Karnataka High Court
Shivaraj Kamshetty S/O Vishwanathappa vs The Commissioner on 3 March, 2023
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CMP No. 200002 of 2022
IN THE HIGH COURT OF KARNATAKA,
KALABURAGI BENCH
DATED THIS THE 3RD DAY OF MARCH, 2023
BEFORE
THE HON'BLE MR. JUSTICE C.M. JOSHI
CIVIL MISC. PETITION NO. 200002 OF 2022
BETWEEN:
SHIVARAJ KAMSHETTY
S/O VISHWANATHAPPA
AGED ABOUT 65 YEARS,
OCC: CLASS I CONTRACTOR,
R/O. HOSPET GALLI, BASAVAKALYAN,
DIST. BIDAR-585327.
...PETITIONER
(BY SRI AMEETH KUMAR DESHPANDE, SR. ADVOCATE
FOR SRI DESHPANDE G V., ADVOCATE)
AND:
THE COMMISSIONER
Digitally signed
by SOMANATH
KARNATAKA HOUSING BOARD,
PENTAPPA
MITTE CAUVERY BHAWAN, 4TH FLOOR,
Location: High
Court of
Karnataka
BENGALURU-560001.
...RESPONDENT
(BY SRI M. SUDHAKAR RAO, ADVOCATE)
THIS CIVIL MISC. PETITION IS FILED U/S. 11(6) OF THE
ARBITRATION AND CONCILIATION ACT PRAYING TO APPOINT
THE ARBITRATOR TO ADJUDICATE THE DISPUTE AS REFERRED
ABOVE AND ALL OTHER ALLIED DISPUTES BETWEEN THE
PETITIONER AND THE RESPONDENT HEREIN REGARDING THE
CLAIM OF THE PETITIONER.
THIS PETITION COMING ON FOR FURTHER HEARING ON
ADMISSION, THIS DAY, THE COURT MADE THE FOLLOWING:
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CMP No. 200002 of 2022
ORDER
1. Heard learned counsel appearing for the petitioner and learned counsel appearing for the respondent.
2. This petition has been filed under Section 11 of the Arbitration and Conciliation Act, seeking appointment of an Arbitrator to arbitrate the dispute that has arisen between the petitioner and the respondent.
3. The petitioner contends that he is a reputed Class-I Contractor having experience of more than 31 years and he has entered a Contract with the respondent for construction of Mini Vidhana Soudha at Surpur, pursuant to tender floated by the respondent. Being successful bidder in the said tender, he entered into an agreement for construction on 09.01.2008 and commenced work of construction of building. The period for construction was agreed to be 9 months from the date of handing over of the site and from time to time the petitioner submitted the running bills and written demand -3- CMP No. 200002 of 2022 of work bill on 17.01.2017, 13.12.2018, 31.01.2020, 10.03.2020 etc. It is contended that respondent did not pay the entire amount of bills submitted in addition to tax, GST etc., to the petitioner and non-payment of the amount allegedly stated to be due to the shortage of the revenue and also due to the requirements of the internal approvals. It is contended by the petitioner that the works which were completed by the petitioner were after due approval and despite the same, the bills amount was not paid. It is contended that on 15.05.2020, the petitioner finally issued a legal notice to the respondent requesting to pay the outstanding amount of Rs.1,34,51,374/- which was due as on 16.09.2011 and interest thereon at the rate of 24% per annum from 16-09-2011 upto 10-03-2020 to the tune of Rs.2,78,48,800/-, which resulted in a total due of Rs.4,13,00,174/-. It is contended that despite issuance of the notice, respondent did not pay the said amount and in the very same notice the petitioner had also invoked Cause-24 of the Special Conditions of Contract and called upon respondent to appoint an Arbitrator named in the -4- CMP No. 200002 of 2022 said notice. Despite receipt of the said notice, respondent neither paid the outstanding amount nor agreed to appoint the Arbitrator and therefore, the petitioner was constrained to file this petition seeking appointment of Arbitrator to adjudicate the arbitral dispute arisen between the parties.
4. On issuance of notice, respondent has appeared through its counsel and filed statement of objections. In the statement of objections respondent contended that the petitioner has suppressed the true and real facts and has made a false and baseless claim of Rs.4,13,00,174/-. It is also contended that the Agreement dated 09.01.2008 between the parties clearly mentions that "LUMPSUM FIXED PRICE NO VARIATION CONTRACT FOR CONSTRUCTION AND COMMISSIONING OF ALL THE WORKS WITH 2 YEARS DEFECT LIABILITY AND 2 YEARS MAINTENANCE PERIOD" is permitted and it is contended that the petitioner has not completed the works entrusted to him within the stipulated period and out of the total -5- CMP No. 200002 of 2022 construction amount of Rs.1,93,50,000/-, the respondent has paid a sum of Rs.1,87,81,000/- to the petitioner in spite of incomplete work. He has denied that the petitioner had completed all works including extra non- scheduled and excess works, though it did not form part of the agreement. It is also contended that the respondent has issued notice to the petitioner to complete all the works, but due to negligent attitude of the petitioner, he did not complete the work within stipulated period. He also contends that the Deputy Commissioner has also recommended to the respondent to terminate existing contract of the petitioner due to shoddy work. It is contended that as per Clause 24.1 of Section 5 of Conditions of the Contract, "the parties were entitle to refer to the arbitration within 30 days of the notification of the employer's decision and the employer's decision will be final and binding". Therefore, he contends that the present petition seeking the arbitration is false and baseless. Apart from that respondent has also tried to reply the claim made by the petitioner on the merits of -6- CMP No. 200002 of 2022 such claim, which are unnecessary at this stage. Lastly, it is contended that the petition is barred by time and therefore, the same is liable to be dismissed.
5. The provisions of Clause-24 of the Special Conditions of Contract, which is produced by the petitioner and admitted by the respondent at Annexure-B, reads as below:
"24. Procedure for resolution of Disputes:
24.1 If the Contractor is not satisfied with the decision taken by the Employer, the dispute shall be referred by either party to Arbitration within 30 days of the notification of the Employer's decision.
24.2 If neither party refers the dispute to Arbitration within the above 30 days, the Employer's decision will be final and binding.
24.3 The Arbitration shall be conducted in accordance with the arbitration procedure stated in the Special Conditions of Contract."-7- CMP No. 200002 of 2022
6. It is evident from bare reading of Clause-24 of the Contract that, if the Contractor is not satisfied with the decision taken by the employer, the dispute shall be referred to the Arbitrator by either of the parties to the contract within 30 days from the date of notification of the employer's decision.
7. The clause also encapsulates that, if neither of the parties refers dispute to the arbitration within 30 days, the employer's decision will be final and binding. Learned counsel appearing for the respondent has also placed on record a notice alleged to have been issued by it on 03.11.2010, whereby the petitioner was notified of the actions taken by the respondent. According to learned counsel appearing for the respondent, the respondent had communicated to the petitioner that by virtue of letter dated 03.11.2010, the termination of the contract and the entrustment of the left over works to the 3rd party at the cost and risk of the petitioner was communicated to the petitioner.
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8. Learned Senior Counsel appearing for the petitioner submits that the tenor of letter dated 03.11.2010 is a warning letter and it does not contemplate a specific termination of contract. It is submitted that the letter refers to a future action that would be taken by the respondent and therefore, the letter at Annexure-R4 cannot be termed as final decision of the employer in the matter as contemplated under Clause-24 of the agreement.
9. A perusal of the letter dated 03.11.2010 shows that, it is titled as 'final intimation letter' (CAwªÀÄ w¼ÀĪÀ½PÉ ¥ÀvÀ)æ and in the last paragraph of the letter, it is stated that "as mentioned in Part-II, Clause-53 of the general conditions of the contract the works entrusted under the tender would be taken back without any further notice and the balance work would be competed by taking suitable action at the cost and risk of the petitioner". It is evident from reading of the letter dated 03.11.2010 which is in Kannada that the work would be taken back without -9- CMP No. 200002 of 2022 further notice and the balance work would be entrusted to some other parties at the cost of the petitioner. In fact it refers to future action which would be taken by the respondent. The tenor of the letter did not specifically shows that the contract entered into between the parties has been terminated, since the petitioner did not complete the work even though the letter refers various action which had taken place and warning letter which has mentioned, it fails to convey of unequivocal intention of the respondent terminating contract. It is also pertinent to note that it does not mention anything about the refund of the security deposit etc., concerning to said tender/agreement. Therefore, I am unable to accept the contention of the learned counsel for the respondent that the letter dated 03.11.2010 unequivocally mention about the condition of termination of the contract between the parties and it convey a final decision of the respondent about the termination of the contract.
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CMP No. 200002 of 2022
10. Learned counsel appearing for the respondent has contended that within 30 days of the letter dated 03.11.2010, the petitioner has not invoked provisions of Cause-24 of the Special Conditions of Contract and therefore, the present petition is time barred and hit by Law of limitation. In this regard, he has placed reliance on the decision in the case of Secunderabad Cantonment Board vs. B. Ramachandraiah and Sons,1 wherein it was held as below:
"20. Applying the aforesaid judgments to the facts of this case, so far as the applicability of Article 137 of the Limitation Act to the applications under Section 11 of the Arbitration Act is concerned, it is clear that the demand for arbitration in the present case was made by the letter dated 07.11.2006. This demand was reiterated by a letter dated 13.01.2007, which letter itself informed the Appellant that appointment of an arbitrator would have to be made within 30 days. At the very latest, therefore, on the facts of this case, time began to run on and from 12.02.2007. The Appellant's 1 (2021) 5 SCC 705
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laconic letter dated 23.01.2007, which stated that the matter was under consideration, was within the 30-day period. On and from 12.02.2007, when no arbitrator was appointed, the cause of action for appointment of an arbitrator accrued to the Respondent and time began running from that day. Obviously, once time has started running, any final rejection by the Appellant by its letter dated 10.11.2010 would not give any fresh start to a limitation period which has already begun running, following the mandate of Section 9 of the Limitation Act. This being the case, the High Court was clearly in error in stating that since the applications under Section 11 of the Arbitration Act were filed on 06.11.2013, they were within the limitation period of three years starting from 10.11.2020. On this count, the applications under Section 11 of the Arbitration Act, themselves being hopelessly time barred, no arbitrator could have been appointed by the High Court."
11. The learned counsel appearing for the petitioner contends that when the letter dated 03.11.2010 did not convey the termination of the contract or the final decision taken by the respondent, the petitioner kept on
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CMP No. 200002 of 2022approaching the respondent, but ultimately he issued a letter to the respondent on 15.05.2020 whereby he communicated that the project was executed and completed in all respects and handed over the possession of the building and even thereafter the respondent had not paid the entire outstanding amount. By the said letter, it had also communicated that he was constrained to initiate arbitration proceedings for recovery of the amount and as such, he also proposed a name of an Arbitrator. Obviously, the said notice was not replied by the respondent. It is submitted that when the letter dated 03.11.2010 by respondent did not communicate a final decision of the respondent, the date of the limitation for invoking the provisions of Section 11 of the Arbitration and Conciliation Act would commence from 15.05.2020. In this regard, he relied on the decision in the case of BHARAT SANCHAR NIGAM LTD. & ANR. Versus. M/S. NORTE NETWORKS INDIA PVT. LTD.,2 - rendered by 2 CIVIL APPEAL Nos.843-844/2021, arising out of SLP(C) No.1531-3/2021
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CMP No. 200002 of 2022the Apex Court, wherein, the Apex Court has analyzed the question of limitation normally raised in these matters. Para Nos.30 and 31 of the said decision read as below:
"30. Issue of Limitation: Limitation is normally a mixed question of fact and law, and would lie within the domain of the arbitral tribunal. There is, however, a distinction between jurisdictional and admissibility issues. An issue of 'jurisdiction' pertains to the power and authority of the arbitrators to hear and decide a case. Jurisdictional issues include objections to the competence of the arbitrator or tribunal to hear a dispute, such as lack of consent, or a dispute falling outside the scope of the arbitration agreement. Issues with respect to the existence, scope and validity of the arbitration agreement are invariably regarded as jurisdictional issues, since these issues pertain to the jurisdiction of the tribunal.
31. Admissibility issues however relate to procedural requirements, such as a breach of pre-arbitration requirements, for instance, a mandatory requirement for mediation before the commencement of
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arbitration, or a challenge to a claim or a part of the claim being either time-barred, or prohibited, until some pre-condition has been fulfilled. Admissibility relates to the nature of the claim or the circumstances connected therewith. An admissibility issue is not a challenge to the jurisdiction of the arbitrator to decide the claim."
12. It is pertinent to note that the Apex Court has identified two types of issues which would arise. An issue regarding the jurisdiction pertains to the power and authority of the Arbitrator to hear and decide the case and issues regarding admissibility relates to the procedural aspects such as pre-arbitration requirements contemplated under the agreement or otherwise. In the case on hand, the question that has been raised by the learned counsel for the respondent is regarding the limitation. The point that has been raised is whether the limitation has to be construed from the letter dated 03.11.2010 or whether the legal notice issued by the petitioner on 15.05.2020. An unequivocal decision of the respondent was not conveyed
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CMP No. 200002 of 2022in the letter dated 03.11.2010 as the letter says that the action would be taken in future. In Kannada the word used in the letter dated 03.11.2010 is "AiÀiÁªÀÅzÉà ªÀÄÄ£ÀÆìZ£ À É ¤ÃqÀzÉ »AzÀPÉÌ ¥ÀqA É iÀįÁUÀĪÀÅzÀÄ". Obviously the said averments speak of a future action that the respondent contemplates to take. Therefore, it is not possible for this Court to accept the contention of the respondent that the limitation commences from 03.11.2010 and therefore, the present petition filed under Section 11 of the Arbitration and Conciliation Act seeking appointment of an Arbitrator is time barred.
13. It is relevant to note that the limitation to approach the Court under Section 11 of the Arbitration and Conciliation Act, 1966, would commence when termination of the contract or the final decision or refusal to appoint Arbitrator is communicated to other party. Obviously the limitation is, 'three years' from the date of such communication. According to the learned counsel for the respondent, he has taken the final decision on 03.11.2010
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CMP No. 200002 of 2022and therefore, he vehemently argued that the present petition is barred by time.
14. In view of the discussion made supra and by interpreting and considering contents of letter dated 03.11.2010, I am unable to accept the contention that the said letter is a final decision taken by the respondent. In that view of the matter, I am unable to accede to the submission made by the learned counsel for the respondent that the present petition is hit by law of limitation.
15. In view of the fact that the arbitral dispute has been raised by the parties in furtherance of the contract and the contract contemplates appointment of an Arbitrator under, this Court is empowered to invoke the provisions of Section 11 and appoint an Arbitrator and permit the parties to approach the arbitration for redressal of their dispute.
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CMP No. 200002 of 2022
16. Learned counsel for the respondent submits that any of the Arbitrators under the panel formulated by this Court may be appointed as the Arbitrator.
17. Learned Senior Counsel appearing for the petitioner submits that he has already named an Arbitrator who happens to be a former District Judge and resides within the jurisdiction of this Court. Therefore, by consent of learned counsel for both the parties, Sri Arun Chaoudapurkar, retired District Judge is appointed as Arbitrator.
18. The order passed by this Court be communicated to the learned Arbitrator. Parties are directed to appear before the Arbitrator as soon as they receive communication in this regard.
19. Petition is disposed of accordingly.
Sd/-
JUDGE SBS LIST NO.: 1 SL NO.: 35