Jharkhand High Court
Ms Architects Atelier Pvt Ltd Through ... vs Sido Kanhu Murmu University Dumka ... on 11 March, 2016
Equivalent citations: AIR 2017 (NOC) 685 (JHAR.), 2016 (3) AJR 693, (2016) 4 JCR 32 (JHA), (2016) 3 JLJR 404
Author: D.N.Patel
Bench: D.N. Patel
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Arbitration Application No. 18 of 2014
M/s Architects Atelier Pvt. Ltd. having its registered office at
SCO-8, Sector 17-E, Chandigarh, P.O. & P.S. Sector-17, town and
District Chandigarh (U.T)-160017 through one of its Director Shri
Satish Kumar Saini, son of Late Vidya Prakash Saini
... ... Applicant
Versus
Sido Kanhu Murmu University, Dumka, through its Registrar, P.O. &
P.S. Dumka Town & District Dumka
... ... Opp. Party
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CORAM: HON'BLE MR. JUSTICE D.N. PATEL
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For the Petitioner: Mr. Indrajit Sinha, Advocate For the Respondents: M/s M. Sohail Anwar, Sr. Advocate Anil Kumar, Advocate
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th 13/Dated 11 March, 2016
1. This arbitration application has been preferred under Section 11(6)
(c) of the Arbitration & Conciliation Act, 1996 mainly relying upon Section XI of the agreement (Annexure 2 to the memo of this arbitration application), which is an Arbitration Clause and upon the fact that Notice for appointment of Arbitrator was also given on 4th August, 2014 (Annexure 5 to the memo of this Arbitration application) and inspite of the said Notice the respondent authority is yet to appoint an arbitrator.
2. Counsel for the applicant submitted that the applicant, who is an Architect was appointed by the respondents and payment has not been made for the work done and therefore, Arbitration Clause No. XI incorporated in the agreement dated 26th May, 2005 entered into between the parties to this litigation (Annexure 2 to the memo of this arbitration clause) is invoked for the appointment of an Arbitrator and the applicant has no objection if any retired Hon'ble Judge of the Hon'ble Supreme Court is made an Arbitrator. It is further submitted that the amount claimed by this applicant runs into few crores.
3. Counsel for the respondent submitted that the Arbitration clause, which is referred to by the applicant is a non est clause as it refers to the Arbitration Act of the year 1940, viz. as the Arbitration Clause refers to Arbitration Act of 1940, the Arbitration Clause has no value in the eye of law. In this context the counsel for the respondent has relied upon a decision rendered by Hon'ble the Patna High Court in Rajan Kumar Verma and another v. Sachchidanand Singh reported in AIR 2006 Patna 1 and has submitted that such arbitration clause which refers to -2- Arbitration Act of 1940 can not be made operative. Thus, there is no arbitration clause in existence at all in the present case and hence, this application is not tenable at law.
Counsel for the respondent has also submitted that a First Information Report has been lodged against this appellant on 16th February, 2016, which is annexed with the second supplementary counter affidavit filed in this Arbitration Application. There are several allegations against this applicant. In this context, counsel for the respondent has also relied upon the decision rendered by the Hon'ble Supreme Court in N. RADHAKRISHNAN versus MAESTRO ENGINEERS AND OTHERS reported in 2010(1) SCC 72.
It is further submitted by the counsel for the respondent that agreement entered into by the parties was never proved by the syndicate of the respondent University and hence said agreement is also a non est agreement and therefore, the arbitration clause in question is not tenable at law. Moreover, the agreement dated 26th May, 2005 has also been cancelled by the respondent University and the resolution in question has also been referred to by the respondent and therefore, in view of the fact that neither the agreement nor the arbitration clause is in existence, this arbitration application may not be entertained by this court. In these contexts counsel for the respondent has also relied upon the decision rendered by this court in Brahmanand Farms and Research Centre Versus The State of Jharkhand reported in (2014)2 JCR 201 (Jhar).
Further, it has also been pointed out by the counsel for the respondent that without any work done by this applicant, a sizable amount to the tune of Rs.76, 61,000/- (approximately) has already been paid. Moreover, this applicant has also raised a bill of Approximately Rs. 4 crores.
4. Having heard counsel for both sides and looking to the facts and circumstances of the case, it appears that (I) An agreement dated 26th May, 2005 was entered into between the parties to this arbitration application (Annexure 2 to the memo of this arbitration application), which contains arbitration clause under Section XI. The said arbitration clause reads as under:
" SECTION XI : ARBITRATION All differences and disputes arising between the Employer and the architect on any matter connected 3 with the Agreement or in regard to the interpretation of the content there of shall be referred to the Arbitration of two persons, on appointed by each party. The Arbitrators shall, when necessary, appoint an umpire. Decision of the Arbitrators or the Umpire, as the case may be shall be final and binding on the parties.
The Arbitration will be governed by the provisions of the Indian Arbitration Act,1940 and its statutory Amendments in force."
(II) It appears that this applicant who is appointed as an Architect alleged that he has completed some work for which bills were raised and as the amount was not paid a notice was also given on 4th August, 2014 (Annexure 5 to the memo of this arbitration application) for appointment of an Arbitrator. (III) As the Arbitrator has not been appointed by the respondents this application has been preferred, which is opposed by the counsel for the respondent.
(IV) The contention raised by the respondent is that in the arbitration clause in question the Arbitration & Conciliation Act of 1940 has been referred to and therefore, Arbitration Clause is a non-est one.
This contention is not accepted by this court mainly for the reason that intention of the parties, looking to the arbitration clause, was to refer the matter to an arbitrator in case of any dispute between the parties arising out of the agreement in question, which is Annexure 2 to the arbitration application. Moreover, it has also been mentioned in the said clause that arbitration will be governed by the provisions of the Indian Arbitration Act, 1940 and its statutory amendments in force meaning there by that the provisions of Arbitration and Conciliation Act, 1996 will be applicable.
(V) It has been held by the Hon'ble Supreme Court in the case of JAGDISH CHANDER versus RAMESH CHANDER AND OTHERS reported in (2007)5 SCC 719 para 8 as under:
"8.This Court had occasion to refer to the attributes or essential elements of an arbitration agreement in K.K. Modi v. K.N. Modi, Bharat Bhushan Bansal v. U.P. Small Industries Corpn Ltd. and Bihar State Mineral 4 Development Corpn v. Encon Builders (I) (P) Ltd. In the State of Orissa v. Damodar Das this Court held that a clause in a contract can be construed as an "arbitration agreement" only if an agreement to refer disputes or differences to arbitration is expressly or impliedly spelt out from the clause. We may at this juncture set out the well settled principles in regard to what constitutes an arbitration agreement:
(i) The intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication and a willingness to be bound by the decision of such tribunal on such disputes, it is arbitration agreement. While there is no specific form of an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration. Where there is merely a possibility of the parties agreeing to arbitration in future, as contrasted from an obligation to refer disputes to arbitration, there is no valid and binding arbitration agreement.
(ii) Even if words "arbitration" and "Arbitral Tribunal (or arbitrator)" are not used with reference to the process of settlement or with reference to the private tribunal which has to adjudicate upon the disputes, in a clause relating to settlement of disputes, it does not detract from the clause being an arbitration agreement if it has the attributes or elements of an arbitration agreement. They are: (a) The agreement should be in writing. (b) The parties should have agreed to refer any disputes (present or future) between them to the decision of a private tribunal.(c) The private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it. (d) The parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them.
(iii) Where the clause provides that in the event of disputes arising between the parties, the disputes shall be referred to arbitration, it is an arbitration agreement. Where there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement. But where the clause relating to settlement of disputes, contains words which specifically exclude any of the attributes of an arbitration agreement or contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement. For example, where an agreement requires or permits an authority to decide a claim or dispute without hearing, or requires the authority to act in the interests of only one of the parties, or provides that the decision of the 5 authority will not be final and binding on the parties, or that if either party is not satisfied with the decision of authority, he may file a civil suit seeking relief, it cannot be termed as an arbitration agreement.
(iv) But mere use of the word "arbitration" or "arbitrator" in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration.
For example, use of words such as "parties can, if they so desire, refer their disputes to arbitration" or "in the event of any dispute, the parties may also agree to refer the same to arbitration" or "if any disputes arise between the parties, they should consider settlement by arbitration" in a clause relating to settlement of disputes, indicate that the clause is not intended to be an arbitration agreement. Similarly, a clause which states that "if the parties so decide, the disputes shall be referred to arbitration" or "any disputes between parties, if they so agree, shall be referred to arbitration"
is not an arbitration agreement. Such clauses merely indicate a desire or hope to have the disputes settled by arbitration, or a tentative arrangement to explore arbitration as a mode of settlement if and when a dispute arises. Such clauses require the parties to arrive at a further agreement to go to arbitration, as and when the disputes arise. Any agreement or clause in an agreement requiring or contemplating a further consent or consensus before a reference to arbitration, is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future.
(Emphasis supplied) (VI) It is further contended by the counsel for the respondent that a First Information Report has been lodged against this applicant on 16th February, 2016 and therefore also no arbitrator can be appointed.
This contention is also not accepted by this court mainly for the reason that the dispute cannot remain undecided by the arbitrator till the criminal proceedings are over. (VII) The agreement between the parties is of the year 2005. First Information Report is lodged in the year 2016, i.e. after approximately 11 years. Even the chargesheet has not been filed in this case and hence, this contention raised by the counsel for the respondent that as the criminal proceeding has been initiated this application may not be entertained is devoid of any merit and substance.
-6-(VIII) It has been held by Hon'ble the Supreme Court in SWISS TIMING LIMITED versus COMMONWEALTH GAMES 2010 ORGANISING COMMITTEE reported in (2014)6 SCC 677, paragraph 24 and 28 as under:
"24. Keeping in view the aforesaid observations made by this Court in Today Homes case, I see no reason to accept the submission made by the learned counsel for the respondents that since a criminal case has been registered against the Chairman of the Organising Committee and some other officials of the petitioner, this Court would have no jurisdiction to make a reference to arbitration
28. To shut out arbitration at the initial stage would destroy the very purpose for which the parties had entered into arbitration. Furthermore, there is no inherent risk of prejudice to any of the parties in permitting arbitration to proceed simultaneously to the criminal proceedings. In an eventuality where ultimately an award is rendered by the Arbitral Tribunal, and the criminal proceedings result in conviction rendering the underlying contract void, necessary plea can be taken on the basis of the conviction to resist the execution/enforcement of the award. Conversely, if the matter is not referred to arbitration and the criminal proceedings result in an acquittal and thus leaving little or no ground for claiming that the underlying contract is void or voidable, it would have the wholly undesirable result of delaying the arbitration. Therefore, I am of the opinion that the Court ought to act with caution and circumspection whilst examining the plea that the main contract is void or voidable. The Court ought to declined reference to arbitration only where the Court can reach the conclusion that the contract is void on a meaningful reading of the contract document itself without the requirement of any further proof."
(Emphasis supplied) In view of the aforesaid decision, if there is an arbitration clause and if there is a dispute which has arisen under the agreement in question and if inspite of notice given by the applicant for appointment of arbitrator, the respondent has not appointed an Arbitrator, then, even if criminal proceedings are pending, application preferred for appointment of an arbitrator is tenable at law.
(IX) Further contention raised by the counsel for the respondent is that the agreement which is entered into between the parties -7- has not been proved by the syndicate of the respondent University and hence such agreement does not exist in the eye of law at all.
This contention is also not accepted by this court mainly for the reason that when a contractor or architect is engaged and an agreement is entered into between the parties, rest of the procedure is to be followed by the respondent. Looking to Annexure 2 to the memo of this arbitration application, which is the agreement entered into between the applicant and the respondent University, it appears that the Registrar of the University has signed the said document. The agreement is dated 26th May, 2005, which was not cancelled for a very long period and ultimately on 18th October, 2014 this agreement has been cancelled by the respondents unilaterally. It is pertinent to mention here that even if an agreement entered into by the parties is cancelled unilaterally, the arbitration clause ought to be made operative. End of an agreement does not mean the end of the arbitration clause also. It is a wrong notion harboured by the respondent that if an agreement is cancelled unilaterally, the arbitration clause also comes to an end.
(X) It has been held by the Hon'ble Supreme Court in SWISS TIMING LIMITED versus COMMONWEALTH GAMES 2010 ORGANISING COMMITTEE reported in (2014)6 SCC 677, Para 21 as under:
"21. As noticed above, the attention of this Court was not drawn to the provision contained in Section 16 of the Arbitration Act, 1996 in N. Radhakrishnan. Section 16 provides that the Arbitral Tribunal would be competent to rule on its own jurisdiction including ruling on any objection with regard to existence or validity of the arbitration agreement. The Arbitration Act emphasises that the arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. It further provides that a 8 decision by the Arbitral Tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause"
(Emphasis supplied) In view of the aforesaid decision, even if a contention is raised by one of the parties to an agreement that the said agreement is void or is cancelled, the effect ought to be given to the arbitration clause, if contained in the said agreement, otherwise, in the event of cancellation of the agreement, respondent, in order to evade any responsibility on its part, is sure to raise the argument that as the agreement has been cancelled, the matter cannot be referred to an arbitrator. (XI) The contention referred to above is also dealt with in Paragraph No. 25 to the decision rendered by Hon'ble the Supreme Court in SWISS TIMING LIMITED versus COMMONWEALTH GAMES 2010 ORGANISING COMMITTEE reported in (2014)6 SCC 677 in Paragraph No. 25.
25. "As Noticed above, the concept of separability of the arbitration clause/agreement from the underlying contract has been statutorily recognised by this country under Section 16 of the Arbitration Act, 1996. Having provided for resolution of disputes through arbitration, parties cannot be permitted to avoid arbitration, without satisfying the Court that it will be just and in the interest of all the parties not to proceed with the arbitration. Section 5 of the Arbitration Act provides that the Court shall not intervene in the arbitration process except in accordance with the provisions contained in Part I of the Arbitration Act. This policy of least interference in arbitration proceedings recognises the general principle that the function of courts in matters relating to arbitration is to support arbitration process. A conjoint reading of Section 5 and Section 16 would make it clear that all matters including the issue as to whether the main contract was void/voidable can be referred to arbitration. Otherwise, it would be a handy tool available to the unscrupulous parties to avoid arbitration, by raising the bogey of the underlying contract being void."
(Emphasis supplied)
5. As a cumulative effect of the aforesaid facts, reasons and judicial pronouncements, this arbitration application is allowed as there exists an arbitration clause and Notice was also given by the applicant, which is not replied to by the respondent and as no arbitrator has been appointed, I, hereby, appoint Hon'ble Mr. Justice (Retired) Sri Sudhanshu Jyoti Mukhopadhaya, Former Judge of the Hon'ble Supreme Court of India as the Arbitrator.
-9-6. Registrar General of this court is, hereby, directed to send a copy of the Arbitration Application No. 18 of 2014 along with all the annexures, affidavits including supplementary and others to the learned Arbitrator appointed by this court.
7. The arbitrator is requested to deliver the award as early as possible and practical. Counsels for both sides jointly submitted that they will cooperate before the learned Arbitrator and shall not ask for any unnecessary adjournment.
8. This arbitration application is allowed and disposed of.
(D.N.Patel, J.) s.m.