Gujarat High Court
Urc Construction Pvt. Ltd vs Banaskantha District Co-Operative ... on 30 September, 2022
Author: Aravind Kumar
Bench: Aravind Kumar
C/IAAP/129/2019 ORDER DATED: 30/09/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/PETN. UNDER ARBITRATION ACT NO. 129 of 2019
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URC CONSTRUCTION PVT. LTD.
Versus
BANASKANTHA DISTRICT CO-OPERATIVE MILK PRODUCERS UNION
LTD.
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Appearance:
MR DHRUVIN MERCHANT, ADVOCATE WITH
MR TEJAS K MOTWANI(8499) for the Petitioner(s) No. 1
MR BHARAT S. PATEL, SENIOR ADVOCATE WITH
MR CHIRAG B PATEL(3679) for the Respondent(s) No. 1
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CORAM:HONOURABLE THE CHIEF JUSTICE MR. JUSTICE
ARAVIND KUMAR
Date : 30/09/2022
ORAL ORDER
1. Though matter listed for admission by consent of learned advocates appearing for the parties, it is taken up for final disposal.
2. Heard Mr. Dhruvin Merchant, learned advocate appearing on behalf of Mr. Tejas K. Motwani for the petitioner and Mr.Bharat S. Patel, learned Senior Advocate appearing on behalf of Mr. Chirag B. Patel for the respondent. Perused the records.
3. Respondent herein invited tenders for construction of Page 1 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022 C/IAAP/129/2019 ORDER DATED: 30/09/2022 diary building, utility building, services, residential apartments, ancillary works along with general development works for Banas Dairy at Lucknow. Petitioner who was one of the bidders was declared successful bidder and after price negotiation and on petitioner offering revised prices, bid of the petitioner came to be accepted on 7.2.2015. Pursuant to same, parties entered into an agreement on 23.2.2015 and it was agreed thereunder that stipulated period of completion of project was 15 months commencing from 13.2.2015.
4. General conditions of the contract provided for dispute resolution if any arising order the agreement would be by arbitration.
5. Petitioner is said to have commenced construction of building on 13.2.2015 and on account of alleged delay in issuance of drawings, non-availability of work front in all areas at the same time, petitioner claims to have been handed over the work site by respondent on piecemeal basis, as a result of which petitioner had to adjust its working parameters as and when sites of land was handed over to the petitioner. It is also Page 2 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022 C/IAAP/129/2019 ORDER DATED: 30/09/2022 contended in the petition that work site was not available to the petitioner and obstructions at the site were not removed on time by the respondent. Petitioner claims to have submitted to respondent several running bills which were paid from time to time and according to the petitioner belatedly. Petitioner is said to have submitted its 26th running account bill-cum-final bill on 6.12.2017 which was certified by the respondent on 19.2.2018 and received payment on 18.4.2018. Petitioner is said to have forwarded a communication to the respondent on 31.8.2018 for release of liquidated damages withheld by the respondent and seeking thereunder extension of time which was accorded only for 7 months though claimed for 20 months and narrating chronological list of events for delay which according to petitioner was attributable to respondent. Subsequently, on account of amount demanded by petitioner not having been paid, petitioner got issued a notice on 22.2.2019 with all the narratives of its demand followed by several reminders and culminating in issuance of a legal notice dated 29.4.2019 for appointment of Sole Arbitrator. On account of demand made by the petitioner in its notice dated 29.4.2019 having not been Page 3 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022 C/IAAP/129/2019 ORDER DATED: 30/09/2022 complied, present petition has been filed.
6. Respondent on being notified has appeared and filed its reply affidavit admitting the averments made in the petition to the extent stated thereunder and expressly denying the averments which have not been traversed. The short and long of the defence raised by the respondent is: at the time of finalising the running account final bill, mutual discussion had been held and after arriving at the final amount payable, same was paid to petitioner which was received by the respondent without any demur and subsequently communication has been forwarded by petitioner making a false claim that too after receipt of the amount without any protest in order to revive a dead claim. Hence, respondent has sought for dismissal of the petition.
7. It is the contention of Mr. Dhruvil Merchant, learned advocate appearing for the petitioner that immediately after receipt of the final bill amount which has been withheld by the respondent, petitioner forwarded a communication dated 31.8.2018 narrating thereunder the delay that had occasioned in the execution of the project was attributable to the Page 4 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022 C/IAAP/129/2019 ORDER DATED: 30/09/2022 respondent itself and said communication was followed by reminders and also detailed demand raised under the communication dated 22.2.2019 which has been followed by subsequent communications dated 2.4.2019, 29.4.2019 and on account of there being no justification for denying the claim of the petitioner, it was followed by issuance of notice for appointment of an Arbitrator on 29.4.2019 and demand made thereunder was also not complied. Hence, this petition has been filed. He would draw the attention of the Court to the arbitration clause viz. clause 68.0 of GCC to contend parties to the agreement have agreed that in the event of any dispute were to arise in the matter of interpretation of terms and conditions of the order / agreement or difference of opinion were to arise between the parties or any in respect of order / contract arising out of or in connection with the agreement / accepted order / contract or with regard to performance of any obligation thereunder, either party was entitled to settle the dispute by mutual communication and in the event of settlement and in the event of same having not yielded any fruitful result, notice in writing is required to be issued as contemplated. He Page 5 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022 C/IAAP/129/2019 ORDER DATED: 30/09/2022 would contend invoking said clause notice is issued and demand made thereunder not being complied for appointment of Arbitrator has arisen. He would draw the attention of the Court to the reply affidavit filed by the respondent to contend that respondent has made attempt to stave off its obligation contemplated under the agreement by contending that there was finality attached to the negotiations held between the parties which culminated in issuance of final bill on 18.4.2018 is a ground which cannot be accepted, inasmuch as, on such finalisation of the bill, petitioner got issued a notice calling upon respondent to refund Rs.1 crore which had been retained by respondent as liquidated damages and contending that said amount was withheld on account of purported delay which was not attributable to the petitioner but same is attributable to respondent and there is a dispute with regard to the retention of the money vis-a-vis the extension of time for completion of the contract and hence, the dispute is to be resolved by arbitration as agreed between the parties, he prays for allowing the petition.
8. Per contra, Mr. Bharat S. Patel, learned Senior Advocate Page 6 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022 C/IAAP/129/2019 ORDER DATED: 30/09/2022 appearing for the respondent would contend that once petitioner has accepted the final bill without any demur or protest and cannot now turn around to contend that on account of alleged force, threat, coercion, etc. as a ruse to perforce the respondent to concur with the appointment of an Arbitrator nominated by it or dispute being resolved through arbitration on the ground of there being an arbitrable dispute which is not there. He would submit that only in the event of petitioner having raised a protest at the time of settlement of the final bill, at the most would have been entitled to invoke arbitration clause and by referring to the communication dated 4.2.2018 forwarded by the petitioner to the respondent, he would contend that petitioner itself has admitted that its final bill value was Rs.3,70,42,767/- and same having been paid by respondent in its entirety on 3.4.2018, petitioner cannot be heard to contend after one year that said amount was received by it was on account of any force, threat or coercion.
9. In this background, necessarily this Court will have to examine whether the dispute is raised arbitrable or not. The Hon'ble Apex Court in the case of National Insurance Company Page 7 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022 C/IAAP/129/2019 ORDER DATED: 30/09/2022 Limited vs. Boghara Polyfab Private Limited [(2009) 1 SCC 267] has held: A contract whether has been discharged by its performance is a mixed question of fact and law and if there is a dispute with regard to said question, it is arbitrable. It has been further held:
"22. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under section 11 of the Act into three categories, that is
(i) issues which the Chief Justice or his Designate is bound to decide;
(ii) issues which he can also decide, that is issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.
22.1 The issues (first category) which Chief Justice/his designate will have to decide are:
(a) Whether the party making the application has approached the appropriate High Court.
(b) Whether there is an arbitration agreement and whether the party who has applied under section 11 of the Act, is a party to such an agreement.Page 8 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022
C/IAAP/129/2019 ORDER DATED: 30/09/2022 22.2 The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the arbitral tribunal) are:
(a) Whether the claim is a dead (long barred) claim or a live claim.
(b) Whether the parties have concluded the contract/ transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection.
22.3 The issues (third category) which the Chief Justice/his designate should leave exclusively to the arbitral tribunal are :
(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration).
(ii) Merits or any claim involved in the arbitration."
10. The aforesaid judgment has been considered by the Hon'ble Apex Court (Larger Bench) in the case of Mayavati Trading Private Limited vs. Pradyut Deb Burman [(2019) 8 SCC 714 and has opined thus:
"14. A reading of the Law Commission Report, together with the Statement of Objects and Reasons, Page 9 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022 C/IAAP/129/2019 ORDER DATED: 30/09/2022 shows that the Law Commission felt that the judgments in SBP & Co. and Boghara Polyfab required a relook, as a result of which, so far as Section 11 is concerned, the Supreme Court or, as the case may be, the High Court, while considering any application under Sections 11(4) to 11(6) is to confine itself to the examination of the existence of an arbitration agreement and leave all other preliminary issues to be decided by the arbitrator."
11. In the light of aforesaid position of law expounded by the Hon'ble Apex Court when the facts on hand are examined, it would clearly emerge that on receipt of the amount on 3.4.2018, petitioner has forwarded a communication to respondent on 31.8.2018 with all the narratives as to how withholding the extension of time sought for and non-payment of liquidated damages which had been withheld by respondent was unjustified. Though petitioner for the first time in the rejoinder filed to the reply affidavit has raised the plea of force, threat, coercion for receiving said amount, this Court is of the considered view such plea raised at a belated stage should not be accepted as contended by Mr. Bharat S. Patel, learned Senior Advocate appearing for the respondent and to that extent said Page 10 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022 C/IAAP/129/2019 ORDER DATED: 30/09/2022 plea merits acceptance. Such plea of force and coercion having not been raised at earlier point of time but subtly contending that withholding of the payment was unjustified which suffices to bring such dispute within the scope of arbitration. Any way that is an issue which will have to be resolved by the Arbitrator after taking into consideration the evidence if any that may be tendered by the parties and at this juncture, if this Court were to venture into examining the rival contentions based on mere assertions, it may prejudice the rights of the parties. In that view of the matter, this Court is of the considered view that all issues including the issue relating to the arbitrability of the dispute is to be kept open and accordingly keeping it open, I proceed to pass following ORDER
(i) Petition is allowed.
(ii) Hon'ble Mr. M.S. Shah, Former Chief Justice of Bombay High Court is hereby appointed as the Sole Arbitrator to resolve the disputes between the parties in accordance with the Gujarat High Court Page 11 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022 C/IAAP/129/2019 ORDER DATED: 30/09/2022 Rules.
(iii) Registry to communicate this order to the Sole Arbitrator forthwith by Speed Post.
(ARAVIND KUMAR,CJ) Bharat Page 12 of 12 Downloaded on : Sun Dec 25 03:03:10 IST 2022