Gujarat High Court
M/S Amar Infrastructures Ltd. vs Patel Infrastructures Pvt. Ltd. on 3 August, 2018
Author: M.R. Shah
Bench: M.R. Shah
C/IAAP/76/2018 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/PETN. UNDER ARBITRATION ACT NO. 76 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE M.R. SHAH sd/-
==========================================================
1 Whether Reporters of Local Papers may be allowed to No see the judgment ?
2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the No judgment ?
4 Whether this case involves a substantial question of law No as to the interpretation of the Constitution of India or any order made thereunder ?
========================================================== M/S AMAR INFRASTRUCTURES LTD.
Versus PATEL INFRASTRUCTURES PVT. LTD.
========================================================== Appearance:
MR KG SUKHWANI(871) for the PETITIONER(s) MR KAMAL B TRIVEDI, SENIOR ADVOCATE WITH MR HARSHADRAY A DAVE(3461) for the RESPONDENT(s) ========================================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH Date : 03/08/2018 C.A.V. JUDGMENT
1. Present petition has been preferred by the applicant herein seeking appointment of an Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 to resolve the dispute between the petitioner and the respondent herein.Page 1 of 19 C/IAAP/76/2018 CAV JUDGMENT
2. The facts leading to the present petition in nutshell are as under:-
2.1 That the Public Works Department, Government of Punjab, invited bids for the work of "Output and Performance Based Road Contract (OPRC) (Asset Management Contract) for Improvement, Rehabilitation, Resurfacing and Routine Maintenance Works of Road of Sangrur - Mansa - Bathinda Contract", under PWD Punjab. According to the petitioner, the respondent and the petitioner decided to bid for the said project with certain terms and conditions. It is the case on behalf of the petitioner that the respondent, by mail dated 18.04.2012, sent a draft report for OPRC Project. According to the petitioner, thereafter, the respondent by mail dated 19.04.2012, informed the petitioner that the technical personnel will come on 23.04.2012 to check the final document of technical and pre-qualification bid and will give the presentation of Technical data and plan that was proposed to be submitted to OPRC authority. According to the petitioner, thereafter, the respondent by mail dated 20.04.2012, directed the petitioner to deposit amount of Bank Guarantee margin of Rs.45 lakhs, amount of commission of Rs.4,50,000/- and other Page 2 of 19 C/IAAP/76/2018 CAV JUDGMENT amounts totaling about Rs.50.00 lakhs in the Bank account of the respondent. According to the petitioner, thereafter, the respondent sent mail on 21.04.2012 whereby pre-bid agreement was sent and accordingly it was executed which is in the custody of the respondent. According to the petitioner on 23.04.2012, the certified copy of the Resolution of the Board of Directors of respondent held on 11.05.2006 was issued and submitted for OPRC Project. That thereafter, the respondent by mail dated 23.04.2012 sent details for RTGS transfer of funds (Rs.50 lakhs) for the Bank Guarantee and accordingly, the petitioner made the payment. It is the case on behalf of the petitioner that thereafter on 18.07.2012, query letter received from the Chief Engineer, Mohali, was provided by the respondent. It is also the case on behalf of the petitioner that thereafter, many mails / communications came to be exchanged in respect of said OPRC Project between the petitioner and the respondent. According to the petitioner, thereafter the petitioner made its analysis and site investigations for preparation of the bid for submission and the respondent submitted the bid accordingly. That on 31.08.2012, the respondent issued Letter of Intent (LoI) dated 31.08.2012 in favour of the petitioner which was issued for carrying out work of Output and Performance Based Road Contract on back Page 3 of 19 C/IAAP/76/2018 CAV JUDGMENT to back basis for a total value of Rs.521,79,04,849/- .
According to the petitioner, the said sub contract was for ten years and the petitioner accepted the said Letter of Intent and complied all terms thereof.
2.2 That thereafter, a Memorandum of Understanding dated 14.08.2012 came to be executed between the petitioner and the respondent for carrying out the work of OPRC (Asset Management Contract). According to the petitioner, thereafter on 23.10.2012, the respondent provided letter of acceptance received from the Chief Engineer (World Bank/ North-2, Public Works Department (B&R) BR-Mohali dated 22.10.2012) for the work of OPRC. That the said work order was issued by the PWD Department in the name of respondent on 27.12.2012. According to the petitioner, the respondent thereafter provided details of OPRC Project by various mails in the month of October/ November, 2012. That thereafter, on 10.12.2012, the contract agreement between the Chief Engineer (World Bank/ North-2, Public Works Department (B&R) BR-Mohali) and respondent was executed.
2.3 According to the petitioner, thereafter the petitioner purchased the plant and machineries on the Project site. Page 4 of 19 C/IAAP/76/2018 CAV JUDGMENT According to the petitioner, the respondent by mail dated 18.12.2012 sent the scanned letter for preparedness required for the OPRC Project and intimated for appointment of technical manpower. That the Bank of India, Bhillai, issued requisite guarantee for performance security in favour of the respondent on 26.12.2012 in pursuance of Contract Agreement executed on 14.08.2012 for OPRC Project. It is the case on behalf of the petitioner that thereafter on 19.02.2013, one Shri Vinay M.Shah of the respondent sent an e-mail which was forwarded to the petitioner for draft sub contract agreement. 2.4 According to the petitioner, thereafter, the petitioner executed the work at site as per the provisions of the contract. The Executive Engineer by letter dated 21.03.2013, issued the interim payment certificate for releasing Rs.2,67,46,705/- on account of the first R.A. Bill dated 15.03.2013. It is the case on behalf of the petitioner that the said first R.A. Bill dated 28.03.2013 was issued by respondent along with the mail dated 29.03.2013 for the net payable Rs.1,98,93,250/- for the work done between 05.12.2012 to 04.03.2013 admitting the work executed by the petitioner. It appears that thereafter by mail dated 29.03.2013, the respondent was provided with a copy of letter dated Page 5 of 19 C/IAAP/76/2018 CAV JUDGMENT 26.03.2013, with a request to release the payment and according to the petitioner, after much persuasion the respondent released the payment.
2.5 It is the case on behalf of the petitioner that thereafter, the petitioner carried out the work, however, except the payment after the first R.A. Bill, no payment was made by the respondent and therefore, the dispute started between the petitioner and the respondent. It is the case on behalf of the petitioner that the respondent committed to provide business worth total value of Rs.571,79,04,849/- for ten years and that as desired by respondent, the petitioner had made investments and deployed property at OPRC Project site as per requirement, however, the respondent stopped making the payment after the payment of first bill. It appears that thereafter, an FIR has been lodged against the respondents by the petitioner on 02.04.2017 for cheating.
2.6 That thereafter, the petitioner sent a notice dated 10.02.2018 and called upon the respondent to resolve the disputes as per Clause 9.1 of Article 9 of the agreement and also nominated a former Judge of the Bombay High Court, and requested the respondent to Page 6 of 19 C/IAAP/76/2018 CAV JUDGMENT appoint their Arbitrator. It appears that thereafter, the respondent replied the to the letter dated 10.02.2018 by reply dated 13.02.2018, and contended that the Contract agreement is non existing document and the reference to the same is completely misplaced and denied the arbitration agreement between the parties and stated that the respondent has no intention to inter into arbitration agreement and requested to withdraw the notice for appointment of Arbitrator. That thereafter, the petitioner vide letter dated 21.02.2018, replied to the letter dated 13.02.2018 and once again requested to appoint Arbitrator. However, as thereafter, the respondent has not agreed to refer the matter to Arbitrator and to appoint the Arbitrator, the petitioner has preferred the present petition for appointment of an Arbitrator as per Clause 9.1 of the pre-bid Memorandum of Understanding.
3. Shri K.G.Sukhwani, learned advocate has appeared on behalf of the petitioner.
3.1 Shri K.G.Sukhwani, learned advocate appearing on behalf of the petitioner has heavily relied upon Clause 9.1 of Page 7 of 19 C/IAAP/76/2018 CAV JUDGMENT the Article 9 of the MoU. It is submitted that the petitioner and the respondent have, in fact, acted upon the pre-bid agreement which is evident from the correspondences between the parties. It is submitted that even the petitioner executed the work at site as per the provisions of the contract. It is submitted that even the Executive Engineer, by letter No.1870 dated 21.03.2013, issued the interim payment certificate for releasing, Rs.2,67,46,705/- on account of the first R.A. Bill dated 15.03.2013. It is submitted that the first R.A.Bill dated 28.03.2013 was issued by the respondent along with the mail dated 29.03.2013 for the net payable Rs.1,98,93,250/- for the work done between 05.12.2012 to 04.03.2013 admitting the work executed by the petitioner. It is further submitted by Shri Sukhwani, learned advocate appearing on behalf of the petitioner that however, after the initial payment, no further payment was done by the respondent for the work carried out and/or done by the petitioner in respect of the OPRC Project. It is further submitted that even the respondent avoided to disclose the status of the petitioner as a sub-contractor and thus prevented the petitioner to coordinate the interact with the Department directly.
Page 8 of 19 C/IAAP/76/2018 CAV JUDGMENT 3.2 It is further submitted by Shri K.G.Sukhwani, learned advocate appearing on behalf of the petitioner that the respondent committed to provide business worth totally value of Rs.571,79,04,849/- for ten years. It is submitted that even as desired by the respondent, the petitioner had made investments and deployed property at OPRC Project site as per the requirement. However, the respondent stopped making the payment after payment of the first bill. It is further submitted that the petitioner had installed plant and machinery with due permission/ No Objection Certificate from the Competent Authority at the Project site. It is further submitted that as the project was allotted in the name of the respondent, taking disadvantage thereof, the respondent has not made payment of the legitimate dues of the petitioner despite there is a pre- bid agreement and post-bid Memorandum of Understanding between the parties.
3.3 It is further submitted by Shri K.G.Sukhwani, learned advocate appearing on behalf of the petitioner the respondent availed mobilization advance of Rs.35 crores from PWD, Punjab Road and Bridges Development Board. It is submitted that the respondent had given the Project on back- to back basis to the petitioner as per the pre-bid agreement Page 9 of 19 C/IAAP/76/2018 CAV JUDGMENT and MoU between the respondent and the petitioner. It is submitted that despite the above, the respondent never communicated about release of mobilization advance by the Department and never released the amount in favour of the petitioner. It is submitted that therefore, the dispute has arisen between the parties arising out of the pre-bid agreement/ post-bid MoU which is required to be resolved through arbitration.
3.4 It is further submitted by Shri K.G.Sukhwani, learned advocate appearing on behalf of the petitioner that as per Clause 6.1 of the agreement between the respondent and the PWD (B&R), Punjab, which contained the arbitration agreement and the applicant being a sub-contractor, the dispute between the petitioner and the respondent is required to be referred to arbitration.
Making above submissions and relying upon the decisions of the Hon'ble Supreme Court in the case of M/s.Unissi (India) Pvt. Ltd. v. Post-Graduate Institute of Medical Education and Research - AIR 2008 SC (Supp.) 407 and Ashapura Mine-Chem Limited v. Gujarat Mineral Development Corporation - (2015)8 SCC 193, it is Page 10 of 19 C/IAAP/76/2018 CAV JUDGMENT requested to allow the present application and appoint a sole arbitrator to resolve the dispute between the parties with respect to the pre-bid agreement and post-bid MoU.
4. Present petition is vehemently opposed by Shri Kamal Trivedi, learned Senior Advocate appearing on behalf of the respondent.
4.1 It is vehemently submitted by Shri Kamal Trivedi, learned Senior Advocate appearing on behalf of the respondent that as such, the pre-bid agreement and/or post- bid MoU are not signed by the respective parties and therefore, the same cannot be said to be a concluded contract between the parties.
4.2 It is vehemently submitted by Shri Kamal Trivedi appearing on behalf of the respondent that as such, there is no existence of an arbitration agreement between the parties which is a condition precedent for appointment of an arbitrator. It is submitted that therefore, the present petition for appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, is not maintainable in law.
Page 11 of 19 C/IAAP/76/2018 CAV JUDGMENT 4.3 It is further submitted by Shri Kamal Trivedi, learned Senior Advocate appearing on behalf of the respondent that the petitioner has relied upon Clause 9.1 of Article 9 of the pre-bid agreement / MoU dated 21.04.2012 allegedly executed between the parties. It is submitted that as such, no such agreement was ever executed between the parties. It is further submitted by Shri Kamal Trivedi, learned Senior Advocate that in Paragraph-41 of the petition, the petitioner has falsely stated that the pre-bid MoU dated 21.04.2012 allegedly executed between the parties is in the custody of the respondent. It is submitted that while responding to the petitioner's purported arbitration notice dated 10.02.2018, vide its letter dated 13.02.2018, the respondent had categorically denied existence of any arbitration agreement between the parties. It is submitted that in its further response dated 21.02.2018, the petitioner never stated that the alleged pre-bid MoU dated 21.04.2012 was actually executed nor did it provide any evidence thereof. It is submitted by Shri Kamal Trivedi, learned Senior Advocate that even the petitioner also did not state in its letter dated 13.02.2018 that the alleged pre-bid MoU dated 21.04.2012 was in exclusive possession of the respondent. It is further Page 12 of 19 C/IAAP/76/2018 CAV JUDGMENT submitted that rather, the petitioner stated in its aforesaid letter that it would produce all necessary evidence before the adjudicating authority, which has not been done. 4.4 It is further submitted by Shri Kamal Trivedi, learned Senior Advocate appearing on behalf of the respondent that even as per the petitioner's own case, the alleged pre-bid MoU dated 21.04.2012 was superseded by MoU dated 14.08.2012. It is submitted that thereafter, the alleged pre-bid MoU having been substituted and superseded, all clauses contained therein, including the arbitration clause, ceased to have any effect. It is further submitted by learned Senior Advocate that as per Clause 6.1 of the alleged pre-bid MoU dated 21.04.2012, upon execution of the detailed sub- contract agreement between the parties, said pre-bid MoU dated 21.04.2012 shall stand superseded. It is submitted that in the letter dated 10.02.2018, the petitioner had categorically stated that subsequently, i.e. after the submission of the bid, M/s.PIPL and M/s.AIL entered into a well-defined sub-contract agreement dated 14.08.2012 for the subject Project. It is submitted that therefore, even as per the petitioner's own case, the alleged pre-bid MoU dated 21.04.2012 came to an end on execution of the MoU dated 14.08.2012. It is submitted Page 13 of 19 C/IAAP/76/2018 CAV JUDGMENT that the MoU dated 14.08.2012 did not have any arbitration clause. It is submitted by learned Senior Advocate that therefore, as there is no arbitration agreement between the parties, the present petition deserves to be dismissed. 4.5 Now so far as reliance placed upon the arbitration clause contained in the contract agreement dated 10.12.2012, executed between the Chief Engineer (World Bank/ North-2, Public Works Department (B&R) BR-Mohali) and the respondent is concerned, it is submitted that such reliance is wholly misplaced and mischievous inasmuch as the petitioner was never a party to the said agreement and hence, it cannot place any reliance thereon.
Making above submissions and relying upon the decisions of the Hon'ble Supreme Court in the case of Sharma And Associates Contractors Private Limited v. progressive Constructions Limited - (2017)5 SCC 743 and Elite Engineering And Construction (Hyderabad) Private Limited v. Techtrans Construction India Private Limited - (2018)4 SCC 281, it is requested to dismiss the present petition.
Page 14 of 19 C/IAAP/76/2018 CAV JUDGMENT
5. Heard learned counsel appearing on behalf of the respective parties at length. At the outset, it is required to be noted that the present petition under Section 11 of the Arbitration and Conciliation Act, 1996, has been preferred by the petitioner herein to appoint an arbitrator to resolve the dispute between the parties invoking the arbitration clause contained in the pre-bid agreement dated 21.04.2012 and the arbitration clause contained in agreement dated 10.12.2012 executed between the respondent and PWD (B&R), Punjab. It is required to be noted that Clause 9.2 of the pre-bid agreement does contain the arbitration clause. However, the subsequent post-bid MoU/ agreement 14.08.2012 does not contain any arbitration clause. The original pre-bid agreement dated 21.04.2012 alleged to have been executed between the petitioner and the respondent is not forthcoming. The respondent has specifically denied execution of any such pre- bid agreement. Even the copy of the pre-bid agreement which is produced on record does not contain the signatures of the parties. Therefore, as such, execution of pre-bid agreement itself is seriously in doubt/ disputed. Even assuming that such pre-bid agreement was executed, in that case also, as per Clause 6.1 of the pre-bid MoU dated 21.04.2012, on coming into existence the subsequent MoU dated 14.08.2012, the pre- Page 15 of 19 C/IAAP/76/2018 CAV JUDGMENT bid MoU dated 21.04.2012 stands superseded and consequently all the clauses contained therein, including the arbitration clause, cease to have effect. Clause 6.1 of the pre- bid MoU (alleged) dated 21.04.2012 reads as under:-
"6.1 This Agreement shall, unless extended by written mutual agreement of the Parties, terminate upon the first of any of the following to occur:
(a) rejection of the Authority of the Tender submitted by Contractor;
(b) award of the Contract to a third party;
(c) execution of the detailed subcontract
agreement between the parties;
(d) upon the mutual agreement of the
Parties to terminate."
Admittedly, the MoU dated 14.08.2012 does not contain any arbitration clause. Existence of an arbitration agreement is a condition precedent for appointment of an arbitrator. Section 11 of the Arbitration and Conciliation Act presupposes existence of a validly executed arbitration agreement between the parties. According to the petitioner, after the alleged pre-bid MoU dated 21.04.2012, the parties entered into a sub-contract agreement / MoU dated 14.08.2012 for the subject Project. Even according to the petitioner and so stated in the letter dated 10.02.2018, the Page 16 of 19 C/IAAP/76/2018 CAV JUDGMENT petitioner and the respondent entered into MoU dated 21.04.2012 with certain terms and conditions for participating in the tender process. According to the petitioner, accordingly, the bid was submitted in the name of M/s.PIPL (respondent herein). According to the petitioner, subsequently, i.e. after submission of the bid, the petitioner and the respondent entered into a well-defined sub-contract agreement (MoU) dated 14.08.2012 for the subject Project. Therefore, as per Clause 6.1 of the pre-bid MoU dated 21.04.2012, on execution of the detailed sub-contract agreement between the parties, the so-called MoU dated 21.04.2012 shall stand terminated and the same can be said to have been superseded and/or substituted. As observed hereinabove, the MoU dated 14.08.2012 does not contain any arbitration clause. Therefore, in absence of any arbitration clause in the subsequent sub-
contract agreement dated 14.08.2012, the present petition for appointment of an arbitrator under Section 11 of the Act deserves to be dismissed.
6. Now so far as reliance placed upon Clause 6.1 of the agreement between the respondent and PWD (B&R), Punjab, is concerned, the petitioner cannot rely upon the same as the petitioner is not a party to the said agreement. Page 17 of 19 C/IAAP/76/2018 CAV JUDGMENT
7. Insofar as reliance placed upon the decision of the Hon'ble Supreme Court in the case of M/s.Unissi (India) Pvt. Ltd. v. Post-Graduate Institute of Medical Education and Research (supra) relied upon by learned counsel appearing on behalf of the petitioner is concerned, on facts, the said decision shall not be applicable. In the said decision, on facts, the Hon'ble Supreme Court observed that where the tender is submitted by the supplier, accepted by Principal; supply of material is made and accepted by Principal, the existence of arbitration agreement cannot be doubted and the appointment of an arbitrator cannot be refused on the ground that no formal agreement was executed between the parties. 7.1 Now so far as reliance placed upon the decision of the Hon'ble Supreme Court in the case of Ashapura Mine- Chem Limited v. Gujarat Mineral Development Corporation (supra), relied upon by learned advocate for the petitioner is concerned, the said decision also shall not be applicable to the facts of the case on hand. On facts, it was held therein that the arbitration clause contained in the MoU is an independent arbitration agreement and, even if MoU is terminated, arbitration agreement continues to remain and Page 18 of 19 C/IAAP/76/2018 CAV JUDGMENT parties are entitled to invoke the said clause and exercise option for appointment of an arbitrator.
8. In view of the above and for the reasons stated above and in absence of any arbitration agreement between the parties, more particularly, with respect to post-bid agreement dated 14.08.2012, and in absence of existence of any arbitration agreement between the parties, the present petition under Section 11 of the Arbitration and Conciliation Act deserves to be dismissed and it is accordingly dismissed.
sd/-
(M.R. SHAH, J) sunil Page 19 of 19