It has been submitted on behalf of the respondent No. 1 that in the year 2007, changes were made to the arbitration procedures, but the fundamental nature of the ESC, the orders passed by it, and the applicability of the Act remained unchanged. The documents obtained under the RTI indicate that the decision by the ESC under the dispute redressal system is to be treated as an award, contrary to the appellant‟s claim that no arbitration clause existed between the parties and the only remedy available to the appellant against an ESC award was to file a petition under Section 34 of the Act, not a suit, and that the Agreement duly provides for the provision to file an appeal under the Act. Therefore, the respondent argues that the appellant‟s suit was rightly dismissed by the learned Trial Court, and there is no error in the impugned order, as the suit is clearly barred by law.

59. At this stage, it is apposite for this Court to peruse the order impugned before this Court and the relevant portion of the same is as under:

―Vide this order, I shall decide two applications filed on behalf of defendant Nos.1 and 2 under Order VII Rule 11 CPC as well as one preliminary issue so framed vide order dated 15.12.2017, which is as under:

―Whether the decision of the Empowered Standing Committee dated 09.05.2014 is arbitration award or not, in view of clause 19 of the Agreement and its effects on maintainability of the present suit?‖ Signature Not Verified RFA 171/2022 Page 27 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 xxxxxxx As per order dated 15.12.2017 this preliminary issue has been framed as there has been a strong objection from the side of the plaintiff that the decision of Empowered Standing Committee is not an Arbitration Award therefore, there is no bar to the present suit filed by the plaintiff and execution petition bearing No. 24167/16 filed defendant No.1 herein against plaintiff herein is liable to be dismissed.

Vide their application filed under Order VII Rule 11 CPC defendant No.1 and 2 have jointly taken similar objections alleging that :

1. Suit filed by the plaintiff is not maintainable as it is barred by provisions of Section 5 Arbitration Act. The decision of Empowered Standing Committee dated 09.05.2014 is an award, hence, jurisdiction of Civil Court is barred.

2. Second relief/prayer clause asked by plaintiff is contrary to the first clause, therefore, both the prayer clause contrary to each other renders the entire suit as liable to be rejected.

It is stated that on the one hand, plaintiff is seeking setting aside of order of Empowered Standing Committee dated 09.05.2014, alleging that this order is not binding upon them whereas on the the contrary he is seeking further directions that defendant No. 2 to be directed to make the payment, if any.

3. There is no privity of contract between defendant Nos. 1 and 2, as per work contract. It is the internal arrangement plaintiff and defendant No.2, that the payment has to be paid to defendant No.1. Work has been awarded by plaintiff in which defendant No. 2 is not directly involved though it is one of the essential party for execution of the work contract. In other words, there is no direct agreement between defendant No.2 and defendant No.1.

Therefore, in a nutshell the entire contentious issue raised vide these two applications as well as preliminary issue so framed vide order dated 15.12.2017, surround around the controversy of clause 19 of the terms and condition of the contract as, whether it is in the nature of an Arbitration clause or not.

Signature Not Verified RFA 171/2022 Page 28 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18

In their reply, plaintiff has strongly opposed, the application as well as framing of preliminary issue vide order dated 15.12.2017 alleging that 'Clause 19' of the work contract does not provide for any clause of Arbitration in between the parties, nor it talks about referring the dispute to be settled through Arbitration proceedings. It is stated that constituted of Empowered Standing Committee does not imply that it is a Committee to arbitrate, therefore, any such decision passed by any such committee cannot be considered as an arbitration clause, therefore, not only the present suit is maintainable as per law but the execution petition filed by defendant no. 1 herein against plaintiff herein liable to be dismissed, as such execution petition has been filed on the premise that impugned award has been passed by Empowered Standing Committee on 09.05.201.

Arguments heard. Record perused.

xxxxxxx During arguments, it is stated on behalf of plaintiff that as per 'Clause 19.4' of work mentioned at its internal page Nos.26 and 27 is not an arbitration clause, therefore, order VII Rule 11 (d) CPC is not applicable. It this regard, it is stated that as per this provision 'Clause 19' is laying down terms and conditions of provision for appeal which is contrary to the this scheme of Arbitration Act. It is stated that as per the Arbitration Act, an arbitration agreement once existing between the parties as per the contract then any decision passed by such arbitrator so appointed is final in nature and against such order there is no provision of appeal. Such an award can only be challenged under Section 34 of Arbitration Act. If not challenged then execution on the basis of such award can be filed under Section 36 of the Act. It is further stated that if such an order is passed by any such committee so constituted does not attain finality then it cannot be considered as an award as per Arbitration Act. It is stated that as per 'Clause 19.4' provides for a provision of resorting to civil court, if 'employer' is not satisfied with the decision. Such clause in itself, does not give finality to such decision, therefore, it falls outside purview of an award Signature Not Verified RFA 171/2022 Page 29 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 as envisaged under Arbitration Act. Therefore, the application is liable to be dismissed.

It is stated on behalf of defendant Nos. 1 and 2 that 'Clause 19' of the work contract provides for a redressal of dispute mechanism in between the parties. It is stated that till 2007, all such orders of Empowered Standing Committee were considered in the form of an award and it was executable as per Arbitration Act. In the year, 2007 certain changes have taken place in the procedure adopted by the plaintiff. However, the nature of such committee and passing of this order and applicability of Arbitration Act upon its order has not changed.

During arguments, plaintiff was asked to file certain documents showing the procedure adopted by their concerned department as well as Empowered Standing Committee prior to 2007 and after 2007 as to whether and in what manner order of such committee were executable. Plaintiff though has not filed any such documents but has merely stated that prior to 2007 such orders passed by such committee were in the nature of an award. Defendant, on the other hand, had filed all such documents so obtained under RTI Act from the concerned department of plaintiff and have alleged that prior to 2007 such orders passed by such committee were very much in the form of an award and were also executed in like manner as per arbitration Act and have been continued to be considered as an award, even after 2007. Plaintiff on the contrary, has not filed any document to show the procedure adopted by them for execution of any order passed by such committee after 2007. Thus, in these circumstances in the absence of any reply to the contrary, the submissions made on behalf of the defendant No.1 which is supported with documentary evidence filed and relied upon them on judicial record has to be considered accordingly. In other words, it means and implies that not only prior to 2007 decision of the such committees was treated as an arbitration awards but in and after similar procedure is continued to be adopted by and or behalf of plaintiff. It is needless to say, as mentioned above, plaintiff Signature Not Verified RFA 171/2022 Page 30 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 has not filed any documents contrary to the submissions made on behalf of defendant No.1. A very interesting fact has emerged form bare perusal of 'Clause 19' of work contract which lays down the provision of appeal as well, however, to a higher committee of plaintiff themselves. The procedure adopted by the plaintiff prior to 2007, however, was such that all such orders were treated as an arbitration in between the parties.

At the outset, it is important to mention that any dispute redressal mechanism besides general courts are covered under Section 89 CPC. Section 89 CPC provides for a provision of Dispute Redressal Mechanism which includes, arbitration, mediation, good offices, conciliation, negotiation etc. Whether it is arbitration or mediation or any such forum as mentioned under Section 89 CPC, such provision brings out the Jurisdiction for dispute redressal from the purview of general civil court and as per Section 9 CPC, jurisdiction of general civil court is barred to entertain any such matter except in the manner and procedure prescribed under the Special Act constituted for that purpose. Arbitration and Conciliation Act, 1996 is such special statute in this regard. As per its, Section 5 jurisdiction of civil Court is barred where Arbitration Act, 1996 applies. It has come on record and not disputed by the parties that the procedure adopted by plaintiff prior to 2007, has been in the nature of arbitration proceeding whenever any such dispute is redressed by their Empowered Standing Committee.

Even after 2007, constitution of such committee has not been written off from their rules and regulation as well as work contract which used to be in their terms and conditions of their work contract prior to 2007. It is also a matter of record and not disputed that such committees have been constituted prior to 2007 as well as after 2007. xxxxxx From the careful perusal of the judgments relied upon by the parties it is important to mention here that each and every such judgment has to be applied in specific and peculiar Signature Not Verified RFA 171/2022 Page 31 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 facts and circumstances of a particular case. In the present case, though there has been a provision of appeal as reflected from clause 19 of work contract. However, prior to 2007 such orders have been considered as an arbitration despite this fact. There has been some changes in such terms and conditions, however, constitution of such committee, redressal of grievances and provision of appeal remains same. Therefore, in the light of above discussion as well as facts and circumstances of the case I am of opinion that by virtue of Clause 19 of the work contract, it provides for a mechanism of redressal of dispute by virtue of which jurisdiction of general civil courts is excluded. There is no provision reflected besides the construction of clause 19 of work contract that if such disputes are not redressed by the committee then can also be agitated before and redressed by the general civil court. Thus, clause 19 of the work contract is in the nature of a provision providing for arbitration. Approach of plaintiff, prior to and after 2007 is very much indicating towards that. Thus, the conduct of parties, more particularly, plaintiff matters here. Thus, none of the judgements relied upon by the plaintiff are applicable here. As per Section 9 and 89 CPC read with Section 5 of Arbitration Act, in my considered opinion jurisdiction of General Civil Court is therefore, barred. I am further of the opinion that, in such circumstances only the special provisions as laid down under Arbitration Act 1996 i.e. Sections 34, 35 and 36 can be resorted to. In these circumstances, therefore, in my considered opinion preliminary issue is decided in favour of defendant Nos.1 and 2, that there exist an Arbitration Agreement as per work contract by virtue of its 'Clause 19'. If such clause 19 is providing the provision of arbitration in between the parties, therefore, as per Section 9 CPC r/w Section 5 Arbitration Act jurisdiction of general civil court is barred. With regard to the plea of privity of contract between defendant No.1 and 2, I am of the opinion that plea of privity of contract is nothing but defence of defendants which cannot be considered under Order VII Rule 11 CPC though Signature Not Verified RFA 171/2022 Page 32 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 it is relevant otherwise. In other words, plea of privity of contract cannot be considered for rejection of plaint under Section VII Rule 11 CPC. In terms of above discussion, application filed by defendant nos. 1 and 2 under Order VII Rule 11 CPC is allowed.

Preliminary issue is decided in favour of defendants, therefore, plaint is liable to be rejected. No order as to cost. File be consigned to record room after due compliance.‖

60. Upon perusal of the aforesaid extracts of the impugned order, it is made out that vide the impugned order, two applications filed by the respondents/defendants under Order VII Rule 11 of the CPC, respectively; and a preliminary issue framed on 15th December, 2017 were decided against the plaintiff/appellant herein.

61. The preliminary issue was with regard to whether the decision dated 9th May, 2024, passed by the ESC, constitutes an arbitration award under Clause 19 of the Agreement and its impact on the maintainability of the suit filed by the plaintiff/appellant.

62. The plaintiff had challenged the aforesaid decision of the ESC before the learned Trial Court, arguing that the ESC‟s decision was not an arbitration award, and thus, the civil suit was maintainable. The respondents/defendants, however, contended that the ESC‟s decision was an arbitration award, barring the Civil Court‟s jurisdiction under Section 5 of the Act, and that the prayers made in the suit were contradictory, and lacked privity of contract between the defendant/respondent Nos. 1 and 2.

63. The learned Trial Court concluded that Clause 19 of the Agreement, which provides a dispute resolution mechanism is akin to an arbitration clause, excluding the jurisdiction of Civil Courts under Section 9 of the CPC and Section 5 of the Act. Therefore, the learned Court Signature Not Verified RFA 171/2022 Page 33 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 below ruled in favor of the defendants, thereby, dismissing the suit under Order VII Rule 11 of the CPC.

64. In light of the above submissions and pleadings made before this Court, as well as the decision of the learned Trial Court, the issue for the determination of this Court is as follows:

1. Whether the learned Trial Court rightly decided the preliminary issue that the civil suit filed by the appellant/plaintiffs before the learned Court below is barred by the law?

2. Whether the plaint is liable to be rejected under Order VII Rule 11 of the CPC being not maintainable due to the applicability of Arbitration and Conciliation Act, 1996?

65. The scheme of the Act is clear in this regard. It is settled law that once it is held that there is a valid arbitration agreement between the parties, the suit would not be maintainable as the genesis of the entire dispute raised in the plaint is that there is no agreement.

66. It is observed that the learned Trial Court had framed a preliminary issue to decide as to whether the decision of the ESC may be treated as arbitration award which affects the maintainability of the suit. Further, the respondents/defendants had filed separate applications under Order VII Rule 11 of the CPC, contending to the effect that the plaint is liable to be rejected being barred by the law since the relief before the plaintiff/appellant herein is to file an objection petition under Section 34 of the Act and filing of the suit is not maintainable as the decision of the ESC is an award under the Act.

67. Therefore, before proceeding further, this Court has perused the Signature Not Verified RFA 171/2022 Page 34 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 Agreement dated 19th January, 2012 and out of the alleged Agreement filed by the appellant, the following extracts have been reproduced for reference and discussion:

―...19.4 The decision of the Standing Empowered Committee will be binding on the employer for payment of claims up to five percent of the Initial Contract Price. The contractor can accept the decision; he is not barred from approaching the court. Similarly, if the Employer odes not accept the decision or the Standing empowered Committee above the limit of five persons of the of the Initial Contract Price, he will be free to approach the court applicable under the law.

Any party taking recourse of dispute redressal system will have to deposit. A of the claim amount in the form of any unconditional - DR pledged in the name of the Engineer and refundable only in case the decision goes in favour on the claimant.

―In view of the provision of Clause on dispute Redressal System there will be no arbitration for the settlement of any dispute between the parties.‖

68. It is observed by this Court that the aforesaid Clause 19.4 of the Agreement states that the decision of the ESC will be binding on the employer for payment of claims up to five percent of the initial contract price. Further, the contractor can accept the decision and he is not barred from approaching the Court. Also, if the employer does not accept the decision of the ESC, he will be free to approach the Court under the applicable law.

69. It is pertinent to mention here that the last lines of the aforesaid Clause also mention that „in view of the provision of clause on dispute redressal system, there will be no arbitration for settlement of any dispute between parties.

Signature Not Verified RFA 171/2022 Page 35 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18

70. Apposite to note here that the respondent no. 1 has filed its written submissions, along with a copy of the alleged Agreement (appended as Annexure R-1) and whilst placing reliance upon the same, the respondent No. 1 has contended that as per Clause No. 28, it was agreed that arbitration will be conducted as mentioned in the conditions of Contract. The relevant portion is as under:

"..28. Arbitration As mentioned in the Conditions of Contract.."

71. It is pertinent to note here that the aforesaid Clause 28 is neither to be found in the copy of the Agreement produced by the appellant, nor to be found in the Lower Court‟s Record. Moreover, the said Clause was not even contended by the respondents/defendants before the learned Trial Court.

72. It is also appropriate to mention that even in the impugned order, although the learned Trial Court has reproduced the extracts of Clause 19.4 of the Agreement, however, it is has failed to reproduce and peruse the last lines of the Agreement which states that there shall be no arbitration, despite the fact that copy of the Agreement, which is part of the Lower Court‟s Record duly shows the existence of the said portion in Clause 19.4

73. This Court also deems it fit to state that a bare reading of the clauses of the Agreement and its interpretation do not make out a case that the procedure of arbitration is to be followed, and proving the same would require proper trial. Further, as observed under the scheme of the act hereinabove and in terms of the judgment of Bhushan Steel Ltd. (Supra) and Sara International Ltd. (Supra), there cannot be any Signature Not Verified RFA 171/2022 Page 36 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 ambiguity with regard to the existence of an arbitration clause.

74. The respondents contend that Clause 19.4 states that the party aggrieved by the decision of the ESC may approach the Court of law. With respect to the same, it becomes relevant to hold that although the wordings of the said Clause may seem to hint at the applicability of the Act on a prima facie basis, however, due to the aforesaid ambiguity and vagueness in the terms of arbitration, it cannot be taken merely on the face of it as the same would be detrimental to the rights of the appellant/plaintiff and against the interest of justice.

75. The judgments relied upon by this Court clearly shows that in order to accept a valid arbitration agreement, the wording of the concerned clause must show, in clear and categorical words, that there will be an arbitration. However, the facts of the instant case are in complete contradiction to the settled position of law due to the contradictory clauses and uncertainty about the procedure to be adopted against a decision of ESC etc.

76. This Court is of the view that the learned Trial Court erroneously considered the RTI documents filed by the respondents/defendants as the same is beyond the scope of the jurisdiction conferred upon it under Order VII Rule 11 of the CPC.

77. In terms of the judgment passed by the Hon‟ble Supreme Court in Kuldeep Singh Pathania (Supra), unlike Order VII Rule 11 of the CPC, while deciding a preliminary issue, the Courts can decide the maintainability of a civil suit by looking at the entire pleadings and material available on record.

78. Thus, this Court is of the firm view that even if the learned Trial Signature Not Verified RFA 171/2022 Page 37 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 Court found it appropriate to rely on and discuss the RTI documents which allegedly state that prior to the year 2007, procedure prescribed under the Act was followed, it ought to have first determined the validity of the said documents by giving the appellant/plaintiff a chance to examine and rebut the same, and to address arguments thereto. Moreover, the learned Trial Court erred in deciding the preliminary issue in haste as prima facie, the suit seems to be maintainable because unless the shadow caste upon the existence and terms of arbitration is decided, allowing the preliminary issue is only against the law.

79. Further, the learned Trial Court erred in passing the impugned order based on the submission of the respondents that till the year 2007, all such orders of ESC were considered in the form of an award and it was executable as per the Act.

80. This Court is also of the view that the learned Trial Court erred in law by considering the contention of the respondents that in the year, 2007 certain changes have taken place in the procedure adopted by the plaintiff, however, the nature of such committee and passing of this order and applicability of Act upon its order has not changed.

81. The surmises of the above is based upon the fact that under Order VII Rule 11 of the CPC, the learned Trial Court ought to have decided the question of applicability of the Act on the basis of the averments made in the plaint itself and relying on the rebuttals and documents produced by the respondents/defendants violates the mandate of rejection of a plaint.

82. There exists contradictory clauses in the Agreement on which both the parties are relying to contend their side of the stories, however, in light of such ambiguities, this Court is of the view that the matter before Signature Not Verified RFA 171/2022 Page 38 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 the learned Trial Court requires consideration and proper adjudication in terms of leading of evidence and examination of witnesses, and the same cannot be decided at the initial stage of deciding an application under Order VII Rule 11 of the CPC as well as under a preliminary issue, as the Courts should bear in mind that rejecting a plaint, under the aforesaid provision and under a preliminary issue, is passing a decision without a trial.

83. Accordingly, it is held that the learned Trial Court erred in passing the impugned order as the same has been passed in a haste manner, without taking into account the complex factual scenario of the instant case.

CONCLUSION

84. Summarily stated, it is held that the learned Trial Court committed various errors of law in passing the impugned order. As discussed herein above, the learned Trial Court failed to appreciate that the dispute raised by the appellant in its suit is not simple, rather a complex one which requires proper adjudication, i.e., a full-fledged trial, and the issues could be determine judiciously only after the parties lead evidence and examine the witnesses.

85. Insofar as the impugned order is concerned, this Court has summarised the illegality/irregularity arising out of the same in terms of the following points:

a. Contradictory clauses in the Agreement with regard to the alleged existence and non-existence arbitration clause. b. The learned Trial Court failed to ascertain the ambiguity regarding the arbitration when at one place in the contract Signature Not Verified RFA 171/2022 Page 39 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18 it is mentioned that there will be no arbitration, however, the defendants/respondents heavily contend that the decision of the ESC is an award in terms of the Act. c. While deciding the applications under Order VII Rule 11 of the CPC, the learned Trial Court went beyond the plaint and relied upon the arguments/defence of the defendants/respondents.

d. The learned Trial Court also erred in relying upon the RTI documents in the impugned order when the same was not a part of the evidence of the plaint, to which the appellant/plaintiff did not have any chance to rebut or refute.

e. The impugned order is passed in haste manner as it seems that the learned Trial Court failed to interpret the essence of the terms of the Agreement, and it merely took the contention of the defendants/respondents as it is.

86. Taking into consideration the observations made herein above, this Court is of the considered view that the learned Trial Court‟s order is patently illegal and erroneous on the face of the record, and thus, the same is liable to be set aside. Further, the civil suit filed by the appellant/plaintiff raised certain „facts-in issue‟ and „issue of law‟ which requires a proper adjudication, i.e., a full-fledged trial to arrive at a legally tenable decision.

87. It is held that the decision, of allowing the applications under Order VII Rule 11 of the CPC and deciding the preliminary issue, in favour of the respondents/plaintiffs is bad in law, and hence, the same is set aside.

Signature Not Verified RFA 171/2022 Page 40 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18

88. In view of the aforesaid discussions on facts and law, the impugned order dated 18th December, 2021 passed by the learned ADJ-01 (Central), Tis Hazari Courts in case bearing CS No. 20450/2016 is set aside.

89. The matter is remanded back to the learned Trial Court to decide the matter after conducting a trial and adjudicating the dispute in accordance with the law, expeditiously, preferably within six months, without giving any unnecessary adjournments to either party.

90. Accordingly, the instant regular first appeal is allowed and stands disposed of along with the pending applications, if any.

91. The judgment be uploaded on the website forthwith.

(CHANDRA DHARI SINGH) JUDGE AUGUST 21, 2024 SS/RYP/AV Signature Not Verified RFA 171/2022 Page 41 of 41 Digitally Signed By:GAURAV SHARMA Signing Date:23.08.2024 19:12:18

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