Bombay High Court
Rail India Technical And Economic ... vs The Director, M/S. Ujjani Highways Pvt. ... on 15 September, 2017
Author: S.B. Shukre
Bench: S.B. Shukre
(Judgment) 1509 MCA 243-2017 1/13
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH AT NAGPUR.
MISC. CIVIL APPLICATION NO. 243/2017
Rail India Technical and Economic Services
(RITES Ltd.),
(Scheduled - A Enterprises of Govt. of India)
Through it's General Manager,
RITES Bhavan, Kadbi Chowk, Nagpur. APPLICANT
.....VERSUS.....
The Director,
M/s. Ujjani Highways Pvt. Ltd.,
"Vidyadeep" 15/3, Manorama Ganj,
Indore (Madhya Pradesh) 452001. NON-APPLICANT
Shri Nitin P. Lambat, counsel for applicant.
Shri Rahul D. Dhande, counsel for non-applicant/respondent.
CORAM: S.B. SHUKRE, J.
DATE : SEPTEMBER 15, 2017.
ORAL JUDGMENT :
Heard.
2] Rule. Rule made returnable forthwith.
3] Heard finally by consent. ::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 2/13 4] In the instant case, there is a serious dispute
regarding existence of arbitration clause in the agreement dated 22/07/2014 executed between the parties. By this agreement, the respondent engaged consultancy services of the applicant for supervision of road overbridge. A dispute arose between the parties regarding payment of various bills raised by the applicant for the consultancy services offered to and availed of by the respondent. According to the applicant, such dispute was arbitrable as per the arbitration clause and also it issued a notice dated 16/08/2016 to the respondent calling upon it to either make the payment of the bills or refer the dispute for arbitration. However, reply that was sent by the respondent to the applicant, was in the negative. Therefore, this application has been filed by the applicant and now dispute has been raised by the respondent about existence of arbitration clause. 5] According to Shri Lambat, learned counsel for applicant, arbitration clause, clause (10) of the agreement dated 22/07/2014, is clear enough and it makes dispute between the parties as arbitrable, which is ::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 3/13 however, not agreed to by Shri Dhande, learned counsel for the respondent. According to him, the Hon'ble Supreme Court in it's various cases has interpreted a similar clause and held that, "The clause makes the dispute as inarbitrable and therefore, only Civil Court will have the jurisdiction". He has placed his reliance upon the following cases.
(i) Eastern Coalfields Ltd. -Vs- Sanjay Transport Agency and another, 2009(8) Scale 720.
(ii) Northern Coalfields Ltd. -Vs- Heavy Engineering Corporation Ltd. and another, 2016(8) SCC 685.
(iii) Saipem Triune Engineering Pvt. Ltd. -Vs- Indian Oil Petronas Pvt. Ltd., 2011 DGLS (Del.) 4782.
(iv) Engineering Projects (India) Ltd. -Vs- Steel Authority of India Ltd., 2017 DGLS (Del.) 248. 6] As there has been a difference of opinion between the parties regarding existence or otherwise of the arbitration clause, it would be useful for us to reproduce the arbitration clause contained in the agreement dated 22/07/2014. It reads, thus : ::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 4/13
10.0 Arbitration :
If at any time any question, dispute on difference whatsoever shall arise between the M/s. UHPL and the RITES Ltd. with regard to or in relation to or in connection with the offer, whether during the progress of the work or after its completion, the provisions of Govt. of India, Ministry of Industry, Department of Public Enterprises Notification No. 3/5/93-PMA, dt. 30/06/1993 or its amendments for arbitration shall be applicable. This is reproduced as below:
"IN THE EVENT OF ANY DISPUTE OR DIFFERENCE RELATING TO THE INTERPRETATION AND APPLICATION OF THE PROVISIONS OF THE CONTRACTS, SUCH DISPUTE OR DIFFERENCE SHALL BE REFERRED BY EITHER PARTY TO THE ARBITRATION OF ONE OF THE ARBITRATIONS IN THE DEPARTMENT OF PUBLIC ENTERPRISES TO BE NOMINATED BY THE SECRETARY TO THE GOVT. OF INDIA, INCHARGE OF THE BUREAU OF PUBLIC ENTERPRISES. THE ARBITRATION ACT, 1940, SHALL NOT BE APPLICABLE TO THE ARBITRATION UNDER THIS CLAUSE. THE AWARD OF THE ARBITRATOR SHALL BE BINDING UPON THE PARTIES TO THE DISPUTE, PROVIDED HOWEVER, ANY PARTY AGGRIEVED BY SUCH AWARD MAY MAKE A FURTHER REFERENCE FOR SETTING ASIDE OR REVISION OF THE AWARD TO THE LAW SECRETARY, DEPTT. OF LEGAL AFFAIRS, MINISTRY OF LAW AND JUSTICE, GOVT. OF INDIA. UPON SUCH REFERENCE THE DISPUTE SHALL BE DECIDED BY THE SECRETARY WHEN SO AUTHORISED BY THE LAW SECRETARY, WHOSE DECISION SHALL BIND PARTIES FINALLY AND CONCLUSIVELY. THE PARTIES IN THE DISPUTE WILL SHARE EQUALLY THE COST OF ARBITRATION AS INTIMATED BY THE ARBITRATOR."
7] Before we proceed to consider the meaning and purport of the above referred arbitration clause, it would be necessary, at this stage, to take a note of the ::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 5/13 fact that the agreement dated 22/07/2014 has been entered into between the applicant and the respondent in the respective capacities as a public sector enterprise and a private party.
8] A bare perusal of the above referred arbitration clause would be enough for us to understand that any dispute or question or difference arising between the applicant and the respondent with regard to or in relation to or in connection with the offering of the consultancy services by the applicant to the respondent, has to be perforce referred by either of the parties to the arbitration of one of the Arbitrators in the Department of Public Enterprises to be nominated by Secretary to the Government of India, in-charge of the Bureau of Public Enterprises. The arbitration clause, no doubt, makes a reference to the provisions of Department of Public Enterprises notification dated 30/06/1993 in terms that whenever a dispute in connection with the contract or work orders arises between the parties to this agreement, the provisions of this notification shall be applicable, but at the same ::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 6/13 time, this clause also specifically reproduces the particular provisions of this notification which are made applicable to the dispute arising between the parties with regard to or in relation to or in connection with the consultancy services offered by the applicant. So, ultimately, what has to be seen in the present case, is not the entire notification dated 30/06/1993, but it's applicable provisions which are so specifically reproduced or incorporated in the arbitration clause (10) and I have already stated that this arbitration clause (10) makes a dispute between the parties arising in connection or in relation to the work orders as arbitrable.
9] The notice dated 16/08/2016 sent by the applicant to the respondent indicates that the dispute was raised by the applicant with the respondent and a demand was also made by the applicant for payment of it's bills mentioned in the notice. It is also seen from this notice that the applicant had made a request to the respondent that in case the respondent failed to make the payment, the applicant would invoke the arbitration clause and take an appropriate legal action. This notice ::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 7/13 was replied too, by sending a reply dated 08/09/2016 by the respondent. In para no.8 of the reply, it was stated that before any reference of the dispute was made to the Arbitrator, it was necessary that both the parties consult each other and decide the matter amicably. It was also stated that if the matter could not be resolved in this way, there would be a real arbitrable dispute warranting its referral to the arbitration. So, even the reply given by the respondent nowhere states that agreement does not contain any arbitration clause, rather the reply admits of its existence. The only rider placed in the reply was that arbitration would be inevitable only when mutual consultation failed. In the present case, it is not the stand of the respondent that there was any attempt at mutual consultation which failed eventually. It is also not the case of the respondent that the applicant was invited to mutual consultation, but the applicant refused to submit himself to any consultation process. This would mean that consultation process, which was to be resorted to first, as contended by the respondent, failed even before it began. Therefore, I am of the view that it can be reasonably inferred that there has been a failure ::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 8/13 of the mechanism provided for invoking the arbitration clause and appointment of Arbitrator. As such this Court will have to proceed in the matter in accordance with it's power under Section 11(6) of the Arbitration and Conciliation Act, 1996.
10] Coming to the case laws relied upon by the learned counsel for the respondent, with due respect, I may say that they would have no application to the facts of the instant case.
11] In the case of Eastern Coalfields Ltd. -Vs- Sanjay Transport Agency and another (supra), both the parties were not Public Sector Enterprises or Government Department. The arbitration clause in that case provided for reference to arbitration of a dispute which existed between the Departments of Public Sector Enterprises inter-se or between the Public Sector Enterprises and the Government Department. It did not envisage reference of a dispute to an arbitration, which was between a Public Sector Enterprise on the one hand and a private party on the other hand. Therefore, the ::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 9/13 Hon'ble Supreme Court held that, the dispute in that case would have to be decided by a Civil Court. 12] In the case of Northern Coalfields Ltd. -Vs- Heavy Engineering Corporation Ltd. (supra), the rival parties to the dispute were the Public Sector Enterprises. There was also a settlement of the dispute between them in terms of the permanent machinery for arbitration as early as in the year 1993-94. The date on which the dispute was referred to arbitration, the Committee on Dispute (COD) was already set up, but it's permission was not taken for reference of dispute for arbitration. The award made by the Arbitrator was not accepted by the appellant therein. The appellant therein filed a Civil Suit No. 1709/2000 claiming a declaration that the contracts were rendered null and void on account of the breach of clause (3) of the contract and further declaration that the respondent company was not entitled to claim any relief under those contract nor was respondent no.2 therein was entitled to do so and that the so-called Arbitral award was vitiated on the face of the record, and as such liable to be set aside. The plaint ::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 10/13 of the suit was rejected by the High Court on the ground that before the institution of the suit, permission from the Committee of Dispute was not obtained. The Hon'ble Supreme Court held that, although a direction given by the Apex Court in the case of ONGC Group of cases was made the basis by the High Court for rejecting the plaint, the direction could not have been understood to mean as though absence of permission of COD was a fatal defect, which was not. At the most, the suit could not have been proceeded for, so held the Hon'ble Supreme Court. These facts are entirely different from the facts in this case which are discussed earlier, and therefore, this case would have no application to the facts of the instant case.
13] In the case of Saipem Triune Engineering Pvt. Ltd. -Vs- Indian Oil Petronas Pvt. Ltd. (supra), the learned Single Judge of Delhi High Court relied upon the portion of ratio of case of Eastern Coalfields Ltd. -Vs- Sanjay Transport Agency and another (supra) to interpret Article-31 of the Format of agreement of Project Management Services and accordingly, it ::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 11/13 concluded that since one of the parties to the agreement was a Private Company, no reliance could be placed upon the arbitration clause, which provided for reference of dispute to arbitration only when the dispute was between the Public Sector Enterprises inter-se or in between Government Department and Public Sector Enterprises. In the present case there is an arbitration clause specifically providing for reference of dispute between the applicant and the respondent to the arbitration and these facts being different from the facts of the said case of Saipem Triune Engineering Pvt. Ltd.
-Vs- Indian Oil Petronas Pvt. Ltd. (supra), I do not think that it would provide any useful assistance to the defence of the respondent.
14] The case of Engineering Projects (India) Ltd. -Vs- Steel Authority of India Ltd. (supra), was about a dispute which had arisen between two Public Sector Enterprises, which is not a case here, and therefore, this case, in my humble opinion, would not be applicable to the facts of the present case. ::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 12/13 15] In the result, I find that this application deserves to be allowed and it is allowed accordingly. 16] The dispute between the parties shall be referred to the arbitration.
17] Both the parties may suggest the name of a Retired District Judge to be appointed as Arbitrator which name is mutual acceptable. They may file a pursis suggesting one or two name/s of a Retired District Judge from the panel of Arbitrators to be appointed as Arbitrator, within two weeks from the date of the order. 18] Both the parties shall deposit amount of Rs.10,000/- each, as processing fees within two weeks from the date of the order.
19] If the applicant fails to deposit amount of Rs.10,000/- within the stipulated time, this reference application shall stand dismissed without any reference to this Court.
::: Uploaded on - 20/09/2017 ::: Downloaded on - 21/09/2017 01:08:06 ::: (Judgment) 1509 MCA 243-2017 13/13 20] If the respondent fails to deposit amount of Rs.10,000/- within stipulated time, the respondent shall be liable to pay penal interest at the rate of 2% per month on the amount of Rs.10,000/-, which shall be payable by the respondent to the applicant, upon adjudication by the Arbitrator, irrespective of the result of the arbitration.
21] No costs.
22] Rule is made absolute in the above terms.
JUDGE
Yenurkar
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