Punjab-Haryana High Court
State Of Punjab vs Darshan Singh Ahuja And Another on 18 May, 1999
JUDGMENT K.K. Srivastava, J.
1. This is a revision filed by the State of Punjab against order dated 23-2-1998 passed by Shri Jag Nahar Singh, Sub-Judge, 1st Class, Chandigarh in Arbitration Case No. 96 of 1-12-1997/24-2-1998. State of Punjab v. S. Darshan Singh Ahuja and another. The State of Punjab approached the Court of Sub-Judge, 1st Class, Chandigarh with the prayer that the dispute referred to respondent No. 2, Arbitrator at the behest of respondent No. 1, S. Darshan Singh Ahuja, Contractor to decide his claim under the contract taken by him from the construction Division SYL Canal Project SAS Nagar be recalled and set aside. This application for revocation of the authority of the Arbitrator-respondent No. 2, Shri S. S. Mongia, Chief Engineer (Retd). came up for hearing before the learned Sub-Judge, 1st Class on 23-2-1998 and the same was dismissed by the impugned order.
2. The facts giving rise to this revision, may briefly, be narrated as under :
Respondent No. 1, S. Darshan Singh Ahuja took a contract for the construction of super passage at RD 77.960 of SYL Canal executed an agreement No. 25 dated 2-1-1987 with Executive Engineer, Patiala, Ki Rao, Construction Division SYL Canal Project, S.A.S. Nagar. The said work under the contract could not be completed by respondent No. 1, who left the work incomplete. Respondent No. 1, however, submitted claims to the petitioner, Executive Engineer aforesaid under Clause 62 of the agreement. The claims were put up before the Superintending Engineer. Clause 62 has been quoted by the learned Sub-Judge, 1st Class, in his judgment which may be reproduced as under :
"62. Settlement of Disputes :
It the contractor considers any work demanded of him to be outside the requirement the contract, or considers and drawings, record or ruling of the Executive Engineer on any matter in connection with unacceptable he shall promptly asked the Executive Engineer in writing for written instruction or decision thereupon the Executive Engineer shall give his written instructions or decision within a period of 30 days such request.
Upon receipt of the written instructions decision the contractor shall promptly proceed with delay to comply with such instructions or decision.
If the Executive Engineer fails to give his instructions or decision in writing within a period of 30 days after being requested or if the contractor or decision of Executive Engineer, the contractor may within 30 days after receiving the instructions of decision appeal to Superintending Engineer who shall afford an opportunity to give contractor to be heard and to officer evidence in support of his appeal this officer shall give a decision within a period of 60 days after the contractor has given the said evidence in support of his appeal.
If the contractor is dissatisfied with this decision, the contractor within a period of 30 days from receipt of decision shall indicate his intention to refer the dispute to arbitration failing which, the said decision shall be final and conclusive."
3. A perusal of Clause 62 aforesaid will go to show that the contractor can file his claim before the Executive Engineer who will consider the same, give instructions or decision in writing within a period of 30 days after being requested and in case the contractor is dissatisfied with the instructions or decision of the Executive Engineer he can file an appeal, within 30 days of the receiving of any instructions or decisions of the Executive Engineer, before the Superintending Engineer who shall allow an opportunity to the contractor of being heard and give his decision thereon within 60 days. Clause 62 further provides that if the contractor is dissatisfied with the decision of the Superintending Engineer he may within a period of 30 days from the communication of the decision shall indicate his intention to refer the dispute to arbitration failing which the decision aforesaid shall become final and conclusive. The arbitration clause is contained in Clause 63 which has also been extracted in the same judgment by the learned Sub-Judge, inter alia, as under :
"63. Arbitration :
All the disputes or difference in respect of which the decision has not been final and conclusive shall be referred for arbitration to a sole Arbitrator appointed as follows :
Within 30 days of receipt of notice from the contractor of his intention to refer the dispute and arbitration the Chief Executive Engineer shall send to the contractor a list of 3 officers of the rank of Superintending Engineer of higher who have not been connected with the work under this contract. The contractor shall within 15 days of receipt of this list select and communicate to the Chief Engineer the name of one officer from the list who shall then be appointed as the sole Arbitrator. If contractor fails to communicate his selection of name, within the stipulated period, the Chief Engineer shall without delay select one officer from the list and appoint him as the sole Arbitrator. If the Chief Engineer fails to send such a list within 30 days, as stipulated the contractor shall send a similar list to the Chief Engineer within 15 days. The Chief Engineer shall then select one officer from the list and appoint him as the sole Arbitrator within 15 days, if the Chief Engineer fails to do so, the contractor, shall communicate to the Chief Engineer for the name of one officer from the list, who shall then the sole Arbitrator.
The arbitration shall be conducted in accordance with the provisions of Indian Arbitration Act, 1940 or any statutory modification thereof. The Arbitrator shall determine the amount of costs of arbitration to be awarded to either parties.
The performance under the contract shall continue during the arbitration proceedings and payments due to the contractor shall not be withheld unless they are the subject matter of the arbitration proceedings.
All the awards shall be in writing and in case of awards amounting to Rs. 1.00 lac and above, such award shall state the reasons for the amount awarded.
Neither party is entitled to bring a claim to arbitration if the Arbitrator has not been appointed before the expiration of 30 days after defeat liability period.
If the Arbitrator so appointed is unable or willing to set or resigns his appointment or vacates his office due to any reason whatsoever, another sole Arbitrator shall be appointed as aforesaid.
The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties fixing the date of first hearing.
Arbitrator may from time to time, with the consent of the parties, enhance the time for making and publishing the award.
To Arbitrator, shall give a separate award in respect of each dispute or difference referred to him.
The value of Arbitration such place as may be fixed by the Arbitrator on his sole discretion.
The fees if any, of the Arbitrator shall if required to be paid before the award is made and published be paid half and half by each of the parties. The costs of the reference other than arbitration fees shall be settled at the discretion of the Award of the Arbitrator shall be final and binding on both the parties.
This contracts shall be governed by the Indian Laws for the time being in forces."
4. The case of the revisionist-petitioner was that since the Superintending Engineer Construction Circle No. III, Chandigarh had not rejected the claims of respondent-contractor, the self appointment of the Arbitrator by respondent No. 2-contractor was illegal and was liable to be revoked. The Arbitrator-respondent No. 2, Shri S. S. Mongia, Chief Engineer (Retd.) had in the meantime entered upon the reference on 18-3-1993. The petitioner had, however, not participated in arbitration proceedings before the said Arbitrator and instead moved the said application in the Court of Sub-Judge 1st Class, Chandigarh
5. Respondent No. 1, contractor was served with a notice of the application of the petitioner-revisionist and contested the same. According to the contention of respondent No. 1 he was awarded the work of construction of super passage aforesaid at an estimated cost of Rs. 2.93 crores with a stipulation that the same shall be completed within a period of nine months which shall begin w.e.f. 2-1-1987. The agreement aforesaid was entered into between the parties being agreement No. 25 of 2-1-1987. It was contended by him that the Chief Engineer of the petitioner organisation was assassinated by anti-social elements in July 1990 in his office. The terror of assassination was so much that the Engineers of the SYL Canal organisation jointly decided not to attend the site as according to them their lives were under threat. All the constructional activities came to a grinding halt. The respondent-contractor under these circumstances could do precious little and he was forced by the circumstances to leave the work incomplete. The respondent-contractor suffered heavy loss on account of the abandonment of the work by the petitioner. The respondent-contractor preferred certain claims to the petitioner which was rejected and thereupon under as per terms of Clause 62 of the agreement he requested the Superintending Engineer to give a hearing to his claims vide letter dated 11-10-1991, copy Annexure R2. Ths Superintending Engineer gave a hearing in terms of Clause 62 aforesaid on 4-12-1991 which was confirmed by respondent No. 1 vide letter dated 26-12-1991 copy Annexure R3. Respondent No. 1 requested for the decision of the said Engineer within 60 days of the date of hearing as per the terms of the agreement. Since the Superintending Engineer did not given any decision on the claims the respondent approached the Chief Engineer of the petitioner organisation for sending a panel of names for appointment of Arbitrator in terms of Clause 63 aforesaid vide letter dated 28-2-1992, Annexure R4. However, no reply was received by respondent No. 1 from the Chief Engineer and as such he as per the terms contained in Clause 63 sent his own panel of names for appointment of Arbitrator vide his letter dated 11-4-1992, copy Annexure P5. It was contended that at the request of the Chief Engineer, respondent No. 1 Contractor agreed to forego his own panel sent vide Annexure R5 and within view to maintain good relations with the petitioner he again agreed to appear before the Superintending Engineer for the hearing of his claims. The Superintending Engineer fixed 15-5-1992 as the date of hearing vide letter dated 14-5-1992, copy Annexure R6. In these circumstances the panel of names sent by respondent No. 1, vide Annexure R5 become redundant and obsolete. Respondent-contractor confirmed having attended the hearing before the Superintending Engineer on 15-5-1992 vide Annexure R7. It was contended that hearing for some more claims in addition to those stated in Annexure R2 was sought from the Superintending Engineer by the respondent vide letter dated 17-7-1992, copy Annexure R8. A reminder was sent to the Superintending Engineer vide letter dated 14-8-1992 vide Annexure R9. Respondent No. 1, however, did not receive any decision on the hearing held by the Superintending Engineer on 15-5-1992. He contended that neither any hearing was given in Annexure R8 nor any decision was taken. Respondent No. 1, under these circumstances, requested the Chief Engineer again to send a panel of names for appointment was Arbitrator vide his letter dated 7-10-1992, Copy Annexure R10. Respondent No. 1 received no reply to his letter aforesaid within a period of 30 days and as per Clause 63 of the agreement he sent his own panel of three names on 17-11-1992 to the Chief Engineer for selecting one out of them to act her sole Arbitrator vide Annexure R11. The Chief Engineer wrote to respondent No. 1 on 23-11-1992, copy Annexure R12, to intimate as to whether the Superintending Engineer had rejected the claims. Respondent No. 1 gave his reply to the said letter vide his letter dated 2-1-1993, copy Annexure R13. After the expiry of the period prescribed under Clause 63 of the agreement and keeping in view the fact that the Chief Engineer had not sent any name from the panel submitted by respondent No. 1, he appointed respondent No. 2, Sh. S. S. Mongia, Chief Engineer (Retd.) as the sole Arbitrator informed about it vide letter dated 2-1-1993, Annexure R14. The sole Arbitrator was called upon to adjudicate the dispute between him and the petitioner. Vide letter dated 22-2-1993, Annexure R15 respondent wrote to respondent No. 2 requesting him to enter upon the reference. Respondent No. 2 entered upon the reference vide letter dated 18-3-1993. Respondent No. 1 submitted his statement of claim before the sole Arbitrator-respondent No. 2 but the petitioner avoided submitting their defence before the sole Arbitrator. Rejoinder to the reply was filed by the petitioner. The learned Sub-Judge framed the following issues :
(1) Whether the appointment of the Arbitrator has been made in accordance with the arbitration agreement between the parties ? OPR.
(2) Relief.
6. The parties agreed to lead evidence by filing affidavits in respect of their respective cases. The petitioner filed an affidavit of Shri Gurdev Singh, SDO as Ex. A1 and copy of notice inviting tenders as Ex. A2. The respondent moved application under Order 12, Rules 2 and 2-A C.P.C. for admission and denial of the documents. Shri Gurdev Singh, SDO admitted the documents of respondent No. 1 as Annexures R2 to R16. The respondent-contractor also proved the Clauses 62 and 63 of the agreement mentioned in Annexure R1. The learned Sub-Judge decided issue No. 1 against the petitioner and held that the respondent-contractor had to right under Clauase 63 of the agreement to refer the disputes to the Arbitrator nominated by him out of the panel of names submitted by him to the Chief Engineer as the Chief Engineer failed to send a panel of names of Arbitrators to the respondent contractor and later on failed to select an Arbitrator out of the panel of names sent by the respondent-contractor to the Chief Engineer. He also held that respondent No. 1 had approached the Superintending Engineer for deciding his claims and sent reminders vide Annexures R4 and R5 but the Superintending Engineer did not take any decision within the stipulated period of 60 days as required by Clause 62 aforesaid of the agreement. The Superintending Engineer called upon respondent No. 1 to bring sufficient proof and evidence in support of his claim. Respondent No. 1 was heard on 15-5-1992. He also held that respondent No. 1 had appointed the Arbitrator in accordance with the provisions contained in the contract agreement and there was no case of any mala fide or incompetence regarding respondent No. 2, Arbitrator. In the result, the application of the petitioner was dismissed by the learned Sub-Judge 1st Class, Chandigarh. Feeling aggrieved against the order of the Sub-Judge 1st Class, Chandigarh, the petitioner State of Punjab has filed this revision.
7. Notice of motion was issued to the respondents. Respondent No. 1, S. Darshan Singh Ahuja, Contractor put in appearance and contested the revision.
8. I have heard the learned counsel for the revisionist and the learned counsel for respondent No. 1 contractor and have carefully perused the impugned order of the learned Sub-Judge 1st Class, Chandigarh.
9. There is no dispute about the fact that respondent No. 1 was granted a contract by the officers of the petitioner-State of Punjab. It has also not been disputed that the said contract could not be completed and the same had to be abandoned due to the circumstances which were mentioned by respondent No. 1 which were beyond his own control. It has not been controverted by the petitioner that there was the terror struck by the anti-social elements who had assassinated the Chief Engineer in July 1990 in his office and the said incident struck terror in the mind of the other engineers who had taken a decision not to attend any site as they feared threat to their lives. There is not rebuttal to the averment made by the respondent-contractor that all the activities of the construction came to a grinding halt as a result of the stoppage of work supervised by the Engineers. Respondent No. 1-contractor had to abandon the work incomplete and consequently suffered heavy loss. The claims were admittedly put up by respondent No. 1, contractor before the concerned authorities of the petitioner who did not take decision on the matter and the matter was then referred to the Superintending Engineer who also did not decide the same within the period prescribed in the agreement entered into between the petitioner and respondent No. 1 i.e. within a period of 60 days. It is not disputed that Clause 63 of the agreement aforesaid provided for arbitration of any dispute arising between respondent No. 1-contractor and the petitioner in relation to the contract. Respondent No. 1, as per the provisions contained in Clause 63 of the agreement called upon the Chief Engineer to refer the dispute to the Arbitrator and send a panel of names for his consent. He took a clear stand that a Superintending Engineer had despite giving a hearing to him not taken a decision in the matter within the requisite period of 60 days and thus he was entitled to invoke the arbitration clause. It has also not been disputed that the Chief Engineer did not act and sent a panel of names to the respondent-contractor who himself then sent a list of his own panel of Arbitrators for approval and selection of the name by the Chief Engineer. The Chief Engineer instead of selecting the name of the Arbitrator called upon the petitioner to satisfy him that his claim had not been considered and decided by the Superintending Engineer within the requisite period. It is also relevant to note that despite the fact that the respondent-contractor had become entitled to refer the dispute to arbitration, he agreed to the suggestion of the Chief Engineer and again referred the matter regarding the claim for decision to the Superintending Engineer. The Superintending Engineer gave hearing to him but again he did not take a decision in the matter. Under these circumstances, respondent No. 1 was left with no other alternative but to invoke the arbitration clause contained in the agreement. Learned counsel for the petitioner contended that since the Superintending Engineer was seized of the matter regarding the decision of the claims preferred by respondent No. 1-contractor, hence he could not have resorted to the arbitration clause by referring the dispute to the Arbitrator and that too of his own choice. In this regard it may be mentioned that from the narration of the events which happened between the respondent-contractor and the Superintending Engineer regarding the settlement of the claim referred by the respondent-contractor, it is abundantly clear that the Superintending Engineer sat over the matter and did not taken a decision thereupon despite giving a hearing to the respondent-contractor. Clause 62 of the agreement which has been quoted above and was also noticed and quoted by the learned Sub-Judge in his judgment showed that the Superintending Engineer was called upon to afford an opportunity to the contractor to be heard and to give his decision within a period of 60 days. Clause 62 further provided that in case the contractor felt dissatisfied with the decision he within a period of 30 days from the receipt of the decision shall indicate his intention to refer the dispute to arbitration. A careful reading of Clause 62 would go to show that once there was a time limit fixed for the Superintending Engineer to take a decision on the matter referred to him by the contractor, the Superintending Engineer was required to take a decision in the matter but in the instant case the Superintending Engineer did not take a decision on the claim referred to by the respondent-contractor despite the fact that the matter was heard and considered by him on two occasions. Under these circumstances, the contention of the learned Counsel for respondent No. 1 is to be upheld that respondent No. 1-contractor had no alternative but to have recourse to the provision contained in Clause 63 of the agreement. Once respondent No. 1-contractor had the right to invoke the arbitration clause, respondent No. 1 meticulously followed the procedure contained in arbitration clause inasmuch as he called upon the Chief Engineer to send a panel of three names to him for the selection of the arbitration and since the Chief Engineer failed to send a list within 30 days, the respondent-contractor became entitled to send a similar list to the Chief Engineer within 15 days for selection of one officer from the list and appoint him as the sole Arbitrator within 15 days. In the instant case the Chief Engineer again failed to appoint one of the three persons mentioned in the panel for acting as the sole Arbitrator to settle the dispute arising between the respondent-contractor and the petitioner within 15 days and as such the respondent-contractor became entitled to select one of the names of the officer from the list as the sole Arbitrator and communicate the same to the Chief Engineer. The action taken by respondent No. 1 cannot be said to be contrary to the Clauses 62 and 63 aforesaid of the agreement. Apart from it, it is relevant to note that respondent No. 1 had selected respondent No. 2, Shri S. S. Mongia retired Chief Engineer of the Punjab State as the sole Arbitrator who is a technical hand and well conversant with the rules and affairs of the department.
10. The Hon'ble Supreme Court in the case of State of West Bengal v. Gourangalal Chatterjee (1993(2) Arb. LR 95), approved the appointment of a retired Chief Engineer to act as the sole Arbitrator. The relevant discussion in this regard is contained in para 5 at page 97 which reads as under :
"Reliance was placed on certain orders passed by this court and it was urged that settlement of dispute under Clause 25 of the agreement being in exclusive domain of the Chief Engineer the High Court was not empowered to appoint anyone else. The submission is devoid of any merit. It is not made out from the agreement. Rather Clause 25 itself permits appointment of another Arbitrator if the Chief Engineer fails or omits to act as such, Relevant portion of the agreement extracted below :
Should the Chief Engineer be for any reason unwilling or unable to act. as such Arbitrator such questions and disputes shall be referred to an Arbitrator to be appointed by the Arbitrator shall be final, conclusive and binding on all the parties to this contract.
In one of the decisions given by this Court the order of the High Court was set aside as the dispute being technical in nature the appointment of a non-technical Arbitrator was not justified. Here in this the High Court has appointed a retired Chief Engineer and not a non-technical man. No allegation has been made against him. Therefore, the order of the learned Single Judge also does not suffer from any infirmity."
11. In view of the foregoing discussion there is no merit in this revision petition which deserves to be dismissed. However, it is mentioned that respondent No. 2, Arbitrator shall proceed with the arbitration expeditiously and decide the same without any delay.
12. With these observations the revision petition is dismissed.
13. Petition dismissed.