Andhra HC (Pre-Telangana)
Stup Consultants Pvt. Ltd. vs Soham Engineering Constructions on 5 February, 2008
Equivalent citations: 2008(2)ALT581
ORDER V.V.S. Rao, J.
1. This application is filed under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (the Act brevity), seeking appointment of arbitrator to resolve the dispute between the applicant and the respondent.
2. The applicant is Consultancy Company. It offers consultancy for civil and structural engineering, architectural engineering and project management. The respondent, which is a construction firm, is in the business of civil/building contract. They desired to have designed consultancy services of the applicant. Discussions were held. Pursuant thereto, the applicant made an offer to provide consultancy services for construction of flyovers at (a) Telugu Talli Statue Junction; (b) Ambedkar Statue Junction and (c) Basheerbagh Junction. The offer also contained details of number of post tender services and consultancy charges therefor. The offer was also subject to "other terms and conditions" appended to the letter of offer as Annexure-I. Condition No. 10 thereof provided that in case of dispute, it shall be referred to a sole arbitrator accepted by both the parties, failing which, to two arbitrators one each appointed by either party and resolved as per Arbitration Act, 1940 (1940 Act, for brevity). The applicant alleges that the respondent accepted the offer by their letter dated 17-10-1996 and thus there resulted the concluded contract between the parties.
3. After performing their part, the applicant requested for payment for the work done. The applicant also alleges that the billing was done as per the contract and the services rendered at agreed stages and total amount works out to Rs. 68,28,213/-. The respondent paid a sum of Rs. 31,81,909/- from time to time including tax deducted at source and the balance amount of Rs. 36,46,304/- was not paid in spite of reminders. Therefore, the applicant invoked arbitration clause and suggested the names of two arbitrators. As there was no response, the applicant again sent a letter dated 30-11-2006 suggesting a sole arbitrator: Thereafter, the present application is filed.
4. The respondent filed counter opposing the appointment of arbitrator. The grounds of opposition are as follows. The offer of the applicant dated 1-4-1996 to provide consultancy services with terms and conditions as stipulated by them, was not accepted by the respondent through letter dated 17-10-1996. In the respondent's letter dated 17-10-1996, there is no mention of arbitration and therefore, the respondent did not accept the condition set out in the offer letter dated 1-4-1996. Alternatively, even if it is assumed that there is arbitration agreement in the Annexure to the offer letter dated 1-4-1996, the same cannot be given effect to as it refers the 1940 Act which is repealed by new Act, and therefore, such clause is void. The applicant has filed reply affidavit adverting to various counter allegations.
5. Learned Counsel for the respondent placed reliance on Thyssen Stahlunion GMBH v. Steel Authority of lndia Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. , SBP & Co. v. Patel Engineering Ltd. 2005 (7) SCJ 461 : 2005 (6) ALT 37.1 (DN SC) : (2005) 8 SCC 618 and Rajan Kumar Verma v. Sachchidanand Singh , in support of the contention that if the arbitration clause provides for arbitration under 1940 Act, such a clause cannot be enforced and that unless and until conditions of offer are categorically accepted by the respondent, the arbitration clause cannot be enforced.
6. Two questions would arise for prima facie consideration. (1) Whether there is no arbitration agreement/arbitration clause in the agreement between the parties; and (2) whether arbitration clause in the terms and conditions attached to the letter of offer of the applicant cannot be enforced as it refers to 1940 Act?
7. The examination of the first point need not detain us any longer. It is admitted fact that after discussions between the applicant and the respondent, the former offered consultancy services for construction of three flyovers by their letter dated 1-4-1996. The terms of offer are also subject to other conditions annexed thereto. There is also no dispute that Clause 10 provides for arbitration. After receiving the letter of offer dated 1-4-1996 the respondent sent a communication dated 17-10-1996 accepting the offer for consultancy services. It was mentioned therein that "the terms of consultancy will be as indicated". These conditions provide and deal with modalities for payment and there was no demur whatsoever with regard to other terms and conditions. This Court, however, hastens to add that whether there is an arbitration clause or whether such arbitration clause/agreement can be culled out from the correspondence between the parties leading to concluded contract is itself a question which falls for consideration before the arbitrator under Section 16 of the Act. Therefore, the first objection has to be overruled.
8. This Court also does not find any merit in the second contention, which is the other point for consideration. It is no doubt true that Clause 10 or condition 10 of Annexure-I to letter of offer dated 1-4-2006 stipulates that the dispute shall be referred to a sole arbitrator failing which to two arbitrators each appointed by either party and resolved as per 1940 Act. This offer was made on 1-4-1996 when the Act had not come into force. Even if it refers to such a question, the same does not seize (sic. cease) to have validity or enforceability. The reasons are as follows. Section 85 of the Act repealed 1940 Act. There is no dispute that the Act has come into force by reason of the notification issued by the Central Government on 22-8-1996. Under Section 85(2)(a) of the Act the repeal of 1940 Act has no effect if arbitral proceedings commenced before coming into force of the Act. Even in such a case, the parties to arbitration can agree that the arbitral proceedings shall be governed by the Act. In addition to this, all the proceedings, which commence on or after coming into force of the Act shall be governed by the Act alone. This means even if arbitration clause contemplates the proceedings under 1940 Act, if the arbitral proceedings commenced after 22-8-1996 when the new Act came into force, such proceedings shall be governed by the new Act only. The Act nowhere renders such clause unenforceable or invalid. Indeed, Section 85(2)(a) of the Act clarifies the position that arbitral proceedings commenced after coming into force of the Act pursuant to arbitration agreement prior to coming into force of the Act shall be governed by the provisions of the new Act alone.
9. Reliance was placed by the learned Counsel on the decision of the Supreme Court in Thyssen Stahlunion GMBH (1 supra). In the said case the Supreme Court interpreted Section 85 of the Act in the background of an arbitration award given on 24-9-1997 pursuant to arbitral proceedings taken out under 1940 Act. Insofar as Section 85(2)(a) of the Act is concerned, the Supreme Court laid down as below.
Section 85(2)(a) is the saving clause. It exempts the old Act from complete obliteration so far as pending arbitration proceedings are concerned. That would include saving of whole of the old Act up till the time of the enforcement of the award. This (sic. Thus) Section 85(2)(a) prevents the accrued right under the old Act from being affected. Saving provision preserves the existing right accrued under the old Act. There is a presumption that the legislature does not intend to limit or take away vested rights unless the language clearly points to the contrary. It is correct that the new Act is a remedial statute and, therefore, Section 85(2)(a) calls for a strict construction, it being a repealing provision. But then as stated above where one interpretation would produce an unjust or an inconvenient result and another would not have those effects, there is then also a presumption in favour of the latter.
10. In Fuerst Day Lawson Ltd. (2 supra) the Supreme Court considered the legal issue as to the date of commencement of the Act. Having regard to the fact that the Act was preceded by an Ordinance with effect from 25-1-1996, the Supreme Court held that though the Act was notified in the Gazette by the Central Government on 22-8-1996 for the purpose of enforcement of foreign award, it shall be deemed to have been effective from 25-1-1996. The relevant observations made by the Supreme Court are as below.
From the plain and literal reading of the said provision and the Gazette Notification, it is clear that the Act came into force on 22-8-1996. But the purposive reading would show that the Act came into force in continuation of the first Ordinance which was brought into force on 25-1-1996. This makes the position clear that although the Act came into force on 22-8-1996, for all practical and legal purposes it shall be deemed to have been effective from 25-1-1996 particularly when the provisions of the Ordinance and the Act are similar and there is nothing in the Act to the contrary so as to make the Ordinance ineffective as to either its coming into force on 25-1-1996 or its continuation up to 22-8-1996. Thus we conclude that the Act was brought into force with effect from 22-8-1996 vide Notification No. G.S.R. 375 (E) dated 22-8-1996 published in the Gazette of India and that the Act being a continuation of the Ordinance is deemed to have been effective from 25-1-1996 when the first Ordinance came into force.
11. Even the ratio in the above two judgments does not in any manner bar arbitrator between the parties. As already mentioned whether the arbitration clause exists is itself a question for arbitration and while considering these issues under Section 11(6) of the Act this Court is precluded from bestowing objective consideration. On subjective consideration of the matter this Court is convinced that an arbitrable dispute exists between the parties.
12. Accordingly this application is allowed, and Hon'ble Sri Justice I. Venkatanarayana, retired Judge of this Court is appointed as arbitrator to adjudicate the dispute between the parties. It shall be open to the parties to raise all objections before the learned arbitrator. It shall be open to the learned arbitrator to fix the fees and other incidental expenses as are deemed fit and proper.