Kerala High Court
Reshmi Constructions Builders & vs The Chairman & Managing Director on 26 October, 2006
Author: K.Padmanabhan Nair
Bench: K.Padmanabhan Nair
IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C) No. 2134 of 2005(D)
1. RESHMI CONSTRUCTIONS BUILDERS &
... Petitioner
Vs
1. THE CHAIRMAN & MANAGING DIRECTOR,
... Respondent
2. S.S.MEDIRATTA,
For Petitioner :SRI.P.JACOB VARGHESE
For Respondent :SRI.B.S.KRISHNAN (SR.)
The Hon'ble MR. Justice K.PADMANABHAN NAIR
Dated :26/10/2006
O R D E R
K.Padmanabhan Nair, J.
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W.P.(C) No.2134 of 2005-D
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Dated, this the 26th day of October, 2006.
Judgment The plaintiff in O.S.(Arbitration) 182 of 1992 on the file of the Subordinate Judge's Court, Mavelikkara is the petitioner in this writ petition. This writ petition is filed challenging the orders passed by the court below dismissing I.A.Nos. 1028 and 1029 of 2004 filed by the plaintiff in the above suit. The prayer in I.A.No.1028 of 2004 was to appoint a sole arbitrator from among the panel of names submitted by the plaintiff. I.A.No.1029 of 2004 was filed for an order of injunction restraining Sri S.S.Mediratta from acting as the sole arbitrator and to stay all further proceedings before the arbitrator till the disposal of the O.P.
2. The short facts necessary for disposal of the writ petition are as follows:-
Petitioner is a registered partnership firm engaged in carrying out civil engineering contract works, having its office at Thiruvananthapuram. Petitioner was awarded the work of earth filling in the temporary Township Part II Nangiarkulangara in the Kayamkulam Project of the first respondent-National Thermal Power Corporation Limited (N.T.P.C for short) during the year 1990. After completion of the work, petitioner submitted the final bill which was rejected by the first respondent. The first respondent itself prepared a final bill and forwarded the same along with a printed format bearing 'No Demand Certificate'. The petitioner signed the certificate and received the amount. On the very same day, petitioner sent a letter to the first W.P.(C)No.2134 of 2005 2 respondent stating that they had signed the final bill and no demand certificate under coercion. It was also stated that they received the amount under protest.
3. According to the petitioner, the first respondent committed serious breach of contract and the petitioner was unable to finish the work in time and he sustained huge loss. It was also alleged that the first respondent promised to pay additional amounts so as to cover the loss suffered by the petitioner. But after completion of the work, N.T.P.C backed out from the promise. It was alleged that during the course of work itself, the relationship between the petitioner and the Engineer in charge of the project and other officers of the first respondent became strained. N.T.P.C rejected the final bill submitted by the petitioner and prepared its own bill because of the strained relationship. Immediately after receipt of the amount, petitioner sent a notice claiming additional amounts. It also issued a notice through its Advocate demanding the N.T.P.C to refer the dispute to an Arbitrator. Though initially the N.T.P.C was amenable to such a course, subsequently it backed out and refused to refer the matter to an Arbitrator.
4. The petitioner filed O.S.(Arb) No.182 of 1992 before the Sub Court, Mavelikkara under Sections 5, 11, 12 and 20 of the Arbitration Act 1940, for appointing an Arbitrator. The suit was contested by the first respondent. It was contended that the petitioner was not entitled to claim any additional amount as it had received the final bill after signing the no due certificate. The learned Sub W.P.(C)No.2134 of 2005 3 Judge found that there was accord and satisfaction of the claims between the parties and dismissed the suit.
5. Challenging that decision, the petitioner filed M.F.A.No.298 of 1995 before this Court. M.F.A was heard and disposed of by a Division Bench of this Court, of which I was also a member. The Division Bench overruled the contentions raised by the first respondent. It was held that even before submitting the final bill, the petitioner had disputed the claim on the bill and he did not accept the same. It was also found that on the very same day upon receipt of the money, he issued a letter of protest. This Court also held that Ext.A9 would show that the Chairman and Managing Director had taken steps to appoint an arbitrator but subsequently retracted. It was held that the question whether there was full and final settlement was to be decided by the Arbitrator. This Court set aside the judgment and decree passed by the court below and allowed the appeal by Judgment dated 23rd November, 2001.
6. The first respondent challenged the judgment before the Supreme Court by filing Special Leave Petition. Leave was granted and the appeal was numbered as C.A.2754 of 2002. The Supreme Court dismissed the appeal on 5-1- 2004 confirming the judgment of this Court.
7. The first respondent did not file the arbitration agreement before the Subordinate Judge's Court. It also did not file the name of the person designated W.P.(C)No.2134 of 2005 4 by the Chairman and Managing Director to conduct the arbitration. On the other hand, on 29-1-2004, the second respondent Sri S.S.Mediratta , General Manager, N.T.P.C. Limited, wrote a letter to the petitioner stating that "in view of the judgment of the Supreme Court in Civil Appeal No.2754 of 2002, as per clause 56 of G.C.C, he, as the General Manager, was appointed sole arbitrator to adjudicate upon the disputes between the parties to the subject contract." On 5-4-2004, petitioner filed I.A.No. 1028 of 2004 before the Sub Court Mavelikkara for appointment of an arbitrator by the court below and I.A.No.1029 of 2004 to restrain the second respondent from acting as the arbitrator.
8. In I.A.1028 of 2004, it was alleged that the assumption of the role of arbitrator by the second respondent himself was against the decision of this court and he has no authority to function as an arbitrator. It was averred that it was for the court to appoint an arbitrator. It was further averred that the respondents did not comply with the direction of this Court in M.F.A.No.298 of 1995 but in gross violation of the judgment, the second respondent had entered upon the reference in an arbitrary manner on the pretext that he was appointed as the sole arbitrator.
9. The respondents filed a counter affidavit contending that the Supreme Court dismissed the appeal only on 5-1-2004 and immediately after dismissal of the appeal, the Chairman and Managing Director of the first respondent nominated the second respondent General manager as the sole arbitrator in time W.P.(C)No.2134 of 2005 5 strictly in compliance with the judgment of this court. It was contended that that appointment is legal and valid. It was further contended that since the second respondent was nominated by the Chairman and Managing Director as per the arbitration clause, he cannot be substituted or removed except in accordance with the provisions of the Arbitration Act.
10. The learned Sub Judge, after considering the matter held that though the Corporation did not file the arbitration agreement, the petitioner itself had produced before the trial court the arbitration clause contained in the agreement entered into between the parties and the same was marked as Ext.A8. It was held that since the petitioner had produced Ext.A8, non-filing of the agreement by the respondents before the court within the time fixed by this court was immaterial. It was also held that the second respondent was appointed by the Chairman and Managing Director of the first respondent in time strictly in accordance with the arbitration clause and there was no violation of the judgment of this court in appointing the arbitrator . The court below dismissed both the petitions. Challenging those orders, this writ petition is filed.
11. In the writ petition, the petitioner has reiterated the history of the litigation and also the relevant portion of the judgment of this court. It was contended that the Chairman and Managing Director of the first respondent did not nominate an arbitrator and refused to comply with the direction of this court W.P.(C)No.2134 of 2005 6 and filed Civil Appeal No.2754 of 2002 before the Supreme Court. It was contended that the respondents should have filed the arbitration agreement before the Sub Court on or before 4-4-2004, the date on which the three months' period fixed by this Court expired. It was also contended that the Chairman and Managing Director should have designated a person and submitted his name to the Sub Court on or before 4-4-2004. It was contended that since the respondents failed to comply with the directions of this court in M.F.A.No.298 of 1995, the Sub Court is bound to appoint an arbitrator.
12. The respondents have filed a counter affidavit. It was contended that there was suppression of material facts. The averments of malafides etc. on the part of the officers of the first respondent were denied. It was contended that at the time of disposal of the M.F.A there was no General Manager and hence this Court accorded sanction to the Chairman and Managing Director to nominate an arbitrator. It was contended that while admitting the Special Leave Petition, the Supreme Court granted a stay of further proceedings which continued till the disposal of the civil appeal . It was further contended that when the Supreme Court disposed of the Civil Appeal, there was a General Manager functioning in Kayamkulam unit. It was contended that this Court directed the Chairman and Managing Director to make a recommendation only on account of the fact that at that relevant period , there was no General Manager . Since at the time of W.P.(C)No.2134 of 2005 7 disposal of the Civil Appeal by the Supreme Court, there was a General Manager, he informed that he was the sole arbitrator and issued notice to the parties. It was contended that the petitioner had submitted to the jurisdiction of the arbitrator and hence he cannot be allowed to turn round and challenge the validity of the arbitration proceedings. It was contended that the judgment of this court is in tune with the arbitration clause and as per the arbitration clause the General Manager is the authority to enter on reference and hence there is no violation of the judgment. The allegation that the officers are prejudiced against the petitioner was denied. It was contended that the respondent produced the General Conditions of Contract before the trial court which is marked as Ext.B7 in the suit and hence there is compliance of the direction of this Court. It was contended that if the General Manager is willing to act as the arbitrator, the file for appointment of the arbitrator may not go to the Chairman and Managing Director through the Law Department.
13. Subsequently the respondents filed I.A.No.11910 of 2006 seeking permission of this court to permit the Chairman and Managing Director to appoint an arbitrator within a reasonable time to be fixed by this Court on the ground that the second respondent Sri S.S.Mediratta, the General Manager had retired from the service of the first respondent and vacated his office . It was further averred that there is no General Manager and hence as per the clause of the W.P.(C)No.2134 of 2005 8 arbitration agreement, the Chairman and Managing Director is the authority to appoint another person as arbitrator.
14. The petitioner filed a counter to the above application contending that the appointment of the first respondent is to deviate/modify from the decree that is passed by this Court and confirmed by the Supreme Court and that cannot be allowed.
15. Learned counsel appearing for the petitioner has argued that the stand taken by the first respondent before the Sub Court and this court are mutually destructive. It is argued that the first respondent did not produce the agreement before the court below as ordered by this Court, on the ground that the petitioner had produced the relevant clause in the arbitration agreement which was marked as Ext.A8. It is argued that the definite contention put forward by the first respondent before the trial court was that the General Manager was appointed by the Chairman and Managing Director of the first respondent in accordance with the clause in the agreement and hence that appointment was valid. It is argued that in the counter affidavit filed before this Court, the stand taken by the first respondent is that the first respondent had already produced the general conditions of the contract which contain the arbitration clause before the trial court and the same was marked as Ext.B7 and hence there was no need to file the agreement again. It is argued that now it is admitted by the first respondent that the General W.P.(C)No.2134 of 2005 9 Manager himself assumed the post of the sole arbitrator and issued notice to the parties. It was contended that because of the documentary evidence adduced by the petitioner before this court, the respondent was compelled to admit that fact . It is argued that the materials on record will clearly establish that the first respondent is biased and prejudiced against the petitioner-Firm and it will go to any extent to deny its legitimate claims of the petitioner. It is submitted that the dispute arose more than 16 years ago and the original partners of the petitioner- firm were affected by cancer and are under heavy financial difficulties. It is argued that in view of the unreasonable stand of the first respondent and the failure on its part to comply with the direction of this court, a person from the panel submitted by the petitioner may be appointed. It is argued that the petitioner had suggested two former Judges of this court and a retired Chief Engineer who is a practising lawyer and a retired Superintending Engineer and any one of them may be appointed as the Arbitrator. It is argued that the stand of the first respondent that the petitioner had submitted to the jurisdiction of Sri S.S.Mediratta and hence it cannot be allowed to approbate and reprobate is unfortunate and cruel.
16. The fact that the petitioner-firm was a contractor who was awarded the work of earth filling in the Temporary Township Part II at Nangiarkulangara in the Kayamkulam Project of the first respondent is admitted. The work was W.P.(C)No.2134 of 2005 10 completed and the petitioner submitted the final bill. Final bill was not accepted by the first respondent. The respondent prepared another final bill and forwarded to the petitioner along with printed format bearing a 'No Demand Certificate' . Petitioner signed the same. Thereafter the petitioner claimed further amounts and demanded the Corporation to appoint an arbitrator. The first respondent did not appoint an arbitrator. The petitioner filed O.S.(Arbn) No.182 of 1992 before the Sub Court, Mavelikkara. That suit was dismissed. Challenging the judgment, petitioner filed M.F.A.No.298 of 1995 before this Court. The appeal was allowed. The operative portion of the judgment reads as follows:-
"However, we find that as per the arbitration clause, it is for the Chairman and Managing Director of the respondent-Corporation to appoint an arbitrator as the General Manager, the sole arbitrator as per the arbitration clause, is absent here. In fact, Ext.A9 proceedings would show that steps were taken by the Chairman and Managing Director to appoint an arbitrator.
In the above circumstances, the respondent Corporation should file arbitration agreement before the court below and designate the person nominated by the Chairman and Managing Director to conduct the arbitration within three months from today before the Sub Court. In case no person is nominated by the Chairman and Managing Director as per the arbitration clause, the Sub Court will be free to appoint an arbitrator".
The first respondent filed C.A.No.2754 of 2002 before the Supreme Court challenging the judgment of this Court. Supreme Court by judgment dated 5-1- 2004 dismissed the appeal.
W.P.(C)No.2134 of 2005 11
17. The first respondent did not file the agreement within three months either from the date of judgment of this court or even from the date of judgment of the Apex Court. On 29-1-2004, the General Manager issued Ext.P3 letter appointing himself as the sole arbitrator to adjudicate upon the disputes between the parties.
18. The petitioner had produced a portion of the agreement before the trial court which was marked as Ext.A8. The stand of the first respondent before the Sub Court was that since Ext.A8 contains the arbitration clause non production of the agreement by the first respondent was not fatal. Before this court it is contended that that the first respondent had produced the General Conditions of the Contract which contains the arbitration clause and the same is marked as Ext.B7. It is contended that since the first respondent had produced Ext.B7 during the trial stage it is not necessary to produce it again. This Court was aware of the documents produced before the trial court. Neither Ext.A8 nor Ext.B7 is the contract executed by the parties. That is the reason why this Court directed the first respondent to file the arbitration agreement within three months. The respondent had refused to comply with the direction issued by this court till date.
19. Now I shall consider the contention raised by first respondent that the appointment of the second respondent as the sole arbitrator is in accordance with the order of this court. The direction issued by this court was clear and explicit. W.P.(C)No.2134 of 2005 12 This Court directed the first respondent to file the name of a person nominated by the Chairman and Managing Director as the sole arbitrator. So one would expect the first respondent to file a statement along with a copy of the proceedings issued by the Chairman and Managing Director nominating the sole arbitrator. No such statement was filed. The learned Sub Judge accepted the contention of N.T.P.C that the second respondent was appointed as sole arbitrator by the Chairman and Managing Director. The petitioner produced Exts.P13 and P14 before this Court to show that whenever the Chairman and Managing Director nominates a sole arbitrator, he will issue proceedings and a copy will be given to the contractor also. No material was produced by the first respondent in support of its contention that the Chairman and Managing Director had nominated the General Manager . On the other hand, Ext.P3 letter issued by Sri. S.S. Mediratta shows that he himself assumed the post of the sole arbitrator. That is in violation of the direction issued by this court. In this Writ Petition the first respondent has admitted that the question of Chairman and Managing Director appointing the sole arbitrator will arise only if there is no General Manager. It was contended as follows:-
"It is in this background the General Manager informed that he is the sole arbitrator and issued notice".
So the first respondent had admitted that the second respondent assumed W.P.(C)No.2134 of 2005 13 the office of the sole arbitrator. That action is without any authority and in violation of the order of this court in the M.F.A. The learned Sub Judge has not considered any of these aspects.
20. Learned counsel appearing for the respondents has argued that when there is a clause in the agreement that the matter has to be referred to a particular person as arbitrator appointed by one of the contracting parties and if there is no consensus regarding that, the appointment of the arbitrator itself is not possible. Learned counsel relied on a decision reported in A.Mohammad Yunus (Dead) by Lrs. v. Food Corporation of India and Anr. (JT 2000(4) SC 621) and also a decision reported in M/s.Ama Corporation, Madras v. Food Corporation of India (A.I.R.1981 Madras 121) in support of that argument. In this case, that stage was already over. This Court had already issued necessary directions to the trial court regarding the appointment of an arbitrator. Counsel also relied on the decision reported in Food Corporation of India v. M/s.Salam Traders (I.L.R.1998 (2) Kerala 795) in which it was held that when the power to appoint or nominate the arbitrator is given to a designated person under the Arbitration Clause, a petition to appoint an arbitrator and refer the dispute to the arbitration is not maintainable. That decision also can have no application to the facts of the present proceedings.
21. Learned counsel appearing for the first respondent has argued that W.P.(C)No.2134 of 2005 14 even accepting the contention of the petitioner that there is failure on the part of the Chairman and Managing Director to nominate the General Manager the court is bound to appoint either the General Manager or any other person nominated by the Chairman and Managing Director as the arbitrator in view of the clause contained in the agreement. He relied on the decisions reported in M/s. Gobindram v. M/s.Shamji K.& Co. (A.I.R.1961 S.C.1285) and Union of India v. Prafulla Kumar (1979 (3) SCC 631) wherein it was held that it is desirable that the court considers the feasibility of the appointment of an arbitrator according to the terms of the contract. It is true that the court has got power to appoint the person designated in the agreement, but whether that should be done in the particular case is a matter to be decided on the facts and circumstances of each case.
22. Learned counsel appearing for the respondents has argued that the petitioner submitted to the jurisdiction of the arbitrator and he issued a telegram to postpone the proceedings. It was further argued that the petitioner sent a letter also on 27-02-2004. Again they sent another telegram on 28-2-2004 to adjourn the proceedings. It is argued that the petitioner is not entitled to approbate and reprobate. The telegrams and the letter were not sent by the petitioner-Firm but by the son of the partners of the petitioner. In the telegram sent on 27-2- 2004, it was specifically stated that both the partners were suffering from cancer W.P.(C)No.2134 of 2005 15 and undergoing treatment as inpatients in the Regional Cancer Centre. In Ext.R1
(e) letter it was stated that both the partners were suffering from cancer and the firm was facing serious financial difficulties. It was further stated that the sender of the letter was only a student who does not know anything about the matter. He had also written that when the health condition of his father improves, father will attend. In the telegram sent on 20-3-2004 also it was stated that the partners were sick and unable to attend the case. By no stretch of imagination sending of the letter and telegrams can be considered as an act on the part of the first petitioner to submit to the jurisdiction of the arbitrator. On the other hand, those communications were sent by a total stranger stating that the partners were suffering serious illness and they may be given time. There is absolutely no merit in the contention raised by the respondents that the petitioner had submitted to the jurisdiction of the arbitrator.
23. Learned counsel appearing for the first respondent has argued that it is not necessary to consider the impugned order on its merits on account of the subsequent development. It is submitted that Sri S.S.Mediratta had retired from the service of the Corporation and vacated his office as Managing Director . It is submitted that at present there is no General Manager and it is for the Chairman and Managing Director to appoint another person as Managing Director in view of the arbitration clause in the agreement. The first respondent has filed W.P.(C)No.2134 of 2005 16 I.A.No.11910 of 2006 seeking permission of this court. The prayer is opposed by the petitioner. It is argued that it is for the Sub Court to appoint an Arbitrator in terms of the decree passed by this court. It is also argued that the conduct of the respondents shows that the officers of the Corporation are prejudiced against the petitioner and on account of their bias, the petitioner will not get justice if any officer of the Company is appointed as an arbitrator. The Sub Court found that the first respondent had appointed the General Manager as arbitrator and dismissed he petition filed by the petitioner. That finding is not based on any material and it is illegal. The court below failed to exercise the jurisdiction vested in it. Since there is a jurisdictional error, I have no other option but to quash the order of the court below in exercise of the power of general superintendence conferred on this Court under Article 227 of the Constitution of India and direct the learned Sub Judge to re-consider the matter.
24. Since the second respondent had retired from service and not acting as the arbitrator, the prayer in I.A.No.1029 of 2004 to stay the arbitration proceedings pending before him has become infructuous.
In the result, the writ petition is allowed in part. The order passed by the learned Subordinate Judge dismissing I.A.No.1028 of 2004 is quashed. The learned Sub Judge is directed to take I.A.No.1028 of 2004 back to file and dispose of the same afresh in accordance with law after hearing both sides. The W.P.(C)No.2134 of 2005 17 petitioner is entitled to get its cost of this proceedings, which is quantified at Rs.5,000/-(Rupees Five Thousand only), from the first respondent.
Being a very old matter, the learned Sub Judge is directed to hear and dispose of the matter as expeditiously as possible, at any rate, within two months from the date of receipt of a copy of this judgment.
K.Padmanabhan Nair, Judge.
s.