Jammu & Kashmir High Court
M/S K.K.Enterprises vs Uoi.Th.Ministry Of Defence And Ors. on 7 March, 2014
HIGH COURT OF JAMMU AND KASHMIR
AT JAMMU
A.A. No.24/2012
Date of order: 07.03.2014
M/S K.K.Enterprises v. Union of India and ors.
Coram:
Hon'ble Mr. Justice M. M. Kumar, Chief Justice
Appearing counsel:
For the petitioner (s) : Mr.Anil Mahajan, Advocate.
For the respondent(s) : Mr. R.P.Jamwal, CGSC.
i) Whether to be reported
Press, Journal/Media : Yes.
ii) Whether to be reported in
Digest/Journal : Yes
__________________________________________________________________
1. This order shall dispose of three* arbitration applications
filed by the same petitioner against the same respondents.
However, the cause of action in each one of them emerges
from different contract agreements which necessitated filing of
three separate petitions under Section 11 of the Jammu &
Kashmir Arbitration and Conciliation Act, 1997.
2. Few undisputed facts taken from A.A. No.24/2012 may
first be noticed.
2.1. The petitioner is a duly approved contractor with Military
Engineering Service, Ministry of Defence Government of India
and is engaged in executing works of civil nature. The petitioner
was a successful bidder and on 10.10.2007 a contract was
allotted to it for a sum of Rs.8,92,405.57 which was for 'special
repairs to building No.P-11 & T-22 , Bikaner line at Domana'
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(AnnexureP-1). Accordingly contract agreement was executed
between respondents-Union of India through Garrison
Engineer, Jammu-respondent No.3 and the petitioner firm. The
general conditions of contract namely 'IAFW 2249' constituted
part and parcel of the contract agreement (Annexure P-2). The
initial date for completion of work fixed in the contract
agreement was 13.07.2008 and the same was later extended
upto 25.11.2008.
2.2. The petitioner claimed that as per the contract agreement
intimation was sent about completion of work through various
letters. It has been confirmed by the officers of the department
that the work was completed by the petitioner on 07.10.2008.
The completion certificate was issued by the department on
29.11.2008. These letters have been placed on record
(Annexure P-3 to P-5). As per the contract agreement, Chief
Engineer is the designated authority to appoint the arbitrator.
The petitioner submitted final bill claiming full payment but the
same became subject matter of disptue. A copy of letter dated
13.07.2012 was sent to respondent No.3 claiming that the work
was completed on 25.11.2008 and the bill has been paid on
18.08.2009. It has been brought to my notice during the course
of arguments that the final bill submitted by the petitioner did
not find complete approval of the respondents. A perusal of the
documents with the final bill shows that there are a number of
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items which have been scored off and there are
cuttings/omissions. Even the signature/counter signatures of
the contractor have been deleted. The aforesaid documents
have been placed on record and relied upon by the
respondents themselves. Signatures which have been encircled
at pages 15 and 18 clearly show that the signatures have been
cancelled by crossing the same. It is thus clear that final bill
submitted by the petitioner has not been fully honoured by the
respondents.
3. I have heard learned counsel for the parties and have
perused the record with their able assistance.
4. Mr. Mahajan, learned counsel for the petitioner has
argued that in terms of Clause 70 of the general conditions of
the contract namely IAFW 2249 all disputes between the
parties to the contract are required to be referred to the
arbitration of a engineer officer after written notice by either of
the party to the contract. In the face of the arbitration clause
which stands incorporated in the contract agreement and live
dispute between the parties it has been submitted that the
prayer made by the petitioner deserves to be accepted.
5. On the contrary, Mr. Jamwal learned counsel for the
respondents has vehemently argued that Clause 65 as
reproduced in Annexure R-5 of the objections creates a
complete bar for referring the dispute between the parties to the
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contract once the final bill has been submitted by the
contractor. According to Mr. Jamwal, the submission of the final
bill by the contractor itself results into operation of Clause 65,
which provides that no further claim could be made by the
contractor after submission of the final bill. According to the
learned counsel, any other claim is deemed to have been
waived and it would be extinguished.
6. Having heard learned counsel for the parties and
perusing the record I am of the considered view that two basic
conditions for making reference to arbitrator stand satisfied in
the present case. There is Clause 70 of the general conditions
of contract in the form of IAFW 2249 which provide for
arbitration in case of dispute between the parties. The aforesaid
Clause 70 stands incorporated in the contract agreement
executed between the parties as is evident from the copy of the
original contract agreement which has been placed on record
with CMA No.5/2013 filed in A.A. No.24/2012. The aforesaid
Clause 5(b) is set out below in extenso:-
"5. General conditions of contract, IAFW-2249 (1989
print) together with amendment No.1 to 15 and errata 1 to
20.
EEEEEEEEEEEE..
EEEEEEEEEEEE..
(a)EEEEEEEEEEE..
(b) To execute all the works referred to in the said
documents upon the terms and conditions contained or
referred to three-in and as detailed in the General Summary
on the subsequent page and to carry out each deviation as
may be order vide condition 7 of IAFW-2249, (upto a
maximum of 20 percent) and further agreed to refer all
disputes as required by condition 70 to the sole arbitrator of
an serving officer having degree in Engineering of equivalent
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or having passed final/direct final examination of Sub
Division II of Institution of surveyors (India) recognized by the
Govt. of India be appointed by Chief Engineer (or Officiating
Chief Engineer) Pathankot Zone Pathankot whose decision
shall be final conclusive and binding.
To be deleted where inapplicable."
7. A perusal of the aforesaid provision shows that the parties
have agreed to refer all disputes as per the requirement of
condition 70 to the sole arbitration of a serving officer having
degree in engineering or equivalent or having passed final
examination of Sub Division II of Institution of surveyors (India)
recognized by the Govt. of India. The arbitrator is to be
appointed by the Chief Engineer or Officiating Chief Engineer,
Pathankot Zone Pathankot whose decision is to be binding and
final.
The oft quoted clause 70 may also be set out below in
extenso, which reads thus:-
"70. Arbitration.--- All disputes, between the parties to the
Contract (other than those for which the decision of the
C.W.E. or any other person is by the Contract expressed to
be final and binding) shall, after written notice by either party
to the Contract to the either of them, be referred to the sole
arbitration of an Engineer Officer to be appointed by the
authority mentioned in the tender documents.
Unless both parties agree in writing such reference shall not
take place until after the completion or alleged completion of
the Works or termination or determination of the Contract
under Condition Nos. 55, 56 and 57 hereof.
Provided that in the event of abandonment of the Words or
cancellation of the Contract under Condition Nos.52, 53 or 54
hereof, such reference shall not take place until alternative
arrangements have been finalized by the Government to get
the Works completed by or through any other Contractor or
Contractors or Agency or Agencies.
Provided always that commencement or continuance of any
arbitration proceeding hereunder or otherwise shall not in
any manner militate against the Government's right of
recovery from the contractor as provided in Condition 67
hereof.
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If the Arbitrator so appointed resigns his appointment or
vacates his office or is unable or unwilling to act due to any
reason whatsoever, the authority appointing him may appoint
a new Arbitrator to act in his place.
The Arbitrator shall be deemed to have entered on the
reference on the date he issues notice to both the parties,
asking them to submit to him their statement of the case and
pleadings in defence.
The Arbitrator may proceed with the arbitration, exparte, if
either party, inspite of a notice from the Arbitrator fails to take
part in the proceedings.
The arbitrator may, from time to time with the consent of the
parties, enlarge, the time upto but not exceeding one year
from the date of his entering on the reference, for making
and publishing the award.
The Arbitrator shall give his award within a period of six
months from the date of his entering on the reference or
within the extended time as the case may be on all matters
referred to him and shall indicate his findings, along with
sums awarded, separately on each individual item of dispute.
The venue of Arbitration shall be such place or places as
may be fixed by the Arbitrator in his sole discretion.
The Award of the Arbitrator shall be final and binding on both
parties to the Contract."
8. A perusal of Clause 70 would show that all disputes
between the parties to the contract are to be referred to the sole
arbitration of a engineer officer to be appointed by the authority
mentioned in the tender document. It also cover certain other
situations which are not attracted to the facts of the present
case.
9. It has been claimed that the work was satisfactorily
completed by the petitioner on 25.11.2008. Such a claim is
evident from the perusal of letter dated 29.11.2008 sent under
registered post to the petitioner by respondent No.3 (Annexure
P-4). The petitioner has also complied with the conditions laid
down in Clause 70 of IAFW 2249 by sending a notice for
appointment of arbitrator on 13.07.2012 (Annexure P-6).
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However, arbitrator has not been appointed within the period of
30 days resulting in filing of the instant petition on 18.09.2012.
The respondents have failed to appoint the arbitrator till today.
Therefore, an independent arbitrator is to be appointed by this
Court as has been laid down by Hon'ble the Supreme Court of
India in Datar Switchgears Limited v. Tata Finance Ltd. and anr.
(2000) 8 SCC 151, of Punj Llyod Ltd. v. Petronet MHB Ltd. (2006) 2
SCC 638, Indian Oil Corporation Limited v. Raja Transport (P) Ltd.,
(2009) 8 SCC 520 and Deep Trading Corporation v. Indian Oil
Corporation and others, (2013) 4 SCC 35.
10. It is well settled that once there is a live dispute between
the parties and arbitration Clause exists between them then the
dispute is required to be referred to the arbitrator. In that regard
reliance may be placed on the observations of the Supreme
Court made in the cases of SBP & Co. v. Patel Engineering Ltd.
(2005) 8 SCC 618, National Insurance Co. Ltd. v. Boghara Polyfab (P)
Ltd., (2009) 1 SCC 267 and Omnia Technologies (P) Ltd. v. WMA Van
Loosbroek, (2011) 3 SCC 682.
11. The argument of Mr. Jamwal that Clause 65 creates bar
on the rights of the petitioner to seek reference after submission
of final bill has failed to impress me because Clause 65
contemplates that the contractor would be entitled to be paid
the final sum. In the present case the final bill submitted by the
contractor has been objected to by the respondents on many
counts and even the signatures on the final bill have been
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canceled by putting a line going over the signatures as is
evident from the perusal of Annexure R-4 at pages 15 and 18. It
is doubtful whether it could be claimed that there was a final bill
and secondly whether in the facts and circumstances of the
case said Clause 65 could be invoked. Admittedly the
petitioner-contractor has not been paid the whole amount
claimed in the final bill which as per Clause 65 he was entitled
to be paid. The judgment of Hon'ble the Supreme Court
rendered in the case of Union of India v. M/s Onkar Nath Bhalla and
Sons, (2009) 7 SCC 350 would also not be attracted to the facts of
the present case because in para 10 of the judgment their
Lordships of Hon'ble the Supreme Court have noticed that
there was no protest raised by the contractor with regard to the
payment made on the basis of the final bill nor any reservation
was reflected. It was in the aforesaid facts and circumstances
that rights of the contractor were deemed to have been waived
and there was no question of any pending dispute referable to
the arbitrator. In the present case the facts are entirely different.
The final bill infact has not been honoured by the respondents
and moreover signatures on the final bill have been cancelled
after crossing the same by putting a line across the signatures
by the contractor himself. Thus the judgment in the case of M/S
Onkar Nath Bhalla (supra) has no application to the case of the
petitioner.
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12. As a sequel to the above discussion, the prayer made by
the petitioner in all the three petitions is accepted. The
additional Chief Engineer in the office of Chief Engineer
Northern Command C/o 56 A.P.O. is appointed as arbitrator,
who shall enter the reference and proceed in accordance with
law. An intimation in that regard be sent to the Additional Chief
Engineer in the office of Chief Engineer Northern Command
C/o 56 A.P.O. under registered a/d cover along with copy of this
order. The petitioner shall be entitled to raise all claims before
the arbitrator which shall be decided in accordance with law.
13. All the three petitions stand disposed of.
(M. M. Kumar)
Chief Justice
Jammu,
07.03.2014
Vinod.
*
S.No. Case No. Title
1. A.A.No.24/2012, CMA M/S K.K.Enterprises v. Union of No.5/2014 India and ors.
2. A.A.No.25/2012, CMA M/S K.K.Enterprises v. Union of No.3/2014 India and ors.
3. A.A.No.26/2012, CMA M/S K.K.Enterprises v. Union of No.4/2014 India and ors.
(M. M. Kumar)
Jammu Chief Justice
07.03.2014.