Madhya Pradesh High Court
M/S Seth Mohanlal Hiralal Construction ... vs Union Of India on 29 November, 2018
1 AC No.117/2017 & AC No.45/2018
HIGH COURT OF MADHYA PRADESH BENCH AT
INDORE
(S.B.: HON. SHRI JUSTICE PRAKASH SHRIVASTAVA)
ARBITRATION CASE NO.117/2017
&
ARBITRATION NO.45/2018
M/s.Seth Mohanlal Hiralal Construction Company
.... APPLICANT
Vs.
Union of India through General Manager
Western Railway & another
.... RESPONDENTS
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For applicant: Shri R.C.somani, learned counsel.
For respondents: Shri Amitabh Upadhyay, learned counsel.
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ORDER
(Passed on 29th November, 2018) Both these Arbitration Cases are decided by this common order since it is jointly submitted by learned counsel for parties that both these arbitration cases involve same issue on the identical fact situation. [2] For convenience the facts have been noted from arbitration case No.117/2017.
[3] This arbitration case has been filed u/S.11(6) and 11(8) of the Arbitration and Conciliation Act, 1996 for appointment of independent arbitrator for resolving the dispute between the parties.
2 AC No.117/2017 & AC No.45/2018[4] The case of the applicant is that he was awarded contract by the respondent for work of Providing LHS by launching of precast RCC box segment vide agreement dated 28/1/2013 and order dated 23/10/2012. The work was completed on 30th June, 2016 and final bill was submitted and thereafter the communication dated 18/5/2017 was sent to the respondent No.2 requesting to include certain amount which were not included in the final bill. Then again the request was made on 4/9/2017 and 12/8/2017 and thereafter the letter dated 1/10/2017 was sent by the applicant to the respondent No.1 for referring the matter to the arbitral tribunal in terms of General Conditions of Contract 64 (Amended) 2016 and since the matter was not referred to the arbitral tribunal, therefore, the present arbitration case has been filed. [5] The respondents have filed the reply opposing the prayer and taking the stand that the dispute is not referable to the arbitrator in terms of the relevant clauses of the agreement and that final settlement has already been made.
[6] Learned counsel for applicant submits that in terms of the amended Sec.11(6A) of the Act, only the arbitration agreement is to be looked into and that clause relating to referring the claim of less than 20% of the award amount is not a part of the arbitration clause, therefore, the application cannot be dismissed on this ground. [7] As against this, learned counsel for respondents has submitted that the claim which the applicant is raising is more than 20% of value of the contract, therefore, the dispute is not referable to the arbitrator as per the 3 AC No.117/2017 & AC No.45/2018 arbitration clause and that the applicant has already signed the certificate of full and final settlement, therefore, the disputer cannot be referred to.
[8] Having heard the learned counsel for parties and on perusal of the record, it is noticed that Sec.11(6A) has been inserted by the Arbitration and Conciliation (Amendment) Act, 2015 with effect from 23/10/2015 and in terms of the newly inserted provision, the scope of examining the present application is confined to examination of the existence of an arbitration agreement. [9] Arbitration agreement has been defined u/S.2(1)(b) of the Act to mean an agreement referred in Sec.7 and in terms of Sec.7(2), an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate amendment. In the present case, it is not in dispute that Sec.64 relates to the settling of dispute through the arbitration which reads as under:-
"64.(1): Demand For Arbitration :
64.(1) (i): 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 on disputed matters shall demand in writing that the dispute or difference be referred to arbitration.
64.(1) (ii) (a) 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 or difference, in respect of which the demand has been 4 AC No.117/2017 & AC No.45/2018 made, together with counter claims or set off, given by the Railway, shall be referred to arbitration and other matters shall not be included in the reference.
64.(1) (ii) (b) The parties may waive off the applicability of sub-section 12(5) of Arbitration and Conciliation (Amendment) Act 2015, if they agree for such waiver, in writing, after dispute having arisen between them, in the format given under Annexure XII of these conditions.
64.(1) (iii) (a) The Arbitration proceedings shall be assumed to have commenced from the day, a written and valid demand for arbitration is received by the Railway.
64.(1) (iii) (b) The claimant shall submit his claim stating the facts supporting the claims alongwith all the relevant documents and the relief or remedy sought against each claim within a period of 30 days from the date of appointment of the Arbitral Tribunal.
64.(1) (iii) (c) The Railway shall submit its defence statement and counter claim(s), if any, within a period of 60 days of receipt of copy of claims from Tribunal thereafter, unless otherwise extension has been granted by Tribunal.
64.(1) (iii) (d) Place of Arbitration : The place of arbitration would be within the geographical limits of the Division of the Railway where the cause of action arose or the Headquarters of the concerned Railway or any other place with the written consent of both the parties.
64.(1) (iv) No new claim shall be added during proceedings by either party. However, a party may amend or supplement the original claim or defence thereof during the course of arbitration proceedings subject to acceptance by Tribunal having due regard to the delay in making it.
64.(1) (v) If the contractor(s) does/do not prefer his/their specific and final claims in writing, within a period of 90 days of receiving the intimation from the Railways that the final bill is ready for payment, he/they will be deemed to have 5 AC No.117/2017 & AC No.45/2018 waived his/their claim(s) and the Railway shall be discharged and released of all liabilities under the contract in respect of these claims.
64.(3) : Appointment of Arbitrator :
64.(3) (a) : Appointment of Arbitrator where applicability of section 12 (5) of Arbitration and Conciliation Act has been waived off:
64.(3) (a) (i) : In cases where the total value of all claims in question added together does not exceed Rs.1,00,00,000/- (Rupees One Crore only), the Arbitral Tribunal shall consist of a Sole Arbitrator who shall be a Gazetted Officer of Railway not below JA Grade, nominated by the General Manager. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by GM.
64.(3) (a) (ii) : In cases not covered by the Clause 64(3)
(a)(i), the Arbitral Tribunal shall consist of a Panel of three Gazetted Railway Officers not below JA Grade or 2 Railway Gazetted Officers not below JA Grade and a retired Railway Officer, retired not below the rank of SAG Officer, as the arbitrators. For this purpose, the Railway will send a panel of at least four (4) names of Gazetted Railway Officers of one or more departments of the Railway which may also include the name(s) of retired Railway Officer(s) empanelled to work as Railway Arbitrator to the contractor within 60 days from the day when a written and valid demand for arbitration is received by the GM.
Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as contractor's nominee within 30 days from the date of dispatch of the request by Railway. 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. GM shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of contractor's nominees. 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 6 AC No.117/2017 & AC No.45/2018 to the officers in SA grade of other departments of the Railway for the purpose of appointment of arbitrator.
64.(3) (b) : Appointment of Arbitrator where applicability of section 12 (5) of A&C Act has not been waived off:
The Arbitral Tribunal shall consist of a Panel of three (3) retired Railway Officer, retired not below the rank of SAG Officer, as the arbitrators. For this purpose, the Railway will send a panel of at least four (4) names of retired Railway Officer(s) empanelled to work as Railway Arbitrator duly indicating their retirement date to the contractor within 60 days from the day when a written and valid demand for arbitration is received by the GM.
Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as contractor's nominee within 30 days from the date of dispatch of the request by Railway. 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. GM shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of contractor's nominees. While nominating the arbitrators, it will be necessary to ensure that one of them has served in the Accounts Department.
64.(3) (c) (i): If one or more of the arbitrators appointed as above refuses to act as arbitrator, withdraws from his office as arbitrator, or vacates his/their office/offices or is/are unable or unwilling to perform his functions as arbitrator for any reason whatsoever or dies or in the opinion of the General Manager fails to act without undue delay, the General manager shall appoint new arbitrator/arbitrators to act in his/their place in the same manner in which the earlier arbitrator/arbitrators had been appointed. Such re-constituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator(s).
64.(3) (C) (ii):
(a) The Arbitral Tribunal shall have power to call for such evidence by way of affidavits or otherwise as the Arbitral Tribunal shall think proper, and it shall be the duty of the parties hereto to do or cause to be done all such things as 7 AC No.117/2017 & AC No.45/2018 may be necessary to enable the Arbitral Tribunal to make the award without any delay. The proceedings shall normally be conducted on the basis of documents and written statements.
(b) Before proceeding into the merits of any dispute, the Arbitral Tribunal shall first decide and pass its orders over any plea submitted/objections raised by any party, if any regarding appointment of Arbitral Tribunal, validity of arbitration agreement, jurisdiction and scope of the Tribunal to deal with the dispute (s) submitted to arbitration, applicability of time 'limitation' to any dispute, any violation of agreed procedure regarding conduct of the arbitral proceedings or plea for interim measures of protection and record its orders in day to day proceedings.
A copy of the proceedings duly signed by all the members of tribunal should be provided to both the parties.
64.(7) Subject to the provisions of the aforesaid Arbitration and Conciliation Act, 1996 and the rules thereunder and relevant para of General Conditions of Contract (GCC) and any statutory modifications thereof shall apply to the appointment of arbitrators and arbitration proceedings under this Clause."
[10] The special conditions of contract are applicable by virtue of Clause 64.(7) of the General Conditions of Contract. In the special condition II relating to disputes of contractor, provides that the Arbitration under clause 63 and 64 of the General Conditions of Contract is restricted to settlement of claims or dispute of a value less than or equal to 20% of the value of the contract and if the value is more than 20%, the applicability of Clause 63 and 64 of the General Conditions of Contract is excluded and the remedy of settlement of dispute through the arbitration is not provided. Special condition II incorporated by CCG's No.W.118/7/0AA dated 12/4/1985 Circular No.1180 reads as under:-
8 AC No.117/2017 & AC No.45/2018"SPECIAL CONDITION II- PROCEDURE FOR RELATING DISPUTES OF CONTRACTOR:
The provision of Clauses 63 and 64 of the General Conditions of Contract will be applicable only for settlement of claims of dispute between the parties for value less than or equal 20% of the value of the contract and when claims of dispute are of value more than 20% of the value of contract, provisions of clause 63 and 64 and other relevant clauses of the General Conditions of Contract will not be applicable and arbitration will not be remedy for settlement of such disputes.
The contractor shall not be entitled to ask for reference to arbitration before the completion of the work assigned to him under this contract. The contractor shall seek reference to arbitration to settle the dispute only on within the ambit of condition 2.1 above."
[11] This Court in the matter of Diamond Agencies Vs. Union of India and another 2014(3) MPLJ 137 considering the general conditions of contract 63 and 64 and also taking note of the special condition II in a case where the similar controversy was involved has held as under:-
"5.-- However, it is pertinent to mention here that at the stage of consideration of application under section 11(6) of the Act the Court may not be able to decide whether the particular dispute can be referred to the arbitration, but the Court can examine whether a particular dispute falls within the purview of the arbitration clause on admitted facts and in such a case as it is not necessary to record evidence. In case of Deepak Kumar Bansal vs. Union of India and another, 2010(2)MPLJ(SC) 516 = (2009) 3 SCC 223 = 2009 Arb.W.L.J. 252(SC), the supreme Court 9 AC No.117/2017 & AC No.45/2018 dealt with pan materia clause, which prohibited the reference of dispute to an Arbitrator, in case the claim was more than 20% of the value of contract and, therefore, it was held that dispute can be referred to the Arbitrator. In other words, if the claim is more than 20% of the value of contract the dispute cannot be referred for arbitration.
6-- In the backdrop of well-settled legal proposition, the facts of the case may be seen. Admittedly, the value of the contract is Rs.1,24,12,320/-. The petitioner has, admittedly, submitted the claim to the tune of Rs.32,24,472/-, which is 25.98% of the contract value.
Clauses 63 and 64 of the General Conditions of Contract provide for reference of the dispute between the parties to the arbitration. The relevant extract annexed by the petitioner himself Page 58 of the application, reads as under:-
"11. Arbitration.--- The provisions of Clauses 63 and 64 of the General Conditions of Contract will be applicable only for settlement of claims or disputes between the parties for values less than or equal to 20% of the value of the contract."
7.-- Thus, in view of the preceding analysis, on admitted acts of the case, the dispute raised by the petitioner falls beyond the purview of Clauses 63 and 64 of the General Conditions of Contract, which provide for arbitration. Therefore, the dispute cannot be referred for arbitration and the respondents have rightly rejected the claim of the petitioner for referring the dispute to the arbitration."
[12] In the present case also the record reflects that the claim of the petitioner is of about a sum of Rs.253.77 lakhs which is more than 20% of the total contract value ie.
10 AC No.117/2017 & AC No.45/2018Rs.5,55,34,728.73. Hence, no arbitration agreement exists in respect of dispute in question. [13] Counsel for applicant has placed reliance upon the order dated 14/7/2017 passed by the Rajasthan High Court in SB Arbitration Application No.15/16, but in view of the judgment of this court in the matter of Diamond Agencies (supra), the applicant is not entitled to the benefit of the single bench order of Rajasthan High Court. [14] Having regard to the aforesaid factual and legal position, I am of the opinion that the dispute in the present case is not arbitrable under Clause 64 of the General Conditions of Contract read with Special Condition II of the Special Conditions of Contract. Hence, the arbitration cases are rejected.
[15] The signed order be placed in the record of AC No.117/2017 and copy whereof be placed in the record of AC No.45/2018.
(PRAKASH SHRIVASTAVA) Judge vm Digitally signed by Varghese Mathew Date: 2018.11.29 18:37:58 +05'30'