Jharkhand High Court
M/S Mecon Limited vs M/S City Construction Corp. Durgapur ... on 28 March, 2025
Author: Sujit Narayan Prasad
Bench: Sujit Narayan Prasad
IN THE HIGH COURT OF JHARKHAND AT RANCHI
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Arbitration Application No. 26 of 2023
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M/s MECON Limited, having its head office at Vivekanand Path, P.O. & P.S-Doranda, Dist.- Ranchi, Jharkhand through its General Manager (Contracts & Legal), Shri Debabrata Acharya, Aged about 57 years, son of Late Tapan Kumar Acharya, resident of MECON Colony, Shyamali, P.O. & P.S. -Doranda, District - Ranchi, Jharkhand-834005. .... Petitioner Versus M/s City Construction Corp. Durgapur having its registered address at R.K. Pally, Main Gate, Durgapur, P.O. & P.S-Durgapur, District-Burdwan, West Bengal-
713203. ... .... ... Respondent
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CORAM: HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD .....
For the Petitioner : Mr. Shresth Gautam, Advocate For the Respondent : Mr. Saptarshi Bhattacharjee, Adv.
[Through V.C.] Mr. Vibhor Mayank, Advocate .....
C.A.V. on 21/03/2025 Pronounced on 28/03/2025 Prayer:
1. The instant application has been filed by the petitioner invoking the jurisdiction conferred under Section 11(6) of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as ‗Act, 1996'] for appointment of arbitrator for resolution of dispute between the parties.
-1- Arbitration Application No. 26 of 2023 Brief facts of the case:
2. Brief facts of the case, as per the pleadings made in the application, which is required for adjudication of lis reads as under:
3. The petitioner-MECON, is a ‗miniratna central public sector enterprises of Govt. of India under the Ministry of Steel' and is engaged in the business of consultancy and execution of construction and industrial projects throughout the country.
4. Tender bearing Tender Enquiry No. 11.51.027U/Civil Works/Pkg. No. 001/008R dated 01.09.2021 was floated by the petitioner inviting bids for execution of works pertaining to ‗Civil Works for installation of 4th Stove in Blast Furnace No. 4 of SAIL, Durgapur Steel Plant, Durgapur'.
5. Pursuant thereto, the respondent applied the aforesaid tender and after going through the tender process emerged as L-1, as such was declared the successful bidder. Accordingly, work order being Work Order No. 11.51.027U/Civil Works/Pkg. No. 001/9807 dated 04.10.2021 was issued by the petitioner in favour of respondent.
6. It is stated that in the ‗work order', it is clearly stipulated that time is the essence of the contract, 2 therefore, the contractor-respondent was directed to abide by the time schedule and execute the entire works within a period of 08 (eight) months from the date of issuance of ‗work order'.
7. After issuance of work order, the petitioner vide email dated 06.10.2021 duly furnished the drawings to the respondent-contractor in order to ensure that work be executed in a timely and prompt manner.
8. It is stated that in spite of timely issuance of drawings and other requisites instructions to the respondent-contractor, the progress of the works was very slow since inception. In that view of the matter, the petitioner, vide e-mail dated 06.11.2021, duly intimated the respondent-contractor to deploy adequate manpower at the time and made a request to execute the work on ‗high priority jobs'.
9. The petitioner again vide email dated 09.11.2021 intimated the respondent-contractor that there have been various failures on its end, which include non-
procurement of construction materials, non-procurement of tools and tackles required to execute the work and non-submission of labour license by the respondent.
10. Thereafter, the petitioner, vide email dated 15.11.2021 and 16.11.2021, send reminders and requested to expedite the works but the respondent- 3 contractor did not meet the targets as agreed upon between the parties.
11. In such circumstance, on 18.11.2021, the petitioner issued a ‗Notice of Negligence' communicating that delayed execution of works by the respondent is severely jeopardizing the completion schedule but in spite of that even after passage of 50 days no visible progress was done in the work assigned to the respondent, which fact was communicated to the respondent vide email dated 26.11.2021.
12. Consequently, a meeting was held on 26.11.2021 in MECON Site Office, Durgapur between the parties wherein revised dates for execution of works were stipulated and agreed upon by the parties. But again, the respondent failed to meet the revised timeline, which was communicated to the respondent vide email dated 30.11.2021.
13. But instead of expediting the work, the respondent withdrew manpower and machinery from the work site, which the petitioner communicated to the respondent vide letter dated 03.12.2021 stating that for such action, the respondent shall be liable for suitable action as per the provisions of work order.
14. But in spite of repeated requests and reminders by the petitioner, the respondent did not execute the works 4 and virtually abandoned the work, which constrained the petitioner to issue ‗Negligence & Risk Purchase Notice' dated 04.12.2021 by which the respondent was requested to immediately mobilize manpower and machinery at the work site and initiate execution of civil works and further if the respondent fails to discharge the execute the work as per work order, the petitioner shall left with no option but to complete the left work by a third entity at the risk and cost of the respondent.
15. Accordingly, the petitioner carried out inspection of work site and found that no manpower was deployed at the side and no work was carried out by the respondent, which was communicated by the MECON, Durgapur side office to the petitioner vide email dated 06.12.2021.
16. In the meantime, the respondent vide letter dated 01.12.2021 communicated to the petitioner that work fronts were purportedly not being made available to the respondent and further claimed of escalation of item rates, to which the petitioner replied vide email dated 10.12.2021 that the work order was fixed unit rate contract having no provision for escalation and allegation of the respondent with regard to the unavailability of work site was also negated by the petitioner.
17. It is stated that seeing no improvement in the rate of progress/execution of works by the respondent, the 5 petitioner terminated the work order vide letter dated 17.12.2021.
18. Upon issuance of the termination order, the respondent was requested to return the reinforcement bars taken from the stores along with all gate passes issued to the workers of the respondents vide emails dated 18.12.2021 and 29.12.2021.
19. Thereafter, the petitioner got the balance work under the work order executed by a third entity at a total basic price of Rs. 3,89,68,536/- as against the ‗Initial Total Contract Price' of Rs. 3,07,80,708/- plus overhead.
20. Consequently, the petitioner vide letter dated 07.04.2022 raised its claim upon the respondent to the tune of Rs.81,87,828/- but the respondent did not pay it till date.
21. It has been stated that as per Clause 36.2 of the work order since the dispute arose between the parties, the petitioner vide letter dated 13.09.2022 requested the respondent for conciliation of disputes that had accrued between the parties, but the respondent failed to take any action.
22. The petitioner herein, upon receiving no response from the respondent side, issued a notice invoking arbitration under clause 36.2.1 vide letter dated 16.06.2023 proposing panel of three names from which 6 the respondent was requested to nominate for appointment of sole arbitrator for resolution of disputes between the parties but the respondent did not take any steps.
23. In the backdrop of aforesaid facts, the petitioner has invoked the jurisdiction conferred under Section 11(6) ‗Act, 1996' for appointment of arbitrator for resolution of dispute between the parties.
Submission advanced on behalf of petitioner:
24. Learned counsel for the petitioner has submitted that in pursuance to ‗Notice Inviting Tender' [NIT], inviting bids for execution of works pertaining to ‗Civil Works for installation of 4th Stove in Blast Furnace No. 4 of SAIL, Durgapur Steel Plant, Durgapur'. The respondent after going through the tender process emerged as L-1, as such was declared successful and accordingly work order being Work Order No. 11.51.027U/Civil Works/Pkg. No. 001/9807 dated 04.10.2021 was issued by the petitioner in favour of respondent.
25. Submission has been made that immediately after issuance of work order, the petitioner vide email dated 06.10.2021 duly furnished the drawings to the respondent-contractor in order to ensure that work be executed in a timely and prompt manner.
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26. Learned counsel for the petitioner has submitted that the work order contains certain conditions particularly the time period in which the entire work was to be completed i.e., within a period of eight months from the date of issuance of work order, as per clause 4.0 ―Completion period‖ wherein it has specifically been stated that ‗Entire works as detailed in the Technical Specification shall be completed within 08 (eight) months from the date of work order.' Further, as per Clause No. 36.0 in case of any dispute or difference in between the parties on any provisions of the contract, there is provision of invocation of arbitration clause.
27. It is case of the petitioner that since inception the progress of the works was very slow, therefore, the petitioner vide e-mail dated 06.11.2021 duly intimated the respondent-contractor to deploy adequate manpower at the time and made a request to execute the work on ‗high priority jobs'.
28. Further submission has been made that the petitioner time and again, repeatedly sent several reminder requesting the respondent-contractor to expedite the works but the respondent-contractor did not meet the targets as agreed upon between the parties. Therefore, vide letter dated 18.11.2021, the petitioner issued a ‗Notice of Negligence' communicating that 8 delayed execution of works by the respondent is severely jeopardizing the completion schedule but in spite of that even after passage of 50 days no visible progress was done in the work assigned to the respondent. Thereafter, a meeting was convened on 26.11.2021 in MECON Site Office, Durgapur between the parties wherein revised dates for execution of works were stipulated and agreed by the parties. But again, the respondent failed to meet the revised timeline, and instead of expediting the work, the respondent withdrew manpower and machinery from the work site.
29. It has further been submitted that in such circumstance, the petitioner issued ‗Negligence & Risk Purchase Notice' dated 04.12.2021 by which the respondent was requested to immediately mobilize manpower and machinery at the work site and initiate execution of civil works and further if the respondent fails to discharge the execute the work as per work order, the petitioner shall left with no option but to complete the left work by a third entity at the risk and cost of the respondent.
30. Submission has been made the considering that fact no improvement in the rate of progress/execution of works by the respondent, the petitioner terminated the work order vide letter dated 17.12.2021. 9
31. Thereafter, the petitioner got the balance work under the work order executed by a third entity at a total basic price of Rs. 3,89,68,536 as against the ‗Initial Total Contract Price' of Rs. 3,07,80,708/- plus overhead. Consequently, the petitioner vide letter dated 07.04.2022 raised its claim upon the respondent to the tune of Rs.81,87,828/- but the respondent did not pay it till date.
32. Submission has been made that in accordance with the provisions of Clause 36.2.1, the petitioner vide letter dated 13.09.2022 requested the respondent for conciliation of the disputes but the respondent failed to take any action, therefore, the petitioner issued notice invoking arbitration clause 36.2.1 vide letter dated 16.06.2023 proposing panel of three names from which the respondent was requested to nominate for appointment of sole arbitrator for resolution of disputes between the parties but the respondent did not take any steps, therefore, the petitioner is before this Court under the provisions of Section 11(6) ‗Act, 1996' for appointment of arbitrator for resolution of dispute between the parties.
Submission on behalf of respondent
33. Counter affidavit has been file on behalf of respondent wherein the issue of maintainability of the 10 arbitration application has been raised besides raising the issue on merit.
34. Mr. Saptarshi Bhattacherjee, learned counsel for the respondent, who appeared through Virtual Mode, being assisted by Mr. Vibhor Mayank, learned counsel for the respondent, raising the issue of the maintainability of the arbitration application, has submitted that the instant application has been filed without following the due procedure of law as the petitioner at no point of time has followed the mechanism as prescribed under reference.
35. Further submission has been made that the work order under reference, was never signed and accepted by the respondent, as such there exists no agreement by the parties to submit any dispute to arbitration which may arise between them.
36. On the merit of the issue, submission has been made that this Court has no jurisdiction to decide on any purported issuance of drawings, deployment of man power, mobilization thereof and/or any execution of works, which emanated out of a purported work order dated 04.10.2021 and further this Court has no jurisdiction to hear any purported issue pertaining to procurement of construction materials, non-procurement of tools and tackles required to execute any purported 11 work or works with regard to test pile boring etc., as alleged by the petitioner.
37. Therefore, submission has been made that purported notice of negligence dated 18.11.2021 is bad in law and is outside the purview of Arbitration.
38. Further submission has been made that failure to adhere to timelines, progress of work, withdrawal of man power, abandonment of work site is not amenable under the provisions of Arbitration and Conciliation Act, 1996, therefore, the purported ‗negligence and risk purchase notice' dated 04.12.2021 is bad in law and outside the purview of Act, 1996.
39. Learned counsel has submitted that absence of any arbitration clause is evident from email communication dated 04.10.2021 and 09.11.2021 issued by the petitioner.
40. Further submission has been made that the alleged ‗termination order' dated 17.12.2021 is bad in law and the consequential demand of additional cost of Rs.81,87,828/- plus overhead is also not tenable in law.
41. At paragraph 8 of the counter affidavit, it has been denied that the petitioner has approached the respondent for any form of conciliation and it has been denied at paragraph 9 that there exists any valid arbitration clause between the parties.
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42. Therefore, submission has been made that the instant application is fit to be dismissed in limine. Analysis
43. We have heard learned counsel for the parties, gone through the material available on record and rival submissions advanced on behalf of parties.
44. The fact, which is not in dispute is that a ‗Notice Inviting Tender' [NIT], inviting bids for execution of works pertaining to ‗Civil Works for installation of 4th Stove in Blast Furnace No. 4 of SAIL, Durgapur Steel Plant, Durgapur', was floated, upon which the respondent participated in the tender process and after going through the tender process emerged as L-1 tenderer, as such was declared successful. Accordingly work order being Work Order No. 11.51.027U/Civil Works/Pkg. No. 001/9807 dated 04.10.2021 was issued by the petitioner in favour of respondent.
45. The work order contains certain conditions. Clause 1.0 under the caption ‗Scope of Work', it is specifically stated that ‗Your scope of work shall be strictly as per Technical Specification (enclosed as Annexure-I).'
46. Further 2.0 speaks about the contract price which says that the contract price for the total scope of work enumerated in this Work Order is indicated in the Price Schedule (Annexure -II) and the contract price shall be 13 firm and not subject to any increase/decrease whatsoever for impositions of any fresh taxes and cesses, if any, or statutory variation/removal of any existing taxes and cess etc. within the contractual period.
47. Clause 4.0 is under the caption ‗Completion period'. Clause 4.1 emphatically says that Completion Schedule/ Time is one of the most important aspects of the work order and Contractor shall complete the entire work as per the scope of work detailed in the technical specification. Further laying emphasis, it has been stipulated therein that the ‗Entire works as detailed in the Technical Specification shall be completed within 08 (eight) months. For ready reference, Clause 4 of the work order is quoted as under:
4.0 COMPLETION PERIOD 4.1 Completion Schedule/ Time is one of the most important aspects of the work order and is firm & binding Contractor shall complete the entire work as per the scope of work detailed in the technical specification and clause 1.0 above in all respects as the following schedule: Entire works as detailed in the Technical Specification shall be completed within 08 (eight) months from the date of work order. 4.2 In order to achieve completion schedule as stated above, contractor shall submit to MECON within 2 (two) weeks from work order, a detailed work programme time schedule in the form of a Bar Chart/ PERT Network to complete the entire scope of work, for approval by MECON. The Contractor shall have to comply with PERT/Bar Chart, as approved by MECON, for completion of the entire work.14
4.3 The delivery period as mentioned above shall be suitably extended if the Contractor is delayed or impeded in the performance of any of its obligations under this order by reasons of any of the following:
i) Delay in issue of drawings/documents by MECON/SAIL-
DSP/CET (Consultant) Delay in issue drawings/ documents to the contractor from the schedule as stipulated in the Technical Specification.
ii) Any occurrence of Force Majeure as provided in clause no. 35.0.
iⅲ) Any suspension order given by MECON under clause no. 22.0.
iv) Delay in handing over of front to carry out civil works as certified by site engineer.
The delivery period under the above condition shall be extended by such period as shall be fair and reasonable in all the circumstances and as shall fairly reflect the delay or impediment sustained by the contractor for the reasons attributable to MECON. Except where otherwise specifically provided in the order, the Contractor shall submit to MECON their claim for an extension of the delivery period together with particulars of the event or circumstances justifying such extension as soon as reasonably practicable after the commencement of such an event or circumstances. The Contractor shall at all times use its reasonable efforts to minimize any delay in the performance of its obligation under the order."
48. Clause 11.0 of the work order deals with ‗submission of progress report, which says that the contractor shall furnish progress report as 1st and 15th of every month showing the progress of each activity. For ready reference, clause 11 of the work order is quoted as under:
"11.0 SUBMISSION OF PROGRESS REPORT The CONTRACTOR shall furnish progress report as 1" & 15 of every month showing the progress of each activity as per the 15 bar chart agreed between MECON and CONTRACTOR. If requested by MECON, CONTRACTOR shall also furnish three (3) prints each to the MECON of progress photographs of the work done at Site.‖
49. Clause 15.1 of the work order speaks about Inspection of the work, wherein it has been stated that Construction/Contract work shall be inspected by petitioner-MECON to ensure that the plans and specification are being properly executed. The petitioner- MECON shall have access and right to inspect the work or any part thereof at any stage. If by the above inspection, the petitioner rejects any work, the Contractor shall make good such rejections either by modifications or repairs as may be necessary, to the entire satisfaction of petitioner-MECON. For ready reference, the Clause 15.1 is quoted as under:
15.0 ACCEPTANCE 15.1 INSPECTION The Construction/ Contract work shall be inspected by MECON/SAIL-DSP/CET to ensure that the plans and specification are being properly executed. MECON/SAIL-
DSP/CET shall have access and right to inspect the work or any part thereof at any stage. If by the above inspection, MECON/ SAIL-DSP/CET reject any work, the Contractor shall make good such rejections either by modifications or repairs as may be necessary, to the entire satisfaction of MECON. Such repair modifications include re-execution of such of those works of other Contractor's and/ or agencies, which might have got damaged or affected by re-work done to the contractor's work. All supply items shall be inspected by MECON/SAIL-DSP CET, if required, before despatch to site. Contractor shall send 16 inspection call after readiness of materials along with copies of Internal Test report/ Test Certificates etc.
50. Clause 16 speaks about completion certificate, which says that within 10 days of the completion of the entire scope of work, the contractor shall give notice of such completion to MECON and MECON shall inspect the work and after satisfying itself with tests as required, shall issue completion certificate to the contractor.
51. Clause 18 speaks about the responsibility for performance of contract, which says that the Contractor shall be responsible for the due and faithful performance of the Work Order in all respects according to the intent and meaning of the drawings, specifications and all other documents referred to in this Work Order. For ready reference clause 18.1 is quoted as under:
18.0 RESPONSIBILITY FOR PERFORMANCE OF CONTRACT 18.1The Contractor shall be responsible for the due and faithful performance of the Work Order in all respects according to the intent and meaning of the drawings, specifications and all other documents referred to in this Work Order. Any approval which MECON/SAIL-DSP/ CET may have given in respect of the order shall not bind MECON/SAIL DSP/ CET and notwithstanding any approval or acceptance given by MECON/SAIL DSP/CET. It shall be lawful for MECON to reject the work at site, if it is found that the materials used by the Contractor are not in conformity with the terms and conditions of the Work Order in all respects.
52. Further, the work order also contains an arbitration clause under Clause 36. Clause 36.1.1 says that in the event of any dispute or difference relating to 17 interpretation and application of the provisions of Contract between the Contractor& MECON, such dispute or difference shall be taken by either party for resolution through Administrative Mechanism for Resolution of CPSEs Disputes (AMRCD) as mentioned in DPE OM no:4(1)/2013-DPE(GM)/FTS-1835 dated 22.05.2018. Clause 36.2.1 says that any disputes, differences, whatsoever, arising between the parties out of or relating to the contraction meaning, scope, operation or effect of this Order shall be settled between MECON and the Contractor amicably. If, however, the MECON and the Contractor are not able to resolve their disputes / differences amicably as aforesaid, the said disputes / differences shall be settled by Arbitration in accordance with the Rules of Arbitration and the award made in pursuance thereof shall be binding on the parties. Conciliation shall be resorted to prior to invoking Arbitration. For ready reference, Clause 36, the Arbitration clause is quoted as under:
"36.0 ARBITRATION 36.1 For PSUs 36.1.1 In the event of any dispute or difference relating to interpretation and application of the provisions of Contract between the Contractor & MECON, such dispute or difference shall be taken by either party for resolution through Administrative Mechanism for Resolution of CPSEs Disputes (AMRCD) as mentioned in DPE OM no:4(1)/2013-DPE(GM)/FTS-
1835 dated 22.05.2018. The place of arbitration shall be New 18 Delhi and the language to be used in Arbitration proceeding shall be English.
36.1.2 During the pendency of the Arbitration proceedings both the parties shall continue to perform their contractual obligations, 36.2 For other than PSUs 36.2.1 Any disputes, differences, whatsoever, arising between the parties out of or relating to the contraction meaning, scope, operation or effect of this Order shall be settled between MECON and the Contractor amicably. If, however, the MECON and the Contractor are not able to resolve their disputes / differences amicably as aforesaid, the said disputes / differences shall be settled by Arbitration in accordance with the Rules of Arbitration and the award made in pursuance thereof shall be binding on the parties. Conciliation shall be resorted to prior to invoking Arbitration. Work under this Order shall be continued by the Contractor during the Arbitration proceedings unless otherwise directed in writing by MECON or unless matter is such that the work cannot possibly be continued until the decision of the arbitrator is obtained. 36.2.2 The arbitration shall be governed and regulated in all respect according to Laws of India.
36.2.3 The Arbitration proceedings shall be regulated and governed by Indian Arbitration and Conciliation Act 1996, or such modification thereof. The seat & venue of Arbitration proceeding shall be Ranchi.
36.2.4 This order including the Arbitration proceeding shall be governed by and interpreted in accordance with the laws of India and shall be subject to the exclusive jurisdiction of the courts of Ranchi."
53. It is evident from Clause 36 of the work order that it provides for dispute redressal mechanism stating specifically therein that the disputes / differences shall be settled by Arbitration in accordance with the Rules of Arbitration and the award made in pursuance thereof 19 shall be binding on the parties. Conciliation shall be resorted to prior to invoking Arbitration.
54. As per pleading available on record, it is evident that the respondent-contractor has accepted the work order and started the contractual work but the work having not been concluded as per the time schedule, and there was no improvement in the rate of progress/execution of works by the respondent, the petitioner-MECON terminated the work order vide letter dated 17.12.2021. Thereafter, the petitioner got the balance work under the work order executed by a third entity at a total basic price of Rs. 3,89,68,536/- as against the ‗Initial Total Contract Price' of Rs. 3,07,80,708/- plus overhead. Consequently, the petitioner vide letter dated 07.04.2022 raised its claim upon the respondent to the tune of Rs.81,87,828/- but the respondent did not pay it till date.
55. It is submitted that thereafter as per provisions of Clause 36.2.1, the petitioner vide letter dated 13.09.2022 requested the respondent for conciliation of the disputes but the respondent failed to take any action, therefore, the respondent issued notice invoking arbitration clause 36.2.1 vide letter dated 16.06.2023 proposing panel of three names from which the respondent was requested to nominate for appointment of sole arbitrator for resolution 20 of disputes between the parties but the respondent did not take any steps.
56. Hence, the present petition invoking the jurisdiction of this Court conferred under Section 11(6) of the Act, 1996, for appointment of arbitrator for resolution of dispute between the parties.
57. The respondent has raised the issue that the condition stipulated in the work order cannot be construed to be concluded contract, as such the arbitration clause even if it is available therein as Clause No. 36.0, cannot maintain the present application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 in absence of any formal contract between the parties.
58. Argument on merit of the issue has also been made.
59. This Court needs to refer herein so far merit of the case is concerned the same is not required to be taken into consideration at this stage by this Court reason being that this Court is exercising the power conferred under Section 11(6) of the Act, 1996 wherein the jurisdiction lies to the Court to appoint arbitrator only and any other issues on merit is to be considered in course of adjudication by the arbitrator, if appointed. 21
60. Herein, the issue has been raised that the work order cannot be said to be concluded contract and as such the instant application is not maintainable.
61. This Court, therefore, first is to consider the issue as to:
"Whether the work order containing certain conditions including arbitration clause can be said to be concluded contract in a case where the work order has been issued by the petitioner in terms of the decision taken by the tender committee in pursuance to the „Notice Inviting Tender‟ and the said work order has been accepted by the respondent-contractor by commencement of the work, as referred in the said work order?"
62. This Court, in order to answer the issue, needs to again go the factual aspect of the instant case.
63. The petitioner-MECON, for executing the work, invited bids for execution of works pertaining to ‗Civil Works for installation of 4th Stove in Blast Furnace No. 4 of SAIL, Durgapur Steel Plant, Durgapur', whereupon the respondent-contractor offered his candidature and participated in the tender process. The respondent- contractor, after going through the tender process emerged as L-1 tenderer, and as such was declared successful. Accordingly work order being Work Order No. 22 11.51.027U/Civil Works/Pkg. No. 001/9807 dated 04.10.2021 was issued by the petitioner in favour of respondent.
64. The said work order has been accepted by the respondent since the respondent has commenced the work in pursuance to the said work order. The said work order contains certain conditions including the arbitration clause at Clause No. 36 i.e., the dispute redressal mechanism. Clause 36.2 of the work order contains specific provision that in case of any dispute between the parties, the same shall be referred to for arbitration.
65. Further, Clause 36.2.1 of the work order speaks that any disputes, differences, whatsoever, arising between the parties shall be settled between parties amicably. If, however, the parties are not able to resolve their disputes/differences amicably as aforesaid, the said disputes/differences shall be settled by Arbitration in accordance with the Rules of Arbitration and the award made in pursuance thereof shall be binding on the parties. However, conciliation shall be resorted to prior to invoking Arbitration.
66. Fact about commencement of work has not been disputed by the respondent, since there is no averment to 23 that effect that work has not been commenced by the respondent-contractor.
67. The question, therefore, would be that in such circumstances where the work order issued by the petitioner has not been disputed rather it is being admitted as would appear from the conduct of the respondent-contractor that the work has commenced in pursuance to the said work order.
68. The moment the respondent has accepted the work order by commencement of the work in pursuance to the said work order dated 04.10.2021, according to the considered view of this Court it is not available for the respondent to take the ground that the same cannot be treated in the nature of concluded contract reason being that the document if being accepted it is to be accepted by the party in entirety and not in piecemeal.
69. It is settled principle of law that there cannot be ‗approbate and reprobate' meaning thereby the part of the document cannot be allowed to be accepted and part thereof cannot be allowed to be refused. Reference in this regard be made to the judgment rendered in the case of R.N. Gosain vs. Yashpal Dhir reported in (1992) 4 SCC 683 wherein at paragraph 10 which reads hereunder:
"10. Law does not permit a person to both approbate and reprobate. This principle is based on the doctrine of 24 election which postulates that no party can accept and reject the same instrument and that "a person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage". [See : Verschures Creameries Ltd. v. Hull and Netherlands Steamship Co. Ltd, Scrutton, L.J.] According to Halsbury‟s order (for example for the payment of costs) a party may be precluded from saying that it is invalid and asking to set it aside". (para 1508)"
70. In State of Punjab and Ors. vs. Krishan Niwas, AIR 1997 Supreme Court 2349 the Hon'ble Apex Court at paragraph-4 has laid down that once the employee has accepted the correctness of the order and then acted upon it, the same cannot be questioned by the concerned
71. It needs to refer herein that the Arbitration and Conciliation Act, 1996 defines arbitration agreement. As per Section 2(b) of the Act, 1996, the arbitration agreement will be said to be agreement as referred in Section 7 of the Act, 1996. Reference of Section 2(b) along with Section 7 of the Act, 1996 needs to refer herein which reads as under:
Section 2(b) "arbitration agreement" means an agreement referred to in section 7;
Section 7. Arbitration agreement.--(1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.25
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in--
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
72. It is evident from Section 7 of the Act, 1996 wherein certain criteria have been given considering the same to be an agreement within the meaning of Section 2(b) of the Act, 1996. The ‗Arbitration Agreement' has been defined under Chapter II of Section 7, which means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not; meaning the agreement will be said to be an agreement which if is in respect of legal relationship, whether contractual or not.
73. Sub-section (2) of Section 7 thereof stipulated that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a 26 separate agreement. Sub-Section (3) thereof provides that an arbitration agreement shall be in writing. Sub-section (4) thereof provides that an arbitration agreement is in writing if it is contained in-- (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
74. Sub-Section (5) of Section 7 stipulates that the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
75. It is evident from perusal of Section 7 sub-section 4(b) along with the word ―legal relationship‖ as provided under Section 7(1) that the legal relationship also establishes by way of exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement.
76. This Court, therefore, requires to consider what is the meaning of word ‗legal relationship' 27
77. For that, this Court is again delving into the factual aspect of the present case, from which it would be evident that the work order is issued on the basis of the decision taken by the tender committee which was constituted in pursuance to the ‗Notice Inviting Tender', in which the respondent was declared successful.
78. It is the respondent who has offered its candidature for consideration so that the work order be allotted to him, if he is found to be eligible in terms of the condition of NIT. The respondent after going through the tender process has emerged L-1 and has been declared successful and thereafter the decision has been taken by issuing the work order in favour of respondent. The issuance of the work order, after being successful in the tender process, will be said to have creation of legal relationship between the petitioner-MECON and respondent-contractor.
79. This Court is coming to such conclusion, that is of relationship between the petitioner-MECON and respondent-contractor is relationship, for the reason that process of entering into the relationship will be legal one when the work order has been issued in favour of the respondent after conclusion of process of tender and thereafter the respondent while accepting the terms and 28 conditions of the work order has commenced the proposed work also.
80. The matter would have been different, if the respondent would not have commenced the work in pursuance to the work order and at the outright work order was not accepted by the respondent but that is not the fact herein and if that would have been the situation then it could have been understood that no legal relationship has ever existed between the parties.
81. But herein the fact is otherwise since the respondents have accepted the work order meaning thereby the work order has been accepted by the respondent in entirety including the terms and conditions stipulated therein, in particular clause 36.0 which is the Arbitration Clause mentioned in the work order.
82. Section 7 sub-section 4(b) stipulates that an arbitration agreement is in writing if it is contained in exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement if the same will be read along with the definition of ‗legal relationship, the ground which has been taken on behalf of respondent that the condition stipulated having not been signed by the respondent will not be said to be concluded contract, is having no force, 29 reason being that in case of exchange of letters the bilateral relationship might be there but in a case of telex, telegrams or other means of telecommunication, which provide the record of agreement, there is no requirement of signature of the other side, exactly the case herein.
83. The moment the work order has been accepted by commencement of work by the respondent it is not available for the respondent to take the ground there is no signature on the work order, hence, the agreement cannot be said to be concluded agreement.
84. The moment the respondent has offered its candidature for allotment of work order in pursuance to Notice Inviting Tender and in furtherance thereto decision has been taken on his application on consideration by the petitioner after declaring the respondent to be successful bidder and work order has been issued thereafter then the same will in the same transaction and it will be the contract in between the petitioner and the respondent by virtue of issuance of work order incorporating certain condition including Clause No. 36 of arbitration.
85. The issue fell for consideration before the Hon'ble Apex Court in the case of Govind Rubber Limited Vs. Louis Drefus Commodities Asia Private Limited 30 [(2015) 13 SCC 477], wherein it has been held that a commercial agreement has to be construed according to sense and meaning as collected in a first place from the terms used and understood in the plain, ordinary and popular sense in order to effectuate the immediate intention of the parties. An agreement even if not signed by the parties can be spelt out from correspondence exchanged between the parties. However, it is the duty of the Court to construe correspondence with a view to arrive at the conclusion whether there was any meeting of mind between the parties which could create a binding contract between them and further it has been held that in order to constitute an agreement, it need not be signed by all the parties. For ready reference, the relevant paragraphs of the judgment are quoted as under:
"12. There may not be any dispute with regard to the settled proposition of law that an agreement even if not signed by the parties can be spelt out from correspondence exchanged between the parties. However, it is the duty of the court to construe correspondence with a view to arrive at the conclusion whether there was any meeting of mind between the parties which could create a binding contract between them. It is necessary for the court to find out from the correspondence as to whether the parties were ad idem to the terms of contract.
13. It is equally well settled that while construing an arbitration agreement or arbitration clause, the courts have to adopt a pragmatic and not a technical approach. In Rukmanibai Gupta v. Collector [(1980) 4 SCC 556] , this Court held that:
(SCC p. 560, para 6) 31 "6. Arbitration agreement is not required to be in any particular form. What is required to be ascertained is whether the parties have agreed that if disputes arise between them in respect of the subject-matter of contract such dispute shall be referred to arbitration, then such an arrangement would spell out an arbitration agreement."
14. So far as the first contention made by the learned counsel for the appellant that since the appellant did not sign the agreement, it cannot be said to be a party to the agreement, we would like to refer Section 7 of the Arbitration and Conciliation Act, which reads as under:
7.Arbitration agreement.--(1) In this Part, „arbitration agreement‟ means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in--
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract."
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15. A perusal of the aforesaid provisions would show that in order to constitute an arbitration agreement, it need not be signed by all the parties. Section 7(3) of the Act provides that the arbitration agreement shall be in writing, which is a mandatory requirement. Section 7(4) states that the arbitration agreement shall be in writing, if it is a document signed by all the parties. But a perusal of clauses (b) and (c) of Section 7(4) would show that a written document which may not be signed by the parties even then it can be arbitration agreement. Section 7(4)(b) provides that an arbitration agreement can be culled out from an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement.
16. On reading the provisions it can safely be concluded that an arbitration agreement even though in writing need not be signed by the parties if the record of agreement is provided by exchange of letters, telex, telegrams or other means of telecommunication. Section 7(4)(c) provides that there can be an arbitration agreement in the exchange of statements of claims and defence in which the existence of the agreement is alleged by one party and not denied by the other. If it can be prima facie shown that the parties are at ad idem, then the mere fact of one party not signing the agreement cannot absolve him from the liability under the agreement. In the present day of e-commerce, in cases of internet purchases, tele purchases, ticket booking on internet and in standard forms of contract, terms and conditions are agreed upon. In such agreements, if the identity of the parties is established, and there is a record of agreement it becomes an arbitration agreement if there is an arbitration clause showing ad idem between the parties. Therefore, signature is not a formal requirement under Section 7(4)(b) or 7(4)(c) or under Section 7(5) of the Act.
86. Therefore, this Court, taking into consideration the discussion made hereinabove and law laid down by Hon'ble Apex Court in the case of Govind Rubber Limited Vs. Louis Drefus Commodities Asia Private 33 Limited (supra), is of the view that what has been argued on behalf of respondent by taking the ground that arbitration clause as contained in the work order cannot be construed to be an agreement since it is not a concluded one, is not sustainable for the reasons aforesaid, accordingly the same is rejected.
87. The issue formulated by this Court on the basis of pleading made by the parties is answered against the respondent and it is hereby held that the work order issued by the petitioner in favour of the respondent, who had already commenced the proposed work based upon the said work order, is concluded contract.
88. This Court, after having discussed the issue is in detail, as hereinabove, is of the view that it is a case where the application filed under Section 11 (6) of the Act, 1996 is held to be maintainable.
89. Now, the second question which arises for consideration is as to:
Whether the mechanism, as provided under Clause 36 of the work order has properly been followed before taking recourse of provision of Section 11(6) of the Act, 1996 or not?
90. It is evident from clause 36.2.1 of the work order that any disputes, differences, whatsoever, arising between the parties out of or relating to the contraction meaning, 34 scope, operation or effect of this Order shall be settled between MECON and the Contractor amicably. If, however, the MECON and the Contractor are not able to resolve their disputes / differences amicably as aforesaid, the said disputes / differences shall be settled by Arbitration in accordance with the Rules of Arbitration and the award made in pursuance thereof shall be binding on the parties. Conciliation shall be resorted to prior to invoking Arbitration.
91. Clause 36.2 of the work order is specific that in case of any dispute between the parties, the same shall be referred to for arbitration.
92. This Court in the backdrop of aforesaid clause has again delve into the factual aspect and found therefrom that at clause 4.0, which speaks about completion schedule/time, wherein it has specifically been mentioned that Completion Schedule/ Time is one of the most important aspects of the work order and further the entire works as detailed in the Technical Specification shall be completed within 08 (eight) months from the date of work order.
93. But, as per pleading made in the writ petition, when the respondent-contractor failed to expedite the progress of the work in question and did not meet the targets, as agreed upon between the parties, sent several reminder 35 letters and vide letter dated 18.11.2021 as also ‗Notice of Negligence', as would be evident from Annexure 8 to the instant application. Consequently, a joint meeting was also convened on 26.11.2021 whereby revised dates for execution of works were agreed upon by the parties, as would be evident from minutes of meeting dated 26.11.2021, annexed a Annexure 10 to the instant application.
94. It is the case of the petitioner that even thereafter, the respondent did not adhere to the time schedule and honor the commitment given by the respondent, as such several request/warning letters were given for completion of work, annexed as Annexure 12 to the application. Thereafter, it is stated that inspection was done by the petitioner of the site and it was found that no work is being carried out by the respondent, as such the petitioner terminated the work order, which was communicated to the respondent vide letter of termination order dated 17.12.2021 [Annexure 17 to the instant application] and got the balance work executed by a third entity third entity at a total basic price of Rs. 3,89,68,536 as against the ‗Initial Total Contract Price' of Rs. 3,07,80,708/- plus overhead.
95. Consequently, the petitioner vide letter dated 07.04.2022 raised its claim upon the respondent to the 36 tune of Rs.81,87,828/- and a claim letter dated 07.04.2022 has been sent by the petitioner to the respondent, as would be evident from Annexure 19 to the instant application.
96. It appears that the petitioner vide letter dated 13.09.2022 requested the respondent contractor for conciliation of the disputes that has accrued between the parties as per Clause 36.2.1 of the work order but the respondent did not act in furtherance of the notice for conciliation issued under Clause 36.2.1 of the work order and no communication has been received by the respondent in this regard also.
97. The fact about making communication for the purpose of resolution of dispute through conciliation has not been disputed by the respondent in the counter affidavit rather the issue of work order being not treated as concluded agreement has mainly been raised, which this Court has answered hereinabove.
98. It is settled position of law that the condition stipulated in the work order/agreement is to be followed by both the parties and in case of non-observance of the conditions stipulated therein, which contains the arbitration clause, the party aggrieved shall have the right to take recourse of Arbitration and Conciliation Act, 1996.
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99. This Court, therefore, is of the view the recourse as available under Section 11(6) of the Arbitration and Conciliation Act, 1996 has been taken after exhausting the alternative dispute redressal mechanism i.e., the process of conciliation, as available under Clause 362.1.
100. Accordingly, the question, as formulated by the Court is answered.
101. This Court, from the discussions made hereinabove, deems it fit and proper to exercise the power conferred under Section 11(6) of the Act, 1996 and requires to pass order accordingly.
102. Accordingly, the instant Arbitration Application stands allowed.
103. However, for making suggestion of the name of the arbitrator by the parties, the matter is posted on 28.03.2025.
104. List this case on 28.03.2025 under appropriate heading.
(Sujit Narayan Prasad, J.) Later on 28.03.2025
1. This Court in course of argument has sought for name of the arbitrator by way of suggestion from the parties, upon which both the parties have suggested the 38 name of Hon'ble Mr. Justice Amitav Kumar Gupta (Retd.), High Court of Jharkhand to act as an Arbitrator.
2. Accordingly, this Arbitration Application stands disposed of by appointing Hon'ble Mr. Justice Amitav Kumar Gupta, Former Judge, High Court of Jharkhand, Ranchi, as Arbitrator for resolution of dispute.
3. Needless to say that the parties will be at liberty to raise all the legal issues for its consideration by the learned Arbitrator, in accordance with law.
4. Learned Registrar General of this Court is directed to send a copy of the entire records of this case along with entire order sheet with this order to the learned Arbitrator forthwith.
5. The instant arbitration application is allowed and accordingly, disposed of.
(Sujit Narayan Prasad, J.) Alankar / A.F.R. 39