Madras High Court
M/S.Ivrcl Infrastructures And ... vs M/S.National Highways Authority Of ... on 24 January, 2011
Author: N.Kirubakaran
Bench: N.Kirubakaran
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 24/01/2011 CORAM THE HONOURABLE MR. JUSTICE N.KIRUBAKARAN CMA.(MD).No.669 of 2009 M/s.IVRCL Infrastructures and Projects Ltd., Having Registered Office at M22/3RT, Vijayanagar Colony, Hyderabad-500057, Andhrapradesh ... Appellant Versus 1.M/s.National Highways Authority of India Ltd., Represented by its Project Director, H.No.831/1, SBI First Colony Extension, Bye Pass Road, Madurai-625 016. 2.The Chief Vigilance Officer, M/s.National Highways Authority of India Ministry of Shipping, Road Transport and Highways, G-5 & 6, Sector 10, Awarks, New Delhi-110 075. 3.Scott Wilson India Private Limited, Represented by its Resident Engineer, Having their office at A-41, Ramabardan Street, Madurai-625 006. ... Respondents This Civil Miscellaneous Appeal is filed under Section 37(1) (a) of the Arbitration and Conciliation Act, 1996 against the fair and decreetal order dated 7.7.2009 made in Arbitration O.P.No.3 of 2009 on the file of the Principal District Judge, Madurai. !For Appellant ... Mr.Murari for M/s.Sarvabhuman Associates ^For Respondents ... Dr.R.Rajagopal :ORDER
This appeal has been preferred against the common order passed Ar.O.P.No.3 of 2009 and I.A.Nos.937 and 938 of 2009.
2. The facts of the case are as follows:
The appellant was awarded a contract for laying four lane road between Madurai and Kanyakumari KM-80 to KM-120. The letter of acceptance was issued on 20.4.2005. The agreement was entered into between the appellant and the first respondent on 12.8.2005. Pursuant to that the appellant proceeded to execute the work and is stated to have completed about 80% of the total value of the work as per the instructions given by the third respondent. There was a surprise visit of the site by the second respondent between 10th October and 13, October 2007 and collected samples from Bitumen were collected for testing. After 8 months, a show-cause notice dated 10.6.2008 was issued by the second respondent relating to the issue of process of bitumen and use of sub-standard bitumen. A reply was issued on 10.7.2008 and it was stated that the bitumen used in the execution of contract were not substandard. Subsequently, the third respondent through letter dated 11.7.2008 recommended to the first respondent to withhold a sum of Rs.3.09 crores from the appellants bill for the alleged use of substandard bitumen in the execution of contract. Therefore the first respondent withheld Rs.4,27,65,826/- from the appellants bill amount. In view of the that, the appellants moved the court under Section 9 of the Arbitration Act to safeguard its interest.
3. The respondent contested the matter stating that:
1) There is no jurisdiction for the court to entertain an application in view of prohibition under National Highways Authorities of India Act 1988.
2) NHAI Act is a special Act and a special machinery is provided for the relief under the Act.
3) In terms of Section 28 of the NHAI Act, 1988 no suit or proceedings can be allowed against the authority;
4) Any contravention of terms and conditions has to be brought out and redressed only as per the provisions of contract.
5) The vigilance cell, NHAI inspected site and found substandard bitumen of 80/100 was used instead of bitumen 60/70 as per the agreement.
6) The converted bitumen, when tested in the M/s. IOC's lab from where original bitumen was procured, failed in all the parameters.
7) The appellant neither objected for the recovery nor referred the matter under arbitration for Dispute Review Board under clause 67.1 of the contract agreement in the month of July 2008 and August 2008.
4. The civil court after hearing both the parties, held that:
a) Section 28(2) of the NHAI Act bars jurisdiction of the Civil Court and that the dispute with regard to use of substandard materials by the appellant cannot be decided by the civil court as the civil court has got no jurisdiction to entertain the same.
b) Under Section 2(i) ( e) of the Arbitration Act, the High Court alone has got jurisdiction.
c) Section 9 of the Arbitration and Conciliation Act would not confer jurisdiction on the civil court.
d) The intention of the government is to vest the jurisdiction on the higher forums, since the amount involved in the transaction is high.
Hence the civil court, on the ground of jurisdiction, returned the O.P. papers to be presented before the appropriate forum. The said order the civil court is being challenged before this court.
5. Learned counsel for the appellant submitted that the civil court committed error in returning the papers on the question of jurisdiction, especially when the court is clothed with powers under Section 9 of the Arbitration Act. Secondly he submitted that Section 28 of the NHAI Act cannot be a bar for the appellant to maintain Section "9" application under Arbitration Act. Thirdly, the civil court wrongly concluded that only the High Court has got jurisdiction. Fourthly, there is no bar for the civil court to entertain the application. Therefore he seeks for setting aside the order of the civil court.
6. On the other hand, learned counsel for the respondent supported the order of the civil court stating that:
1) The contractor used substandard quality bitumen,
2) the appellant did not object the recovery of money or refer the matter for Dispute Review Board under clause 67.1 of the contract agreement.
3) The appellant failed to avail alternative remedy by way of reference to Dispute Review Board.
4) The first respondent already appointed DRE and therefore the proceedings under Section 9 of the Arbitration Act are premature.
5) The bank guarantee of Rs.8.65 crores is only the guarantee for any lapse found at the time of completion of project and the present recovery is only for the amount already paid by the NHAI for the work done in which substandard bitumen was used.
6) The appeal proceedings are intended to bypass or override the provisions of the agreement.
7. Heard the rival contentions and perused the records. The only question before this Court is whether the civil court was right in returning the papers for want of jurisdiction.
8. The allegation against the appellant is that it used substandard bitumen for laying the road which was denied by the appellant. As stated above if the dispute arises, what is the course open to the appellant to get redressal? As per clause 67.1 of contract agreement, the party has to approach the Dispute Review Board which will give its recommendations. In case of dissatisfaction about the recommendations, arbitration proceedings are provided under clause 67.3 of the contract agreement.
9. As the amount was sought to be withheld for the alleged use of sub- standard bitumen the appellant approached the civil court seeking interim measures under Section "9" of the Arbitration and Conciliation Act, which reads as follows:
"Section-9. Interim measures, etc., by Court-- A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court:--
(i) for appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely--
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration-agreement;
(b) securing the amount in dispute in the arbitration;
( c) the detention, preservation or inspection of anyl property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorizing any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
10. It is evident from the above Section that any party can approach the civil court before or prior to arbitration proceeding and the same has been recognized by the Hon'ble Supreme Court in Sundaram Finance Limited NEPC India Limited reported in AIR 1999 Supreme Court 565. In this case there is an agreement, in which there is a provision for arbitration. According to the appellant, the dispute has already arisen. Section 9 application before the Civil Court is to safeguard its interest only. However, the Civil Court returned the papers on the question of jurisdiction holding that the arbitration and Conciliation Act confers jurisdiction only on the High Court and not on the Subordinate Civil Court.
11. To test the correctness of the Trial Court order regarding jurisdiction, this court has to consider Section 2(1) (e) of the Act. Section 2(1) ( e) of the Arbitration and Conciliation Act 1996 reads as follows:
"(e) "Court" means the principal civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal civil Court, or any Court of Small Causes"
The above Section specifically states that the Principal Civil Court of original jurisdiction in a District includes the high court in exercise of its original civil jurisdiction. The Trial Court which is the District Court, the Principal Civil Court of a particular district. A Division Bench of this Court in The State of Tamil Nadu rep. By the Superintending Engineer, Madurai and another vs. R.Sundaram and another reported in 2006 (1) CTC 178 held that under the provisions of The Arbitration and Conciliation Act 1996, "Court" means the District Court which is the Principal Civil Court in a District. When such is the position of law, there is no basis for the conclusion of the trial court that it has no jurisdiction to decide the issue. Therefore the conclusion reached by the civil court that Section 9 of the Arbitration and Conciliation Act will not confer jurisdiction on the civil court is fundamentally wrong and the said finding is liable to be set aside.
12. It was further held by the court below that civil court's jurisdiction is barred under Section 28(2) of the NHAI Act, 1988. Section 28 of the NHAI Act is extracted as follows:
" 28. Protection of action taken in good faith -(1) No suit, prosecution or other legal proceeding shall lie against the Authority or any member or officer or employee of the Authority for anything which is in good faith done or intended to be done under this Act or the Rules or regulations made thereunder.
(2)No suit, prosecution or other legal proceeding shall lie against the Authority or any member or officer or employee of the Authority for any damage caused (3) or likely to be caused by anything which is in good faith done or intended to be done under this Act or the rules or regulations made thereunder"
13. The said section is only to give protection of action taken in good faith. Therefore the said Section cannot extended to bar the civil court's jurisdiction under Section 9 of the Arbitration and Conciliation Act. The National High Ways Authorities of India Act,1988 never overlapped with the arbitration and conciliation Act and therefore there is no question of any conflict or overriding of the other Act. When clause 67.3 of the agreement itself speaks about the resolution of dispute by way of arbitration as per the Arbitration and Conciliation Act 1996, the conclusion of the Trial Court that the civil court's jurisdiction under Section 28 of the NHAI Act is erroneous and the same is liable to be set aside. The other finding of the court that the intention of the government is to confer jurisdiction of the higher forum, since the dispute involves higher value has no basis.
14. In view of that, this court holds that:
1) Section 28 of the National High Ways Authorities of India Act 1988 does not bar the jurisdiction of the Civil Court to entertain Section 9 application under the Arbitration and Conciliation Act, 1996.
2) As per Sections 2(1) (e), 9, 34 and 36 of the Arbitration and Conciliation Act 1996, the Trial court has got jurisdiction to entertain an application under Section " 9 " of the Act.
3) The conclusion of the Civil Court that the High Court alone has got jurisdiction under Section 2 (1) (e) of the Act is erroneous. Therefore return of petition for presentation before appropriate forum is set aside. In view of the above reasoning, the civil court should not have returned the papers without deciding the matter on merits. In this case, the dispute has already arisen. As per clause 67.1 of the contract agreement, the parties have approached the Dispute Review Board. Irrespective of the out come of the Board proceedings, the out come would only be recommendatary in nature as seen in Clause 67.1 of the contract. Moreover the Board has got no power to grant interim orders.
Therefore, the appellant rightly approached the civil court under Section " 9 "
of the Act for interim relief As per Section 9, the civil court has to entertain the application and decide the matter on merits. The Civil Court after considering prima facie case, balance of convenience granted interim order and therefore the same order is required to be continued till the disposal of Section 9 application.
15. In view of the above reasonings, the Civil Court should not have returned the papers without deciding the matter. In this case, the dispute has already arisen. As per clause 67.1 of the contract agreement it is stated that the parties have approached the Dispute Review Board for settlement irrespective of the out come of the Board proceedings, it is seen from the contract that the out come would only be recommendatory in nature as seen in Clause 67.1 of the contract. After Review Board proceedings, the parties are liberty to go for arbitration. Moreover the Board has got no power to grant interim orders. Till that time the parties' rights are to be safeguarded as per law. Therefore the appellant rightly approached the civil court under Section "9" of the Act for interim relif, as the 1st respondent recommended withholding of Rs.3.07 crores from the appellant's bill through letter dated 11.6.2008. The Civil Court after considering prima facie case, balance of convenience granted interim order in this matter. The interim order granted by the Civil Court is as follows:
"1. The 1st respondent is a liberty to work out the amount to be recovered.
2. Such amount is to be intimated to the petitioner.
3. The 1st respondent is injuncted from recovering such amount from the bill to be forwarded by the petitioner for the period ending 30th April 2009.
4. The petitioner is also directed to approach the Dispute Review Board or Arbitration Tribunal on or before 15.6.2009 with repect to the amount quantified as recoverable or with respect to any other dispute.
5. The 1st respondent is also injuncted from recovering such amount for the period ending 31st May 2009 without further notice to the petitioner."
Therefore the same order is required to be continued till the disposal of Section 9 application.
16. Therefore without going into merits of the case, this court directs the Trial Court to entertain the application and decide the matter on merits as per law as expeditiously as possible. Till the matter is decided the interim order as granted by the trial court will be in force.
17. With the above, the appeal is allowed. No costs.
vk/gsr To Principal District Judge, Madurai.