Gujarat High Court
Classic Network Ltd vs Union Of India Through on 3 May, 2013
Author: Akil Kureshi
Bench: Akil Kureshi
CLASSIC NETWORK LTD....Petitioner(s)V/SUNION OF INDIA THROUGH CHAIRMAN / MANAGING DIRECTOR O/IAAP/78/2009 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD PETN. UNDER ARBITRATION ACT NO. 78 of 2009 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE AKIL KURESHI ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ CLASSIC NETWORK LTD....Petitioner(s) Versus UNION OF INDIA THROUGH CHAIRMAN / MANAGING DIRECTOR & 2....Respondent(s) ================================================================ Appearance: MR HK PARMAR, ADVOCATE for the Petitioner(s) No. 1 DELETED for the Respondent(s) No. 2 MR JV MEHTA, ADVOCATE for the Respondent(s) No. 1 , 3 MS KRISHNA B MEHTA, ADVOCATE for the Respondent(s) No. 1 , 3 ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI Date : 03/05/2013 ORAL JUDGMENT
This petition was heard earlier. Today it is kept for passing the order. The petitioner is a company registered under the Companies Act. The petition is filed seeking to invoke the provisions of section 11(6) of the Arbitration and Conciliation Act,1996 ( the Act for short) for appointment of a sole arbitrator to resolve the disputes between the parties arising out of contract dated 31.8.2000.
Briefly stated, facts are as under. The petitioner company is engaged in the business of executing engineering contracts. The agreement was entered into between the company called CLASSIC CONSTRUCTION LTD and the respondents for execution of certain engineering works. It is not in dispute that the work order pursuant to such work order was also issued on 11.9.2000. It is the case of the petitioner that during the course of execution of such work, the company CLASSIC CONSTRUCTION CO merged into company called CLASSIC NETWORK LTD by virtue of Memorandum of Association dated 7.3.2002. By further resolution also dated 7.3.2002, CLASSIC NETWORK LTD was converted into public limited company with effect from 20.3.2002. During the course of execution of works contract, various disputes surfaced between the parties. It is the case of the petitioner that due to various reasons attributable to the respondents, the execution of the work got delayed. According to the petitioner, such reasons were inability of the respondents to obtain prior permissions from various authorities, delay in supplying HDPE pipes and such other similar reasons. It is also the case of the petitioner that due to devastating earthquake in Kutch region which took place on 26.1.2001, the labour force required to execute the work was not available which also contributed to further delay.
Case of the petitioner is that the respondents withheld a sum of Rs.12,29,223/- wholly illegally. The petitioner raised a claim of Rs.50,56,434/- with the respondents under a notice dated 1.12.2007. In such notice the petitioner elaborated such claim under various heads as under :
Claim No. Claim Amount Particulars Claim No.1 Rs.12,28,223/-
On account of refund of amount illegally and arbitrarily deducted from R.A. bill and final bill Claim No.2 Rs.25,42,876/-
On account of compensation for the damages caused due to extra expenses incurred on various overheads and also due to loss of profit due to prolongation of work.
Claim No.3 Rs.12,84,335/-
On account of compensation for the damages caused due interest loss due to illegal deductions of Rs.12,29,223/-
Claim No.4 On account of interest at 18% p.a. on all the above claims from due date/till realization.
Total Rs.50,56,434/-
Plus interest as per claim No.4 above.
In such notice, the petitioner also conveyed that the said sum of Rs.50,56,434/- be paid with interest at the rate of 18% p.a. and that the claim be settled within 30 days from the date of receipt of notice failing which the petitioner would request for appointment of sole arbitrator as per the arbitration clause contained in agreement between the parties.
In reply to such notice issued by the petitioner, the respondents replied under a communication dated 26.12.2007. It was mainly contended that the respondents have no relation or privity of contract with the petitioner. It was also contended that the petitioner therefore, had no right to issue such a notice.
Further correspondence ensued between the parties. For the purpose of this order, however, it is not necessary to take note of such exchanges. Suffice it to record that finally on 10.1.2008, the petitioner addressed a notice to the respondents calling upon the respondents to appoint an arbitrator as per condition no.4 of the agreement by choosing one of the three names suggested of retired Judges of this Court suggested by the petitioner. It was conveyed that if the respondents failed to do so, the petitioner would move the Chief Justice of the Gujarat High Court under section 11(6) of the Act. To such notice the respondents responded under a letter dated 23.1.2008 and opposed the request for appointment of arbitrator.
The petitioner thereupon filed Arbitration Petition No.30/2008. Same was however, disposed of by order dated 26.12.2008 observing that :
Without expressing any opinion with respect to the same as prima-facie it appears that there is no contract between the petitioner - M/s. Classic Network Ltd. and the ITI Limited, there is no question of appointment of Arbitrator to resolve the dispute with respect to the agreement dated 31.08.2000. Still it will be open for the applicant to submit application afresh with full particulars and details whether the applicant has derived any right with respect to agreement dated 31.08.2000 or not. As and when such an application is made, same shall be considered in accordance with law and on merits. With these, present Petition is dismissed.
Case of the petitioner thus in the nutshell is that there was a valid arbitration clause in the agreement between the parties. Disputes have arisen. Respondents have failed to concur with the choice of arbitrator. The petition is therefore, required to be allowed.
On the other hand, the respondents have opposed the petition filing a detailed reply contending that there is no privity of contract between the present petitioner and the respondents. They doubt the veracity of the merger documents and conversion of company into a public limited company. They have also raised the ground of limitation. They have contended that claims are not valid.
Respondents raised the following contentions for opposing the appointment of arbitrator :
1) That previously the petitioner had approached the Chief Justice for the same purpose. Arbitration petition was dismissed. Therefore, petition would not be maintainable.
2) There is no privity of contract between the petitioner and the respondents and there is thus no binding agreement between the parties and even other-wise documents of merger are not reliable.
3) That the petitioner had accepted several payments without any protest.
No dispute survives. Reference to arbitration therefore, is not necessary.
4) The claims are barred by limitation and at such a belated stage, such reference to arbitrator may not be made.
Before dealing with such contentions, it may be noted that agreement dated 31.8.2000 contained an arbitration agreement in the following manner :
4. In the event of any dispute arising in connection with this contract, it is further agreed that such dispute shall be referred to the sole arbitration of an Engineer/Officer to be appointed by the Chairman/Managing Director of the Company.
In view of such arbitration clause, we may examine the respondents objections. Regarding the petitioner s previous approach for the same purpose, it is apparent from the order previously passed that such petition was dismissed granting liberty to apply again with full particulars and details whether the petitioner derived any right with respect to agreement dated 31.8.2000. The fresh petition was therefore not precluded.
It is not in dispute that M/s. CLASSIC CONSTRUCTION CO. did enter into the said agreement dated 31.8.2000 with the respondents. Pursuant to such agreement, work order was also issued. From the documents produced by the petitioner, it emerges that under an agreement dated 7.3.2002, M/s. CLASSIC CONSTRUCTION CO. MERGED INTO M/s. CLASSIC NETWORK LTD. In the memorandum of Association of Articles of M/s. CLASSIC NETWORK LTD., it was provided as under :
The business assets, capital and liabilities of M/S. CLASSIC CONSTRUCTION CO. shall become the property of the company and having regard to the obligations imposed on the company by these presents would be taken at their net book value (i.e. total assets less total liabilities) on and from the date of the incorporation of the company.
Thus at the time of merger of the company, it was clearly envisaged that business assets, capital and liabilities of M/s. CLASSIC CONSTRUCTION CO. will become the property of the company.
By virtue of such clause, the petitioner s company i.e. M/s. CLASSIC NETWORK LTD would become successor of erstwhile company M/s. CLASSIC CONSTRUCTION CO. Clause(4) of the agreement pertaining to arbitration agreement, therefore, would apply to the petitioner also.
Though the respondents have taken a ground of genuineness of such merger, etc., from the record, it emerges that in response to the petitioner s notice dated 1.12.2007 when the respondents replied under communication dated 26.12.2007, no such stand was taken. Even other-wise I have no reason to disbelieve the documents produced before me particularly, when ultimately shortly after merger, the petitioner s CLASSIC NETWORK LTD was converted into a public limited company, whose all records would be with the Registrar of Companies. Though I do find that in letter dated 23.1.2008, the respondents did assert that M/s. CLASSIC NETWORK LTD.
has no right to issue a notice since it was not that company which was awarded any work contract by the respondents.
With respect to respondents objection for acceptance of bills without protest, I notice that none of the bills, payments of which were made by the respondents indicate that such bills were in the nature of final bills or that the payments were received by way of full and final settlement of all claims. Documents produced show that the payments were of the running bills. At no stage, the petitioner had accepted any amount by way of full and final amount of settlement of all dues.
With respect to question of limitation, insofar as the present arbitration petition is concerned, ex-facie, it is not beyond the period of limitation. The notice for appointment of arbitrator was issued on 10.1.2008. Right to move the petition for appointment of arbitration would accrue after 30 days of such notice. The petition which was filed in the year 2009 was well within the period of limitation of three years. Regarding the claims themselves being barred by limitation, it is by now well settled that the Chief Justice or his designatee may if claims sought to be raised are hopelessly barred by limitation, refuse to make a reference. However, if such aspects are not clearly emerging from the record, it would also be open to the designatee of the Chief Justice to make a reference to the arbitrator keeping the question of limitation open. In the present case, there was detailed correspondence between the parties. The work execution got delayed due to various reasons for which both sides blame each other. The respondents have not produced any settlement of final bills. It can therefore, be not stated that the claims are ex-facie beyond limitation.
Under the circumstances, I request Shri Akshay H. Mehta, retired Judge of this Court, to Act as a sole arbitrator to resolve the disputes between the parties arising out of agreement dated 31.8.2000. It is clarified that question of limitation with respect to claims raised is kept open to be judged by the learned arbitrator.
Arbitration petition is disposed of accordingly.
(AKIL KURESHI, J.) raghu Page 10 of 10