Gujarat High Court
Royal Infra Engineering Pvt. Ltd vs Bagasara Nagarpalika Through Chief ... on 16 June, 2023
Author: A. J. Desai
Bench: A. J. Desai
C/ARBI.P/33/2022 ORDER DATED: 16/06/2023
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/PETN. UNDER ARBITRATION ACT NO.33 of 2022
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ROYAL INFRA ENGINEERING PVT. LTD.
Versus
BAGASARA NAGARPALIKA THROUGH CHIEF OFFICER
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Appearance :
PARAS K SUKHWANI for the Petitioner.
MR RUTVIJ OZA FOR MS POONAM M MAHETA for the Respondent No.1
NOTICE SERVED for the Respondent No.2.
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CORAM:HONOURABLE THE ACTING CHIEF JUSTICE MR.
JUSTICE A. J. DESAI
Date : 16/06/2023
ORAL ORDER
1. By way of the present petition preferred under Section 11 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as 'the Arbitration Act'), the petitioner has prayed to appoint an Arbitrator to resolve the disputes arose between the parties with regard to Agreement dated 10.8.2017 which was executed between the respondent and the petitioner in pursuance of Tender Notice dated 15.5.2017 by which the bids were invited for construction work of Cement Concrete Road with (Tri-Mix) at various area of Bagasara, Dist. Amreli.
2. In response to the notice issued by this Court, the respondent has appeared through learned advocate Mr. Rutvij Oza and filed affidavit-in-reply and opposed the present application. The petitioner has also filed affidavit-in-rejoinder.
3. Mr. Sukhwani, learned advocate appearing for the Page 1 of 6 Downloaded on : Tue Jun 20 20:37:21 IST 2023 C/ARBI.P/33/2022 ORDER DATED: 16/06/2023 petitioner would submit that in pursuance to the Tender issued by the respondent Nagarpalika for the above mentioned work, Agreement dated 10.8.2017 came to be executed between the parties. Thereafter, dispute arose between the parties and hence, by notice dated 21.12.2021, the petitioner has called upon the respondent to pay Rs.2,32,24,897.40 together with interest @ 18% p.a. from due date till its realization or to appoint an Arbitrator for resolving the disputes between the parties. However, the same was not replied by the respondent. Hence, the petitioner was left with no other alternative but to prefer the present petition.
3.1. Mr. Sukhwani would submit that as per Condition No.35 of the Tender offer, which is in vernacular language, the President of the respondent Nagarpalika or any person appointed by him can decide the disputes between the parties under the provisions of Indian Arbitration Act, 1940. However, he would submit that as per Section 12 (5) of the Arbitration & Conciliation Act, 1996, the President being in control of the Nagarpalika cannot act as Arbitrator. He would further submit that when Agreement was executed between the parties on 10.8.2017, a specific condition being Condition No.29 was incorporated stating that all the conditions of the tender notice shall be treated as part of the agreement recorded on that date and, therefore, Arbitrator is required to be appointed to resolve the disputes between the parties.
He would further submit that as per sub-Section (5) of Section 12 of the Arbitration Act, any person whose relationship with the parties or counsel or the subject matter of the dispute which may fall under any of the categories specified in 7th Page 2 of 6 Downloaded on : Tue Jun 20 20:37:21 IST 2023 C/ARBI.P/33/2022 ORDER DATED: 16/06/2023 Schedule to the Act, cannot be appointed as an Arbitrator. In support of this submission, he has relied upon the decision dated 25.2.2022 of this Court rendered in the case of Bhagwati Construction v. Western Railway, Arbitration Petition No.89 of 2019. By taking me through the said decision, he would submit that this Court has interpreted Section 12 (5) of the Arbitration Act by referring various decisions of the Hon'ble Apex Court and, therefore, the present petition may be allowed and the Retired Judge of this Court may be appointed as the Sole Arbitrator.
With reference to the specific contention raised by learned advocate appearing for the respondent that there is no condition in the Tender offer as well as in the Agreement dated 10.8.2017 for appointment of Arbitrator, Mr. Sukhwani would submit that the said contention cannot be accepted since it has been specifically stated in Condition No.29 of the Agreement dated 10.8.2017 that all conditions incorporated in the tender notice shall be treated as part of the Agreement dated 10.8.2017. In support of this submissions, Mr. Sukhwani has relied upon the decision of the Hon'ble Supreme Court in the case of Inox Wind Limited v. Thermocables Limited, (2018) 2 SCC 519.
4. On the other hand, Mr. Rutvij Oza, learned advocate appearing for the respondent has opposed this petition and would submit that in the Agreement dated 10.8.2017, there is no specific condition mentioned for appointment of Arbitrator and, therefore, the present petition may be dismissed. He has also taken me through certain factual aspects of the disputes between the parties. He, however, would submit that if this Court accepts the present petition, then any Retired Judge of the District Court may be Page 3 of 6 Downloaded on : Tue Jun 20 20:37:21 IST 2023 C/ARBI.P/33/2022 ORDER DATED: 16/06/2023 appointed as an Arbitrator.
5. I have heard learned advocates appearing for the respective parties and perused Condition No.35 of the Tender offer which deals with Arbitration clause and Condition No.29 of the Agreement dated 10.8.2017 which specifically states that all the conditions of the tender offer shall be treated as part of the Agreement and, therefore, in my opinion the submission made by learned advocate appearing for the respondent that there is no condition in the Agreement dated 10.8.2017 with regard to appointment of Arbitrator cannot be accepted.
6. It has been categorically held by the Hon'ble Apex Court in the case of Inox Wind Limited (Supra) that a general reference to a standard form would be enough for incorporation of the arbitration clause. Paragraph 18 of the said decision reads as under :-
"18. We are of the opinion that though general reference to an earlier contract is not sufficient for incorporation of an arbitration clause in the later contract, a general reference to a standard form would be enough for incorporation of the arbitration clause. In M.R. Engineers this Court restricted the exceptions to standard form of contract of trade associations and professional institutions. In view of the development of law after the judgment in M.R. Engineers' case, we are of the opinion that a general reference to a consensual standard form is sufficient for incorporation of an arbitration clause. In other words, general reference to Page 4 of 6 Downloaded on : Tue Jun 20 20:37:21 IST 2023 C/ARBI.P/33/2022 ORDER DATED: 16/06/2023 a standard form of contract of one party will be enough for incorporation of arbitration clause. A perusal of the passage from Russell on Arbitration 24th Edition (2015) would demonstrate the change in position of law pertaining to incorporation when read in conjunction with the earlier edition relied upon by this Court in M.R. Engineers' case. We are in agreement with the judgment in M.R. Engineer's case with a modification that a general reference to a standard form of contract of one party along with those of trade associations and professional bodies will be sufficient to incorporate the arbitration clause."
7. As far as appointment of President of the Nagarpalika as Arbitrator as observed in Condition No.35 of the Tender offer is concerned, in view of Section 12 (5) of the Arbitration Act, he cannot be appointed as an Arbitrator. Section 12 (5) of the Arbitration Act reads as under :-
"12. Ground for challenge :-
(1) ...............
(2) ...............
(3) ...............
(4) ...............
(5) Notwithstanding any prior agreement to the
contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as Page 5 of 6 Downloaded on : Tue Jun 20 20:37:21 IST 2023 C/ARBI.P/33/2022 ORDER DATED: 16/06/2023 an Arbitrator."
8. From the perusal of the above referred sub-Section, in my opinion, President of the Nagarpalika would be in direct relation with the management and, therefore, he cannot be appointed as an Arbitrator to resolve the dispute between the parties. Hence, the submission made on behalf of the petitioner is accepted.
9. In the result, the present petition succeeds and is allowed. Hon'ble Ms. Justice Harsha Devani, Retired Judge of this High Court is hereby appointed as the Sole Arbitrator to resolve the disputes between the parties. It is made clear that no opinion is expressed with regard to the rival claims and contentions of both parties are kept open to be agitated before the Arbitral Tribunal. No orders as to costs. Registry to communicate this order to the sole Arbitrator forthwith by Speed Post. It would be open for the parties to avail the facilities available at the Arbitration Center, High Court of Gujarat.
(A. J. DESAI, ACJ) SAVARIYA Page 6 of 6 Downloaded on : Tue Jun 20 20:37:21 IST 2023