Karnataka High Court
M/S Balaji Builders vs Union Of India Rep By on 15 June, 2012
Equivalent citations: 2013 (3) AKR 543
Author: Ajit J Gunjal
Bench: Ajit J Gunjal
1
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 15TH DAY OF JUNE 2012
BEFORE
THE HON'BLE MR. JUSTICE AJIT J GUNJAL
C.M.P.NO.93 OF 2011
BETWEEN:
M/S BALAJI BUILDERS
NO.21, 4TH CROSS, 5TH BLOCK
3RD PHASE, BSK 3RD STAGE
BANGALORE - 560 085.
REPRESENTED BY ITS PARNTER
SRI.VASUDEV NAIDU
...PETITIONER
(BY. SRI.SAMPAT BAPAT, ADV.)
AND:
UNION OF INDIA
REPRESENTED BY
1. THE CHIEF ADMINISTRATIVE OFFICER (CONST.)
SOUTH WESTERN RAILWAY
18 MILLERS ROAD,
BANGALORE - 560 046.
2. THE CHIEF ENGINEER (CONST./EAST)
SOUTH WESTERN RAILWAY
18, MILLERS ROAD
BANGALORE - 560 046.
3. THE GENERAL MANAGER
SOUTH WESTERN RAILWAY
CLUB ROAD, KESHWAPUR
HUBLI
4. THE DY. CHIEF ENGINEER IV
CONSTRUCTION
2
CLUB ROAD, KESHWAPUR
HUBLI. ...RESPONDENTS
(BY SMT.H.C.KAVITHA. S.GP. FOR R1 TO R4)
*****
THIS CMP IS FILED UNDER SEC 11(6) OF THE
ARBITRATION AND CONCILIATION ACT, 1996 WITH A
PRAYER TO APPOINT A SOLE ARBITRATOR TO RESOLVE
THE DISPUTES AND OUTSTANDING RESOLVE THE
DISPUTES AND OUTSTANDING ISSUES BETWEEN THE
PARTIES IN ACCORDANCE WITH THE PROVISIONS OF
AGREEMENT BEARING NO.CAO/CN/BNC/72812/
A358/VI/08 DATED 23.06.2008, IN THE INTEREST OF
JUSTICE AND EQUIRY.
THIS C.M.P. COMING ON FOR ADMISSION THIS DAY
THE COURT MADE THE FOLLOWING:
ORDER
This petition is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996.
2. The facts leading to filing of this petition cannot be summarized as follows:
The respondent No.1 called for tenders for construction of 42548 Hospet ROH Shed, Infrastructure M & P Facility overhauling, Guntakal Section. Proposed Construction of ROH steel covered shed of size approximately 30mx50m BOX N Wagons and other related miscellaneous works. In response to the said 3 tender notice the petitioner submitted its tender on 9.10.2007 and the same was accepted by respondent No.1 through the letter of acceptance. A copy of which is produced at Annexure-B.
3. Suffice it to note that the entire project was to be completed on or before 28.8.2010 i.e., within a period of six months from the date of acceptance of the tender. It is noticed that there were five extensions. Four extensions without penalty and one extension was with penalty of `.1,00,000/-.
4. It is the case of the petitioner that he completed the said work within the extended period. The petitioner was required to submit his final bill and sought for release of security deposit and other amounts, which he was entitled to. The petitioner was also required to give a no claim certificate, which according to the petitioner was given. The respondent No.3 accepted the bill, but however, declined to grant certain reliefs, which are in the nature of claims and damages. The petitioner issued a notice on 21.2.2011 4 invoking the arbitral clause at Clause 64 of the General Conditions of the Contract to resolve the dispute between the parties. It is the case of the petitioner that the said notice was issued under Clause 63 of the General Conditions of the Contract. The said request for referring the matter to the arbitral Tribunal was rejected pursuant to Annexure-J.
5. The respondent No.3 would press into service Clause 43 (2) of the General Conditions Contract wherein according to the respondent No.3 once a no claim certificate in favour of the Railway is given the question of referring the matter to the Arbitrator for adjudication does not arise. Hence, the request of the petitioner for Arbitration was rejected. Hence, the petitioner is before this Court.
6. The learned counsel appearing for the petitioner vehemently submits that after the no claim certificate has been given the clause envisages that no fresh claim will be made. But the said clause does not debar from seeking dispute referred to the Arbitral Tribunal where 5 the claim made in the original bill is denied. The alternate contention raised by him is that before the final bill could be finalized the petitioner had lodged the claim for damages. He would press into service Clause 64 (1) (iv).
7. The learned counsel appearing for the Railways submits that indeed, no claim could be entertained if a no claim certificate has been given, which would necessarily mean that other than the final bill there is no other claim. In the circumstances she justifies the rejection of the request of the petitioner for arbitral dispute. Another alternate contention of hers is that Clause 63 with reference to settlement of dispute indicates that it is within the domain of the Railways to appoint a panel of Arbitrators and decide the dispute and it would fall within the excepted matters i.e., which is not arbitral.
8. I have given my anxious consideration to the submissions made by the learned counsel appearing for the parties.
6
9. Indeed, the moot question would be whether this Court can entertain a petition under Section 11 (6) of the Act for appointing an Arbitrator. More so, when the General Conditions of the Contract viz., Clause 64 envisages a panel of Arbitrators are required to be appointed by the respondent. This specific question has been answered by the Apex Court in the case of M/s Dakshin shlters P.Ltd. vs. Geeta S.Johari reported in AIR 2012 SUPREME COURT 1875 wherein the Apex Court following the earlier ruling in the case of Union of India vs. Bharat Battery Manufacuring Co. Pvt. Ltd. reported in 2007 (7) SCC 684 has observed thus:
"From the above response, it is clear that the petitioner declined to appoint its arbitrator as according to it there was no question of appointment of arbitrator by either of the parties and there being no arbitral dispute, there was no occasion for resolution of dispute as provided in the Development Agreement. The stance of the petitioner amounted to failure on its part to appoint its arbitrator on receipt of the request to do so from the respondent.7
In view of the above, it cannot be said that the Designate Judge committed any error in nominating Mr.D.V.Seetharama Murthy, Sr. Advocate as an arbitrator on behalf of the petitioner. The order of the learned Single Judge is in conformity with the decision of this Court in Bharat Battery Manufacturing Co. (P) Ltd., wherein this Court stated as follows:
Once a party files an application under Section 11(6) of the Act, the other party extinguishes its right to appoint an arbitrator in terms of the clause of the agreement thereafter. The right to appoint arbitrator under the clause of agreement ceases after Section 11(6) petition has been filed by the other party before the Court seeking appointment of an Arbitrator The petitioner's right to appoint its arbitrator in terms of clause 25 of the Development Agreement got extinguished once it failed to appoint the arbitrator on receipt of the notice dated December 10, 2010. There is no merit in the submission of the learned senior counsel for the petitioner that the Designate Judge ought to have 8 given an opportunity to the petitioner to nominate its arbitrator."
10. It is also to be noticed that the Apex Court in the case of National Insurance Company Limited vs. Boghara Polyfab Private Limited reported in (2009) 1 SCC 267 with reference to Section 11 has observed thus:
22. Where the intervention of the Court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide;
(ii) issues which he can also decide, that is, issues which he may choose to decide; and
(iii) issues which should be left to the Arbitral Tribunal to decide.
22.1. The issues (first category) which the Chief Justice/his designate will have to decide are:
9
(a) Whether the party making the
application has approached the
appropriate High Court.
(b) Whether there is an arbitration
agreement and whether the party
who has applied under Section 11 of the Act, is a party to such an agreement.
22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead (long-
barred) claim or a live claim.
(b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection.
22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are:
(i) Whether a claim made falls within the arbitration clause (as for 10 example, a matter, which is reserved for final decision of a departmental authority and excepted or excluded from arbitration).
(ii) Merits or any claim invoked in the arbitration.
11. The Apex Court in the case of Union of India vs. M/s Bharath Battery Manufacturing Co. (P) Ltd., reported in 2007 (10) SC 133 citing the decision in the case of Datar Switchgears Ltd. vs. Tata Finance Ltd. and Another reported in (2000) 8 SCC 151 has observed thus:
"So far as cases failing under Section 11 (6) are concerned - such as the one before us no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11 (4) and Section 11 (5) of the Act. In our view, therefore, so far as Section 11 (6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get 11 automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court under Section 11, that would be sufficient. In other words, in cases arising under Section 11 (6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand the right to appoint an arbitrator under Section 11 (6) is forfeited."
12. In the case on hand, it is to be noticed that the petitioner had invoked the arbitral clause and had issued a notice. The said notice has been responded and respondent No.3 has declined to refer the matter for arbitration. In these circumstances, I am of the view that the present petition is maintainable and it is not 12 open for the respondents now to suggest that they would appoint a panel of arbitrators.
13. It is also to be noticed that once the General Manager of the railways has declined to entertain the claim of the petitioner on the ground that the petitioner has given a no claim certificate any subsequent claim itself is barred, hence declined to refer the matter to the Arbitrator.
14. It is submitted at the bar by the learned counsel appearing for respondent No.3 that the panel of Arbitrators sought to be suggested are none other than the three Arbitrators who are as follows:
(i) Engineers & Accountant
(ii) Indian Railway Engineering Service
(iii) Indian Railway Accountancy Service
15. Apparently all the three persons who are sought to be appointed as Arbitrators are subordinates and are working under respondent No.3-General Manager.
13
16. Insofar as the apprehension of the petitioner that the entire arbitral proceeding will be at force cannot be discounted. If any decision is required one can refer to the case of Denel (Proprietary) Limited vs. Government of India, Ministry of Defence reported in 2012 (1) ARB. LR 99 (SC) wherein the Apex Court has observed thus:
".............The attitude of the respondent towards the proceedings is not indicative of an impartial approach. In fact, the mandate of the earlier arbitrator was terminated on the material produced before the court, which indicated that the arbitrator was biased in favour of the Union of India. In the present case also, learned senior counsel for the petitioner has made a reference to various notices issued by the arbitrator, none of which was received by the petitioner within time. Therefore, the petitioner was effectively denied the opportunity to present his case before the sole arbitrator. Therefore, the apprehensions of the petitioner cannot be said to be without any basis."14
17. The Apex Court in the case of Danel (Proprietary) Limited vs. Bharat Electronics Limited and Another reported in (2010) 6 SCC 394 has observed thus:
"21. However, considering the peculiar conditions in the present case, whereby the arbitrator sought to be appointed under the arbitration clause, is the Managing Director of the Company against whom the dispute is raised (the respondents). In addition to that, the said Managing Director of Bharat Electronics Ltd., which is a "government company", is also bound by the direction/instruction issued by his superior authorities. It is also the case of the respondent in the reply to the notice issued by the respondent, though it is liable to pay the amount due under the purchase orders, it is not in a position to settle the dues only because of the directions issued by the Ministry of Defence, Government of India. It only shows that the Managing Director may not be in a position to independently decide the dispute between the parties."15
18. Insofar as after giving the no claims certificate whether any fresh claim could be lodged, it is noticed that it is for the Arbitrator to decide as observed by the Supreme Court in the case of National Insurance Company Limited vs. Boghara Polyfab Private Limited reported in (2009) 1 SCC 267 that once a no claim certificate has been given whether the claim of the petitioner could be adjudicated. Having said so, I am of the view that the dispute inter se between the petitioner and the respondent is required to be resolved by appointing an Arbitrator. Needless to say that it is always open for the Arbitrator to take assistance of an expert. Hence, the following order is passed:
(i) Petition is allowed.
(ii) Justice R. Gururajan, Former Judge of this Court (Address: "Sree Harikrupa"
No.504, 5th Floor, Sri. Chitrapur Housing Co-operative Society Ltd., 15th Cross, Malleswaram, Bangalore - 560
003) is appointed as sole arbitrator to resolve the dispute between the parties.16
(iii) The sole arbitrator shall enter reference and cause notice to the parties.
(iv) The registry to communicate this order to the sole arbitrator along with the addresses of the parties as well as the counsel appearing for them.
SD/-
JUDGE SS