Gauhati High Court
Slt Infracon Private Limited vs The Union Of India & Anr on 7 September, 2017
Author: Arup Kumar Goswami
Bench: Arup Kumar Goswami
1
IN THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Arbitration Petition 29/2014
SLT Infracon Private Limited,
(A company incorporated under the Companies Act 1956,
Formerly known as M/s Shyam Lal Tusinal, a partnership firm,
having its registered office at village Uttar Badarpurghat,
P.O. Badarpurghat, District-Hailakandi, Assam.
- Petitioner
-Versus-
1. The Union of India,
Represented by General Manager, N.F. Railway,
Maligaon, Guwahati - 781011.
2. The Sr. Divisional Engineer,
N.F. Railway,
Lumding, Assam.
- Respondents
For the petitioner : Mr. R. Hussain, Advocate,
For the respondents : Mr. U. K. Nair,
Standing Counsel, N.F. Railway
Date of hearing and order : 07.09.2017
BEFORE
HON'BLE MR. JUSTICE ARUP KUMAR GOSWAMI
JUDGEMENT AND ORDER
(ORAL)
Heard Mr. R. Hussain, learned counsel appearing for the petitioner. Also heard Mr. U. K. Nair, learned Senior Standing counsel, N.F. Railway, appearing for the respondents.
2. Pursuant to a Notice Inviting Tender issued by the N.F. Railway in which the petitioner had participated, the offer of the petitioner dated 20.11.2009 was accepted on negotiation and, accordingly, the work, namely, "At Manu Depot-supply of 50MM size machine crushed track ballast from private quarry as per Railway Board's specification June/2004 including loading between Manu-Agartola section including development of ballast stacking area at depot under the jurisdiction of Assistant Divisional Engineer/II/Badarpurghat", was awarded to the petitioner at a total cost of Rs. 6,98,48,137.56. An Agreement of Works, being Contract Agreement No. SE/83 was also entered into by the petitioner and the Railways on 20.07.2010.
Arb. P. 29/ 2014 23. The contract was terminated by the Railway by a letter dated 03.06.2014 in terms of Clause 6.2 of the General Conditions of Contract. The said letter dated 03.06.2014 recited that the petitioner had taken no action to commence the work/show adequate progress of work and that a notice had been issued in that connection on 20.05.2014. Consequent upon termination of the contract, the petitioner had submitted the final claim vide letter dated 15.07.2014 amounting to Rs. 2,97,67,520.00 with damages @18% per annum from the date of final claim till payment. In response to the said letter dated 15.07.2014, the Divisional Engineer-II, for DRM (Works), issued a letter to the petitioner on 06.08.2014 stating therein that the Contract Agreement was entered into between N.F. Railway and M/s Shyamlal Tusnial and, therefore, correspondences ought to be made in the name of M/s Shyamlal Tusnial and not by SLT Infracon Private Ltd. as renaming of M/s Shyamlal Tusnial was not approved by competent authorities of the Railways. The claim made by the petitioner was also disputed. However, it was indicated that the petitioner may demand for arbitration to be conducted by the Railways for disputes, if any, and if the demand of the petitioner is accepted by the Railways, the claim shall be adjudicated by the arbitrators only.
4. After receipt of the said letter, the petitioner got a notice dated 02.09.2014, under Section 11 of the Arbitration and Conciliation Act, 1996 (for short, 'Act'), issued through a lawyer for appointment of arbitrator/arbitrators in relation to disputes arising out of the Contract Agreement No. SE/83. The nature of disputes in respect of the claim was also specified and appointment of arbitrator/arbitrators, as per the agreement read with General Conditions of Contract, was sought for within a period of thirty days from the date of receipt of the notice.
5. In response to the said notice of the petitioner's lawyer, the Divisional Engineer- II, for DRM (Works), wrote back a letter dated 25.09.2014 to the lawyer who had issued the notice. In the said letter, dated 25.09.2014, response was given to the pleas taken in the notice dated 02.09.2014. It was further stated as follows:
"Para 2: It is once again reiterated that in terms of Clause No. 15 of CA and 64 of GCC, 1998 edition, the contractor may demand for arbitration in writing specifying the disputes along with the amount of claim item wise within 120 days after the completion/termination of the contract. But the contractor has not submitted any demand for arbitration in absence of which competent authority cannot appoint Arbitration Tribunal. Therefore, the contractor, instead Arb. P. 29/ 2014 3 of serving legal notice may demand for arbitration tribunal in writing specifying the disputes and amount of claim item wise.
Para-3: All the item wise claims may be elaborated in writing while demanding for arbitration Tribunal. The contractor directly cannot approach Hon'ble Court of Law. Firstly, the contractor shall demand in writing for appointment of Arbitration Tribunal within 120 days from the date of termination of the contract as per Clause 64 of GCC, 1998 edition and if Railways fail to appoint Arbitration Tribunal within specified time limit, the contractor can take shelter of the Hon'ble Court of law please."
6. A perusal of paragraph 2 of the aforesaid letter goes to show that the notice dated 25.09.2014 was considered to be a legal notice. The petitioner did not serve any other notice demanding appointment of Arbitration Tribunal as suggested at paragraph 3 of the letter dated 25.09.2014. However, alleging failure on the part of the respondents to appoint arbitrator, the petitioner has filed this petition under Section 11(6) of the Act for appointment of an arbitrator.
7. An affidavit-in-opposition was filed by the respondents dealing with the claims made by the petitioner. In paragraph 17 of the affidavit, reiterating the stand taken in the letter dated 25.09.2014, it is stated as follows:
"17. That with regard to the statements made in paragraph 19 of the arbitration petition, under reply, your deponent states that demand for arbitration having not been made by the petitioner/contractor in terms of the requirement under provision of clause 64 of the General Conditions of Contract Act, 1998, the same came to be rejected vide communication dated 25.09.2014 (Annexure-20 to the arbitration petition) with the specification that the contractor should make the demand for constitution of Arbitration Tribunal. The Railway Authorities at no point of time refused to refer the matter to Arbitration Tribunal but only required the petitioner/contractor to comply with the provisions of Clause 64 of General Conditions of Contract Act 1998."
8. That there was a clause in the Contract Agreement providing for arbitration is not in dispute. Even then, it will be appropriate to take note of the relevant provisions for a better understanding. Clause 15.0 of the Agreement dated 20.07.2010 provides as follows:
Arb. P. 29/ 2014 4"Settlement of disputes and arbitration: Arbitration and settlement of disputes shall be governed vide Clause 63, 64 of General Conditions of Contract, N.F. Railway, 1998 edition with up-to-date correction".
9. Learned counsel for the parties are ad idem that the appointment of arbitrator in the instant case shall be in terms of Clause 64(3)(a)(ii). The relevant part of Clauses 63 and 64 of the General Conditions of Contract read as follows:
"63. Matters finally determined by the Railway - All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the work or after its completion and whether before or after the determination of the contract shall be referred by the contractor to the Railway and the Railway shall within 120 days after receipt of the contractor's representation make and notify decisions on all matters referred to by the contractor in writing provided that matters for which provision has been made in clauses 8(a), 18, 22(5), 39, 43(2), 45(a), 55, 55-A(5), 57, 57A, 61(2) and 62(1)(b) of the General Conditions of Contract or in any clause of the special conditions of the contract shall be deemed as 'excepted matters' and decisions of the Railway authority thereon shall be final and binding on the contractor provided further that 'excepted matters' shall stand specifically excluded from the purview of the arbitration clause and not be referred to arbitration.
64(1)(i) Demand for Arbitration - In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the 'excepted matters' referred to in clause 63 of these conditions, the contractor, after 120 days but within 180 days of his presenting his final claim or disputed matters, shall demand in writing that the dispute or difference be referred to arbitration.
64(1)(ii) - The demand for arbitration shall specify the matters which are in question or subject of the dispute or difference as also the amount of claim item-wise. Only such dispute(s) or difference(s) in respect of which the demand Arb. P. 29/ 2014 5 has been made, together with counter claims or set off shall be referred to arbitration and other matters shall not be included in the reference.
64(1)(ii)(a) - The arbitration proceedings shall be assured to have commenced from the day a written and valid demand for arbitration is received by the Railway.
(b) *** *** ***
(c) *** *** ***
64(i)(iii) *** *** ***
64(i)(iv) *** *** ***
64(2) *** *** ***
64(3)(a)(i) *** *** ***
64(3)(a)(ii) In cases not covered by clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below JA grade as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway Officers of one or more departments of the Railway to the contractor who will be asked to suggest to General Manager up to 2 names out of the panel for appointment as contractor's nominee. The General Manager shall appoint at least one out of them as the contractor's nominee and will also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the Presiding Arbitrator from amongst the 3 arbitrators so appointed. While nominating the arbitrators it will be necessary to ensure that one of them is from the Accounts department. An officer of Selection Grade of the Accounts department shall be considered of equal status to the officers in SA grade of other departments of the Railways for the purpose of appointment of arbitrators.
*** *** ***
*** *** *** "
10. Admittedly, in the instant case, a demand for arbitration was made by the lawyer by issuing notice dated 02.09.2014 on behalf of the petitioner. The issue that has arisen for consideration in the facts of the case is whether a notice given by a lawyer, commonly known as a legal notice, can be construed to be a demand made by Arb. P. 29/ 2014 6 the contractor in terms of the Contract Agreement entered into by and between the parties.
11. Mr. Hussain has submitted that having regard to the definition of "party", as appearing in Section 2(h) of the Act, a restrictive meaning of the term cannot be given in all circumstances and if the context requires otherwise, it can be given an expanded meaning. Legal practice does not mean practice in a court of law alone and it includes legal consultations, issuing legal notice, etc. He has submitted that it is well known that lawyers give notice articulating the grievance of his client and demanding appropriate response from the noticee and if response, as demanded, is not forthcoming, the client may, ultimately, have to approach the court of law to redress the grievances. He has submitted that a notice assumes great importance as, unless the grievance is appropriately raised, the person may be deprived of claiming reliefs beyond what is claimed in a notice and, therefore, a lawyer's expert advice is required. He has drawn attention of the Court to Clause 64(1)(ii) to demonstrate that only such disputes or differences in respect of which demand had been made, together with counter claims, shall be referred to arbitration and other matters shall not be included in the reference. Therefore, the notice is not a mere formality demanding arbitration, but the claims have to be clearly spelt out therein. Drawing attention of the Court to Section 21 of the Act, he submits that Section 21 does not, in terms, provide for a written request or a request from the party to the arbitration agreement. All that is required is that there has to be a request for the dispute to be referred to arbitration and the arbitration proceeding would commence when the request is received by the respondents. He further submits that in the cases of Ashapura Mine-Chem Limited vs. Gujarat Mineral Development Corporation, reported in (2015) 8 SCC 193, M/s Gayatri Project Ltd. vs. Sai Krishna Construction, reported in 2014 (1) R.A.J. 218 (SC), the Supreme Court had appointed arbitrators on the basis of legal notice issued by the lawyer demanding arbitration. In the case of M/s Mears Group Inc. vs. Fernas Insaat A.S. (Fernas Construction Company Inc.), reported in 2017 (1) R.A.J. 732 (SC), the Supreme Court had appointed arbitrator even on the basis of an e-mail of an advocate. Mr. Hussain has drawn the attention of the Court to the definition of "contractor", as appearing in Clause 1(g) of Part-II the General Conditions of Contract, to submit that the plea taken by the Railways that the notice has to be given only by the contractor himself is not tenable in law. According to him, such an interpretation will not advance the cause of justice.Arb. P. 29/ 2014 7
12. Per contra, Mr. Nair has submitted that parties are governed by the Contract Agreement which they had entered into and, therefore, the parties are bound by the terms of the Agreement and they have to act in terms of the Agreement and there can be no deviation. When the Agreement enjoins demand for arbitration by the contractor, such demand has to be made by the contractor and the contractor only, and not by a lawyer. If notice is given by a lawyer demanding arbitration, such a notice will not conform to the requirement of the Agreement entered into by the parties in the instant case. He has submitted that once the arbitration proceeding commences on the basis of a valid demand, the role of a lawyer can be envisaged, but not prior to that. Similarly, he submits that once the arbitration proceeding culminates with the passing of the award, the role of a lawyer comes to an end. He submits that who is a "party" is defined under Section 2(h) and, having regard to the language employed, there is no scope for expansion of the definition. He submits that the expression "unless the context otherwise requires" at the beginning of Section 2 caters to situation such as the one indicated in Section 8 of the Act.
13. Mr. Nair further submits that although it is common that legal notices are issued in respect of rent control matters, Negotiable Instrument Act, 1881 (N.I. Act) matters, etc., the distinguishing feature in such cases is that there is no agreement between the parties channelizing their future course of conduct and, therefore, the analogy sought to be drawn by Mr. Hussain does not deserve acceptance. He has relied upon the judgement rendered by the Supreme Court in the case of Benarsi Krishna Committee and Others vs. Karmyogi Shelters Private Limited, reported in (2012) 9 SCC 496 and has submitted that in the face of the aforesaid judgement, a notice issued by the lawyer cannot be treated to be a valid notice for demanding arbitration in terms of the Agreement.
14. I have considered the submissions of the learned counsel for the parties and have perused the materials on record.
15. Having regard to the arguments advanced, it will be appropriate to consider the definition of "party" as defined in Section 2(h) of the Act, which reads as under:
"2. Definitions. - (1) In this Part, unless the context otherwise requires, -
*** *** ***
*** *** ***
(h) 'party' means a party to an arbitration agreement."
Arb. P. 29/ 2014
8
16. It is to be noticed, at the outset, that in Ashapura Mine-Chem Limited (supra), M/s Mears Group Inc. (supra) and M/s Gayatri Project Ltd. (supra), where arbitrator was appointed by the Supreme Court on the basis of a notice/e-mail issued by the lawyer, the question did not come up for consideration as to whether the notice given by a lawyer was a valid notice on the touchstone of the agreement entered into by the parties. Since strong reliance is placed by Mr. Nair on the judgement of Benarsi Krishna Committee and Others (supra), before proceeding further, it will be appropriate to take note of the aforesaid judgement to understand the issue in proper perspective. In Benarsi Krishna Committee and Others (supra), the question that had fallen for consideration before the Supreme Court was as to whether, having regard to the provisions of Section 31(5) and 34(3) of the Act, the service of an arbitral award on the agent of a party amounts to service on the party itself. For a better appreciation, it will be appropriate to extract herein below Section 31(5) and 34(3):
"31(5) After the arbitral award is made, a signed copy shall be delivered to each party.
34(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."
17. A perusal of Section 34(3) goes to show that an application for setting aside the arbitral award cannot be made after three months had elapsed from the date on which the party making the application had received the arbitral award or if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal. The power to condone delay for a limited period of thirty days is vested with the court if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the period of three months. The provision makes it clear that the court is not empowered to entertain any application filed beyond thirty days after the initial period of three months had expired. As serious consequences may ensue, it is essential that the party concerned receives the arbitral award.
Arb. P. 29/ 2014 918. In Benarsi Krishna Committee and Others (supra), the notice of the arbitral award was served upon the counsel of the party and the argument advanced was that the expression "party", as appearing in Section 31(5) of the Act, would also include an agent of the party. In paragraph 15, taking note of the submission of the counsel appearing for the parties, the Supreme Court held as follows:
"15. Having taken note of the submissions advanced on behalf of the respective parties and having particular regard to the expression "party" as defined in Section 2(h) of the 1996 Act read with the provisions of Sections 31(5) and 34(3) of the 1996 Act, we are not inclined to interfere with the decision of the Division Bench of the Delhi High Court impugned in these proceedings. The expression "party" has been amply dealt with in Tecco Trechy Engineers's case (supra) and also in ARK Builders Pvt. Ltd.'s case (supra), referred to hereinabove. It is one thing for an Advocate to act and plead on behalf of a party in a proceeding and it is another for an Advocate to act as the party himself. The expression "party", as defined in Section 2(h) of the 1996 Act, clearly indicates a person who is a party to an arbitration agreement. The said definition is not qualified in any way so as to include the agent of the party to such agreement. Any reference, therefore, made in Section 31(5) and Section 34(2) of the 1996 Act can only mean the party himself and not his or her agent, or Advocate empowered to act on the basis of a Vakalatnama. In such circumstances, proper compliance with Section 31(5) would mean delivery of a signed copy of the Arbitral Award on the party himself and not on his Advocate, which gives the party concerned the right to proceed under Section 34(3) of the aforesaid Act."
19. A perusal of the above paragraph goes to show that in the context of the provisions under Section 31(5) and 34(3), the Supreme Court held that any reference made to a party could only mean the party himself and not his or her agent or advocate empowered to act on the basis of a Vakalatnama and, accordingly, it was held that proper compliance with the provision of Section 31(5) would mean delivery of a signed copy of the arbitral award on the party himself, which gives the party concerned the right to proceed under Section 34(3) of the Act.
20. The reliance placed by Mr. Hussain upon clause 1(g) of the Standard General Conditions of Contract for Use in Connection With Engineering Works, which provides that the contractor is one who enters into contract with the Railways and includes its Arb. P. 29/ 2014 10 executors, administrators, successors and permitted assigns, ex facie, does include a lawyer. Reliance placed by him on Section 21 to contend that demand for arbitration need not be in writing and that it does not prescribe for any particular person competent to request for arbitration is also not found to be acceptable. Section 21 is in respect of commencement of arbitration proceedings and it lays down that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commences on the date on which a request for a dispute to be referred to arbitration is received by the respondent. Section 21 does not deal with form and/or manner of issuance of notice.
21. Section 138 of the N.I. Act provides for making of a demand by the payee or the holder in due course of the cheque for the payment of the amount of the cheque, which was dishonoured due to insufficiency of fund, by giving a notice in writing to the drawer of the cheque within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. Mr. Nair is correct in submitting that in most of such cases, demand is raised through a legal notice.
22. The expression "unless the context otherwise demands" cannot simply be wished away. Though Section 2(h) provides that "party" means a party to an arbitral agreement, such definition cannot be confined to a watertight compartment or a strait- jacket formula applicable in all circumstances. If the context demands and warrants, the import of the word "party" can be judicially expanded so as to conform to the needs of the situation.
23. In the adversarial system of litigation, lawyers play a pivotal role and they espouse the cause of a litigant. According to the perception of the Court, it should be endeavour of every court to promote justice and it would be a necessary concomitment to interpret the means of achieving justice in a pragmatic manner.
24. In Maxwell's 'Interpretation of Statutes' (12th Edition), at page 99, the learned author had underscored that provisions regarding giving of notice often receive a liberal interpretation. The thrust of Clause 64(1)(i) of the General Conditions of Contract is on the need to "make a demand". Clause 64(1)(i) of the General Conditions of Contract, which requires the contractor to raise a demand in writing that the dispute and difference be referred to arbitration, ought to be given a liberal interpretation.
25. As has been noted earlier, the demand notice for arbitration has to be specific with regard to the dispute and claim and any dispute or claim not made in the notice Arb. P. 29/ 2014 11 will not be referred to arbitration. We cannot pre-suppose, rather, it will be too hazardous to surmise that in all situations and circumstances, a person will be aware of the intricacies of law and the legal requirements. If requirement of raising of demand by the contractor is interpreted to include raising of the demand by the contractor through a lawyer, such interpretation will not cause any prejudice to either of the parties unlike in the case of Section 31(3) and 34(3), where expansion of the meaning of the term "party" to include a lawyer and treating service of notice on him as notice to the party may end up causing grave prejudice to the party concerned. The contextual texture in both the situations is different. Surely, a lawyer cannot be equated with the party himself. But he acts as a mouthpiece for and on behalf of the party when the notice is given under instructions from and on behalf of the party concerned.
26. In view of the discussions above, I am of the considered opinion that in the facts and circumstances of the case, the notice given by the lawyer will meet the requirements for a valid demand for arbitration.
27. Taking that view, this application is allowed appointing Hon'ble Mr. Justice H. N. Sarma, a former Judge of this Court as arbitrator.
28. The Registry will send a copy of this order to Hon'ble Mr. Justice H. N. Sarma.
JUDGE RK Arb. P. 29/ 2014 12 Arb. P. 29/ 2014